Custom Knives as investments?

Hi Dan,

Great little thesis on long term investment strategy. Suzy Orman is smiling at you right now. Of course compounding interest is a wonderful thing, so is the rule of 72 if you have the discipline to invest monthy and use the "dollar cost averaging" method.

Again, you nailed it right on the head. Invest in "real" investment vehichles. YOu know like those former employee's at Enron.

I bet they wish they had put their money in a collectible market...at least they would still have something.

Dan, obviously you are a very conservative investor. You prefer small, but constant growth over a more risky type investment.

That is fine for you. Noting that you did not answer my question about which knives you invested in. I will take it that you have never invested in custom knives. As such your opionion on this has limited value.

Please note for all of those reading this. I have never said using custom knives as an investment is easy.

I was interviewed for an article about buying custom knives for Blade Magazine last night. The interviewer made several statements. One of which was "custom knives are not good investments". When I told him I disagreed with that statement. he was surprised. Until I explained to him why.

Dan, if you don't know what you are doing then you are 100% correct, you should not invest in custom knives.

For every example of money you lost on a custom knife, I can give you 10 stories showing you how I made money on custom knives.

Dan I suspect you are employed by a company (like 95% of all Americans are). That pays you weekly or bi-weekly. As such you are left with only a certain amount of money to invest.

Lets say your income was based on how you did every day. If you don't get work...you don't get a dime. However, if you bust your butt several days a week you can make several thousand dollars in one day.

In my world there are no "sick" days. There are no "vacation" days. If I choose to be non-productive at work or take off half a day for "presonal" reasons...I do not get paid. In my world there is no "comp time". In short...you are paid on performance.

As of April 1st this year I will have been a full time custom knife dealer for 7 years. There is no other source of income.

Consequently, mine and my wife's retirement, my children's college education and all of our bill's are being funded by custom knives. ALL OF IT!

Now do I know more about the custom knife market than the average custom knife buyer? Yes.

Do I have a collection of knives? Yes

Could I turn these knives for a healthy profit in less than 30 day? Yes, to every single one of the 25 knives I have in my collection. Each of these knives will have a several 100% retun on my investment in them.

Do I have other investment vehicles...yes. A balanced portfolio is the sign of an intelligent investor. In addition to my knives I have other collectibles in that group. To include, coins, guns and toys.

Most things in life give you no return on investment. Look around your house. What in it could you sell for more than you paid for it right now? What about your cars, maybe you have a boat. All of it money spent that you will little if any hope of recouping close to your costs.

However, if you were given the chance to invest in something that you would both enjoy and had a chance to not only get your money back....but make money. You can honestly tell me that you would not be interested in that??

Talk about preaching! :D

Yes, custom knives can be an investment.

Yes you can make money with custom knives.

Yes, it will take time, effort and money on your part to do so.

If the custom knives you are buying are not holding or going up in value then you are buying the wrong knives.

You are buying with your emotions instead of your experience and intelect.

If you are buying knives and you could not care less if you made money or lost money. That is fine.

But please do not turn around and then tell people that custom knives are a poor investment.

Buy what you like...but understand if you choose to do so you can make money with your custom knives.
 
With the proper knowledge in the field you could find good investments in any category. I don’t think this is a controversial idea.
 
Les, you are a little off base. Actually pretty poor guesses on the nature of my employment and how I am paid. I'll give you a hint...look at my profession.

I have a portfolio that is very aggressive. However, I spread my risk by buying a broad portfolio. Still doing pretty darn well even with the last 12 mos factored in. Nope, really have not lost money on knives...my objections to knives as an investment are based on intellectual reasons (and no I have never read Suzy Ormond). Hmmm you postulate that I don't have "much money to invest".....ha ha ha. The average collectible investor is usually the one with limited funds to invest, that is why they invest in such things...look into it.

You are right though about single stock investments like Enron, they carry a significant element of risk and most financial advisors recommend not buying your own's companies stock. The reason so many companies offer such programs is that there are tax advantages to do so and they feel it increases loyalty and productivity. Most employees participate because it is either their only option or the company adds a match. Everyone likes "free money." Please note, people who buy individual stocks have portfolios that usually underperform the market by a third.

