The Young Collector: Commodity Futures (or the Risk of Commodifying Antiques)

The Young Collector

by Hollie Davis and Andrew Richmond

We pondered this column for a long time. What do we know about finances, economics, investments, et cetera? Then it occurred to us that with the current state of the market, you might as well follow your barber's advice as your financial analyst's. We decided we'd toss our two cents out there. This would also be a good time to toss out a disclaimer. We are not financial experts. (Heck, we can barely operate Quicken.) We're not offering any advice related to investing in antiques or anything else. If you want investment advice, you need to consult a professional.

Over the past few years we've routinely cringed when we've overheard people saying such things as "Buy antiques, and they'll appreciate in value" or "Consider investing in antiques to diversify your portfolio." We've even encountered rules for investing in antiques, including our favorite, the 31 steps to making millions in antiques. (Don't you always wonder what that extra one is? What was so important that they had to go past a nice round number like 30?)

Anyway, this left us asking ourselves if investing in antiques were really that wise a decision, so we decided to consult the definitive source-Google. Seriously, enter the terms "investing" and "antiques" in Google, and you'll come up with a staggering 2.9 million pages that include those terms. Clearly antiques as investments is a topic with a lot of buzz, but this doesn't answer our question about the wisdom of the idea.

We definitely don't want to turn anybody off to buying antiques for any reason. Frankly, as people who earn their livelihoods in the trade, we don't care why you buy or sell antiques, as long as you keep doing it. Your personal motivation is, frankly, none of our business. When it comes to drawing the under-40 crowd into the world of antiques and collecting, however, we both feel pretty strongly that touting antiques as good investments is not the way to go. In fact, we'll go out on a limb and say it borders on irresponsible.

Buying antiques makes fiscal sense, and we've said that here before. Buy a $2000 Chippendale chest today, and in two, five, ten, or 20 years, it will have retained value. The same cannot be said of a new mass-produced Chippendale-style chest. Therefore, it is a wise financial move to buy antiques to furnish your household. It's a long way, though, to go from "retained value" to "appreciated value," about as far as it is between "fiscal sense" and "financial gain."

If you go back to those Google results and start browsing around, you'll see all sorts of "experts" telling you that all you need is to buy good quality antiques, and you will make money. If you swap "antiques" with "art," the picture gets a whole lot more interesting. Dozens of art investment funds are springing up, taking in millions and millions of dollars of investors' money and promising big returns. These fund managers have their sights set on the younger generation (higher risk, longer wait for return), possibly those with dot-com fortunes who are perhaps lacking some of the considered judgment that normally comes with a slower acquisition of money.

This high-level hard-core investment chatter has, thus far, largely kept itself to the upper end of the fine art market. Nevertheless, there are a growing number of authors out there telling young folks to invest in antique furniture, silver, and the like. When we go to shows and auctions, we are hearing the same from more and more dealers, auctioneers, and our fellow collectors.

Many of these folks are pitching "investment-grade" antiques (and just who makes that determination, by the way?)-the big-dollar, top-of-the-line objects, the upper 5% to 10% of the market-that are apparently sure to increase in value. One author goes so far as to say that by buying investment-grade antiques, you should "expect" a 100% return in seven years, a 300% to 500% return in 12 years, and, get this, if you hold an investment-grade antique for more than 20 years, you will achieve a return of more than 1000%! Hmm, perhaps we should dump our 401(k) and just buy more antiques. (Nice try, Andrew.)

OK, perhaps we are being a bit hard on the investment quality of art and antiques. We do know plenty of older collectors who, upon the sale of their collections, realized a pretty good return on the dollars they spent on antiques 30 and 40 years ago. In truth, we could probably debate the sense of investing in antiques and never come to a consensus. You can always find some financial guru out there who will point out how a certain segment of the antiques market has outperformed the stock market over the past 20 years.

Honestly, during turbulent economic times such as these, parking some of your money in tangible assets, in this case antiques, is probably not a bad idea. We certainly feel some sense of security knowing that we have money in other places than in our retirement and savings accounts.

Buying and selling antiques as good investments, however, still strikes us as not a good idea, particularly as Social Security grows more questionable with each passing generation, and young people need every retirement dime they can scrape together. The stock market is risky (clearly), but there's a vetting process there, a gold standard, an S&P index. You see occasional trends, like the dot-com boom, but the antiques market is far more inherently trendy and unpredictable than the stock market.

