Another Score

I had to travel today.  I spent part of my lunch hour at a coin shop in a samll town.  I found a 1913-P Type II Buffalo nickel graded MS63 in an NGC slab for a bargain price of $50 even.  The Redbook guide says it is a $80 coin in this grade but one sold last week on Ebay for $125 in the same grade in the same Slab. (A special thanks and a shout-out to my friend Curvey for looking that up for me over the phone!) 

I think I'll keep it.  It's a nice type coin and it's worth enough to where it is worth its storage space.

Collector Steve

I've got a time machine and $800

Here's the situation.  The year is 2010, I have $800 and a time machine.  The year 2010 is when I bought my comicbook price guide, so bear with me.  Unfortunately, since I'm on a budget, I bought my time machine as a "scratch and dent" model so it will only go back 8 years.  Now I'm a really big comicbook fan, so I set my time machine to transport me to a really big comicbook convention in the year 2002.  I figure Spiderman comicbooks are a good safe bet, so my plan is to spend my $800 on some Spiderman comicbooks at the convention and then zip back to the year 2010 with my investment. Hopefully, I'll choose the right comicbooks.

But now the big question:  What do I buy?  Should I spend my $800 on one really important comicbook in low grade?  Or maybe a somewhat important comicbook (or two) in mid-grade?  Or perhaps I should buy a really mint version of a not so important comicbook.  What do I do?

Here are my choices:

1.  I can buy a "good" copy of Amazing Spiderman for exactly $800.  This agrees with the 2002 price guide loaned to me by a friendly dealer.  This book, in "good" isn't really that good at all.  A good comicbook looks pretty rough, but it is still intact.  Hmmm....It would be nice to have a Spidey #1! 

2.  Or, I can afford two comicbooks in Fine, like a Spiderman #5 in Fine for $414, which is an early Dr. Doom appearance (a really cool bad guy) and a Spidey #6 in Fine, which is the first appearance of the Lizard (another cool bad guy), for $375.  I'd still have enough change to buy an overpriced lunch for my $800.  These books look better than average, but they still show some wear.

3.  Lastly, I could spend my $800 on a Near Mint copy of Spiderman #17.  This is the not-so-important second appearance of the Green Goblin (yep, another cool bad guy).  By guide, it is a $875, but the dealer gave me  a 10% discount.  I figure maybe I can pass on that savings to the next guy and sell it for 10% off when I get back to the future (pay the good Karma forward).

I think I'll take option #2.  I figure I may as well take the middle of the road option by buying the two comics in Fine condition since I don't know the outcome.  Note that I'm careful to pay the dealer with currency dated before 2002 so as not to arouse suspicion. :)

Now I jump in my time machine and go back to the future to see how I did with my new purchase.

Option #1 is now worth $1500

Option #2 is now worth $636 plus $513 for the #5 and #6 respectively, totalling $1149.  Say $1170 after factoring the lunch money that I could have invested in something other than a hotdog.

Option #3 is now worth more than $2000.  I don't know exactly how much because the 2010 price guide only goes to a low end Near Mint grade.  Even with the 10% discount I need to give it for the sake of fairness (or Karma), I'm sure it's worth more than $2000 in the slightly lower (but still very high) grade.

So what can we conclude?

The return on our investment is a kinked line, like a "V" or a "U" where the Y-axis is return on investment and the X-axis is grade and I chose badly by selecting the middle of the curve.  It seems that it is better to spend a set amount of money either on a very key item in low grade, or a somewhat key item in a very high grade.  This is probably because collectors want items that are very key, even if they are in low grade, or the items that are in very high grade, even if they aren't as important.  Oh, and for the record the better collectibles in this scenario averaged around a 10% return.

So, does this work with other collectibles?

Quickly, here's a scenario:

In the 1990 Redbook price guide, $65 will either buy you: 

1.  A very rare "key", but very worn 1914-D cent in Good (low grade).

2.  Six Fine (mid-grade) 1910-S (semi-key) cents at $10 each with $5 left over for lunch. (or 6.5 coins if you want to think of it that way).

