Diversifying With Collectibles
Sales of global collectibles are expected to grow to US$692 billion over the next 10 years.
Sales of global collectibles are expected to grow to US$692 billion over the next 10 years.
The collectibles market is booming. During the pandemic, folks with old collections dug them out, new collectors came to market, and trading activity and prices across categories from sports memorabilia to fine wines soared.
“I can’t even count the number of people who contacted us during the pandemic who hadn’t touched their collections in more than 10 years,” says Scott English, executive director of the American Philatelic Society in Bellefonte, Pa., who welcomed attention on stamps when four 1918 Inverted Jenny stamps—so-called because they were printed with an upside down airplane—fetched a record US$4.9 million at Sotheby’s last year.
Sales of global collectibles are expected to grow to US$692 billion from $412 billion over the next 10 years, according to Market Decipher, a Canadian market research firm.
For investors, a long view is advisable, says David Savir, CEO of Element Pointe Advisors, a wealth management firm in Miami. “Many collectibles are at values that may not be sustainable for the next two to three years,” he says. “Anyone buying should be holding them for over a decade and not expect to profit in the short term.”
The highest level of trading activity is in sports collectibles, boosted by the entry of sports-related nonfungible tokens, or NFTs, which exploded to $1 billion in sales last year—bigger than the entire 2020 NFT market—and are expected to reach $2 billion this year, according to the London-based consultancy Deloitte.
The overall NFT market surged to $24.9 billion last year, including digital creations from high-end fine art to collectibles. Sales of popular collectible series haven’t waned: In March, sales of Bored Ape Yacht Club and CryptoPunks hit $257 million and $81 million, respectively, according to CryptoSlam, an aggregator of NFT data.
Tangible sports memorabilia aren’t taking a back seat to NFTs: Sales in the traditional $4 billion arena have been breaking records. Last year, a Dallas Mavericks star Luka Doncic rookie NBA trading card sold for $4.6 million—the most fetched for a basketball card—and a 1952 Mickey Mantle card hit a record for baseball cards, at $5.2 million.
For classic cars, the first quarter of each year is when three of the biggest car auctions take place, says Juan Calle, co-founder and CEO of Classic.com, a site that tracks car market data. This year’s quarter closed with a total sales volume of $1.3 billion, double the same period last year, Calle says.
While other categories have less practical value, they can be attractive diversifiers for investment portfolios.
Consider fine wine’s low correlation to the S&P 500: just 0.3, which is lower than gold, real estate, or any traditional portfolio-balancing asset class, says Anthony Zhang, co-founder and CEO of Vinovest, which runs a portfolio of 500,000 collectible wine bottles stored in custom-built warehouses around the world. “We’ve seen a big uptick in interest from people who you wouldn’t traditionally think of as wine enthusiasts,” he says.
The wine market tends to shrug off factors that send stocks reeling, but has other sensitivities, such as tariffs and even gift-giving policies in authoritarian nations. When China banned gifts to government employees in 2011, popular Bordeaux wine values plummeted, says Robbie Stevens, Americas Territory Manager for London-based Liv-ex, a global marketplace for fine wine.
The broad Liv-ex 1000 index was up 19% in 2021, driven primarily by the popularity of Champagne and Burgundy. In the 12 months through March, Liv-ex’s index for Champagne was up 47.8%, and for Burgundy, 36.8%.
But no category is immune to broad economic trends, says financial advisor Savir. “Collectibles are more vulnerable to price declines in a recession than other assets, given the nonessential nature of many of them.”
This article appeared in the June 2022 issue of Penta magazine.
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
Office owners are struggling with near record-high vacancy rates
First, the good news for office landlords: A post-Labor Day bump nudged return-to-office rates in mid-September to their highest level since the onset of the pandemic.
Now the bad: Office attendance in big cities is still barely half of what it was in 2019, and company get-tough measures are proving largely ineffective at boosting that rate much higher.
