coins, stamps and other collectables

[SmallCap]

A couple of anecdotal observations and some questions that result.

 

I remember reading some old investment books from the 80's and they advocated a portion, say 10% of your investments be in collectibles, they primarily recommended coins. They could point to some very consistent and nice returns on those collectibles over the previous 50+ years. What do you think, does this have any relevance to investing today?

 

My father and I collected a bunch of coins and stamps during the 80's and he justified it based on the long history of steady increases in the values of coins and stamps. But looking at it now it seems like that was the high point for prices and the have trended down since then. Baseball cards have followed the same path but more dramatically. The trend seems to be general down since the 80's and from what I have heard, values dropped a lot in 08 and they haven't recovered since. Not counting bullion values, do you see any change in these trends or reasons why collectibles deserve a place in your investment plans?

 

Now let me take this to my situation personally,  I have kept those coins and stamps in boxes in storage for a long time. I haven't really kept up with the market until now. I originally assumed that it was worth holding onto because they would just increase in value. I had a very vague idea of doing something with them with my kids. But now that I have kids at that age I am questioning if I want to really get them involved in collecting and my desire to keep things around that aren't benefiting me somehow has greatly decreased as I have loved decluttering my life.

 

what are your thoughts? outside of sentimental value is there any real reason to keep these boxes of coins and stamps?

[TwoCitiesCapital]

A couple of anecdotal observations and some questions that result.

 

I remember reading some old investment books from the 80's and they advocated a portion, say 10% of your investments be in collectibles, they primarily recommended coins. They could point to some very consistent and nice returns on those collectibles over the previous 50+ years. What do you think, does this have any relevance to investing today?

 

My father and I collected a bunch of coins and stamps during the 80's and he justified it based on the long history of steady increases in the values of coins and stamps. But looking at it now it seems like that was the high point for prices and the have trended down since then. Baseball cards have followed the same path but more dramatically. The trend seems to be general down since the 80's and from what I have heard, values dropped a lot in 08 and they haven't recovered since. Not counting bullion values, do you see any change in these trends or reasons why collectibles deserve a place in your investment plans?

 

Now let me take this to my situation personally,  I have kept those coins and stamps in boxes in storage for a long time. I haven't really kept up with the market until now. I originally assumed that it was worth holding onto because they would just increase in value. I had a very vague idea of doing something with them with my kids. But now that I have kids at that age I am questioning if I want to really get them involved in collecting and my desire to keep things around that aren't benefiting me somehow has greatly decreased as I have loved decluttering my life.

 

what are your thoughts? outside of sentimental value is there any real reason to keep these boxes of coins and stamps?

 

Seems reasonable to have a portion of your cash in non-financial portions of the economy. Collectibles is one way to achieve that.

 

I'm not an expert on collectibles, so I stray from that arena, but I do tend to keep a portion of my money aside for small time, opportunistic endeavors. Something like floating cash to buy pre-sale concert tickets for re-sale or flipping used luxury watches.

 

These things don't scale well, but they offer me the opportunity to put some money to work at higher returns than I can consistently achieve in the market while being largely uncorrelated with financial assets.

[mttddd]

before all the automated scalpers i used to love buying tickets for big shows and flipping them. If you only do it with the truly big acts its pretty fool proof. A lot harder to compete with the computers...

[eclecticvalue]

before all the automated scalpers i used to love buying tickets for big shows and flipping them. If you only do it with the truly big acts its pretty fool proof. A lot harder to compete with the computers...

 

I thought there was a bill to ban ticket bots.

[johnny]

"Collectables" seem generally to be speculation on certain aspects of culture (with some underlying speculation on the civilization). The value of baseball cards going forward depends entirely on the cultural interest in baseball (and how that skews across the wealth distribution).

 

Precisely because of the slower pace of cultural evolution -and- the incomplete and unreliable documentation of "non-financial" assets, we're all susceptible to m-m-m-major survivorship bias when looking back on "how collectibles performed". By definition, if you're looking at something understood to be "collectable" in 2017, you're already looking at a winner. It's worse than survivorship bias with stocks though; at least we have the ability to correct for bankruptcy/delisting effects in equity performance. There's no EDGAR for antebellum firearms.

 

So my first question is: what sort of things were vaguely considered to be collectible in 1950 (or 1900, or 1850) that have been obliterated from cultural consciousness? How do I even go about compiling this list? At what point do I know my list is complete? Because without a complete list, I have no ability to even pretend to know the performance of the asset class.

