Are you Paying Too Much For That Collectible?

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magicam
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Are you Paying Too Much For That Collectible?

Postby magicam » September 17th, 2004, 5:55 pm

Over the past couple of years, I've had a running conversation with a few friends about various auction and sales practices, both on the buyer and seller side.

One practice is for certain "collectors" to bid on an item they already own in order to "protect their investment." The logic here is that the owner doesn't want an item to sell for much less than what he/she paid for it. But is this a good thing? Is it justified? How would the buyer who seeks the item feel if he found out that he paid 3 times the next lowest bid just because somebody else wanted to "protect their investment"?

Let's set aside the question of whether or not somebody has the right to purchase and own multiple specimens of the same item - in fact, let's assume that they have this right.

The question is whether or not it's "fair" to make somebody pay more than what the market might currently call for, just because somebody in the past paid more for an item.

Any thoughts?

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Re: Are you Paying Too Much For That Collectible?

Postby John LeBlanc » September 17th, 2004, 6:15 pm

Originally posted by Magicam:
Over the past couple of years, I've had a running conversation with a few friends about various auction and sales practices, both on the buyer and seller side.

One practice is for certain "collectors" to bid on an item they already own in order to "protect their investment." The logic here is that the owner doesn't want an item to sell for much less than what he/she paid for it. But is this a good thing? Is it justified? How would the buyer who seeks the item feel if he found out that he paid 3 times the next lowest bid just because somebody else wanted to "protect their investment"?

Let's set aside the question of whether or not somebody has the right to purchase and own multiple specimens of the same item - in fact, let's assume that they have this right.

The question is whether or not it's "fair" to make somebody pay more than what the market might currently call for, just because somebody in the past paid more for an item.

Any thoughts?
You seem to be separating collectors from "the market" -- they both are "the market".

Items become collectible for any number of reasons, including apparent or evident interest, and availability. Is someone chooses to collect a certain item or line, I don't consider it unfair that they pursue every item they can get their hands on, even if it pushes prices up. That's part and parcel of the dynamics of collecting.

I don't really consider the practise "artificially inflating prices" since a legitimate buyer pays the price he bids up on an item. The ultimate value of an item depends upon what someone (or several someones) are willing to pay. If one person choses to bid up an item beyond what you might consider "fair", wouldn't you allow that the price he choses is equally fair?

As for your last question, whatever price has been paid in the past is part of what "the market" says the item is worth.

No one is forcing another person to purchase anything; this is all voluntary. "Value" as it pertains to collecting is a balance between desire and what would be considered rational thought in the minds of others.

If a particular item is bid up at a price higher than you value it, don't pay the price. Simple. It has nothing to do with what's fair.

I've passed of any number of books -- my real weakness, next to red heads anyway -- simply because "the market" has established a price that exceeds my desire.

On the other hand, I own any number of books that, as high and (in my opinion) obscene as the prevailing prices have gotten, I simply will not sell because I wish to keep them.

John LeBlanc

Robert Allen
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Re: Are you Paying Too Much For That Collectible?

Postby Robert Allen » September 17th, 2004, 6:44 pm

First, if the seller wants a minimum amount from the sale, they should set that as the minimum bid. The reason some do not do this is they feel it fails to prime the pump enough to get a good bidding war going, but I disagree with that. Certainly shill bidding, which is what you're talking about, is considered immoral if not a violation of the rules by reputable auction houses, IMHO.

Second, as to the cost of things... I've been on both sides of, having spent absurd amounts of money (relative to my income) for items which are utlimately not worth it for one rason or another. There is no way to estimate what is fair. When I was making big bucks in the software biz I would think little of spending $500-1000 for a book or piece of apparatus I wanted (such as the $512 I payed for one of the first 50 of Busbys machined stainless set of Paul Fox cups, though that did give me pause). More recently, while out of work, I opted not to bid on one of Tony Andruzzis Negromicons which ultimately sold for $1.5k, despite the fact that I have one of his Grimoires of the Mages, and my desire to "Collect the Whole Set!" is strong (of course I only paid $40 for that Grimoire when it was new.) When I see people on Ebay pay what I consider to be absurd prices for stuff, I assume they're either just wealthy, or they really really wanted item 578022211 because as a kid they could never afford it.

The real question is, what about when it comes time to sell those "investments"? The seller is gambling that economic times will be good enough that they can sell stuff for the high prices they may have paid. In some very few cases, such as Andruzzis Scroll and Negromicon which are both very rare and seem to have obtained cult status, this *might* be true. The rest of the time the seller will either sell at a loss, or hang on to it until they die, at which time their estate will sell it for whatever they can get.

For us buyers to complain makes little sense I guess, as long as the item in question was not misrepresented. If it was then you have a bit more reason to complain, but the phrase Caveat Emptor still comes to mind in the final analysis.

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magicam
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Re: Are you Paying Too Much For That Collectible?

Postby magicam » September 17th, 2004, 6:59 pm

John: Generally, I agree with you, but my question wasn't so much whether or not it's "fair" that somebody is willing to pay a higher price than somebdoy else in order to OWN an item; rather, whether or not it's "fair" for Person A to bid on an item he doesn't even want just to make sure that the other folks pay as much as Person A did in the past. If two people want an item, and Person X is willing to pay $100 and Person B is willing to pay $500, then Person B gets it for a little over $100 at auction. But what if Person A (our guy who wants to "protect his investment") now also bids - not because he wants the item, but because he doesn't want to see it go 'cheap" - and the final hammer price is $500. Does that really mean that the market price is $500? Perhaps. At any rate, I hope you get a better idea of may question now. More later. Clay

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Re: Are you Paying Too Much For That Collectible?

Postby John LeBlanc » September 17th, 2004, 7:12 pm

Originally posted by Magicam:
John: Generally, I agree with you, but my question wasn't so much whether or not it's "fair" that somebody is willing to pay a higher price than somebdoy else in order to OWN an item; rather, whether or not it's "fair" for Person A to bid on an item he doesn't even want just to make sure that the other folks pay as much as Person A did in the past. If two people want an item, and Person X is willing to pay $100 and Person B is willing to pay $500, then Person B gets it for a little over $100 at auction.
And that's the way eBay proxy auctions work. Each bidder bids the maximum amount he is willing to pay for an item. People who complain about this system typically are those who bid $100 for an item that ends up selling for $101. Hey, if $100 is the most you are willing to pay, why complain? If you were willing to pay more, why didn't you bid more?