Indeed, a number of forces—from the prospect of more Covid-19 cases in the fall to a weakening economy—could push the return rate into reverse, property owners and city officials say.
More than before, chief executives at blue-chip companies are stepping up efforts to fill their workspace. Facebook parent Meta Platforms, Amazon and JPMorgan Chase are among the companies that have recently vowed to get tougher on employees who don’t show up. In August, Meta told employees they could face disciplinary action if they regularly violate new workplace rules.
But these actions haven’t yet moved the national return rate needle much, and a majority of companies remain content to allow employees to work at least part-time remotely despite the tough talk.
Most employees go into offices during the middle of the week, but floors are sparsely populated on Mondays and Fridays. In Chicago, some September days had a return rate of over 66%. But it was below 30% on Fridays. In New York, it ranges from about 25% to 65%, according to Kastle Systems, which tracks security-card swipes.
Overall, the average return rate in the 10 U.S. cities tracked by Kastle Systems matched the recent high of 50.4% of 2019 levels for the week ended Sept. 20, though it slid a little below half the following week.
The disappointing return rates are another blow to office owners who are struggling with vacancy rates near record highs. The national office average vacancy rose to 19.2% last quarter, just below the historical peak of 19.3% in 1991, according to Moody’s Analytics preliminary third-quarter data.
Business leaders in New York, Detroit, Seattle, Atlanta and Houston interviewed by The Wall Street Journal said they have seen only slight improvements in sidewalk activity and attendance in office buildings since Labor Day.
“It feels a little fuller but at the margins,” said Sandy Baruah, chief executive of the Detroit Regional Chamber, a business group.
Lax enforcement of return-to-office rules is one reason employees feel they can still work from home. At a roundtable business discussion in Houston last week, only one of the 12 companies that attended said it would enforce a return-to-office policy in performance reviews.
“It was clearly a minority opinion that the others shook their heads at,” said Kris Larson, chief executive of Central Houston Inc., a group that promotes business in the city and sponsored the meeting.
Making matters worse, business leaders and city officials say they see more forces at work that could slow the return to office than those that could accelerate it.
Covid-19 cases are up and will likely increase further in the fall and winter months. “If we have to go back to distancing and mask protocols, that really breaks the office culture,” said Kathryn Wylde, head of the business group Partnership for New York City.
Many cities are contending with an increase in homelessness and crime. San Francisco, Philadelphia and Washington, D.C., which are struggling with these problems, are among the lowest return-to-office cities in the Kastle System index.
About 90% of members surveyed by the Seattle Metropolitan Chamber of Commerce said that the city couldn’t recover until homelessness and public safety problems were addressed, said Rachel Smith, chief executive. That is taken into account as companies make decisions about returning to the office and how much space they need, she added.
Cuts in government services and transportation are also taking a toll. Wait times for buses run by Houston’s Park & Ride system, one of the most widely used commuter services, have increased partly because of labor shortages, according to Larson of Central Houston.
The commute “is the remaining most significant barrier” to improving return to office, Larson said.
Some landlords say that businesses will have more leverage in enforcing return-to-office mandates if the economy weakens. There are already signs of such a shift in cities that depend heavily on the technology sector, which has been seeing slowing growth and layoffs.
But a full-fledged recession could hurt office returns if it results in widespread layoffs. “Maybe you get some relief in more employees coming back,” said Dylan Burzinski, an analyst with real-estate analytics firm Green Street. “But if there are fewer of those employees, it’s still a net negative for office.”
The sluggish return-to-office rate is leading many city and business leaders to ask the federal government for help. A group from the Great Lakes Metro Chambers Coalition recently met with elected officials in Washington, D.C., lobbying for incentives for businesses that make commitments to U.S. downtowns.
Baruah, from the Detroit chamber, was among the group. He said the chances of such legislation being passed were low. “We might have to reach crisis proportions first,” he said. “But we’re trying to lay the groundwork now.”
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual