Violin as a long-term investment

April 13, 2005 at 04:26 PM · Provided you can actually sell for $20,000, that is not a bad profit.

However, most of the gain is illusory--merely the devaluation of the dollar.

Per Capita Income in 1973, avg for US, was $5211. 1997, it was $25298. Extrapolating to 2005, it is about $41,000 or so. We can take the income to be an indicator of inflation (devaluation). So, it works out to over 6% per annum averaged over that period!

So, the $900 would have to be worth $7390 today, just to break even, not considering taxes.

In your case, what you get for taxable gain is $19100, so at a 15% tax rate (let us assume you pay on one of the lowest brackets) you will realize a book profit after taxes of only $16,235, which, after accounting for the inflation, is only (16235-7390) $8845, which is still a pretty handsome sum! What is that in buying power in 1973? $1077.50. So, what you really did is double your money in 32 years. Not quite so impressive after all, is it?

What is more impressive is the idea that you could own something (a violin) which makes such beautiful sounds, and still get more than you paid for it, in the end. (Boats, cars, racehorses--they all go to worthless at the end).

Question is, how did the DOW or S&P500 or gold or silver do over the same period? (Real Estate is essentially flat).

regards,

Bill

April 13, 2005 at 04:35 PM · In '73 the minimum wage was around 2 dollars per hour, now it's between 5 and 6...that's a lot less increase in income than the stats you cite, but the rich keep getting richer while the poor get poorer.

I'd be tickled with a 20-fold increase in an investment over 30 years, but, yes you do have to sell the instrument to get the money...and then what would you play?

April 13, 2005 at 05:06 PM · Minimum Wage is not in any way an indicator of inflation. It is a statutory number--and one which, for a variety of reasons, has been held to a level which is artificially below any real "minumum" wage level. In other words, in the early 70's, it had a much larger impact on the labor force. Today, very few (adult) people are actually paid that little. Typically today, the bottom is around $8 to $12 per hour in the northeast. I do not know what it is in the midwest or south. Furthermore, the standard of living of the lowest wage earners is significantly eroded compared to where the lowest were in the early 1970's. While VCR's and other gadgets have gotten cheaper, the things that matter most have not--housing, food, transportation--and so they suffer. At the bottom, all you can afford are the essentials, and so the "consumer indexes" etc are meaningless.

On the whole, investment in art has been seen to be rosy, but there are lots of hidden costs. For instance, in the case of the violin, if you figure in the cost of maintaining it, insuring it etc, you take a bite out of the "earnings".

If you are a player rather than a collector, the rising value of good instruments is more of a problem than a cure--it means that fewer and fewer good vintage instruments will be attainable--and that waiting to earn more will backfire (exactly what has happened to many in the current real estate market--and one reason for the crazy "I have to buy before it is too late" mentality). However, if the art or in this case instrument market becomes too "popular" then the values will eventually fall rather than rise--which is in fact exactly what happened in the fine art market some time back--especially when the Japanese economy imploded.

April 13, 2005 at 05:38 PM · Bill,

It's true that, as a purely financial investment, a good instrument isn't necessarily superior to well-chosen stocks or other investments (of course, in both cases, if you choose badly, you lose). The special appeal is in the two aspects you rightly point out: (1) a good violin has its own intrinsic value separate from its monetary value, especially to the violinist who plays it, and (2) if well treated, the violin doesn't wear out or lose value, unlike (for example) a trombone.

It's also true that since other comparable instruments continue to appreciate in value at approximately the same rate, you still can't trade up without spending more money (unless you change instruments).

It's similar to the situation I find myself in regarding housing: my NYC apartment has increased in value insanely in the past 6 years, but that doesn't help me unless I decide to move to Boise!

April 13, 2005 at 06:05 PM · Bill, since you asked, the Dow Jones index has been essentially flat since the 1960s, accounting for real inflation. The DJ doubles about every 10 years, following the rule of seven. Inflation has little to do directly with per capita income, and nothing at all to do with 'devaluation of the dollar.' You're taking something that sums to zero and calling it inflation. Terry did a lot better than he would have holding onto the cash, in fact better than most $900 investments I can think of. Using your model, a Strad has probably been losing money since 1737. Terry made $19,000 that you didn't. You want to poop in his milkshake.