Les you are a retailer and a successful one. It is an honorable profession and there is nothing to be ashamed of there. Just because you have success being a retailer does not extrapolate to the validity of collectibles being good investments.

You will say that your inventory is your "investment" but that is true only in the simplest of senses. All retailers carry inventory but that does not mean they are considered to be "investments" unless they are held for a period of time and kept out of the regular retail stock.

Les, when you receive a knife from a "hot" maker do you put it up for a sale on your website or do you hold it for 1+ mos in hopes of receiving a "5-100%" or more return. Heck why not hold it for 6 or even 18 months and make 400%?

If not, why not?

You say you have only 25 knives or so in your own collection and could make many hundreds of percent in return...why so few if such fabulous returns can be made? Heck I would have a hundred or even a thousand put away with that kind of return. You say you invest in other collectibles because it is intelligent to have a balanced portfolio. Do they all have such high rates of return? Why would you need to hedge when there are "sure things" with 5-100% returns in only 30 days.....?

Why, because it is not possible to repeatedly and consistantly do so. Especially not on a scale to generate any significant income. Note that I am not referring to income generated from operating a retail business, but from buying at or near retail/makers price (and not at a retailers discount), holding, and then reselling knives for profit not forgetting to factor in sales expenses (postage, retail fees/commision, and any pertinant travel expenses).

Sure, people can and have made money buying and selling most everything under the sun. Les, you are right in that there are certain things one should consider if one wants to maximize resale. There are always bargains to be found.

There are a select few who make a good living at selling collectibles but the exception does not make the rule. There are no surefire systems. Doing it for fun is one thing but relying on such schemes for financial security is foolhardy.

The average American is broke and lives paycheck to paycheck. Lets not exclude our northern neighbors, did you know the average net worth of a non homeowning Canadian is less than $5000C?.

Buy knives for fun, if you are primarily interested in financial gain you can consider Les' method, just do it with discretionary funds that you will not need to rely on in the future.

And most of all don't take financial advice from broke people (like your average "investment advisor")
 
Jerry, how much life insurance do you have?

The real person to ask is your wife!!!! :p :p :p
 
EXCUSE ME GENTLEMAN, BUT;

Then there are the FEW. The makers who climb to the top. The ones who MADE it. Like a sperm, if you will. Maybe by Divine, luck, fate, hard work, who knows why the SELECT few make it. They do the right things at yhe right time for a majority of the collectors to agree they(the MAKER) are VALUABLE. If one of their knives goes up in value, they all go up. Like a painting.

THESE knives require a premium to possess. People want to have the best. They want the rare. They want to aquire something SPECIAL, something no one else has. It's human nature. That is where the RETURN on the INVESTMENT comes in. Not everyone will sell at the same time. Some never will. This keeps the prices rising. You also have to realize there will be many other collectors in the future. Some will have the desire and the means to want the BEST.(BEST being who the majority says they are) I have driven myself crazy trying to figure out why Picassos are worth so much. Well, people talked, people bought, he didn't paint enough for everyone to have one, now everyone wants one because they don't have one, SO the price goes up. Collecting and investing simultaneously? I think so.

Anthony, you gave a great list of do'es and don'ts. I hope people will take heed to your list and quit THROWING their money away.

This should drive it on home,

How many of you will sell your mint Fisk knives that you bought 5-10 years ago for the exact price you paid for them then? How many will commit to sell your Fitch knives your buying now for the exact amount your paying, in 5-10 years? I THOUGHT SO!
*******************************************************************

I will add here that this is why QUALITY is so IMPORTANT. The more SPECIAL a piece, the more it cost up front. In return it will be more sought after or desired because of this RARITY. Hence, a greater return potential. Buy from the BEST makers, Buy their BEST knives you can afford, RUN FROM THE REST! If you ever hope to make anything in collecting knives. Again ,just MY opinion.

Darby Neaves;)
 
Hi Dan,

I understand where you are coming from.

I think if your going to "advise" people how to spend or invest their money. You should give them your custom knife investment background.

