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Gone Viral

If the economy tanks because of the economic impact of a viral pandemic, I believe that the best of the investment grade guitars will be just fine. This 58 is guaranteed not to harbor any viruses. As a precaution OK Guitars will be open by appointment only for the month of March. Call for an appointment.

If you are an investor, the past week has been discouraging. The stock market is down 15% or so and the threat of a pandemic is the engine driving this. An economy that is chugging ahead nicely, along with a stock market that seemed unsustainably high (and going unsustainably higher) is bound to react to global bad news-especially bad news that has long term consequences. Me? I’m just a guitar guy. I don’t know much about economics (making the previous statements totally suspect) nor do I know much about investing in stocks other than a personal history of investing in a totally safe stock that promptly tanks the moment I buy it. I learned long ago that the stock market doesn’t like me and I don’t particularly like it. But I know about “investment grade” guitars and that’s what we’re going to talk about here.

What does “investment grade” even mean? Isn’t any guitar that has a value that can go up “investment grade”? After all, that’s the point of investing. Buy low, sell high, right? That’s true but history shows us that some guitars are simply better investments than others. I’m not going to be your investment advisor. You’d be nuts to listen to me about any guitar that isn’t a 335, 345 or 355. So, that’s what we’ll talk about. In my year ender posts, I looked at the past year from an investment perspective. But it was a pretty general discussion…block necks, dot necks, blondes, mono 355’s and so on. But now, with your stock portfolio, which did so well over the last…what, ten or twelve years?, heading into losing territory, what does that do to the guitar market? I don’t know-if I did, I’d be rich and retired-but I have a pretty good idea.

Here’s my opinion from a guy who believes in the vintage guitar market and a guy who knows that you can’t play the blues on a stock certificate (although you can sing the blues over a stock certificate-especially recently). The stock market downturn has to do with worldwide economic concerns. The supply chain for new products largely flows through China. A pandemic will keep people from going to work and things won’t get made. The travel and tourism business drops to near zero in a pandemic. The entertainment business, including professional sports, suffers because folks won’t congregate in large numbers. You can trade your stock portfolio in your pajamas from your home office but that doesn’t help the companies whose stock you are buying and selling from tanking in the wake of a worldwide economic standstill. But vintage guitars don’t follow these economic realities. They simply are.

There is no supply chain to speak of except, perhaps, reproduction parts. There are no crowded public spaces required. You can, indeed, buy a vintage guitar in your pajamas. With an approval period, your risk is minimal. Your risk of getting an illness from a guitar is pretty slim. Does a significant economic downturn hurt the guitar market? It could, by diminishing the wealth of prospective buyers. But it doesn’t hurt the demand for the product. Truthfully, if I’m stuck at home because it’s too dangerous to go out in public or I’m self quarantining , I’m going to really happy having my guitars to keep me company and the thrill of getting a “new” one-if I can trust the Fedex man not to have a communicable virus-will likely be enhanced. If I have to wear gloves and a mask to unpack my purchase, I’m OK with that.

My general advice, from an investment standpoint, is to buy no issue guitars. Mint guitars are great investment pieces because the serious collectors will always want the best example available. Player grade guitars are not the place to go in an uncertain market. Buy them and enjoy them but they will not keep pace with what is still a vibrant and rising market. The values will likely hold up in the short term, but the liquidity (ease of selling) may not and that will drive the values down. If the global repercussions of a pandemic affect all aspects of the economy, including collectibles, then the best of the collectibles will likely become more desirable while the lower grade stuff will likely stagnate or back down. The reality is that the folks who can afford the best of the best will still be able to afford them after the potential pandemic has either fizzled (like SARS) or blown up (like Spanish Flu). It could take a few months or it could change our lives for years.

You can’t go wrong with a Fender narrow panel tweed. These will never die. I’ve heard they are loud enough to drive any virus out of your house.

One Response to “Gone Viral”

  1. RAB says:

    Charlie, Good points as always! While I agree investment grade vintage guitars can be a good component of an investment strategy I’ve never viewed my guitars that way. And some of them have been investment grade or highly collectible. I did unintentionally make a killer profit on my first ‘59 Burst, buying it for $1,000 and selling it for $2,500 a couple years later! Ha, ha! It does pain me to think of a fine vintage axe languishing in a climate controlled vault. These beasts were made to be played y’all, hopefully in front big a loud, enthusiastic audience! RAB

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