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Junk Collectibles – The Bane of the Antiques Connoisseur

Junk Collectibles - The Bane of the Antiques Connoisseur

One of the reasons I collect antiques is because I love high quality items.  Fine antiques are often made from some of the most durable, beautiful and desirable raw materials known to man.  This not only grants them an unmatched look and feel, but also a far longer useful life than whatever clutter you can buy at Walmart or Amazon.

But I don't want to talk about fine antiques today.  Instead, I want to discuss the other end of the spectrum - the junk collectibles made from the nastiest materials conceivable.  Junk collectibles are the kind of banal stuff you'll find piled knee-deep at almost every flea market, garage sale and swap meet in the country.  And they all have one thing in common.  They are almost always made from one of the unholy trinity of garbage materials: plastic, plywood/chipboard or cardboard.

Of these three undesirable materials, plastic is perhaps the most offensive.  Because it is cheap and versatile, plastic has been gradually repurposed to fill every niche in our lives over the last 50 years.  Whereas during the mid 20th century it was employed with a modicum of aesthetic and engineering care, plastic has since metastasized into a modern-day plague.

This trend has been especially apparent in the junk collectibles segment of the antique market.  A growing influx of collectibles into the marketplace are invariably made of plastic, as items from the 1970s, 1980s and 1990s slowly gain the attention of collectors.  For example, innumerable vintage toys, from Legos to action figures to Lite-Brites, were all made of plastic.  Other vintage collectibles as varied as movie memorabilia, wristwatches and kitchenware were also often made from plastic.

Now, you may ask why I hate plastic so much.  The reason is very simple: it doesn't last.  Plastic ages very poorly over time, becoming brittle and often discoloring.  Sunlight and temperature extremes accelerate this process.  Plastic items don't have to be used for very many years before they are covered in chips and cracks, or even deteriorate into a gummy mess.

So if you have an interest in late 20th century junk collectibles, you had better make sure to keep them in strictly climate controlled storage, far from the rays of the hated sun.  And you should definitely handle them as infrequently as possible too.  Most old plastic collectibles are fragile flowers, metaphorically speaking.

In contrast, fine antiques made from comparable organic materials, such as amber, bone, ivory, wood, tortoiseshell or antler, are surprisingly tough.  These kinds of antiques are often 100 to 200 years old, and despite having been dropped, mishandled or neglected for much of their lives, are often still in remarkably good shape.

Sadly, I wish I could restrict my diatribe to only junk collectibles made from plastics.  Alas, cheap composite wood products like plywood, MDF and chipboard have also done their part to contribute to the poor quality of vintage furniture.  Before the 1980s, pretty much all furniture sold was assembled in a factory by skilled craftsmen before being shipped as completed units to furniture stores.

However, it wasn't long before IKEA burst onto the scene with its ubiquitous "flat-pack" or "ready-to-assemble" furniture.  What began as a good idea quickly devolved into a race-to-the-bottom in term of furniture cost, quality and looks.  Self-assemble furniture from the last few decades is yet another junk collectible, ultimately fit for little else than the landfill.

And then we come to the last of the three horsemen of the junk collectibles apocalypse - cardboard.  Cardboard has traditionally been used as a packing or container material.  In many ways, despite the obvious drawbacks of cardboard - fragility, coarseness and a lack of aesthetic appeal - I find it to be the most forgivable of substandard materials.  After all, cardboard rarely pretends to be something that it isn't.

Huge swaths of junk collectibles incorporate cardboard in some way.  Any vintage item described as "new in box" by online sellers is invariably encased in a cheap cardboard sarcophagus.  Other collectibles, like vintage baseball cards, board games and select advertising media, use cardboard in a more central role.

Of course, even when dealing with lower quality materials, a distinction should be made between the better implementation of these materials before the 1970s and the horrifically cheap standards in place today.  Plastics are the best example of this trend.  From the late 19th to the early 20th century, plastics were considered the pinnacle of human scientific achievement.

Because of this, early plastics, like celluloid, Bakelite and Galalith, were judiciously used in some very high value items, where appropriate.  Likewise, plywood might be discreetly deployed as an unseen, purely structural member in a piece of otherwise fine Mid Century furniture.  Even cardboard was generally fabricated to a higher standard before the 1970s, although this material definitely has its limits.

