It’s every collector’s dream: take a few bucks spent at a yard-sale or a flea market and turn it into a jackpot . . . earning a staggeringly high rate of return on one’s original investment. This is Antiques Roadshow, the wildly poplar (okay, it’s not “Dancing with the Used-to-be and Never-really-quite-were Stars”, but it still draws a pretty good audience.)
I love the PBS show, where folks from around the country bring in art, ceramics, bric-a-brac, Civil War swords, and mechanical toys, and wait a few dozen hours in line to find out if they are chumps or brilliant investment strategists. Just like Wall Street, except the market is a little less fungible, a little less liquid, and the bids and offers are quite as deep.
How about a landscape painting acquired for $1.50 at a Salvation Army “half price” sale and valued at up to $15,000; a $5 garage-sale art pottery vase, grabbed for less than $5, now worth around $15,000; a 19th-century album of watercolor paintings, got for twenty-five cents at a yard sale and now worth, presumably, $25,000.
You see some pretty incredible stuff and some great ROIs. What you don’t see, of course, is all those folks who bought a Leroy Neiman print of Mohammed Ali, Joe Montana, Arnold Palmer or Lafitte Pincay in 1979 for $3,500 who have absolutely doubled their money. Heads up folks! If you invested $3,500 in 1979 and got back $7,000 today, you earned a compounded annual rate of return on investment of around 2.8%. If you loved having you Thomas Kinkade or Margaret Keane painting or print over your mantle for a couple of decades, I’m not going to tell you you’re an idiot. That’s because I won’t for a second attempt to value your psychic, personal, ethereal return on that acquisition / investment. I might offer a comment on your taste in art, but few can deny that if you like the work, then it has genuine value to you. And stick with that.
But, don’t tell folks who visit your house that you could sell the Keane or the Neiman or, for that matter, the knockoff oriental rugs, for hundreds of thousands of dollars, even if they’ll believe it. If you get 2.8% annually on a piece of artwork that decorates your house and enriches your soul and your life . . . and you sell it . . . and work out legally with the IRS how much capital gain taxes you should pay . . . then I’ve got no argument with you.
But don’t tell me or any other investment expert that you’re investing in Thomas Kincade glicees that have an original print run of 2.8 million and expect us to believe either of the following: that you know what you’re talking about, or you’re not a prevaricator.
Probably the most basic problem is that people compare the end result with the initial investment and ignore the time-honored “time value of money”. Doubling or trebling or quintupling your investment is all very well and good . . . and meaningless. Unless you factor in the time period over which the investment was made.
It is among the most fundamental and consequential of beginner investment blunders. For example, “I bought my house for $875,000 and I just got an offer of $3.5 million. I really bought it right!”
Maybe not. You bought the house thirty-five years ago. You paid maintenance, property taxes, insurance, etc. and got a return of maybe 4.5% per annum compounded, before all those expenses.
If you’d invested the same funds in a low-expense, no-load Vanguard index fund for thirty-five years, you’d have perhaps $12 to $14 million, versus the $3.5 mil you got out of your house.
In both cases, with the right tax vehicle or structure, you can defer your taxes so that the ROI is compounded on a pre-tax basis, one of the most powerful investment tools that passes muster with the Internal Revenue Service.
Your fees – both operating fees and management fees - in a low-cost, no-load diversified fund are negligible, and you don’t have to put on a new roof, paint the siding, put in a new kitchen, or mow the lawn. To make the investments apples-to-apples however, you do have to find a place to live . . . that is, you have to subtract fair-market-value rental of your residence from the Vanguard mutual fund example, to be able to compare the two cases fairly.
Houses, antiques and stocks of publicly-traded companies are vastly different commodities. In the stock market, there are millions upon millions of investment appraisers giving you by-the-second appraisals of what they think your investment is worth. There’s a standing offer to buy your “antique” (shares of General Motors or IBM?) and they will guarantee the price within a few seconds and to the penny!
Try that with a Ming vase or a Tabriz or Keran rug. Early American furniture investments are decidedly less liquid and your feedback on FMV is, how might one say, more problematic.
Houses, unless you own a small horse farm surrounded by housing developments, city parkland, and fronted by railroad tracks, are reasonably measurable as to value.
Whether they like it or not (and most don’t) CEOs’ corporate investments (or rather YOUR investment which, for a fee, they manage on your behalf) get valued continually. Every day, on places like the NYSE, there is a specialty appraisal forum, where thousands of experts get together to decide what they think your investment is worth. And the value of your investment gets re-set every day . . . not only every day, but every nano-second.
Maybe you could think of Antiques Roadshow as the NASDAQ and the NYSE in slow motion. Personally, I prefer the immediacy of information and the accountability – my own for buying a stock and the accountability of the CEO who presumably leads the enterprise - that comes with being able to measure my investment without having to turn on Public Broadcasting on Sunday night and see if maybe, just maybe, this time someone’s got a rare pair of late Victorian matching oil lamp wall arm holders and brackets or an exceptional pair of mid-19th Century large Tole Peinte tea bins . . . probably made in Philadelphia.
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