Collectibles are terrible investments
fullstackeconomics.com
fullstackeconomics.com
> 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 collectibles that have grown faster than the economy as a whole over a period of O(decades), which is all any human needs.
e.g. a Black Lotus card from magic was about $15 in 1994 and about $11,000 (or more, depending on age and condition) in mid-2021. [0] In that same time period, the S&P 500 has gone up only about 10x.
[0]: https://infinite.tcgplayer.com/article/A-History-of-the-Pric...
I think it's also arguing that the particular appreciation you need to capture largely only happens at the "before you heard of it" part of the curve. I don't think it has quite enough specifics there, e.g. would buying a Honus Wagner card in 1990 compared to a bunch of stocks have paid off over the last 30 years? I haven't done that research myself.
Even easier, if you just pick the right 6 numbers you could end up with millions of dollars.
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, infra, pharma). Most are doing ok (down about 10%) but one in particular has absolutely tanked even though their pharma products are doing great and they've got two promising drugs in clinical trials. It's value has gone down 65% in the last year.
People will tell you to do you DD but the simple fact is, you can't. The market doesn't operate on any type of logic, a cat can do as well as a stock broker at picking stocks, and huge investment firms only win out in aggregate because they can (usually) absorb gigantic losses.
Right now I'm "bag holding" for the foreseeable. I consider these things "back pocket lottery tickets" that might one day give me a small win. But for the future I'm maxing out my pension and saving enough to buy a rental property, because one thing that has never dipped through boom and bust (at least where I live), is rent.
Edit: I lie, part of my TC is stock, so wherever I work, I am "investing in them" too
No they do not tell you to DD. Just do boggleheads method.
And its your fault for "investing" in shitcoins (all coins are shitcoins).
And the time horizon is 20 years and not 2.
You can buy a house and it needs a repair in the 2nd year and you are again in the hole. You get a bad tenant and again bag holding.
Everybody has promising clinical trials all the time.
You may want to reconsider investing in crypto too if you are down %65.
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...
The big issue is carrying costs. If I could have parked a bunch of 70s/80s Porsches in a climate controller garage for 30+ years I’d be cashing in right now.
Let's try to predict the future instead: which of things that 2022 kids are into should we be buying up for 20 years from now? Roblox items? New Pokemon cards? (I don't know if I actually can come up with any other things off the top of my head, lol.)
Streamer memorabilia: https://www.gwern.net/Startup-ideas#streamer-memorabilia
Tho I think the average HNer is too out of touch to make good investments in this field and would be better off asking their kids
Obviously, who would have known, but at least in video games you can watch prices start to rise about 20 years after a consoles original life.
From cars I'm not sure, Teslas? Or will they just die on their own.
So they might actually make a comeback.
Are you sure? I investigated once the Mercedes 300SL Gullwing. Despite the high price it fetches, it's still a lousy investment, if you consider inflation, compare it to S&P 500 returns, and account for all the storage costs, insurance costs, and costs to keep it in running condition.
Cars decay even in a climate controlled garage. I've had some problems with my '72 Dodge with plastic parts becoming very brittle, and some things just disintegrating when they're touched. Not that I mind, I didn't buy it as an investment.
Probably not worth it as an investment however - I’ve done it and sure some of the sets I was able to sell for much more but many just sit there.
It is about timing, in both buying and selling. And then in carrying.
Not quite true for MTG. It was insanely popular in the mid-to-late '90s, and you could still pick up a black lotus for $250. Dual lands, which are now $100+ each, could be had for $5 each.
For MTG, the problem was more "is this gonna keep increasing in value". In hindsight the answer is yes.
While that might be true for toys, it's not entirely true for art. Some old paintings of reasonable quality which aren't already sold at exorbitant prices will go up in price because of scarcity. After the buyers will decide they can't afford the best known ones and current favorites, their attention will switch to what can afford.
For modern art you have to find quality. Because at some point in time its value will rise.