But since the 1970s, cost cutting has emboldened product manufacturers to progressively cheapen products in every dimension possible.  Striving to shave a few pennies off the unit cost of goods eventually led to the pervasive use of cheaper, thinner plastics and cardboards.  Plywood, along with other wood composites, became far more widespread in furniture, as well.  As a result, the last few decades of the 20th century have left us an abominable legacy of junk collectibles.

The really sad thing about all this is that many people under the age of 40 have never experienced high quality consumer goods.  While unfortunate, this situation is unlikely to change anytime soon.  Of course, that only makes high quality antiques all the more desirable.  Once you see and touch true quality, you'll never want to go back to using junk goods ever again.

 

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How Much Gold Does the Average U.S. Household Own?

How Much Gold Does the Average U.S. Household Own?

How much gold does the average U.S. household own?  It is a deceptively simple question that has a very complicated answer.  For one thing, there are no reliable statistics surrounding private gold ownership in the U.S.  And people certainly aren't going to willingly volunteer this very personal information either.  However, I believe this question will become increasingly important as our global monetary system is inevitably reordered in the decades to come.

Before we make an attempt to answer this question of private American gold ownership, let's talk for a moment about the official U.S. government gold reserves.  According to the U.S. Treasury Department, the United States currently holds over 8,133 metric tonnes, or 261,498,926 troy ounces, of fine gold at secure facilities around the nation.  Over 50% of this stash, approximately 4,583 metric tonnes, is stored at the world famous United States Bullion Depository at Fort Knox, Kentucky, where it is guarded by an active U.S. Army camp.

If these official U.S. gold reserves were distributed evenly across the estimated 125.8 million American households, it would total about 2.08 troy ounces (64.7 grams) of gold per household.  Of course, this analysis ignores the rumors that have persistently circulated for many decades that some (or even most) of these official U.S. gold reserves have been leased or sold without public knowledge.  These rumors have been stoked, in part, because the U.S. gold reserves at Fort Knox have not been audited since 1953.

Regardless, these really aren't the numbers we're looking for.  Instead, we want the average private gold ownership per U.S. household.  Or, more specifically, we want the median level of gold ownership per U.S. household.

Conspiracy theories about Fort Knox aside, it is obvious that official government statistics are not going to provide us the information we want in regard to average private U.S. household gold ownership.  So I am going to try a different approach here.  I am going to use my experience with gold scrapping and cleaning out elderly relatives' homes to make an educated guesstimate about the amount of gold owned by the average U.S. household.

In order to attempt to derive a more meaningful number, I am going to explicitly exclude very wealthy households from my estimate.  This demographic is much more likely to own an abnormally large amount of very expensive gold jewelry and gold coins.  I will also ignore precious metal stackers and gold-bugs in this analysis; these people will obviously have more gold than the average middle class household.  In addition, I will exclude extremely poor households that are likely to possess no precious metals at all, other than perhaps a pair of wedding bands.

 

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The primary source of U.S. household gold is undoubtedly held in the form of solid karat gold jewelry.  Most solid karat gold jewelry ranges from 9 karat gold (37.5% fine) up to 18 karat gold (75% fine).  However, most people own a lot less solid karat gold jewelry than you might think.

Most karat gold jewelry is very lightweight; hollow pieces are not uncommon.  This is done to keep the weight, and therefore the cost, of the gold jewelry down.  So, for example, your average solid karat gold women's ring or wedding band might only weigh between 2 and 5 grams, and contain 1/40 to 1/8 of a troy ounce of fine gold.  As you can see, it takes quite a bit of solid karat gold jewelry before you can even accumulate one troy ounce of pure gold.

It is far more common to encounter costume jewelry in the average U.S. household, which I loosely define as gold-filled and gold-plated jewelry.  Gold-filled jewelry has a thick layer of karat gold that is mechanically fused to a copper-alloy base.  In contrast, gold-plated jewelry is made by electro-depositing a very thin layer of gold directly onto base-metal.

Gold-filled jewelry can often be economically recycled for its gold content, provided it is judiciously mixed with solid karat gold jewelry before being sent to the refinery.  However, gold-filled jewelry's fine gold content by weight is between 2.1% and 7.5% - substantially less than even the lowest solid carat gold alloys.  Because it is so diluted, it takes a huge amount of gold-filled jewelry to accumulate a significant amount of pure gold.

