Economic Hardship in a Deflation and OA

[KreeSkrull99]

If the economy continues to sputter, do most here think, that would lead to more original comic art hitting the market ? I know alot of people believe that price escalation leads to MORE pieces of OA coming to market, but is the opposite more likely that as the economy becomes tougher, those leveraged will release their prized possessions ?

[r1982rhoads]

I've seen a few people selling everything they have...

[batman_fan]

There is currently about 30k worth of stuff I would love to own coming to the market .... Wish I could buy it.

[mtlevy]

I am always buying what I consider to be the good stuff....

[malvin]

I am always buying what I consider to be the good stuff....

 

Agreed, I'm still buying, so bring it on!

 

Malvin

[*paull*]

There is no way that the OA market will be immune to the financial woes we are experiencing. I've heard many analysts saying that we won't be things _begin_ to turn around until second half 2009. I think that's a conservative view... I think it's going to be longer than that, particularly for the real estate market.

[BleekerBob]

A good test for everyone is to take a piece of art you purchased in the last year and try to find a buyer at the price you paid. My guess is very few people would be able to do that myself included.

[spider9698]

Great point. I think people are just a tad shy to pull the trigger in this economy, myself included.

[batman_fan]

A good test for everyone is to take a piece of art you purchased in the last year and try to find a buyer at the price you paid. My guess is very few people would be able to do that myself included.

 

I agree with you on this one. If I reflect back on what I bought this last year I can't imagine getting what I paid back.

[Mephisto]

A good test for everyone is to take a piece of art you purchased in the last year and try to find a buyer at the price you paid. My guess is very few people would be able to do that myself included.

 

Your Wolverine 17 Byrne cover.

[malvin]

A good test for everyone is to take a piece of art you purchased in the last year and try to find a buyer at the price you paid. My guess is very few people would be able to do that myself included.

 

2 points.

 

1. If you bought it at auction, in theory you were the person willing to pay the most and probably can't find another buyer. But some (including me) argue in another thread that it's not always true.

 

2. Depending on the piece, and if you are careful with your purchases, its not that hard for the pieces to maintain the value.

 

Malviin

[delekkerste]

Great point. I think people are just a tad shy to pull the trigger in this economy, myself included.

 

Anecdotally, between here and ComicArt-L and hearing through the grapevine, it does appear that there haven't been a lot of transactions reported in the last month or two. The True Believers will argue that prices have not come down much, if at all, and that may be true for the diminishing number of reported transactions, but I do feel like a lot of material has probably begun to decline in value nonetheless. I do believe that a growing number of people recognize this on some level and are worried, but are in the early stages of the "denial" phase of grief at the moment.

 

As you said, it will be interesting to see how the sales & auctions go over the next couple of months, and, more importantly, into the first half of next year. A lot has changed in the world even since the summer - a lot of hard assets were a lot more valuable then; I can point you to stocks of commodity producers that were, literally, 100-200% higher (!!) three months ago when the weak dollar and inflation fears were foremost on peoples' minds. Before people dismiss this, keep in mind that part of the motivation for buying collectibles was a perceived safe haven from a falling dollar, which also made things cheaper for foreigners, and as an inflation hedge. With other such hedges having halved or worse in the past 90-odd days, is it even rational to expect collectibles to be unaffected?

 

Now, clearly, the greatest threat out there is the ongoing debt-deflation which is crushing all asset prices. People can talk about nostalgia and one-of-a-kind until they're blue in the face, but when the inflation psychology turns to a deflation mindset, foreign economies are joining the U.S. in a race to recession/depression, other assets are racing towards zero, credit is being destroyed by the tens of trillions, net worths are falling by trillions of dollars in aggregate and the dollar is strengthening as liquidity evaporates from the financial system, things don't look very pretty with OA prices near their highs while many other hard assets have crashed and are 60% off their peaks.

 

If you thought there was a good chance the U.S. could be entering a period similar to 1990s Japan, would you be buying artwork? The Japanese sure didn't, which is a big reason the fine art market collapsed after 1990. Of course, no one can predict the future with certainty, but comparisons to the past half century of U.S. history don't make a lot of sense when collectibles prices have never been this high both absolutely and relative to incomes and net worths, and when the U.S. has not faced an economic/financial crisis of this type (deflationary) or magnitude in any of our lifetimes.

 

I feel like the OA market of the past couple of years was so clearly an unsustainable bubble that we'll look back a few years from now and ask ourselves what we were thinking. We'll see how quickly it takes for prices to crack. As we've seen with Manhattan real estate, it could take a while (and there will certainly be some new record prices paid in the bear market which will keep people in denial for longer), but ultimately, the laws of reality and gravity always win out.

