Custom knives and stocks: Predictions

Happy Camper

Happy Camper

Joined
Jan 8, 2000
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311
The "Bang for the Buck" thread has grown overly long, so rather than add to it, I thought I'd take a slightly different (more specific) slant on one of its facets.

Martin j had stated exactly what I was thinking in that predicting which relatively unknown makers will be in demand is rather like predicting stocks. Sure, there are specialists (dealers) who have experience, instinct, and judgement to make more educated guesses, but it's still a guess involving the prediction of human reaction to reality. The more of a sure thing it is, the less of a dramatic discount (or profit) is realized.

It's like the popular advertisement slogan "best known secret." There is no such thing!

There's no substitute for doing your own homework, and in the end you buy the knife that meets your specific goals. If you're a dealer, that means one you can turn over at a profit. If you're an end user or collector, it can mean vastly different things for each person.

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edited for brevity
 
One thing that is for sure, I have gotten much better over the last couple of years at predicting which new makers knives will be in demand in the not too distant future. I do this more to see if I can than because it matters to me. My knives are not purchased with any thoughts as to how much they will be worth in the future.

I am in full agreement that you must do your homework when it comes to the knives you are going to get and the makers you are going to get them from. With the internet it has become so much easier to do this. Web sites, forums and email have made researching knives and makers simpler. That is not always the case though. Lot's of makers do not have web sites and are pretty well unknown outside of a very small group of people. Researching knives by these makers can still be very difficult.
 
I think the analogy to stocks is over-reaching. The flow of information in the stockmarket, along with the extremely heavy influence that the general economic factors puts on stock prices make it a much different animal than the knife market. Custom knives trade very much like the pre-depression stock market did, when rumor, inuendo, cornering, and lack of information conspired to inflate and deflate prices, and absolutely no degree of restraint existed to check dealers of such activity. Just as that benighted time, there were fair and false players in the markets. Les's "do your homework" is in fact the first real step in eliminating this state of affairs, and he is rightly commended for it.

The only purely honest and, in the long run, successful strategy ever pronounced for buying knives is: "Buy what you like".
 
Guys,

Obviously I agree with JB that it is important to do your homework. I also agree that you cannot liken custom knives to stocks.

However, you can implement some of the same "strategies" when putting your "portfolio" together.

As for "buying what you like", of course this is the number 1 rule that many utilize.

There is a problem with this and this is why the "Bang for the Buck/ Up and Coming makers" threads go awry.

The majority of people who post a makers name or a particular knife do so because the "buy what they like". Unfortunatley, just liking a knife or a maker does not qualify or quantify the reason(s) someone may or may not be a BFTB or U&C maker.

Talent/Ability are only part of the equation for BFTB and U&C makers. There are several other variables. Each depending on the totality of the market and specifically the market sector the maker is working in. Will receive different values (scores) in the equation.

Quick example: New maker A, is doing what many feel is exceptional work for the money. This maker's next project is going to feature either a Wharncliffe blade, Re-Curve blade or a Up-Swept semi-Persian (futuristic) type blade.

Which blade style should this maker choose and why?

Note the answer is not as simple as you would think. Other variables will affect this blade style.

Your answer will show you what market you like the best. This will also show you how you personally "Skew" the information you put into your knife buying "equation".
 
"Buy what you like" - only comes with time, and after having made many errors...
 
It is definitely true that most people put their own personal biases into any recommendation that they make. That is only to be expected, because you are most likely to recommend something that you have had experience with and you are most likely to have had experience with something you chose because of your personal biases.

When it comes to advice on which makers are BFTB and U&C I will not even give advice as to which ones knives will be most likely to increase in value. This is because, unlike Les, I have not spent countless hours fine tuning my ability to recognize the signs. My advice would be nothing more than an opinion and therefore might do more harm than good.

On the other hand, if I am asked for advice on how well one of these makers knives performs and I have had the apportunity to use one of his/her knives, I will be more than happy to pass on whatever information I can.
 
Keith,

Well said.

Greg,

Your right there "ain't no crystal ball".

So I don't rely on guessing and chance. I rely on my experience and my personal "equation".