So, it's possible to knowingly buy art which will appreciate, the only question is if it will beat the stock market.
As for that, if I'll buy something, I won't do it as an investment. I will be happy to not lose money.
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 year, its price rose from $4.85 on May 9 to $13.50 by Aug. 15."
So let's use that $2.05 price as "ten years ago," I'm willing to give you 10 and a half years ;). A dollar in bitcoin then would be worth about $20,000 now.
So sure, pretty good. Nowhere near tens of millions, though.
And that $30->$2 change, and a few more up/down cycles between 2012 and 2017, shows that plenty of people thought it had already peaked. See also the various "oh no I lost my hard drive with the bitcoins I'd mined since I didn't think it was that important" stories. So sure, getting in for just a few bucks before 2011 and holding? Yeah, you're looking super great! But most people hadn't heard of it by then, and that's not who the article is talking about... when they did hear of it, you had a huge wave of pump-and-dump shitcoins proving the point of the article: the average person getting in at that point was largely too late for the level of return they were looking for.
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.
And with NFTs, there's just this endless sea of them. Even within one collection, most of the supply stays dormant so there's no telling who might wake up at any moment and completely flood the market.
...typically, anyway.
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.
So while there is downside pressure from liquidation cascades on the levered positions, the main point is that volatility in general will smooth out. The juiced up all time highs we've seen so far have been driven by leverage. Maybe BTC sells off to $12K but if there was no leverage in the system I think it would take a lot longer to bring up to $69K than it did before.
But if you’ve read about it in the newspaper, you’re too late.
With collectables this risk is much harder to quantify as it generally professionally recorded.
This inability to correctly measure risk, especially in markets with low liquidity dupes people into believing they have a much larger chance of 'winning' than actually exists.
On the whole, the collectables market does not.
This is absolutely not true. If we pick a random item from the 1980s that was valuable at the time, the chances are it's worthless now.
If you buy 1000 random collectibles at a random time, in ten years you’ll have lost most of your money.
Sometimes you luck out and your stock grows 20x in five years. Sometimes it doesn’t.
On the other hand, buying, say, Apple stock, is not much different from buying a first edition Charizard card or an unopened copy of Super Metroid. It’ll probably steadily grow in value over years and has been. But both could end up collapsing tomorrow for unknown reasons.
The relationship for land is more obvious and immediate that business investment (you can charge rent!) but someone in 2010 who said "this iPhone thing seems to be generating a lot of cash flow for Apple, I think this is a good time to invest" is doing it not solely because they think the number of people interested in buying stocks is going to increase, but because they think Apple in particular is going to continue to do well financially because Apple is producing something people want to use.
People aren’t going to lose interest in Nintendo series any time soon. Even if Nintendo made some awful business decisions, went bankrupt, and the developers and executives were all revealed to be violent criminals, people would still love those games and want to own them.
There’s a non zero possibility Apple could be bankrupt in 5 years and all those stocks become worthless. You never know what the next ENRON could be.
Just a few years ago that would've gone for a massively lower price. How certain are you that that rate will continue in the next five years? Would you seriously recommend that as a wise place to park two million bucks?
"Mario is going to remain popular" is a weak reason to expect massive returns on a $2M copy of a video game in a market that saw an extreme recent rise.
https://www.cnet.com/personal-finance/crypto/jack-dorseys-2-... - twitter is still popular, what's the problem, right?
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.
Of course this ETF (the index did exist) didn't exist in the 80s, and you increased the valuation numbers much more due to inflation which was double this dividend rate for all of this period. Additionally somewhere in there, the US economy grew a lot in this time period.
Collectibles have the same risk but a zero or negative average return.
S&P500 would be more analogous to averaging out the growth across a large cross-section of collectibles.
[1] https://www.macrotrends.net/stocks/charts/MNST/monster-bever...