Gold-plated jewelry is even worse.  The thickness of gold electro-plate is typically measured in microns, or 1/1000s of a millimeter.  Most gold-plating on jewelry is between 0.1 and 5 microns in thickness.  As a result, electro-plated gold jewelry is impossible to economically recycle, rendering it, to the best of my knowledge, the leading cause of permanent gold loss in the world today.

Another major source of gold found in the average U.S. household is gold coins.  These are fairly uncommon, but some people have a random gold coin or two tucked away, even if they aren't collectors.  These coins usually come in two forms: old circulated gold coins and modern bullion coins.

The first type of gold coin commonly seen in American households is pre-1933 semi-numismatic U.S. gold coins.  These were issued by the U.S. government before 1933, when the United States was still on the gold standard.  These coins come in denominations from the diminutive $1 gold piece to the gigantic $20 double eagle.  Although these coins were fully exchangeable with paper currency before the Great Depression, they tended to see little circulation because they represented such large sums of purchasing power.  Apart from collectors, most households that have these coins today inherited them.

Modern gold bullion coins are another type of gold coin frequently encountered.  The Canadian, U.S., Mexican, Australian and British mints (among others) began producing these coins in the 1980s.  The smaller fractional sizes - 1/4, 1/10 and 1/20 troy ounce coins - have been popular gifts for graduations, holidays and birthdays.  As a result, even average people with no interest in gold bullion have sometimes accumulated one or two of these coins.

 

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The final type of gold commonly found in households is rather unexpected - electronics scrap.  Many people don't realize it, but gold is a vital component in almost every high-tech gadget out there!  In particular, heavily gold-plated contacts are used in CPUs, RAM sticks and other vital electrical contact points where corrosion resistance is a necessity.  Cell phones, desktop and laptop computers, tablets and set-top TV boxes are just some of the electronics that contain gold.

Of course, the only problem is that electronics don't contain very much gold at all.  As the price of gold has steadily risen over the last 15 years, hardware manufacturers have gone to great lengths to reduce the amount of gold used in electronics.  This makes recovering the gold from computer scrap very difficult.  In spite of this, there is a thriving market for electronics scrap on platforms like eBay.  The average U.S. household has, in aggregate, only a few hundredths of a gram of gold stored in electronic equipment and computers.

So now it is time for the big reveal.  How much gold does the average U.S. household own?  In my opinion, a good guess is between 1/3 and 1 troy ounces (10 to 31 grams) of pure gold, plus or minus.  Almost all of this gold will be in the form of solid karat gold jewelry and gold coins, with a smattering from gold-filled jewelry and electronics scrap.  With gold currently trading at $1,800 per troy ounce, this translates into anywhere from $600 to $1,800 worth of gold, give or take, per household.

There are a few conclusions we can draw from our estimate of average U.S. household gold ownership.  First, it is safe to assume that these private gold holdings do not represent a significant addition to most peoples' net worth.  Second, we can infer that the silver holdings of most American households are also proportionately low; applying a traditional 15x multiplier to gold holdings probably gives a reasonable estimate of household silver holdings.  Third, we can presume that the median U.S. household value of all other tangible assets, like gemstones, antiques and fine art, is also rather small.

These are important findings.  A massive dislocation is coming in the paper asset markets, where most Americans currently have the bulk of their (non house) net worth.  Hard assets, like precious metals, gemstones, fine art and antiques, can serve as a buffer during this future period of financial chaos.  But it doesn't work if you don't own any.  Invest accordingly.

 

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Bog Oak – The Rarest Wood in the World

Bog Oak - The Rarest Wood in the World

Exotic and elegant woods are a staple material used in fine antiques.  Brazilian rosewood, Cuban mahogany, and English walnut, among others, all figure prominently in antique furniture and objets d'art.  Fine woods can substantially enhance the desirability of an investment grade antique.  So I was delighted when I stumbled across bog oak during my research, the rarest wood in the world.

Bog oak is a catchall name for partially fossilized wood.  Although most of this wood, as its name implies, originates from oak trees, partially fossilized yew or pine wood is also considered bog oak.  The origins of this ancient timber are a mysterious, wonderful thing.  Thousands of years ago, swamps, fens and bogs were often surrounded by huge, primeval forests full of massive oak trees.  Due to storms, floods or other natural events, these trees would sometimes fall into these adjacent wetlands.