April 14, 2005 at 06:05 PM · Hi Jim,

(Very Off Topic)

I bothered to look up the Dow history and found that in 1973, it was around 600 to 800; today it is around 10,500 (and has been for what, 5 years now?!), so, yes, the violin did better than the dow. (Of course the dow is not a fixed point either--but that is a whole different point).

As for your position that "inflation has... nothing at all to do with 'devaluation of the dollar'" I think you are misinformed. The result of devaluation is always infation. Printing money at a rate greater than that required to replace old paper is by definintion devaluation. When the govt indirectly prints money, having issued debt, the result is erosion of the value of the dollar on the world market. It also increases the amount of capital in circulation domestically, which spurs spending and therefore inflation.

The government "offical" infation idexes are cooked with strange adjustments--"hedonics" etc--and real estate is now out (it used to be included). So, the only really good measure of spending power is how much money is out there, ready to be spent, and that is income--per capita income. That is in fact what you really "feel" when, after 30 years, you earn 10 times more and are no further ahead.

"Terry made $19,000 that you didn't. You want to poop in his milkshake."

Actually, I never said it was not a good return--just that the seemingly large number needs to be looked at more carefully. Making $19000 or $16000 or some large number, out of thin air, today, is a lot of money. But it is not a lot when the investment, made 32 years ago, was a considerable sum for the time. To wit, our new chevrolet malibu classic cost something like $2,500 in 1973 (maybe it was $4k--and I remember that corvettes cost $10k then). So, $900 was a LOT of money back then.

It is easy to forget the "pain" taken 32 years ago, in putting money into something--especially when the raging of inflation over the years has re-adjusted one's inner sense of value.

My real point is that the violin "got lucky" and that the real value was the music--and that even having "got lucky" it is not as huge a gain as it seems. In other words without taking into account the *time* value of money, gain is meaningless.

A 5% return, will, in approximately 14 years, double. In this case we saw a doubling after about 30 years, so the rate of return adjusted for inflation and taxes is only about 2.3%.

Regards,

Bill

April 14, 2005 at 05:06 PM · The principle cellist of the New York Phil bought his Guadinini for ike $250,000 in the 1980s. Inflation is a bitch.

April 14, 2005 at 06:57 PM · So really, the trick is to buy an instrument by a maker who isn't popular at the moment, but who will at some point (preferably during your lifetime) become popular.

Good trick, if you can do it. I'd say you got lucky, and had fun playing a nice violin in the meantime.

The instrument I'm looking at buying is unmarked -- I know that it'll never bring me millions, unless it's millions in concert bookings! However, it's a nice violin to play and has a good, clean sound.

That, you see, is my gripe with the violin market. I suppose it works in my favor, because I'm not obsessed with name or appearance; but still, a lovely-sounding violin with a poor pedigree is "worth" less than a lovely-looking, named instrument with a terrible sound. It's because the collectors drive the prices, not the violinists.

I'd call for us to Take Back the Market!... but I can't afford it. :)

April 14, 2005 at 07:37 PM · Bill, that's pure gibberish.

This compares Terry's investment directly to a typical securities investment, and it ought to satisfy you: an investor will expect 10% a year over the long haul. At that rate for thirty-two years, $900 earns you around $20,000.

For some fun perspective, if you'd spent $900 on nine shares of Microsoft in 1987 at the time of the first split, when it was a little over $100, it would be worth $115,000 today.

In 1973 you could have bought a '59 Gibson Les Paul guitar for $900, perhaps two of them, and they go for $200,000 now.

April 15, 2005 at 07:19 PM · Well Jim, you would have had to buy a Les Paul Standard. The customs of the same vintage do not hold nearly the same value, but oddly enough, the Custom was still the most expensive of the entire Les Paul line.

59 Plain Tops are now going for $200,000. If you've got something like the African Burst or Brock Burst, you can get half a million.