3.  A Choice Uncirculated (MS-63) 1919-S cent...(an uncommon but definitely not key coin).

How do those do in the 2012 Redbook Price guide?

1.  The 1914-D cent guides for $215.

2.  The six 1910-S cents (combined) guide for $143 after figuring in a similar return for the lunch money.

3.  The 1913-S cent sells for $275.

The average return on the best two selections in this example is about 6.2%.

Note that the selection of the coins was somewhat difficult due to the fact that the price of a low grade key coin and a mint state coin was so high relative to the price of a mid-grade more common coin.  It took many mid-grade coins to be equivalent to the amount you'd spend on one nice coin and the 1914-D isn't even the absolute key of the series! The comics, on the other hand, were all fairly key.  In effect, the division line between key vs. non-key coins is more obvious than it is with comics; possibly due to the fact that comics are keys due to their content/popularity, rather than their production numbers. (i.e., with coins, it's obvious if you have a key or not, but with comics, the transition is more subtle).

Regardless, low grade and key or high grade and non-key trumps mid-grade semi-key material most of the time for the same dollar value.

Collector Steve

Portfolio Rebalancing...when you collect more than one thing...or Gold...or whatever

I was just on a coin collecting forum, and a fellow forum member posed the question of whether it makes sense to sell some of their collectible coins to buy gold, or even vice versa.  I gave my answer (my "two cents") and I realized that the method needed to be repeated here.  So here goes:

Suppose you believed that it was a good "investment" to buy gold and silver.  Truth be told, when you factor in inflation, gold makes a poor investment because it only goes up in price when the dollar is weak, and the dollar is only weak when inflation is present, so the net result is that it just breaks even with inflation over the long term.  But there can be short term run-ups (or crashes) in price that can significantly outpace inflation or underperform it.  (Side note:  Check out Exchange Traded Funds which trade like stocks, such as ticker symbol "DGP").

Back to our example.  If you wanted to hold gold and silver, a good way to do it might be to buy an equal dollar value of each.  For example, imagine you were to buy $1,000 worth of gold and $1,000 worth of silver.  Then you monitor the price of both.  At some point, you might see that the value of gold and silver fluctuated where you had $1,200 worth of gold and only $800 worth of silver.  If that happened, you could "rebalance" your portfolio.  This means you would bring the dollar value of each back to the original one to one (1:1) or 50%/50% ratio.  So what you'd do is sell $200 of your gold and use that money to buy $200 worth of silver.  Then you'd have $1,000 worth of each again.  Now why in the heck would you do that?  Because when Gold went up and silver went down, you'd be selling the gold at a relative high and buying silver at a relative low.  Remember...the idea is to buy low and sell high right?  Would it help?  In some cases, yes.  But remember that when you buy and sell gold and silver, you will incur transaction fees, right?  Because of that, you might not want to balance very often.

Another example.  You don't have to maintain a 1:1 or "50/50" ratio.  Suppose you decided you wanted a portfolio of 60% Gold and 40% Silver.  You could buy $100 worth every month for 10 months.  If gold and silver didn't move much, after 10 months, you'd have about $600 worth of gold and $400 worth of silver.  Now suppose they started to shift in value.  They might shift because Silver is not just a precious metal, but also an industrial metal with rising and falling demand.  (yes, gold is an industrial metal too...but to a lesser degree).  Anyway, Silver stagnates, but Gold rises.  Soon, you have $900 worth of gold and $400 worth of Silver.  At that point, you would go through the Math to figure out how much gold to sell.  Since you have a combined $1300, you should have $780 worth of gold and the rest in silver.  So you sell off $120 in gold and buy more silver. 

What else can you balance?  You could balance a portfolio of Gold and Cash in a 70% Gold/30% Cash ratio.  If Gold climbs too high, you sell gold.  If gold drops, you buy more with your cash to rebalance.  Neat, huh?