Obviously, a full time custom knife dealer like myself has an advantage over even a very seasoned custom knife collector.

This advantage stems from looking past just the knife and/or the maker. The advantage is found in being able to encompass the totality of the market.

This is important because much like differnt knife styles will ebb and flow through the custom knife market.

The collectors experience will increase, this will cause their collection to ebb and flow.

The knife you buy today, 5 years from now will be the expendable piece from you collection,

What makes this knife expendable is that the collector has improved, yet the knife has not. Note I said the "knife" not the knife maker. As such flaws that were not apparent 5 years ago, now have become visible.

While you may still want to collect knives from that same collector. You will be looking to "upgrade" that makers representation in your collection.

Ok, back to the example:

Don't be shy, take a shot at the answer.
 
1. Learn to recognize quality workmanship and only buy quality.
2. Lean towards designs that have withstood the test of time. Fads are seldom a good bet in the long term.
3. Don't buy it if you don't like it. You will probably need to hold it for a considerable length of time to insure a profit. You don't want to find yourself asking "what in the hell was I thinking", every time you look at it.

There is one more. If you don't love knives, stick with the stock market.

Racer Roy

KNOWLEDGE THAT IS NOT SHARED IS LOST.
 
Hi Racer,

Good basic set of rules.

However, regarding #1. Most people do not take the time to learn what truly is quality for the money. I was guilty of this as well. When I first started buying knives I "bought what I liked". This strategy cost me thousands of $$$$$.

#3 "Don't buy it if you don't like it. You will probably need to hold it for a considerable length of time to insure a profit."

Here is an example of why that is false. I sold a Mike Snody neck knife to a client retail $200. He got it and a friend of his loved the knife. So he sold it to his friend for $225. His profit was $25 or 12 1/2%.

Two things, this profit occured in less than 24 hours upon receipt of the knife.

Second, he paid for the knife with a credit card, who's cycle had not ended yet.

As such he made the 12 1/2% and a very very small bit of interest on not only the $225 he received from his friend. But also the $200 he got to keep in the bank because he used a credit card. So for 10 - 30 days he got to draw addtional interest on $425.00 from his bank. While it won't be much, point is it is free money.

Also I suspect he saved the captial gains expense that a posiitve stock market transaction would incur.

I think too many people only view investment type knives as those that will make you 100% or more on your money.

Obviously, each collector has their ROI goal.

Sometimes contrarian strategies favored by investment guru's such as Warren Buffet can be very lucrative.

Note, the Forbes 400 richest in the US list was released last week. This was something I found very interesting. While the richest man in the world lost 11 Billion last year. Warren Buffet made 3 Billion during the same time frame.
 
I do not consider myself a knife collector, or gun collector, or really a collector of any type. Maybe I am, maybe I just don't qualify in my mind as a "value" collector.

My "collection" of both has occurred as a result of a deep love for both, dating back to some of my first memories of life. Why? I have no idea, beyond I always loved to hunt and scratching on stuff with sharp pointy blades.

While I have seen knife collections that were a very, very well thought out business combined with a passion, those "collections" were put together with the initial goal of either making money [net], or at least enough to keep the habit a self-sustaining one. A couple of collections were put together for different reasons, I guess.

Now, my two examples, both friends.

One hunting buddy has enough folding knives to probably fill as big a suitcase as you could handle. We were talking about the knives once, and he said he had picked them up here and there over the years as he travelled, from pawn shops to jobsites, to just meeting good fellas, finding out they made knives, and then buying a few. He said he never bought a knife to make money on, as he "never figured on selling any of them"...instead, just giving them away to friends and his sons and grandsons. To make a long story shorter, many months down the road he gave me a folder in thanks for some favor or other...guess he thought he was one behind?:) It was an early knife from a very hot folder-maker. Knowing what those were now worth, I declined the gift and asked him if he knew what those were worth? He had no clue, and pulled another one out of his pocket that had nearly been sharpened to nothing, and said he had a bunch of them from when the guy was starting out. In response to me telling him what they were selling for, all he said was "it sure is great to hear that he is doing so well, he is a good guy". Later, I asked if he had sold those knives and he just laughed, said no, "figure I will let the kids sort 'em out when I die". My point? He had what he had through some luck, no doubt, but also because he just liked what he liked [luck there too, I guess] AND liked the guys who made the knives. I guess by buying the knives he was in a way buying some good memories. It was not about money to him...and he is by no means a rich man.

