Antiques, Millennials and the Rebirth of Formal Dining

Antiques, Millennials and the Rebirth of Formal Dining

One of the most persistent myths of the modern age is that Generation Xers and Millennials abhor antiques, while at the same time oddly adoring anything “vintage” (as if there was much difference between the two).  The mainstream narrative goes something like this:

The younger generations love living in apartments, condos or townhouses in the inner city.  Your average Millennial employs a sleek, streamlined sensibility when decorating his (or her) posh city condo.  The color palette is invariably bright and colorful and design choices are always modern and sophisticated.  All things considered, in the popular imagination a typical Millennial’s urban pad looks remarkably like the product of a James Bond villain – part contemporary art collector and part evil genius.

But like all myths, this one isn’t quite authentic.  It is true that younger people like different antiques than older generations.  For example, overly ornate and frilly Victorian styles are out and alluringly sleek Mid-Century Modern is in.  Grandma might not approve, but this is a story that has been retold many times throughout human history.

The real issue for Millennials is that they were born into less than ideal economic circumstances.  Jobs and raises have been scarce for many people since the Great Recession of 2008-2009, but younger workers were hit especially hard.  As a result, Millennials have been forced to live in smaller apartments, live with roommates or even, under exceptional circumstances, move back home with their parents.  None of these living arrangements is conducive to buying antiques.

In addition, practicality reigns supreme in the lives of most 20 and 30 somethings these days.  If your dining nook doubles as a living room, you’re not going to feel particularly inclined to clutter it up with unnecessary furniture or knickknacks.  Instead you would carefully and thoughtfully decorate in a way to make maximum use of the space.

Another major reason that Millennials shy away from buying antiques is because they don’t host formal dining parties.  Given their fluid living arrangements and restrictive space constraints, this is perfectly understandable.  Instead, they tend to focus on more intimate, informal gatherings with good friends.

But these trends may not last forever.  I think that formal dining (or at least more formal dining, relatively speaking) will make a comeback over the next couple of decades.  Why do I believe this?  That’s easy – demographics!

Right now it is a safe bet that most family gatherings in the U.S. occur at the clan matriarch’s house.  This could include holidays, graduations, birthdays or anniversaries, among others.  And for many families, these celebrations involve semi-formal or formal dining.  After all, Thanksgiving dinner just isn’t the same without fancy place-settings around the big mahogany dining room table.

This means that under most circumstances, Generation Xers and Millennials make the pilgrimage to the ancestral family home several times a year for these events.  And while traditions vary from family to family, it isn’t uncommon for the fine china, good silver and formal dining room suite to be on full display during these meals.

This is a system that exists because it works.  But it only works because the older generations – the Baby Boomers and Silent Generation – tend to live in the largest houses and, just as importantly, have the accessories for formal dining.  It is difficult to host a family gathering in a cramped condo.  Likewise, formal dining requires nice silverware, plates and glasses – many of which are invariably antiques.

But right now the Silent Generation is quickly passing into the mists of time.  The youngest members of that generation are in their mid 70s as of 2018.  The Baby Boomers are not far behind.  They range in age from their mid 50s to early 70s.

And now we come to the crux of the matter: downsizing.  The ancestral family home and de facto gathering spot is usually owned by the oldest members of a family.  These houses are, generally speaking, generously proportioned and chocked full of a lifetime’s accumulation of stuff.  But they are also highly demanding in terms of time, money and maintenance.

Within the next 20 years, the Silent Generation will pass away and many of the Baby Boomers will choose to downsize for the sake of convenience and expense reduction.  But the family gatherings will not stop just because grandma and grandpa have moved to a retirement community in Florida.  This will leave a formal dining vacuum that will need to be filled.

Enter the Generation Xers and the Millennials.

These younger generations will be forced to take up the challenge of formal dining and family gatherings.  By this time it is probable that, just like the generations before them, they will have abandoned their tiny inner city condos and apartments for larger suburban housing.  And this is just as well, because they will need the room.

Now, I don’t believe that this means that Millennials will adopt the tastes of their parents or grandparents wholesale.  Quite the contrary, they will continue to carve their own eclectic stylistic path.  But, discretionary funds allowing, they will buy antiques or vintage items in some form.

Long gone will be the practical but boring, white IKEA furniture.  In its place will be real wood furniture.  It is doubtful that Waterford crystal and Depression glass will make a comeback, but formal dining with paper plates and plastic utensils is equally unlikely.  Instead, a middle path of sensible Fiestaware and meticulously chosen vintage sterling silver decor is more probable.

