FMF - Friends of Minerals Forum, discussion and message board

[Matt_Zukowski]

There was an article in today's Barrons entitiled "Collectibles Lag Equities."
https://blogs.barrons.com/penta/2014/07/25/collectibles-lag-equities/?mod=BOLBlog?mod=BOL_hp_highlight_5

This article referred to a study:
https://www.q-group.org/wp-content/uploads/2014/01/Dimson-Inv-Performance-of-Art-and-Other-Collectibles.pdf
that stated that equity (stock market) returns were better than certain collectibles over the long term, but that these collectibles did better than gold, bonds and most other asset classes. Risk-adjusted returns to these collectibles were worse because collectible prices can be volatile in the short run, and problematic over the long term as various collectibles go in and out of fashion. Finally, it may still be rational to "invest" in collectibles because they provide a psychic value that augments their financial value.

The article pointed to another study:
https://www.marketwired.com/press-release/www.spam.org-private-bank-study-more-than-half-high-net-worth-americans-engage-hobby-investing-1930540.htm
that discusses a survey of high net worth individuals describing what and why they collect.
(links normalized by FMF)

[James Catmur]

I always thought I had a collection for the physic returns! It is fun finding them and fun holding them. But it is clear that once you take into account sales costs (25% is low for our sector - more like 50% for us) it take a long time for specimens to gain enough value. And self collected ones have a cost too - how many nights away, how much equipment, how much gas?

So interesting but nothing new in the articles

[Peter Megaw]

Plus ca la change...another reporter discovering that folks who invest in a highly specialized market about which they know little are surprised when they discover it takes quite a while for their investment to mature and liquidate profitably.

No-one should be investing seriously in a market sector they don't understand...be it high tech or pharmaceutical start-ups, Mining exploration companies, Old Masters, gold bullion or mineral specimens. It's borderline delusional to think there shouldn't be a major difference in performance between these markets and main line equities...and making the argument that you can compare them head to head is tissue thin.

To begin with, comparing something vocational with something avocational (for most participants) is comparing apples to oranges or chalk and cheese. The performance of equity investments (largely made vocationally by highly knowledgeable and often professional people in a highly regulated market with significant disclosure requirements) does not compare well to the appreciation of collectibles (invested in by significantly less knowledgeable people engaged avocationally in a minimally regulated market with only selective disclosure).

Further, the comparison is arguably inherently statistically unsound because there are almost infinitely more equities investors out there...and legions of institutional equities advisors operating at huge scales, which tends to stabilize their market... so a long-term average investor or investment means something. Collectibles are a bimodal market with few falling between the highly knowledgeable e and relatively unknowledgeable categories, so the "average" is arguably non-existent...perhaps largely occupied by folks making the transition toward becoming more knowledgeable?

Both markets are subject to fashion and occasional busts, but you can make a nice profit if you know what you're doing and a nasty loss if you don't. Knowledge is important in both but absolutely vital to making a good return in a specialized market like mineral collecting...the trick being figuring out what is really a Blue Chip (Blue Cap yes, Cavansite, no; Deusenberg yes, Dodge Dart, no; Judy Garland's ruby slippers yes, Barbie high-heels, no) without Dow Jones or S&P to guide you. If making a profit is a major component in why you collect, you owe it to yourself to learn as much as possible about the mineral market and how it operates so you can make your own judgments on acquisitions. How often do you hear of big-time equity investors who got that way by following their broker's advice?

I share the philosophy of those who collect because we enjoy specimens and making ourselves more knowledgeable about minerals in and of themselves..."psychic value" in the article's parlance. But I don't ignore/deny the market as I do so. Making a profit is not what drew us in (and that probably gives us a decent resistance to being taken in) but when we ultimately divest we shouldn't turn our noses up at a nice reward...and know something about how to maximize our cash out. And plenty has been written here about disposing/cashing out of your collection before the end while you still can!

This leaves me wondering whether dollar for dollar I would have been better off investing in Apple, McDonalds, IBM or Google than my mineral collection? Financially perhaps, but that misses the point that not all profits are monetary.

Deep Enough!

[Dale Hallmark]

I have investments and I have hobbies. I am an avid coin collector, an avid rock and mineral collector. I paint, sculpt in stone and wood, do metal casting and play guitar.

Investing and hobbies...I never mistake one for the other.

Your milage may vary.

Dale