Money Flows From Wall Streets Bear To Vintage Guitars Bull
By Larry Meiners
Bob Marley's seminal 1977 song Exodus proclaimed, "We know where we're going, we know where we're from, we're leaving Babylon, we're going to our Father's land." Considering that your dad's old guitar may be worth more than your 401K, leaving the stock markets Babylon might seem like a prudent exodus. As stocks in the USA lost value to the tune of more than $5 trillion during the past three years, many American vintage guitars have seen double-digit increases and some have doubled in price. Not just a recent phenomenon, top tier vintage guitars manufactured by Gibson, Fender and Martin have outperformed the Dow Jones Industrial Average, S&P500 and the NASDAQ Composite over the last 17 years.
"I think it's just money moving from one place to another, as my top income customers have felt 40-60% losses in the stock market, guitars have been historically better investments and certainly easier to understand, so some of their money goes from Wall Street to Vintage guitars," said vintage expert Timm Kummer from Florida. "Some are buying for investment, especially when the stock market goes bad, people feel that if they study the vintage market they can make an intelligent choice and have the pleasure of playing their investment," added Norm Harris from Norm's Rare Guitars of Tarzana, California. Further, George Gruhn of Gruhn Guitars in Nashville revealed, "…we are seeing some evidence that people who were invested in the stock market and were fortunate enough to get their money out in time are now putting some of it into fretted instruments since they feel it is far better to park their money in instruments which are appreciating rather than leaving their money in stocks or mutual funds which are loosing ground."
Gibson's Les Paul "Burst" (short for sunburst finish) is the most sought-after vintage solid-body guitar today. Those models made from 1958-1960 and having highly figured maple tops (flame-tops) have become the ultimate blue chip investment of this long-running bull market in collectable guitars. Investing $12,000 in the S&P500 Index in 1986 would yield just over $50,000 today. If you bought an excellent example of a flame-top 1959 Les Paul Standard "Burst" instead, your investment would be worth three times that amount or $150,000 now. Several dealers believe that in the next fifty years these vintage sunburst Les Paul guitars will be the viewed as Stradivarius violins are today, super rare and selling for millions of dollars.
With the price tag of a collectable 1959 Burst or golden-era flat-top such as the 1941 Martin D-45 well over $100,000 each today, the buyers market for these instruments is increasingly populated by multi-millionaires and a few billionaires. Wealthy individuals with large and growing collections of classic guitars have added demand into a market with an already limited supply of original instruments for sale. Mr. Kummer described it as, "A drought of excellent examples." Prices have been elevated to record levels recently for some models and demand shows no signs of slowing down anytime soon. Eliot Michael, owner of Rumbleseat Music of Ithaca and Brooklyn, New York remarked, "Some of my customers want the best guitars available, price is never the first consideration. Obtaining a rare vintage model in excellent condition overshadows the asking price."
Perry Margouleff, owner of Pie Studios in Glen Cove, New York and a vintage guitar authority contends, "It's continuously becoming more difficult to find quality guitars at any price." Models like the Burst, along with pre-1965 custom color Fender guitars and pre-war Martin flat-tops have been actively pursued for years by significant collectors around the world. It is assumed that most of these instruments are effectively 'off the market' and won't be sold for many years, if ever, by the present owners of mega-collections. This behavior acts as a strong lever to increase prices over time. "People are starting to discover the finite amounts of these instruments," divulged David Davidson, a vintage guitar buyer for Sam Ash Music at Carle Place, New York. Vintage guitars are unlike stocks because a company may issue more stock but there are only a finite amount of classic vintage guitars.
Although most collectors are amateur musicians, their reasoning for obtaining these high-dollar instruments seems to be primary for investment purposes. Richie Friedman, vintage buyer for Sam Ash Music in New York City confirmed, "Yes, people are buying for investment because the stock market can't compete with the returns of the vintage market." The guitar bulls say that not only is the supply of investment grade instruments limited, but the Fed's present easy-money policy bodes well for future price increases as tangible assets become more valuable while paper assets lose value. Gold, housing and vintage guitars were strong performers in 2002. "There has been a shift from intangible to tangible assets and less availability as more guitars are absorbed into collections," declared Michael Jones of Michael Jones Vintage Guitars of Aspen, Colorado. Also, it's considered 'cool' for many collectors raised on the music of the Beatles as well as super-hero guitarists like Jimi Hendrix and Eric Clapton, to own the same types of instruments these musicians played in the 1960s. Mr. Jones exclaimed, "Once you feel that guitar rush, you're hooked for life. A vibe by the way, you could never get from a stock certificate."
