Monday, 21 April 2014

The strange case of the Syracusan dekadrachm ― part three

Messiah Stradivarius
photo: Pruneau
If  you watch programs like the Antiques Roadshow, you will likely have seen someone bringing an imagined Stradivarius violin to get appraised. I will always have some label inside with the Stradivarius name on it and it will always be a copy worth very little. The disappointed person is then told that all Stradivarius violins have been recorded.

At the other end of the spectrum is the common belief that anything old and extremely rare or unique must be very valuable, or even "priceless". Some people even believe that if an object is very old then it must be valuable, regardless of any imagined rarity. It might seem a paradox or an oxymoron to say that the unique and the rare is very common, but it is a true statement. For something to be valuable, supply and demand comes into play, but if some old object is something that has never be seen before, then there is no established market, and no one has been eagerly awaiting for such an object to show up.

Only by defining the object as a rare part of a much commoner whole, does the object acquire great value. Collectors need a number of examples of the sort of things they collect to be available. Very few people will want to collect a category where something might show up every decade or so, and the market for such an object will accordingly be very limited and this will be reflected in its value.

Then, fashion and popularity comes into play ― some of the most valuable collector coins are American. If you find an American coin type known only from five examples, you are about to become very wealthy. However, if you find an ancient Greek bronze coin in well-circulated condition that no one has ever seen before, then the sale of it might only buy you dinner. More valuable would be another, far commoner type of ancient Greek bronze coin made rare because of the unworn condition of that example. The numbers of the type, itself, creates the market and the arrival, on that market, of  "the finest example known", will make it quite valuable. But there are very few collectors of ancient Greek bronze coins so even the best example in existence would be nowhere as valuable as a fairly worn American dime of which only a few are known.

My dekadrachm of Syracuse was an example of something made valuable by its popularity, but there are a limited number of collectors who have the financial resources to specialize in these things, so the market for a rare variety is actually not that great. Most collectors of ancient Greek coins would like to just own one of them, and the exact variety is of  little importance. My example was made less valuable because of its condition issues than more valuable because it was a variety known from only two other examples. Compare this with an 1893 S Morgan dollar: about 10,000 of them are thought to now exist. A poor one will likely cost you more than $6,000 and the best of them more than half a million.

Prevailing fashions can have dramatic effects on the values of collectables, but most people only become aware of the fads whereby something dramatically increases in value and thus becomes newsworthy. When the market falls in some category, few get to hear about it. Most people have heard that the general antique market is not very strong right now and that the prices are low.  The rarest and best, though, continues to rise in price.

It can get even more complicated: modern restrictions on coins and antiquities, in some countries, have lessened the desire of a number of dealers to trade in such items as they worry about even greater restrictions in the future. This makes such things become less valuable. Then, as so much more becomes economically available to a wider market, more people are encouraged to become collectors in the first place. Eventually, the price will rise to meet the new demand and potential restrictions might even become a selling ploy ― "Get one while you still can!".

The market in these things always goes in cycles, it is just the reasons for the rises and drops that will vary each time. For investment purposes, alone, only long-term investments are seriously considered in this category, and such investments are usually profitable only when other investments are doing badly and no one is keen on holding too much in currencies, metals or stock shares. Most collectors have little concern about the investment value of what they are buying, and most investors do not have the knowledge needed to be very good at it.

I was quite surprised to discover that a number of  Bronze Age gold torcs found in the nineteenth century had been recorded, and then melted down to recover the gold. This was done because there were not that many collectors for such material back then, and the average person had a far lower standard of living than is the case today. In countries where the economy is going into a nose-dive, and restrictions on owning antiquities are getting even more draconian, we can expect to see gold and even silver objects being melted down without any recording at all. Such actions are virtually risk free and collector markets, there, are already depressed.

Before more stringent controls were placed on pre-Columbian art, examples were being dug up by local farmers and sold to visiting tourists, little of it was actually getting out because the tourists were not too numerous in the more remote areas, and the farmers were not traveling to the larger cities. As the restrictions increased, organized crime became attracted to that material as they could buy off, or threaten local officials, giving protection to those who dig things up. Of course, the farmers were paid far less than the tourists had paid them previously, so they had to dig up much more to maintain their income. I heard that, in one of those countries, a full cargo plane was leaving each week.

As is commonplace in drug trafficking, the more oppressive the laws become, the more there is to be made from breaking such laws. A number of the bigger players will actually turn in interlopers in their business to the authorities as they can eliminate their competition without having to resort to more violent methods.

So this brings us to a Jungian term enantiodromia ("the superabundance of any force inevitably produces its opposite"). I was rather surprised just how succinct is the Wikipedia entry, so I won't explain it any further and recommend that you ponder its ramifications and think of other examples.

This installment is just an introduction: the background material, if you like for what will start tomorrow. It is important to understand this background, however, because it is the stage on which very different personalities are acting in a rather surreal play. I will leave you with just one thought: The greater the numbers and intensity of laws that are applied to any commodity, the greater will be the cost to small businesses and the public, and the greater the profit will be to large companies and organized crime.

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