Finally, let's discuss collectibles.  It is possible to balance a portfolio of collectibles.  Some ideas:  You could balance your coin collection's value vs. a portfolio in gold.  You could balance your coin collection's value against cash.  You could balance your coin collection's value against your comicbook collection's value.  You could even balance three things....like maintain the value of your coin collection, your comicbook collection, and gold in a 40%/40%/20% ratio. 

One last thing to realize.  This rebalancing is more effective when the items in it are fluctuating up and down...rather than certain types of collectibles that will only keep moving up in fits and starts.  But this can also create a situation where you are selling winners to buy losers.  Imagine if Bill Gates decided back in the early 1980's to balance a portfolio of MicroSoft Stock and Cash in a 50%/50% ratio?  If he did that, he'd still be rich, but not nearly as much.  In fact, he'd have been over-investing in the relative "loser"...the U.S. Dollar.  Balancing a portfolio of anything can cut your gains because you're not fully invested in a winner, but it can also help set a bottom floor on losses because you don't hold through a peak.  For example, if you were balancing a portfolio of Silver and Cash back when Silver hit $50 an ounce, you would have sold some of your silver near that peak.  But on the other hand, you wouldn't have owned as much silver either because you were keeping money in cash.  Portfolio balancing creates some tough decisions!

Collector Steve

Would you rather have a 1839 Large Cent or a 1939 Nickel? (Rate of Return)

Here's a hypothetical situation.  Let's say you have $80 burning a hole in your pocket and you want to buy a coin.  But imagine also that you're a collector like me.  Though the artistry and beauty of the coins excite you...because after all, that's why you collect coins in the first place...you also demand a good return on the coins.  Like even though money is tight, perhaps you can justify your purchase because the coins you buy will be purchased at a good price and you're thinking in the back of your mind that you'll start selling off your coins when you retire in 22 years.


So you go down to your favorite brick and mortar coin store and it's really busy!  There is a sign in the window that says, "going out of business sale".  Oh my God!  Your world is crashing around your ears.  So you go in and you see old Vick, the owner.  You expect him to explain how the internet finally got to him and he couldn't compete.  Instead, he's all smiles and tells you that he's won the lottery and is in a hurry to sell off his inventory and move to Florida.  Great for him!  Vick tells you that he's having a sale and all of the items have been discounted nicely.  So you look around, and you see a couple coins that catch your eye.


One is an 1839 Large Cent.  This is the Head of '38 Beaded Cords variety.  It's in Extremely Fine condition, has original, unmolested surfaces, and it's on sale for exactly $80.  It has a guide price of $110.  Hmm...this isn't exactly making a killing on it, but its a good deal and you feel maybe you could sell it online for what you paid if you needed to. 

The other coin that you're interested in is a 1939-D Jefferson Nickel in Gem Uncirculated, MS-65.  It's a typical Gem, but it is the key to the series.  It is also $80.  And coincidently, it also has a guide price of $110 in MS65 condition.

It's at this point that analysis paralysis sets in.  "Gee, that nickel is the key to the series...but look at the classic beauty of the cent!"  "What do I do?"  "What do I do?!"

Then you notice that the cent is exactly 100 years older than the nickel.  Is there any significance to that?  Is it better to buy the older coin?  It is 100 years older.  It's gotta be rarer, right?

The 1839 cent is 100 years older, or 173 years old..  It's guide value is $110.  The nickel is "only" 73 years old.  It also guides for $110, but it's a "new" coin.  Surely an "old" coin is better than a "new" one, right? 

Not so fast.

Think of  it like this:  The 1839 cent has had 173 years to grow in value to its $110 guide price.  But the nickel grew in value to $110 in only 73 years.  It's really hard to estimate what a good starting price would be for each one, but it does seem like the 1839 cent is growing in value slower.  So a question that comes to mind is what was that nickel worth...say....72 years ago.  Was it still worth a nickel then, or did coin dealers value it at 10 cents because it was the key to a 2 year old series???  Maybe we can't answer that question, but we can approach it another way.

