Purchasing from lesser known makers

raker said:
Thanks, Joe.
But it is all relative as to what or how many people are aware that you make knives. Then, of that number, how many know you make good knives.
In my area, I am "real close" to the group that has no idea of what a hand made knife can do or the amount of work that went into it. I am trying to change that by going places that has a lot foot traffic of "under exposed" people and answering their questions. My wife was a nervous wreck after this week end of "don't touch that young un". The parents were almost as unaware that knives really are sharp. Next year I will put a sign on my table "Self Service, Shaves $5.00, Blood letting $20.00 (includes bandaid)".
It was almost that bad. I did sell a few knives and other objects of interest and had a great time talking to those that were interested.
I guess what I am trying to say is that of all the people that asked me if I knew "their knifemaker", there was only a couple that I knew. I also felt ignorant about not knowing them as knifemakers. To these people, they felt I should have known their maker. Since he had been making knives for so long in that area. It is relative to the person buying the knife or knives.
Most of the collectors here have people that they buy knives from and are looking for similar quality in the unknown makers. They also know who will probably buy the knife from them at some point in time. This is the "homework" that will keep it from being a losing proposition.
Joe, you just happen to travel to some of the same places I do. :) Looking forward to the 20th year one next April. I will be there and it is a "freebee".
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My schedule required me to miss some events this past year like the Spring Hammer-In at Washington and, believe it or not, the Guild show, which is only 90 miles from me. I hope to attend more events in 2008 because they are all very helpful. I'm issing Spirit of Steel, but thats OK, because i will be attending SICAC in Paris for one day
:D
 
When I talk of lesser known makers, I am referring to those makers that are not well known outside of certain circles. There are makers that are very well known to people on this forum that aren't known that much elsewhere. I don't think it's true that most collectors purchase knives made by lesser known knifemakers.
 
Hi Kevin,

Collectors buy to build a collection. Now they can also buy a knife because they think it has a chance to go up in value. That is still a collector.

The mantra of the collector: Piece, maker, price

The mantra for the investor is: Maker, price, what is my ROI.

The maker only comes into play due to a demand or perceived demand.

The price is much more important than the piece.

This is where the Arbitrage Lives!

I was at the auction this past Saturday in Chicago.

Every Loveless sold...every single one. Now how many of those people bought it to have it as part of their "collection"? Answer...none.

There were several Moran's, most sold below what they would have brought this time last year. Why? (this question is for you collectors out there).

A Moran folder was withdrawn as it did not meet the reserve.

The ABS knife that Bill Moran did the Damascus for (I believe his last piece of Damascus) was withdrawn as it did not meet the reserve. Lots of Big Time ABS Guys worked on that knife. The reserve was the price the knife sold for at the ABS Auction. Question for the ABS "Brain Trust". Kevin, Peter, Roger, Stephen, STeven, Danbo, et. al. Why didn't this knife even bring what it did a mere two years ago?

In fairness to Mr. Moran, there were a couple of Buster Warenski Daggers that sold for under retail.

Knives by Michale Walker...KILLED!

I bought one knife a Walter Brend 8 1/2" Model 2. What can I say Im a sucker for the Best Tactical Fixed blade ever made!

Personally, I think you best strategy is the one that Kevin, Roger, Peter, STeven, etc. employ. Be a collector with an eye towards a profit in the after market.

WWG
 
WoodWorkGhost said:
The mantra of the collector: Piece, maker, price

The mantra for the investor is: Maker, price, what is my ROI.

WWG
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With respect to the Guru, I would like to modify and elaborate on the mantras.

Collector mantra:

1. PIECE: You have to love the example, or at the very least like it a lot. Consider, at least slightly, what others may think of your new beauty. If you have poor taste in knives, plan on being $crewed by yourself.

2. MAKER: He has to have great skills and reputation, combined with a solid track record of excellent and improving work. Where does this maker stand in the market and in the minds of collectors. If you depend only on your own judgement, you may be $crewed by yourself.

3. PRICE: I may be in lust for this hottie, but if it doesn't work out, will you be able to part easily and as friends. If it doesn't, plan on being $crewed by your EX, because of your own bad judgement.

Investor mantra:

1. MAKER: Is there valuable brand recognition in this guy's name? Will it sell it$elf?

2. PRICE: Can I buy it right AND make a profit ea$ily?

3. ROI (return on investment): How quickly can I flip this sucker and repeat the proce$$?

Peter ;)
 
Peter,

Thanks for the help. Im a little "rusty" on the "Collector Mantra."

As for the Investor Mantra - probably best you clarified that for Collectors. :D

WWG
"Investing" in Custom Knives for 23 Years!
 
Hunter,

Come on now, surely you know what that Bend Looks like. :D

WWG,

Using a 8 1/2" Brend Model 2 for 21 Years!
 
Kevin Jones said:
One thing that has throughly amazed me since my participation on this forum is how so proud some are of proclaiming they do not buy knives for an INVESTMENT. Why is this?
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because collectibles tend to be poor investments. very few people actually make money "investing" in them.

who has reported a profit on their taxes from custom knives?

say just $10k a year for the last 3 years
 
The Chicago auction is a lesson in "interesting".

At that point my mindset shifted to buying what I like but only if it was a good investment. I was more than happy to make 10% on a knife. The point was I was making money, even if it was only $20 or $30 per knife. After a couple of years I was no longer using "my" money to buy knives.