Thirty years ago "country primitives" were popular, as was hand-painted china. Today, Andrew often feels he's spent his entire day disappointing people who keep exclaiming, "But when I bought it twenty years ago..." Today's market is all about folk art, weathervanes, and anything "in original surface."

Trends do not make good investments, at least without a deeper understanding that dictates when it's time to leave the party. Beyond this, who knows what will be popular and what will be passé in ten, 20, or 30 years? Perhaps Victorian furniture will experience a resurgence, and maybe worn, painted furniture will just be considered shabby (and not shabby chic).

With investing, no discussion is complete without factoring in inflation. The $2000 Chippendale chest, mentioned above, if you had purchased that in 1970 and sold it now for $10,000, you might be inclined to rejoice at the $8000 profit. Yet plugging that $2000 into the Bureau of Labor Statistics' inflation calculator will quickly dissipate that joy. That $2000 in 1970 dollars is worth over $11,000 in today's dollars.

Moreover, had you invested that same $2000 at even 6%, you could today have nearly $20,000, depending on inflation, taxes, and the rate at which interest is compounded. Finally, of course, what are the chances that your chest will bring $10,000? Keep in mind that turning a non-liquid asset such as a Chippendale chest into cash may take some time, perhaps months at least, if you are committed to retrieving every penny spent. (Around our house, we tend to think of antiques as "rent to own." If at the end of the day you paid a little rent via a loss, at least you had something beautiful in your home for years.)

Anyway, that's the dollars and cents aspect of the issue, but we really feel that touting antiques as investments does something a little more damaging—turning the objects that we love into mere commodities, things to be bought and sold with only the dollars and cents in mind. Where's the fun in that?

Some people have fun making money, but staying home to day-trade is more appealing to them than going to a show. Maybe we're being idealistic, but to us, this stuff is not just "assets" or "merchandise." Things we collect have become an integral part of our lives and our home. For example, our new cat, Charlie, simply loves to sleep on top of a pie safe in our family room, and when we think of that pie safe now, we also think of Charlie's fluffy tail hanging over the edge. We also remember that we had to stretch a bit to buy it, but that it was the first piece of early West Virginia furniture we purchased, something very important to Hollie. It has become more than "original surface" or wood, nails, and paint.

Andrew admits that, around Garth's office, he occasionally refers to the antiques they are selling as "inventory" (though he is vehemently opposed to the term "merch"), but he is careful never to use that term in public. In our day-to-day lives, we regularly have to take a business approach to antiques, as do all dealers and auctioneers. You have to think of revenue streams and profit margins, but if that business perspective is what you use when interacting with the buying public, particularly those new collectors and those under 40, then you run the risk of turning them off. (Honestly, you'll probably turn us off or at least put us to sleep.) It just doesn't convey the sense of passion, fun, or adventure that you look for in a hobby.

By the way, we recently did an informal survey of a handful of collectors we know who fall into the "veteran collector" category. All have been collecting (and sometimes dealing) for at least 25 years. We asked them if, when they started collecting, antiques were pushed as investments, and they all responded "no." Apparently, before we young collectors were out of elementary school, collectors were simply encouraged to buy what they loved and buy the best they could afford.

Now, we're sure that there were dealers and auctioneers in the 1970's who preached the investment value of antiques, and we also know that many dealers and auctioneers today preach those same two tenets: buy what you love and buy the best you can afford. We are, however, quite confident that the commodification of antiques was then nowhere near what it is today. People collected these things because they wanted to own historical objects-tangible connections to the past. People collected these things because they have beauty, character, and they give us a warm fuzzy feeling when we live with them. Just think about this: these same people, the collectors of decades past, formed collector clubs, not antiques investment clubs.

The antiques marketplace seems to be struggling for an identity, and we have to be really careful that in that search we don't give away the heart of who we are. Antiques are beautiful, special, unique, but they're also not always practical, not always good investments, and not always the easiest option. That Chippendale chest is nice, but in many ways, it's a lot easier to go to Target.

To attract young collectors and to keep them, this has to be about what we love and helping them love it too. Love isn't about reason and return. We don't treat the things we love and value in life as commodities; we don't reduce them to a cost-benefit analysis. If we did, many of us would ditch our pets, our friends, our kids, our homes, our spouses—and our antiques.

We welcome ideas, tips, criticisms, and questions regarding "The Young Collector." Andrew and Hollie may be reached by e-mail at <youngcollectors@maineantiquedigest.com> or by writing The Young Collector, c/o Maine Antique Digest, PO Box 1429, Waldoboro, ME 04572.

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