[westform]

I have seen no evidence of slowing down or deflating of prices for OA that I have bought and sold in the last year; in fact just the opposite. Sorry guys, not buying it..... yet.

 

But, I have seen a dearth of 'art days' at the high end... although I attribute this more to KK's (and others) call out that showing art depriciates its value. This may have finally taken hold of some of our psychology (actually there are many long term collectors who have always believed and practiced this). In fact, all I hear is 'fresh to market' these days as the selling tool that trumps all others. If buyers are constantly going to be beaten over the head with the 'freshness' factor as they plunk down their ever increasing bucks, then surely they are going to take the hint and hide away their freshly gotten booty.

 

Yes, it may suck for the rest of us voyeurs, but as prices have gotten so huge, it is perhaps a risk that many are no longer willing to take. This new tack could even end up hurting the market, as I've always believed that you need transparency in the market to get people reved up and keep them excited. Hoarding and hiding can work in the opposite direction. I feel the Golden Age market suffers from stagnation not due to it's age but mostly due to the lack of material and transactions in the open marketplace as old time collectors hoard and hide and transact infrequently in secret. Just my 2 cents. DF

[spider9698]

No doubt that people should hold for the long term but there may be folks out there that need to move pieces for unexpected emergencies, need for liquidity etc and they will get hurt short-term.

 

[Silow]

When there is blood in the streets buy realestate or original comic art!!! I hope some people are foolish enough to sell some pieces they can't afford. If you need money sell some of the pages you don't really like but keep your favorite stuff so you are not sorry latter.

[dem1138]

My buying and selling has definitely slowed down. I think the majority of us are taking a "wait and see" approach. From conversations I've had, I don't think anyone is willing to panic until an "A" Ditko Dr. Strange, ASM, or Kirby/Sinnott FF page sells for less than 15K.

 

From what I've observed, a lot of people are holding on and not looking to dump any of the exceptional art that they own. I think collectors are holding a longer approach to what they own.

 

Will the hobby go the way of animation cels or japanese toys? I hope not.

 

I think it'll be an interesting San Diego 2009.

 

Comics don't seem to be affected as much. A signature series 6.0 AF #15 just sold for 22K and Borock sold 2 9.8 All-Star Batman #10 Variant covers signed by Jim Lee for $350-$375 and an 8.0 Avengers #4 just sold for over $2000. Those are all healthy record sales within the last week.

 

All of us who own a lot of art clearly have a vested interest in the hobby remaining strong so the next few auctions and conventions should give us all a clearer story.

 

Looking through the upcoming Heritage and Comiclink Auctions though, it doesn't look like anyone is letting go of much yet.

 

 

 

 

[spider9698]

Looks like KK was banned again

 

[delekkerste]

No time to be Pollyannish here, methinks...

 

 

Deflation Threat Returns as Asset Markets Decline

2008-10-06 12:49:07.330 GMT

 

By John Fraher

 

Oct. 6 (Bloomberg) -- As Federal Reserve Chairman Ben S.

Bernanke and his global colleagues fight the worst financial crisis since the 1930s, one danger is looming larger by the day: deflation.

 

With asset markets tumbling, commodity prices plunging the most in 50 years and banks keeping a tighter grip on credit, the ingredients for a sustained period of falling prices are coalescing. While inflation is still a concern for many policy makers only months after oil and food prices peaked, the risk is their patchwork of rescue and stimulus packages will fail, and prices will start to fall throughout the broader economy.

 

``The ghost of deflation could be dragged out of the closet again in coming months,'' says Joerg Kraemer, chief economist at Commerzbank AG in London.

 

A global recession is already looking more likely, with the credit freeze stirring memories of Japan's decade-long struggle with deflation in the 1990s. So European Central Bank President Jean-Claude Trichet and Bank of England Governor Mervyn King may be forced to follow Bernanke, whose Fed has chopped its benchmark rate by 3.25 percentage points since August 2007 to 2 percent -- its most aggressive round of easing in two decades.

 

The deflation scenario might go like this: Banks worldwide, stung by $588 billion in writedowns related to toxic assets -- especially mortgage-related securities -- will further reduce the flow of credit, strangling growth. That will push house prices lower, forcing additional losses and making banks even more reluctant to lend. As the credit crisis worsens, businesses will find it almost impossible to raise prices.

 

A `Vicious' Cycle

 

``A vicious deflationary cycle'' could then ensue, says Tony Tan, deputy chairman of Government of Singapore Investment Corp., a sovereign-wealth fund that oversees more than $100 billion.

 

Prices are already falling in parts of the world economy.

