Wednesday, May 20, 2009

Market Reality Followup

Yesterday I talked about how changing markets impact collectibles and showed how a fragmenting customer base can erode value (because at the end of the day, a collectible item, like a stock certificate, is only worth what people agree it's worth).

Waiting for in the mail this afternoon was a littler from AmbroseBauer Trains, "the nation's foremost marketplace of toy trains and toy train auctions." In this rather lengthy solicitation letter* Drew Bauer presented another take on what affects market value. He writes:

...Toy Trains do share with Financial Instruments [read: stocks] the fact that values of different Toy Trains do rise and fall depending on current market and demand conditions.

Because of changing demographics, an incredible amount of Toy Trains will come to market over the next several years. This large supply will have a negative effect on prices... since demand will not rise as quickly as supply.
Which makes sense. Even with the same field, the highly desirable items of one generation may not be the top collecting priority of the next. Going back to my post yesterday about Ken's Lionel 752E, the demand (and value) has dropped with the arrival of a quality reproduction that satisfies a certain market segment. As older collectors retire (or pass on), more 752Es are likely to resurface, driving down the price even more.

The lesson's still the same. Invest in a collection for enjoyment. Invest in stocks for profit.

- Ralph

*Note to Mr. Bauer: four-page single-spaced letters need bullet points. Really.

Day 45 of the WJMA Podwatch.

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