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Collectibles are terrible investments

fullstackeconomics.com

131–140 of 170 posts

Re: Collectibles are terrible investments

#131
I'm a guitarist, and have been buying / selling guitars for some 20 years now - and while I agree that the vast majority of guitars that are seen as collectibles would lose against the stock market, there are some exceptions.

The "holy grail" of guitars would be the 1959 Les Paul Standard, though any from 1958-1960 with high grade of flames (that is, wood figuring on the maple top) is very collectible. And there are some others that will fetch lots of money (Flying V in Korina, from same period, for example).

In 1959, said guitar with case would retail $307.5 - that's equivalent to $3038.06 in current money / purchasing power.

These days, such a guitar will cost you minimum $200000. That's almost 11% annual ROI.

If it's a beautiful "case queen" that's been laying in its case for most of the time, you could easily get $500k. That's almost 12.5%.

Or if it's a celebrity owned, the sky is the limit - though your initial investment would have to be much higher, unless the guitar was acquired ages ago.

Same goes for Fender Strats and Telecasters from the same period (up to the early 60s) - though these are in much higher abundance. Nice ones can be had for $25k-$50k, which would give you a return right around, or above, the stock market.

But of course, few would have known this, back in the day. These guitars didn't become collectible until the 70s, and certain artist playing them helped the hype.

With that said, I don't think people that bought these as an investment, are too much into investing. It's a nice alternative/side investment that you can enjoy as you age - if you play guitar. They don't generate rent, they don't generate dividends, but that was never the point either.

So far, they've proved to be investments on par with the stock market - even beating the stock market if you have the right item. In fact, some of them have outperformed the stock market by magnitudes for the past 2-3 decades. Those $200k Les Pauls only sold for a fraction back in the 90s, so the majority of appreciation is a more recent thing.

Re: Collectibles are terrible investments

#132
This article conflates multiple distinct mechanisms in a way that doesn't make sense.

For instance, the author implies that stock returns (in the long run) are comprised of economy-wide growth and dividends. The author provides a hypothetical example of 8% stock return being explained by 5% economy-wide return and 3% dividend return. This is wrong on so many levels.

First of all, dividends are a mechanism to transfer wealth from the company to its shareholders. Emphasis on "transfer". Dividends do not magically create new wealth out of thin air. If a company decided that - all else being equal - they will reinvest profits instead of paying dividends this year, the investors' returns would not be affected. Value of the skipped dividend would simply appreciate the stock price instead (when a company pays a $1 dividend, their stock price drops by $1).

Secondly, the author implies that without dividends a stock investors's returns would be constrained by economy-wide growth. This is nonsensical. You can own a company within a stagnating economy and that company can still turn a profit. Even if the economy is growing at 0%, a company might still make 10% profits per year. The connection between economic growth and company profits is not what the author believes it to be.

Re: Collectibles are terrible investments

#133
post #124

Earlier quoted context omitted.

Unfortunately this is why I've given up on investing anything more in stocks or crypto. Everything I invested since before COVID is down. My coinbase account currently has only 34% of the value I put into it 2 years ago, and I spread my investment over the top 5 hot currencies at that time (ethereum, cardano, algorand, sushi, bitcoin). My stock investments are doing better at 65% of what I invested (tech, engineering…

> investment [...] hot [...] at that time I don't think "hot at a point in time" is a good way to choose investment. Perhaps exactly the opposite? Edit: uhh, and the other things? I honestly think you were a little unlucky...

Atleast he's not both buying high _and_ selling low.

Re: Collectibles are terrible investments

#134

Earlier quoted context omitted.

why does 100:1 leverage contributes to upside, but isn't cancelled out by 100:1 to downside?

Because you can't go below zero. There's a floor to how much you can lose, and it's "everything you've put in", not "everything plus additional debt". ...typically, anyway.

> Because you can't go below zero. There's a floor to how much you can lose, and it's "everything you've put in", not "everything plus additional debt".

