A good blog entry on liquidity
WestySteve
Posts: 567 ✭✭✭
A Painful Lesson on What Kind of Collectible is Best (or a lesson on liquidity)
If you’ve been reading this blog, you know that I’m in a competition with a friend of mine to flip my way to $1,000 starting with $50. After a great start, I made two flips in 10 days that brought me to $80. After that, I bought a few items and now I’m dead in the water. In fact, I’m so bad off that I’m “dumping” these items at a loss. What adds insult to my injury is that since my last “flip purchases”, I’ve seen, and even bought some items that would have been an ideal purchase for my competition. One in particular would have tripled my money!
Sounds bad doesn’t it? Should you feel sorry for me? Don’t. I’m happy and, in fact, I think it’s great! Every collector should try to sell some of their collectibles once in a while to cross-check the wisdom of their purchases.
The fact is that this challenge has been really interesting and it is teaching me things. Valuable things. Think of my loss as cheap tuition. OK, the truth is that I didn’t really learn anything, but I was reminded of an idea that I wasn't rigidly applying. A lesson I learned a long time ago that has served me well. Let’s back up a bit and I’ll give you a history lesson that will tell you what I mean...
Way back in the days before Ebay, I used to go to a lot of comicbook shows. My buddy, Daniel, and I would buy and trade key comicbooks and pal around with other collectors; some of whom have since become movers and shakers in that industry. I would buy the comicbooks at the shows and sell them for big profits on the internet newsgroups (remember them?). Everyone should try this kind of thing to really hone your haggling skills. Sadly, Ebay changed the profitability of that game. I do miss those days!
At that time, my friend Daniel, had boxes upon boxes of comicbooks he collected as a child with his father. Each of these comicbooks was worth around $3 each. They were “nice”, but they weren’t material that was hard to find at any comicbook show. Average grades and not all that rare. But then Daniel started trading up. He’d trade a box of $3 comicbooks for a dozen or so $10 comicbooks. And then he’d trade those $10 comicbooks for single comicbooks worth $100 each. He kept trading up until his entire “collection”, which used to take up lots of storage space, was only 4 comicbooks. But what comicbooks they were! He had the first issue of the golden age Submariner, the first appearance of the Black Terror, an absolutely gorgeous issue of the Fantastic Four #4 and a really nice early Sandman cover appearance . Ok, so you might not know what those are, but trust me that these were very, very nice investment grade comicbooks. We were talking about his collecting philosophy one day and he said something that stuck with me ever since. He said:
“I won’t buy something if it’s not really liquid”.
What he meant by that is that he wouldn’t buy any comicbook that others wouldn’t quickly purchase from him for the same price.
Think about that. There is a lot of wisdom there. Loads of it. Do you buy collectibles that you can resell for your purchase price, or would you have to "take a hit" to cash out?
If your collectibles are items that are easily found in any dealer’s display case, then they probably aren’t liquid because they are priced at a level where the number of buyers pretty much matches the number of sellers for the prevailing price. But if it’s an item that is highly liquid, an item that you were only able to buy it because you stumbled on it first, an item that would sell immediately to the guy behind you, or for the same price quickly, then what you have is an item that will go up in price, or is at least worth more than you paid for it.
Note: I'm not knocking dealers. Many of my most liquid purchases came from leveraging a good relationship with a dealer who knew who to phone when he needed to flip an item fast to buy something else.
My point is that hotly contested items go up in value/price over time for the simple reason that constant competition to obtain these items creates frustration for the buyers that can only be satiated by paying more to get that item. This is the kind of demand that drives up price! It's too bad that Daniel and I eventually lost interest in our comics. He sold off all of his and I sold off most of mine. They're worth many, many times more than we paid for them today.
When you buy your collectibles, don’t settle for the ordinary. Get something special and liquid! Something that you can sell for what you bought it for. From a return on investment perspective, it’s better to have a collection of a few really incredible items that will sell quickly than to have boxes of items that are not liquid. Yes, finding these items won’t be easy, but if you can find them (and trust me...you can), then you will know that they will probably go up in value nicley and you can always sell them quickly if you need to.
I forgot this in my quest to flip my money. My first two purchases were (somewhat) special items that were a bargain for the price I paid. But the items I have now are somewhat ordinary. So I’m dumping them. My next purchase for the flip will be something special that will be very liquid for the price that I’ll pay. But first, I have to dump some a few things…
Epilogue: You should note that I'm neglecting the "sleeper" collectible which is subject to rotational leadership in this discussion. I'll get to that.
If you’ve been reading this blog, you know that I’m in a competition with a friend of mine to flip my way to $1,000 starting with $50. After a great start, I made two flips in 10 days that brought me to $80. After that, I bought a few items and now I’m dead in the water. In fact, I’m so bad off that I’m “dumping” these items at a loss. What adds insult to my injury is that since my last “flip purchases”, I’ve seen, and even bought some items that would have been an ideal purchase for my competition. One in particular would have tripled my money!
