Economics of GA Investing

[Straw-Man]

My only reply would be that literally millions of dollars of collectible comics have been absorbed into the marketplace through auctions in the last two years alone.

The money is coming from somewhere. The books are going into collections/portfolios/closets/safe deposit boxes somewhere.

 

I also think that the average age of buyers of golden age comics on this forum is much lower than you would think.

 

With the myriad avenues to generate sales, it is also much easier now for a savvy collector/part-time dealer to parlay a small collection into bigger and bigger books.

 

I don't discount the idea that older collectors leaving will have an effect on the hobby. But it has been a long time since those older collectors drove the hobby.

And the young guys are clamoring for the old guys' books.

 

you don't think i'm an old guy, do you geek?

[adamstrange]

When old-time collectors, with books on the scale of Bangzoom and the like, start cashing in they will realize prices beyond many of our dreams. And all of those books (including the Fawcetts, strip reprints, and other black sheep) will find new homes.

 

Who are all these young collectors with millions to spend? Do you see them in the hobby today, or are you betting on investors moving in?

 

I dunno, there's clearly a split of opinion on this topic. And a lot of the posts seem to be expressions of faith, not recitations of fact. The speculation here that the market may sustain itself as the torch gets passed and the old guys' collections come to market may well prove true, but I'd be more comfortable with that opinion if it was supported by more meat. I suppose it is notable that young wealthy guys like Nick Cage and Rich Kylberg entered the hobby ... but they both exited -- supporting a comment above observing that young guys come in and then mostly leave. Despite his protestations to the contary and his childhood collecting, I view Kylberg as a classic pure investor both because of his background (high asset individual, Harvard MBA) and what he bought (predominantly investment quality key books instead of runs of a title or genres etc. ). I'd love to know the basis for his decision to liquidate.

 

First of all, comics is one of the last places I would suggest someone invest their money. There will always be buying opportunities for the knowledgeable but the typical new investor may have a hard time spotting them.

 

By the time it's known that there are active young millionaires investing, it's probably too late for someone else to come in and make a good investment because those other guys are probably well along the learning curve and have already established sources for the "good stuff".

 

I don't see "investor" money as particularly good for the hobby unless you are one of those looking for someone like Parino to fund your retirement. If comic prices rise because of increasing interest on the part of new and existing collectors then so be it, but personally I'm hoping for a crash.

 

There isn't necessarily any obvious place to make money in GA if you are paying retail. It could be the big money in an investment climate would be in high grade Silver Age because it's easy to assemble an "investment grade" set (ie. all CGC 9.4 and above) of a recognizable character that is fairly liquid when it comes time to sell.

[Timely]

I started collecting comics when I was 12, got into Silver Age when I was 14, started collecting Golden Age when I was 15 and bought my 1st Edgar Church/Mile High at age 17 (Captain Marvel Adventures #44 ). I am 35 now and have really enjoyed being in this hobby the last few decades. It seems like no matter how long you are in the hobby you always find something new and cool you have never seen before. Sharing our enthusiasm of comics with fellow collectors has never been easier than it is right now, especially with places like the forum to post. The hobby seems stronger than ever as I see a lot more people entering the hobby than exiting it. My

 

West

[MrBedrock]

 

you don't think i'm an old guy, do you geek?

You can't be old...look at all the comics you have bought lately.

[lou_fine]

There isn't necessarily any obvious place to make money in GA if you paying retail. It could be the big money in an investment climate would be in high grade Silver Age because it's easy to assemble an "investment grade" set (ie. all CGC 9.4 and above) of a recognizable character that is fairly liquid when it comes time to sell.

 

Adam;

 

I also agree with you that the investment dollars from outside the hobby would naturally tend to gravitate to the high grade SA books as opposed to the GA books.

 

After all, investors as opposed to collectors, are used to conducting their transactions in markets that are fairly liquid. It is really not that difficult to put together a portfolio of investment quality SA books in a short period of time. All it would take is money as the books are out there and there is a fair bit of activity going on here.