The stock market equivalent of buying any of the recent stocks that have blown-up due to executives and accountants cooking the books is similar to buying a bogus guitar represented as original by the seller. Buying expensive vintage guitars without intimate knowledge of decades old construction techniques, parts and paint formulations increases the possibility of buying an instrument that has been repaired, repainted or is an outright fake. Mr. Gruhn said, "This is not unlike the art market. Sophisticated buyers must be careful to avoid fake Picassos, Rembrandts, and other such forgeries, but the fact that copies exist has not diminished the appeal or value of the originals."
Fake guitars are not new to the business of rare and valuable musical instruments. Considered the very best, Stradivarius violins have been copied for centuries. Once instruments like the sunburst Les Paul began selling for five-figures (now much more), near-exact copies came out of the woodwork equipped with original late 1950's parts appropriated from low-cost Gibson models of the same period.
The exponential growth of the Internet in recent years has provided a seller-friendly platform for many original and non-original vintage instruments. Potential buyers can shop via the World Wide Web and view vintage guitars on personal homepages, dealer websites and auction sites like EBAY. Unfortunately, some individuals sell phony guitars on the Internet knowing that a buyer located hundreds of miles away has a more difficult effort trying to pursue and convict them. Most sellers plead ignorance and fraud is difficult to prove if the seller doesn't make definitive statements about originality in their on-line ad.
Savvy buyers of expensive vintage guitars who are not experts themselves have their purchases blessed by a professional to avoid owning a well-crafted imitation. "Fake guitars only enforce the notion that you should buy from reputable dealers who know their merchandise. I am very careful about what I represent and if I feel a guitar is in question, I won't buy or sell it regardless of price," stated Norm Harris (several pieces from Mr. Harris's guitar collection was used in the filming of the hit movie Spinal Tap).
As the great stock market bull from 1984-1999 made buyers look smart, the mega-bull of the vintage guitar market from the mid-1970s to the present made buy-and-hold collectors look very smart. During the last three years the stock market has taken some of investor's gains back while vintage guitar owners saw their instruments continue to appreciate. A few experienced dealers question the vintage market's longevity while others see no end to higher prices. "A large percentage of my customers are baby boomers. We have fewer customers for high-end instruments from generations X and Y. It is a concern to me that the oldest boomers are now 57 years old. Needless to say, if the market is to remain healthy ten years from now there will need to be a transfer of interest in these instruments to generations X and Y," suggested George Gruhn.
Most wealthy collectors and vintage dealers are not at all worried about vintage instrument devaluation in the future. Mr. Friedman (his father owned We Buy Guitars, Inc. on West 48th street in New York City) noted, "How about real offers of $350,000 for a 1959 Les Paul and it was turned down several times. Yes, prices will definitely rise as the amount of good pieces are dwindling down." "I don't know if it will ever end. I see no end in sight," said Mr. Harris. Michael Jones maintains, "There is hardly a guitar I've sold that I wouldn't love to have back. I would like to have been my best client over the years and have those guitars now." Although Mr. Gruhn, who co-wrote Gruhn's Guide To Vintage Guitars, is concerned about future generation's interest in vintage guitars and is aware of the volatile nature of the stock market, he still concludes, "I have not seen the fretted instrument market as a whole ever take a nose dive."
| Stock Market | 12/31/1985 | 12/31/1999 | 12/31/2002 | 1986-99 | 2000-02 | 1986-2002 |
|---|---|---|---|---|---|---|
| Dow Jones Industrial Average | 1547 | 11497 | 8342 | 643% | -27% | 439% |
| S&P500 | 211 | 1469 | 880 | 596% | -40% | 317% |
| NASDAQ Composite | 325 | 4069 | 1336 | 1152% | -67% | 311% |
| Vintage Guitars * | ||||||
| 1941 Martin D-45 | $15,000 | $140,000 | $160,000 | 833% | 14% | 967% |
| 1954 Fender Stratocaster | $5,000 | $20,000 | $30,000 | 300% | 50% | 500% |
| 1959 Gibson Les Paul Flame-top | $12,000 | $75,000 | $150,000 | 525% | 100% | 1150% |
Source: Larry Meiners
* Assumes guitars listed are in excellent original condition.
Copyright (c) 2003 Larry Meiners, All Rights Reserved