Monday, December 2, 2013

If Warren Buffet Collected Antiques and Folk Art

I am currently reading a biography of Warren Buffet, the gazillionaire Oracle of Omaha who bought his first "stock" at the age of 11 and went on to amass one of the great fortunes in the world.
Mr. Buffet is legendary for his meticulous research. His goal was to find shares of companies that were inexpensive in relation to the value of various assets within the company.  To do this he often had to read through annual reports, consult various industry directories and peruse countless  research papers.
He was not above burning through some shoe leather by visiting a targeted company's operations and talking to customers, suppliers and employees. Later, he added "qualitative" analysis to his "quantative" approach and was equally successful.
He knew instinctively that the strength of a company's "brand" gave it additional value and impact in the market place and would continue to do so over time.
Mr. Buffet made his investments most often for the "long haul".  Jumping in and out of the market and flipping stock was not the way he invested. To him, every single dollar was important. The smallest transactions received the same scrutiny as the largest regardless if it was $5 or $5 million.
So, how is Mr. Buffet's approach to investing relevant to the search and acquisition of antiques and folk art?
First of all let's look at the point about research.
In the antiques and folk art field, at any given time, there is huge amount of material on offer.  Despite a lagging economy, there are still antiques shows in all parts of the country.  Group shops and flea markets are seemingly everywhere.  Antique auctions are promoted and held every weekend. In the on line "virtual" world, there are thousands and thousands of antiques and art being offered.  The "categories" of collecting also continue to expand. Items that were once ignored regularly come into vogue as a new trend in collecting to say nothing about fakes, forgeries and reproductions that routinely flood the market.
Imagine then the beginning collector approaching the antiques and folk art market today without doing research.  Yes, it's certainly possible and many collectors do just that, overcome by the sense of anticipation that comes with buying your first few antiques.  But to my mind it's the equivalent of drinking from a fire hose. Yes, you'll satisfy your thirst but you'll get soaked in the process!
Compare that to the collector who does some research before buying. One who decides beforehand to search for a specific antique or folk art.  This collector knows the market prices for particular pieces and specific folk artists. A la Mr. Buffet, the prepared collector looks at many items before making a buying decision.  The Buffet-like collector is looking to add objects to the collection that will remain there for a long time; likely appreciating in price as time goes on. Over the years I've sought out and purchased works by specific folk artists; a practice which has strengthened my collection and will also, if I ever decide to sell them, return many times my purchase price of these works.
Mr. Buffett made a point of investing at times when others were shunning the market or traditional investment vehicles. In a sluggish economy, the price of antiques can and do suffer.  If you can afford to so so, this is a good time to buy. For example, antique furniture prices are down sharply from a few years ago. It is an opportune time to buy superior examples - if you are prepared to have those pieces in your collection and to do so for the long haul.
Consistent with Mr. Buffet, the savvy collector has a plan and an objective. If a piece does not meet their criteria, then it is not acquired!  Similarly, Mr. Buffet resisted fads sticking with his regime year after year. When the competition for value stocks became too intense, he opted to fold his tent rather than change his practices.  The studious collector should also resist fads. Decide beforehand what it is you like, what you are prepared to pay and when.  After that, stick to your plan and your objectives. Adding an item to your folk art collection should be a major event; one that you celebrate quietly every time you walk by the object in your home.  Know too that the more refined your collecting becomes, especially folk art, fewer people will be able to relate to it.  For reinforcement you must have faith in your own research, your own convictions. Seek out other collectors that share that same spirit and conviction.  The trend setters often thought Mr. Buffet was out of touch with the times.  He didn't care.  He was supremely confident in his beliefs because he had done all the research. He knew the answers. If he needed reinforcement, he had a circle of colleagues and investment professionals to which he could and did refer on a regular basis.
So, my fellow collectors. That's what I've learned about collecting folk art from Warren Buffet. The skills are transferable. By any standard, he is a remarkable and extraordinary individual. I can only imagine what he would have done, if he'd turned his attention to art and antiques!
By the way the book is titled: The Making of an American Capitalist by Roger Lowenstein. I highly recommend it.
Best wishes for the holiday season. Hope someone gifts you with a good reference book on antiques and folk art!

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