I have in my library, a 1990 price guide.  This is the redbook price guide, the same one that quotes $110 for each of the coins in the 2012 edition.  In 1990, the MS65 nickel was listed at $55.00.  The cent was valued at $85.00!  So in 22 years, the nickel doubled in the guide.  Yet the cent only increased in value about 30%.  If we assume that the rate of increase will continue for another 22 years when you retire, then the guide value of the nickel *MAY* double again to $220 and the large cent *MAY* increase another 30% to about $143.

***Caution...heavy math ahead****  (if math bores you, stop reading now)

So it seems that the nickel is rising in value faster.  It is doubling in guide price every 22 years.  What kind of return is that?  I mean, what percent?  Well, there is a really neat trick called "THE RULE OF 72s".  The rule of 72s works like this.  If you divide 72 by the interest rate, it should approximate the doubling time.  Or stated another way, if you divide 72 by the the doubling time, it should approximate the interest rate of return.

For example, if a collectible doubles in value in 9 years, what is the percent return?  Well, 72 divided by 9 equals 8.  So the answer is 8%.

Another (harder) example, what about a collectible that increased in value by a factor of 8 in 30 years?  Well, first, we need to figure out how many times it doubled.  If it doubled once, it would be twice as expensive.  If it then doubled again, it would be 4 times as expensive.  If it doubled one more time, it would then be 8 times as expensive.  So if an item is 8 times more expensive, it doubled 3 times, right?  If it doubled 3 times in 30 years, then...on average...it doubled every 10 years.  So now we know the doubling time....10 years.  So 72 divided by 10 (doubling time) equals 7.2 years....or 7.2% return.

Back to our Jefferson nickel.  It doubled in 22 years.  It's doubling time is 22 years.  So 72 divided by 22 is about 3.25...so around 3.25%.  Our Jefferson nickel probably stayed ahead of inflation, but barely.  And the cent actually lost value compared to inflation!

Something to consider is this.  The nickel's guide value is $110, but you buy it for $80.  So it seems like your nickel would give you 3.25% of $110 every year...so it should go up in value about $3.50 a year at first.  That $3.50 per year is actually a higher percent of your $80 purchase...its probably about 4%.  In other words, because you  bought it cheaper, your return is higher, because you get the return associated with a value of $110, but you actually only spent $80.  

Here's a simpler example.  If an item worth $100 is going up in value 5% a year, and you bought it for full price, you'd expect to get 5% return on your investment.  But if you bought it for half price, you would expect more return on your $50 purchase.  This is because the item will go up $5 in value every year because it's worth $100 and growing at 5%.  Yet, you only paid $50, so that $5 increase in value every year actually represents 10% of the $50 investment.

One more extreme example.  An item worth $100 goes up in value 4% a year.  In the short run, this means the value of the item should increase $4 a year.  Now imagine that you cherry picked that item and purchased it for only $5.  It will go up in value $4 a year, but you only paid $5 for it.  You're getting a $4 annual return on your $5 purchase...thats an 80% return on your money! 

You can see that the best way to boost your returns on your collectible "investments" is to buy them for way below guide and focus on things that are moving up in value faster. IN OTHER WORDS, TRY TO CHERRY PICK THE NEWER, MORE EXPENSIVE STUFF.  If you could buy that Jefferson nickel for half price, or $55, then you'd be making double the 3.25% rate of return we calculated....which is 6.5%.  That's pretty good in an era when a savings account pays you only 1%.  Maybe old Vick would consider selling you the Jefferson for $55 since he just won the lottery.

Post Script:  Please realize that past performance (rate of return) is not an indication of future performance.  For example, changing collector demographics could hurt or help the change in value of any collectible.  Also realize that the 1839 cent in this example is much rarer.  What made the Jefferson Nickel outperform it was likely due to a greater number of collectors putting together sets.  That too could change.  But I know this one thing.  While the race does not always belong to the swift, nor the battle to the strong, that's probably how you should bet.