Originally posted by Magicam:
But what if Person A (our guy who wants to "protect his investment") now also bids - not because he wants the item, but because he doesn't want to see it go 'cheap" - and the final hammer price is $500. Does that really mean that the market price is $500? Perhaps. At any rate, I hope you get a better idea of may question now. More later. Clay
Oh, I see.

Well, my final comment still applies: this stuff is voluntary. No one is pointing a gun at someone else's head to make them pay a higher price.

If a collector bids up an item, one of two things occurs: either he ends up paying his bid up price, or someone values the item at a price greater than the collector and voluntarily pays the higher price.

And if he pays the $500 price, that's what "the market" says the item is worth in that instance. That doesn't necessarily mean that's what that item will always sell for.

If ten more similar items are auctioned off, one of three things could happen: our collector bids up $500 on each, and further extablishes a $500 value on that item; one guy thinks it's worth more than $500 and further pushes up the market value; no one considers the item worth $500 and it sells for less.

I don't see anything unfair about that system. A collector is part of "the market". If it is his actions that push the price of an item up, he is forced to either defend that value every time that particular item comes up, thereby confirming the established value, or someone else confirms or denies that value.

"The rain falls on the just and the unjust." As Linus said, that's a good system.

John LeBlanc

Robert Allen
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Re: Are you Paying Too Much For That Collectible?

Postby Robert Allen » September 17th, 2004, 7:27 pm

I learned some good, cheap, lessons at local magic auctions as a kid. Marvin Burger, aka. Buma, was auctioning off stuff. I bought several items including a nicely made but useless to me cocktail shaker set ("Used by Think a Drink Hoffman I swear!"), and then Buma pulled some item out of his bag of stuff and started the spiel. I don't recall what the item was. But it must have been rare, and desireable, because Buma said it was and after all, would Buma not tell the 100% truth? :) So I bid on it. So did others. Ultimately I won the item. I felt good at having scored on this highly desireable and presumably rare item. ....until, a few items later, Buma pulled a clone of the item I'd just bid on out of his bag and gave the spiel all over again. I was somewhat crestfallen. Dejected even. It turns out he had a whole bunch of those items in the bag, but like a good seller he didn't let the potential buyers know that (right away at least..)

I learned some good cheap lessons that day, and I (in all seriousness) thank Buma for teaching them to me so inexpensively. Others should be as lucky. Buma was a nice guy too. Near the end of the auction he had one of the same items left over so he gave me an extra one, free, for having been the guy who bought the first one. Auctions are not for the weak :D

Note also: in my opinion the cross over between magician and con man is a big part of our history. Rather than complain about being conned, learn to out-con the other guy, or at least to recognise the con. [which only sometims works; I saw a broad tosser not that many years ago and he gave me his come on. After politely refusing and still being accosted, I told him "Look, I've done that trick, I know how it works." Even then the guy wouldn't be dissuaded, so I walked away. The last thing I needed was to have *me* busted for the game, or to have his shills beat me up :) ]

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Re: Are you Paying Too Much For That Collectible?

Postby John LeBlanc » September 17th, 2004, 7:39 pm

Originally posted by Robert Allen:
Even then the guy wouldn't be dissuaded, so I walked away. The last thing I needed was to have *me* busted for the game, or to have his shills beat me up :) ]
Therein lies the key: the intestinal fortitude to walk away from a "deal". One of the things that drives prices up is the fact that there will most always be someone who can't walk away. The only thing more expensive than experience is stupidity.

John LeBlanc

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Re: Are you Paying Too Much For That Collectible?

Postby Guest » September 17th, 2004, 10:16 pm

Robert,
In case you haven't learned, the routine Marvin Burger did of selling a "rare collector's item", "dented because Houdini wasn't careful with it", was practically a running gag with him...everyone,(except for first-timers) knew this and laughed at it...as he did it, at each auction...you are right, a little like Flosso, he could present a side, much different from a perceived gruff exterior.

DON'T know of those who have that much money to foolishly overbid prices on a duplicate item...all it means is THEY have overspent money on items that others won't, for possible good reason...time is not always good for collectables.
A caution is reading ads like, "One of these went for $340.00 on EBAY, but today only $60.00....."

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Re: Are you Paying Too Much For That Collectible?

Postby magicam » September 18th, 2004, 12:22 am

Now that I have a moment, Id like to try again, as Im not sure Im asking my question in the right way. So here goes:

To John the White: lets say you and your neighbor collect Tonka trucks, and he bought a rare truck a few years ago for $1,000. Now, theres an auction coming up and another one of those rare trucks is up for grabs. During a casual conversation, you tell your neighbor that youd pay upwards of $700 for one of those trucks. So, on auction day, you attend the auction and bid, and you find that the floor bidding stops at the $150 mark, but you have to tangle with a telephone bidder until you have finally won the truck for your $700. When you get home, you tell your friend that you got the truck, and he tells you that he was the underbidder at $675. But I thought you had one, you say, to which he replies, well I do, but I wasnt going to let the latest market price be $150 for that truck! I paid $1000 for mine and I need to protect my investment.

How would you feel about this, John? Would you respond with a shrug of the shoulders and still say this stuff is voluntary. No one is pointing a gun at someone else's head to make them pay a higher price? Or would you feel otherwise, maybe a little pissed off that you had to pay $550 extra just because your neighbor wanted to protect his investment? Maybe youd feel okay about it, which would make you a better man than me, for Id be a little pissed off!

