Why violin an antique market? What is the history?

October 26, 2007 at 06:05 AM · I was pondering the whole old vs new violin question today on the stationary bike....what else does one do on a stationary bike anyway???

My question: how did the violin/viola/cello become an object of antique collectors and largely a collectors' marketplace rather than remain a utilitarian marketplace? Nobody (at least to my knowledge) is going around seeking out old oboes or trumpets. For $50 grand, you can pretty much get the ne plus ultra vintage archtop guitar and certainly any strat or telecaster.

The result of the violin market being an antique market is profound. Innovation has been essentially completely arrested. Even "modern" makers still make a violin with all the ridiculous ornamentation from the 16th century, and many are now gravitating to making exact copies of old instruments, essentially reducing the profession to that of a human transducer. My sincere apologies to modern violin makers on this point -- I don't mean to take anything away from the vast skill and art that the profession requires.

In all fairness I have to say that I am a pretty crappy violinist. I do enjoy playing nevertheless and am curious about the heritage.

Respectfully,

Tom

Replies (58)

October 26, 2007 at 09:54 PM · As I read this after posting it I should probably clarify -- I see the modern maker as victim of the trend not culpable. Tom

October 26, 2007 at 11:53 PM · Musical instruments did not become a "commodity" until mass production techniques coupled with middle class money made this possible.

Violins were collected from the beginning, more or less. Though various makers moved in and out of fashion, the best of them were seen as objects of high art.

What is surprising is that a mass-produced electric guitar can reach prices of 50K.

Personally I don't find the ornamentation of violins to be ridiculous; rather the contrary. At any rate, it would be difficult to make the violin much simpler than it is; ornamentation like the scroll may be unnecessary, and soundholes do not have to be graceful, but anyone capable of making a fine violin is entitled to a free hand in the decoration thereof, in my opinion. And it is a way of separating the sheep from the goats; you're not likely to find a really beautifully cut scroll on a POS violin-shaped object.

There has been no lack of innovation over the centuries; however, most of it has not been successful in the marketplace. (The Luis & Clarke carbon-fiber violins offered at 5K seem to be finding homes, for example. So don't give up hope).

October 27, 2007 at 12:21 AM · Oboes deteriorate over time. Trumpets probably get gross after a number of years. I don't know of anyone who is really into antique wind instruments, except for bassoons.

You might think some things on violins are ridiculous, but among man's creations, in terms of engineering and art, the violin is among the most perfect inventions. Why mess with that?

Also, there aren't exactly so many decorations on a violin...

October 27, 2007 at 02:46 AM · tom, here is a short article that may be worth a glance...

http://www.stringsmagazine.com/article/139/139,3651,YourInstrument-1.asp

October 27, 2007 at 09:21 AM · I appreciate your thoughts and comments. It is true that the violin is a highly optimized creation. The whole question of provenance has become a black art of sorts in terms of interpreting labels, deciding whether all parts are original, etc....all hallmarks of an antique market. How did it start? What is so special about the violin vs. other musical instruments? An article on the Hersh Darnton website indicates that values of instruments just after the French revolution were such that a pianoforte was valued four times as high as a Cremona violin. Certainly that ratio has not been preserved.

And then there is the question of innovation. Pickering and an army of scientists after him have endeavored to discover the secret sauce. Whether it has been discovered or not is up for debate -- time will tell. But think of all the potential innovation that has been unsuccessful ....the steel bows by Vuillaume, radical violin shapes to prevent joint injury. And the innovation that has been prevented: a six string violin, a violin that is tuned to form a chord on open strings, violin that can be played using barre chords, whatever....

If you see a modern band with an upright bass, the bass looks completely out of place. Some artifact of the Pilgrims compared to the guitars amps drum kits etc.

Just keeps me thinking and wondering.

Tom

October 27, 2007 at 03:53 PM · Pieter Viljoen hit the nail on the head. Outstanding violin makers flourished 250+ years ago and their violins are still in use. Can you think of any other kind of tool that remains in use for its original function after even just 100 years? But all antique objects, particularly those that are beautiful, become collectors' items, even if, unlike violins, they're no longer functional, and this inevitably pushes up prices.

October 27, 2007 at 04:21 PM · Note the prices of antique japanese swords. Same thing has happened. You can not use them for their intended purpose. You can only admire the craftsmanship and discipline that it took to create and weild. Yet, some of these are in the hundreds of thousands of dollars. They haven't changed for over 500 years. People like what they like. It would be difficult to pin down why this happens.

October 27, 2007 at 09:18 PM · "I was pondering the whole old vs new violin question today on the stationary bike....what else does one do on a stationary bike anyway???"

Hi Tom;

Stationary bikes are great for letting your mind wander... no need to watch for gravel and potholes. :-)

"My question: how did the violin/viola/cello become an object of antique collectors and largely a collectors' marketplace rather than remain a utilitarian marketplace? Nobody (at least to my knowledge) is going around seeking out old oboes or trumpets. For $50 grand, you can pretty much get the ne plus ultra vintage archtop guitar and certainly any strat or telecaster."

Actually, I believe a Gibson solid body went for around $110,000 at skinners last year. Miles Davis' custom trumpet sold for around $35,000 (hammer) there a couple weeks ago.

I'm not sure anyone can give a completely definitive answer to your question, but the collectable aspect of the violin isn't all that new... Count Cozio was collecting and documenting instruments, tools and techniques in the late 18th century. He had extensive involvement with the Mantegazzas and Guadagnini (as well as others... like Rivolta if my memory serves me) and a profound interest in Stradivari before the bulk of his work was "antique".

As one who is smitten by the instrument, the profession, restoring and collecting, I can say that I find the individual interpretations of the classic instrument fascinating... and the object itself very much an attractive, intriguing one. The high values do serve one very practical purpose... There is no debate that the value of the great instruments certainly make the time and effort it takes to conserve them "worth it".

