Crisis Investing=Custom Knives??

[Les Robertson]

Hi Paul,

Im always surprised when I see people write about "Long Term Investing".

Any particular reason someone could not buy a knife, hold it for a year or two and move it?

Given market volatility, speed at which the market cycle is now rotating and the ability to "mine" information. Long term is probably not the way to go.

Keep in mind the "Time Value of Money" concept.

The one thing I have seen in the last 18 months is the willingness for people to pay "stupid" premiums for the knives they want. Which is why the "flavor's for the months" of 2 - 4 years ago have taken a hit in both the primary and secondary markets.

 

[Les Robertson]

Hi Roland,

You said it was a "Historical Fact" that people made money with custom knives.

What are you basing this on? Personal experience or something you read?

Your view of the world is one of gloom and doom. There are always problems...always. Not just in the US but Canada and in every nation in the world.

You have two choices you piss and moan about it and become part of the problem.

Or you get off your ass and do something to fix it.

The housing bubble??? Too many people were given loans who shouldn't have received them. You want a house now you better have a 700 + credit score and a down payment.

The Tech Bubble Burst...why? Too many people invested in smoke and mirrors. They invested in potential. Nothing was solid and nothing had been proven...it was all theory.

It was the same thing that the Noble Committee did this year when they awarded the peace prize.

Yet the big blue marble keeps turning. The reality is that this has very little to do with the buying and selling of custom knives. With the exception of price point and value pricing.

Shows, for the most part have been doing much better in the last 6 months than they did the previous 12 months.

A lot of makers who are charging too much for their knives are being exposed and their sales and waiting lists have dropped off.

There were a lot of "Players and Posers" who were happy to get on a makers list who was 7 -10 years behind. Knowing that when their knife came due it would be a long time down the road before they had to come up with the money.

Many of these makers were "forum" favorites whose buyers enjoyed an arbitrage situation with the knives they received from them. This too has seen a slow down.

Many of the established makers who have been resting on their laurels are being pushed aside by the newer makers who are doing as good if not better work than the more established makers.

This is particularly true in the ABS.

Now is the time to do your homework and make smart purchases. Not just walk into a show and buy the first thing you see that catches your eye.

For me, the biggest problem I am having this year...is not being able to get enough quality knives.

Roland...someone is buying knives!

 

[blad5]

Hi Paul,

Im always surprised when I see people write about "Long Term Investing".

Any particular reason someone could not buy a knife, hold it for a year or two and move it?

Given market volatility, speed at which the market cycle is now rotating and the ability to "mine" information. Long term is probably not the way to go.

Keep in mind the "Time Value of Money" concept.

The one thing I have seen in the last 18 months is the willingness for people to pay "stupid" premiums for the knives they want. Which is why the "flavor's for the months" of 2 - 4 years ago have taken a hit in both the primary and secondary markets.

Les, I'm not sure what point you are trying to make or if you are taking issue with what I wrote. For the vast majority of knives that are sold, I would agree that investing "[l]ong term is probably not the way to go." I also see no "reason someone could not buy a knife, hold it for a year or two and move it." After all, it's their knife and they can hold it for as long as it pleases them. Your last paragraph seems to buttress my position that most knives, over the long term, do not make good investments. You appear to take an even narrower position, that even over relatively short periods of time, individuals' tastes change and what was popular 2-4 years ago is no longer the case today. All the more reason to be careful what you pay for a knife today, regardless of whether it is purchased from the maker or a dealer.

Paul

 

[cnas122]

I think I saw a similar thread a couple days ago. I'll be the first to admit that I collect many custom knives for investment. The good thing about that is....if your investment doesn't offer a decent return, you still get a great knife to use

 

[Les Robertson]

HI Paul,

Don't be confused....I am agreeing with you!

There always seems to be some confusion when people start talking custom knives as investments.

First, they cite Loveless...which is why I pointed out that his after market prices really took off once he stopped making the knives and others began to make them.

Second, talk drifts to "you can't retire" on your custom knives. You mean as opposed to your other investments?? How have they done over the last 3 years.

Next up is the "Long Term Perspective" the buy and wait 30 years. My point was (and I agree with you) that given the volatility of the market and cycles of custom knives trends. That in fact short term may....may be a better way to go.

It seems buying a knife for $400 and selling it at $460 (a 15% ROI in 12 months) is not "sexy" enough or not enough of a return?? How does 15% ROI compare with what the Bank is offering. True they guarantee that 4% every 6 months. Don't forget that the IRS gets a taste of the 4%.

Anyway hope you are not longer confused. You make/made excellent points.

 

[Durwood]

SNIP...

The one thing I have seen in the last 18 months is the willingness for people to pay "stupid" premiums for the knives they want. Which is why the "flavor's for the months" of 2 - 4 years ago have taken a hit in both the primary and secondary markets.

