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Emotionally Satisfying Investments: Works on Paper - By Bruce McKinney For books, manuscripts, maps and ephemera: price change over 100 years Arnoud Gerits, the President of ILAB, the International League of Antiquarian Booksellers, was interviewed recently in the Hong Kong Economic Times and mentioned that book collecting should be understood as a passion, not an investment. He’s quoted on book collecting: “ILAB does not recommend buying books as a financial investment.” “Don’t buy them as an investment: it is the wrong angle to look at books. Buy them because you love books, you love a subject..." Is he suggesting it’s not possible to both love books and buy them as investments? Book collectors certainly believe their books are investments. I thought it was common knowledge and so decided to contact collectors to see if their perspectives have changed. They haven’t. They still view and apparently always have viewed, these purchases as investments, albeit ones that mature slowly and are often pursued for ancillary benefits. They did not go into collecting expecting to be buried in their books and do not expect it now. In fact, I haven’t found a single collector who subscribes to the “abandon hope all yea who enter here” approach implicit in the “don’t buy them as investments” idea. Dealers always expect to make profits and Mr. Gerits seems to be saying collectors should not. Collectors choose to invest in books because they have a passion for them, but they do not buy them believing they are costume jewelry. They view them as long-term investments and over all but the last five years they have been.
Emotionally Satisfying Investments: Works on Paper - By Bruce McKinney Books, manuscripts, maps and ephemera: a steep drop in prices on an inflation adjusted basis As to why ILAB would take this position there are three possible reasons – [1] They recognize the market has declined and wish to avoid disputes with future collectors who buy from ILAB members believing their purchases are investments and later find out they were not. [2] Historically dealers have bought back material that was sold by the trade. In suggesting that books, apparently irrespective of value, are baubles rather than gems, they set the stage for declining to buy back material at anything but a steep discount. [3] Or Mr. Gerits may view the current economic environment as one that requires a restatement of the financial prospects for future collectors because circumstances may be radically different. For decades it has been possible to buy, own and resell ten to 25 years later and achieve a positive financial outcome. Mr. Gerits seems to be suggesting collectors ought not have this expectation. To test this I used the Americana Exchange Database of 3.2 million records to create charts showing year-by year-changes in median values, adjusted for inflation, from 1914 to the present, to see if the financial underpinnings of collecting are changing. Click on the image on this page, In looking at these charts I can see why the president of ILAB would not call rare books an investment. We are currently in the deepest decline in collectible book prices in a hundred years. Close up, looking at online listings and material posted at auction it doesn’t feel so bad but from a distance it doesn’t look good. Prices have gone up and down over the decades but books have usually maintained parity with other things. During the depression, the second worst downturn for books in the past one hundred years, prices were down for almost all forms of assets and books suffered correspondingly and in time recovered correspondingly. Recently, in what we now see is a far worse downturn in book valuation, books are uniquely suffering. They are dropping relative to other things, the drop is substantial and the prospect unlikely for this trend to reverse anytime soon. We know this because auction realizations are coming down, not because dealers are necessarily lowering prices. If dealer prices do not adjust Mr. Gerits’ admonition is well taken.
Emotionally Satisfying Investments: Works on Paper - By Bruce McKinney Taken together Mr. Gerits seems to be giving fair warning, one however that will not be slipped into the boxes of books shipped by ILAB members to collectors. Neither will it be posted as banners at ILAB related affairs. Nor will “collecting books may be dangerous to your financial well-being” warnings be pasted onto the descriptions of material offered. His message, if it is retained at all, will simply sink deeply into the ILAB institutional boilerplate to be quoted decades hence to rebut disappointed collectors seeking recompense who have learned that “the bloom is off the rose.” How this plays out for dealers and collectors will be different. For the collectors things may not be so bad. They can adjust. Already they are buying more at auction. When the differences between auction realizations and dealer prices get out-of-line collectors seek the lower cost alternative. Such shifts are slow to develop but tend to be permanent. New collectors, seeing the disparity, may be more likely to seek alternatives to dealers. For the dealer who reduces prices they are not assured of more sales but are guaranteed to receive less money. They also rely on other dealers for access to material and must therefore balance those requirements with a market that becomes more transparent everyday. It’s a difficult task.
Emotionally Satisfying Investments: Works on Paper - By Bruce McKinney If dealers acquire a hundred books, they make their money on six and shelve the rest. The remainder is in most cases going to lose value. Many dealers understand this and are reducing prices to reflect what they see online. This helps but few expect this inventory to change hands soon. There is simply too much of it and more are posted every day. It seems likely this imbalance will not be resolved until prices drop enough to induce buyers to step in. Until then the market will have a sell-side bias. One way to reduce inventory risk is to emphasize more valuable material and many dealers are doing this. But given that dealers may hold inventory for five or ten years, the possibility for protracted decline, even among the materials thought to be strong, represents significant risk. The response of some: shorten inventory. It makes sense, but if practiced widely wipes out the sell-back-to-dealers strategy that has sustained the market for lower value collectible books for three generations. There may simply be too much risk to pay much anymore. We do know something about why the market is weakening. [1] We have never experienced the surplus of material we are seeing today. The listing sites are packed and more material, stored for decades, stuffed into attics and basements, is coming out. It turns out that belief in the value of books is an old and widely held idea. No one threw books away and now they are here to haunt us. [2] The content of many old books is now on line in Google Books. Did you want the book or its content? If its the content its much easier [and free] to run full text searches on line. You can of course then try to locate a copy but more often than not Google Books seems to answer questions and dampen interest in actual copies.
Emotionally Satisfying Investments: Works on Paper - By Bruce McKinney [3] Traditional collectors are aging but the emerging generation of new collectors has yet to place their stamp on the market. They are in fact all but invisible, acquiring hundreds if not thousands of items, one here and one there, often inexpensively wherever they find them. They are developing knowledge and expertise but little loyalty to dealers. In the early acquisition stage they can go it alone but they will someday need dealers' help in acquiring the more complex and expensive material and later in dispersing their collections. We know it is difficult to efficiently build a collection but it is much more difficult to dispose. So Mr. Gerits has it right - for the casual collector. And perhaps he’s hoping that serious collectors will heed the same admonition but not be discouraged from buying. They won’t be dissuaded. Serious collectors are smart and strategic. They remember William Tell and his assistant and the question then and the question now, “what was going through your head.” They will buy but they will be increasingly disciplined because someday they may sell and want the conversation to be one of praise and satisfaction. If they have overpaid the buyer or agent will tell them. The conclusion: it’s best to be tough today. Values are falling and caution is required. Link to ILAB