"The result of the violin market being an antique market is profound. Innovation has been essentially completely arrested. Even "modern" makers still make a violin with all the ridiculous ornamentation from the 16th century, and many are now gravitating to making exact copies of old instruments, essentially reducing the profession to that of a human transducer. My sincere apologies to modern violin makers on this point -- I don't mean to take anything away from the vast skill and art that the profession requires."

I agree that there is a relationship between the traditional form and the strong values... although there may be a bit of chicken and egg type logic at work here. The lack of innovation may be a result of the collectable nature, or could be a cause of the collectable nature... but you know... some of that ornamentation has other purposes (like purfling).

There is, presently, a strong movement by some in the industry for innovation. Currently, the VSA devotes a good portion of it's convention to this interest. This sort of movement has also existed at times in the past (in 19th century France, for example; Besides Vuillaume's steel & self-rehairing bows, Chanot's cornerless fiddle, and Gand's experimentation with the bending of the center portion of his 3 piece tops, Savart and others devoted time to study and design of bowed strings).

Jeffrey

October 27, 2007 at 11:35 PM · >>There is, presently, a strong movement by some in the industry for innovation. Currently, the VSA devotes a good portion of it's convention to this interest. This sort of movement has also existed at times in the past (in 19th century France, for example; Besides Vuillaume's steel & self-rehairing bows, Chanot's cornerless fiddle, and Gand's experimentation with the bending of the center portion of his 3 piece tops, Savart and others devoted time to study and design of bowed strings).

And it's important to note that the results of these experiments were generally not received as improvements. It's nice to want to make things better, but change for change's sake, only, without positive results, is a waste of time and energy.

October 28, 2007 at 12:50 AM · A reason some electric guitars get such high prices is that the perception is quality and evolution peaked in the late 50s and 60s and that the best moderns are only attempts to copy, a lot like the situation with Stradivari and the rest of the ancient violin makers. It's the prevailing perception in both cases. They were "mass produced" but not in the modern sense. It was very hands-on and the workers specialized, and sometimes the parts have known initials or a name. Because of the specialization and quantities made, (thus had lots of practice), the situation theoretically beats an individual maker, at least in some ways. Modern independent electric guitar makers by comparison are seen as sort of fringe people. But not so with acoustic guitar makers, where the perception is they lavish time and know-how on individual intruments and so on. I think it was taken very seriously, too. According to an interview with Leo Fender's wife, he was a man with a mission. He knew nothing about music and couldn't play guitar, and considered himself to be developing new instruments for "angels on the Earth" (musicians).

October 28, 2007 at 02:06 AM · There are other utilitarian objects that are very much in demand and are considered priceless among collectors. Rare furniture, books, stamps,are very much in demand. Violins have a form and sublime function that hasn't been improved upon in over 300 years. The masters who created and refined the instrument are great innovators whose works are legendary and are said to improve over time. They have been passed down and have been coveted and cherished by the greatest musicians in every generation since their creation. It is no wonder that the original violins are in such demand not only by musicians but by collectors, who want the privilege to own an object of art that resonates with anyone who appreciates western music and culture.

October 28, 2007 at 09:00 PM · Some financial planners to the ultra rich have also begun to recommend very expensive violins as investments as a way to diversify one's portfolio. That creates further demand for an item of limited supply and a self-fulfilling prophecy for the violins to appreciate in value, which is one reason why Strads and del Gesus have skyrocketed in value lately. People who will never play the instruments are buying them to make money. Plus, some people view them as status symbols.

October 28, 2007 at 09:20 PM · T Carlsen,

These financial advisors are obviously taking personal enjoyment into account, because even some money market (read savings accounts) will accrew more interest than and violin with incidentals of like $20 a year. Nothing even close to most index funds, REITs, and nothing even close to well picked stocks.

October 28, 2007 at 11:29 PM · I think some del Gesus sell for up to $6 million, when you could have bought them in the 1970s for a few hundred thousand. I think part of the reason the prices are now so high is because the professional investors have entered the market. Between themselves, they set the market through a series of transactions at these higher prices. Violins previously were "undervalued" and so the markets are now "more efficient" at the new prices as reflected in their transactions. I'm not sure if the prices can go up much further. Then again, looking at the supply and demand equation, there is nothing that will ever bring the prices back down. There will never be more Stads.

Didn't a Picasso recently sell for $93 million?

October 28, 2007 at 09:35 PM · I don't know about that, Pieter. My friends who had both violins and "well-picked" stocks 10 years ago are pretty happy they had the violins.

It's all about choosing the investment and the time appropriately. If you're following the dollar vs the UK pound and Euro, the price of gold, and the stock markets right now, and thinking about where these things might be heading, violins aren't looking too bad. You may want to consider that the financial advisors who are looking at violins might know more about their business than you do. :-)

For years I've been saying that when a 100-year old faded painting of flowers sells for $68 million and a Strad, the epitome of perfection, and hundreds of years older and rarer, is a tiny fraction of that, there's an imbalance there that needs to be adjusted.

October 28, 2007 at 11:01 PM · Yes, I know. Even money managers cannot beat the S&P 500. However, any simple index fund will have outperformed any violin, without an iota of the risk. But whatever. Also, your friends, like many other investors, were probably caught up in the tech market which made a mountain out of a mole hill. They were most likely not "well picked" stocks.

At this point I don't see violins being that much of a better investment. It depends what kinds of violins. Probably certainly modern italians which could eventually be due for the "bump" that makers like Pressenda and Rocca got a while ago.

I just cannot see any responsible or worthwhile money manager telling a client to invest in instruments unless the client specified an interest in art or artifacts which would give them some enjoyment and moderate ~7% appreciation in place of some low risk long term growth fund. Michael, I actually know some of these people, and pretty much all of them would agree with me. Especially after the Nasdaq blunder, great money managers look for value. Now ask some guys in Chicago where commodities are traded, and you probably will get differing opinions... I mean, look at gold and other precious metals in the last 5 years.