Robert Allen wrote:
*****
The real question is, what about when it comes time to sell those "investments"? The seller is gambling that economic times will be good enough that they can sell stuff for the high prices they may have paid. In some very few cases, such as Andruzzis Scroll and Negromicon which are both very rare and seem to have obtained cult status, this *might* be true. The rest of the time the seller will either sell at a loss, or hang on to it until they die, at which time their estate will sell it for whatever they can get."
*****

One pet peeve of mine is the collector who buys for investment. IMHO, he/she is not a collector at that point, but an investor in a speculative commodity. Is there anything wrong with investing? No, but it seems different from collecting, at least to me. One of the biggest used magic dealers in the country, Mario Carrandi, sells on Ebay as magic investments. To me, Mario is basically telling people that collectibles are good investments. This approach I do not care for, but at the same time it is only fair to note that those items of quality magicana that Mario sold 20 years ago are, generally speaking, indeed worth much more today, beating inflation soundly. So whatever I think about his style of marketing, when it comes to quality magic collectibles over the long haul, its hard to say that Marios pitch is incorrect. And I have to admit that when it comes to purchasing a rare item that is expensive, my justification to my wife is that Im just converting cash into something that very probably will at least retain its value over the long haul. Now, thats not ALWAYS true, because we cant predict the economy or collecting tastes a generation in the future, but a savvy collector does have a fairly good idea of value and rarity, and with prudent and reasoned purchases, it is often that case that one can easily get their money back after a few normal economic cycles. And even if I wrong on a few items (which I no doubt will be), that's okay too, because I still get a ton of pleasure out of my purchases.

Diego Domingo wrote that time is not always good for collectables. When it comes to purchasing truly rare magicana, one well-to-do friend of mine is fond of saying, I didnt pay too much, I just paid early.

Diegos comments about Ebay also harken to my feeling that Ebay provides us with examples, time and again, of the fact that (a) there will always be suckers out there, and (b) that there will always be shrewd buyers and sellers out there. The fact is that, after seeing the same very rare book on Ebay ten times in a year, even neophytes will realize that such book is not very rare but very common.

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Re: Are you Paying Too Much For That Collectible?

Postby Q. Kumber » September 18th, 2004, 2:05 am

Collectibles, like stocks and shares go up and down in value. The current market value is what someone is prepared to pay "today".

Bidding at auctions can be like industrial espionage. You want to gather as much information as possible about the item, the seller, the other bidders and their motives without giving any information away yourself. (Sound like poker?)

Clay, you know a similar truck has previously achieved a price of $1000. You are prepared to go to $700 and convey this information to a potential bidder. You've shown your hand. Even if you hadn't, the chances are your friend, being a collector would know about the auction of the second truck and would go along to check it out.

Yet you get it for $300 less than a previous sale and you're unhappy? You got it for what you were prepared to pay. If your friend hadn't told you about his strategy, you would have been thrilled.

Is this right or wrong? It is both one of the advantages and one of the disadvantages of capitalism.

Let's say you go to an auction a few weeks later and a similar truck comes up and the top bid is $50. What would you do?

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Re: Are you Paying Too Much For That Collectible?

Postby John LeBlanc » September 18th, 2004, 7:06 am

Originally posted by Magicam:
To John the White: lets say you and your neighbor collect Tonka trucks, and he bought a rare truck a few years ago for $1,000. Now, theres an auction coming up and another one of those rare trucks is up for grabs. During a casual conversation, you tell your neighbor that youd pay upwards of $700 for one of those trucks. So, on auction day, you attend the auction and bid, and you find that the floor bidding stops at the $150 mark, but you have to tangle with a telephone bidder until you have finally won the truck for your $700. When you get home, you tell your friend that you got the truck, and he tells you that he was the underbidder at $675. But I thought you had one, you say, to which he replies, well I do, but I wasnt going to let the latest market price be $150 for that truck! I paid $1000 for mine and I need to protect my investment.

How would you feel about this, John? Would you respond with a shrug of the shoulders and still say this stuff is voluntary. No one is pointing a gun at someone else's head to make them pay a higher price? Or would you feel otherwise, maybe a little pissed off that you had to pay $550 extra just because your neighbor wanted to protect his investment? Maybe youd feel okay about it, which would make you a better man than me, for Id be a little pissed off!
Here's my bottom line: No, I wouldn't be pissed off and it hasn't anything to do with who is the better man. I'm just going to be responsible for my own actions -- in this case, choosing to pay a certain amount of money for an item obviously I want -- and not blame someone else. That's it.

That about wraps up my opinion on this. No need to (further) paint the lilly unless someone grows a new one in this thread.

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Re: Are you Paying Too Much For That Collectible?

Postby John LeBlanc » September 18th, 2004, 7:11 am

Originally posted by Quentin Reynolds:

Let's say you go to an auction a few weeks later and a similar truck comes up and the top bid is $50. What would you do?
People do funny things to molify a bruised ego, Quentin. In your example, does the state where the auction takes place outlaw gun ownership? :)

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Gary Hunt
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Re: Are you Paying Too Much For That Collectible?

Postby Gary Hunt » September 18th, 2004, 7:27 am

Clay your point on magic collecting as an investment is right one. One of the problems with magic collecting as an investment is the limited number of buyers. One just has too look at the poster market too see what can happen. It seems that an ever-increasing number of collections are coming onto the market and this is going to further drive down prices in the future. Though there will be some exceptions on very rare or unique items. I am not sure that the number of collectors is increasing rapidly enough to absorb all of the new material. Just take a look at the age of the people attending Collectors Weekend or the Magic History Conference. One fellow collector (with tongue firmly planted in cheek) suggested we all need to add another room to our homes in order to hold all of the material that will be coming our way. Ebay has also brought a large number of items to light that in the past would be almost impossible to find. In fact it really is changing the definition of what is rare or at least hard to find.

Another distinction that can be made is collector vs. historian. I consider myself a historian and am building a research collection. Now there is a lot of overlap between the two. In my case condition is not an issue, as long as it is complete and readable I will buy it. So my collection of books and magazines range from pristine to just barely holding together. I would rather have several books vs. one leather bound collectors edition. But then again, it is the information I am interested in and not the future value of the item.

Just some random thoughts on this wet Saturday morning.

Gary Hunt
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Re: Are you Paying Too Much For That Collectible?

Postby Robert Allen » September 18th, 2004, 8:08 am

Magicam, keep in mind that when your hypothetical truck buyer raises the bid, 'ust to keep the value up', he may well be stuck with buying the item at that price if someone stupider, pardon me, more erstwhile, doesn't come along and bid again. As someone else here said, if someone does bid it higher, then that's what it's worth.

It's relatively difficult to get a good deal at an auction, online or offline. People that go to them almost by definition are a cut above the average buyer (if one exists).

