As I See It...
By James E. Lee
(From Newsletter No. 53)

 

A hobby can help you
weather the emotional
rollercoaster of a recession.


When my children were young, they would play a game (unknown to me) during our dinner table discussions. They would keep track of the number of open ended questions I would ask them during dinner. One night when the number of questions asked reached 25 they let me in on the game. This leads me to my experience at Home Depot this past weekend.

I was wandering about the store looking for white duct tape. The store manager came to my aid. While walking around the store with him I asked a simple question: "How’s business?" His response: "very mixed." I then asked: "What’s selling?" He responded that paint is their best seller. I took that as a very positive sign. Painting is a very calming experience that provides instant gratification once the project is finished. Usually you don’t have to invest a lot of money to brighten up your environment. What a great way to ride out a recession.

The same can be said for the hobby of philately. During tough times you may cut back on the amount of money you spend on your collection. However, you can still enjoy your hobby by remounting or just studying the material already in your collection. Like painting, stamp collecting is a very calming experience.

Opportunity

There are certain fundamental facts about building a competitive exhibit that need to be reinforced from time to time. When preparing to act as an agent at auction for one of my clients this piece I wrote several years ago was the bases of our discussion about the value of the lot he wanted to acquire.

Great collections are built over time. It can take as long as twenty years to reach a level of completeness that lets the collector take it to the next level, competitive exhibiting. As a collector travels along this path there will be several opportunities to acquire rare or unique pieces for the collection. These opportunities must be taken very seriously since they may not repeat themselves. It should also be understood that these opportunities will most likely require a strong financial commitment as well.

The first thing you need to do is define the scope of your collection. This will be your blueprint containing a list of the pieces needed to complete the collection. This can be accomplished by studying auction catalogs to determine the population of material for your collection. When I collected the One-Cent 1861 issue I put together a list of over 250 covers I wanted to acquire. I studied every postal history auction I could find since the 1940s Knapp sales. In 20 years, I was able to acquire all but 13 covers.

As a collection is being built the opportunity to acquire key pieces will emerge via private treaty or auction. On occasion you may find a key piece at a show.

There are two important strategies to employ when acquiring via private treaty. Develop a relationship with a dealer who is knowledgeable in the area that you are pursuing. An extra set of eyes in the marketplace is a must. As an example a show dealer will see more material in a week that you will see in a year. Make sure he/she has a way to communicate with you from the show floor. Next, develop a relationship with an auction agent. An agent will constantly scan upcoming auctions for you and represent you at the sale. Believe me, it is to your advantage to use an agent at auction and not place your bids on the book. You may also want to use an agent when negotiating the purchase of key pieces privately.

The relationship you build with a dealer and an agent is critical to your success. Just the savings in time will be worth their profit or fee. This person also serves as an important sounding board as your collection develops. As the relationship grows you may want to give your dealer/agent some latitude when it comes to purchasing for you at auction.

What follows is the most important part of this piece. While a collection should not be viewed as an investment vehicle, it will serve as a parking place for a lot of money over the years. Therefore, you want to position your collection to bring a maximum return when you sell. I many cases this will mean getting your original investment back. If your collection is formed over say a period of 20 years you may even make money. The key to positioning is to make sure you acquire the key pieces in your area as they come to the market. Having the means does not ensure that you will wind up with the pieces. However, using an agent increases your chances. Collectors tend to undervalue key items. An agent can provide the guidance on value and also on what competition you might encounter at auction. This proved to be the cast at the Lake Show collection auction not long ago.

Without revealing the client or the item I will give you the scenario. The essay was one of the most important keys to his collection. He had been the underbidder on this item once before. During our conversation before the sale he valued the item for half what I valued it at. Once I built a case for the value that I had placed on it he agreed with me. Then I said where I thought his competition would come from for the piece. From previous sales, I knew how this other collector would bid. Therefore, I added a factor of 25% to the top bid. Once my client understood all of the elements of the competition, he agreed to my bid. His final instructions were: "don’t come back without it." I purchased the lot for him at about $1,000 under the top bid. This turned out to be over twice what he had originally thought the item was worth. However, he had the key piece for his collection. The alternative would have been second place. When this collection is exhibited I am sure with the proper write up it will be at the gold medal level.


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