Guitars as True Investments

  • Thread starter Thread starter Zaphod B
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Mine is pictured in my avatar (pretty poor resolution, LOL).

It's a conventional mahogany/maple cap Les Paul, with a mahogany 3-piece neck and body binding. It's finished in gold on the top and natural on the sides and back and neck, which was the original LP finish.

It's from the era when Norlin was reissuing the Les Paul, but they couldn't figure out which version to market. The early reissues had P90 pickups, and right away the dealers told them that the humbucking versions were what Eric Clapton and Peter Green were playing, so Norlin was stuck with a lot of LPs that had already been routed for the small single-coils.

Along came some bright guy who noticed that the Epiphone (which Gibson had bought, lock, stock and barrel in the late 50s) mini-humbucker fit right into the rout for the P90.

Thus was born the Deluxe, a pretty much ordinary LP with mini-humbuckers instead of the full sized ones on the Standard, Custom and so on.

The sound is brighter than the full-size pickup models. In fact, I was never a fan of LPs until a friend bought this one in 1984. I played it and fell in love. Thirteen years later (!) he decided to sell it, so I got it in 1997.

The bridge pickup was dead, and I replaced both with Seymour Duncan SM-1 minis. They retain the sound of the stock ones, which was what I was after.

Other than that, everything is original. As I've noted, it's a boat anchor, but it sounds so sweet I can't give it up. It became my main gigging guitar (taking over from the Chet Atkins I talked about earlier) and is now my one and only electric, after a motley collection of Ric, Strat, Country Gent and too many pawn shop prizes to count.

At the moment, though, it resides in its case most of the time, since I'm currently playing bass in a working band.

I'd love to attach a pic, but I don't have one small enough -- other than the avatar. Let's see yours.
 
That sounds like a very nice guitar, lpdeluxe.

I posted some pictures of mine a while back......lemme see...

Here they are. I plan on replacing the Schaller bridge with something more like the original (which I never had - it came with another aftermarket thing on it...)

https://homerecording.com/bbs/showthread.php?t=221338
 
Pm me with your email address and I'll send a better pic.
 
Rare Book Dealer....

In my real job I work as a rare book dealer. People coming in trying to sell books all the time. Some of them are over 150 years old, in good condition. Know what? 99% of them ain't worth shit!

I don't know how the price structure of guitars works... but I expect if you check auction records, which is free information and open to the public (if you can find the shit, that is) you will find that most guitars that are not handmade in limited editions will be worth less and less over time, as their condition will invariably worsen, and there will be less and less ability to tell how many of those guitars were made.

Limited edition, handmade guitars will most likely become rare on the market, and their price may increase slowly in increments over time as they are sold, and sold, and sold again. I'm talking dealer to client prices, not regular joe selling regular bill his old guitar.

Really, though, you don't even want a single copy of the guitar you have to be on the market, as then you can set your price. Of course, in the guitar world, that's difficult. Basically what I'm saying is, you want a unique item that collectors will want. For example. Get some smelling salts and wake up the dead Nick Drake and have him play it for a while. Not possible?

Just become famous and play sold out shows in Madison Square Garden and incite modern hipsters to riot. Most of those hipsters will become alcoholic loafers, but a good deal of them will stop dying the hair, cut their fingernails, and get good respectable jobs with disposable incomes. They'll want to prove they're your biggest fan by buying your signed/limited les paul custom with your blood on the fretboard from when you ripped your fingernail off on your "odernized" cover of "incense and peppermints."

If that doesn't work you can always buy one of Clapton's guitars. He seems to be selling them at a pretty good clip. As long as you don't touch it, it will probably continue to increase in value.

Until, that is, the world realizes that Eric Clapton is an asshole.

But for real, the rules in the rare book world are as follows:

Is the book uniqe? if yes—CONDITION CONDITION CONDITION.

:D

so yeah.
 
starbuck 26, there are differences....

A big difference is that guitar values seem to be driven by fads. Maybe the best metaphor is something like the original Oz books: for a period, there was a generation of people who grew up on them and later started trying to find mint copies, which drove prices up above intrinsic worth. Once everyone has his or her copy the market settles down.

