Exploding knife market?!

Hi Joss,

I would prefer not to say which market. I don't have the time to devote to all those who will tell me I don't know what I am talking about.

Its not Don Fogg :D

WWG
 
WoodWorkGhost said:
Hi Kevin,

Most high end custom knife buyers have a position in the stock market. If they were wiped out in an afternoon, how long do you think it would take for the high end collectibles markets to be wiped out. Remember Interframes in 1991.

WWG
Professional Prognosticator!!!
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That's a good point. Market dives, the high end buyers are initially selling collectables to cover. But then they buy gold, collectables/tangibles etc, to hold until the market recovers.

I don't think the high end custom buyers are driving this market?

Someone in a very good Blade article about collector trends a couple years ago (possibly you) stated there were less than 700 collectors worldwide that purchased knives over $2000. So you have to wonder how much impact they have on the market.
A relatively small worldwide number compared to the knife buying public.
 
Hi Kevin,

Actually it only takes 2 buyers. Case in point, Ken Onion. His knives were driven to the prices they got to in the aftermarket by basically two collectors. This of course fed the desire to get an Onion. Ken kept his prices fair and except for his early shows had a drawing and/or an auction. While Ken's knives are still highly sought after the days of Quadruple in mere minutes is gone. This in no way, shape or form reflects on Ken or his knives. It is the volatility of the market.

One of these gentlemen shifted his interest to another maker and interest in his work has risen. That makers work has now "softened" in the aftermarket...not for the maker but for those who were asking triple or quadruple. I was discussing this with a client the other day and he laughed and said "now you can only get 2 - 2 1/2 times your money in five minutes.

Subsequently he has moved into a new level of the folder market. I have no doubt this was driving some of Don's recent sale.

It is collectors like this who help all makers (whether they realize it or not). Similar to Tiger Woods on the PGA tour. As his "appearance fees" and endorsement deals go ever higher, all the other golfers benefit from this.

So it is always good for someone to lead the way. Take Jerry Fisk. If he wasn't leading the way on the ABS side of the house do you really think some of these makers would be getting the money they do? The answer is no. If it weren't for Jerry Fisk the ABS would 5-10 years behind where it is right now.

Look at the slipjoint folder, if it weren't for the money Tony Bose knives and to an extent Eugene Shadly get for their knives. Do you really think the makers in 5th and 6th position would be getting the money they do?

Someone emailed me and asked me about "artificial inflation". This comes in two forms.

1) Makers who become in demand but only make 8 -10 knives year. It is much simpler to find a collector who will pay an over inflated price just to get one. However, as soon as that makers starts producing 40 knives a year that price will never be realized again.

2) A new wealthy investor steps into custom knives and is told "These are the ones to get". Subsequently, they pay an inflated price for the knife".

Case in point...Damascus Auto Folders in the mid-90's. Several of those makers asked me to represent them. When I explained how I would manage the market. They laughed and said "our prices have gone up 300% last year". My question was "how many years do you think you can keep that up"?

That market imploded. One maker made it out ok, but you seldom hear of him any more.

Prices can only go up so fast without negative consequences.

WWG
 
I am curious with as much as one can make " flipping" a knife on the secondary , after scoring it in a lottery at a show , or from a maker with a long wait list , and there being buyers waiting in the wings to buy it , how would it be percieved if makers rose their prices to slightly under those secondary prices ? Would the makers who did be looked upon as being $$$ hungry ?
I would rather see the maker get more for the knife than to see someone who happened to draw the lucky card in a lottery make 2 - 3x the purchase price.
I know its a bit off topic , but the opinions here are all great and I would be curious to how those in the know would percieve it to be viewed.

A friend whom isnt that much into knives that I took to a show , asked me " well if his knives sell for so much on the secondary , why doesnt he just raise his prices to just under the secondary ? " , and honestly I couldnt think of a reason why other than it would effect those who see them as investment pieces.
 
Hi John,

How can you make on a knife buy flipping it? Whatever the market will bear.

Why doesn't the maker raise his price to just under the "After market" price. Simple...Supply and Demand.

