Collectibles generate a growing market
Boston — There's always a market for a Rembrandt. But what about rare gold coins or bank notes signed by the Founding Fathers? The word from a number of observers on the collectibles front is that now is a good time to buy. An expected upsurge in inflation is seen as likely to push prices of art, rare coins and stamps, rugs, and other collectibles back to the levels of ''the halcyon days of the late '70s,'' as one expert puts it, and beyond.
But - and this is an important but - there is still no substitute for solid knowledge of the field in which you intend to collect. The best investors are those who are knowledgeable, indeed, ''passionate'' collectors.
However - and this is an equally important however - it's not that hard to develop expertise. The key is to define an area of specialty narrow enough that you can really become expert in it.
Numismatists and other experts on tangibles generally agree that tangibles are not a short-term investment. Glenn Miller, senior numismatist of the New England Rare Coin Galleries in Boston, says coins run in a seven-year cycle, which he expects to peak again in late 1986 or early 1987.
He advises investors to go into only the highest grade coins, specifically, 19th-century US or early 20th-century US gold coins in an uncirculated condition known as mint state 65 - MS 65. He also advises people to hold them for three or four years.
He argues that the fall in bullion prices, which began in early 1980, did not drag coin prices down as far as the earlier rise in bullion prices had pushed them up. ''A $20 gold piece that sold at $1,800 in 1980, when the price of bullion was $850 an ounce, is still selling for about that today,'' with bullion around $400.
John C. Porter, vice-president of the rare stamp and coin division of Newhard , Cook & Co. in St. Louis, suggests that such a coin would probably sell today for $1,500 to $1,600, but agrees that coin-price falloffs have not been so great as those of bullion prices.
Mr. Porter, who describes his firm as a ''conservative, very traditional brokerage,'' says that coins have yielded an average annual compounded return of 27.5 percent over the past 30 years. He calls this ''an excellent time to buy,'' particularly for investors looking for diversification.
He is expecting such an upsurge in inflation, with an attendant upsurge in coin prices, to hit this year. Just in the last several weeks he has seen a new wave of interest in coins, both from first-time investors and from those seeking to expand existing portfolios. And stamps, he says, have a similar potential.
Inflationary periods are considered the best time to buy tangibles. Mr. Porter argues that it's not only inflation, but the rate of change in inflation, that affects the psychology of buying. ''If there is a belief that inflation will return, that anticipation has dramatic results.''
But Larry Biehl, vice-president of Bailard, Biehl, & Kaiser, financial planners in San Mateo, Calif., says that it's not inflation itself, or the change in inflation rates that drives prices up; rather, it's the perception that inflation will be a problem. ''I don't think inflation will reignite.'' He expects inflation to be under 5 percent for 1984 and under 7 percent next year; neither figure, he feels, is likely to panic people into inflation hedges.
Mr. Biehl also feels tangibles bought purely for investment are not something for a long-term hold. Rather, they are best purchased at the end of the business cycle, during a period of ''runaway'' inflation - and we aren't there yet, he says. Better keep your money in money-market mutual funds for another year or so , and then plan to get out after six months - or a year to get a lower capital gains tax rate.
For those who do want to take the plunge into tangibles right now, though, the recommendation is to work with a broker on commission, if possible, rather than a dealer, who is buying and reselling.
''You can have problems with a dealer. If he's got 49 gold coins and he wants to have 42, he can call you up and say that suddenly he's got a great deal for you on seven gold coins,'' says Tony Crumbley, a coin and stamp consultant in Charlotte, N.C. ''On the other hand, you could have a broker who's in cahoots with a dealer, and that wouldn't be any good either.''
If you want to find a broker, Mr. Crumbley recommends checking for those advertising in hobby magazines. Also, some financial planners go into coins and stamps; their ads are to be found in personal finance magazines, he says. But, he adds, ''The best thing to do is to take the time to learn about coins.''
''The people who have been the most successful investors are those who have been collectors,'' Mr. Porter concurs,
Coin collectors can educate themselves by joining the American Numismatic Association, in Colorado Springs, Colo.; by attending coin shows, and by subscribing to numismatic magazines. A collector who must work with a dealer should look for someone who has been in business at least 10 years or so, and who can buy back at a fair market price the coins it sells.