Regarding ebay, I spend quite a bit of time there buying plastic model kits. Things are tough to predict, but never assume that just because you suddenly see one "rare" kit, that its really rare. What happens is the first such item sells for a high amount because of it's apparent rarity. Other sellers, seeing this, take their copy of the 'rare' item out of storage and sell it too. The first 2-3 people will get a pretty good price. But eventually odds are good you'll either not be able to buy the kit at all (hey, what do you know, it really was rare) or you'll be able to buy one substantialy cheaper. Until you've seen this cycle a few times it's hard to recognise, but it's there, though less for magic since lots people have already bought stuff high, and so won't sell it cheap, so you'll have to wait for their estate to sell it cheap.

The starting price on an auction means little, and on ebay, the fact that the price stays low for days at a time before suddenly peaking means nothing either; ebay is just a time-expanded version of a realtime auction where prices quickly rise to the going rate, then bids slow down as the truly hardcore remain, until one person wins.

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Re: Are you Paying Too Much For That Collectible?

Postby magicam » September 18th, 2004, 10:48 am

Guys, Im not really whining about it - was just raising a topic which has been discussed privately with friends. Ultimately, I guess I share what appears to be the Machiavellian consensus that has developed here. Its just that my prejudice against viewing collectibles as investments tends to leave a sour taste in my mouth when it comes to bidding up prices just to protect an investment. For me, primarily viewing what one collects as an investment, or taking actions such as those Ive discussed in order to protect an investment suck the fun out of collecting. But to each his own!

My friend Quentin Im going to take you to the best fish and chips place in Dublin Reynolds (and he did!) makes some good points. Yes, I did tip my hand, but to me part of the fun of collecting is sharing ones thoughts and hopes with fellow collectors. In other words, for me part of the fun of collecting is the people I get to know and develop friendships with. Anybody who has read the early issues of Magicol or Findlays annuals will find that a different attitude existed in those days. Yes, there was still competition, but it was largely friendly and it seems that then, people were more apt to share information, seeing collecting as a collegial thing more than a competitive thing.

Quentin also asked, Let's say you go to an auction a few weeks later and a similar truck comes up and the top bid is $50. What would you do? Well, my friend, theres not much I could do, but one of the things I would ask myself is whether or not the low price was an aberration or if I had miscalculated on the rarity of the truck! The low price would certainly cause me to rethink my estimation of the rarity of that truck and question how carefully I had researched this truck.

Garys thoughts more or less echo my feelings, although I do tend to prize the condition of an item, if only because, in connection with my HGCR series, I want to include a photograph of the book in as close to as published condition as possible. Garys approach also seems to suggest that, if one appreciates what he has for the immediate value it brings to him (in Garys case, the information), then the worry about appreciation as an investment is not so acute, if it exists at all.

And whether or not its due to Ebay, the usual generational acquisition and disposition cycles of collections, or other factors, it does seem that now is a great time to add to ones collection and this will likely be the case for the next decade, IMHO.

Roberts points about availability of items at auction rings true to me. Things go in cycles. The one point I would make in the context of determining whether something is rare or not is that knowledge and experience go a long way towards making good judgments on purchases. One who has been collecting for 30 years usually has a far superior perspective of what is truly rare over the beginner. Unfortunately, many beginners tend to see Ebay as THE market, which is a mistake of course.

Clay

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Re: Are you Paying Too Much For That Collectible?

Postby Guest » September 18th, 2004, 7:35 pm

My sentiment is with Gary...remembering when it was a hobby/passion...before it became a "Market".
(I remember a line from a TV drama, "You don't appreciate art, you appraise it. You seek it's sale value, but never it's truth or beauty.")

High bids on things do not always establish the value/price of something...we have seen auctions at Swann and ebay, where high,(silly) bids were made, but most shook their heads in disbelief...and saw the value of similar items stay at the previous same level, while others futilely tried to get the similar high prices at later auctions.

Ebay has helped dealers reach more customers, and circumvented them as well....If a dealer said he only had one "Barry Goldwater for president" button and proclaimed it rare, it could go for so many dollars. Now that regular folks are clearing their attics via selling thru ebay, there are many selling their Goldwater stuff which is no longer rare, but getting $2-3 dollars.

Old does not always = money....I came into boxes of (non-magic) books, many of them 80-100+ years old, first editions, and could find from knowledgeble dealers, only 3 books that they said had value of more than $10.00.

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Re: Are you Paying Too Much For That Collectible?

Postby Q. Kumber » September 19th, 2004, 4:03 am

When it comes to new and used magic books there are at least three categories of purchaser.

The Collector. For the joy and pleasure of owning the book.

The Collector/Investor. The main purpose is to acquire an asset that will hopefully increase in value.

The Student. Either amateur or pro who wants the information.

While all categories prefer to pay as little as possible, the professional finding an idea, effect or routine to put in his or her working repertoire will yield the greatest return on investment.

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Re: Are you Paying Too Much For That Collectible?

Postby Robert Allen » September 19th, 2004, 7:47 am

There are two kinds of people:

1. the kind of people who group people into groups.


2. and the kind of people who don't.

:D :D :D

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Re: Are you Paying Too Much For That Collectible?

Postby Q. Kumber » September 19th, 2004, 8:26 am

And which kind are you Robert?

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Re: Are you Paying Too Much For That Collectible?

Postby John LeBlanc » September 19th, 2004, 8:31 am

Originally posted by Diego Domingo:
High bids on things do not always establish the value/price of something...we have seen auctions at Swann and ebay, where high,(silly) bids were made, but most shook their heads in disbelief...and saw the value of similar items stay at the previous same level, while others futilely tried to get the similar high prices at later auctions.
I'd only add the qualifier "universal" to the phrase "value/price of something."

Obviously someone estimated an item's value highly, and it is to him that valuation belongs. To the extent others agree with him the prices will remain high. Often enough, people aren't agreeable.


Old does not always = money
No, demand/availability = money.

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Re: Are you Paying Too Much For That Collectible?

Postby Steve Mills » September 19th, 2004, 3:50 pm

I'm old enough that I actually recall the concepts of "right" and "wrong". At some point in the last 20 years we began to justify all manner of actions as OK if the bottom line is obtained. We cover this with words like "capitalism", "aggressive marketing", "privatization", "shareholder value" etc. etc. We even wrap it in the flag as "the American way".