The second example, an elderly man that just passed this past year or so that had "collected" CASE folders since he was a kid. His estate was not large, but he had a huge number of knives, and some well worn side-by-side shotguns and double rifles. He had told me about his double guns a few times, and really laughed at what they were selling for in used condition. He said he wouldn't sell them, they held too many good memories. He also added "if ya live long enough I guess even your junk becomes worth a mint".

What does this mean to this thread? No idea really, other than a thought toward buying what you like, using it as it was built to be used, and letting the cards fall where they will way on down the road. I love using my knives, and guns, and enjoy most of the memories their scars have given me.

Above, there was a reference or two to Warren Buffet. Interesting study, he is. Wealthy beyond imagination, but uses very little of it for himself. Read up on him...he is and always has been a "value" collector of companies. If the numbers did not work, he did not buy the companies or stock in the same. He took massive grief from shareholders in his company [Berkshire Hathaway] during the mid-90's when tech stocks seemed to double every day...he never bought into it because, he claims, he did not understand it. I figure it was his way of saying the numbers didn't add up. Good lessons to be found in the letters he has written to his shareholders, and in the annual reports, many of both are on the company website.

Good luck in your knife related collecting, don't forget to have fun with it!:)
 
Quick example: New maker A, is doing what many feel is exceptional work for the money. This maker's next project is going to feature either a Wharncliffe blade, Re-Curve blade or a Up-Swept semi-Persian (futuristic) type blade.

Which blade style should this maker choose and why?
Click to expand...

I'll bite. I think a recurve would show blade grinding talent without straying too far into an area that has a limited market. Persian's are limited to the art-knife lovers, and wharncliff's simply aren't as popular.

Coop (Rookie outlook... ;))
 
Congratulations Coop,

You at least attemepted to answer the question.

Now, here is some more food for thought.

Persians, only art knives?

What about the Walter Brend Model 5, Emerson Persian (Tac fixed blade) and the Al Polkowski Scorpion? All very popular tactical fixed blades. Also, Steve Ryan has done some pretty unusual tactical folders with "persian" style blades.

Wharncliffe's unpopular? Didn't you see the Mike Snody "Hybrid" in the current issue of Blades (whish I had a dozen). What about the Kit Carson M21?

The re-curve my personal favorite style of blade. However, can be tricky to grind and some collectors claim they have difficulty in sharpening it.

Coop, one other question. Did you have Maker A producing a folder or a fixed blade?

Note, the unpopularity of the Wharncliffe is, for the most part, a correct answer.

Coop, I would hazard to guess you are a very neat and organized person. Especially when it comes to your knives.
 
Les,
I'm a little confused as to why you think that the opportunity to make a quick $10 or $20 is investing? That sounds like purveying or dealing to me. And most dealers and purveyers that I know claim that you will go bankrupt wasting your time on less than a 25% or 30% margin and the ability to turn the money over 4-6 times a year. I suppose that $25 is a big deal if you are not trying to pay the light bill or buy groceries with it. Wheeling and dealing can be a lot of fun, but it not something I would recommend as a method of providing for your retirement or childrens college education.
You are correct that many collectors care about return on investment, but just as many couldn't care less. They do it because they love it.
Few who buy them care about the return on investment of a set of golf clubs, or a bass boat, or a good bird dog either.
My definition of an investment is something that will hopefully stay even with inflation, realize an annual appreciation in value over a period of time, and be reasonably liquid when I need to cash it in.
If you look at other areas of collectables (art, coins, antiques), the term "investment grade" usually pops up when there is a glut of inventory available for sale and a stable or shrinking buyer pool. It is primarily intended to draw people into the market for that product whose only motive is profit and who could care less about the vehicle.
I will now stand down from my soap box. :D Racer Roy

KNOWLEDGE THAT IS NOT SHARED IS LOST.
 
