Crisis Investing=Custom Knives??

[rprocter]

Historical fact: many people who chose wisely and bought custom knives anywhere from 10 to 30 or more years ago, have sold these knives giving themselves some degree of R.O.I. not surprising as these were heady times of global economic expansion with many seeking exotic, expensive items to reward themselves for their successes.
but that is history. i believe the future will be one of constrained economies with crucial and overwhelming problems requiring much money and effort to deal with. (some examples: atmospheric pollution is causing damaging weather events and affecting food production; the oceans are becoming increasingly acidic with negative effects on all oceanic life forms; the infrastructure throughout N.A. is old, decaying and needs replacement, population demographics is shifting to a smaller work force and more elderly people who require more health care; etc. it is a long list).
custom knives are unlikely to do well in such times.
roland

 

[Les Robertson]

Hi Roland,

Let me show the question again:

Ok, so what has the "Brain Trust" decided???

Custom knives can be investments or not?

A question for the "Trust"...no one discussed ROI %??

When you are considering ROI, do you including shipping?

How about if you had to travel to a show to get the knife? Is that somehow "expensed" in a "below the line" accounting technique?

Are you making an adjustment for inflation each year you keep the knife?

Is it really a historic fact about people buying knives 10 30 years ago doing well?

Which makers are you speaking of? What percentage ROI did they expect and did they receive when they sold the knife?

How many people on this forum do you think even knew what a custom knife was 20 years ago?

Are you saying that a knife that is bought today cannot be a good investment without waiting 10 - 30 years?

 

[Kevin Jones]

Ok, so what has the "Brain Trust" decided???

Custom knives can be investments or not?

I believe the answer is yes. They can be if you have the desire and put the effort and time forth to make them such. It's not for everyone.

A question for the "Trust"...no one discussed ROI %??

I brought it up several times. I've heard collectors quote their ROI, and some are impressive some are modest and some not good. I offer a spreadsheet to those who attend my collecting seminars that calculates ROI, among quite a few other things.

When you are considering ROI, do you including shipping?

Yes, all costs/expenses directly associated with acquisition/upkeep the particular knife should be included (shipping, photos, sheaths, maintenance etc).

How about if you had to travel to a show to get the knife? Is that somehow "expensed" in a "below the line" accounting technique?

No, at least in my case, as I never attend a show just to purchase a knife. I go because it's something I enjoy and/or to promote the CKCA. In fact, I rarely have time to look for pieces for my collection at shows these days. The time I have away from CKCA booth/business is more looking at knives in general and visiting with makers. I do take delivery of commissions at shows sometimes.

I would be incurring the same show expense whether I was buying a knife or not. Now if I were a dealer, I would charge off show expense.


BTW, there are some great investment grade knives $500 and under...if you are ok with 15% to 70% ROI.

Very true. There's investment grade knives at all price points, however the collector has to exert the desire/time/effort to find them.

*********************

 

[Kevin Jones]

Historical fact: many people who chose wisely and bought custom knives anywhere from 10 to 30 or more years ago, have sold these knives giving themselves some degree of R.O.I. not surprising as these were heady times of global economic expansion with many seeking exotic, expensive items to reward themselves for their successes.
but that is history. i believe the future will be one of constrained economies with crucial and overwhelming problems requiring much money and effort to deal with. (some examples: atmospheric pollution is causing damaging weather events and affecting food production; the oceans are becoming increasingly acidic with negative effects on all oceanic life forms; the infrastructure throughout N.A. is old, decaying and needs replacement, population demographics is shifting to a smaller work force and more elderly people who require more health care; etc. it is a long list).
custom knives are unlikely to do well in such times.
roland

You paint a grim view of the future Roland.

 

[Les Robertson]

Hi Kevin,

In which post was ROI % discussed in this thread?

Hi Niko:

I've always wondered if it is better to invest in many production knives or few custom knives? Especially in this economy. Would it be easier to sell 20/ $100 knives or 1/ custom $2,000 knife?

With regards to the totality of the custom knife market. What is most important is: Does the knife have a value price?

The majority of custom knives being sold today are over priced. Which is why very few custom knives have "investment" potential. The "over pricing" eliminates the investment potential as all of the money goes immediately to the makers.

This of course is great for the makers short term...however it is bad for both the makers and collectors in the long term.