 

In my lifetime I've seen Pogs, Beanie Babies, Pokemon/Yu-Gi-Oh/Magic cards, etc. all come and go. Each one of these has a credible claim to status as "collectables" but it turned out (only with benefit of hindsight) that the underlying cultural significance was ephemeral. A lot of cultures valued seashells -pretty- highly. I'm not sure who, or where, or when. But I know it happened and that at some point it stopped. Yet when we form or intuitions about the "collectable" investment class, we are very likely to not credit these against the winners. Somehow it ~feels~ totally unserious and unfair to compare Pokemon cards to baseball cards. But, why? There was some point when some player's rookie card had the same market value as a first-edition holographic Charizard. At that specific moment in time the comparison was not at all unserious or unfair, it was literally the market's assessment.

 

So, how popular will baseball be with millionaires in 2050? You may have a very strong opinion on that, but I would say the "collectable" designation gives 99% of participants a completely unjustified sense of security/stability/common-sense-understability in what should be viewed as something more speculative than Facebook stock. And it all stems from looking back at the 50 or 100 year performance and attributing that to "collectable performance" instead of something that has nothing whatsoever to do with collectables. Such as:

 

The great success of baseball cards occurs over a timeframe where the country with a peculiar obsession with baseball went from being in the midst of a depression (where many thought there would be no recovery, or communist revolution was imminent) to undisputed back-to-back world-war champion, and global economic and military hegemon. And it probably explains much of why pieces of paper with some chubby dude Nestle named Baby Ruths after are suddenly worth millions of dollars while memorabilia from the National Socialist League of the Reich for Physical Exercise seems to be marketed to a much narrower audience.

 

It's also worth considering that a great deal of "collectible" value derives from the disintegration/disappearance/destruction of many/most/nearly all instances of the item in question (IE rookie cards from the 1920s). This seems like a pretty precarious investment thesis a-priori. If you tell me that a thing is going to be very valuable in 50 years because there's a 99% chance it will be misplaced or destroyed in the meantime, I'm going to need quite a big return to simply break even, probabilistically. And if you're already paying a "collectable" price, then I think that means you shouldn't be baking in any assumptions about further supply shrink. Not sure how you seperate that out from the other factors involved in appreciation.

 

[DTEJD1997]

I know a little bit about this...

 

A). I think the decline in baseball and sports cards was the result of speculative bubble in the 90's and that bubble got popped when one (or more) of the sports card manufacturers was found out to have faked numbers of cards produced.  They were actually producing much more than they reported in order to give an appearance of scarcity, inflate prices & such.  After that...anything other than ultra-rare, very old cards, lost much of their value. A lot of people lost interest....

 

B). I once had a real estate business partner whose wife was putting a substantial part of her retirement on "beanie babies".  She had a WHOLE room of their house to store these things and show them off.  She was travel through the midwest to get them...going to McDonalds 100 miles away, in the middle of nowhere, buying 100 value meals simply to try and get a "rare" beanie baby.  Last I heard, she still has them all, but is looking at a 99%+ loss.  Obviously, her retirement plans have changed....

 

C). When I was growing up, my father and I collected electric trains, primarily Lionel.  We would go to garage sales looking for them.  One of my Dad's best friends had one of the best collection of trains in the whole country.  Hundreds of thousands of dollars worth of them...Through the years, I lost almost my trains...wish I still had some of them!

 

D). I used to collect stamps also.  The market in stamps has shrunk, and has largely moved online.  Very few retail stores have any serious inventory of them.  You simply don't see much interest in them.  I imagine the very, very rare & old ones still retain value...but would be skeptical of their value unless you know EXACTLY what you are doing.

 

E). I have been seriously buying and selling precious metal and coins (silver & gold) for a few years now.  This is a good market, and easy to learn the basics.  I think that it is important for serious people who have assets, to have some percentage of them in physical gold & silver.  I had arguments with family members about this for a long time.  They simply didn't really think it was that important....UNTIL their former employer entered bankruptcy and their pensions got cut a little bit.  That really caught their attention.

 

You can go all across the spectrum and there are certainly some "gold bugs" out there.  I think the VAST majority of your wealth should be in stocks, bonds, real-estate and such...but think about this:  If you are worth $1MM, 1% of your wealth would be $10,000.  If you put 1% of your wealth into gold, that would be about 8 ounces.  If you put that into silver, that would be about 550 ounces.

 

Gold & silver are not susceptible to counter party risk.  Most financial instruments have that risk, however low it might be.

 

I love to show 5 $20 St. Gaudens and a $100 "gold note" from the 1920's to prospective purchasers.  The $100 gold note could have been converted to those almost 5 ounces of gold back in the 20's.  It is STILL legal tender, and still worth $100.  Which would you rather have?  5 1 ounce gold St. Gauden coins OR the $100 gold note?

 

Think about how many times in the last 100-150 years there have been wars, financial panics, vast inflation, etc.  Not too often, but they do happen.  Certainly higher than a 1% chance per year.

 

As I've started buying/selling coins, I've also been exposed to jewelry.  What an incredible and fascinating market.  I would like to learn more about that and ramp that up.

 

Just my thoughts...