I'm sure many reading this have no idea what I'm saying or and are laughing at the naivety of an old man. I can deal with it.

What you describe is wrong. Will it matter to the perpetrators? Nah - it's just the American way.
I'm a living example that if you speak softly, you will get hit by a big stick.

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Re: Are you Paying Too Much For That Collectible?

Postby Jonathan Townsend » September 19th, 2004, 4:08 pm

On ebaY you can stop the fussing by just holding to your price and letting them get the item for what you consider "more than it's worth".

Stick to your guns. The free market can and usually does sort itself out over time.
Mundus vult decipi -per Caleb Carr's story Killing Time

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Re: Are you Paying Too Much For That Collectible?

Postby magicam » September 19th, 2004, 5:54 pm

Steve Mills wrote:
****
"I'm old enough that I actually recall the concepts of "right" and "wrong". At some point in the last 20 years we began to justify all manner of actions as OK if the bottom line is obtained. We cover this with words like "capitalism", "aggressive marketing"...

I'm sure many reading this have no idea what I'm saying or and are laughing at the naivety of an old man. I can deal with it.

What you describe is wrong. Will it matter to the perpetrators? Nah - it's just the American way."
****

Steve, those are mighty broad statements there! I can think of more examples than not where I'd agree with you, but in the context of this thread, could you elaborate?

Jonathan Townsend wrote: "Stick to your guns. The free market can and usually does sort itself out over time."

Ebay is probably a great example of a free market. No market has perfect knowledge, except in Econ 101. If you are saying that prices for books like Ricky Jay's CARDS AS WEAPONS will come down over time (there were thousands printed), then I agree. But if you are saying that an "artificially" high price does not reflect the free market, I would disagree in some respects. If I recall my econ classes, "artificially" high prices on supply and demand curves just reflect low supply or high demand, depending on which curve you want to look at, and always use the "equlibrium price" as a point of reference. Equilibrium only exists at the intersection of the supply and demand curves, and while equilibrium exists in theory, it rarely occurs in real life.

Clay

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Re: Are you Paying Too Much For That Collectible?

Postby Robert Allen » September 19th, 2004, 6:01 pm

I agree. Greed is by no means an invention of the 21st century and it existed 30 years ago, 60 years ago, and 600 years ago.

Trying to argue that some specific aspect of an artificial environment like an auction is immmoral seems very falacious to me. That is different from something being illegal, or otherwise against the rules, as shill bidding is in the the case of ebay for example. But it's nearly impossible to prove, and even then, a 3rd party bidding something up just to try to retain the value of an item they already own is not shill bidding, it's just plain old bidding.

I laugh about the whole Cards as Weapons situation. When I was a kid there were PILES of the softcover edition at B. Dalton booksellers, and no one was buying them (not even for the risque female photos I seem to recall it contains).

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Re: Are you Paying Too Much For That Collectible?

Postby John LeBlanc » September 19th, 2004, 6:30 pm

Originally posted by Steve Mills:
I'm sure many reading this have no idea what I'm saying or and are laughing at the naivety of an old man. I can deal with it.
Well, I'm not laughing. And I will admit I have no earthly idea to what you are referring.

Can what you described be applied to some aspects of capitalism and some people? Sure. And I'd like to know exactly to what and who you consider your statement applies.


What you describe is wrong. Will it matter to the perpetrators? Nah - it's just the American way.
What who describes is wrong?

Finally, are you suggesting that "the American Way" somehow means people -- whoever "people" are -- don't care about right and wrong? I'm old enough to remember that "the American Way" stands for integrity and hard work and is complementary in nature.

John LeBlanc

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Re: Are you Paying Too Much For That Collectible?

Postby Bill Hallahan » September 20th, 2004, 6:54 am

Magicam,

Imagine an investor in an investment chat room complaining about hobbyists driving down the profit on their investment by driving up the price of an item.

Would they be wrong? Why?

Magicam wrote:
If I recall my econ classes, "artificially" high prices on supply and demand curves just reflect low supply or high demand, depending on which curve you want to look at, and always use the "equilibrium price" as a point of reference. Equilibrium only exists at the intersection of the supply and demand curves, and while equilibrium exists in theory, it rarely occurs in real life.
This is a semantic issue, but your last sentence is not correct in a free market economy. Equilibrium is always maintained in a free economy. Supply and demand curves are often estimated based on past empirical data and thus quoted equilibrium points are often estimates too. The correct equilibrium point is based on actual market forces. The market is defined by what happens, however rational or irrational that happens to be.

Temporal perturbations to the market do occur, and these move the equilibrium point. Prices can go artificially high or low because of flawed perceptions, i.e. incorrect estimation of true value, but that only changes supply and/or demand. The equilibrium point changes only as a result of a change in supply and/or demand.

Guest

Re: Are you Paying Too Much For That Collectible?

Postby Guest » September 20th, 2004, 9:38 am

I'm an accumulator,not a collector, because of age, I did manage to accumulate some rare items.
But magic is not really a collectible. Years ago before going full time, I was an Insurance agent. You couldn't insure magic as a collectible. Why? Because there was no accepted standard market. Like Scotts for postage stamps. You could insure professional equipment, but not magic collections as "antiques"
Now as an investment, I had a friend who sold expensive jewelry and diamond rings. He tell people, this diamond ring is an investment, it will grow in value. True if you're Methisala. He didn't say his price was 3x what he paid for the ring. And it would have to appreciate an awful lot to overcome that. AND if in that time the style changes, lottsa luck
So buy magic because, you want it, love it or are gonna use it. Wanna make a profit become entertaining, do shows with it
from
Ford

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magicam
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Re: Are you Paying Too Much For That Collectible?

Postby magicam » September 20th, 2004, 9:56 am

Bill Hallahan wrote:
*****
"Imagine an investor in an investment chat room complaining about hobbyists driving down the profit on their investment by driving up the price of an item.

Would they be wrong? Why?"
*****

When you say "they," I assume you are referring to the investor(s)? If so, is this a trick question? If an investor buys a good at price x, and hobbyist demand drives the price up to x+y, how is it that the investor is losing money? Hasn't the price of the good gone up? I've read some of your prior posts in passing, and they always seemed thoughtful to me, so maybe I'm missing something here.

