The past few years have not been kind to collectibles markets. It’s safe to say it’s a cheap and hated space right now.
But there are a number of reasons many people believe that is about to change…
Personally, I don’t think Unconventional Wealth’s Collectibles Week could have come at a better time.
Why? Glad you asked…
Why Own Collectibles at All?
Collectors and investors alike have been buying collectibles — things like rare U.S. and world coins, rare stamps, watches, art, wine and automobiles — for as long as they have existed.
Some do it as a symbol of status. Others do so simply because they admire the quality or beauty. Others are laser focused on making money.
Whatever the overall reason to buy or invest in collectibles, folks who buy them get the following benefits…
- A completely uncorrelated asset class
- Portfolio diversification
- Proven long-term returns
- Generational wealth transfer
- Varying degrees of liquidity
- Pleasure of ownership.
All these benefits are “baked in,” if you will, into this asset class. But like any asset class, their prices ebb and flow based on the broader markets and the factors affecting all markets.
Flow Follows Ebb
Suffice it to say, the past five–10 years have not been the most agreeable for collectors in general.
We’ll take a look at why some of the factors providing headwinds to collectibles prices are about to change. But the first point I’d like to make is — as I write, collectibles are cheap and hated.
Premiums for certain types of early U.S. gold are down to decade lows. Some of that is due to large estate liquidations, and some is due to net dishoarding of U.S. gold from European banks.
We’ve seen even deeper drops in premiums for British stamps over the same period.
Pick a collectible and you are bound to find the same pattern.
Money has been going elsewhere for 10 years as greed has prevailed over fear as a market driver. Remember, we saw 4–50% corrections in stocks in the Great Financial Crisis of 2008–09.
Not surprisingly, investors have been doubling down and letting winners ride as they furiously work to replace the wealth lost a decade ago.
Many who were hoping to retire 10 years ago still haven’t to this day.
All Good Things Must Come to an End
None of us will know the current bull market top for stocks until we are correcting. Some may not even recognize it then…
But I agree with Mike Hall, CEO of JustCollecting, when he cites the long bull market in stocks as an opportunity for collectors. Mike suggests, “Diversify now before the next bear market. Remember what happened in 2008. Don’t get caught twice!”
There is wisdom in Mike’s warning.
This historically long bull market will come to an end — and paper gains will disappear if you don’t take profit.
Now is the time to find “cash” in your portfolio for collectibles through either trailing stops or simply rebalancing. You have cash for collectibles. It is just currently misallocated.
Mike further revealed that the wealthiest investors are doing this now.
Worldwide auctions are showing record realizations for the rarest items… Demand is rising from those who are typically the first to act… This looks very much like an early signal of the inevitable start of an uptrend.
Our good friend Geoff Anandappa of Rare Tangible Assets (U.K.) sees opportunity to make money two ways right now from collectibles.
You see, collectibles have always benefited in the long term from being measured in mismanaged fiat currencies.
Just like gold and real estate, commodities such as rare tangible assets tend to store purchasing power as the currencies we price them with become diluted and “worthless.”
And I agree with Geoff’s assessment of the current situation… especially for U.S. dollar-based investors.
The U.S. dollar is currently in its eighth year of a bull market against other major currencies. Historically, U.S. dollar bull markets tend to last seven–nine years.
When will this one end? I don’t know.
But — like the long-in-the-tooth equities bull market — a reasonable and prudent investor would think the end is near.
Taking some dollars off the table and putting them into rare tangible assets protects those assets from the weakening dollar. And if you buy those tangible assets based in another currency — like Geoff’s British pounds — your benefit can be twofold.
The Time to Act Is Now…
The rare combination of factors in favor of higher collectible prices is too clear to ignore.
Cheap and hated collectibles are giving would-be collectors some of the cheapest premiums in a decade or more. The green shoots of a bull market in collectibles are starting to show.
Equities are still making new highs. But at this point, a correction is much more probable than a sustained bull. And the U.S. dollars most of us would use to buy our collectibles are at their strongest point for the foreseeable future.
Whether your goal is profit or enjoyment, the time is now to give serious consideration to collectibles. You and your heirs will be glad you did.
That’s one great way for you to “Keep What’s Yours” in 2020.
P.S. Want to get your own investment-grade collection going? Our partners at Asset Strategies International (ASI) have perhaps the greatest collection of American coins you can find anywhere — at least amongst those ready to sell.
And our partners at JustCollecting can help you with world coins — and all sorts of other collectibles, like stamps, cars, movie posters, you name it.