With the Dow down 1100 points this morning, it might be time to take a closer look at your investment strategy. Today, you can buy a pretty nice dot neck 335 for the same price as 335 shares of Apple stock. That would be around $35000. That won’t get you a mint 59 but it will get you a near mint 58, 60 or 61 or a really nice (but not mint) 59. So, which would you rather have?
Note that I didn’t say “which is the better investment?” If I knew that, I’d be rich and I wouldn’t be selling vintage guitars I’d be collecting them. Certainly, Apple and a lot of other stocks have been really good investments for the past 7 years or so-pretty much since the market last tanked in 2008 thanks to a bunch of out of control and greedy banks and investors. These same investors took down your home and your vintage guitar collection too. The end of the vintage guitar bubble coincided with that unfortunate market turn. But what about now?
I’m going to use the dot neck market as my reference point. 59 dot necks hit $50,000 in 2008 and blondes were flirting with (and probably exceeded) $100,000. The 335 dot market got hit by 30-35% while the Dow took a 50% nosedive from it’s October 2007 high of 14,164 down to 6594 in March of 2009. If you hung in there with your stocks, you were rewarded with a 6 year bull market and your portfolio probably added another 30% from its 2007 high. If you stayed with your 59 335, you probably got back close to where you were in 2008 but if you bought before that, you are probably, once again, way ahead. The 335 market is still not at the level it was at the peak of the bubble but it is pretty close. Right now, it’s too early to know what the Dow is going to do next and it’s too soon to see if the current downturn is going to affect the vintage guitar market. But I have some thoughts on the matter.
The pundits are saying that the Chinese economy has taken a serious downturn and that has affected the US markets. When stocks go down, money leaves the market and goes elsewhere. It goes to cash, it goes to bonds, it used to go to real estate and maybe some of it goes to collectibles. It has to go somewhere. The downturn of the Chinese economy in and of itself, isn’t going to affect the vintage guitar market because the Chinese don’t buy American vintage guitars. They copy them but they don’t buy them. I haven’t sold a single guitar to anyone in China. Of course, the effects of the Chinese downturn as it applies to American investors may affect the vintage market to a degree. After all, most buyers of vintage guitars are using disposable wealth-money that isn’t currently needed to live on. The same money that goes into stocks often goes into vintage guitars. I heard time and again that a buyer “needs a day for two to sell some stock” to fund a guitar purchase.
With the market tanking, you might be inclined to liquidate some holdings. You might be inclined to simply hang on. I’m not going to tell you that a 59 ES-335 is a better investment today than buying 335 shares of Apple. But it might be a safer one. People want Apple stock because they feel they can make some money from it. People want 59 dot necks because they really want to own a 59 dot neck. That doesn’t go away when the value dips. A 59 335 is going to be someone’s dream guitar until my generation is dead and buried. Whether subsequent generations will continue the love affair is yet to be seen. But I just don’t hear folks talking about how they can’t wait until their Apple stock arrives so they can – what, look at the stock certificate? Nobody even gets stock certificates any more. You can’t touch Apple stock. You can’t play Apple stock. You can make money and you can lose money. Apple could, conceivably, go to $12 a share. I know-I once owned it at that price. On that day 335 shares of Apple would be worth $4020. Your 59 ES-335 will never be worth $4020. And if it is, let me know. I’ll buy it from you. Oh, and you can’t play the blues on a stock certificate but you can certainly sing the blues if that’s where your money is today.