The funny thing is that if you were looking at some "undervalued" mid-cap or an impressive looking new Municipal Bond. Then you found out the person recommending these to you had only experience in Large Caps and no Bond experience. You would back away quicker than if you just leaned against a hot stove.

Since you have yet to tell us what your investment back ground is in regards to custom knives. You can proabably undertand why people are backing away as if they leaned against a hot stove.

Ok, you asked me several questions about buying and selling custom knives. I'll try to do this in a concise manner. ;)

My buy/sell/hold strategy concerning custom knives is driven largely by two things, finite captial and the "cost of money".
The cost of money for me has two schools of thought:

1) Quick Nickel

2) Slow Dime (or Quarter on occasion).

Ususally the best mix is somewhere in between.

If you have a little invested, you can usually wait it out (slow dime).

Depending on your investment strategy, being more "fluid" may be the dynamic that fuels your portfolio. As such you would want the "quick nickel".

Those who can stand it may welcome a great ROI, possible with a little more "risk" involved.

As with most investments most times it comes down to just what amount of "Risk Aversion" you possess.

The amount of risk you are willing to take redgarding custom knives is probably far less than mine.

Consequently, you view these as too risky and look for an investment that gives you a little more of a "warm fuzzy". Nothing wrong with that. At your age you should be looking at reducing your risk.

Where as you think they are a "joke" as an investment. Obviously, I disagree and feel they can be an exceptional investment.

But you have to do your homework.

Well Im going to leave for now to go see if I can find two nickles to rub together :D

Im so broke I can't pay attention.

Jerry, if it turns out that you are going to be worth more dead than alive...I would like to pre-order your last 5 knives.

Darby....Im on your side!
 
Originally posted by Les Robertson
The funny thing is that if you were looking at some "undervalued" mid-cap or an impressive looking new Municipal Bond. Then you found out the person recommending these to you had only experience in Large Caps and no Bond experience. You would back away quicker than if you just leaned against a hot stove.
Click to expand...

And if you found out that the person has a vested interest in promoting the field he was in you might just do the same. ;)

Always consider the source of any advice, wouldn't you agree?
 
ST James,

I believe if you go back an check this thread you will find that not once did I say that you should only buy your knives from me ;) So you lose points there.

However, I agree with you 100%. You should back away from anyone selling anything they they don't stand behind 100%.

I have been told by others that there are actually custom knife dealers out there that will not give you 100% of what you paid for knife in trade for another that they sell.

Why wouldn't they offer a 100% money back guarantee? Maybe those were the people Dan was talking about.

I agree with Dan and everyone else here that custom knives should not replace your 401K, IRA's, SEP's, etc as your main retirement vehichle.

However, I will disagree with anyone that says you cannot make money with custom knives.
 
Originally posted by Les Robertson
ST James,

I believe if you go back an check this thread you will find that not once did I say that you should only buy your knives from me ;) So you lose points there...

However, I will disagree with anyone that says you cannot make money with custom knives.
Click to expand...

Les, aren't you living proof that you can? Once you find those two nickles, that is ;)
 
I do not wish to dilute your discussion, many good thoughts have been discussed in this thread. There is however another part to our investements that need to be mentioned. When we buy a knife from a new or established maker, the investement goes both ways. We invest in the maker, providing him or her encouragement as well as funds to continue their contribution to the world of knvies thus insuring the future of an art that provides all a nice place to be. Those we encourage will be the future.
 
A curious set of responses Les.

You seem to rely heavily on experiential learning to support your views. In fact by your consistent refrain of "tell us what knives you have invested in" it would appear that you would reject opposing views that are not based on personal investment experience in the very small field of custom knives. You infer that one should not "advise" (quotes are yours) without relating custom knife "investment experience" (quotes are mine).

To do so is very limited thinking and rejects incorporating the well-known history of the collectible markets in general and prudent economic thinking into a realistic and comprehensive investing plan. You state you have an MBA as one of your qualifications on your website, I am curious where it is from as you espouse a plan radically different from that seen from many B-school grads.