Is formal dining dead among younger people?  Hardly.  They just haven’t had the opportunity or demographic push necessary to adopt it yet.  Informal entertaining is great, but it definitely has its limits.  The rebirth of formal dining is on its way, and some parts of the antique market will benefit from the trend.

 

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Bill Reiswig Nature Print Titled “Octopus Among the Pilings”

Bill Reiswig Nature Print Titled "Octopus Among the Pilings"
Photo Credit: BillReiswig

Bill Reiswig Nature Print Titled “Octopus Among the Pilings”

Asking Price: $60 (price as of 2018; item no longer available)

Pros:

-This calming undersea-themed print by the artist Bill Reiswig is titled “Octopus Among the Pilings”.  It is an original, mixed linocut and woodblock print that was handcrafted in traditional Moku Hanga style.

-This compelling nature print measures 9.5 inches (24 cm) wide by 7.5 inches (19 cm) tall.  It also has a 1.5 inch (4 cm) white margin around the work’s perimeter, making the actual printed area 8 inches (20 cm) by 6 inches (15 cm).

-Bill Reiswig is a self-taught artist living in Olympia, Washington, who specializes in nature-themed prints.  Olympia, the capital of Washington state, is located at the southern end of Puget Sound.  The city is not only close to the tranquil Pacific Ocean, but also to the majestic temperate rainforests of the Cascade Mountains.  Both of these stunning natural environments serve as inspiration for his work.

-Bill Reiswig produces prints using traditional Japanese woodblock printmaking techniques, otherwise known as Moku Hanga.  Most contemporary Western artists create Moku Hanga style prints using classic Japanese themes, such as landscapes, animals or nature scenes.

-Bill Reiswig created this undersea print from high quality kozo-pulp paper and water-based, Akua Kolor ink.  Kozo fibers are derived from the bark of mulberry trees and are a key ingredient in traditional Japanese print-making paper.

-The artist has skillfully used the repeating vertical pier pilings to give this work a sense of structure and perspective.  Repetitive motifs, strokes or lines are a common theme in high quality works of fine art.

-This undersea-themed print is a limited edition work, with only 40 copies created.  In addition, each print is individually signed and numbered.  Limited edition prints are far more desirable than those with no production cap.

-I love how the subdued oranges and pinks in the foreground of this Bill Reiswig print subtly contrast with the velvety blues of the surrounding ocean environment.

-“Octopus Among the Pilings” is a deceptively simple, yet aesthetically powerful nature print.  Why decorate your house or apartment with the reproduction print of an over-exposed, derivative artwork when you can purchase an original, limited edition fine art print like this for only $60?

 

Cons:

-This nature-themed woodblock print is relatively small and would be overwhelmed in a large space.  If you want to hang it in a large room, it would do best as part of an art grouping combined with many other works.  On the other hand, it would work superbly if hung in isolation in a bathroom, entry foyer, hallway, small bedroom or other constrained space.

-If you intend to display this alluring Bill Reiswig woodblock print, be prepared to spend an additional $50 to $150 for framing costs.  This will drive the total price of the art print up to around $150, which is still a bargain for a beautiful and original work.

 

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Future Stock Market Valuations and the Shiller P/E Ratio

Future Stock Market Valuations and the Shiller P/E Ratio

The above graph shows the historical Shiller P/E ratio for the broad U.S. equity market from 1881 through early 2018.  The Shiller P/E ratio is also known as the CAPE ratio, which stands for Cyclically Adjusted Price Earnings ratio.  This is because the ratio uses the trailing 10 years of reported earnings data in an attempt to remove earnings cyclicality from its calculation.

This last point is so important that it cannot be overstated.  Any attempt to measure stock market valuations must take into account the fact that corporate profit margins and, by extension, earnings are highly variable.  When the economy is rapidly expanding, companies have pricing power and margins rise.  When the economy is mired in recession, pricing power declines, leading to lower profit margins and lower earnings.

If you look closely at the historical Shiller P/E graph, you’ll notice that I’ve added two different bands.  The first is denoted by green dashed lines.  This reflects the approximate boundaries of undervalued and overvalued markets in the period from circa 1880 to 1995.  During this timeframe, stock market valuations rarely declined below 7.5 for any significant period of time.  Similarly, valuations spent relatively little time about 22.5.