That being said, there is a possibility that the imbalance between the fine art market and the instrument market might begin to correct itself, but I don't think, from an historical perspective, that visual art has ever been on par with instruments. Even really fine baroque furniture is reasonable compared to art of the same era. I think it has something to do with violins and antique furniture having utilitarian purposes.

October 28, 2007 at 11:22 PM · From Pieter Viljoen;

These financial advisors are obviously taking personal enjoyment into account....

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Or they may be pocketing a hefty sales commission.

I've been offered a pretty good sum to find a buyer for a Strad.

David Burgess

http://www.burgessviolins.com

October 29, 2007 at 12:11 AM · Interesting responses, any comments on this article?

http://www.machold.com/content/Violins%20as%20Investments%20draft%204.0.pdf

October 29, 2007 at 01:08 AM · And this website: http://www.stradivariinvest.com/index.html

It mentions that "The average annual value increase for the rare stringed instruments has been for years between 10-15%. With the latest dramatic development on the market in mind, we can expect the gains on investments in the finest stringed instruments to become a great deal higher."

It mentions that "Taiwanese Chi Mei Foundation announced last year its intention to invest up to 500 million US dollars within the next two years into the antique Italian violins. This alone will very significantly augment the high pressure on the already finite number of fine instruments on the market and increase dramatically their value.

It also mentions these incredible transaction prices:

Instrument: Sold for (US dollars):

Dolphin Stradivari violin of 1714 $5,500,000

Bass of Spain Stradivari cello of 1713 $5,000,000

Hausmann Stradivari cello of 1724 $4,500,000

DeMunck Stradivari cello of 1730 $5,000,000

Ries Stradivari violin of 1699 $3,500,000

The Maiden Stradivari violin of 1708 $5,500,000

General Kyd Stradivari violin of 1714 $5,500,000

La Pucelle Stradivari violin of 1709 $6,000,000

Hammer Stradivari violin of 1707 $3,544,000

Lord Wilton Guarneri del Gesù violin of 1742 $6,000,000

King Joseph Guarneri del Gesù violin of 1737 $6,000,000

Carrodus Guarneri del Gesù violin of 1743 $4,500,000

Kemp Guarneri del Gesù violin of 1738 $6,000,000

Guarneri del Gesù violin of 1699 $3,500,000

Paganini Josephus filius Andrea Guarneri violin of 1696 $1,000,000

Matteo Goffriller cello $1,500,000

Sleaping Beauty Domenico Montagnana cello $3,000,000

I count nine sales at five million or more, including four sales at six million. Plus there are many more "undisclosed price" transactions between private parties in that high-price range. Obviously, something more than utility is happening here.

October 29, 2007 at 12:39 AM · There were several high-end violins that were purchased by wealthy Hong Kong residents prior to the British departure in the late 90s. A very compact and portable means of transporting wealth quickly from one place to another. Looks like a good idea that paid even more dividends when the idea caught on.

A decade or so ago I could have bought a Gibson mandolin signed by Lloyd Loar for 25000. Recent sales have been near ten times that amount. This has been driven by bluegrass music's local (US) popularity, though I don't forsee prices dropping precipitously. American guitars were very hot a few decades ago, when the Japanese were awash in cash. Much of the stuff sold overe has come back in this direction.

Personally, I've diversified into various tangibles, having little trust in the people who run the stock market. "Stuff" is less liquid than stock, but you can play on it, or with it, or whatnot, until you need to liquidate. But as with any collectable, the item you want as an investment should be of top quality and condition, and be known as the best. Anything less will find few takers in a tight market.

As ever, the wails get quite loud from working musicians, who damn the collectors as soulless hoarders preventing real musicians from owning the tools of the trade; while others seem to think that the collectors are in fact preserving the items in question for the future, and even preventing destruction at the ham-fisted hands of working musicians, who will wear out the treasures.

These arguments have been going on for generations, of course. The dealers are the real winners; they sometimes sell the same instrument several times during their careers, taking a piece of the action every time. But even they may suffer, with their funds tied up in something only a woodworm can eat.

It's not nice having money. It just brings headaches, although there are some compensations.

October 29, 2007 at 05:05 AM · Carlsen...

At the end of the day, and I can tell you this from experience, (and I guess actual, basic logic), that money managers, especially ones handling large accounts, are responsible for making as much money as possible for their clients. Their clients usually want to remain as liquid as possible, and have different risk levels. Both sources, machold, and Bein and Fushi, are very biased sources. Granted, these two firms have incredible experience in the realm of rare instruments. I've read these pamphlets, and some of what they say is really grasping at straws. Like I said, it's a wonderful investment if you have piles of money and a love of music. In fact, there's hardly a better way to invest if those are your criteria. With Bein and Fushi, you can buy a Strad, and twice a year get your own little prodigy to perform concerts for you and your friends in your house, and all flights and repairs/routine setup are on the violinist. And most importantly, a young artist (or even prominent artist) gets to use an instrument they'd normally never get to use. It's a fantastic deal.

Violins, provided good certificates etc... can be somewhat low risk, but there's just so much better out there. Like I've said, financially, if you are looking to invest money and MAKE money, there is absolutely zero logical reason to make violins a significant part of your portfolio. The only reason to do that would be to satisfy a desire to own these instruments and have the pleasure of loaning them out to young artists. Sure it's a great investment, but there's so much better out there, and much easier places to park your money. If you cannot understand that, perhaps you should buying, then selling an instrument within a matter of a few months. Then, read a simple book on investments, and you'll realize that you aren't totally informed on the subject.

David:

Just like some violin teachers will steer their studnets to more expensive purchases. I even know of one famous teacher who tells his students not to get modern instruments, and to instead buy old stuff. Interestingly it's always the same dealer bringing in the violins.

October 29, 2007 at 09:29 AM · If the two dealers cited truly believed in rare violins as superior long-term investments, wouldn't they "buy and hold" these themselves?