Collector Steve

I'll tip you off

I'm trying to get readers.  If you subscribe to this blog, I (think) you'll get notifications when I put up new posts.

Need incentive?

OK, here's what I'm going to do.

When I see something I think is a good deal...but it is an item that I'm not going to buy...I'll post it.  I don't want these to be considered buy recommendations, so much as examples.   If you are going to buy them, I expect you to do your own due dilligence to decide on your own that they are items that make sense.  OK?

So sign up and receive notices.

Collector Steve

A Seller's Paradise can be a Buyer's Trap

I’ve been reading with interest the results of the 2012 Florida United Numismatists (FUN) auction.  From the feedback that I’ve been getting from one of my favorite forum sites, Collector’s Universe, very high prices were made on much of the material. A high grade early cent even broke the $1 million mark. From the “buzz” before this auction, it’s no wonder that high prices were paid.  So many were talking about bidding or attending the auctions.  There were multiple ways to bid.  And some very good material crossed the auction block.  At the same time, I’ve been reading comments from some of the attendees that a few lackluster items crossed the auction block yielding higher prices than might have been warranted.

Based on this feedback, I can only imagine that the sellers are giddy with excitement about the auction results.  Most times, sales are made to the satisfaction of both parties involved.  The seller is happy with a good price, and the buyer purchased something rare or exciting that is seldom offered for sale so they are happy too.  Sometimes paying top dollar is warranted.  For example, for almost every news-worthy rarity sold…like items that you hear about in the mainstream media following the sale…a rarified price was likely paid for the era that it was purchased.  For example, the high grade early cent that recently sold for $1 million may make the uninitiated wrinkle their brow and say, “those people have more money than sense”…HOWEVER, in 10 or 15 years, when that cent is sold for $2 million, those same uninitiated folks will likely comment on how "lucky" the seller was to sell their cent for so much money. Luck indeed!

So to be clear, for those items that exhibit (1.) Great rarity (2.) Unusually Original Condition and (3.) a High Degree of Popularity due to their “wow factor”will always be worth top dollar, or even more than top dollar depending on the time horizon of the buyer.

HOWEVER, what about the items that don’t meet this criteria in the same auction?  Sometimes group-think prevails in auctions.  A frenzy can set in.  The spark of this frenzy might be the mere presence of these rare “first water” collectibles that everyone wants.  Observing the auction is exciting and the attendees want to feel that excitement in their price range too.  A well promoted auction doesn’t hurt in fanning the flames either.  Sometimes, auction goers will get carried away in the excitement, or the competition to win the relatively few items available to a relatively overly-large group of bidders.

So ask yourselves these questions:

Would you rather sell an item in a well advertised, well attended auction, or a poorly advertised, lightly attended auction?

Put the shoe on the other foot…would you rather buy an item in a well advertised, well attended auction, or a poorly advertised, lightly attended auction?

The answers should be obvious.  OK, sure...if the collectible you’re looking for can only be purchased in a heavily attended auction, then that is obviously where you will need to go. But should you buy a collectible in the highly attended, well advertised auction if you can get it elsewhere? 

Probably not…but of course, it does depend on the price.  In cases like these, the smart move is to decide on your bid before-hand and stick to it.  If you walk away with nothing, you made the correct decision.

Do you want to make money buying and selling collectibles?   There is a very popular television show on one of my favorite cable channels about a man who makes his living buying and selling classic cars. It’s a great show for car nuts like me. If you watch the show long enough, you’ll realize why the man is able to make a living following his passion. It is a simple formula:  He tends to buy cars outright for prices below what he could buy them at auction, or he will attend smaller, lightly attended auctions for his purchases.  But he only sells them at the larger auctions.  I’m sure he’ll also sell them for full retail in his showroom too.  And the difference between what he buys his cars for, and what he sells them for, is borne by the sellers who he buys from and the buyers who get caught up in a buying frenzy.  Don’t be one of them.