This is where the artificial inflation I talked about earlier comes in to play. A $500 knife being sold for $2,000 in the aftermarket happens primarily because there is not enough supply to fill the demand.

When the maker produces more the demand starts to get filled (after all only so many people want the knife). The demand lessens.

If the maker raised his prices to $1800 and $2,000 was the max anyone in custom knives would pay for his knife. What happens when there is enough supply for the demand.....Exactly the demand disappears.

The maker has two choices at that point.

Continue to try and sell a $500 for $1,800.00 or lower his prices. At which time he pisses off everyone who bought one from him at $1,800.00.

This is why Ken Onion, who could have easily raised his prices to $3,000 a knife and sold everything he made did not. He knew who the "players" were and if one or both left, his prices would come down in the after market...which they did.

However, Ken is still super hot...why? Because he had only a modest increase in his prices over the original prices before he got super hot. Very smart business man. Ken was also smart by creating many one of a kinds or very highly embellished knives. He kept his base prices where everyone could afford them and at the same time created works of art for those who were looking for that. A very difficult practice to implement.

John W. Smith has been very successful at this as well.

WWG
 
WoodWorkGhost said:
Hi Joss,

I would prefer not to say which market. I don't have the time to devote to all those who will tell me I don't know what I am talking about.

Its not Don Fogg :D

WWG
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This market segment wouldn't happen to include knives that make judicious use of paracord, would it? :D
 
The market can be funny. I scored a Jay Hendricksen hunter on the secondary market for the a bit less than what I paid Jay for a hunter at the Guild show in '05. Funny part was the one I got on EvilBay had a carved panel handle, wire inlay and a metal throat wood lined sheath, which would normally ad a bit of compared to my other one, which has relatively simple wire inlau, but just a plain leather pouch sheath with a concho. Around the same time, I scored a Jim Walker sheephorn handled cowboy bowie for around $325. Sometimes you just get a little bit lucky, other times you pay market.
 
WoodWorkGhost..thanks.
I spent quite a bit of time with Ken at SHOT 2006 , talking about the business side of things as I was just starting to make knives. I like the way he looks at things , you sound like you have the same views.

thanks again.
 
Hi JDM,

Has nothing to do with Paracord, bead blast finishes, etc. Not a knife or maker in the "tactical" market.

Lots of knives come up for sale below retail, multiple reasons for this. Usually because someone needs money...many times for another knife.

SThumbs,

Lee knives are a perfect example of what I am talking about. Limited production, high demand and at least one person willing to pay a very high premium for Lee's knife. However, I doubt that you will see Lee raise his price to $2,500 because of this sale. Lee has a unique style and some good ideas. Pricing his knives correctly will allow him to be in the business for as long as he wants.

Hi John,

Our views are similar because we both approach custom knives as a business.

WWG
 
I believe WWG is referring to the market for certain established, higher end stock removal makers who have, throughout the last 15 years or so, seen good, but tempered demand for their knives, but are now seeing explosive demand. S.R. Johnson, and certain other Loveless style makers. Certain folder makers, others....Loveless knives, while previously a "no brainer" investment if you found a solid deal on one, are also at a price level where the level of risk is something to give a lot of consideration to.

I think a lot of the ABS makers represent solid investments at this time. You won't be "flipping" too many of these, but solid long term. I used to invest pretty heavy in the aforementioned higher end stock removal makers. Demand was moderate, but not crazy and I felt that an S.R. Johnson chute or NY Special at $1200 was a solid investment. Yes, you could buy them all day long for that. Only a few years ago. I now see similar potential with certain ABS makers.

Pete
 
AV8R said:
I believe WWG is referring to the market for certain established, higher end stock removal makers who have, throughout the last 15 years or so, seen good, but tempered demand for their knives, but are now seeing explosive demand. S.R. Johnson, and certain other Loveless style makers. Certain folder makers, others....Loveless knives, while previously a "no brainer" investment if you found a solid deal on one, are also at a price level where the level of risk is something to give a lot of consideration to.

