Collecting During a Time of Inflation 4 4

[jimbo_7071]

On 3/4/2022 at 10:25 AM, buttock said:

The key is to just not report anything on your taxes.  I've heard that's the best way to go to Leavenworth.

I fixed it for you.

[adamstrange]

On 3/4/2022 at 12:19 PM, sfcityduck said:

There are benefits to inflation.  For example, let's say you took out a $1M fixed rate loan at a 3.1% interest rate to buy a house or fund your comic purchases, then inflation is financially helpful.  When inflation increases, the fixed-interest rate financing you took out costs you less than when you took out the loan since the dollar has lost some of its value. You’re essentially paying the lender back money that’s worth less than what it was when you took out the loan.  In addition, wages and revenues tend to rise during periods of high inflation. So, if you’re making more money but your monthly payments for your fixed rate financing stay the same, then the payments take up a smaller percentage of your working capital.  Those of us who took advantage of the historically low interest rates during the pandemic will benefit from this effect.

This beneficial aspect of inflation for homeowners occurred in the 70s.  It also cratered the Savings & Loan industry's primary source of income, causing them and other financial institutions to chase riskier investments leading to the total collapse of S&Ls and lots of big banks in deep trouble that took most of the 80s to get out of.

People that bought houses in the late 70s/early 80s had extremely high interest rates that made it much harder for them to pay off once inflation receded. 

[MyNameIsLegion]

On 3/4/2022 at 9:15 AM, Bookery said:

Well, according to Moody's Photo-cover western index (PCWI), the long term outlook is stated as "fare to Midland" (technical market jargon) with a hold/sell ratio leaning to the downside against comparable assets, though for some reason, it may depend on weather conditions due to a tendency for the PCWI to be tied to oat futures.

fixed that fer ya

[shadroch]

On 3/4/2022 at 10:35 AM, adamstrange said:

This beneficial aspect of inflation for homeowners occurred in the 70s.  It also cratered the Savings & Loan industry's primary source of income, causing them and other financial institutions to chase riskier investments leading to the total collapse of S&Ls and lots of big banks in deep trouble that took most of the 80s to get out of.

People that bought houses in the late 70s/early 80s had extremely high interest rates that made it much harder for them to pay off once inflation receded. 

Not really.  My first house cost $39,000 and had a mortgage over 10%. I want to say 11.9% but not certain.  20% down.  I think I made about 15 payments and refinanced at around 8%.  I had the house three years, sold it and walked away with  a tidy profit.  Sadly, the house would be around a million dollars these days.

[adamstrange]

On 3/4/2022 at 12:41 PM, szav said:

Pass them on to your heirs, or friends, or annoying internet strangers/acquaintances.  No taxes or inflation considerations for them at least! 

Looking at the situation from a tax perspective, these are valid options.

It's also possible that the tax value of donating comics to charity provides a better overall return than selling them.

[adamstrange]

On 3/4/2022 at 12:54 PM, shadroch said:

Not really.  My first house cost $39,000 and had a mortgage over 10%. I want to say 11.9% but not certain.  20% down.  I think I made about 15 payments and refinanced at around 8%.  I had the house three years, sold it and walked away with  a tidy profit.  Sadly, the house would be around a million dollars these days.

Some mortgages were variable, with their rates coming down as the Fed lowered theirs.  Also, the US kept liquidity in the home loan market through the quasi-governmental Fannie Mae and Freddie Mac, making re-financing an easier alternative that it might otherwise have been.

Edited March 5, 2022 by adamstrange

[Robot Man]

On 3/4/2022 at 8:44 AM, adamstrange said:

Even if you don't sell, you are likely to find your collecting to be affected by inflation.

For example, let's say your collectible field increases in sync with inflation running at 15% per year.  Let's say your income increases at 3% per year.  You may find that you have less money to spend on your collection and that you are able to purchase fewer comics as each year goes by.  If there is a dramatic move into your collecting field by those seeking to shield themselves from inflation, you may find yourself priced out of most everything you used to be able to buy.

This is why title of the topic is not specific to taxes but about the broader impact of inflation on the collector.

In my case, I don’t think inflation has inhibited my purchases, more the crazy rise in prices before inflation.

Yeah, I’m an old geezer who remembers when comics were dirt cheap compared to today. But I don’t live in the past. I long ago let 10 cent cokes and 50 cent gasoline pass buy.

Everything is relevant and as time goes on, everything costs more. The way it has always been. But I have never seen comics rise as much as I have in the past couple of years.

I have always viewed comics as just a fun hobby. Not an investment.

As a long time collector, I have long ago seen the giant whales swim past my reach and am OK with it. But now the minnows are slipping away as well.

There is just so much I will pay for books that I can simply enjoy. They are just comics and Lord knows how many I have collected.

I have only bought a few books this year. I used to buy piles of them. I’m paying up for a few that I really need and sitting back enjoying what I have.

And, yeah, enjoying seeing folks fight over books as I continue to weed down my collection. It never ceases to amaze me how much people pay for stuff I paid cents on the dollar for. 