 

Home values dropped more than 10 percent in the U.K. and in the U.S. in the past year. Oil, copper and corn drove commodities toward their biggest weekly decline since at least 1956 on Oct. 3, with the Reuters/Jefferies CRB Index of 19 raw materials tumbling 10.4 percent. The Baltic Dry Index, a measure of commodity shipping costs, has dropped 75 percent since May.

 

``We are certainly more worried about deflation than inflation,'' says David Owen, chief European economist at Dresdner Kleinwort Group Ltd. in London. Central bankers need to ``get rates down and keep them there for quite some time,'' he says.

 

Aggressive Easing

 

Trichet said Oct. 2 that European policy makers have considered reversing their decision in July to raise their benchmark rate by a quarter point to 4.25 percent. Forty-six of the 61 economists surveyed by Bloomberg News expect the Bank of England to cut its key rate by at least a quarter point Oct. 9 from 5 percent.

 

The Fed has already responded to one deflationary scare this decade. With inflation approaching 1 percent in 2003, then- Chairman Alan Greenspan slashed its rate to a 45-year low of 1 percent and kept it there for a year, which its critics say helped fuel the property and credit boom that is now unraveling.

 

This time, the crisis is an increasingly dysfunctional banking system that may not be able to continue making loans that grease economic activity. Such a pullback, combined with slowing growth and falling asset and commodity prices, makes deflation more of a threat, Owen says.

 

Restricting Credit

 

Spooked by the collapse of Lehman Brothers Holdings Inc. and other institutions, banks are restricting access to credit. The London interbank offered rate, or Libor, they charge each other for three-month loans in dollars rose to 4.33 percent on Oct, 3, the highest since January.

 

Not all economists share Owen's gloomy outlook. Some say Bernanke and other central bankers have learned the lessons of Japan and the Great Depression so well they will do everything necessary to head off trouble.

 

Former Fed Governor Lyle Gramley says that while deflation is a risk ``if we were to go into a very, very prolonged recession and nobody did anything about it,'' he is ``not worried,'' because he's confident the Fed will act ``very, very, very aggressively.''

 

Bernanke, who has studied the Great Depression since he was a graduate student, has said that one key reason the U.S. stock- market crash of 1929 had such severe consequences was that lenders were forced to close and the banking system was deprived of liquidity.

 

`Lost Decade'

 

He has also studied Japan's ``lost decade'' of deflation, which was partly caused by a banking crisis, and has argued that its policy makers waited too long to respond to a stock-and- property price crash at the start of the 1990s. In a 2002 speech that earned him the nickname ``Helicopter Ben,'' he said governments and central banks must respond immediately to such a deflationary shock by dropping money into the banking system.

 

The caution of Japan's leaders -- who waited until 1999 before using taxpayers' money to bail out the banks -- cost their economy dearly. Lending shrank, unemployment more than doubled to 5.5 percent, and Japan experienced three recessions between 1990 and 2002. From 1997 to 2007, consumer prices dropped 2.2 percent.In the U.S., prices climbed 29 percent in the same period.

 

When credit markets started seizing up in August 2007, Bernanke set up more than $1.4 trillion in emergency borrowing for financial institutions. Today, the Fed said it's doubling emergency loans to commercial banks to as much as $900 billion.

 

The ECB, the Bank of Japan and other central banks have set up similar lifelines. On Oct. 3, President George W. Bush signed into law Treasury Secretary Henry Paulson's $700 billion bank- rescue plan.

 

`Last Resort'

 

Commerzbank's Kraemer says the Fed might also consider further easing collateral requirements or purchases of government bonds ``as a last resort.''

 

Kraemer says he thinks a slowdown in inflation is more likely than deflation. The surge in commodity prices earlier this year drove inflation in the U.S., Europe and Asia to the strongest pace in at least a decade. Strategists have pointed to Paulson's rescue plan as an additional risk.

 

Japanese core consumer prices, which exclude fresh food, climbed 2.4 percent in August from August 2007. The U.S. core rate, which strips out food and energy, rose 2.5 percent from a year earlier.

 

Still, deflationary forces are mounting in the U.S. and other parts of the world economy. In Britain, the Nationwide Building Society says house prices have dropped 12.4 percent in the past year as banks restrict the supply of mortgages, putting the economy on course for its first recession since the early 1990s.

 

Deflationary Consequences

 

``The risk we must be careful not to underestimate is the deflationary consequences of the credit crisis,'' Bank of England Deputy Governor John Gieve said last month.

 

In the U.S., prices manufacturers paid for materials last month plunged the most since at least 1948, with the Institute for Supply Management's index dropping 23.5 points to 53.5 points.