I realize looking back that this took a plan and a lot of discipline to stick to it.
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Les, no truer words were ever spoken. I have purchased my collection based on this playbook and it has never let me down. I can also honestly say I have NEVER lost money on a handmade knife. Have I "broke even", sure. I have never lost a dime and my tax records will reflect a substantial profit in most cases :)
 
Bandaid,

I report the profit I make on the sale of custom knives every year.

Profit made on the sale of a custom knife has a max tax level of 35%.

The tax paid on a profit by a corporation is 15%.

So if you were a collector who started a knife business you could decrease your potential tax liability by up to 20%. As well you could deduct all knife buying expenses.

While most "collectors" do not include show expenses in the price of their purchases...a "investor/business" would. And they would deduct them from any profit made.

This would reduce what you have in a particular custom knife even more. To the point that even if you sold the knife for what you paid for it, you have the potential to make a profit.

Where as the collector would have even more invested in each knife (did you remember to include shipping for each knife you purchased)? To the point that even if they sold the knife for a 5% profit chances are they would still lose money (due to variable expenses figured in to the purchase of each knife, a little "cost" accounting).

Reading this I realize that the collector who became a business entity would reduce their tax liability and deduct expenses that a collector couldn't.

So a collector who started a business related to custom knives could really maximize their ROI!

Wow, what a good idea! Wish I had thought of that. :D

Almost any collectible has "investment" potential. The problem with collectors of those collectibles is that they are collectors and not investors.


WWG
 
Hi Anthony,

There you go. You took it seriously and didn't apply the Collector Mantra of "I buy what I like I don't care if I lose all of what I paid for it...After all I will never get rid of this knife" to every knife you bought.

Collectors collect, if they didn't there would be a lot fewer knife makers.

WWG
 
I would love to say that I have never lost money on a custom knife, but it simply would not be true.

I would however, be willing to say that I have never lost more than 10% on a custom knife, which when you are starting out is actually pretty darn good. In fact I would suggest to newer collectors that if you can hold your losses under 10% and learn from your mistakes, it is a relatively easy transition to breaking even, or even, dare I say, actually making 5-10%.

I have committed all the sins of collecting, so I can speak from experience regarding all the pitfalls. Some day, I might even start following more of my own advice. One thing that I am certain of, is that you will feel really good when you start breaking even.

I do have to give some credit, where credit is due. Three people are primarily responsible for jump starting my learning curve on custom knives, Dan Unger, STeven Garsson and Les Robertson. They have always gone out of their way to freely share their knowledge and experience, in order to teach a FNG, the difference between the gold nuggets and the rocks.

Occasionally, I have been smart enough to listen to them.

P
 
i value craftmanship , not the name . but i grew up working with my grandad and father who both making knives in the cold winters in our basement .

and spent alot of time at gun shows seeing new craftsman and sharing ideas on our next build ... there is alot of good homebrew knife makers out there with awsome quality .
 
Hi Peter,

Im in the same club. I have committed every collecting sin out there (multiple times). Until I had my head pulled out of my "4th Point of Contact" Airborne Speak for "Ass".

I was fortunate enough to run into Paul Basch. He went out of his way to help any and all who asked his advice.

I learned a lot from Paul both about knives and the knife business.

When I give advice all I am doing is what Paul taught me to do.

WWG
 
collectibles have a disadvantageous long term capital gain rate of 28% (unless the law has changed recently, has it?). short term i believe they are treated as regular income for both corporations and individuals. curiously collectible losses can not be reported by individuals, only the gains.

wwg you obviously have a c-corp if you pay a 15% tax rate , and that is only up to 50k only though. s corps appear to be still subject to the 28% rate.

dealers are exempt from that as their "gain" is regular business income

are you recommending folks form c-corps (and thus become dealers) in order to take advantage of preferential tax rates? they are not cheap to set up and add a level of complexity and expense to tax preperation.

of course you can deduct legitimate business expenses against business income.

however, the IRS has started scrutinizing returns from small businesses. i would be very careful what expenses you have the corporation pay and how you report income.

i am all for minimizing taxes but get really good professional advice before proceeding. avoid practitioners that charge a commission based on the amount of tax-savings.
 
Kevin Jones said:
One thing that has throughly amazed me since my participation on this forum is how so proud some are of proclaiming they do not buy knives for an INVESTMENT. Why is this?
:
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bandaidman said:
because collectibles tend to be poor investments. very few people actually make money "investing" in them.

who has reported a profit on their taxes from custom knives?

say just $10k a year for the last 3 years
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Sorry, but I will have to disagree.

You are probably right regarding collecting of nick-knacks or bennie baby type items, but IMO collectors of such items as stamps, coins, sports memorabilia, baseball cards, collector cars, collector motorcycles, artwork, porcelain, glassware, guns, rare books, antiques, vintage boats, old newspapers, old magazines, artifacts, relics, vintage airplanes, silverware and other fine collectible items consider appreciation of value a VERY important part of collecting and many do profit or see their collection/investments appreciate in value.

That's actually my point, as IMO many custom knife collectors seem to expect to loose money at some point when purchasing custom knives. I find this odd in comparison to other fine collectibles.

To your second point, I doubt there's many custom knife collectors that have kept good enough records on their purchases and sales to even know how much they have made or lost overall on their collections.
 
Hi Bandaidman,

Short Term Capital Gains can go up to 35%.

You are correct I do have an C Corp and that 50K you speak of is Profit. After taking IRC (Internal Revenue Code) approved deductions having less than 50K in profit sitting in the bank generally isn't a problem. Yes, a good CPA can help you with this.

Actually I am telling collectors to become a business...A LLC would probably best suit that.

Most people are very misinformed when it comes to the US Tax Code. The tax code changes every year so it is always best to check with a professional.

WWG
 
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