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Strange Things in the Precious Metals
Issue #531, July 17, 2018

Buying Years of Retirement
Issue #530, July 09, 2018

Rent-A-Kid for Retirement
Issue #529, July 02, 2018

The Dark Side of Student Loans
Issue #528, June 25, 2018

The Cost of Out-sourcing Convenience
Issue #527, June 18, 2018

Social Security: 66 or 70?
Issue #526, June 11, 2018

Student Loans: There’s (Unfortunately) a Lot More!
Issue #525, June 04, 2018

Co-signing a Note
Issue #524A, May 31, 2018

The Knight Frank Luxury Index and Collectables
Issue #524, May 28, 2018

The Importance of Diversification: The Myth of Diversification
Issue #523, May 21, 2018

How to Save Thousands on Your Food Bill
Issue #522, May 14, 2018

MoviePass and Other Things
Issue #521A, May 10, 2018

Degree Inflation, Long Training Periods, and “Certification”  Part III
Issue #521, May 07, 2018

Degree Inflation, Long Training Periods, and Certification” Part II of III
Issue #520, April 30, 2018

Follow-up on Several Things
Issue #519A, April 25, 2018

Degree Inflation, Long Training Periods, and “Certification”: Part I of II
Issue #519, April 23, 2018

The Kids Birthday Party Hustle
Issue #518A, April 18, 2018

A Pension Question: Part II of II
Issue #518, April 16, 2018

A Physician is an Executive
Issue #517A, April 11, 2018

A Pension Question: Part I of II
Issue #517, April 09, 2018

Is the Correction Over?
Issue #516A, April 05, 2018

Used Car Dealers, Student Loans, the Chinese, and Uncle George’s Rule
Issue #516, April 02, 2018

Starter Homes
Issue #515, March 26, 2018

Redecorating: Beware!
Issue #514, March 19, 2018

NASDAQ Closes at Record High
Issue #513, March 12, 2018

A 40% Chance
Issue #512, March 05, 2018

Several Things
Issue #511, February 27, 2018

Human Capital, Education and Wealth
Issue #510, February 19, 2018

Another Stock Market Update
Issue #509A, February 18, 2018

Some Thoughts on Savings
Issue #509, February 12, 2018

A Stock Market Upfate
Issue #508S, February 10, 2018

Who Can You Trust? Part II of II
Issue #508, February 05, 2018

The Christmas Decoration Pre-worn Jeans Hustle
Issue #Interim Bulletin #507A, February 03, 2018

2018 Outlook for Financial Markets
Issue #507, January 29, 2018

Who Can You Trust? Part I of II
Issue #506, January 22, 2018

Life Insurance Settlements
Issue #505, January 15, 2018

Commodities and Buying the Breakout
Issue #504, January 08, 2018

Buffett Wins His Bet
Issue #503A, January 04, 2018

Practice Real Estate and Free Agency
Issue #503, January 01, 2018

Outlook for 2018: Part III: Stocks and Bonds
Issue #502, December 25, 2017

My Outlook for 2018: Part Ii: Precious Metals
Issue #501A, December 21, 2017

Outlook for 2018: Hard Assets: Part I of III
Issue #501, December 18, 2017

More Thoughts on Bitcoin
Issue #500A, December 14, 2017

Fees and Good Relations with Bankers
Issue #500, December 11, 2017

Salvator Mundi
Issue #499A, December 07, 2017

Should You Rent or Own a Home?
Issue #499, December 04, 2017

A Gift Subscription
Issue #Interim Bulletin #498A, December 02, 2017

Stocks vs Real Estate: Asset Allocation: Part II of II
Issue #498, November 27, 2017

When Good Enough is Fine
Issue #497A, November 22, 2017

Stocks vs Real Estate: Asset Allocation. Part I of II
Issue #497, November 20, 2017

The Saudi Arrests and the Perils of Foreign Investing
Issue #496, November 13, 2017

Gambling and Las Vegas
Issue #495, November 06, 2017

Some Tips on Auto Insurance
Issue #494, October 31, 2017

Bitcoin and the Digital (Crypto) Currencies
Issue #493, October 23, 2017

The Coming Bear Market: Part II How to Prepare
Issue #492, October 16, 2017

Some Observations on Cemeteries
Issue #Interim Bulletin #491A, October 12, 2017

The Coming Bear Market: Part I: The Myth of Buy and Hold Forever
Issue #491, October 09, 2017