 

Putting together a portfolio of investment quality GA books, however, is a completely different story. Money alone will not do it, as these books just tend to come out so slowly that it would also require a great deal of time and patience. Investors from outside the hobby simply don't have the patience to put their money into a market which is so illiquid from a buying point of view.

[Comicdey]

40 with a ton of GA collecting ahead of me. SA/BA too if I have to.

[tth2]

There isn't necessarily any obvious place to make money in GA if you paying retail. It could be the big money in an investment climate would be in high grade Silver Age because it's easy to assemble an "investment grade" set (ie. all CGC 9.4 and above) of a recognizable character that is fairly liquid when it comes time to sell.

 

Adam;

 

I also agree with you that the investment dollars from outside the hobby would naturally tend to gravitate to the high grade SA books as opposed to the GA books.

I don't think so. Until AF 15 started breaking $200K, SA books simply weren't worth enough money for big-money investors to bother with. There are still only a handful of SA books worth over $100K, and AF 15 aside, not many of the big money copies have actually changed hands recently (at least not publicly).

 

But don't take my word for it, there is empirical evidence. The most high-profile big money investor to come into the hobby recently was JP, and he went straight to the GA. .

 

After all, investors as opposed to collectors, are used to conducting their transactions in markets that are fairly liquid. It is really not that difficult to put together a portfolio of investment quality SA books in a short period of time. All it would take is money as the books are out there and there is a fair bit of activity going on here.

 

Putting together a portfolio of investment quality GA books, however, is a completely different story. Money alone will not do it, as these books just tend to come out so slowly that it would also require a great deal of time and patience. Investors from outside the hobby simply don't have the patience to put their money into a market which is so illiquid from a buying point of view.

Have you been following the same GA market that I have? I think JP showed that some very nice runs of GA books can be assembled in a pretty short amount of time. Anyone who's been monitoring the market over the last couple of years or so could have assembled a very nice portfolio of ultra-HG GA books, including several impressive MH runs. And now we've seen that the MH AA #16 was actually available for the right offer.

 

[adamstrange]

Parino came into the market in 2001 and he did in fact make substantial purchases of SA material an even OA. He did not drive the choice of material but chose advisors to make the majority of the "picks". CGC was just getting started and there was not the same Marvel brand awareness that has come with the recent films. It's certainly possible that future entrants take the same approach, but one precedent is not sufficient for me to conclude much of anything.

[MrBedrock]

Since we are talking about pure investment money I want to share a story...

A year and a half ago I was approached, through a friend, by a group of guys who work for The Stanford Group, a large investment company with offices here in Houston. Apparently they put together a large venture capital fund that invests in collectible coins and competes with Heritage. They were interested in discussing the viability of doing the same thing with comics.

 

How a fund like this works is that a group of venture capitalists put aside X dollars. A fund manager is hired. The investment funds are doled out for the manager to invest. As the investment matures the manager gets a percentage of the profits.

 

So these guys explained what they had in mind and then I explained to them the size, scope, demographics, and outlook of the collectible hobby. I am usually a very gung-ho, rosy picture kind of guy, but I tried to give them an un-biased viewpoint. But as rosy as I could get, I couldn't match their expectations - but not for the reasons you think!

 

You see, they wanted to invest a ton of money. The fund they were proposing was to be $20 million dollars, split into quarterly $4 million dollar investment outlays. Now imagine legitimately trying to spend $4 million dollars every three months on quality investment material which will turn a satisfactory profit over a one year period, and five year period. And if you are able to do that for one year then most assuredly you would have to keep up the pace. You cannot not spend the money because stagnant money is doing no one any good. On top of that you would have to implement some type of sales mechanism to move the investments i.e. creating a whole new competitor to C-Link, Metro, Heritage etc.

 

They were very interested in the growth of the market. They felt the turn times and rate of return was perfect. Everything was going good until we all realized that that type of money would be a HUGE percentage of the overall present collectible comic economy. In otherwords, it would be very hard to profitably spend that much dough. There just doesn't seem to be a big enough total pie to entice those types of investors yet.

[VintageComics]

Rich, that's a great story!