I think this is largely due to the fact that the stock market during this time was dominated by professional investors.  These stock market pros knew that low valuations were good times to buy and high valuations were good times to sell.

In addition, it was an epoch when central bankers were still sane.  They knew the boundaries of their mandate and that it was their job to take away the monetary punch bowl just as the party was getting started.

A funny thing happened in the mid 1990s though.  Central bankers collectively lost their minds and began wildly inflating securities market bubbles.  They decided that there was no problem that easy money could not solve.  Global central banks, led by the U.S. Federal Reserve, became activist institutions.  They adopted asymmetrical monetary policies which encouraged speculation and the reckless accumulation of debt, while simultaneously discouraging prudence and savings.

In addition, we saw the arrival of the armchair or amateur investor.  This trend was driven by millions of workers who were given 401-k or IRA accounts and told to go invest their retirement funds themselves.  Most of these people were not financial professionals and didn’t know when to buy or when to sell.

I delineated the modern era of stock market valuations with red dashed lines in the Shiller P/E chart above.  During this period, stock market valuations spent most their time much higher than they had historically, bounded between a P/E ratio of 21 and 32.

Interestingly, my analysis of historical stock market valuations does not rely solely on the Shiller P/E ratio for its validity.  You could easily substitute a variety of other cyclically-adjusted valuation measures and get basically the same chart.  So price-to-revenue, market cap-to-GDP or Tobin’s Q ratio would all work just as well (provided you can find the historical data).

Now the real question for equity investors today is which way will stock market valuations go in the future?

As I see it, there are three possibilities.  First, we could ascend to a new, higher range.  This would seem to be what the stock market is discounting at the moment, but it implies societal and governmental changes that I don’t think many people would be comfortable with.

For example, I believe higher stock market valuations could be supported if we were to enter a neo-feudal age.  In such a scenario, corporations would effectively become partners with the government – especially large tech companies like Facebook, Amazon, Apple, Alphabet (Google) and Netflix.  Tax and anti-trust laws would be changed to give these already gargantuan firms even more advantages then they already enjoy today.  As a result, their earnings would permanently readjust upward.

This would be a dystopian nightmare for average people.  Income inequality would become far worse than it is today, as the rich would get richer and workers would see their salaries stagnate or even decline.  Only those people with large equity, business or real estate portfolios would make good.

In the second possibility, stock market valuations would stay within the red dashed boundaries I’ve defined for the modern era.  This would be a muddle through scenario, where the global economy continues to underperform while inflation remains largely suppressed.  Income inequality would continue to worsen, although not at the same pace as under the first scenario.

Wages would remain weak and corporate profits would continue to grow at a reasonable clip.  Most equity investors would be disappointed by this status quo outcome, as it would involve a reversion to the stock market valuation mean that would suppress future returns considerably.

The third possibility would be a return to the stock market valuations of the pre-1990s.  Nobody is prepared for this scenario at the moment, which would probably be driven by chastened central banks that reign in loose monetary policies for any number of reasons.

Central banks could have a come to Jesus moment as federal debt levels explode, thus forcing them to confront the negative consequences of their prior feckless behavior.  Or it might be revived inflation that finally forces the central bankers to raise interest rates higher than they would otherwise.  Central banks might even be compelled to change their longstanding easy money policies due to political changes driven by disgruntled electorates.

In any case, this third scenario would be a catastrophe for most financial assets.  Stock market valuations would be cut in half while property and bond markets might not do much better.  Many local governments, corporations and pension funds would undoubtedly go bankrupt in this situation.

I will leave it up to the reader to decide which of the three scenarios that I’ve presented is more likely to occur.  But I will say this.  If you are relying on traditional portfolio diversification to protect your nest egg, you are taking on an extraordinary risk.

Neither stocks, nor bonds, nor real estate is in a position to save you if an average recession, much less a financial disaster, unfolds.  This is one of the reasons I like investing in tangible assets, such as precious metals, fine art, gemstones and antiques.  They are some of the only assets left that still trade for reasonable valuations.

 

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The Secret History of 20th Century U.S. Currency

The Secret History of 20th Century U.S. Currency
Photo Credit (CC 2.0 license): J W

The United States dollar is currently the world’s reserve currency.  One factor that has undoubtedly helped secure this coveted position is that almost all U.S. currency issued by the Treasury or Federal Reserve from 1863 to the present is still legal tender, acceptable for debts, commerce and taxes.  This is exceptional, as most countries regularly demonetize old notes and withdraw them from circulation.

