July 18, 2013
Yesterday afternoon while strolling around Lisbon, I happened upon a row of antique stores.
Like most retail storefronts in the city, the proprietors were in a serious cash crunch and looking to quickly liquidate some inventory.
I found this to be an exciting opportunity given that collectibles are such a unique asset class; just as they say about property, “they ain’t making any more of it.”
In fact, whether you’re talking about rare stamps, coins, watches, or wine, supply is generally fixed… and falling.
For example, only a certain amount of 1794 “flowing hair” silver dollars were minted. Very few remain. And they can’t go back in time to make any more of
them. As a result, certain old coins not only have melt value, but also true scarcity.
In an environment of increasing money supply, this means that more money is chasing fewer collectibles. Generally this is bullish for nominal prices. And it’s why I was so intrigued yesterday.
The shopkeepers’ financial jam presented me an opportunity to trade a paper currency that I don’t even believe will exist in five years for something scarce, liquid, and valuable.
Now, as with anything, it’s critical to be well-informed when buying collectibles. I know very little about watches and stamps, so we started with their coin inventory– something I’m educated about.
I ended up buying several different coins– including some Indian head $2.5 gold pieces and English Sovereign gold coins.
Sovereign coins are an interesting beast as they’re a bit of a hybrid. Modern mintages are traded around the world like other bullion coins such as US Eagles, Maple Leafs, etc.
And with over millions minted, they’re not exactly rare. (Bear in mind that an old coin isn’t necessarily a rare coin…)
But there are several older mintages that are becoming more scarce. So occasionally there’s rarity in addition to bullion content.
In this case I was able to pick up the Sovereigns in bulk at almost exactly the spot price of gold… meaning I was only paying for the metal value. I got the potential scarcity and numismatic value for free.
This was a phenomenal bargain, simply because I happened to be in the right place at the right time. And it’s indicative of the trend I see unfolding in the West.
Just like all the agricultural property and residential real estate I’ve seen here, high quality assets are selling for steep discounts in bankrupt countries. But I’m not seeing any signs of a turnaround. Rather, it seems to be worsening for now, at least in southern Europe.
For investors, it’s definitely worth keeping an eye on these places for great deals. Given that world stock markets are inebriated bubbles rigged by central bankers at the ends of their ropes, high quality distressed assets in bankrupt countries may provide more compelling opportunity.
* Lastly, as an aside, I should mention that certain coins (and stamps, etc.) are so rare that they can sell for tens of thousands, hundreds of thousands, even millions of dollars.
And if you’re looking for a fast way to ‘pocket’ a lot of wealth and leave the country, this may be worth considering. More on this another time…