Sounds bad doesn’t it? Should you feel sorry for me? Don’t. I’m happy and, in fact, I think it’s great! Every collector should try to sell some of their collectibles once in a while to cross-check the wisdom of their purchases.
The fact is that this challenge has been really interesting and it is teaching me things. Valuable things. Think of my loss as cheap tuition. OK, the truth is that I didn’t really learn anything, but I was reminded of an idea that I wasn't rigidly applying. A lesson I learned a long time ago that has served me well. Let’s back up a bit and I’ll give you a history lesson that will tell you what I mean...
Way back in the days before Ebay, I used to go to a lot of comicbook shows. My buddy, Daniel, and I would buy and trade key comicbooks and pal around with other collectors; some of whom have since become movers and shakers in that industry. I would buy the comicbooks at the shows and sell them for big profits on the internet newsgroups (remember them?). Everyone should try this kind of thing to really hone your haggling skills. Sadly, Ebay changed the profitability of that game. I do miss those days!
At that time, my friend Daniel, had boxes upon boxes of comicbooks he collected as a child with his father. Each of these comicbooks was worth around $3 each. They were “nice”, but they weren’t material that was hard to find at any comicbook show. Average grades and not all that rare. But then Daniel started trading up. He’d trade a box of $3 comicbooks for a dozen or so $10 comicbooks. And then he’d trade those $10 comicbooks for single comicbooks worth $100 each. He kept trading up until his entire “collection”, which used to take up lots of storage space, was only 4 comicbooks. But what comicbooks they were! He had the first issue of the golden age Submariner, the first appearance of the Black Terror, an absolutely gorgeous issue of the Fantastic Four #4 and a really nice early Sandman cover appearance . Ok, so you might not know what those are, but trust me that these were very, very nice investment grade comicbooks. We were talking about his collecting philosophy one day and he said something that stuck with me ever since. He said:
“I won’t buy something if it’s not really liquid”.
What he meant by that is that he wouldn’t buy any comicbook that others wouldn’t quickly purchase from him for the same price.
Think about that. There is a lot of wisdom there. Loads of it. Do you buy collectibles that you can resell for your purchase price, or would you have to "take a hit" to cash out?
If your collectibles are items that are easily found in any dealer’s display case, then they probably aren’t liquid because they are priced at a level where the number of buyers pretty much matches the number of sellers for the prevailing price. But if it’s an item that is highly liquid, an item that you were only able to buy it because you stumbled on it first, an item that would sell immediately to the guy behind you, or for the same price quickly, then what you have is an item that will go up in price, or is at least worth more than you paid for it.
Note: I'm not knocking dealers. Many of my most liquid purchases came from leveraging a good relationship with a dealer who knew who to phone when he needed to flip an item fast to buy something else.
My point is that hotly contested items go up in value/price over time for the simple reason that constant competition to obtain these items creates frustration for the buyers that can only be satiated by paying more to get that item. This is the kind of demand that drives up price! It's too bad that Daniel and I eventually lost interest in our comics. He sold off all of his and I sold off most of mine. They're worth many, many times more than we paid for them today.
When you buy your collectibles, don’t settle for the ordinary. Get something special and liquid! Something that you can sell for what you bought it for. From a return on investment perspective, it’s better to have a collection of a few really incredible items that will sell quickly than to have boxes of items that are not liquid. Yes, finding these items won’t be easy, but if you can find them (and trust me...you can), then you will know that they will probably go up in value nicley and you can always sell them quickly if you need to.
I forgot this in my quest to flip my money. My first two purchases were (somewhat) special items that were a bargain for the price I paid. But the items I have now are somewhat ordinary. So I’m dumping them. My next purchase for the flip will be something special that will be very liquid for the price that I’ll pay. But first, I have to dump some a few things…
Epilogue: You should note that I'm neglecting the "sleeper" collectible which is subject to rotational leadership in this discussion. I'll get to that.
0
Comments
So the bottom line is that I try to love the collectibles that will also make me a nice return. A well-heeled "purist collector" probably gravitates to very similar items...he just approaches it from another direction.
Steve
I call "substantial" the amount that would make a difference if it went to half the buy price.
Drunner
Many members on this forum that now it cannot fit in my signature. Please ask for entire list.
collectibles is always in flux, so there's really no golden rule for profit under all market conditions.
I saw this all the time with golden age, silver age, and bronze age comicbooks. The silver age stuff, like Spiderman, moves all the time. The older material (golden age) and newer material (bronze age) will periodically go through a catch-up phase where they are on-fire.
Theoretically, you could follow the idea of buying something that is very liquid and...unfortunately...purchase it right before it stagnates. However, since a price run can't be predicted and they will eventually move again, and probably move well...there is no reason to avoid them...they are still going to be the better stuff.
Steve
Larry L.
I went ahead and wrote a couple more blog entries. I did one about the FUN auction that you might find interesting. Just click the link in my signature line.
And for gosh sakes, subscribe!
Steve