I mostly see dealers trying to sell these instruments, rather than keep them. ;)

October 29, 2007 at 12:14 PM · "If the two dealers cited truly believed in rare violins as superior long-term investments, wouldn't they "buy and hold" these themselves?

I mostly see dealers trying to sell these instruments, rather than keep them. ;) "

Snide, but perhaps misplaced. I think you will generally find that most dealers do have a small collection of their own, and probably have more money in violins than they do in other investments. That's a separate issue from what's necessary to run a life day-to-day, though, and you shouldn't hold it against them that, as with most of us, they find it necessary to work for a living while they're also saving. And then there are also dealers who like a huge percentage of Americans aren't saving anything, anywhere.

October 29, 2007 at 01:59 PM · If one has a business it is usually prudent to turn over inventory if possible. More money can be made that way in the short term. Also a business has expenses which can not be paid by holding inventory for long term appreciation. There is a common caveat concerning investments which states that past history isn't necessarily an indication of future returns. If one is lucky or can predict the future one can always make money. The stock market only works if you pick the right stocks. Many stock pickers have lost their shirts. Pieter did mention some of the potential benefits to investing in violins. Another benefit might be protection against the continued devaluation of the dollar. A Strad might be as good as gold.

October 29, 2007 at 01:28 PM · it goes back to the saying,,,invest in what you know. (do you really know, or just think you know?:)

an average joe investing in stocks may lose money, just like an average joe investing in strads may lose money. a guy who knows more about violin should stay with violin. the same applies with securities.

just curious, how many here have actually invested in strads and made money and is able to do it repeatedly with an acceptable return in an acceptable time frame? no, keeping a strad in a vault and living on bread and water does not count.

i don't understand how strads can be compared with the capital market except as a topic of conversation in a cocktail party where you can pitch the wacky idea that instead of getting that gulfstream, or the italian villa, try a strad.

i mean, with less than couple hundred thousand dollars, bill gates started microsoft in the 70s. as we speak, a hedge fund manager just did a swap that can fetch couple strads. with the built-in derivatives, those who can afford strads make money regardless of the direction of the market.

if the taiwanese foundation is going to instill capital into the high end violin market, where does the fund come from? here? http://finance.yahoo.com/q/bc?s=LFC&t=2y

buy what you know and keep an eye at the door.

October 29, 2007 at 03:01 PM · Oh boy... The old investment debate continues. :-)

Quite simply, of those who participate on this board, I know several who deal with, make, or own 5 figure instruments or bows. Fewer here who own or deal with 6 figure instruments or bows, and a very few who deal with 7 figure instruments... but there seems to be plenty of "expert" verbal speculation/advice being offered in a good number of threads on this board!

Knowing players or collectors who do own multi-million dollar fiddles might give one some insight to their logic and motivation, but only what is shared with you. The same goes with money managers or real estate developers. Unless you’re involved directly, it's a relatively sure thing that you don’t have the whole picture.

Asking questions, or trying to place yourself into the shoes of one who does invest in these objects, can be useful and lead to some understanding. Close-minded statements of fact (which seem often to be lean on actual facts) and answers that aren’t supported by real knowledge or experience are something else, in my opinion.

Also, in my opinion, the answers just aren't as simple as has been suggested here.

There is risk in any investment... certainly more risk in some and less in others... but there is risk.

Each person is different. There may be tax advantages for professional musicians purchasing an instrument for use... especially if the fees associated with that player's career support the investment. If a musician is simply looking for a high-quality playing tool and doesn't have a high 5 figure job, a 6 figure job or a trust fund, maybe they should consider a great modern fiddle and view it as a tool. Certainly, if there is no desire to own an expensive older instrument, they shouldn't.

Those who collect instruments because they have a passion to do so, and the funds to support the passion, may not be as interested in the return on investment as they are in other aspects (stewardship, pride, support of an artist... )

As Al suggested, a fiddle might be a terrible place to put money for someone who doesn't understand the market and/or doesn't have a relationship with someone who does. Conversely, it may be a great place for someone who does understand and have the connections to invest. Either way, sales commission structures are very different when comparing art, instruments, real property or stocks. Cost of insurance is a factor concerning some investments and is not with others, as are maintenance costs, and these may be tax deductible in cases and not in others. Etc., etc., etc.

The point is, I feel that any blanket statement concerning the validity of investment into any vehicle without knowing anything about the investor, their motivations, their resources or their desires, is simply something that can be abbreviated with two letters… the first one being a B. Quoting gross, or raw, ROI numbers for any investment without knowing the tax burden, cost of resale, or holding cost of that investment is also something that can be abbreviated with those two letters… the second one being an S.

Jeffrey

October 29, 2007 at 03:38 PM · From Michael Darnton;

Snide, but perhaps misplaced.

---------------

Snide??????

Definition: Adj. expressive of contempt; "curled his lip in a supercilious smile"; "spoke in a sneering jeering manner"

This certainly wasn't my intent.

Soliciting investors is a great way to keep demand up, keep the market active, and keep prices from topping out though, now that few musicians can afford the top-tier instruments. Very creative.

Even though I'm fairly well positioned to use instruments and bows as investments, the few I have were acquired mostly out of sentiment, fascination, for sound comparison, or for study value. I expect them to appreciate, but don't consider them on par with other more mainstream investments.

Still, the rising fiddle market at least enables musicians who buy wisely to essentially have use of the tools of their trade for free, or to make a profit over the long haul. That's pretty rare in any other business.

October 29, 2007 at 03:05 PM · Lyndon,

If the stock market crashes, no one will want to buy those violins. So, I'm afraid your scenario doesn't pan out.

Jeffrey, you can just come out and say that you're talking about me. I should clarify; as you know, I do, and have owned 5 figure instruments and actually have been quite involved with excellent money management due to a family connection. A good money manager makes you intimately aware of their motivations and their reasoning behind what they do. If my assumption is incorrect, then forgive me.