Moreover, I'm not sure how your question ties in to my original question/premise, because in my question it is the hobbyist who has to pay more because an "investor" is trying to buoy the price of a good.

Bill, you also wrote:
*****
"This is a semantic issue, but your last sentence is not correct in a free market economy. Equilibrium is always maintained in a free economy. Supply and demand curves are often estimated based on past empirical data and thus quoted equilibrium points are often estimates too. The actual equilibrium point is based on the real market forces. The real market is defined by what happens, however rational or irrational that happens to be.

Temporal perturbations to the market occur, and these move the equilibrium point. Prices can go artificially high or low because of flawed perceptions, i.e. incorrect estimation of true value, but that changes supply and/or demand. Equilibrium is maintained."
*****

You may have a better grasp of free market economic theory than I do, but I disagree with you. It's not an issue of semantics or tautological reasoning. Free market economic theory ASSUMES rational behavior at all times, doesn't it? That's the whole basis of a supply or demand curve. In other words, economic theorists assume that, at price x, only a certain number of rational people will buy a good, and that at price y, a different number of rational people will buy that same good. The same goes for rational suppliers of a good, who will supply only a certain amount of a good at price x, and a different amount of the good at price y. And it is the collection of these discrete price points which make up the respective supply and demand curves. The minute somebody (buyer or seller) acts irrationally, instead of a MOVEMENT along the supply or demand curve, we instead get a SHIFT of the supply or demand curve. The fact that purchasing decisions can be made irrationally (i.e., without the perfect market knowledge that economic theory requires) seems to suggest that the equilibrium point (estimated as it almost always is, and usually derived by regression analysis of the supply and demand curves) is more often than not skewed by such imperfections as irrational behavior, i.e., imperfect market knowledge.

When you say that my last sentence is incorrect, it occurs to me that you are mixing two different things here - real life economics, and the economic models which try to tell the story of what is going on in real life economics. The two may sometimes come close, but my point was that they rarely are the same thing, due to, among other things, two factors which you seem to admit to be true: (1) people act irrationally and (2) supply and demand curves are often only estimates. I agree that "the real market is defined by what happens, however rational or irrational that happens to be," and that is why any economic modeling scheme is only an approximation, and thus any supply or demand curve (or the intersection of those curves which suggests the equilibrium point, or price) is only an estimate. And if the equilibrium point (price) is only an estimate, then we really don't know what the "real world" equilibrium point is, do we? And thus why I wrote that "... while equilibrium exists in theory, it rarely occurs [i.e., we rarely know it or can determine it] in real life."

Clay

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Re: Are you Paying Too Much For That Collectible?

Postby Robert Allen » September 20th, 2004, 10:27 am

Now I know why I gave up an econ double major to pursue computer science....

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Re: Are you Paying Too Much For That Collectible?

Postby Bill Hallahan » September 20th, 2004, 10:45 am

And thus why I wrote that "... while equilibrium exists in theory, it rarely occurs [i.e., we rarely know it or can determine it] in real life."
Something occurring and knowing about that occurrence are different things.

In a free market economy (and that qualification is necessary) equilibrium always occurs.

It might be a small point, but its necessary to use common terms to avoid confusion. I think what you mean is that peoples rational (or irrational) behavior affects supply and demand. This subtle difference is important. One way says that economics doesnt apply. The other says that economic issues are sometimes difficult to gauge accurately. I agree with the latter, but not the former. I think the economic issue is key here when added to several other points.

That being said, Ill address the larger question of this topic, i.e. "Is it fair?"

First, were talking about wants, not "needs", here.

Second, the bulk of good magic literature and some magic apparatus are available for a reasonable cost, so if something is too expensive, there is no need to purchase it.

Finally, when I look at priceless art, art that I cannot afford, I dont find that this limitation prevents me from developing my talents (or lack thereof) in that art form. When one refers to magic items, one is referring to secrets, routines, presentations, and apparatus. There are items in all these categories I cant afford. I dont find the fact that I cant afford these wrong.

These items are worth what someone is willing to pay for them.

So someone gets a magic item in order to make a profit. To declare that their goal is less fair than yours, youd have to convince me that what they are doing is wrong, not that your goal is better.

If someone was purchasing works and destroying them, I would agree thats unfair. But an investor is going to resell one or more of the items he purchases. If someone pays his asking price, then they feel the item is worth that price.

Its a valid point that rich people can get things you and I cant. Thats unfair for needs, but I accept that for wants. While capitalism has its drawbacks, its been demonstrated to be the best system for raising the economic level of the masses.

But in your original post, you did state that you recognized the right of people to bid what they wish, and you questioned whether that is fair.

My previous post turned this around to essentially ask, Why are your goals fairer than theirs?

In this case, I think their goal could be just as fair.

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Re: Are you Paying Too Much For That Collectible?

Postby magicam » September 20th, 2004, 11:29 am

Robert Allen wrote: "Now I know why I gave up an econ double major to pursue computer science...."

Robert, I sympathize with you, which is why, if I tell someone I received a B.S. in economics (which is true), I tell them there was a heavy emphasis on the BS! :D

As for you, Bill, I will get back to you later today when time permits. I think we've steered somewhat off course on this thread, but I'm willing to go with it.

Clay

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Re: Are you Paying Too Much For That Collectible?

Postby Q. Kumber » September 20th, 2004, 11:52 am

The only constant throughout recorded history is human nature. You would expect rationality to prevail. Very few people make decisions based on rational thought.

It is also very surprising what is collectible and what isn't. A friend of mine has some Chung Ling Soo posters that collectors are interested in but no one seems to be interested in his Chung Ling Soo stage costumes.

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Re: Are you Paying Too Much For That Collectible?

Postby Brad Henderson » September 20th, 2004, 12:30 pm

This is a very interesting thread. I have skimmed it and wanted to add a few thoughts before I get snowed under this week with work.

First, it takes two idiots to make an auction skyrocket. (I have often been one of those idiots.) Once one of those idiots gets what he or she is after, then the second idiot (assuming another item come available) will get theirs at a steal because idiot number one has one already.

In fact, when a RARE item sells for a high amount, the standard dynamic is for that item to become LESS rare. Why? Because people see what price it realized and start looking for them or releasing them from private collections where they have been secluded. Depending on the number of people desiring the item determines what level the prices will stay. If 10 people want a rare book, and 10 become available, the last guy will get a steal because no one is there to bid against them.