With guitars, uniqueness is a liability: people seem to want one "just like -- fill in the blank -- played" because, as has been pointed out, that person was their hero when they were 12 years old, never mind that "fill-in-the-blank" played off-the-shelf axes of which bazillions were cranked out. It's true that "real" collectors value uniqueness, but the guitar market is not primarily driven [IMHO] by the bona fide collectors.

In fact, the guitar market prices seem to be based on (as one guy in the trade told me) "what the biggest fool will pay." Thus the $50K Stratocaster canoe paddle.

For a long time, the Les Paul has been the gold standard of "vintage" (as opposed to "used") guitars...there are thousands upon thousands of them out there. A friend took an extremely rare 1950 Fender Broadcaster to the Dallas guitar show last spring, and almost sold that sucker for $100K...but the buyer found a '57 Les Paul for $250K instead!

That's a little insane. As an aside, it's also what prompted Zaphod B to start this thread. Everyone lives in hope that he'll find a $250K guitar under old uncle Fred's bed when he goes to the nursing home. That's human nature, just as it is for unknowledgeable people to bring in old books to you, in the expectation of striking it rich.

Me, I buy guitars to play.
 
I did a quick search and found a listing for a '73 Les Paul Deluxe on Gruhn's website. the guitar has replacement Schecter pickups and he's asking $2k. That's more than double it's retail price when new. As is still the case, this is not the most desireable model and it is not really rare. If it were all original it would be worth quite a bit more. A good example of a Les Paul Standard from the time has a higher value and is more common. I believe it was less expensive new.

In this case doubling your money is really a wash in terms of real dollars, but if you were to have bought it new you would have lost nothing and had a fine guitar to play for 30+ years.

Very few professional guitars made in this time frame can be had for much less in original condition. Most of them had lower retail prices when new.

This is in the lower end of the market. Were talking about standard professional instruments. LPDeluxe's Guitar will go up in value. He will get to play it in the meantime.

I really believe good guitars are good investments. That doesn't mean anything you buy bill be worth a bazillion dollars. Niether was your Enron stock
 
Yeah, Norlin Gibsons are like CBS Fenders: it doesn't matter that quality declined, to a person born in 1980 it's "vintage".

Now, MY Norlin Gibson is exceptionally good, but here's another thing: being an excellent playing and sounding axe, it has a lot of wear on it.

Collectors, God bless 'em, want pristine...so they end up with the ones that weren't good players.

As always, my opinion.
 
LPDeluxe,

I agree, I've seen some guys who were really proud of some really sucky guitars, but they don't represent most of the market. Most of the market is made up of people who can't afford "pristine examples".

The guitar Gruhn has is a "players guitar". It's an example of what makes up most of the market. Most of the buyers are buying them to use. The ads for them talk to tone and playability and they may not be worth what a mint condition one is but they are still plenty desireable.

In this tier of guitar collecting guitars still outperform the stock market over the long term. You just won't make a fortune like you would with a pre-war Martin or a 'burst.

There are some segments of this market that are doing very well indeed. The days of finding that "he didn't know what he had" guitar may largely be over, But you can still justify your toys as good investments.
 
You're probably right. I was focusing on the killer end of the market.

The fact is, there are lots of good instruments out there, for reasonable prices, but taking my LP for an example, it sold for $450 when my friend bought it, and would fetch maybe $1200 now. That's not gonna make me rich (and of course, he didn't sell it to ME for $450).
 
Aye... Differences abound.

Yes, there are differences. As I said, I am not aware, nor do I really care, of the price structure for the guitar market. I am merely trying to point out that buying a guitar off the shelf, playing it, and expecting it to appreciate in value over time is a bit ludicrous.

The broadcaster example is an excellent example of what I am talking about. You're talking about a guitar that--again, in my own paltry understanding of guitar history--was really on the cusp of the electric guitar being used in rock and roll. It's going back to the beginning, and, from what I understand--the model had a very short lifespan, thus limiting the number of them that are around in the world. I was surprised to some degree that it might fetch as much as 100,000 dollars, but then again I don't really know about that, and would have to study some auction records.

