How Do I Explain This One To My Wife?
by Dr. Steve Sjuggerud
January 9, 2006
I bought a guitar last week...
For the money I spent, I could have bought a car.
In my head, I know it’s a fantastic deal, actually…
I personally think rare, high-quality tangible assets like collectibles will outperform the stock market over the next decade. Some could easily return 1000%+ in the next five to ten years (coin prices, as measured by the CU 3000 Index, rose 1,195% in the great coin bull market of the late 70s)
I think it makes sense to spread a little money outside of stocks and real estate (which everyone is talking about and is over priced) and putting it into physical things of extraordinary value that nobody would even consider… things like gold coins… and for me, as a guitar buff… guitars.
So I’m just putting my money where my mouth is. I’m spreading a little money outside of stocks and real estate and into things that are rare, desirable, and rarely talked about.
But getting this idea across to my wife is going to be another thing. Before you call me crazy, like she probably will, let me tell my story…
A TRIP TO VINTAGE GUITAR HEAVEN
“Oh, they’ve doubled or more in the last two years…”
I spent last Thursday in Nashville, Tennessee with George Gruhn. George might be the most knowledgeable person in the world when it comes to vintage guitars. I asked him how the famous guitars of the 1960s have done lately… specifically, Stratocasters and Les Pauls.
“I can’t believe it myself. I thought the run might have ended in 2000. But it hasn’t. When I opened my shop in 1970, I was selling these Les Pauls for $100. Let me show you this one… It’s the cleanest one in the shop. All original, never been refinished. It’ll sell for over a quarter-million dollars.”
That’s a 25% gain, per year, for the last 35 years. Why do the prices of these guitars keep going up? What makes them so desirable? George thinks it’s the same thing whether it’s vintage guitars or antique cars… “Design, workmanship, and materials… in that order,” he says. There’s a lot of wisdom buried in that thought.
I’ve discovered something else to be true in making money in collectibles… age is not that important. Something that’s old, but not particularly special, doesn’t go up in value. It generally just keeps up with inflation.
Over the next decade, I personally believe that collectibles will beat the stock market, if you buy them right. And that’s where you need someone like George Gruhn in guitars, or Van Simmons in coins.
I’ve come to learn how you make money in these types of things. I’ve bought U.S. coins, stamps, European coins, autographs, ancient coins, guitars, etc. You get the picture. And the smartest things to do to make money are the same across all of them.
Here’s what you must do:
1) You must buy the absolute best thing you can afford.
2) You must buy it in the best condition you can afford.
3) You must become as knowledgeable as possible before you buy.
4) You must have the best possible proof of its authenticity.
5) You must buy from the best dealer, period.
There’s no guarantee that you’ll make money in collectibles, even if you do all of these things. However, if you try and skip out on just one, it’ll cost you profits. If you try and skip out on two or more, forget it. Don’t even bother buying.
I’m telling you this from experience – I’ve bought things “sight-unseen” from people I didn’t know. And now I regret it. I bought the wrong thing, or I bought in the wrong condition. And I’m going to take a loss.
What I’m telling you above is what works. For what I bought yesterday, I followed all five of my rules above. The only thing I could have done better was number two above – I could have bought in a little better condition… for a lot more money. But try getting that big price tag by my wife!
The goal of today was not to convince you to buy a collectible guitar. The goal today was to show you how you buy collectibles properly.
Spread some of your assets outside of the stock market, into things like coins and other collectibles. And do it right.
The more you stick to my tips above, the more money you’ll make in collectibles in the next decade, I’m certain of it.
Good investing,
Steve
P.S. If you’re curious, I bought a 1930s Martin 000-28 model. In 2004, Eric Clapton’s Martin 000 from the 1930s sold for over $700,000 at auction. It is unquestionably a desirable guitar. Mine’s a 1939. They made 48 of them that year. How many still exist?
P.P.S. If you’re interested in guitars, visit Gruhn’s in Nashville, or online at www.gruhn.com. If you have a guitar and don’t know what it’s worth, George has excellent and speedy online appraisals for $35. He can help you find a guitar that is right for you… just like he helped me. He can also get you good money for your old guitar, too. I trust him. George said you can contact him directly, at ggruhn@gruhn.com. Get in touch with him…
Editor's note: Steve Sjuggerud is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments.
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