I do think that the numbers quoted here with regards to stringed instruments generally gtting 10% annually are BS. However I'm sorry jeff, but any 3 second gander at any website will tell you the exact performance of a fund since its inception, the costs, the policy and regulations. Therefore, it is very, very easy to determine that one with very little money, can buy a fund that has historically yielded an average of around 10 or 11% (and aggressive funds, more than that). So in that way, investments can be easier to talk about. Instruments do have the added advantage of being playable and useable, and I know several profs. who have sold their violins when they retire and live off of that sale.

I've said all along that you must take into account the desires of the investor, if instruments are what they want to do. If you (and I mean anyone) cannot be convinced that making money with money (which some consider morally currupt) is better than buying something like a violin, then I don't know what to say. I don't necessarily care that people don't get it, but this is a discussion and I thought I might weigh in.

October 29, 2007 at 04:02 PM · "Jeffrey, you can just come out and say that you're talking about me. I should clarify; as you know, I do, and have owned 5 figure instruments and actually have been quite involved with excellent money management due to a family connection. A good money manager makes you intimately aware of their motivations and their reasoning behind what they do. If my assumption is incorrect, then forgive me."

Pieter, if that part of my response had been directly aimed at you, I would have used your name. :-) It was much more general... On the other hand, my response did consider your posts as well as others.

"I do think that the numbers quoted here with regards to stringed instruments generally gtting 10% annually are BS. However I'm sorry jeff, but any 3 second gander at any website will tell you the exact performance of a fund since its inception, the costs, the policy and regulations. Therefore, it is very, very easy to determine that one with very little money, can buy a fund that has historically yielded an average of around 10 or 11% (and aggressive funds, more than that). So in that way, investments can be easier to talk about."

Although not all named specifically, I think these points were considered in my response. Easier doesn't mean "better" or "worse", performance wise. It may mean "clearer" or "regulated". It may even mean "less risk", but that's not a rule. I'm not sure what you're sorry about. I haven't offered a % concerning appreciation of instruments in general... or suggested that instruments were a good investment for the masses.

"I've said all along that you must take into account the desires of the investor, if instruments are what they want to do. If you (and I mean anyone) cannot be convinced that making money with money (which some consider morally currupt) is better than buying something like a violin, then I don't know what to say. I don't necessarily care that people don't get it, but this is a discussion and I thought I might weigh in."

Unfortunately, I find your statement above has a conflict in logic or definition. If the desire of said investor is to purchase a violin, why is this action not "better" for them. What do you know about them? How will that investment impact their career? What about their individual tax structure? Which instrument are they considering and at what price? What are their connections to the music industry in general or to the instrument market specifically?

If you're suggesting that the standard return of a good mutual fund can't be challenged by a specific violin, I can't agree with that either. I also wouldn't suggest that buying any-old instrument (Italian or not) would out-perform a good mutual fund. I'd suggest (again) that not taking into account the purchasers situation, tax structure, and musical requirements can only result in a (probably bad) guess as to what is an appropriate action for them.

If you're trying to say that, for an average investor (not a musician or one who buys and sells in the collectable market), a mutual fund is a clearer, safer, more comfortable, and more understandable investment, I'd probably agree.

October 29, 2007 at 04:01 PM · No Jeff, we agree on my second point. I was saying that for an investor who has the money, and has the desire to buy a fine violin, it's a perfect situation ("useable" equity etc...). I'm saying that for a regular person who wouldn't normally do something like buying an instrument, with a profit motive or with a desire to generation income from an investment, it would not be the best avenue. I'm not talking about a player here. Someone brought up the idea of the "ultra rich". Well, I only know a few violin players who have "ultra rich" parents who have bought them a Strad or Guarneri. The number of musicians who are seriously in the market for high dollar instruments is probably not very high (and by that I mean 1 million+ instruments).

So, this idea that just regular old rich folk are being told by their financial advisers to do this (and not by Bein and Fushi) is very hard to believe.

So yes, for 99.9999% of investors, I believe the market is a far better place to look for investing your money (if profit and security are your aims). That doesn't mean that when I am able, I will not buy the Peccatte or Tourte I've always wanted, or whatever else I might ever be so fortunate to take care of for a little while. I was just addressing the point from the view of a regular person who does not play and like most people, it's about money.

October 29, 2007 at 04:57 PM · pieter, i don't mean to interrupt the Brilliant Science:) between you and jeffrey, but would like to respond to this from you:

"I believe the market is a far better place to look for investing your money (if profit and security are your aims)."

i think the "profit and security" part needs to be qualified. one advantage of the capital market is that it offers a much wider range of products/vehicles to balance out the risk and reward (often, low risk, low reward and high risk, high reward). amateurs tend to get into problems when misjudging/misapplying those concepts because of ignorance and greed.

similarly, jeff probably has a better idea than you about what is out there in the violin field: what not to touch, what to go after... it will probably take shorter time for him to place a violin from A to B with both A and B happy, and jeffery brings home some bacon.

you, pieter, will certainly have a better idea than i do because of your past due diligence. the danger, however, is for someone like me to think i were you and for you to think you were jeff.

there is a price to pay for expertise in any field.

the problem i see is that there are may be about 50 jeffs in this world at most :), but may be 50000 quality financial experts. from that weird angle, to an average joe, one can argue that financial expertise is more accessible, particularly in this high tech age.

October 29, 2007 at 06:13 PM · al ku, Jeffrey certainly does, but don't assume I don't get good, from someone as qualified " :) "

Also, I'd hope that anyone buying an instrument would do their due dilligence, and find someone who knows what they're talking about to buy from. I don't sell instruments, I only talk about them as a hobby. I am not in the business of dealing with them so I don't really know how anyone could confuse me and Jeffrey. In 5 seconds he can look at a violin and tell you more than I could after I studied it, with a smattering of every book written on the subject. All I can tell you is, every time I've had to sell something, I've lost money on the deal (15 to 20%), so this definately isn't a business for me. Did I buy really good stuff? Of course, I'd like to think I have excellent taste (granted, with a limited budget). However, the instrument business requires you hold onto stuff a little longer, and when you're like me and prefer to have more stuff go through your hands, ultimately you lose money on a sale, whereas the commission is far smaller with other holdings (not to mention that you're liquid in as little as 1 business day). And, even if you did have a violin forever, it doesn't mean that it didn't simply appreciate relative to inflation, or that you don't have to pay for the high incidental costs, big commission, possibly a certificate, and the months and months it can take to sell....