I do like the fact that he "almost sold the thing" for 100K. We joke in the rare book trade about "almost sales." As if they actually count. At the shop where I work we have--if we were to go by our prices--tens of millions of dollars worth of extremely rare books. But we're usually broke. A hundred thousand dollar book--and we have dozens of this caliber--is not a hundred thousand dollar book when it's sitting on the floor of our shop in cambridge. It's a book no one wants or no one is willing to pay for. It's a fucking book, and nothing else, no matter how we try to convince ourselves otherwise.

I guess, in a round about way, I am offering some advice on collecting. Tell you a story: A kid about my age (I'm 24) came into the shop with a whole bunch of money he got from his grandmother wanting to buy some fairly rare books and manuscripts. He wanted to start a collection and eventually break into the book trade. I see this all the time. So he buys a 300 dollar book. Pretty nice book. Then a letter for 1,200 dollars. Then Maurice Blanchot's driver's license for 1,000. Then another book for 500 bucks. Then some shit on ebay. Whole time I'm trying to advise him that if he really wants to start a collection, you return all the shit he bought--books that, in the life of a bookseller, we will find a dozen more in the next ten years--and spend grandma's money on one thing that n o b o d y has or ever will have because it's one of a kind. Or, don't spend Grandma's money at all. Which was what I (halfheartedly) tried to convince him to do. But not so hard because we have to keep the lights on and get paid and buy booze for the shop etc...

And, yes, interesting pills to keep us alive until we're 150 years old. Or, at least, pills to make us write weird sentences like that. :D

Really, it all boils down to this: If you want to buy a guitar to play, buy a guitar to play. If you want to collect guitars, collect guitars. But the two don't really mix.

A guitar, I guess, is an investment in the soul, which is where all the real dividends pay off double.

Cheers, gentlemen.
 
starbuck26, we don't disagree

I was simply pointing out some factors affecting the high prices of guitars.

As to the "almost sold" story, well, that's another way of looking at it. The guitar shows are full of people who have large wads of cash and also people who don't. The guy telling me the tale has made pretty good money peddling those things -- he sold a local musician's Bigsby electric mandolin for $50K, and turned it over to him without taking a commission, to ensure the old guy's retirement.

Me, I'm strictly agnostic. Anywhere you look, if it's possible to buy low and sell high, someone will be out there doing it. There are fakes and forgeries and every venal thing you can think of (especially with Fenders, which are essentially bolted together out of parts) but I don't take part in it myself.

I just like to inflict my opinions on undeserving others.
 
Milnoque said:
For what it's worth,

Guitars outperform the stock market and have done so for quite some time.
Click to expand...

At the risk of sounding like an intellectual coward :) I truly would love to see some data supporting this. Could be true, but boy am I skeptical.

I wouldn't doubt that picking just the right guitar could outperform the S&P 500, but I'd think on average the guitar market would perform well below it. A better comparison would be to pick just the right stock vs. just the right guitar and I'd bet the stock would bury the guitar.

I doubt the vast majority of guitars even hold their value in real dollars, i.e. outperform inflation.

I love guitars and have a bunch, I just think it's a mistake to think of them as long term investments. If you are able to consistently purchase them at below market value and resell them, then you have a business which is different of course.
 
I totally disagree with the idea that the average guitar, say a Fender Strat, or Tele, something in the 1-2k range is going to appreciate in value over time as you play it. It's like buying a car. Soon as you get that thing off the lot it's worth a great deal less. Even if you change the tires and the oil every 900 miles and don't smoke and don't pick your nose and wipe it under the seat.

I mean, think about it. If everything increased in value slowly over time, why the hell are we all on craigslist every day waiting for some wanker who spent a buttload of money on a really nice guitar, or amp, or whatever, and is now trying to get rid of it. They're all the same thing: "Mint condition." "Only been used twice!" "Still-in-the-box." It's bullshit. In your head you're already knocking that thing down by half. If even.

Maybe I'm wrong. I'm just always looking for cheap gear, and willing to wait. It'll usually show up...
 
OK, stream of consciousness rambling here.

As has been previously alluded to, the vintage guitar market is not homogenous. I generally view the market as consisting of at least three basic segments of instruments. There is the high end stuff -- 50s LP bursts and nocasters, prewar martins and the like. Virtually all of these instruments, in addition to being old, are relatively few in number.