By the same token we could apply the same rationale to your oft-stated opinions of “tactical knives” and their actual relevance. Does one have to have actual combat experience to have a legitimate opinion on what makes a good combat knife? As you have taken others to task for not having “military or LEO experience” is it fair to ask you Les if you have any actual combat experience? Have you earned a Combat Infantryman’s Badge or received any combat decorations? This is not to denigrate anyone’s service to their country but I find these forums filled with folks who have strong opinions about the validity of this combat knife or that one using only non-combat experience as their guide. This is a fair question by your line of reasoning.

When one examines the history of collectible markets like sports memorabilia, beanie baby, and even "high art" like Van Gogh paintings you will see rapid rises followed by significant falls. Even the long-standing coin and stamp markets have never reattained the heights of past decades (those sectors have other problems as well). Many people who espouse investing in these markets often relate the same mantra that with enough specialized knowledge you too can become wealthy, unlike all those other folks who have failed to do so.

I am not convinced that custom knives are immune from this and that the long-term performance of this market will be any different from the others. That is why I post my objections to knives as an investment. Interposing Enron into the equation does not support the validity of your view but only supports the well known risk of heavily investing in a single stock and has no impact on my assertion that investing in the equity markets via mutual funds is a superior form of investing both in relation to risk AND return.

The vast majority of people who have invested in mutual funds (and broad portfolios of stock) over the last 70 years have made money and a great many have become wealthy doing so. There is risk of course and no guarantees of what the future will bring but I prefer a long-term track record to anecdotes.

It is my assertion that the majority of people who invest in collectibles end up not making much money with a substantial portion losing money. Very few have become wealthy. Most of those who have done well in the collectible markets in my experience are those that deal in the goods or sell advice/ books. Nothing wrong with that but seldom does the “regular investor” or even the “well-educated” one do so well.

I am not selling anything and I do not financially benefit from the sale of custom knives or any other financial product. It was not my intention to infer anyone here was "broke", but most people selling highly specialized financial advice are usually not too wealthy themselves. Les, I apologize if you took umbrage to that statement, I have no knowledge of your personal finances and quite honestly do not care to know. If you become a multi-millionaire you can gloat all you want and I hope you will be able to do so. Just keep in mind if you post “investment advice” in an area where you directly benefit if people follow that advice (and a dealer who posts about the tremendous investment potential of buying an item HE SELLS is hoping to benefit from that) there will be many here who will critique such statements

Look folks, you can make a few bucks here and there, but keep in mind you are just as likely to lose some. History tells us that. Don’t follow my example though and use and enjoy your knives as that really decreases their financial value. I “appreciate” them more though.

On the other hand if you can convince your spouse that buying knives is an “investment” and not just a fun hobby more power to you.

Say maybe it isn’t such a bad idea after all
 
Hi Dan,

My response was sounding like an infomercial for Robertson's Custom Cutlery.

So to keep from boring everyone I sent you a private email.
 
I think part of the discussion stems from what an investment is, or not. As far as I am concerned, an investment is something that, in order of priority:

a) Has a specific horizon - life - and a specific goal.
b) Minimize the risk of loosing the capital invested over the life of the investment, for any cause;
c) Guarantees a given minimum return above and over inflation, based on either contract clauses or empirical research;
d) Can be liquidated within a week at expiration of the horizon, without sacrificing (a), (b), or (c);
e) Doesn't require more than minimal maintenance;
f) Doesn't give you other satisfaction than financial returns (else, those are going to skew your perspective eventually).

I.e., in my mind an investment cannot be disposable money. You're counting on your invested $$$ to pay for college, a house, retirement, etc. Also, it is something you shouldn't have to combine with your full time job or do as a hobby - obviously, any good work you invest in a venture will increase potential returns, but then the field is not the same for everyone. If you're gambling with stocks - which everyone buying individual stock is doing - you're not investing, you're having fun (or you're a fool to think you can beat the market on a risk adjusted basis.)

For me, the only real investment is a diversified index fund, period. Those can be bonds for shorter horizon, or stocks for longer horizon, and they can be US focused or international, depending on your horizon and your profile (if like me you're a European living in the US, it's a good idea to also invest in European fund.)