 

The breakeven rate on U.S. 10-year Treasuries, a measure of price expectations, dropped to 1.4 percent from 2.6 percent in July. Japan is the only country whose bond market implies a lower inflation rate than the U.S. The rate represents the pace of inflation investors expect over the life of the securities.

 

All this is likely to make the Fed resume rate cuts, says Robert Dye, a senior economist at PNC Financial Services Group in Pittsburgh, Pennsylvania.

 

``If we're going over a cliff, we're not going to go over a cliff with a 2 percent federal funds rate,'' he says. ``What's the point of holding back?''

 

For Related News:

Stories about deflation: NSE DEFLATION Stories about the credit crisis: NI CRUNCH Stories about Paulson's $700 billion plan: STNI PAULSONPLAN

 

--With reporting by Scott Lanman and Robert Willis in Washington, and Ben Sills in Madrid. Editor: Melinda Grenier

 

To contact the reporter on this story:

John Fraher in London at +44-20-7673-2058 or jfraher@bloomberg.net

 

To contact the editor responsible for this story:

Riad Hamade at +49-69-9204-1214 or rhamade@bloomberg.net.

 

 

[comix4fun]

From a personal perspective, I am person that makes art day announcements when I get a commissioned piece that is new and unique and (I think) is fun to look at. I usually don't post about pubbed pieces unless it is to thank someone for their help.

 

There are several folks I know that have emailed me when they get something new but they don't post publically. Simply put, I don't know how much stock I put into equating a lack of "art day" announcements to a slow down in selling and buying on the top end.

 

In the 16-17 years I have been collecting artwork I have never had as many people come to me to buy prices at amazingly high price levels as I have had in the last 6 months. In the last 60 days in fact I have had no less than 12 different collectors seek out prime pieces from my galleries and make offers (on several different pieces from silver to modern) that no one would mistake as deflationary.

 

This hobby of ours is still a very close to the vest kind of thing for all but the very new at it. The more seasoned veterans don't usually make declarations about their transactions very often.

 

And when it comes to buying and selling art as a commodity....that has never been how I have approached it. The money I have used to acquire artwork has always been money that I could afford to lose. I never used the rent, mortgage, car payment money to buy artwork. If someone is using money that should be buying their kids food, or tuition, or pay the electric bill they are (frankly) in the wrong hobby or playing at the wrong level.

 

If people only spend what they can afford to lose it takes all the pressure off the collecting parameters. You will never be "forced to sell something" to pay a bill. You use the old business model of "pay yourself first". Max out your 401k, or IRA, have a healthy cash reserve, make sure your kids college funds get theirs, etc. etc, before you start to allocate cash for OA collecting. If you do that you can afford to be patient, to wait until you want to sell, or want to trade to get something you want more. Using that as a model it is very hard to take a loss or lose your shirt on a piece or on a collection.

 

Personally, after this many years or trading, buying and selling I have "dollar cost averaged" my collection (through selling at the right time, buying at the right time, and trading at the right time) to the point that my I have almost no money into it. And trust me (and ask my wife) I am no genius. I am just patient, and willing to forego buying or trading for a piece until it is the right time for me at a price that I can justify if the piece is "worthless" tomorrow.

 

Oh and finally, I only buy what I really love. I know it sounds cliche, but if I see a piece I have to say anything less like or and I usually pass. I have never gone wrong doing it that way.

 

Best,

Chris

[delekkerste]

Chris,

 

It doesn't surprise me to hear that you have kept a level head when it comes to your art collecting, but I wonder how many others haven't, especially those who are relatively new to the hobby and never had the benefit of buying art at pennies/dimes on today's dollar.

 

The art days observation is anecdotal, to be sure. Of course not everyone shouts from the rooftops every time they get a new piece, but it does seem like the number who do has dropped precipitously in recent weeks. I would say looking back to the spring and summer is pretty much ancient history at this point. I would have loved to have sold U.S. Steel at $196/share (now at $54), crude oil at $147/barrel (now $89), copper at $8,940/ton (now $5,560), etc. this past summer. Clearly, that was the top of the hard asset bubble and inflation hysteria, of which art and collectibles participated in.

 

Perhaps it is fortunate that OA does not trade on an exchange where price discovery occurs on a daily basis, so we can cling a while longer to the belief that our collections are worth as much as they were 3 months ago. Sadly, I am pretty sure that, for most of us, that is simply not the case. For those like you and me, who collect using discretionary funds and not for investment or resale, it may sting to see prices fall, but it won't be catastrophic. For those who got in over their heads, though, I wouldn't twiddle my thumbs waiting to see what happens - I'd be unloading all the stuff you don't intend to hold for the long haul *right now*. Do not pass go, do not collect $200, just sell.

 

Gene