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July 2003
Issue

 

 

  Collecting Investment Grade Antiques: by Ed Welch

           The real money in antiques is in that small area of the trade commonly referred to as “investment grade antiques.” Collecting investment grade antiques can add wealth to your estate. It can, but usually does not, make you rich. Dealing in investment grade antiques is a risky thing to do. It can make you a lot of money quickly. But you can just as easily lose a lot of money fast.

    Collecting investment grade antiques is similar to investing long-term in the stock market. Investment grade stocks, if held between 10 and 30 years, will make money. Everyone knows the big companies whose stocks are considered investment grade (General Motors, IBM, Coke, just to name a few). Buy the stocks when you are young and sell them when you retire, and common wisdom has it that you will make a lot of money. This method of investing somewhat like watching grass grow. Nevertheless, it often works.

   Collecting investment grade antiques is a bit more exciting, but not much. About one-tenth of one percent of any category of antique is of investment grade. If you want to make money collecting antiques, buy the best art glass, the best period furniture, the best paintings and sculpture. Keep these items 10 to 30 years and you will make money.

 What About Collectibles?

     Collectibles, by their very nature are not unique. They are mass-produced and subject to the whims and fantasies of collectors and dealers. The selling price of a given collectible can skyrocket only plummet to a new low in weeks. I can easily think of dozens of collectibles that were selling for a lot of money ten years ago that today are nearly worthless. If you are collecting anything and do not understand the difference between an antique and collectible, you owe it to yourself to find out before you get too much money tied up in your collection.

    But collectibles are the ideal moneymaker for the aggressive dealer. The trick is to catch a new fad in the early stages, invest as many thousands of dollars as possible, and hold until someone writes a book on the subject. When the book hits the marketplace, sell as fast is you can. If you can buy one or more books on the subject, it may already be too late, especially if the books are well researched.

    I know a dealer that has many thousands of fountain pens that he bought at prices ranging between $5 and $20. Most of his fountain pens are now worth hundreds of dollars each, some are worth thousands of dollars each. For more than five years, I have had an ongoing debate with this dealer. Although he wants to hold on to them for a few more years, I think he should sell. This is because several books have been written on the subject, the price has leveled and is beginning to decline, fountain pens are a mass-produced commodity and, therefore, a collectible. Fountain pens may go up in price when the economy recovers. I believe that this is unlikely.

     I think he should sell now and put some of his considerable profits into a retirement account. I think he should put aside a portion of his earnings for a college education for his children. Finally, I think he should invest heavily into an emerging collectible that seems to have promise. 

    This paper cannot print what he told me to do with my advice. He claims that I have become too conservative with age. I disagree, and have put my money where my mouth is: I recently purchased 400 collectibles for $10,000. I will hold these items between 5 and 10 years. Several books have recently been published on this collectible. All the books are poorly written, inaccurate, and the prices quoted are greatly inflated. All of this is beneficial to me as a speculator. I will not make nearly the amount of money that my friend will make on his fountain pens, but, I will do very well considering that at my age. I no longer have the luxury of time.

    This brings us to a the question: who is a collector and who is a dealer? True collectors are buying for the long-term, for example between 10 and 30 years. Dealers are buying for the short-term, or more like 10 to 30 weeks. It is much more difficult to be a dealer. Dealers require more knowledge, they must be aggressive, and they must be willing to suffer a financial loss should they make a buying mistake. Most successful professional dealers are in the trade full-time. Professional dealers must be willing to travel extensively, spend a lot of money on research, and be risk takers.

    Long-term collectors of investment grade antiques, on the other hand, are protected by time against poor judgment, haste, and lack of knowledge. Dealers of investment grade antiques have no protection. A bad buying decision can result in the loss of thousands of dollars. Individuals unwilling to suffer a substantial loss by reselling a mistake for less than its purchase price should avoid dealing in investment grade antiques.

    I speak from experience. I have been a dealer of investment grade antiques since 1968. The most money that I have lost on a single item is $8,625. I bought a fake for $8,600 and paid a welder $25 to cut the thing into bits and pieces. Fortunately, buying this fake is unusual. Most of my losses dealing in investment grade antiques are between $100 and $2,000.  Despite the risk, I love the challenge, the thrill, and, quite frankly, the money.

   It is a mistake to repeatedly show an investment grade antique to the same customer. I keep my investment grade antiques for six months, but I never show the same antique to a customer twice. My customers have just one chance to buy an investment grade antique from me, which is the first time they see it. Dealers of investment grade antiques have two choices when it comes to items that do not sell quickly. They can consign the item to an auction and recoup as much of their investment as possible. They can put the item in long-term storage of 5 years or more.

  It is nearly impossible for a person to be both a dealer of and a collector of the same type of investment grade antique. That person would find it difficult to resell the very best items that he or she had been able to purchase. That person would most likely keep items that did not sell. Why would anyone keep expensive items that other qualified collectors had declined to buy? Collectors should collect, dealers should buy and sell. Mixing the two is a poor business decision that serves neither objective well.

  Dealers must consider the current popularity of the item, its current price structure, the cost of reselling, and they must have some idea as to which one of their customers will be the most likely buyer. Successful investment grade dealers are, for all practical purposes, paid buyers. They must develop a clientele of customers who collect investment grade antiques. Most of what they buy should be earmarked for a specific buyer. Collectors, on the other hand, can almost disregard today’s selling price. They are free to pay more and allow inflation and market demand to provide the profit.

  If your children are grown and you have money that you will not need for 10 years or more, consider buying investment grade antiques. Do not buy 10 mediocre examples because they are cheap. Instead, hold out for one or two investment grade pieces. Study and research the item you choose to collect. Make a point of the befriending dealers who sell this antique.

  Most likely, you will see hundreds of examples before you find one investment grade example. Remember, if you do not pay attention to and study all the examples that you see, you will have no knowledge upon which to base a buying decision when you to find an investment grade example. After you purchase your first investment grade antique, you will no longer look at common examples with the same eyes. Most important of all, you will be able to look at an antique priced in the thousands of dollars and know with certainty if that antique is overpriced, under priced, or fairly priced. If you need to look in a book for value, you are certainly not ready for the investment grade marketplace. This is true for collectors as well as dealers.

 

This cased surgical set is 100 percent complete. The mahogany case is in excellent condition. All the tools have ebony handles, all are in excellent condition, and all are signed by the maker.  It has a value of around $4,000 in today’s antique marketplace. Nevertheless, this antique is not of investment grade. On a scale of one to 10, with 10 being the best, I would rate this surgical kit no higher than six. This is because the lines of the tools lack grace and style, and they are bulky and do not balance well in the hand. Although the finish and fit is well done, they cannot be referred to as excellent and certainly not superb. For the same amount of money, one can buy a similar kit made by any of several other makers who produced surgical instruments of superior quality. One secret to investment grade collecting is calculating value received per dollar spent.

 

Reference Links You'll enjoy
www.metiques.com
This is an online directory
of Maine Antique Dealers

www.maineantiques.net
This is a Search Engine database for New England and Northeast Art and Antiques Trades

www.theappraisernetwork.com
This is a do it yourself message board that users can use free of charge to ask questions about the value and identification of antiques