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The Collectible Market

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There is a story that is often told about the collectibles market. The story is anecdotal so there's no way to tell if it's true, but as myth it is true enough to illustrate a common 21st Century idea.
There are several versions of the story, the most common version runs roughly like this: A guy walked into a toy store and discovered that the store had three (sometimes four) models of a specific early Matchbox Volkswagen. The guy knew that Matchbox only made four (sometimes five) of this model and as a result they were very valuable. In the course of a conversation with the owner, the guy discovered that the store was up for sale, and he bought it on the spot, never worrying about financing the operation. He didn't have to worry, because he knew he could get the value of the store and then some just by selling one of the Matchbox Volkswagens.

It's a good story, and it has a reasonable possibility of being true. Unlike so many urban legends, there is a certain amount of hard peripheral evidence for the story's main theme: the high value of middle-class collectables. Recently very rare Matchbox Volkswagens have brought home sums in the $60,000+ range at auction.

The prices of collectables and memorabilia have skyrocketed in the last few years as Baby Boomers have begun to push old age with a very short stick. Nostalgia is a potent market force. The Fender Stratocaster played by Jimi Hendrix at Woodstock—an instrument that enjoys no particular distinction besides its dead famous owner—went for a cool $338,580. On a more "affordable" level, Boomer toys, records and other effluvia regularly bring fantastic sums on Ebay and other marketplaces.

Recently a Schwinn Stingray "Crate" bicycle from late in the Baby Boom era was priced at $600—the first bid was placed at $300.

A record by the Beatles with a notorious cover went for $450, despite the fact that the cover was damaged. The same cover in undamaged condition should sell for nearer the $2000 range. The record itself is considered "valueless."
A Topper Secret Sam "spy" attaché case went for $450.
The pricing on very desirable Barbies will run from $300 to $6,000, with the really rare ones selling for even more.
It would be a pleasure to tell you how much a Mickey Mantle rookie year baseball card is currently worth, but the prices were unavailable on Ebay as this article was being written: the deals on the cards had all been closed, presumably all for more than the original $1000-$1,500 starting bids (note: "book value" for the card is around $10,000- $12,000).

The trouble with the "old junk" market is that Hendrix didn't play that many guitars and not very many toys, records and gum cards survived Boomer childhoods. Worse, the pricing on these Boomer collectables puts them out of most unafflicted people's price ranges.

It is interesting that so many Americans now define themselves by their stuff…either that or many people choose their stuff based on some self-definition. In terms of economic decisions it boils down to the same thing: you are what you buy. But there's not enough old junk for everyone to use in their self-definition so, to fill this howling void in the market, companies like Easton Press and Franklin Mint exist to create collectables ready made.

The value of collectables is determined by esthetic value and nothing else. Assuming you can stand the clutter, there is nothing wrong with having a ton or two of great stuff around the house. Where collectables become an investment problem is when the collector confuses the value he or she has for the items with their value in the bigger world. In short, collectables and memorabilia are not investment instruments and are generally poor investment choices.

Most of the time when this argument blows up, a collector will get an exasperated look on their face and petulantly attempt to explain that the items in their collection have held value for x years at y price, that price typically increased in value at a rate of z. Which may be true, but if all the collectors in America emptied their collections today and placed everything in their collections at auction with no reserve price, the stuff would find its natural value, and a lot of bubble gum cards would be as indigestible as the gum with which they originally came.

This is not a condemnation of the memorabilia market, but it is a call to recognize collectables for what they are: collectables. Sure, all that old stuff is fun, but unless you happen to be the guy in the Matchbox Volkswagen story and immediately go into sales of the collectable you happen to like, there is usually little margin to be realized from commodities of this kind.

Collectables are a very poor hedge against inflation. When the "real" markets collapse or become soft, vintage items have traditionally been the first commodities to loose value. Non-vintage "collectables," those pre-fab items made to meet the needs of a memorabilia-hungry section of the market—generally depreciate from catalog value the second they are delivered. In the case of the "made-to-collect market," even those items made of silver and gold have no real value beyond than that of the metal that went into their making, and that will be of less value than the original catalog cost of the object.

Again, the collectors of those items will argue that they have increased in value, and will often have some auction or "book" figures to back that up. Those people need to remember that the market, though soft recently, has not gone soft enough to completely rob value from these items; when a seriously bad economy hits, the bottom will fall out of the collector's market.

The trouble with the collectible market is that things that move there have value because someone says they do and prices in one auction do not mean that a given item's value is equal across all markets or even a second time in the same auction. Also, the items valued by one sector of the market are not generally known to have a value across all collectors. For example, a baseball card highly valued in its niche may have little-to-no value among the collectors of Mad magazine paraphernalia.

Worse, it is impossible to predict which items will enjoy heavily inflated values over the years. The first lot of Star Wars action figures from the 1970's has become startlingly pricey. If one of those old toys is laying around your house in its original packaging, you can probably sell it for a hefty price ($250+). Despite this, a poor choice of investment would be to run to the local Hyper Mart and buy a bulk shipment of the current Star Wars toys. A lot of people have that same idea and in 30 years when all of you try to dump the things on Ebay, you're going to rediscover the law of supply and demand.

The suggestion is to collect the things you like and keep them for your own pleasure. Enjoy them. Talk to other fanatics about them, but unless you are assured of an immediate value—based in some form of specie—don't consider such bits and pieces as a part of your retirement portfolio. These items have value only as long as many people want them and have the disposable income to buy them. Once things get rough and those disposable incomes go away, then they will loose value quicker than a mid-sixties cap guns break. Worse, since these items' values are primarily driven by purchases by Baby Boomers, the value they have will disappear as soon as the people of that generation get tired of repurchasing their past.

Collecting is great, sometimes it can be profitable in the short run, but if you're going to pursue it for financial gain, it's best to plan on living it as a profession and liquidating stock when possible as quickly as possible.

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