Emotionally Satisfying Investments: Works on Paper

- By Bruce McKinney

For books, manuscripts, maps and ephemera: price change over 100 years

Arnoud Gerits, the President of ILAB, the International League of Antiquarian Booksellers, was interviewed recently in the Hong Kong Economic Times and mentioned that book collecting should be understood as a passion, not an investment. He’s quoted on book collecting:

“ILAB does not recommend buying books as a financial investment.” “Don’t buy them as an investment: it is the wrong angle to look at books. Buy them because you love books, you love a subject..."

Is he suggesting it’s not possible to both love books and buy them as investments? Book collectors certainly believe their books are investments.

I thought it was common knowledge and so decided to contact collectors to see if their perspectives have changed. They haven’t. They still view and apparently always have viewed, these purchases as investments, albeit ones that mature slowly and are often pursued for ancillary benefits. They did not go into collecting expecting to be buried in their books and do not expect it now. In fact, I haven’t found a single collector who subscribes to the “abandon hope all yea who enter here” approach implicit in the “don’t buy them as investments” idea. Dealers always expect to make profits and Mr. Gerits seems to be saying collectors should not. Collectors choose to invest in books because they have a passion for them, but they do not buy them believing they are costume jewelry. They view them as long-term investments and over all but the last five years they have been.

Emotionally Satisfying Investments: Works on Paper

- By Bruce McKinney

Books, manuscripts, maps and ephemera: a steep drop in prices on an inflation adjusted basis

As to why ILAB would take this position there are three possible reasons –

[1] They recognize the market has declined and wish to avoid disputes with future collectors who buy from ILAB members believing their purchases are investments and later find out they were not.

[2] Historically dealers have bought back material that was sold by the trade. In suggesting that books, apparently irrespective of value, are baubles rather than gems, they set the stage for declining to buy back material at anything but a steep discount.

[3] Or Mr. Gerits may view the current economic environment as one that requires a restatement of the financial prospects for future collectors because circumstances may be radically different. For decades it has been possible to buy, own and resell ten to 25 years later and achieve a positive financial outcome. Mr. Gerits seems to be suggesting collectors ought not have this expectation.