[SharperDingaan]

Years ago, shortly after leaving university, some friends & I partnered together to pursue 'adventures in trade'; primarily as a way of keeping in contact with each other, and to use the opportunities resulting from 1-2 year international assignments. One of the early ventures was 'collectable' furniture.

 

As one of the guys, we would scour northern England & buy up wrecked late 1800's couches & chairs, put them in a container, and ship them to Halifax. The girls went to Paris and Milan and bought bold designer couture fabrics from 6 names (Lacroix), for export to Halifax. One of the moms & her friends, would then re-upholster the frames in a couple of garages, with the finished product sent on to New York (usually as part of someones personal effects) for sale in a high-end shop. Put a designer name on a unique 'one-off' piece of furniture (evidenced by chips/dents on the frame), & you can sell it as a collectable (with attitude!) - at a price comparable to an oil painting. The profits paid for a few wedding dresses, and one or two receptions.

 

The money in collectables is in recycling them, not holding them.

 

SD

   

[SmallCap]

Some really good thoughts here, thanks for the input.

 

Johnny, good thoughts on the entire "collectibles market"

DTEJD1997, I wonder what I could teach my 8 year old about investing by doing some investing in very low end coins.

SharperDingaan, brilliant statement "The money in collectibles is in recycling them, not holding them."

 

I am thinking of selling the coins that I have that are worth over say $10 and keeping the rest for no good reason, they might be interesting for my kids to see

 

I have no idea what to do with my stamps, probably no stamp that I have is worth over $10

[watsa_is_a_randian_hero]

"I am thinking of selling the coins that I have that are worth over say $10 and keeping the rest for no good reason, they might be interesting for my kids to see"

 

I would do the opposite. 

 

The ones that are worth under $10 will probably always be worth under $10.  They ones that have appreciated to date have appreciated for a reason (more rare, actually have collector value, bullion value), and will likely continue to appreciate. 

[DTEJD1997]

Some really good thoughts here, thanks for the input.

 

Johnny, good thoughts on the entire "collectibles market"

DTEJD1997, I wonder what I could teach my 8 year old about investing by doing some investing in very low end coins.

SharperDingaan, brilliant statement "The money in collectibles is in recycling them, not holding them."

 

I am thinking of selling the coins that I have that are worth over say $10 and keeping the rest for no good reason, they might be interesting for my kids to see

 

I have no idea what to do with my stamps, probably no stamp that I have is worth over $10

 

Well, if you want to teach your 8 year old about investing/collecting, I would do 3 things....

 

A). Get a "Red Book" that lists the value of all USA coins.

B). Go to a reputable coin dealer and get $50 or $100 of unsearched wheat pennies.  Have your child search through them for "rarer" dates & mint marks.  I've done this myself many times.  It is time consuming, but easy to do.  I've found $15 & $20 pennies sometimes!  Obviously those are pretty rare, but you should be able to find pennies that are worth $.50, $1, $2, or so.  A great return for a few cents!  That should get your child's interest

C). Once they have learned about the pennies, and are ready to move on to slightly more advanced/valuable things...go to banks and get rolls of $.50 pieces.  Most people know that ones before 1965 are 90% silver, but fewer people know that halves from 1965 to 1970 are 40% silver.  I've found 40% silver coins many times.  Obviously these are worth substantially more than $.50.  I know people that make some serious money doing this.  Of course, they have a route and have scaled it up.

 

Finally, another thing you can do is look for copper pennies, 1982 and before.  The melt value of these are greater than $.01, depending on the market price of copper.  It is one of the best investments that you can make!  It will never be worth LESS than a penny!  It could be worth substantially more if the price of copper goes up...Truly a NO LOSE situation!

[mbreject]

Unless you need the money, I wouldn't sell it. They're memories you had with your dad.

 

I wouldn't steer my kids towards them though. I was looking at my coin collection a few weeks ago and was shaking my head about some of my purchases. I've paid $400+ for a coin with an intrinsic value of $10. Though it's increased in value, I still feel stupid.

 

I still enjoy looking for old coins when I get change, but it's getting harder and harder to find the good stuff. I do know someone whose mom worked at a bank and was able to get huge amounts of awesome coins. The son has since inherited the collection and is now, contemplating selling them =(

[JayGatsby]

Seems like the people I've known who have been successful with this sort of thing have a deep interest in the underlying product (baseball, stamps, guns, art, etc). For those people who have an information advantage, opportunities present themselves. If your information advantage is declining (old boxes), it seems like you may do better with that value in something else.

 

Personally i've never met a younger person who cares about stamps. Seems like stamps had sentimental value to a generation that communicated primarily via letter, particularly to those who served overseas and a stamp was the key to sending a message a message back to someone at home. Having said that, I've never really asked so maybe it's just never come up.

 

Just my two cents.  ;)