Collectables Economic Essay Part 2

This is a follow-up of my first draft posted a few months ago on the collectables market in relation to macro-economic swings. It is important to note that you should not use the following information for buying/selling purposes as it only represents my personal opinion. I also apologize in advance for my English as it is my second language.

My model (mostly focussed on SW collectables and Golden Age comics) indicates that a bottom would have been reached. We could stay at this bottom point of the wave for a while, but prices have stopped their decline apparently. My model (composed of a basket of collectables) indicates the beginning of what seems to be a reversal in the supply and demand relation, which is different from what has been observed since June 2009 where we had a strong supply and a weak demand for collectables (not talking about the Action Comics #1 of this world!!). To-date, demand is showing positive signs and supply should be limited (to a certain extent) and command higher price. This could happen in the next weeks (even next quarter) or so (but could have begun as well). I would pick the later. You should slowly see highly sought after items selling for higher prices than they were during the past 3 months (1 quarter). This trend seems to be starting with the very high-end collectables first (this is always the case). As an example, high-end means AFA 85 (all subs 85 at least) at the minimum for toys and VF/NM for comic books. In other words, good deal could be more and more difficult to get at this point and practically inexistent in 6 months to 1 year from now. However, this would be possible if the central banks interest rate stays negative (I mean the real rate; interest rate minus inflation). This seems to be a given for at least 2-3 years.

What does that mean for a collector like you and I? It means that bargain time should come to an end within the next few months if not earlier than that. It also means that all the money that has been pumped into the economy should start to show its effect. Meaning that more dollar (pounds, euros, yen etc.) chasing the same supply of goods would push there price higher (apparently). I say “apparently” as in fact it is the currencies that are loosing purchasing power, so it takes more of them to buy the same goods. That’s the magic of hard assets, which is a little bit different than financial assets that could be available in unlimited quantities (ie: stocks, bonds etc). However, money easing policies should also push financial assets higher but it is another story that unfolds differently.

With the recently “enormous” expansion of the money supply, highly sought after collectables should rise to unbelievable sky high prices in a couple of years. That’s what I think and that’s what I share with you. Please do not throw me tomatoes if I am proved wrong!

The negative of this radical expansion of the money supply is that it always end bad. After hyperinflation comes the depression and at that point not a lot of assets would escape the down trend, so like what you buy!

dom