AUGUST 2012 ADVISORY:
The current market is jittery and very cautious due to several negative dynamics: e.g. national debt, runaway government spending, mandated health care and its impact on employers, the continued realignment within the Islamic World, the threat of Iran and other rogue states, rising oil futures, and the ever present threat of economic collapse of the Euro. This basket of market inhibitors has stalled business momentum when the world’s economy was improving from a deep recession that had commenced in January of 2008. Until the parameters of these risks are defined, assessed, and measured, the wider market will likely remain stagnant.
Demand for most categories of antiques and collectibles will likely remain stagnant for a different, longer lasting reason: changing demographics. Boomers are rapidly downsizing across the globe and the only reason that the rate of their downsizing effort isn’t greater is because of the weak housing market. Nonetheless, they are dispersing their personal property amongst their heirs and dumping what remains en masse at auction.
Furthermore, uncertainty in the marketplace is manifested by dealers consuming their existing stock, commonly at diminished margins or at a loss, rather than refreshing inventories at auctions. Older dealers who remain optimistic in spite of the obvious demographics either cannot adapt or are in denial or are delusional or suffer from a combination of all of the above. Thus their retail art and antiques shops are depleted and often look haggard, a combination which tends to perpetuate demise. Hence collectors have been and are buying at auction because product availability is often far better and less expensive at auction than in retail shops. The overall effect on the market is descending retail and wholesale prices across the board.
Older collectors who remain optimistic in spite of the obvious and continue to buy will erode the net asset value of their estate.
In general, demand will not return to pre-2008 levels for at least 30 years, in my opinion. The reasoning is elementary: demand is weak and diminishing as supply is plentiful and increasing in a threatened world economy with clueless or hopeless younger generations. Sage advice for Boomers: dispose now rather than hope for another bubble recovery. And for younger generations: buy, buy, buy – dollar cost average only the crème de la crème. This is not just a trend, this is The New Order.
As always, there are exceptions to the New Rule: fine art by listed artists, the noble metals, 20th century moderne, etc. For various reasons too complex to explain on this page, each category has added strength even in the face of The New Order. Seek advice before adding to one’s collection. If you are young and clueless, now is the time to become self-informed and to buy, buy, buy! If you are a Boomer, downsize now and sell ASAP before your stuff is worth less tomorrow – and for the gods’ sake, stop buying more crap!