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Collectibles are terrible investments

fullstackeconomics.com

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Re: Collectibles are terrible investments

#81

Post by vmception »

Great article, yes, Masterworks is a joke or their price index is disengenious

Yes, past performance is not indicative of future results, its also the best metric we have for future results

Not responding to a request for comment means nothing

But the Beanie Babies… there was a rational trade there, a supply constriction when a supplier wasnt able to fulfill the beanie baby production contract. The founder resolved this and flooded the market and the prices tanked. Beanie babies arent the best example of irrational exuberance. Yes there were people far removed from active trading that merely believed in price appreciation, do these people matter? They exist in the most rational markets too

Re: Collectibles are terrible investments

#82

Post by Natsu »

majormajor wrote: post #8
allturtles wrote: post #7

I find this argument very strange: > But it is, because in the long run, assets without cash flows cannot increase in value more than the economy as a whole. If something appreciates faster than the whole economy in the long run, it eventually eclipses the whole economy, which is impossible. No one is operating on an infinite time horizon in their investments, so this argument seems moot. You can certainly find colle…

The article is arguing that you aren't likely to be able to pick the ones that will grow faster than the economy as a whole over the time frame you intend, because it relies on an extreme amount of right-place-right-time luck. If you were looking for the next Beanie Baby for the last 20 years, do you think you would've found it? I think it's also arguing that the particular appreciation you need to capture largely on…

> If you were looking for the next Beanie Baby for the last 20 years, do you think you would've found it?

Even easier, if you just pick the right 6 numbers you could end up with millions of dollars.

Re: Collectibles are terrible investments

#83

Post by DennisP »

majormajor wrote: post #51
charlieyu1 wrote: post #44

Earlier quoted context omitted.

$1 on Bitcoin ten years ago are worth over ten million dollars now. And I think people thought Bitcoin had potential, even back then. Definitely something you wouldn’t mind spending a few bucks on. But back in the day it was quite different for average folks without enough tech knowledge to mine or buy crypto.

Where are you getting your numbers? They don't match my recollection, or some articles I'm seeing: https://www.investopedia.com/articles/forex/121815/bitcoins-... "Bitcoin's price rose again on April 13, 2011, from $1 to a peak of $29.60 by June 7, 2011, a gain of 2,960% within three months. A sharp recession in cryptocurrency markets followed, and Bitcoin's price bottomed out at $2.05 by mid-November.4 The following…

You'd have to go a little further back. The first real price for BTC was in 2010, when someone paid 10,000 BTC for two pizzas, worth about 40 bucks. From that to the current price of $40K per BTC is a gain of ten million times.

https://en.wikipedia.org/wiki/History_of_bitcoin#2010

Of course, you had to be a serious deep-in-the-weeds enthusiast to get in that early. Maybe that's the sort of people who tend to make money on collectibles, too.

Re: Collectibles are terrible investments

#84

Post by allturtles »

allturtles wrote: post #7

I find this argument very strange: > But it is, because in the long run, assets without cash flows cannot increase in value more than the economy as a whole. If something appreciates faster than the whole economy in the long run, it eventually eclipses the whole economy, which is impossible. No one is operating on an infinite time horizon in their investments, so this argument seems moot. You can certainly find colle…

Many of the replies to me provide other arguments for why stocks are a better investment than collectibles. I'm not disputing that. I just don't think the fact that collectible returns can't outpace the economy forever is a relevant reason.

Re: Collectibles are terrible investments

#85

Post by [deleted] »

majormajor wrote: post #51
charlieyu1 wrote: post #44

Earlier quoted context omitted.

$1 on Bitcoin ten years ago are worth over ten million dollars now. And I think people thought Bitcoin had potential, even back then. Definitely something you wouldn’t mind spending a few bucks on. But back in the day it was quite different for average folks without enough tech knowledge to mine or buy crypto.

Where are you getting your numbers? They don't match my recollection, or some articles I'm seeing: https://www.investopedia.com/articles/forex/121815/bitcoins-... "Bitcoin's price rose again on April 13, 2011, from $1 to a peak of $29.60 by June 7, 2011, a gain of 2,960% within three months. A sharp recession in cryptocurrency markets followed, and Bitcoin's price bottomed out at $2.05 by mid-November.4 The following…

[deleted]

Re: Collectibles are terrible investments

#87

Post by bruce511 »

magicroot75 wrote: post #34

Houses also do not generate income. And many people also feel the urge to consider them an investment.

I assume you are talking about a personal home you live in.

In this context a house generates income by reducing a non-optional expense. [1]

In other words, once paid off, you are living rent free[2]. Since housing is usually a large part of any budget, this is a significant cash-flow gain.

While paying it off it also has the effect of "fixing" rent [3] - potentially over a long period of time. This can work as a hedge against inflation - or to put it another way, in inflationary environments it can cause your housing cost to diminish.

Ownership also provides a hedge against rampant house price inflation,which drives up rent.

Lastly it acts as a store of future value[4]. If the market goes up then "downsizing" on retirement can free up cash. If the market goes down, then you have a place to live rent free. Either way you have a place to live.

Whether home ownership is the right option for you depends on your circumstances. It can be a critical investment for some, or a hindrance to others.

[1] there are clearly enormous differences in housing costs based on location, size and condition. You may get better returns by simply renting a cheaper house, and investing the difference.

[2] while you won't pay rent, or mortgage, you will encounter very real maintainence costs and taxes. These will be less than rent, but still a very real number > 0.

[3] if your mortgage interest rate is flexible then inflation will likely drive up interest rates, but this is a secondary effect and applies to the interest portion of loan repayment, not the capital portion. This can change literally overnight, a renter typically is insulated from this for the duration of the lease, but may then see an exaggerated increase on the next lease.

[4] assuming you buy a house you can afford. If you reach for something you can't ultimately afford it will likely end badly.

Re: Collectibles are terrible investments

#88

Post by Retric »

djbusby wrote: post #58
Retric wrote: post #42

Earlier quoted context omitted.

Stocks have a positive bias above overall economic growth in dividends. In other words if you owned 1% of the US stock market in 1980 then without luck or skill you could turn that into owning more than 1% of the stock market in 2020.

Really? It just feels like dilution from IPOs would make it less percentage than the original stake.

Yes a large part of this is IPO’s are uncommon and companies go public early on when they are much smaller. But the other half is dividends collectively add up to enormous amounts of money.

Microsoft’s ~0.8% dividend doesn’t sound like much but it’s ~15 billion dollars every year. It’s rare for a US IPO to be that large and few US companies IPO every year. Sure Facebook was $104 billion at IPO, but that’s the largest ever yet Microsoft’s dividend alone would have paid for it in less than a decade.

PS: That’s looking at US companies, global IPO’s are tricky.

Re: Collectibles are terrible investments

#90

Post by poink »

The exception to the cash flow argument, if you’re willing to stretch the definition of “collectible” a bit, are rare items that can be used to generate revenue by skilled artists/artisans who might be willing to pay a premium to rent the collectible. I’m thinking things like Stradavarius violins.

There are NFT projects that are trying to operate in this way. That NFT game that recently got robbed is one example. Players are apparently being staked by investors who are loaning them valuable characters. People trying to license their NFTs for use in media are another.

I don’t think any of this will work for NFTs, mind you.

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