I don't have the expertise to go to an auction and pick out some hidden gem and charge a markup on it. Those, like Jeffrey, with that skill, are quite clearly making a living on it.

And, you are right about their being fewer violin experts, because the market, and the amount of people who care about violins, is very small. It's even smaller in fact, because some of those "50", an arbitrary number to be sure, have been proven to be, like Skilling, and Fastow, or a host of other executives, to be corrupt and criminal in their actions. Part of the reason that the financial markets are more a safe bet is because some of these "50" people, ultimately decide the value (but of course the consumer ultimately does). It's a bit more subjective, and sometimes when a criminally minded person is writing the certificates or selling a "del Gesu" cello, someone is being misled. Given all of the dealers out there, I doubt such things are even common. I have heard otherwise from reliable sources, but I myself wouldn't assert that the high end market is fraught with fraud and deception. Good help and expertise is fairly cheap to get these days, and I think that keeps people honest. If anyone is considering buying at auction or from a big dealer, I'd recommend hiring a consultant, possibly someone like Jeff Holmes, to look at the thing.

In the financial markets, what you see, is usually what you get.

So yes, I'm glad you agree with me that the capital markets, just by grace of how much there is out there, are a much better place to put money.

October 30, 2007 at 04:36 AM · That reminds me of the story about Joshua Bell's violin. He wanted to buy the Gibson Ex Huberman but it was too expensive at $4 million. Then he became very upset when he heard that a German industrialist was going to buy it for a private collection. So Bell sold his Tom Taylor Strad and ponied up a couple million more money to buy the Gibson Ex Huberman. The great news is that Bell’s instrument will be played and not stuck in a museum. By the way, Bell’s investment paid off. According to Wikipedia, Bell's next album sold 5 million copies.

One encouraging trend is that more and more rich people are buying Stradivaris and del Gesu's and putting them into trust so they will be played by musicians forever. For example, Ruggero Allifranchini with the Saint Paul Chamber Orchestra plays the "Fetzer" Stradivarius violin on extended loan from the Stradivari Society of Chicago. That violin will pass to future musicians in future generations, just as it has the last 300+ years. Beethoven may have heard it played by an owner a long time ago, and someone will hear it played forever more. Steven Copes with the SPCO plays a Guarnerius del Gesu made in 1742 on loan to him from Michael and Jean Antonello. Thanks to these wealthy benefactors, these instruments will be played and not sitting in a museum somewhere.

Of course, this is possible because of the amazing increase in the number of super-rich people. According to Forbes.com, there are “a record 946 billionaires this year.” And there are thousand and thousands of multi-millionaires. When you have that kind of money, things change. Your hobbies are different. You are different. Estate planning becomes important. Tax planning becomes important. You have a legacy.

What makes priceless violins different than stocks and bonds is, well, they are violins. They can be played. They are status symbols. They have a finite supply and a rising demand.

If you want it, you have to pay the asking price.

I would never buy a violin as just an investment myself, but if you have utility for a violin, considering the investment aspects of a violin makes sense.

Obviously, sound and playability are important, but other factors make two equal-sounding instruments cost much different. A violin by a master maker with a reputation for quality, and an established sales history for that maker, will make for a happier sale when you finally do need to sell the violin. Contrast that to the Chinese violins of unknown origin. They may sound nice, but how can you make a market for a violin from parts unknown?

October 30, 2007 at 04:26 AM · T Carlsen, I totally, totally agree.

I completely admire David Fulton. If I had his money, I'd do the same thing.

I don't know much about charity write offs. I give fairly regularly but they are in such insignificant amounts that as a student, I doubt it would really amount to anything in terms of tax benefits, so I never bothered to look into it. However, I have no doubt that $5,000,000 would make a nice dent.

November 1, 2007 at 05:00 AM · To comment on one item mentioned above -- I am very skeptical of those who claim double digit returns from investments in violins. First off, they are usually from people with a vested interest in propping up the market. Second, the supporting evidence is usually not readily available. Thirdly, the evidence that I have seen offered is very sketchy or, based on what is presented, not sound. Specifically, studies of returns on violins seem to fail to account properly for 1) carrying costs, 2) the special risks in buying/selling instruemnts (authenticity is the big one), and 3) the extreme illiquidity of the market. On top of these issues, price data is not publicly available, as it is with stocks.

No study I have seen that asserts superior returns for investments in violins has attempted to correlate these alleged returns with the risk of the investments.

Kevin

November 1, 2007 at 05:34 AM · Finally.... someone who understands.

November 1, 2007 at 12:50 PM · Return on any investment is highly dependent on the circumstances. I don't believe any overall long-term prediction of double-digit returns, including on Pieter's suggestions, except that such things are possible in all fields for well-informed investors at certain times. (Pieter is the one who's been suggesting strawman return rates in his posts, not me, by the way.)

With that restriction, I'd claim it's done all the time, in many fields. In certain times, putting money in certain investments is equivalent to flushing money down the toilet. Many investors believe that stocks and housing currently fit in that category, but that certain other real items do not.

Look at gold prices recently and you can see that something's going on: http://kitco.com/charts/livegold.html While you're at it, look at the dollar vs the British Pound and the Euro, the devaluation of our currency, the war this country is in, the huge resulting deficit, the war our "leader" is contemplating, and the insanity of the President.