Many people do weird things when it comes to investing. I have a good friend who consistently bought stock of the company for whom he works, which is of course a terrible idea: he already has his job at stake, and now he's got much of his savings. Bad idea: if the company fails - which happens all the time without Enron-like scandals - he looses both his job and his savings. The fact that some people are succesful at doing something doesn't make it a good idea. At the end of the day, numbers catch up with you.

Here is a "snif" test for investing: each time you're considering putting some money somewhere - knives, stock, a house, whatever - ask you this question: "if I had a newborn child and was looking for somewhere to invest for his / her college, could I argue with a straight face that this is an appropriate use of the money?"

Another thing most people don't do - and empirical research has proved that most people are poor judges on this - is to work a worst case scenario. Things like "what if the house burns down, I get a long expensive desease, and a divorce. Will my kid's college fund still be safe?"

Finally, the "enjoyment" aspect is a critical one. When you talk about "investing" in knives, would you still do it if you don't get to enjoy the knives? Say, you get to see them, you buy them, and then they go in a vault somewhere, and you don't get to see them ever till the point when they're sold. Now, those are exactly the same knives you'd buy for pleasure, only now the only thing you get out of it is the financial returns, without the pleasure. Would you still put your money in knives?

Again, I think it all depends on what you mean by investing. I don't claim to have the perfect definition, but it works for me. And based on that, I don't see how I could "invest" in knives (or wine, paintings, trips to go gambling in Las Vegas,...) All those might be appealing, rewarding, etc, but I wouldn't count on those to fund my kid's college.

JD
 
I would not hold your breath on your investment moving up in value enough to line your pockets. Some will sure, but the main thing better be if you like the knife or not. There is a very limited pool of people who collect, and they have very specific tastes. That said the real danger is you will be buying knives that will appreciate fast, not knives that you just plain like. Maybe thats what you want to do. Les says knives are a good investment. Maybe for him. He may be a master of the market. But as I see it the market is too small. If you buy a 1000 dollar knife and it goes up 300 percent, you have 3000 dollars. Great, big deal, you have to pull that off times 10 to buy a car. Where as to seriously "invest" you need to be talking about tens of thousands of dollars if not hundreds of thousands, at a more modest 12-15 percent average over 20-30 years. Then you will serious money. Not chump change. Also since your money is in knives, not figures that exist in accounts on computers, what happens if you have a massive flood or fire or theft or storm. Insurance on such a collection will eat you alive. Nope, you show me the first knife collector millionare that made it on his collection, not running a business selling knives every day, and I will show you thousands that made it by investing in paper. As for Enron, well thats a case of putting all ones eggs in one basket. Beats me what that has to do with it. In the end please yourself. Room for everybody in this world.
 
Hi Joss,

To me an investment is something that provides you with a "positive" (meaning you make money) return.

Your statement of: "For me, the only real investment is a diversified index fund, period."

This is "it" for you because you feel comfortable with this type of investment. I suspect you fall in the middle maybe even a little on the high side of aversion to risk. So you have chosen a conservative investment with a specific goal in mind. Makes very good sense.

Question, would you be willing to invest $32,000 in an established corporation. Who has developed a new (to the industry) production process. When 90% and above of industry "analysist's" would tell you that company has a 100% failure probablitly? However, should this process work you could see an annual return of 40%? A 100% ROI in less than 3 years.

Regarding your "very strong statment". I think you would agree were you to make that statement in a forum that was comprised mostly of brokers, financial planners and other investment advisors. You would be "flamed" from several different sides.

Why, because everybody has their opinion of what is best. As long as the investment vehicle meets your needs and expectations, then it is the right one for you.

However, we are discussing why custom knives are good investments.

I realize I am in the minority. Like you I feel comfortable with my investments. One of my investments just happens to be custom knives.

For my part I can only go on my experience. Which shows me daily that there are incredible investment opportunities out there. Both short and long term.

I have noted in this thread that most people are looking at investments Long Term. That is of course traditional "inside the box" investment thinking.

Nothing wrong with short term investments either. Some refer to these as "money movement" stratgies.

As Phil wrote earlier; no matter whether you feel custom knives are or are not an ivestment....you are correct.
 
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