But demonetization simply does not happen in the United States (although obsolete notes are sometimes withdrawn from circulation).  In fact, when I worked as a bank teller in the mid 1990s, I found a Series 1934 $20 Federal Reserve Note in my till.  That particular $20 bill had probably been in circulation for a good 50 years, if not longer.

Many people do not realize that U.S. currency has a secret history.  There have actually been 4 (or 5, depending on how you count) different types of U.S. paper money in circulation during the 20th century.  Below I will reveal the untold history of U.S. paper money, concentrating on Series 1928 and later bills.

I consciously chose 1928 as a starting point because in that year all U.S. currency was radically redesigned.  For the sake of convenience, these new notes were shrunk in size compared to previously issued bills.  They also began to feature the presidential portraits (Lincoln on the $5, Hamilton on the $10, Jackson on the $20, etc.) that we are familiar with today.

On the whole, the average American would recognize a Series 1928 note as being essentially modern, although anti-counterfeiting design updates since 1996 have endowed newer notes with larger, off-center portraits, more color and less scrollwork.

As an FYI, a U.S. currency’s series refers to the year a design was first initiated, not necessarily the date the note was printed.  So if a Series 1928 note was later followed up by a redesigned Series 1953 note, the Series 1928 note could generally have been printed anytime between 1928 and 1953.

And now let’s examine the different types of U.S. currency that were issued during the 20th century:

 

U.S. Gold Certificates (Gold Seal Notes)

The United States Treasury issued gold certificates from the end of the Civil War in 1865 until the Great Depression in 1934.  As the name implies, these iconic U.S. notes with their characteristic gold seals were exchangeable into gold coin upon request.  In fact, each one has a gold clause that unequivocally states:

“This certifies that there have been deposited in the Treasury of the United States of America XX dollars in gold coin payable to the bearer on demand”.

These beautifully engraved notes were issued in denominations ranging from $10 to $10,000.  Starting in 1928, U.S. gold certificates were, like all other U.S. currency, redesigned with the presidential portraits and smaller-size familiar to us today.

Unfortunately, the advent of the Great Depression in the 1930s soon put an end to the international gold standard.  The catastrophic failure of Austria’s Credit-Anstalt bank in May 1931 increased pressure on over-extended banks and governments around the world, eventually forcing the Bank of England to break the British pound’s peg to gold in September 1931.  After this, the United State’s abandonment of the gold standard was inevitable.

The honor of reneging on U.S. gold certificates ultimately fell to President Franklin Delano Roosevelt, who declared a nationwide banking holiday on March 5, 1933, shortly after taking office.  One month later, on April 5, 1933, FDR decreed that all U.S. gold coins and gold certificates had to be exchanged for non-gold coins and notes on pain of imprisonment.  After a short grace period, it became illegal for any American to own or possess gold certificates.

But history wasn’t over for that most revered of U.S. paper currencies.  In 1934, the U.S. Treasury actually printed a new series of U.S. gold certificates in denominations of $100, $1,000, $10,000 and $100,000.  These non-circulating notes were distinguished from older, previously circulating series by their orange-toned reverse and amended gold clause, which reads “payable to the bearer on demand as authorized by law“.

Series 1934 gold certificates were used exclusively for bank reserves and inter-bank transfers.  They are exceedingly rare and valuable today.

In 1964, the restriction on American citizens owning U.S. gold certificates was removed.  Although no longer redeemable for gold coin or bullion, gold certificates are still legal tender today at their stated face value.

 

U.S. Silver Certificates (Blue Seal Notes)

Silver certificates were another kind of note issued by the U.S. Treasury between 1878 and 1963.  They were redeemable at the rate of 0.77344 troy ounces of pure silver for each dollar.  Much like gold certificates, each silver certificate had the following silver clause printed on it:

“This certifies that there is on deposit in the Treasury of the United States of America X dollars in silver payable to the bearer on demand”.

After 1928, U.S. silver certificates were issued in $1, $5 and $10 denominations, although denominations as high as $1,000 were printed in the late 19th century.  Post-1928, small-size notes are easily identifiable by their blue treasury seal.

The only exceptions to this rule were a couple of World War II emergency issues.  The first of these was a $1 silver certificate with a brown seal and the word “Hawaii” over-printed in several areas.  The other was a set of $1, $5 and $10 yellow seal silver certificates intended for circulation among U.S. troops in allied-occupied North Africa.  Both types of these distinctive notes were issued so that they could be easily demonetized if those territories were overrun by Axis forces.