Originally posted by Les Robertson

Coop, I would hazard to guess you are a very neat and organized person. Especially when it comes to your knives.
Click to expand...

I've met Coop, and I'd be willing to bet he presses his socks. ;)

Not only that he happens to have excellent taste in knives. There are far too many people with little or no taste so that the only thing they can do is follow the herd. The other thing is that Coop is very active, not only on these boards and other forums, but at shows and an active knife club. Being involved and knowing the right people can lead you to opportunities that others just aren't going to hear about.

I'm lucky I've had the chance to become friends and tour knife shows with makers and long time collectors, who have introduced me to others and also let me see the knives through their eyes. An hour with the right person can save you lots of time and tons of money. That's another thing, you better have the cash when the right knives present themselves, and there are many.

I like and respect Les a lot. I think his advice is honest and right on target. Still, we're not all in his position as a dealer. Let me explain, Les knows who is hot and may even have helped make some makers knives a hot item. He has a client base of buyers looking for certain knives, and Les may have first chance to buy those knives , and get them at a discount. When he buys he's not buying to collect. but to flip ASAP so his risk is ZERO and his profit is built in. Most buyers wil take a loss on most of the knives they buy. Buy when it's hot and sell when it's cold and someone is going to end up sucking hind tit.

To answer Les's question, although I like a nice recurve a wharncliffe would be my choice. I don't have an upswept blade in my collection and there's none on my Wish List. Just shows you what I know.
 
Hi Phil,

I just read and re-read this...you didn't really write this did you?

"When he buys he's not buying to collect. but to flip ASAP so his risk is ZERO and his profit is built in."

Do you truly belive there is no risk in what I do. Surely you don't belive I have a buyer for every single knife I buy? What happens when I order 25 of each for some of my Vanguard knives.

Speaking of Vanguard knives, did you really think there was no risk investing over $30,000 up front in these knives?

My Risk is ZERO. Phil there is no business that has ZERO Risk.

If Risk is Zero for dealers, why do you see BIG NAME INTERNET DEALERS WITH...Sales and Bargain Basements on their web sites???

Now it's true I get a discount, you could get the same exact discount. You just have to step up and buy between 5 - 10 knives from the same maker at once. Five to 10 knives from the same maker all at once...Talk about taking a Risk!

You ever travel and set up at one of the New York Shows? Over $1,200 in upfront expenses and no guarantee you will sell a knife. Let me say that again, no guarantee you will sell a knife. Let alone the over $5,000 worth you need to sell just to break even...$5,000 worth, just to break even! No RISK?

What about that $20,000 - $40,000 in inventory. No Risk?

Phil, Buddy your killing me here!

Phil, I think you might want to re-think that No Risk statment. Hell, if there was no Risk, everyone would be a dealer!
:D

Phil, you are correct that being a knowlegeable dealer can help you reduce the risk. For not only the dealer, but their clients as well.

I hear tell that there is a dealer who will take back any knife he sells. Then give you what you paid for it in trade towards a more expensive knife. Thus allowing the collector to increase the value of their collection with minimal additional investment.

Phil perhaps there is a little confusion on your part. As it would seem that working with a dealer like that, it would be the collector and not the dealer who has no risk. I mean with a dealer like that, the worst you would ever do is break even.

If there was such a dealer as that. It would make you wonder why all the dealers don't have that same policy. Surely their clients collections would be their first priority! :)

Racer,

Racer you are appear to be a very concervative investor, nothing wrong with that. You have the textbook Investment definition. Yes, you want a long term investment, that produces a dividend every year that is at least equal to or beats inflation.

Racer, I would suggest to you that there are other very good investment strategies. If you get a chance read the book "Buffetology" by Warren Buffet.

This is why I recommend his book. I think you would agree that last year was one of the worst years in the market in recent memory. Bill Gates who no doubt has some of the top financial people in the world managing his portfolio lost...$11 Billion Dollars!

Warren Buffet made...$3 BILLION DOLLARS.