Which brings us to Clay's question. If one sees that last guy about to get a steal, should you put in a bid to protect your "investment." I say, why not?

One, you may be willing to go a fraction over the competitors limit and still under what you paid for yours. Now you have two items which have a bought value which is the average of the two. This will be less than the value you paid, assuming you were one of the "early adopters." Now, you have two items, can pick the best specimen, and should you offer for resale at a later time, have a greater price range that attractively takes care of your investment. However, as I will explain later, you also run the risk of getting stuck with items you cannot move because of a self correcting mechanism within the marketplace.

Now, if the first buyer paid an outrageous amount for an item, unless they have A LOT more money than sense, it is unlikely they will push it to that level again. But the price realized will top off one bid higher than the second purchaser is willing to go, which is still a fair realization of what the market is for that piece at that moment. (Which is defined by whatever someone is willing to pay for that piece at that moment.)

The downside, alluded to earlier, for the the first/double purchaser is he may be collecting items which he cannot move later in the marketplace. One, he will want them to go for the value he paid, and two the buyers who he defeats will likely find other sources for the items whcih will be sold at their price point. The market established he was the only person willing to buy at that price point, and as others find other sources, the market pool shrinks. Other buyers will eventually find access to other items as at some point the first buyer will run out of resources to hoarde the items. So the system does have a self correcting mechanism.

So, does bidding up auctions protect your investment? Not really. However, if there is an item going for a steal I think it is wise to bid it up with the intention of buying it. But decide why you are doing this. To get a better copy, to have an item suitable for trading, or to have a book you know to be worth more than that which you paid for it. I see nothing wrong with doing what Clay's question suggests, I just don;t know if it accomplishes its intent in the long run.

Now, what about knowing someone is after a piece and is willing to go to the limit for it. You want the piece but know you have no chance of getting it with them in the auction. Your attitude is, "Well, I know I'm going to get it, but at least I'm going to make so and so pay through the roof for it." Is this a bad thing?

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Re: Are you Paying Too Much For That Collectible?

Postby magicam » September 20th, 2004, 5:00 pm

Bill Hallahan wrote:
*****
Something occurring and knowing about that occurrence are different things. In a free market economy (and that qualification is necessary) equilibrium always occurs.
*****

The first sentence is true, but this distinction doesnt get me closer to understanding your quibble with my observation. If a buyer or seller is not aware of that occurrence, can we say that they will be able to make a rational decision in the market according to economic theory? I dont think so.

The statement in your second sentence only makes sense to me if instead you say, In the theory of a free market economy (and that qualification is necessary) equilibrium always occurs. In addition, to my mind the fact that you put always in quotes suggests that there is some further qualification to your statement, or that youre not really sure its true, or that equilibrium truly doesnt always occur.

You also wrote:
*****
It might be a small point, but its necessary to use common terms to avoid confusion.
****

Maybe thats part of the problem, because supply, demand and equilibrium are all terms of art in economics. They may be common terms to economists, but probably not to laypeople.

You also wrote:
*****
I think what you mean is that peoples rational (or irrational) behavior affects supply and demand. This subtle difference is important. One way says that economics doesnt apply. The other says that economic issues are sometimes difficult to gauge accurately. I agree with the latter, but not the former. I think the economic issue is key here when added to several other points.
****

I do mean that peoples rational (or irrational) behavior affects supply and demand. But the subtle difference you refer to, to follow your logic, is really germane to my point: theres a world of difference between economic theory and real world economics. In order for me to accept your observation, you have to argue that microeconomic theory assumes that people act rationally and irrationally. Its been a long time since Ive consulted my old textbooks, but I think that economists have always acknowledged that microeconomic theory fails to precisely describe real world economics because , among other things, people do act irrationally and do not have perfect information rational behavior and perfect knowledge are basic assumptions in microeconomic theory. Are you prepared to argue that they are not? I argue that its the very gauging accurately problem that you accept which proves my point: there is no real world equilibrium precisely because the whole concept of equilibrium is a purely theoretical device used to TRY and describe real world economic behavior; the concept and usefulness of equilibrium hinges on the veracity of the assumptions on which it is based, viz, rational behavior and perfect knowledge, which aint real life! So Im not saying (and have never claimed) that economics doesnt apply (far from it), just that economic theory doesnt fully explain human economic behavior (and never will), and thus this concept of equilibrium, borne purely out of economic theory, rarely has any application to real world economics and economic decision making.

Bill, your following comments on the is it fair question, I will try to respond to in bolded text hope it works!

These items are worth what someone is willing to pay for them.

True so far as it goes, but my question focused on a specific reason why somebody is willing to pay a certain price, and then posed the fairness question in relation to that reason, namely protecting an investment.

So someone gets a magic item in order to make a profit. To declare that their goal is less fair than yours, youd have to convince me that what they are doing is wrong, not that your goal is better.

You have assumed something that I havent that somebody gets an item to make a profit. My premise is more or less that a person buys something to protect his investment certainly not the same thing as trying to make a profit, and if Brad Hendersons arguments below are accepted, it seems that acting to protect an investment is a money loser, not a money maker. It doesnt make sense for me to convince you of something Im not arguing.

If someone was purchasing works and destroying them, I would agree thats unfair. But an investor is going to resell one or more of the items he purchases. If someone pays his asking price, then they feel the item is worth that price.

Just for the sake of argument, why is it unfair for somebody to destroy something he/she owns? Isnt that one of the fundamental concepts of private property? I happen to think its wrong, and I guess you could say its also unfair. But isnt your logic based on morally neutral concepts of market theory? If so, why bring morals into it now?

But in your original post, you did state that you recognized the right of people to bid what they wish, and you questioned whether that is fair. My previous post turned this around to essentially ask, Why are your goals fairer than theirs? In this case, I think their goal could be just as fair.

