When it comes to investment in a recession, there is little to rival collectibles for sheer growth:- According to a new report from the Institute for Fiscal Studies, the wealth of the average Briton has taken quite a hammering in recent years...
And the effects have been even worse for those groups with greater disposable income. Degree educated individuals have reportedly suffered a £17,600 ($26,400) drop in wealth, while citizens aged 55 to 74 endured a drop of £25,000 ($37,500).
On balance, the recession has dealt a blow of £11,300 ($16,950) to the average Briton's wealth.
Downturns in the property and stock markets, along with a fall in the value of defined pension contributions, have had a significant effect on the wealth of UK households.
In 2007, the value of the FTSE 100 was set at around 6700 points. Two years later, it had dropped to just under 4,000. The UK housing market has also experienced problems. In 2007, the average house price was set at £184,070, but today that figure stands at £167,802 - a loss of 8.7%.
But, while traditional asset values have fallen leading to a loss of wealth, it's a very different story in the world of collectible investments. A similar period has seen investors all over the world turning what has been a £11,000 loss for traditionalists into a profit for collectors.
For starters, some of the world's most sought after autographs have seen incredible short term returns.
An Albert Einstein letter dated January 1954, from Einstein to a Dr Oliver Ford in England, sold at Bonham's in October 2009 for £1626 ($2,440).
The famous "Burns Bible" |
Yet just four months later, the same letter reappeared at an online auction with bids reaching £1,810 ($2,716). That's a return of 11% in 16 weeks.
Paul Fraser Collectibles has experienced this phenomenon first hand. After the recent sale of Scottish poet Robbie Burns' Bible for £25,000 ($41,250), international interest around the piece continued resulting in one collector offering us £37,500 ($61,875).
Had the new owner parted with the treasured collectible, he would have seen a profit of over 50% in one week.
Meanwhile, the stamp market has also seen impressive short term gains.
In China, this has led to world record prices. In September 2009, a collector paid £221,110 ($331,671) for one Chinese Red Revenue stamp, only one of 32 left from the 1897.
Yet, just over three months later, another of the Red Revenue stamps sold for £474,400 ($711,600). That is over double the amount paid just four months earlier.
Stamps are also increasing in value at the lower end of the market. Recently, a rare 1d orange-vermilion went up for auction with a £3,500 ($5,250) presale estimate.
The stamp sold for £13,000 ($19,500) - nearly four times the estimated price.
And such value appreciation hasn't been limited to more traditional collectibles either.
A 1960 Green Lantern Comic issue #1 was auctioned in 2003 for £12,650 ($18,975) which was considered an excellent price at the time. This year, the same issue of the comic, sold for £33,250 ($50,787): an increase of 123.9% in seven years.
The world of art and celebrity has also seen high short term profits. In a 2005 Los Angeles auction, one of the Mick Jagger paintings created by Andy Warhol sold for £13,300 ($19,975).
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The Andy Warhol painting
of Mick Jagger
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Just two years later, the same painting sold at a similar auction for £26,000 ($39,000.)
Elsewhere, a bathrobe, once belonging to Marilyn Monroe was purchased for $6,000 in 1999. Ten years later, at the height of the recession, this same robe sold at auction for $120,000. That equates to an increase in value of 1,900%.
The long term investment potential for collectibles is equally impressive if not better.
In the world of rare collectible stamps, the GB30 Rarities index, which charts the value of the top 30 rare British stamps for investment over the past 40 years, has shown an overall increase of 6,403% in value. This equates to a compound average annual increase of 11% per annum.
More importantly, at the height of the recent recession, the GB30 Rarities index saw an increase of some 38.6% in value from 2007 to 2008, while the following year recorded a further 45.6% growth.
Collectibles, like autographs have seen equally impressive gains. The PFC40 autograph index, which charts the value of the top 40 most sought after celebrity autographs on the market, recorded an average increase of 335.9% over the last ten years. That's an average compound increase of 15.86% per annum.
And luxury collectibles are seeing even better returns than an investment with Warren Buffett. According to figures, if you had invested in Buffett's famous Berkshire Hathaway Group over the last 20 years you'd have seen returns of 18.83% per annum.
In comparison, in 1986, one avid collector bought Andy Warhol's 200 One Dollar Bills for £256,600 ($385,000). Earlier this year, the same painting was sold for £29,200,000 ($43,800,000) at auction in New York. That's a return of almost 23% per annum.
Ultimately, the recession dealt a £11,300 blow to Britons because their wealth was directly correlated to the traditional investment markets of shares and property.
But unique collectible values hold little correlation with other traditional financial investments. Furthermore, they are tangible: you can hold them, and they will always hold value.
With an estimated 200 million serious collectors worldwide underpinning the market, and early projections forecasting this consumer base to double in the next twenty years, the future looks good for investment grade collectibles.
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