Then, if you're deaf, dumb and blind, continue on with your life as usual. Pieter's relatives (I presume--he hasn't informed us of his specific entanglement)--will be delighted to take your money as if nothing is going on.

Preservation of assets is an investment strategy, remember.

November 1, 2007 at 10:12 AM · I know that the cost of these instruments grew incredibily since asian countries especially Japan got interested in this market.

November 1, 2007 at 01:51 PM · Pieter's too young to remember this one, and the opinions of the investment community leading up to it, which are laid out in this article, but I remember it well: http://www.stock-market-crash.net/nasdaq.htm

That's hardly the only example of the investment community's record of failure. I believe it is an established fact in the fiddle business that violin prices have almost never (a dangerous word, but I feel nearly secure in using it relative to the stock market and other investments) moved backwards. They tend to hold for long periods of time, and then burst forward suddenly. An appealing concept in hard times.

November 1, 2007 at 04:44 PM · Michael,

Of course I remember the Nasdaq disaster. I'm 22. I wrote 30 pages on it for my senior finals in economics in high school (defiantely not anything special existentially, but for high school, good enuf).

The "straw man" ROIs have been in response to other people.

I suppose you haven't read everything I wrote because several days ago, I alluded to the tech bubble. I always acknowledged that even the best money managers cannot consistently beat the S&P. Also, as you will find if you look up a few posts, I said that since the tech bubble, investors look more closely for value. Because as I'm sure you know, that's exactly what was missing in those days. Investment banks throwing incredible sums at internet upstarts with no real potential to be successful (a website selling kitty litter...), cashing out on the high, and then taking that money and pumping up some other useless IPO, and the voracious, sheep like investors, jumping at anything they could find.

That is part of the reason some investors have made a killing in gold. It's concrete, you cannot play with and manipulate it like you can with paper. That being said, there is concrete proof that if you stay with the S&P 500, you're doing very well, regardless of the market's folies. There are many such funds which have been doing it for years, and most are highly accessible. So, I don't think that proving that stock pickers and greedy banks should lead anyone to buy a fiddle as if there are not excellent vehicles out there. Listen to Buffett... almost every investor should be in Index Funds. Anyone who has done that, has few regrets. I have seen no data that suggests the same with fine violins, whereas there is ample data that supports stable, profitable investment vehicles over decades.

Regardless, I still don't think there will be any correction between visual art and instruments. You'll probably see a del Gesu go for the price of a Klimt in 100 years, but by then the Klimt will have risen exponentially, far outstripping the value of the violin. Historically, instruments have never been valued equally with fine art.

November 1, 2007 at 05:11 PM · when perlman sells the soil, there will be as much celebrity value as sound value even though it is arguably one of the best sounding violins ever made. btw, is it a strad? :)

one cannot say that about many of the older violins sitting on the shelves. in other words, the soil will not necessarily revive the rest. for an average violin player, it is a non-event. you still play what you can afford, old or new.

for reference, find me the 87 crash in this historical chart.

http://stockcharts.com/charts/historical/djia1900.html

also, without the evolution of tech bubble, there will not be v.com:) take home message: one cannot pick and choose in hindsight:)

November 1, 2007 at 05:28 PM · "one cannot pick and choose in hindsight:)"

No one was trying to. You're like the new Jim Miller.

November 1, 2007 at 08:57 PM · Pieter,

I've been trying to avoid personal attacks on this forum, but for the sake of principles, why don't we all abstain from making remarks like "You're like the new Jim Miller"? As I've been following this thread, I've mostly agreed with you. But your know-it-all attitude about just about everything is rather off-putting. However,

we know from whence it springs:

"I'm 22."

I knew everything when I was 22 also.

Scott

November 1, 2007 at 11:04 PM · Scott, do you have any facts to add which are relevant to the discussion?

November 1, 2007 at 11:32 PM · I'm just asking you not to be an insufferable know-it-all. And you could hardly call the insult that I quoted a factual addition to the discussion.

November 2, 2007 at 11:33 AM · Anyone interested in a scientific study of violin investment performance can download a copy of a current economics paper here: http://people.brandeis.edu/~kgraddy/

Disclaimer: I'm one of the authors. I would be happy to hear what people think of it.

November 2, 2007 at 11:53 AM · "You're like the new Jim Miller."

LOL. Could do worse. At least a little.

November 2, 2007 at 12:21 PM · philip, that is a good exercise put forth by the investigator imo. based on her model, we can make several observations that i can think of:

1. strad/de gesu are in a league of their own.

2. modern italians may be a better "investment", if you will, than older italians.

3. all violins studied as a whole, quite representative of the creme de la creme of the violin world, is inferior to the stock market in the period studied.

one thing mentioned in the article is the intangibles of owning a good violin which cannot be measured in financial terms. to musicians, i hope that is what really matters.

so strad/ de gesu compare rather favorably with the market, but with a price tag in the millions, as i said yesterday, it is a non-event to a working musician. to very few selected investors who have the resouces, it is an option to park some of the money but it suggests to me that to get a bigger bang for the buck, look elsewhere.

November 2, 2007 at 01:55 PM · Thanks for the paper Philip, it's interesting.

Since I don't have the economics knowledge to fully understand it, can I state some of my conclusions, and have you correct anything I've misunderstood?

It looks like overall, during the periods studied, the increase in the value of violins has been roughly half that of the S&P. Yes? No?

That the figures for violins don't include commissions paid to sell, or upkeep and insurance? (I understand that an investor who lends the instrument to a player might have the player handle upkeep and insurance)

Did you notice any tendency for violin categories which didn't perform as well during certain periods to "correct" at some point? In other words, might some group of instruments which has lagged behind be seen as a good value at some point, so buying causes it to go through a period of steep appreciation?

Is it possible that one might do best by investing in historically poorly financially performing violins, rather than those that have done well, anticipating some kind of correction?

P.S.