[sfcityduck]

On 3/4/2022 at 9:35 AM, adamstrange said:

 

People that bought houses in the late 70s/early 80s had extremely high interest rates that made it much harder for them to pay off once inflation receded. 

I think Shadroch got this right, the market for refinancing is robust when interest rates are declining.  

[sfcityduck]

On 3/4/2022 at 10:17 AM, Robot Man said:

 

And, yeah, enjoying seeing folks fight over books as I continue to weed down my collection. It never ceases to amaze me how much people pay for stuff I paid cents on the dollar for. 

And I'm sure that you've found other things to collect given the diverse stuff in your sig line and your talk of cars, guitars, and music.

[shadroch]

On 3/4/2022 at 11:03 AM, adamstrange said:

Some mortgages were variable, with their rates coming down as the Fed lowered theirs.  Also, the US kept liquidity in the home loan market through the quasi-governmental Fannie Mae and Freddie Mac making re-financing an easier alternative that it might otherwise have been.

Variable  mortgages were very unpopular at the time, as chances were they would go up, not down.  I was four days late one month on my payments and the rule for refinancing at my bank was nine consecutive on-time payments, and the new rate had to be 3% lower or the fees involved  would eat up the savings. After this, I was out of the mortgage game for a decade and the landscape was very different when I went looking in the early 90s.  In the 70s, banks only wanted to lend money to people who didn't need it. If Citibank gave you a loan, they were locking in a relationship with you for the next twenty years.  In the 90s, the idea was to make the loan and quickly sell it to another bank, locking in a small profit but reducing the risk to nil.

[adamstrange]

On 3/4/2022 at 1:17 PM, Robot Man said:

But I have never seen comics rise as much as I have in the past couple of years.

Which matches exactly the timeline for the Fed loosening the purse strings and running the printing presses 24x7...

Comics have been rising steadily for 50 years, with incredible records being set within the last decade.  People who were no longer spending money on entertainment and travel had more to spare for collectibles, especially comics.

Edited March 5, 2022 by adamstrange

[Robot Man]

On 3/4/2022 at 10:22 AM, sfcityduck said:

And I'm sure that you've found other things to collect given the diverse stuff in your sig line and your talk of cars, guitars, and music.

Indeed. Prices on vintage cars and motorcycles have been dipping quite a bit. It is amazing how cheap a pretty driver Camaro muscle car is now compared to comics. I jumped in on one plus a nice side shift Indian last year.

Personally, nothing like shifting gears and pushing down the gas pedal driving down coast highway. Sure beats smelling pages.

But with $5 gas, it is surely something I don’t do as aggressively as I used to.

On the bright side, I have a lot of oil stocks that are doing real well lately…

[adamstrange]

On 3/4/2022 at 1:37 PM, szav said:

Are you looking to adopt?

Can you catch mice?  Are you litterbox trained?

[adamstrange]

On 3/4/2022 at 2:42 PM, szav said:

I can learn.

I'm only looking for USDA-certified Level 5 mouse-catchers with at least 3 years farmyard experience.  And you'd need to be neutered.

Edited March 4, 2022 by adamstrange

[Dr. Love]

On 3/4/2022 at 9:56 AM, adamstrange said:

Looking at the situation from a tax perspective, these are valid options.

It's also possible that the tax value of donating comics to charity provides a better overall return than selling them.

Can you say some more on this please

Edited March 4, 2022 by Dr. Love

[adamstrange]

On 3/4/2022 at 5:01 PM, Dr. Love said:

Can you say some more on this please

Buy a comic for $100.  Eight years later sell it for $400.  However, inflation has been high enough over those 8 years that the book is still worth just $100.

If you sell, you receive $400 minus the taxes you pay on a $300 gain.  Also, you will need to take $400 out of your pocket to give to the charity.

• Gross Sale = 400
• Taxes from sale = -100
• Charitable Giving = -400
• Charity Tax Deduction = 150
• Net = $50

If you donate it to charity, you receive a $400 deduction that reduces your tax bill.  

• Gross Sale = 0
• Taxes from Sale = 0
• Charitable Giving = 0
• Charity Tax Deduction = 150 
• Net = $150

You can run both options through tax software to determine whether you gain more by selling than by donating.  

Note:  I'm not a CPA or tax lawyer.

Edited March 5, 2022 by adamstrange

[adamstrange]

On 3/4/2022 at 3:21 PM, szav said:

Look let’s not get too personal here but I may only meet one of these qualifications.  3 kids was enough.

You are blessed. 

[I am not Glenda]

This entire post just depressed me

[adamstrange]

On 3/4/2022 at 6:01 PM, I am not Glenda said:

This entire post just depressed me

 It could be worse...

 

[Moondog]

On 3/4/2022 at 11:54 AM, shadroch said:

Not really.  My first house cost $39,000 and had a mortgage over 10%. I want to say 11.9% but not certain.  20% down.  I think I made about 15 payments and refinanced at around 8%.  I had the house three years, sold it and walked away with  a tidy profit.  Sadly, the house would be around a million dollars these days.

That’s exactly what happened to my wife and I, Bill.  Almost the same timing, price and rates.  CDs were 18%!