Excellent point:thumbup:

There also seems to be a phenomenon that exists on the exchange forum that most buyers don't understand. There is stiff competition to say "I'll take it" for the work of a few makers, but when the buyer later decides to sell it, most of that interest has dried up and the seller can't understand why The seller usually takes a big hit and will often even post in their for sale forum their frustration that the item isn't moving despite large price cuts.

Many buyers seem to place an intrinsic value on the fact they got a knife direct from the maker or that they "scored it" before someone else even though the knife isn't a special order. The competition among buyers allows some makers to sell above the normal market for comparable work, IMO. I do not fault the makers for this

 

[blad5]

Excellent point:thumbup:

There also seems to be a phenomenon that exists on the exchange forum that most buyers don't understand. There is stiff competition to say "I'll take it" for the work of a few makers, but when the buyer later decides to sell it, most of that interest has dried up and the seller can't understand why The seller usually takes a big hit and will often even post in their for sale forum their frustration that the item isn't moving despite large price cuts.

Many buyers seem to place an intrinsic value on the fact they got a knife direct from the maker or that they "scored it" before someone else even though the knife isn't a special order. The competition among buyers allows some makers to sell above the normal market for comparable work, IMO. I do not fault the makers for this

I think what both Les and you have said just emphasizes the point that if the buyer's ultimate objective is at some point to sell the knife/knives he has acquired at a profit, he must do his homework before putting down his money. And even then, it's really a crap shoot. Tastes change as Les points out.

There are many fine makers out there making knives I would love to own, but not because I see future profit potential. I see very few knives that meet that criteria and that may explain your post.

Something that has interested me is why a collector would pay $2,000 or more for a knife? As Les has previously pointed out, buy a $400 knife and sell it for $460 in a year and you make 15% ROI, not much money, but a good ROI. Even if sold at a loss, the buyer can survive. On the other hand, buy an expensive knife and if the knife or maker loses favor, the buyer's loss can be substantial. Since there are very few makers that a collector can have a significant degree of confidence that the maker's work will continue to appreciate in value over the years, why are collectors willing to spend large sums for a particular knife?

Paul

 

[Kevin Jones]

I think what both Les and you have said just emphasizes the point that if the buyer's ultimate objective is at some point to sell the knife/knives he has acquired at a profit, he must do his homework before putting down his money. And even then, it's really a crap shoot. Tastes change as Les points out.

There are many fine makers out there making knives I would love to own, but not because I see future profit potential. I see very few knives that meet that criteria and that may explain your post.

Something that has interested me is why a collector would pay $2,000 or more for a knife? As Les has previously pointed out, buy a $400 knife and sell it for $460 in a year and you make 15% ROI, not much money, but a good ROI. Even if sold at a loss, the buyer can survive. On the other hand, buy an expensive knife and if the knife or maker loses favor, the buyer's loss can be substantial. Since there are very few makers that a collector can have a significant degree of confidence that the maker's work will continue to appreciate in value over the years, why are collectors willing to spend large sums for a particular knife?

Paul

Because you can buy a $2000 knife and make the same 15% ROI and realize a lot more in your pocket.

 

[webb_jr]

Well, it's a nice knife, but I don't see the investment value here:

http://cgi.ebay.com/Bob-Loveless-Ba...ible_Knives?hash=item2eac603699#ht_500wt_1182

I just think of all the INFI I could get! This kind of commitment could only come from a collector with a love of this maker. Are there really that many people who collect such knives? Even if I had a ton of money, I would have to be trying to complete a collection from this maker AND be slightly insane. It just doesn't compute for me, but to each his own.

webb jr.

 

[Durwood]

Because you can buy a $2000 knife and make the same 15% ROI and realize a lot more in your pocket.

Yes, BUT, when you move into that range don't you also take out a huge percentage of prospective buyers. An astute knife investor/collector can put together a decent "portfolio" with $2000 in undervalued custom work and even make a poor choice or two and still realize 15% gain in the short run. The odds of turning 15% on one $2000 knife has to be a lot lower than the odds of making 15% on a diversified assortment of less expensive knives.

 

[Durwood]

Another thought The free market is very good at filling voids and making corrections. Take the custom slipjoint market for example. Even just five years ago there were perhaps only a handful of makers producing what most slipjoint collectors would now consider very good work. There are still only a few top makers, but the middle ground is filled with choices that didn't exist and what used to be the middle won't even turn the heads of a lot of custom slipjoint buyers these days:thumbup: There is/was a need and it continues to be met by new makers who can produce fine quality at affordable prices. Work that was considered acceptable or even good five years ago, in many cases, isn't desirable now.