Midrange stuff (and I use the term "midrange" loosely) includes instruments like 60s strats, teles and 335s, 50s and 60s Martins and Gibson acoustics.

Then there is lower range stuff like 70s teles and strats.

Each represents a different market. The high end stuff is purchased largely by real collectors who may never play the instrument. And at $150k a copy, you aren't taking that LP burst out there and gigging it. The middle range stuff is typically bought both by collectors and well heeled players. Certainly some of this market is fad driven, but some is also driven by boomers recapturing their youth. For some of this mid range market, tone and playability still matters. There are more of these instruments than the high end instruments, but the numbers are typically still fewer than the production figures for the 70s and later. Virtually all of the high end and mid level instruments are composed of instruments that were commercially produced in some volume (there are exceptions such as D'Angelico guitars, for example) and certainly there was more hand work in the production in those days. Nonetheless, we aren't generally talking about high end solo luthier production.

The lower end stuff is more typically bought by players who want a "better" or more unique guitar, and who might believe, rightly or wrongly, that a 30 or 35 year old instrument offers better quality or more cachet. Lower end stuff is also bought by people trying to break into guitar collecting, and see this stuff as relatively affordable compared to the other segments. There are typically more instruments produced for a given model in this segment than in the other two segments.

This doesn't really even address instruments that seem completely fad driven (for example when Fleetwood Mac started touring again, Rick Turner guitars like those played by Lindsey Buckingham became as scarce as hen's teeth -- you couldn't unload them for love or money the year before, even though they are quite nice guitars and I suspect the price on those has declined steeply since). It also doesn't address celebrity guitars (i.e., Blackie).

In any event, because the market is not homogenous, different segments will appreciate at different rates as the number of buyers in each segment and their motivations are different and will change differently over time. So yeah, it's still a crap shoot, although you probably decrease your risk a bit by buying in the upper two segments where instruments are relatively more scarce and values are also somewhat more established. Trying to buy a current production instrument or a fad instrument, however, with the hope that it will someday be collectible and worth more, seems to me to be the height of speculation and the highest risk. If I bought a modern instrument (and I have several), I'd buy them primarily because I thought they played and sounded great, and if I was lucky enough for them to also appreciate in value, that's just a windfall.
 
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I keep going back to LPDeluxe's guitar because it is a perfect example of what I'm talking about.

This instrument is in the lower tier of the vintage instrument market. It is not uncommon. There is no current fad associated. It's just a fine old guitar in good playing condition.

The guitar was worth $450 at a point in the past. Someone bought it, played it a while and then sold it at a profit to LPDeluxe. He has played it for a while and now he values it around $1.2K. Given that a dealer is asking $2k for a similar example I would argue that the $1.2K valuation is reasonable. This guitar has nearly tripled in value even though use has likely degraded it's condition a little.

It would help if we knew over what time frame the guitar's value appreciated.

This guitar was a good investment.

Sure, you can come up with many examples of stocks that have outperformed it. Many others have done far less well. At the time this guitar was made a casual investor would likely have chosen manufacturing stocks, few of which have done as well over the same time frame.
 
Milnoque said:
This guitar was a good investment.

Sure, you can come up with many examples of stocks that have outperformed it. Many others have done far less well. At the time this guitar was made a casual investor would likely have chosen manufacturing stocks, few of which have done as well over the same time frame.
Click to expand...

Even if that is true, how many guitars would one have to buy for the investment value to be really significant? Sure, if you had bought a Strat in the early 60's and kept it under a bed with the original paperwork and hang tags, it would be worth orders of magnitude more than you paid for it in today's market, but even a $20K profit isn't that big a deal if it's the only one you've got. It would be a nice windfall but it wouldn't fund your retirement.
 
You can do well with selective and informed purchases of used guitars held over time. Generally, they'll hold value at the rate of inflation at the very least and you won't lose money. If you get lucky and find a great deal there's a chance you can make a fair amount of change. I can't recall ever losing money this way.

New guitars are another matter, there's glut of good ones out there with no letup in sight, and therefore they're a bad investment, if investing is what you're into.
 
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