Too many makers will interpret the sale of this knife as an indication that they priced the knife right. Not fully realizing that (as most have said on this thread for the last 10 years) that they "Buy what they like".

More times than not when the owner goes to sell the knife...they take a loss...which is Ok because they "Bought What They Like".

Today what is happening is that the collectors are paying attention "BIG TIME" to what is happening in the after market. If the makers work is not holding its value....many collectors who before would have bought a knife from this maker. Are now considering other options....before purchase.

Today many of what many felt were the top makers have seen their waiting lists shrink perciptiously. Yes the slowing economy is partly responsible. However, the other part of this equation is the lesson's of the after market.

For years on this forum I have held that custom knives can be good investments. For the most part I have been told I am wrong.

I understand that trying to make money with your knives is foreign to some and bordering on the obscene to others. Primarily the "I buy what I like Club" members.

Fact is you can make money with custom knives. Yes, you have to work at it and do your homework.

I really think this is the biggest rub for most. After all this is your hobby...you don't want to have to think it out. You just want to be with your knife friends, feel the love at a show and buy what you like.

That is what happened to Roland...and now he is a proponent of the Mayan 2012 Calender predictions.

Hi Roland,

I understand your level of Pessimism. I just barely missed the Atom Bomb drills when I was in 1st grade! There were people who really thought the world was going to blow up. I have heard stories of people building bomb shelters in their back yards.

How about in the 1960's when cyclamates were going to kill us. How about Red Dye #2?

How about 3 mile Island in 1979? Obviously Nuclear power could not be controlled and we were all going to die from Radiation.

How about HIV and AIDS in the 80's and 90's...all we had to do was look at someone with either of those two and we were going to be infected....and die!

Many of your fears will be allayed in about 7 months...and a whole new set of problems will be beset upon us!

Hang in their Roland.

If you don't like what you are hearing now...wait 10 years and you will have a whole new set of problems to worry about!

 

[betzner]

Hi Roland,

I understand your level of Pessimism. I just barely missed the Atom Bomb drills when I was in 1st grade! There were people who really thought the world was going to blow up. I have heard stories of people building bomb shelters in their back yards.

How about in the 1960's when cyclamates were going to kill us. How about Red Dye #2?

How about 3 mile Island in 1979? Obviously Nuclear power could not be controlled and we were all going to die from Radiation.

How about HIV and AIDS in the 80's and 90's...all we had to do was look at someone with either of those two and we were going to be infected....and die!

Many of your fears will be allayed in about 7 months...and a whole new set of problems will be beset upon us!

Hang in their Roland.

If you don't like what you are hearing now...wait 10 years and you will have a whole new set of problems to worry about!

Les, I didn't erase your opening comments because I disagreed. Mostly, I agreed with those comments.

I just wanted to "quote" this part of your post because it seems one of your best, and enjoyably funny, ones. We must be about the same age, LOL. I can relate.

I may not yet see daylight at the end of the tunnel with respect to the economy and it's effect on custom knife pricing - but I "know" it's there at some point. At least for me - because of the way I buy - and the way I sell - buying the pieces I love.

Bob

 

[Durwood]

Les, a while back you mentioned using a SWOT analysis on custom knife purchases:thumbup: That's basically what I always do. Having said that, in my limited experience, the best time to sell a knife is when someone else wants it and is willing to pay more for it. That is, more often than not in the knife world, soon after it was acquired. There seems to be a few staples in the custom world that are more or less always easy to turn, but for the most part the interest is in what's new. Human nature

 

[STR]

So, I'm reading this book called Crisis Investing by Doug Casey
It was a N.Y. Times best seller in 1983
http://www.amazon.com/Crisis-Investi.../dp/0936906006

At the end of a small section on collectibles he says that there are TWO products that he sees as GOOD investments (for the upcoming crisis he predicts)===>
One is Roman and Greek coins
The other is CUSTOM KNIVES
He said he had been collecting custom knives for years

I was just wondering if any of you had ever heard of Doug Casey in the custom knife realm?
I was gonna send him an email asking him if his custom knives as collectibles in the coming crisis lived up to his expectations
But, he is all corporate now
A little guy like me can't email the big wigs with a simple question
http://www.caseyresearch.com/