I think a lot of the ABS makers represent solid investments at this time. You won't be "flipping" too many of these, but solid long term. I used to invest pretty heavy in the aforementioned higher end stock removal makers. Demand was moderate, but not crazy and I felt that an S.R. Johnson chute or NY Special at $1200 was a solid investment. Yes, you could buy them all day long for that. Only a few years ago. I now see similar potential with certain ABS makers.

Pete
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I agree Pete.
 
you have a great collection. If you ever get tired of looking at your blade that Winkler accidentally poured all that copper into, let me know. I'll help you out.

Pete
 
Look at metals, gas, food, tools, materials and supplies etc... The cost of making knives has gone through the roof! ... Not to mention the expense of running a business.

The value of the dollar has gone down... :(
 
Hi Tai,

Excellent points. That address why knife makers have to charge what they do in the primary market. Not why so many collectors will pay the premiums they do in the after market.

When the dollar is soft in the US, that just means there are opportunities in other parts of the world. My overseas business is up 300% in the last 2 years.

WWG
 
I don't think it's uncommon for retailers to take a 40% percent commission or more, depending on whether the knife was consigned or bought outright. That means jacking the price way up. If you couple that with the rising costs of making the knives and selling them first hand,... you can see what happens.

Some collectors don't want to "order" knives. They want to see them first and then buy them "immediately". They don't want to wait or be surprised in a negative way with the outcome of an order. Perhaps the markup is worth it to them. I can’t really think of any other reason.

Also, even though the primary market and the secondary markets are separate entities,... they are connected and do influence each other.

It's a bit different than what happened in the late 80s and early 90s. At that point, we had reached a certain plateau. If we go back to the seventies, the whole custom knife phenomenon in the U.S. was still relatively new, and the push was to sell more knives for more money. The market got over inflated and a lot of guys had to drop out of it.

Now days all we can do is hope to keep up with things the way they are. It's just a sign of the times we live in.
 
Here's one more thought...

Most knifemakers who have been in it as long as I have, go through changes in style, design, technique etc... We don't make the same knives today as we did back in the 80s, and have stopped taking orders on them. These older works can show up on the secondary markets and there are collectors competing for them. It seems somewhat odd that some collectors actually prefer the older works,... but it happens quite often.
 
Tai Goo said:
It seems somewhat odd that some collectors actually prefer the older works,... but it happens quite often.
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The maker is learning and improving from his or her adventure and the collector may seek a knife that carries memories of the good, old days.
 
thombrogan said:
The maker is learning and improving from his or her adventure and the collector may seek a knife that carries memories of the good, old days.
Click to expand...

That's right!

The maker was as sincere yesterday as he is today. Only now, he is older and has a history. :)

It doesn't happen overnight! What we see now, is a result of things that went on a long time ago. The modern custom knife industry was not always the "monster" it is today.

I think it will just keep growing the way it is, for quite a while...
There's always going to be money, somewhere, and guys who really like knives! :)
 
Hi Tai,

A couple points to clarify.

First, I can only speak for myself. I do not have a 40% mark up. In fact 95% of my knives are sold at the makers price.

Second, as for consignment I charge 20%. However it is common place for 25% to be charged.

The primary and after market are definetly linked. However, up until a couple of years ago when I was making posts about the after market will have an effect on the primary market. Few if any makers paid attention to it. Except for those who encouraged dealers to sell their knives for inflated prices. This of course paved the way for those makers to raise their prices. I was recently asked to do the same thing by a maker.

In some cases extremely high premiums are being asked for and gotten. While it may not be a prudent investment move to basically eliminate all potential ROI at the point of purchase. I have never seen a dealer hold a gun to a collectors head and force them to buy a knife.

Yes a plateau was reached in the 80's. As is the case so far in the 21st century. However, these plateaus are happening much faster as is the subsequent drop. It is the speed at which this happens is what keeps the rise and fall sometimes obscured to all but the most hard core collectors.

My posts are not geared towards the makers retail price, but the premiums in the after market. Your observation of increased fixed and variable costs to todays makers are spot on. This of course will increase the retail price.

As it is with all things it is up to the consumer to determine how to spend their money.

WWG
 
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