Racer, I have never said that knives are a substitiute for good solid long term investments. I would never recommend someone use strictly knives to fund their retirement or childrens college edcuation.

Just as I would not soley recommend only having one mutual or index fund, only one IRA, 1 stock or even 1 group of similar stocks (examples banks or utilities) or investing in only your company's stock in your 401K. Obviously, diversity is the key to successful investing.

The trick is to balance your portfolio. So no matter what at least something is making money. This of course is basic Investing 101. Nothing new here.

What I am submitting to the group is that you can make money with custom knives. No you do not have to be a dealer. Although, looking at the number of names on the BF Custom Knife For Sale forum, it would appear that many of our members are headed that way.

The reality of any investing is that you have to have the ability to recognize opportunity. There are opportunities to make money with custom knives. With some you can make a lot, other a little. However, the point is you are making money. Even if it is one dollar...isn't that better than losing one dollar?

Racer I can honestly tell you that I do not make 25% - 30% on every knife I sell.
One of the main keys to a successful business is Cash Flow. Sometimes, making $25 on a knife can keep the cash flowing.

Racer and Phil, both of you have interesting points of view.

Racer you seem to feel there is too much Risk in Custom Knives, Phil you think there is None!

Which just shows you that each person has to be comfortable with what they choose as an "investment". Much like with knives, buy what you like.

Ok, you guys have convinced me. I can't make money with custom knives, they are lousy investments.

So,I'm taking my series 6/63 exam next month and Im going to get a Securities License, then I'll get an Insurance License and become a Financial Planner. :D
 
Originally posted by Les Robertson

Speaking of Vanguard knives, did you really think there was no risk investing over $30,000 up front in these knives?

Now it's true I get a discount, you could get the same exact discount.
Click to expand...

Les, if you followed the basic business plan I spelt out, there would be no risk. Who the heck told you to stick your neck out with the Vanguard series? You must just like to live dangerously. :D

Les, I get a discount on just about every knife I buy, without buying 5-10 at a time. That has to do with knowing the right people. ;)
 
There are many theories on investing, about as many as there are financial planners, business news shows, and investors.

The word 'investment', or 'investing' standing alone, mean very little. You make a large financial 'investment' in your vehicle...but it is an investment of capital that, on the vast majority of vehicles that see daily use, will end with a complete loss of capital...or very nearly so. We make the trade with this investment because it gives us pleasure [we drive on vacations, ballgames, get away from the in-laws, whatever], and affords us an opportunity to range away from our home to work. Is buying a car an investment? Yes. Is it done to return on the capital invested? Yes, but not directly.

If you are using the words as meaning a use of your money that will allow that money to grow, at more than the rate of inflation, then you have to look at many, many things, including history, liquidity, the return you need (as pointed out by Les).

Here is an oddity. The S&P 500 stock index has shown an average return of about 14% since 1952. Does this information make Enron, Global Crossings, WorldCom, investors sleep better at night, or feel better about their losses? Not likely. But, despite this average return, the market timer has been routinely crushed by the markets. Why? Because bottoms and tops are extremely hard to read, or guess. Remember the pundits who said the market had bottomed a month or so ago? Look at what happened yesterday:)

Are custom knives a good investment? It depends entirely on how you define investment. No question there are some makers that, assuming for the argument, you could take delivery of his next / last 25 knives, from the maker himself...it would be a good move to bet your house and kid's college fund on it. That is almost a fantasy though, and doesn't apply well to the real world of what you can do, what you can get, and when. Do I consider selling a knife for $50 more than I paid for it a return on my investment? In the purest sense yes, but in the overall sense no more so than I consider finding a $50 while walking down a trail a return on my investment of deer hunting.

In order to really determine whether buying custom knives is a "good" investment strategy, you need to be able to pin historical figures down regarding the market as a whole. That is, taken as a whole, what is the average rate of return on knives bought from the maker and then sold, by non-dealers. My guess is, it will be impossible to quantify, as many if not all are cash transactions...and, of course, there is no reporting mechanism by which the same can be accurately charted.

Have lots more questions, but running short on time:)
 
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