By the early 1960s, it had become increasingly apparent that the rising price of silver would soon render it impossible for the U.S. Treasury to continue redeeming silver certificates.  As a result, the legal obligation to exchange these notes for silver dollars was suspended on March 25, 1964, with a provision that they could still be redeemed for the appropriate weight of raw silver granules or bullion bars until June 24, 1968.  It has been speculated that the U.S. treasury modified the redemption of these notes from coins to bullion in an attempt to dissuade people from cashing them in.

Much like U.S. gold certificates after 1933, U.S. silver certificates ceased to be exchangeable for any precious metal after 1968.  However, they still remain legal tender.

 

United States Notes (Red Seal Notes)

United States Notes were another variety of paper money issued by the U.S. Treasury during the 20th century.  These notes, which are also known as Legal Tender Notes, are characterized by their red seals.  They were first issued during the Civil War in 1863 and last released into circulation in 1971.

Since 1928, red seal United States notes have been issued in $1, $2 and $5 denominations, along with the singular and uncommon Series 1966 $100 bill.

United States Notes have not been redeemable for specie since the U.S. abandoned the gold standard in 1933.  Consequently, they were eventually determined to be redundant, and were gradually withdrawn from circulation in favor of Federal Reserve Notes in the 1970s.  However, like all of the other currencies detailed here, United States Notes continue to be legal tender.

U.S. Federal Reserve Notes (Green Seal Notes)

Federal Reserve Notes are the most recognizable of 20th century U.S. currency types because they are the paper money we still use today.  First printed in 1914 (in a large-size format), Federal Reserve Notes have been issued in denominations ranging from the lowly $1 bill to the mammoth $10,000 note.

The chief distinction between red seal United States Notes and green seal U.S. Federal Reserve Notes is that the latter have been issued by the Federal Reserve instead of the United States Treasury.

In addition, Congress has decreed that Federal Reserve Banks must retain collateral that is equal in value to all outstanding Federal Reserve Notes.  This collateral primarily consists of gold certificates (including the intriguing Series 1934 gold certificates mentioned above) and U.S. Treasury securities.  Theoretically, Federal Reserve Notes held by the public have a first lien on these assets, but are not redeemable for them.

Federal Reserve Notes eventually displaced gold certificates, silver certificates and United States Notes to be the only form of paper money issued in the U.S. by the late 20th century.  All Federal Reserve Notes ever issued are still legal tender.

 

High Denomination U.S. Paper Currency

High denomination U.S. currency refers to anything larger than a $100 bill.  These include the $500 note featuring President William McKinley, the $1,000 note with President Grover Cleveland, the $5,000 note with President James Madison and the $10,000 note with Treasury Secretary Salmon P. Chase.  The U.S. Treasury even issued an elusive $100,000 gold certificate with the portrait of President Woodrow Wilson on it.  However, only a handful of these ultra-rare $100,000 bills survive – all of which are in the possession of the Federal Government.

Although I’ve placed high denomination U.S. currency in its own category, all of these notes technically belong to one of the previously discussed types: gold certificates, silver certificates, United States Notes or Federal Reserve Notes.

High denomination U.S. paper money was regularly printed in the late 19th through the mid 20th century.  In most instances, these monster notes were used primarily by banks and other financial institutions.  Few individuals ever saw a circulating, high denomination bill due to their immense purchasing power.

For example, a $1,000 bill issued 90 years ago in 1928 would be equivalent to almost $15,000 in 2018 dollars, due to inflation.

High denomination U.S. currency was last printed in 1946, although they remained in circulation until they were actively withdrawn in 1969.  The decision to withdraw large denomination bills was largely driven by political anxiety over their potential use in organized crime, although there was never any explicit evidence that this happened systematically.

As a result, high denomination U.S. currency is very scarce today, especially denominations above $1,000.  Because there are a fair number of counterfeit notes targeting collectors, buyers of high denomination notes are advised to only purchase bills that have been third-party certified by Paper Money Guaranty (PMG) or PCGS Currency.

One of the most interesting high denomination notes is the Series 1900 $10,000 bill.  It is the only U.S. high denomination note found in the wild that is not currently legal tender.  Consequently, when these notes occasionally come up for sale, they sell for significantly less than face value – something that collectors love.

 

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