I don't agree. I see why he wants to say that being that he is heavily invested in customs but quite honestly if you are looking for good investment in the way of barter materials for a future crisis there are far better things to buy now. Paper goods with no shelf life, toilet paper for one. Seeds, especially heirloom seeds that are not genetically modified to stop producing in three seasons. Canned goods, MRE's, powdered foods and freeze dried foods. Jerky, and other long term storage products. Maybe even some extra Motrin, Tylenol, allergy and cold formulas, rechargeable radios and flash lights, and popular ammo that you can both use if you need to but have extra of for trades. I would say things like these seem to make far more sense to me than expensive custom knives or expensive guns. Face it if a crisis hits and trade routes shut down, air lines stop flying and society begins a break down the first thing to go will be food stores. Food in this case will be more valued than gold and those that have a green thumb and know how to make food and store it will be more valued than Presidents in the new society.

However, if you are looking for barter material there is nothing at all wrong with cheap but well made knives by production companies. I would feel a lot better about trading off a mini pal by Cold Steel or an inexpensive Condor fixed blade Bushcraft knife or machete for some food, ammo or seeds for my family, than I would a knife I had a lot more money and investment in than I would one of these items. Hell, instead of wasting potentially thousands of dollars on a handful of custom knives spend that money to have a well dug in your own property. That makes a lot more sense doesn't it?

STR

 

[tom mayo]

I know a few very popular internet purveyors who buy customs knives with the intention of getting a 20% markup.

They do this.......day in and day out.....
Usually they sells the knives within two weeks.....although not always

Show me ANYWHERE in the stock market/investment portfolio biz where you can make this kind of return on your money?????

 

[bandaidman]

Who reported any capital gains on knives on their taxes in 2009 or earlier?

 

[betzner]

Who reported any capital gains on knives on their taxes in 2009 or earlier?

Doesn't seem to me you'll find too many collectors willing to admit they lost much money, or many intelligent collectors willing to even answer the question at all.

 

[Durwood]

Doesn't seem to me you'll find too many collectors willing to admit they lost much money, or many intelligent collectors willing to even answer the question at all.

Ever add up the winnings and losings at the end of a poker game among friends

 

[martinr]

I know a few very popular internet purveyors who buy customs knives with the intention of getting a 20% markup.

They do this.......day in and day out.....
Usually they sells the knives within two weeks.....although not always

Show me ANYWHERE in the stock market/investment portfolio biz where you can make this kind of return on your money?????

Buying and selling knives at the retail or purveyor level is not really investing. I'm in the commercial door and hardware business, if I sell a customer a door lock I bought from a manufacturer or distributor and I've marked it up 25% I've made a profit. Same thing goes for Les Robertson, he's in the knife business and every time he buys a knife and resells it he hopefully makes a profit. But is it considered an investment if he buys the knife on Monday and sells it on Tuesday? I don't think so. It's just business for profit. If someone buys a Loveless Big Bear with the intention of holding it for a relatively long time and then reselling it for a profit then that person is investing. Going to a knife show and getting picked in a lottery and immediately flipping the knife for a profit is not investing.

 

[Les Robertson]

Hi Tom,

Show me ANYWHERE in the stock market/investment portfolio biz where you can make this kind of return on your money?????

:foot:

I direct your attention to the "Oracle of Omaha".

Another term for you is "Derivatives"...google it.

How about IPO's?

How about the Broker who makes a percentage when they buy a stock for a client. Then makes another percentage when they sell (in some cases the same stock) for their client.

REIT's, Spdr's, Hedge Funds, Investment Capital Groups.

Another term for you (guys were making a killing with this) "Selling Short"...google it.

Tom, if you are going to make a comment like that you need to do some homework first.

As for those nasty dealers marking up their prices 20%...if it bothers you that much...stop selling to them.

 

[Les Robertson]

Hi Bandaid:

Who reported any capital gains on knives on their taxes in 2009 or earlier?

I'm sure Kevin Jones did. As his spread sheet would let him know exactly what amount he should claim on Line 13 of his 2009 1040.

The biggest question would be...short term or long term Capital Gain.

Next year the Capital Gains rate is going up. Probably want to move those "investments" now. If possibly hang on to them for at least 12 months.

 

[Les Robertson]

Hi Durwood,

Ever add up the winnings and losings at the end of a poker game among friends

Every two weeks.

 

[Les Robertson]

Hi Martin:

Buying and selling knives at the retail or purveyor level is not really investing. I'm in the commercial door and hardware business, if I sell a customer a door lock I bought from a manufacturer or distributor and I've marked it up 25% I've made a profit.