This is why I never understood sports cards. The literally have no utility, which is fine in itself, but I cannot see how this does anything other than produce a few highly valuable artifacts of the cultural phenomenon that is sports. I actually think that the major sports league should create an ever green strategy game, to which the collectibles are inextricably linked as game pieces. Then again, they already generate so much revenue, and they would not be good at all at designing a game, so I suppose anything derived from licensing is simply gravy.
Differentiating between fad and valuable, especially with manufactured commodities, is a guessing game. Odds are someone will end up with a large amount of junk along the way.
A normal, warren buffet-style investment is a good investment if you are better at predicting future cash flows than the average investor.
A collectible is a good investment if you are better at predicting future demand than the average collector.
I consider a collectible anything that there is a limited supply of… ostensibly more (or not enough more) cannot be created to fulfill future increase of demand.
Real estate, professional sports teams, gold, beanie babies, art, old video games, and bitcoin all fall into the category.
If you can predict future demand for something of a fixed supply, you can do well.
But yeah, like the article says: Taking care of things is hard! Which is why I store that kind of thing in a plastic bin so that even if the roof sprung a leak I'm not totally screwed.
I don't own enough to warrant a fireproof safe, at least not yet :-P
https://www.investopedia.com/articles/personal-finance/06171...
In high school I worked in a library. Every once in a while somebody would want to donate their National Geographic collection. (For those unfamiliar, it is a high-grade, highbrow magazine that has been published for more than a century.) After subscribing for decades and lining them up on the shelf, they really valued those well-made treasuries of knowledge. But we were a library, so we already had sets. At least then, there wasn't much in the way of a secondary market. So we had to break their hearts and explain that we couldn't help them.
https://xray-delta.com/2011/05/10/national-geographic-the-do...
If you want to invest, buy equities. If you want to collect, collect.
Is my promo copy of the Late Great's "Turpentine" ever going to be worth something? Irrelevant, burn it on the funeral pyre along with the rest of that stuff when I die.
That album rocks, though.
We had one "rare" beanie, it last sold on eBay for 15 dollars. I can't image who was selling some for $1000 1 bid this year. If I had to guess: money laundering on eBay.
That whole "Toy Story" sub-plot about the Japanese market for dolls has a thin edge of truth: Akihabera has/had a man whose entire stock of vintage hifi valves would fit in one suitcase, but a single KT66 valve sells for ¥100,000
Investment in anything this quirky is risky. You'd trivially outperform most purchase with more rational investment. Art investment works, at the medium high end but the cost of certification and ownership is non zero. You need climate control, conservation, insurance.
Wine is a bit of a busted flush. Lots of fakes, and substitution in storage, or outright fantasy of existence before purchase even: imaginary wine being sold amongst investors sight unseen, buyer and seller mutually unaware the market facilitator was lying.
Pink Diamonds are scarce: the Argyll mine shut down. Hard to know if the whole diamond scam is going to explode or not, it's been on the brink since the 60s.
Gold jewellery and diamonds sold for use sell massively below owners inflated expectations. Antique jewellery like collectibles and antiques depends on certification and forgery was rampant right back in the 18th century.
I wonder how many stamp and coin collections turn out to be harmless valueless hobbies?
I'm holding on to a huge box of pdp8 and pdp11 "flip chip" modules in original DEC cardboard boxes. I doubt they will ever be worth selling, but sentiment plays its part too. Unboxed they list for $5, arguably below cost!
https://www.etsy.com/listing/708113857/aunt-beru-and-uncle-o...
They seem rare enough...
If you are a collector, never buy anything less than the ones that are in the highest condition and very rare. Also make sure it's highly wanted by other collectors. Those are the ones that shoot up in value. Anything else tends to not keep up with inflation. I think that's why collectables are thought to be a bad investment.
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.
Yes it is, but that's not what the author of the article was doing. They were not looking at capital growth of the stock, they were looking at economy-wide growth. Those are entirely different things. As I said, you can have a stagnating economy with 0% year-on-year GDP growth, and at the same time, the average company within that economy will be turning a profit.
