There has been talk of investment value recently in threads about buying instruments for children, and I too, before COVID, and when I didn't now how much I wanted to spend on a violin, was advised to spend my life's savings on one, since it was a worthy investment.
And I remember a year ago when COVID was on the horizon, we were trying to recall what happened to instrument prices either after Spanish flu in 1919 or after the 1929 stock market crash, since we were expecting a COVID-related crash. I can't remember any conclusions, except that maybe Strad values temporarily plummeted. Also I'm not sure if the crash has been quantified yet or if it is still expected to happen.
Why are people so interested in modern makers, is it because they are expecting them to appreciate in value more than antiques?
What about a general discussion to remind ourselves or to focus our thoughts or to predict the future?
There may be expectation that prices will continue to rise, at least in the near future, which could be driving some of the investment. In other words, a violin could be a good investment if it could be sold for a higher price in the future that provides a return exceeding the rate of inflation.
not interested in them as an investment, but there's some very good modern makers making very nice instruments that are great to play. That's enough reason to be interested in them.
Things really did crash in the GREAT DEPRESSION. I recall reading that the value of classic instruments really did plummet. I was not born until 5 years into the depression, but because my father had a job he and my mother were able to purchase really fine used items that the formerly wealthy were forced to sell: complete furnishings for our home, Chickering baby grand piano, Scarampella violin with Voirin & Weichold bows, etc.
The price of everything dropped during the Great Depression, 1929--1939. Part of that was essential deflation. Economist Milton Friedmann argued quite effectively that the Federal Reserve bank did the opposite of its primary responsibility, stopping financial panics. They reduced the money supply, raised interest rates, while banks were failing and the stock market was dropping. The Feds other responsibility is to prevent inflation; match the money supply to the real aggregate of goods and services. Since the Feds start in 191_, gradual inflation has reduced the value of the dollar by more than 90%. Having failed at both of those responsibilities, during our recent Great Recession, the Fed has also tried to stimulate the economy by taking the short term interest rate down to zero, like pushing on a wet noodle. The Fed has recently announced that they will tolerate an annual inflation rate of 2%, instead of the previous 1%. During this virus shutdown, trillions of extra dollars have been sent to people that are not working. Even orthodox Marxists know this to be wrong (labor theory of value). Inflation is equivalent to an added tax on all bonds, bank accounts, and income.
In my opinion, with rare exceptions the only people who are making money on violins are the dealers. I would never advise the average non-wealthy person to consider the purchase of a violin as an investment. Violins are the very opposite of liquid, for one thing, and then there is usually a commission if/when one does sell.
Buy gold. Its value relative to the dollar has been going up and up for decades now, ever since the gold standard was abolished.
In a financial book that I read recently there was an interview with a prosperous family with a big old Villa in Rome. Their family wealth had survived centuries of wars, revolutions, financial trouble. Their "secret" was only 3 things; buy land, gold, and art. How do people deal with hyperinflation?, as in Germany 1920, Argentina-twice, and Venezuela-now. Buy stuff as soon as you get paid. It is OK to buy things with loans at fixed interest rates. Exchange your money for another currency. Warning; - China is counterfeiting coins.
Cotton, keep in mind that if an actual crash happens, everything will plummet, including Gold. Gold is traditionally an inflation hedge, but as we are due for a deflationary cycle, it's not the best investment choice currently IMHO.
The best systematic return from art of any kind (as opposed to buying a Vermeer at a yard sale) is the untaxed dividends you get by enjoying it.
As the topic of this thread is "investment", and not "violin investment", and in relation to COVID, I will allow myself to go off-topic for a moment.
Dmitri is correct in his assessment of the stock market.
Thank you, Lydia. The reason I brought this up was that it is not necessarily easy to sell your instrument at the proper value. Obviously you want retail value, but an instrumentalist will not be a dealer at the same time, and that brings up a problem.
Another chapter in the "Bigger Fool" theory. You purchase something because you assume that one day, somebody else will want to purchase that item from you for more money than you paid for it.
There is research being done on violin prices, mostly by people who are raising money to invest in them.
Something related that I haven't seen mentioned yet here is that over on the makers / dealers forum, the first rule of antique violin pricing is that the price has little to do with how the instrument sounds. Pricing is based on maker, provenance, condition, and the market. I'm sure you can find some happy medium but if I was a musician stretching to afford something as an investment first, I'm not sure I'd like that compromise. Maybe if the investment thing was just one consideration, in search of that happy medium, you'd come out better.
As with any investment, diversification will help to mitigate risk. I use the rule of no more than 5% of my total net worth tied up in instruments and bows.
Judging from auction prices some sectors of the antique violin market (e.g. English violins) have been stagnant for 20 or more years. And adjusted for inflation I think there are very few contemporary makers whose instruments will ever truly appreciate. Italian violins seem to be in continually increasing demand but that could prove to be a bit of a bubble.
"Judging from auction prices some sectors of the antique violin market (e.g. English violins) have been stagnant for 20 or more years."
@Gordon - going back 30 years that's not so surprising and to be worth £40K it must be a pretty exceptional viola. Going back further of course there was a lot of inflation. My first decent violin (English) that cost £120 in 1971 would now probably be worth £3-4K retail, roughly in accordance with the PBI (Price of Beer Index).
In 1999 a study was published by the University of Cincinnati, where they took a group of fine violins ranging from Antoniazzi up to Nicolò Amati and saw how sale prices fared between 1960 and 1996. To maintain statistical relevance, Strads and del Gesùs were excluded from the list.
@Dimitri - was that adjusted for inflation? If so, whose inflation? In 1960 the average weekly wage in the UK was about £20 (the maximum wage for professional footballers!). By 1996 it was more like £400. Counting on my fingers I reckon that's not far off 7% pa and the Price of Beer Index was in close step. Of course inflation was probably much lower in the US.
@Steve, I don't think the numbers were corrected for inflation. But you do have a point, because the prices were in USD, or corrected to that currency.
My plastic oboe cost £99 in 1973. By 1978 I was insuring it for £300.
Even when violin price data is reliable and relevant (i.e., accurately reported private retail transactions-- hah!), there isn't all that much of it compared to what is routine in financial or real estate markets. Also, that period from 1928-1960 was not a great time to be selling an instrument that had been bought back in the 20s. While the numbers after that did catch a nice wave, as Asian markets exploded and the wealthier end of the spectrum caught a larger share of global prosperity, there was nevertheless a lot of catching up to do.
I more than doubled my money on the 19th century violin that I bought in 2000 and sold in 2015. Took a year to sell, though.
And even doubling in 15 years is less than 5% per year. Not at all bad, but (as you say) with imperfect liquidity and much uncertainty.
You can play your violin, its not much fun to try to play with your stock market holdings.
Indeed. During those years, I had use of a fine violin essentially for the cost of capital. The bow that I purchased at the time has quadrupled in value, though. (I've been contemplating selling it, but recently I've found that I actually like it a lot for fiddling.)
Untaxed dividends. Those won't go to a financial buyer.
Whether or not the cost of a violin is recoverable, or turns a profit, even the worst scenarios can look a heck-of-a-lot better than trying to recover the cost of a fifteen-year-old computer, or automobile, which most of us buy without any thought to depreciation or "investment" value.
Sure. But you don't have entrepreneurs raising money from pension funds to troll around used car lots. Yet.
In my opinion, ethically-questionable people have managed to be so pervasive in every sort of business, that it's all a minefield.
If you think of individual makers as artists who happen to produce objects that also have utility, it might reframe your thinking a bit. When we buy hand-crafted stuff from artisans, we're supporting a creative lifestyle that we should, in my opinion, try to keep in the world.