Do you / they / any one else here feel that the market is yet very young (as I do) and still has lots of growth potential in over all value and collector group?

 

The way books have been taking off exponentially for decades seems to indicate no slow down for the forseeable future.

 

Is this because comics have just started to come to the forefront of the public eye and become "cool" now as opposed to belonging to an eccentric fringe group? If so are we rady to see a plateau or will it continue to gain mass appeal?

 

R.

 

 

[drbanner]

Good story Richard, it's a small pond and a few big fish is all it takes to out-bid all us minnows. The last Heritage Signature auction sold around $3.2M+, so yeah, it would be very difficult to spend over a million dollars a month on "investment quality" material. I could probably do it if forced to though!

[The Black Hand ®]

But are these book then sitting in collection for a long time or are they just being sold back and forth between dealers and investors?

[MrBedrock]

The last Heritage Signature auction sold around $3.2M

That was one of the things we considered. Between the Heritage Signature and C-Link Focused auctions (the two biggies at the time) there were about 8 million total going up quarterly. Out of that let's say twenty percentage (pulling a high number out of the air) is "investment" quality. So there is 1.6 million bought at theoretical top of market. How much of that could be turned for a profit in a reasonable amount of time?

 

To me, the only way to make it work is to also be able to buy from collections, from dealer stock, and from referrals. But establishing name recognition to do that would be very tough in and of itself.

[ft88]

I'm not so sure about that. It would take some work, no doubt but when you start flashing Benjamins around, word gets out that you are buying. So the buying would probably be pretty easy but the selling is tough as you mentioned. On the buying side: $10k here and 50k there and you could probably do it with 100 contacts. For selling, you really would have to have your own selling location or fees, even using ebay, would really rack up.

 

Ed

[tth2]

Parino came into the market in 2001 and he did in fact make substantial purchases of SA material

I`m not saying he didn`t buy any SA, but it was dwarfed by the GA that he bought. The only limitation was he couldn`t pry a lot of the top books out of the owner`s possession, but he certainly wanted the MH Action 1, and from what I heard tried very hard to get the 8.5 Action 1 out of Kramer.

[tth2]

Since we are talking about pure investment money I want to share a story...

A year and a half ago I was approached, through a friend, by a group of guys who work for The Stanford Group, a large investment company with offices here in Houston. Apparently they put together a large venture capital fund that invests in collectible coins and competes with Heritage. They were interested in discussing the viability of doing the same thing with comics.

 

How a fund like this works is that a group of venture capitalists put aside X dollars. A fund manager is hired. The investment funds are doled out for the manager to invest. As the investment matures the manager gets a percentage of the profits.

 

So these guys explained what they had in mind and then I explained to them the size, scope, demographics, and outlook of the collectible hobby. I am usually a very gung-ho, rosy picture kind of guy, but I tried to give them an un-biased viewpoint. But as rosy as I could get, I couldn't match their expectations - but not for the reasons you think!

 

You see, they wanted to invest a ton of money. The fund they were proposing was to be $20 million dollars, split into quarterly $4 million dollar investment outlays. Now imagine legitimately trying to spend $4 million dollars every three months on quality investment material which will turn a satisfactory profit over a one year period, and five year period. And if you are able to do that for one year then most assuredly you would have to keep up the pace. You cannot not spend the money because stagnant money is doing no one any good. On top of that you would have to implement some type of sales mechanism to move the investments i.e. creating a whole new competitor to C-Link, Metro, Heritage etc.

 

They were very interested in the growth of the market. They felt the turn times and rate of return was perfect. Everything was going good until we all realized that that type of money would be a HUGE percentage of the overall present collectible comic economy. In otherwords, it would be very hard to profitably spend that much dough. There just doesn't seem to be a big enough total pie to entice those types of investors yet.

Exactly! Great post, Richard.