Actually the investment came to start the business and secure inventory.

Same thing goes for Les Robertson, he's in the knife business and every time he buys a knife and resells it he hopefully makes a profit.

The only reason you go into business is to make a profit. Before you uniformed jump in:

A Non-Profit Business...makes a profit. The Non-Profit is a "Tax Status".

Martin is right, if I am not making a profit on every knife I sell...well you can get into a situation referred to as "Negative Cash Flow"...that's a bad thing.

I agree with Martin that my business purchases of knives for resale is not an investment....although those profits do fund my "SEP" (Simplified Employee Plan (Kind of like an IRA). Which is in fact an investment So maybe I am an investor.

But is it considered an investment if he buys the knife on Monday and sells it on Tuesday? I don't think so. It's just business for profit.

Again I agree with Martin. This is not an investment...just superior product knowledge!

If someone buys a Loveless Big Bear with the intention of holding it for a relatively long time and then reselling it for a profit then that person is investing.

Martin is right again...this (I think) for most people is what they think of when they think of a knife as an investment. Narrow minded to be sure...but none the less this is a form of investment.

Going to a knife show and getting picked in a lottery and immediately flipping the knife for a profit is not investing.

One can make the argument that this is an investment. You invested your time and money to get to the show. Show up at the makers table and get your name drawn.

There is brief second when you purchase the knife and you may not personally know of someone who will buy the knife from you. If you did, this would be called an arbitrage.

Often times it is one of those "Nasty" dealers that Tom works with that is right there willing to buy the knife from you. Only so they can jack it up 20% or more than what they paid for it.

Excellent points Martin.

 

[Les Robertson]

Hi Bob,

I may not yet see daylight at the end of the tunnel with respect to the economy and it's effect on custom knife pricing - but I "know" it's there at some point. At least for me - because of the way I buy - and the way I sell - buying the pieces I love.

The market cycle has returned back to less expensive knives....for now. The newer makers who are having success in this market are generally utilizing value pricing.

There are a small percentage of Established makers who seem to be economy proof. That is a testament to their abilities, longevity and business acumen.

You, Kevin Jones, Roger Pinnock and others do your homework. Putting in the time and effort to know who to buy and when. As well what to sell and when.

Success at anything is generally not an accident.

 

[blad5]

Some of what Les has said I agree with. Some of what Proctor said I also agree with. However, some of what has been posted appears to me to be getting off subject.

I am one individual that considers knife collecting a hobby and above a certain point, the price of a knife loses its appeal as a hobby and would become an investment, something I will not permit myself. I cannot criticize any maker for the price he/she charges. That is his decision entirely. After all, it may be the basis for his making a living. But the maker should also be aware that his pricing, particularly if it is based on popularity rather than his costs, may limit his potential customer base.

Why is this important? There are few collectors that really have the finances to buy knives regardless of price based on popularity of the maker. And if they are buying these knives as long term investments, I believe they are in for a rude surprise. I would look to today's housing crisis as an example. Yes, many were tricked into buying houses they could not afford, but many also speculated that housing prices would continue to rise and bought properties with little money invested thinking that they could sell at a profit and repay the loan. We have seen how that worked out. Everyone in our economy is paying some of the price for the results.

The only difference I see with knife collecting as an investment is that knives are paid for in full when purchased. However, just like the housing bubble, I think there is a limit on the price of virtually any knife. When the "knife bubble" hits, and it will, the individual investor/collector will pay a price.

I have a few friends that don't trust in their retirement (not sure I blame them) and buy knives as a hedge that they expect to sell at considerable profit when they retire. I can't persuade them otherwise.

Paul

 

[rprocter]

Les, your rebuttal to my remarks is largely a misunderstanding of what i said.
i'm sure there are knife collectors who have done well over the last 20 to 30 years, averaged out. some knives might have been flipped within hours of purchasing, others held on to for longer.
i view the future more as challenging than necessarily "grim". the problems i speak of are reported on frequently in the press and scientific media. these changes in our world are already well underway and are backed by a great deal of solid scientificevidence. the 'scares' of the past you mention were largely media hype, not in the same league at all.
you can bury your head in the sand and proceed as if all is as it was, but at your own peril, including investments.
you know a great deal more about knives than i ever will, but successful investing requires seeing the 'bigger picture', now more than ever.
roland