I don't have an agenda either way. Modern makers have benefited from the price increase in old violins. It was difficult to make a living as a maker back when a Strad could be purchased for $20K. ;)

November 2, 2007 at 01:58 PM · To al ku: I think your three conclusions are correct. The only thing I would add, which is not highlighted in the paper, is that the antique violin market was quite frothy in the 70s and 80s but hit a wall about 1990. Since 1990, growth has been not only a little worse than the stock market, but much worse.

To David: Yes, returns have been only about half the S&P, and this is without taking into account commissions and other expenses.

Regarding the possibility of investing in instruments that have done poorly in the past with the hope that they'll turn around, we didn't really have enough data to analyze this scenario. Our hedonic dataset goes back only till 1980, which isn't a long enough period to show changes for particular makers. We did, however, plot 5-year moving price averages to see which makers are going up fastest (they're all going up) for the period 1980-2005. These results aren't included in the paper, but for those who are interested, the 5 makers whose instruments appreciated at the fastest rates from 1980-2005 are:

C.G. Oddone

Stefano Scarampella

Ferdinando Gagliano

Hanibal Fagnola

Vincenzo Posiglione

November 2, 2007 at 03:15 PM · the common sense of buy low sell high is more idealistic than practical in the capital market. the opportunity cost is very high. it is more speculation than investment. the wealth gap widens because those who are better informed, as advocated by essentially all market gurus, buy "high" and sell higher. not to mention why "expensive" blue chips perform better in the long haul, this precise point is illustrated in the violin world by the price trend set by strads. on the contrary, in another thread, there is the talk that it is safer, if you will, to buy a chinese violin not paying more than 2000 dollars. money is money; you have just thrown the 2000 dollars down the drain.

the fundamental building block should be mass psychology, that is, what other participants are doing/thinking. you cannot outsmart the market in the long run. you have to go along with it and make the trend your friend.

find 100 guys, each chip in 50000 dollars and go after that strad!

November 2, 2007 at 10:21 PM · OK Al, I'm in!

I'd heartily recommend storing it at my place....climate controlled environment and all..... (big grin)

November 3, 2007 at 02:44 AM · We need to differentiate the investment potential of the very best violins -- the Strads and del Gesu violins over $2 million -- and all other violins. The very eliite violins, now selling from between $2 million and $6 million, are likely going to sell for into the $20 and $30 millions soon. They are unique and unlike all others.

Now that they have this reputation of selling for up to $6 million and being the very best of the best masters, the prices will skyrocket just like the very best of the best master painters.

These violins have already seen astonishing increases in prices.

One famous Lady Tenant Strad sold for only a few hundred thousand in the 1970s -- I think $287,000 if my memory is correct. It then in the 80s failed to meet the minimum bid. But then that violin sold for just over $2 million in 2002. Now it's worth at least $3 million, an increase of %50% in just 5 years. These type of elite violins are in a league of their own.

Now let's use art as a comparison. There are thousands and thousands of straving artists today making excellent art today that is simply excellent. Depending on your taste, many of these works are much better than the Mosa Lisa or a Rembrandt painting of an ox being killed. Yet their investment potential is poor compared to the great master paintings.

So don't put your investment money into $3,000 20-year old German violins. But a $4 million Strad may go to $20 million.

November 3, 2007 at 03:58 AM · Dealers make money from both deliberately selling violins and passively holding violins that appreciate in value, because they must always keep an inventory to sell.

Selling instruments and keeping instruments to appreciate in value are not mutually exclusive activities. A dealer does not need to refrain from selling instruments to hold violins that will appreciate over time. The dealer does that automatically with the unsold inventory.

So here we again so the matching of utility (selling as a business) with investment. This is not unlike players and enthusiasts buying violins for utility (to be played) but with future value increase a variable.

November 3, 2007 at 03:35 AM · I think dealers may be uniquely positioned to buy low and sell high, versus other investors in these instruments.

Long term gain may be reasonable, but every time we had a Strad for restoration and sale, I remember quite a bit of pressure to get it done and move it out.

I suppose there was more value in moving another one than in keeping the one we had.

November 3, 2007 at 03:57 AM ·

November 3, 2007 at 03:54 AM · My regards to those of you who do this professionally, despite your differences of opinion. Someone like me can only merely read information written by others.

I do have a good economics background, though.

November 3, 2007 at 04:20 AM · Imagine the situation of an instrument which the owner really wants to get rid of, has held for a long time, and which is in a condition that will unlikely lead to a sale--for instance, one that's been off the market for years or decades, and needs a serious amount of work to get it ready for sale.

When I worked at Bein and Fushi, this was a regular situation, the late Robert Bein took a great enjoyment in and regarded it as his responsibility to "save" a certain number of instruments each year in need of help (of the marginally profitable type--we did a lot of unprofitable work in the shop for instrument "charity cases") and such instruments were sold at heavy discount to musicians and investors who were willing to wait for the work to be done. When it was completed, they had the option of keeping the instrument, or selling it for a slight or greater profit that was better than any other similar investment. This was a successful situation for everyone, not unlike what's often done with real estate, and there was a steady flow of such situations. Lots of people who weren't dealers made some pretty good money, and enabled a flow of the restoration of instruments in need of help, to the benefit of everyone, including their ultimate owners.

In my five years in sales there, I myself was involved in five sales of this type, representing quite a bit of money, and I was only one of four people there selling instruments. One person (not one of my customers) waited four years for a nearly unique cello to be completely restored and showed up the day it was finished with a couple of bottles of champagne to celebrate. This was a sales situation, but there was also quite a bit of altruism coupled with it from everyone involved. These jobs didn't generate huge profits for the company, but they made work for the shop, and saved some very interesting and rare instruments. I doubt such things are being done now, though, with Bob gone.

Another thing, unrelated to this thread, was happening when I first worked in the shop: Bob was running unprofitable work on undeserving instruments through the shop at a loss as training exercises for new people. He viewed is as a way he could give back to the music world, paying his dues, in a way. He was an interesting person, and I (and a lot of others) miss him.

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