Collecting During A Recession

Collecting During A Recession

The dreaded “r” word.  Go ahead, say it: RECESSION!

We may or may not already be in the throes of an economic recession, depending upon who you believe.  But there is no question that we are in for bumpy times when it comes to economic growth, the value of our retirement funds, exploding inflation, and a host of other economic factors.  Regardless of whether the economy stops growing, tough times lie ahead.  (A recession is formally defined as two straight quarters of negative GDP, or Gross Domestic Product).

Our two most recent downturns were The Great Recession of 2008 and the pandemic recession of 2020.  Both were extraordinary circumstances, not likely to repeat.  Still, those two recessions and others provide guidance – and some tough lessons - as to how collectors should operate during a recession.  This is the right time to reflect back, and then, look forward.

There are three golden rules of collecting during a recession, pointing in different directions, but ending up in the same place.

First and foremost, if your income is significantly impacted by a downturn – you are laid off, your pay is cut back, your hours are reduced – stop collecting, until conditions improve. This seems like an obvious suggestion, but it’s often tough to follow in practice.

Often, when pinched economically, we are more likely to spend on collectibles that (we believe) will yield an immediate windfall.  That is, economic necessity often forces us to take risks.  We begin investing our dwindling resources in very cyclical, trendy collectibles, unlikely to hold value over time.  It is often a desperate effort to offset the decline in our income, net worth, or general financial condition.  We literally spend on “get rich quick” collectibles.

The list of collectibles that dramatically grow in value, only to crash soon thereafter, is endless.  Recall pet rocks? Cabbage patch dolls?  Beanie Babies?  If not, check them out online.  Once upon a time, each of these collectibles was considered the road to riches.  They are virtually worthless today.

I can add a personal anecdote at this point.  Upon exiting the 1998 Major League Baseball All-Star game, all fans, myself included, were handed a limited-edition Beanie Baby.  Outside the gates of Denver’s Coors Field, collectors were lined up, offering $50 or more for each Beanie.  The next day, many of these Beanie Babies were listed on eBay and other sites for $250 to $500 each, based upon publicity surrounding their release.  Today, they are virtually worthless, including the one I kept, and never sold.  Those poor collectors outside the gates made a major bet on this item, and, in the end, lost everything.  It happens when the zest for quick profit supersedes good judgment.

The second fundamental rule of collecting during a downturn is quite the opposite of the first.  If you are unaffected by a recession or maintain a solid financial footing, a downturn may be THE BEST time for collecting.  Why?

Over time, mosi collectibles are a solid long-term investment.  The Great Recession tells us so.  

During that dramatic downturn in the global economy, the price of many collectibles dropped, some precipitously.  Collectors panicked.  Many sold their memorabilia at deep discounts, figuring they needed to salvage what they could from before the total collapse of the market.  During downturns, collectors, like many others, conclude that the economy will never recover.  In fact, it ALWAYS recovers and grows.  The Great Depression, The Great Recession, the pandemic recession were all painful, yet didn’t last.  We recovered, and thrived.

Just three to five years after The Great Recession, many of the collectibles that had experienced steep declines had soared in value – worth more than ever.  Those who sold in a panic lost out.  Others, who maintained and even built their collections, profited handsomely.

A downturn or recession can be a great time to add to a collection, as some collectors are anxious to liquidate their memorabilia at below-market costs.  Buying opportunities abound.

When a recession ends, there are usually significant price bumps, or soaring appreciation in value.  The market price of many collectibles explodes, as those who exited the market during the recession return to collecting.  Demand far outstrips supply.  It’s simple economics.

The third and final rule for collecting during a downturn?  When in doubt, buy classic collectibles.  Classics can roughly be defined as categories of collectibles that:

  • Have been around for a long time
  • Are avidly collected by a wide swath of collectors (not a narrowly defined niche). 
  • Which date back to the 20th century or before – that is, have been around for a while, if not a very long time.

Let’s take a closer look.

With apologies to Bitcoin, numismatic (collectible) coins have always been collected, and always will.  They are not transitory.  So, despite a potential dip in value during a recession, they will quickly recover when the downturn ends, and will continue to be collected and increase in value.  That’s the essence of a classic collectible.

What are some other categories of classic collectibles?  Art, trading cards, vinyl albums, action figures, comic books, game worn sports memorabilia, to name a few.  These solid, classic collectibles will snap back faster after a downturn because they are widely collected and will be collected in perpetuity.

The Bottom Line

There is no question that a recession is looming.  We are in for tough times, economically.  But tough times never last, no matter the circumstances.  The American economy has been, and always will be, resilient.  It may not be easy to climb out of the hole, but you can be assured that we absolutely will. 

 So, If you have the means, keep collecting.  Don’t stop!  Most collectibles will rise dramatically in value over the long-term, no matter the short-term decline in value.  The Great Recession was called that because it was the worst economic downturn since The Great Depression.  It was, for many of us, a horrible time.  But most collectibles that dipped during that recession have not only recovered, but soared in value.  Look it up.  That’s a fact.

On the other hand, if you are challenged economically in the coming year, don’t spend money you don’t have and don’t make speculative investments in an effort to somehow overcome the decline in your economic outlook.  Things WILL get better.  And when they do, you can resume your collecting with renewed vigor.

In short, with all the gloom, doom, and malaise that pervades every corner of our lives these days, it’s easy to lose perspective.  Take a deep breath, and look at the big picture.  The sun still rises every day, and most of us will keep collecting until we take our last breath.  That last thought puts a smile on my face.  Hopefully, on your face, too.

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