 

[bergdoll]

In my opinion, there are several factors that will/can influence the price of any collectible - whether for investment, or pleasure:

 

1) Scarcity (real or perceived)

2) Price (higher priced items will "flag" or "pull" material to market)

3) Demand (which in collectibles is normally 2-phased: those that seek to hold and those that seek to use for some purpose)

4) Avenues of acquisition and disposal (the trading floor)

5) New demand and predictive future demand

 

In comics, we have those that collect to invest, to own, to read. There are some pressures to consider before investing in large value books:

 

Here are some of my personal thoughts (I'm new into GA, but mostly Ducks, Archie and Canadians)

 

1) Scarcity. The general population has been trained: "old things are worth money" - this means we see less and less "farm" collections coming onto market. You know...that dream you have of buying an old trunk only to discover that it's full of screaming mint DC's and Timely's...not going to happen - sorry).

 

This means scarcity information is generally pretty stable on the Golden-Age and we are very likely dealing with close to a fixed-deck on what's out there. Anything new into the market means we have someone exiting, changing focus, or in financial need.

 

What this also means is that there are certain books that if you don't buy TODAY, you are going to have to wait YEARS to get. This is an upward pressure on price.

 

2) Price. Onto price. There will always be some folks with some money for some things. While the pool for $100K+ books is smaller - so are the number of copies available. Most collectible markets have a "sweet" spot of action where books are traded with some frequency and at moderate returns. In comics this is NOT the GA Keys. It's the books across the spectrum that are in a couple "groups" - the $100-500 group of Key SA/BA and the $1000ish GA's. These trade frequently and with a little patience, you can probably find the book you want.

 

3) Demand. This is the tricky one! Demand today is what it is. Demand over time is really hard to nail down. It's easy with the iconic characters to look at demand with rose coloured glasses because we always assume that characters like Raggity Ann, Howdy Doody and Buster Brown will always have a place in the hearts of .... wait a minute..... I meant Batman, Superman and ... you get the idea. Now, I KNOW that 70+ years is a long time for characters to exist and the seem pretty entrenched, but the lesson is that you never know and all it takes is the modern comic industry to fail for these characters to begin to fade from people's minds.

 

That said, there is certainly a world beyond comics that fuels the obsession for characters such as Batman, Spider-man and Superman. Can anyone else name others that have placed themselves into the world as much as these? (I'd say Archie and Mickey Mouse are good bets)

 

The hardest part of investing is knowing when to sell. Which brings me to:

4) Avenues of Acquisition and Disposal (the trading floor).

 

This is where we have seen the most change in recent years! We now have 3rd party certification (which is really risk management) and we have auctions and the internet. This means we are eliminating both regional, national, and even international price variations. This has caused the market to really de-stabilize - but only as it prepares to re-stabilize into the "true" market. As a collector of Ducks and Archie, I can tell you that the prices were all over the map depending on where you bought. Not today. The hard-to-get books are not just hard-to-get-here books. They are now hard-to-get-everywhere.

 

This area has undergone massive change. Expect stabilization in the next 3-7 years. Be careful. Some folks may be driving prices on some books up just because they are right there.

 

5) New Demand and predictive future demand.

 

My suggestion here is to look at Stamps and Coins. They are much more mature collectibles and we can expect our industry to follow suit. Stamp and Coin collecting has about 40-50 years more "history" on comics. The monkey-wrench is that these two industries don't focus on an entertainment product, but I still feel there are lessons to learn from them.

 

In the end, comics are enjoyed mostly by readers and collectors. If you choose to invest in comics with the intent of financial gains, then you must consider these groups as a possible audience for liquidation. Readers? - forget it, they can buy reprints. Collectors? This tricky bunch are the hardest to understand. They change their tastes, their budgets fluctuate, they have more and more places to buy and sell, more choices of what to buy.....tricky folks those collectors.

 

I would say GA investing is higher risk than reward.

 

Of course....I'm a collector.

[Socratic Wonder]

I am, um, fort...no....thir.... no, um 27, yeah, lots of years ahead of me!

 

[VintageComics]

bergdoll you need to post a bit more often.

 

(thumbs u

[GreatEscape]

bergdoll you need to post a bit more often.

 

(thumbs u

 

Absolutely! Great post bergdoll. Very insightful!

 

GE