A related area, much less well known, he says, is antique currency. Early US banknotes - those issued by the Continental Congress during the American Revolution, the first notes on which the words ''United States'' were used - are often available inexpensively, for $125 to $200. ''The early bills were signed by hand, with quill pens, one signature on the lower denominations, and three on the higher denominations,'' Mr. Porter says. ''And they were signed by some of the signers of the Declaration of Independence and the Constitution. And some of these notes were printed by Ben Franklin - or engraved by Paul Revere.''
Joseph Deitch, president of the Cambridge Group, financial planners in Newton , Mass., is cautious on collectibles. ''One could say this is a nice time to buy , a reasonable time. Prices are a lot lower than four years ago. But,'' he adds, ''Investments are hard enough anyway - and collectibles are even worse.''
Unlike stocks, for example, where the ''bid'' and ''ask'' prices are very close together, collectibles are sold, like any other retail goods, at a markup, typically 100 percent. ''You might find a dealer who says, 'Our markup is 20 percent.' But then you have to ask, 20 percent over what? They may get a $100 item at $60, but instead of charging a 20 percent markup on what they paid, which would be $72, they charge a 20 percent markup over normal wholesale - $120 , which comes out to be 100 percent markup over $60. A lot of these people make their money by buying cheap.''
He warns people to be ''enormously cautious'' in the coin market, and is skeptical of dealers and brokers. ''Stay away from them.''
He adds, ''At best, you're going to pay market rate for things you get through them; at worst you'll pay the market rate for a coin that isn't worth quite what you think.''
He recommends developing expertise on your own, or hiring an expert for the occasion - ''Even your neighbor's 14-year-old kid who knows about coins. Give 'em $5 to come with you to a coin show. It's like going to the Haymarket with a housewife from the North End, who goes there all the time,'' he says, referring to Boston's somewhat rough-and-tumble open-air produce market, adjacent to the colorful Italian section. He suggests haggling over prices - and paying cash.
The best art investments are the best art, ''those works of art that really capture something of value about the human spirit,'' says Bruce K. MacDonald, dean of the School of the Museum of Fine Arts in Boston. ''There's always a market for Rembrandt. The quality of the work, the aesthetic values are what really holds value.''
For those unable to finance Rembrandts out of petty cash, Mr. McDonald recommends young artists - ''They're the bargains, and they end up as expensive as anything.'' He recommends finding a specialty and working at becoming an expert - through avid museum going, art history courses, and gallery hopping, reading the local and national art publications, ''Art in America,'' for example , going to lectures, keeping in touch with local art associations. ''You should ask yourself, 'Do I see a strong personal statement here?' ''
J. Brian Cole, senior vice-president of Christie's in New York says the art market has had a good boost just in the last six months. Jewelry, rugs, good furniture, American and European paintings have been fetching prices consistent with the halcyon days of the late '70s.'' Some areas, though, ''have yet to unfold,'' as he puts it.
Photographs are one area that has been ''overexploited and overexposed'' - even in the case of the internationally recognized masters. There has been some rebounding of prices over the past couple of years, but not that much. Ansel Adams's ''Moonrise, Hernandez, New Mexico,'' is in itself almost an index of the photography market. This photo, selling at $10,000 or $15,000 about four years ago, was down to $4,000 a couple of years ago, and is back up to $6,000 or so today, Mr.Cole says.
Original prints - old masters and modern prints - have not suffered so much in price as other groups.
Like many connoisseurs, David Redden, director of the book, print, and photograph department of Sotheby's, sounds rather pained to be discussing art collecting as an investment, but comments, ''It's probably a good time to collect.'' Like the others, he preaches: ''Become a connoisseur.'' If you define your specialty narrowly enough, it's not unreasonable to expect you'll soon know more about your field than the dealers you do business with. A professional art dealer often has to know everything about everything,'' and thus must spread himself rather thin.
The builder of an ''intelligent collection'' can rather easily find that collection setting a standard in its field, says Mr. Redden. Can those of us whose names are not Rockefeller or Mellon do this? ''Well, yes, in book collecting, for example; there are endless wonderful books under $50,'' he says, although Sotheby's itself generally does not handle such bargain-basement treasures.
He recommends the public library as a way to start with the ''endless publications'' available, attending auctions, and considering their catalogs.
He also advises hands-on inspection of objects at a dealer's - ''That's something you can't do in a museum.''