It is possible to make money collecting, but it’s very time sensitive and an active hustle. You pretty much only want to do it if also get joy from the collecting itself. Which is the thing.
Collectibles are a terrible financial investment. They can be an excellent personal life enriching investment. If you have a good healthy attitude towards it acknowledging it’ll probably yield low financial gain, and high positive emotional response… go nuts. Just don’t let it usurp your long term plans.
1: Except me. Anyone want to buy a really nice acoustic guitar that could use a more attentive home? I have a laughable number of them which I never play! I’m not in need for cash but it’d be nice to reclaim some space, and any proceeds would go to helping out my fam with much tighter budgets.
I think this is key. In my experience, the best (and usually most valuable) collections are by those that are very passionate in whatever niche it is. These people usually don’t set out to make money but to acquire pieces that they really want.
In my case, I collect vinyl because I love having physical copies of my favorite music. But I also enjoy seeking out rare albums and getting them for a good price, not because I want to resell them, but because I just don’t want to pay more than I can and I’m in no hurry.
The interesting thing to me is how much time it takes to develop your taste in these niche topics. It’s not something that you can even accelerate. You just dig deeper and deeper over many years until you find yourself listening to some bizarre album on repeat and then decide you have get the vinyl.
Yes, just about everything out there still feels pyramid-schemey due to its emphasis on increasing price, so I don't disagree with anything written in the article... _but_ it's not impossible that NFTs could generate some cash flow through a smart contract piece.
Dealing with regulation is tricky -- since an NFT that can generate cash flow is basically a security. The SEC is likely to shut that down hard, and it's safest to avoid as a builder. But anyway, unlike a beanie baby it's feasible that NFTs could generate cash flow (staking, lending as an item in an in-game economy... etc).
That's never going to happen in a real game because no game developer is going to spend time supporting some "item" bought somewhere else. There's no incentive for them. They can much more readily just sell their own in-game items and make all the money from the sale. This has the positive side effect for the developer that the in game item can't be taken to some other game.
Something feels off about that, but I’m not sure what. It seems like a fundamentally different kind of “cash-flow” than what the article is referring to. It’s still capped by the total appreciation of the asset.
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.
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
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.
Real estate is in between IMO - kind of a collectable but there is cash flow but it doesn’t have the upside growth of stocks, unless it is some kind of rezoning or redevelopment.
Gold is more like a collectable (no revenue stream) as is any other commodity.
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)
To the best of my knowledge, he's still storing them and working to keep them from getting moldy in his garage. I don't think he's ever had an offer to buy that's been close to what he put in.
I have been buying/selling collectible video games (and related hardware/paraphernalia) for over a decade and many items are still sitting in a storage unit waiting to be listed because they continue to appreciate so quickly. My only regret is usually that I didn't buy more of each item.
For example film cameras and more rare medium format digital cameras are appreciating now quite a bit, above original MSRP
Most stuff never goes up in value. Most technology, even the famous/popular stuff has only gone down in value. With a few exceptions of things which were later seen as iconic but rare. Stuff like the original Nintento gameboy can be bought now for less real value than they were new. Almost certainly because there are so many around. So you have to be a fortune teller to work out what item will be more popular in the future than it is now.
They are akin to a lottery / market speculation.
They are assets with no underlying value, other than the subjective whims of the prospective buyer.
A rich mans game, if you will.
It is if you're wealthy
The plural of "anecdote" is not "data"
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.
Crypto on the other hand, outperformed everything else. Too bad a lot of you on HN missed out on this.
Bitcoin is still hitting new highs after 10 years.
Seems like any sort of physical collectible would be great for under-the-radar transactions - claim you found them in the attic or something when it's time to turn them into cash, nobody's going to expect original receipts. Anything on a blockchain seems far riskier. Using Beanie Babies would've worked better before the bubble burst and people would still pay crazy prices for common ones compared to now, of course...