The Market makes New Highs
Issue #490, October 02, 2017

The Importance of a New High
Issue #489, September 25, 2017

A Little Insurance: Wealth, War and Wisdom
Issue #488, September 18, 2017

Some Observations
Issue #487, September 11, 2017

How to be Successful in Your Career
Issue #486A, September 07, 2017

How NOT to Buy a Home
Issue #486, September 04, 2017

This Week in the Market
Issue #485, August 28, 2017

Is the “Trump Bump” Running Out of Gas?
Issue #484, August 21, 2017

Gold is on the Move
Issue #483, August 14, 2017

The Importance of Estimation
Issue #482, August 07, 2017

Buying Art and Collecting: Part II of II
Issue #481, July 31, 2017

Buying Art and Collecting in General, Part I of II
Issue #480, July 24, 2017

Physicians need to be More Forceful: Follow-up
Issue #479, July 17, 2017

Physicians need to be More Forceful
Issue #478, July 10, 2017

Your First “Real” Investment
Issue #477, July 03, 2017

Leasing a Watch: Don’t
Issue #476, June 26, 2017

The Importance of Your Children having a Job
Issue #475, June 16, 2017

The Problem with Medical Student Debt is—the Med Schools
Issue #474, June 12, 2017

Critters and Varmints in your Home and Yard
Issue #473A, June 07, 2017

Leveraged ETFs
Issue #472, May 29, 2017

Leasing a Vehicle: Don’t!
Issue #471, May 22, 2017

Issue #470, May 15, 2017

More on Buying Jewelry
Issue #469, May 08, 2017

Buying Jewelry: Gold, Diamonds and Pearls
Issue #468, April 30, 2017

Thomas Sowell: Part III of III
Issue #467, April 24, 2017

Thomas Sowell: Pat II of III
Issue #466, April 17, 2017

Live Close to Where You Work
Issue #465, April 10, 2017

Medtronic in Hospital Management
Issue #Interim Bulletin #464A, April 07, 2017

Thomas Sowell: Part I of II
Issue #464, April 03, 2017

A Political Contribution a an Investment: Part II of II
Issue #463, March 27, 2017

A Political Contribution as an Investment: Part I of II
Issue #462, March 20, 2017

Buffett Selling Vacation Home
Issue #461, March 13, 2017

Advanced Placement (AP) ourses
Issue #460, March 06, 2017

The Importance of a Credit History
Issue #459A, March 02, 2017

A Credit Card Scam
Issue #459, February 27, 2017

The Electronic Health Reord
Issue #458, February 20, 2017

Issue #457, February 13, 2017

Platinum and Palladium
Issue #456, February 06, 2017

Economic Outlook for 2017: Part II of II
Issue #455A, February 02, 2017

Economic Outlook for 2017: Part I of II
Issue #455, January 30, 2017

A Story From Vegas
Issue #454A, January 25, 2017

Land Donation Deals and the IRS
Issue #454, January 23, 2017

The Theory of Gambler’s Ruin
Issue #453, January 16, 2017


By Robert M. Doroghazi, M.D., F.A.C.C.