Bottom line:  Unless you collect first-water collectibles that can only be obtained from large auctions, be very, very, careful about what you pay for your more common items in a big and exciting auction.  Realize that in a highly advertised and populated auction, you will be bidding against people who have a great, great, love for their collectibles and some of them do not have to worry so much about dropping large sums of money to pursue their passion.  And they just might have auction fever!  Instead, buy in locations where those people likely won’t be found.

But be sure and surround yourself with them when it’s time to sell.

Rotational Leadership...what it is and how a cool head can profit from it

As you know, price resistance plays a major role in shaping the prices of collectibles.  Closely related to the concept of price resistance is the concept of rotational leadership.  Rotational leadership is what occurs when you have two equally desirable collectibles within a price resistance grouping.  With rotational leadership, two, sometimes three collectibles will take turns in the price leader role within a collectible genre.  A great example of this are two comic books, Issue #27 of Detective Comics and Issue #1 of Action Comics.  Detective Comics #27 the comic book where Batman first appeared.  Action Comics #1 is the comic book where Superman first appeared.  Both of these characters are popular among the collecting faithful, though Batman may be a bit more popular. (Come on, Batman is pretty cool, right?)  Action Comics #1, however, is a ground-breaking comic book, because Superman was the first super hero.  Before Action #1, there were no super heros, including Batman.  So which book is more important?  Which should be more valuable?  The market can’t decide!   Over time, each of these comic books has held the title for the most expensive comic book.  Often, the championship belt for most expensive comic book is worn by whichever comic was the most recent to cross the auction block in high grade.  Once in a while, however, there is a third contender for this throne, issue #1 of Marvel Mystery Comics.  This comic book is the first Marvel Comic book, and also the first appearance of the Human Torch, a very popular comic character.  This comic is in the same general category of rarity and desirability as Action #1 and Detective #27.  So once in a while, Marvel Mystery Comics #1  will hold the title as the most expensive comic book.   All three comics are rotational leaders.

      How can knowledge of rotational leadership help the investor and the speculator?   First, we have to understand that rotational leaders do exist.  Not every collectible genre has a single most expensive item.

     But secondly, it is important to know that a change of rotational leadership creates excitement among those collectors who desire that leader.  For example, when Detective #27 moves into the leadership position, this creates excitement among Batman collectors who reassert their efforts to own the more key Batman issues.  Then a trickle-down effect occurs.  The collectors believe that if the value of Detective #27 jumped into first place with a 10% increase, then surely the value of the almost as rare, almost as valuable issues should increase by almost 10% as well.  This creates a trickle-down or ripple effect that starts at the top and works its way down the collector pyramid and the collectible pecking order. 

     How can we take advantage of this phenomenon?  First of all, if we monitor the high-level comic auctions, if we knew that a high grade copy of Detective #27 was going to be coming up for auction and the current rotational leader was Marvel Mystery Comics #1, it might behoove us to pick up some first-rate specimens of Detective and Batman comics in anticipation of a changing of the guard.  But of course, we should only consider this if other factors are taken into consideration, (i.e., we must not overpay, the comic book must be a truly great book, etc.).  Secondly, even if we were not aware of an auction coming up, it might make sense to buy issues of the non-reigning rotational leader in anticipation that some day the guard will change.  When everyone else is buying Batman, you buy Superman.  When everyone is buying old Gold coins, you buy old high grade copper coins. 

    Rotational leaders do come in and out of favor.  Sometimes, they can go surprisingly out of favor and become screaming bargains.   As long as you can verify that a collectible item is truly a rotational leader, (i.e., it has held the price leadership role more than once), then buying a high quality collectible related to an out of favor leader can be lead to excellent profits.  However, when it is time to sell, do remember to keep a level-head and actually sell, and not get caught up in the feeding frenzy.   

A Painful Lesson on What Kind of Collectible is Best (or a lesson on liquidity)

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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. :)