 

[blad5]

Yes, BUT, when you move into that range don't you also take out a huge percentage of prospective buyers. An astute knife investor/collector can put together a decent "portfolio" with $2000 in undervalued custom work and even make a poor choice or two and still realize 15% gain in the short run. The odds of turning 15% on one $2000 knife has to be a lot lower than the odds of making 15% on a diversified assortment of less expensive knives.

While I can see Kevin's point that the potential gain is greater, so is the risk. Overall, I'm more inclined to agree with Durwood's position.

Paul

 

[Kevin Jones]

Yes, BUT, when you move into that range don't you also take out a huge percentage of prospective buyers. An astute knife investor/collector can put together a decent "portfolio" in undervalued custom work and even make a poor choice or two and still realize 15% gain in the short run. The odds of turning 15% on one $2000 knife has to be a lot lower than the odds of making 15% on a diversified assortment of less expensive knives.

Yes, less buyers however less knives for these buyers to choose from as well.

I have two very nice knives on the "for sale" page of my photosite @ $350 and $450 by very talented and fairly well known makers. These knives have set un-sold for quite a while. However I have had no trouble selling knives in the $1500-$10,000 range in spite of the poor economy.

It's more about taking the time and making the effort to learn what knives from what makers to invest in, then what price range of knives to invest in.

 

[Durwood]

Yes, less buyers however less knives for these buyers to choose from as well.

I have two very nice knives on the "for sale" page of my photosite @ $350 and $450 by very talented and fairly well known makers. These knives have set un-sold for quite a while. However I have had no trouble selling knives in the $1500-$10,000 range in spite of the poor economy.

It's more about taking the time and making the effort to learn what knives from what makers to invest in, then what price range of knives to invest in.

But, could it be that you spent more time, invested more wisely, made more informed decisions i.e. knew the market better in the price point you were successful in than on the lower priced market?

 

[Kevin Jones]

But, could it be that you spent more time, invested more wisely, made more informed decisions i.e. knew the market better in the price point you were successful in than on the lower priced market?

Perhaps, but the point I'm making is that it's not difficult to sell $2000 plus knives and make respectable ROI if you do your homework.

I am a collector first, investor second. I can only think of one knife I purchased specifically to profit. It's not like one has to choose whether to be a collector or investor.

As I said earlier in this thread, the best collecting philosophy IMO is that which brings the individual collector the most satisfaction.
However, it bothers me when collectors who do not make the effort or take the time to successfully invest in custom knives make blanket statements that they are bad investments.

 

[Marvin8]

I'll just say this to all of the budding knife investors on this forum;

"Vaya Con Dios"

 

[blad5]

Perhaps, but the point I'm making is that it's not difficult to sell $2000 plus knives and make respectable ROI if you do your homework.

I am a collector first, investor second. I can only think of one knife I purchased specifically to profit. It's not like one has to choose whether to be a collector or investor.

As I said earlier in this thread, the best collecting philosophy IMO is that which brings the individual collector the most satisfaction.
However, it bothers me when collectors who do not make the effort or take the time to successfully invest in custom knives make blanket statements that they are bad investments.

Kevin, I agree with and follow your philosophy, i.e., "... the best collecting philosophy IMO is that which brings the individual collector the most satisfaction." I have, as you know, a few years seniority over you and, hopefully, will not be forced to sell my collection. If I implied previously that investing in custom knives is always a bad investment, that was not my intent. I should have, and believe I did say, that custom knives are a risky investment and the higher priced they are, the more exposure the collector has. That said, there is the old cliche, there are few things assured in life other than death and taxes (and I look forward to neither).

Paul

 

[Sidehill Gouger]

Take Loveless, Moran and a couple of others out of the equation. Find a copy of "A Guide to Handmade Knives, The Official Directory of the Knifemakers Guild" by Mel Tappan copyright 1977. See how many of the makers listed you have even heard of, let alone are willing to buy examples of as an investment today.

Making money on custom knives is best done as a short term investment. In the long term only a very rare few will provide a real return. Most makers will be totally forgotten in 30 years.

 

[blad5]

Take Loveless, Moran and a couple of others out of the equation. Find a copy of "A Guide to Handmade Knives, The Official Directory of the Knifemakers Guild" by Mel Tappan copyright 1977. See how many of the makers listed you have even heard, let alone are willing to buy examples of as an investment today.

Making money on custom knives is best done as a short term investment. In the long term only a very rare few will provide a real return. Most makers will be totally forgotten in 30 years.

Agree.

Paul

 

[Les Robertson]

Because you can buy a $2000 knife and make the same 15% ROI and realize a lot more in your pocket.

Of course if you sell 5 $400 knives you have the same amount of money in your pocket.

A couple of truisms about collectibles:

1) There are more people who have $400 in their pocket to spend than there are those who have $2,000.

2) It takes years for most custom knife collectors to develop the knife "intelligence" ...whether they have the disposable income or not....to feel comfortable spending that money.

3) It is much more difficult to replace that $2,000 knife.