The Knight Frank Luxury Index and Collectables

Issue #524, May 28, 2018

    Knight Frank is based in London with offices world-wide. They compile a Luxury Investment Index (KFLII) which is a reasonable estimate of the collectables market.
                  Collectable                             10-year return
                    Art                                       78%
                    Wine                                   192%
                    Watches                                 69%
                    Coins                                   182%
                    Jewellery                               138%
                    Cars                                     334%
                    Stamps (see below)                    103%
                    Coloured Diamonds                     70%
                    Furniture                               (-)32%
                    Chinese Ceramics                       (-)3%
                    KFLII (average of above)              126%
    1) This is the very high-end, 6, 7-figure and higher material. This is a 1959 Ferrari 250GT that sold recently for $18M, not the 1958 Edsel in your grandparent’s garage (The “horse-collar” grill of the Edsel has been described as “An Oldsmobile sucking a lemon).
    2) The “round-trip” fees to buy and sell a home are 10%. The round-trip fees to buy and sell collectables are—at least—20-25%, and often more. You don’t “flip” collectables. The holding period to realize any reasonable return is at least a decade, and usually, an adult lifetime.
    3) Single-year returns can be volatile. Prices rise and fall in trends that last variable periods of time. Likewise, these are discretionary purchases: prices tend to be strong when people are flush, and soft when the economy is weak. These are also often discretionary sales: the best material comes to market when prices are strong. 
    4) Buy quality. Somebody will always want the best, and is willing to pay for it. One collectable worth $10K is at least twice as valuable as 10 collectables worth $1K each.
    Knight Frank lists the 5 main reasons for buying luxury investments (collectables). I whole-heartedly agree, and also believe they are in the correct order.
    1) Joy of Ownership.
    RMD comment: You buy a painting with 9 heads, 21 (maybe 22, depending on the lighting) eyes on 7 bodies which could be male, female, or might not even be human. You don’t like the work, but you’re sure it will be a good investment. Five years later, it’s appraised at 20% of what you paid. Now every time you walk in the room, all of those gooney, bizarro eyes are looking straight at you, and the faces are sneering, reminding you that you were a chump for buying such a stupid painting. Buy what you like, that captivates you, so you will never second guess yourself. 
    2) Capital Appreciation.
    RMD comment: Buy what you like, but when you’re talking this kind of money, the price and investment potential must be taken into account.
    3) Safe Haven for Capital.
    RMD comment: Since the beginning of my financial writing, I’ve recommended you have 5-10% of your entire net worth in “portable” wealth: gold, jewelry, art, and high end collectables (see Issue #468, 5/1/17 “Buying Jewelry: Gold, Diamonds and Pearls”). It’s your insurance policy should “stuff” happen. In the meantime, the art looks nice on your wall, the bling looks good at parties, and there’s nothing wrong with owning the finer things in life (If you can afford them). Also realize these can become family heirlooms.
    4) Investment Portfolio Diversification.
    RMD comment: Collectables, all hard assets, tend to do well during times of inflation. People trade their depreciating paper money for real things that preserve wealth.
    5) Status among Peers.
    RMD comment: This is not the first reason, but it made the list. If you have an impressive painting on the wall, it’s impressive, you don’t need to say anything about it.
    Some time ago I came up with Doroghazi’s Rule of Collectables. Until the Industrial Revolution, almost everything a worker produced was consumed immediately in their daily lives. As society becomes wealthier, with more discretionary income, more money will be directed to collectables (and recreational land). Only so much can be spent (admittedly a lot by some folks) on clothing, electrical gadgets, entertainment, a car and a home. People want things with a restricted supply, things made yesterday. There are only so many 19th century tables, so many ante-bellum mansions, and so many sci-fi movie posters from the 1950s.
    A reminder: There are only 2 differences between adult’s toys and children’s toys. Adult’s toys are more expensive, and tinker toys and video games aren’t financed with a loan from the bank.   
    A subscriber’s daughter has been very happy with how Athenahealth (ATHN) has helped in setting up their medical records, and their support and services.
    RMD comment: Their chart is technically interesting. A breakout above the multiyear high of 155 would be very bullish.

    Stamp collecting was popular among the nobility in Europe, at least in part because it was portable wealth. It peaked in the US in the 30s and 40s, because FDR was an avid collector. A subscriber tells me that only stamps more than 100 years old currently generate any interest, and notes prices have been weak for so long that stamps might be worth a look.   
    On Antiques Road Show, they will often say “We think a reasonable auction estimate is $50,000-60,000, but for insurance purposes, we recommend a value of $80,000.”
    RMD comment: I never understood that. If something is worth so much, how can you insure it for more? I asked a retired insurance company CEO. “Bob, you’re right. That’s not how it works. You can’t just place whatever value you want on a collectable. If there is any question about value or authenticity (he notes forgeries abound), we require an independent appraisal”.
    George Caleb Bingham was from this area, and is considered the first genre painter in the US (“The Jolly Flatboatmen” and “Lighter Relieving a Steamboat Aground” (hangs in the White House). I live on Bingham Rd, and have always admired his work. I purchased “Mrs. George Caleb Bingham (Sarah Elizabeth Hutchinson) and Son Newton.” from Sotheby’s in 2010. I presented the bill of sale to the insurance company and insured it for that amount. Today, to increase the insurance value, I would need an independent appraisal (at my expense). See George Caleb Bingham on Wikipedia. Mine is the 2nd painting.
    I continue to progress well, but slowly, after back surgery. I can’t do any heavy work, but have been able to tend my garden. It reminds me of the last line of Voltaire’s Candide: Or Optimism. In response to Dr. Pangloss’ observation that fate seemed to determine the entire course of events, Candide responds “Excellently observed, but we must cultivate out garden”.

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