Bill, where did I say that in my original post? I never made such a broad statement, and thus never posed the fair question in that context. Perhaps the reason why I couldnt see the relevance of your turning the question around is because your question is based on something I never said. All I said was, Let's set aside the question of whether or not somebody has the right to purchase and own multiple specimens of the same item - in fact, let's assume that they have this right. It should be very clear from my original post that my fairness question has nothing to do with the case where a collector wants multiple specimens of the same item in fact, the idea is that this collector doesnt really [b]want another specimen for his collection and is only bidding to protect the price of the specimen he already owns. So I think you are really tearing down a straw man here, but if you are truly answering my real question and saying, so what, its fair, thats okay with me! getting the opinions of others was the whole point of my post. [/b]

Now, as to Brad Hendersons post, Brad answered my question directly he thinks its okay to act to protect ones investment, although he questions whether or not the investors goals with this approach are really met.

Brads final question was: Now, what about knowing someone is after a piece and is willing to go to the limit for it. You want the piece but know you have no chance of getting it with them in the auction. Your attitude is, "Well, I know I'm going to get it, but at least I'm going to make so and so pay through the roof for it." Is this a bad thing?

Im not sure if its a bad thing, but I dont like it. I suppose if you didnt like the person who wanted it, you could do it for spite. But that simple pleasure is something I try not to indulge in! And needless to say, if youre doing it to a friend, youre no friend at all.

Heres a twist to Brads question. Say you are a dealer. Is it fair for you to put in at least a wholesale price bid even though a friend or acquaintance wants the item? Overall, Id say yes, with the realization that it could create some hard feelings the closer a friendship is. But the logic here is that the non-dealer buyer got it for less than retail and so should still be happy, and the dealer is a dealer and needs to do his business and bidding on items at wholesale prices is certainly part of the business! And lest anybody say that auction prices always reflect retail prices, youre wrong!

Sorry for the long post, but I had time to kill and decided to indulge in a little debate with Bill. Bill, no hard feelings just having fun.

Clay

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Re: Are you Paying Too Much For That Collectible?

Postby magicam » September 20th, 2004, 7:40 pm

A small post-script on the notion that there is always equilibrium in the market (and also on the issue of "perfect knowledge" in a market):

While talking about this subject with a friend (whose opinions and facts I respect and trust), he mentioned that within the past few days on Ebay, the same book - in the same edition and basically the same condition - went for $77 one day, and $19 the very next day !

So what's the equilibrium price on this book? Is there an equilibrium price for this book? Forget equilibrium, whats the damned value of this book? :confused:

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Re: Are you Paying Too Much For That Collectible?

Postby Bill Hallahan » September 20th, 2004, 11:47 pm

Reread my previous post with the following in mind.

- The long-term goal of all investors is to make a profit. The word invest means:
1 : to commit (money) in order to earn a financial return
2 : to make use of for future benefits or advantages
If they aren't going to try to make a profit then they aren't "protecting an investment", they are forming a collection.

- Also, my point is related to the fact that investment economics "can be" morally neutral. Other things might not be.

- You mention that somebody has the right to purchase and own multiple specimens at the same time; you assume this right. Therefore you assume that people can bid what they wish since that is the only way they could purchase and own multiple items in an auction.

My turnaround was worded broadly, but I presumed you would narrow the context to the original question. The significance of asking this was NOT because of something you said. It is an original argument demonstrating that from the investors perspective, what they are doing cannot be "unfair" unless investing itself is unfair.

I think investing can be unfair, and thus I point out the issue of wants versus needs and the readily available alternative. These make this case of investing totally fair, unless, as I stated, the investors are damaging works of art. That is legal, of course, but it is unethical, at least I think so.

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Re: Are you Paying Too Much For That Collectible?

Postby Bill Mullins » September 21st, 2004, 12:00 am

Originally posted by Robert Allen:
There are two kinds of people:
1. the kind of people who group people into groups.
2. and the kind of people who don't.
There are three kinds of people:
1. People who can count.
2. People who can't.

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Re: Are you Paying Too Much For That Collectible?

Postby Bill Mullins » September 21st, 2004, 12:10 am

Originally posted by Magicam:
those items of quality magicana that Mario sold 20 years ago are, generally speaking, indeed worth much more today, beating inflation soundly.
Anytime someones says that some collectible is a good investment, I wonder if they have really invested in them.

Just because the current retail selling price is greater than some former retail selling price, does not mean that the item is a good investment.

Return on investment has to reflect the transaction costs. With an illiquid collectible (like magic items), this means you have to compare the price you purchase at (usually retail) with the price you sell at (usually much, much less than retail).

With truly liquid commodities, like stocks, precious metals, financial securities, the transaction costs are small relative to the selling price. With magic items, they are huge (50% and up), greatly eating into the return.

But you say you can sell it yourself on ebay. That means it's a month or more from the day you decide to sell it to the day you have cash money in your hand. Plus you have to factor in the costs of selling, shipping, etc, and something for your time (this is the opportunity cost which has been lost -- if you could have spent the time cutting the neighbor's grass at $10 an hour, you have to deduct the value of your time from the selling price).

Even though selected items have grown in value, it is hard to say that magic is a good investment compared to traditional investments.

Guest

Re: Are you Paying Too Much For That Collectible?

Postby Guest » September 21st, 2004, 12:10 am

Originally posted by Bill Mullins:
Originally posted by Robert Allen:
[b] There are two kinds of people:
1. the kind of people who group people into groups.
2. and the kind of people who don't.
There are three kinds of people:
1. People who can count.
2. People who can't. [/b]
There are 10 kinds of people - those who understand binary arithmetic, and those who don't.

(Sorry, couldn't resist it.)

Dave

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Re: Are you Paying Too Much For That Collectible?

Postby John LeBlanc » September 21st, 2004, 6:41 am

Originally posted by Bill Mullins:
Just because the current retail selling price is greater than some former retail selling price, does not mean that the item is a good investment.
And for various reasons, not the least of which the fact that things change.

When Richard reprinted "Strong Magic" -- the last time, a few years ago -- I purchased two copies: one for me and one for a friend. Rudely, my friend died before I could gift him with the copy, so it's been sitting on my shelf as a great reminder not to wait so long next time.

I paid, I don't remember, $40 for the copy. In the interim, the price has gone up as much as $150, thanks to scarce availability and high interest.

Now, the monetary value is back to $40, thanks to renewed supply.

While I own quite a few magic items (books, posters, tricks) that are currently worth quite a bit more than I paid, I don't recall making my purchasing decision as an investment, per se. I always figured I could at least get my money back when the item resold, which is not always a wise suggestion anyway.

John LeBlanc


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