To test this I used the Americana Exchange Database of 3.2 million records to create charts showing year-by year-changes in median values, adjusted for inflation, from 1914 to the present, to see if the financial underpinnings of collecting are changing. Click on the image on this page,

In looking at these charts I can see why the president of ILAB would not call rare books an investment. We are currently in the deepest decline in collectible book prices in a hundred years. Close up, looking at online listings and material posted at auction it doesn’t feel so bad but from a distance it doesn’t look good. Prices have gone up and down over the decades but books have usually maintained parity with other things. During the depression, the second worst downturn for books in the past one hundred years, prices were down for almost all forms of assets and books suffered correspondingly and in time recovered correspondingly. Recently, in what we now see is a far worse downturn in book valuation, books are uniquely suffering. They are dropping relative to other things, the drop is substantial and the prospect unlikely for this trend to reverse anytime soon. We know this because auction realizations are coming down, not because dealers are necessarily lowering prices. If dealer prices do not adjust Mr. Gerits’ admonition is well taken.

Emotionally Satisfying Investments: Works on Paper

- By Bruce McKinney

Taken together Mr. Gerits seems to be giving fair warning, one however that will not be slipped into the boxes of books shipped by ILAB members to collectors. Neither will it be posted as banners at ILAB related affairs. Nor will “collecting books may be dangerous to your financial well-being” warnings be pasted onto the descriptions of material offered. His message, if it is retained at all, will simply sink deeply into the ILAB institutional boilerplate to be quoted decades hence to rebut disappointed collectors seeking recompense who have learned that “the bloom is off the rose.”

How this plays out for dealers and collectors will be different.

For the collectors things may not be so bad. They can adjust. Already they are buying more at auction. When the differences between auction realizations and dealer prices get out-of-line collectors seek the lower cost alternative. Such shifts are slow to develop but tend to be permanent. New collectors, seeing the disparity, may be more likely to seek alternatives to dealers.

For the dealer who reduces prices they are not assured of more sales but are guaranteed to receive less money. They also rely on other dealers for access to material and must therefore balance those requirements with a market that becomes more transparent everyday. It’s a difficult task.

Emotionally Satisfying Investments: Works on Paper

- By Bruce McKinney

If dealers acquire a hundred books, they make their money on six and shelve the rest. The remainder is in most cases going to lose value. Many dealers understand this and are reducing prices to reflect what they see online. This helps but few expect this inventory to change hands soon. There is simply too much of it and more are posted every day. It seems likely this imbalance will not be resolved until prices drop enough to induce buyers to step in. Until then the market will have a sell-side bias.

One way to reduce inventory risk is to emphasize more valuable material and many dealers are doing this. But given that dealers may hold inventory for five or ten years, the possibility for protracted decline, even among the materials thought to be strong, represents significant risk. The response of some: shorten inventory. It makes sense, but if practiced widely wipes out the sell-back-to-dealers strategy that has sustained the market for lower value collectible books for three generations. There may simply be too much risk to pay much anymore.

We do know something about why the market is weakening.

[1] We have never experienced the surplus of material we are seeing today. The listing sites are packed and more material, stored for decades, stuffed into attics and basements, is coming out. It turns out that belief in the value of books is an old and widely held idea. No one threw books away and now they are here to haunt us.

[2] The content of many old books is now on line in Google Books. Did you want the book or its content? If its the content its much easier [and free] to run full text searches on line. You can of course then try to locate a copy but more often than not Google Books seems to answer questions and dampen interest in actual copies.

Emotionally Satisfying Investments: Works on Paper

- By Bruce McKinney

[3] Traditional collectors are aging but the emerging generation of new collectors has yet to place their stamp on the market. They are in fact all but invisible, acquiring hundreds if not thousands of items, one here and one there, often inexpensively wherever they find them. They are developing knowledge and expertise but little loyalty to dealers. In the early acquisition stage they can go it alone but they will someday need dealers' help in acquiring the more complex and expensive material and later in dispersing their collections. We know it is difficult to efficiently build a collection but it is much more difficult to dispose.

So Mr. Gerits has it right - for the casual collector. And perhaps he’s hoping that serious collectors will heed the same admonition but not be discouraged from buying. They won’t be dissuaded. Serious collectors are smart and strategic. They remember William Tell and his assistant and the question then and the question now, “what was going through your head.” They will buy but they will be increasingly disciplined because someday they may sell and want the conversation to be one of praise and satisfaction. If they have overpaid the buyer or agent will tell them. The conclusion: it’s best to be tough today. Values are falling and caution is required. Link to ILAB