April 15, 2005 at 09:59 PM · I read the other day Mark Twain's guitar was appraised at $15 million. Is that the highest priced instrument of all time?

Interesting thing about the Pauls is no one would seriously claim they sound a lot different than a reissue, like they would a Strad, for instance. In fact no one would ever take it out and play it. It's just collectabilty driving the price.

P.S. It's a pre-war Martin. Pre-Civil War that is :)

April 15, 2005 at 09:12 PM · That sounds like an appraisal from a Mark Twain fan who might also happen to be the owner, not an instrument dealer, AND doesn't want to sell it. I'd like to see someone try to sell it for that. :-)

April 15, 2005 at 10:25 PM · The Sons of the Confederacy would cough it up if you threated to take a lighter to it.

April 16, 2005 at 01:21 AM · Jim, head over to the Les Paul Forum. That is a forum filled with doctors, lawyers and CEOs with more money than God. Many of them have large collections and would definately take you up on that assumption that they wouldn't rather have a burst. "Old wood" as they call it is most of the time more favourable to the R9s (reissues).

I've played a few bursts, the resonnance is amazing.

People do still play them out.

April 16, 2005 at 03:01 AM · Pieter, I know there are people who say that. That's why I qualified my statement with the word 'seriously.' As for playing them out, I'm sure there are isolated cases of that too. Nothing sounds less attractive to me than a bunch of doctors and lawyers on a Les Paul forum.

Let's not kill the thread.

April 17, 2005 at 02:45 PM · I think one thing people have failed to mention when considering a violin as an investment is the liquidity factor. It takes a simple phone to call a broker to liquidate a portfolio of stocks and have a check in your hand in three days. When trying to sell a fine instrument, you will either have to try and arrange a private sale, consign through one of the auction houses, or sell to a dealer (at a deep haircut). Any of this options could take several weeks to several months.

April 18, 2005 at 01:12 AM · Mark Twain's guitar doesn't touch the Messiah in value.

Speaking of value over the years, in the 1920's as I understand, Genova was offered something along the lines of $25 million for the Canone. What would that be equivalent to nowadays?

April 18, 2005 at 09:30 AM · Maximillian,

Are you sure of that figure? That would translate into almost billions today!

Cheers!

April 20, 2005 at 12:36 AM · o_O I know it sounds odd, and I realized that translated into billions.

That is my understanding. I may be wrong, but remember, this is the Old Devil himself we are discussing. >:)

April 28, 2005 at 01:25 AM · I bought a 175 year old (now 200) fiddle in 1980. Its value has beaten inflation, and it sounds better than in 1980 because it's been played a LOT.

How many other things can buy, use every day for 25 years, and have them worth as much or more than you paid? Not many I can think of.

FR

April 29, 2005 at 08:58 PM · I have been involved with collectibles for some time. (Ancient coins) I hope that experience can apply here.

First of all, you cannot invest in collectibles. You purchase them for the pleasure of owning them.

Period. Most people forget about inflation in calculating their return.

Nevertheless, the best strategy to buy the best quality item you can afford.

Other schemes can never second guess the market.

As for violins, I would buy the best I could afford and enjoy it. If it appreciates, so much the better.

If you want to invest, buy securities.

May 7, 2005 at 09:35 AM · Terry, I guest that you will have a 60000$ investment in 10 years since master Scrollavezza is fast 80 yrs now. The inflation will take from you 35% your money in 10 years but it makes also new fiddles more expensive too. I guest that in 10 year a new fiddle of Alf or Curtin will cost 350000$, no more 25000$. So 60000$ in 10 years is somewhat like about 40000$ today. It's also good invesment, you have twice at much.

I find it crazy that fiddles by Ansaldo Poggi (who died in 1984 i think) usually were sold for 50-60000$ at auction houses (so by dealers they cost easily 80-110000$). It's readly a good invesment with an italian name, whether there are makers of the same quality aroung the world, but they never have this high reputation like the italian ones.

I have a new violin by a not well-known german maker. It's a copy of the "Kreisler" del Gesu. I could make a commission by an italian maker in Cremona for the same amount but I don't like their works very much. Their fiddles looks so "holywoodish" for me.