If you're leveraged, you are borrowing money, which means you can lose more than you put in as you could lose the money you borrowed and thus would owe on the debt. Further, if you are shorting bitcoin for instance, there is no floor.

Re: Collectibles are terrible investments

#135
Basically any best selling Lego set will sell pretty high if you can store them in mint condition during 20 years (the time for the kids playing today to become 30).

But I guess it’s not that easy to store enough of a high volume toy (when boxed) during 20 years for the operation to be really valuable.

(Edit : imagine just having kids and a room full of brand new legos)

Re: Collectibles are terrible investments

#136

This article conflates multiple distinct mechanisms in a way that doesn't make sense. For instance, the author implies that stock returns (in the long run) are comprised of economy-wide growth and dividends. The author provides a hypothetical example of 8% stock return being explained by 5% economy-wide return and 3% dividend return. This is wrong on so many levels. First of all, dividends are a mechanism to transfer…

Combining capital growth and yield is quite standard across the industry for measuring total return. Yes the dividend is reflected in the share price (it doesn't grow as much as it might have if reinvested) but that's completely fine. Combine them to get the total return. Pretty normal.

Re: Collectibles are terrible investments

#137
post #13

Earlier quoted context omitted.

That relies on you being able to guess. You can retroactively see which collectibles gained value, but you are unlikely to know that ahead of time. If you somehow do know - congrats, you’ve hit the jackpot. Maybe you have a place in the art community that introduces you to rising artists before they hit it big. Maybe you have access to sales data for toys before it gets published. But if you’ve read about it in the n…

Isn't exactly the same thing true of stocks? I always wish I had bought Apple or Tesla at the right time, but I didn't.

Based on historical data, if you buy 1000 random stocks or bonds at a random time, in ten years you’ll have made money - on dividends and value appreciation.

If you buy 1000 random collectibles at a random time, in ten years you’ll have lost most of your money.

Re: Collectibles are terrible investments

#138

Earlier quoted context omitted.

There’s some predictability in terms of people trying to buy all the things they wanted as a kid when they finally have the adult income to afford it. Some examples include muscle cars, BMX bikes, LEGO sets, and other things that a large population of children were aware of and wanted. If you just stock-pile the big sellers or scoop up the used stuff when it bottoms out in value then you might be able to profit. The…

How are 90s baseball cards, pogs, and yo-yos looking? Or "regular" opened copies of NHL 94 or what have you? I think we often overlook all the shit we were into that hasn't gotten expensive. We'd have to basically index-fund this shit if we had really been trying to invest in it in 2000 or so, and I think the losers would be a big problem for our fund. Maybe you bought a 3000GT instead of a Supra because you didn't s…

fwiw Topps (one of the Big Two manufacturers of baseball cards) recently attempted to go public via a Special Purpose Acquisition Company (SPAC). Their pitch? NFT baseball cards.

So they might actually make a comeback.

Re: Collectibles are terrible investments

#139

Earlier quoted context omitted.

If you were early enough into Beany Babies, you did make quite a bit of profit

If you bought and sold at the right time, yes. That is more of a luck factor. Bitcoin is still hitting new highs after 10 years.

Yes, that’s because the hand-wavy promise of utility is used to onboard new crypto buyers. Beanie babies quickly proved to be utterly useless.

Re: Collectibles are terrible investments

#140

Earlier quoted context omitted.

To my mind, the top echelon of trading card games, really only MtG and Pokémon, have a different economy. The games are actively played and people do make a living by furnishing the card market, as well as the organized playing market. I don’t have a description of the exact mechanism, but I think the greater liquidity caused by changes in the meta game, and therefore which cards are valuable at any given moment, len…

I am pretty sure there are now sport card collectibles that are connected to online and offline games, e.g. Panini has produced collectible sport stickers (mainly European football) for decades, but now also produces trading card games using the same sport cards, the "adrenalyn" TCG. The EA FIFA imprint should have something too.

That's interesting. I'll have to take a look.
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