Oak trees are rich in chemical compounds called tannins or tannic acid.  Tannins are yellowish to brownish in color, astringent, and acidic in nature.  Tannins are renowned for their powers of preservation.  In effect, tannins have the ability to mummify organic matter when present in high concentrations.

Wetlands containing large numbers of dead oak trees naturally become saturated with tannins over time.  This is the reason the mummified remains of ancient European bog bodies like Tollund Man are discovered thousands of years later in excellent condition.  In fact, tannins were originally used by ingenious ancient people to tan animal hides.  Words like tannins, tanning and oak tree (tanna in Old High German) have shared etymological origins, underscoring their close association over the centuries.

Any tree that fell into a bog and sank quickly had a tendency to be preserved in the tannin-rich waters.  However, some types of wood were preserved better than others.  Oak is already an incredibly tough and rot resistant wood.  And, because it naturally contains a large amount of tannins, oak gets a double-shot of tannins from the bog water.  These circumstances are ideal for preserving wood, eventually turning it into bog oak.

Over thousands of years, wetlands gradually fill in with organic matter.  This process chokes off any oxygen from the submerged tree trunks, thus limiting bacterial activity.  During this extended period without rot, iron and other minerals leach out of the surrounding soil and into the bog water.  They then bind with the tannin saturated wood and displace some of its organic material.

As a result, bog oak gradually darkens over the millennia, slowly turning from a light, golden brown wood into a lustrous, almost ebony-black color.  This color change is just a guideline however.  The tree species and local bog conditions can all significantly impact the final color of a piece of bog oak.

In addition to taking on a dramatically deeper color, bog oak also becomes extremely dense.  This is driven by the wood's partial mineralization, which also renders it almost rock-hard.  While bog oak's physical properties vary considerably from specimen to specimen, it is generally very tough on cutting blades due to its excessive hardness.

 

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Most bog oak comes from the British Isles, Northern Europe or Russia.  But the most famous deposits are the peat bogs of Ireland and the fens of East Anglia, in the southeast of England.  While bog oak can form over as little as 1,000 years, it can also be almost unbelievably ancient.  Specimens are regularly radiocarbon dated to between 2,000 and 5,000 BC.  This means some trees were alive during the building of the Egyptian pyramids or Stonehenge, at the very dawn of human history!

The discovery and milling of bog oak is almost as miraculous as its formation.  For hundreds of years, farmers in marshy areas of Northern Europe, Ireland and England have discovered ancient tree trunks when plowing their fields.  In many instances these logs were cursed as a nuisance.  Most farmers simply burnt the strange black logs or left them to rot once they were excavated, but a few made the effort to harvest the strange, velvety black timber.

Perhaps the wood's greatest drawback is that it has only traditionally been available in small sizes and very limited quantities.  Once an ancient log of bog oak has been uncovered in a field, time is of the essence.  The wood will break down quickly upon exposure to air if it is not quickly harvested.

First, all the outer, rotten wood must be carefully stripped away.  The logs are usually greatly reduced in diameter by this step.  Then the logs must be quarter-sawn before being carefully seasoned, often for several years, to avoid warping.  Seasoning can be accomplished either via air drying, which only works for exceptionally well preserved specimens, or kiln drying.  Kiln drying is faster than air drying and can give better results, but requires tremendous experience and control.  The larger a piece of bog oak, the harder it is to season properly.

Bog oak has been extensively used in European luxury goods for centuries.  It was highly prized for fine woodworking - inlay, detail-work and turning - due to the fact that it is the only native black European wood.  Bog oak was also in particularly high demand in the Victorian age for black mourning jewelry.  The black pieces of chess sets, traditionally fashioned from ebony, were occasionally made from this rarest of black woods.  Bog oak was especially prized for fine smoking pipes, where it was called "morta".

 

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Today, bog oak is used for small sculptures, objets d'art, jewelry, fountain pen blanks and other small woodworking projects.  As far as I can tell, Bog oak is the rarest wood in the world.  It is beautiful, durable and thousands of years old.  And yet, ironically, it seems to be little known and substantially undervalued.  Don't overlook this incredible, exotic black wood when looking to invest in antiques.


A Detailed History of the Platinum Gold Ratio

A Detailed History of the Platinum Gold Ratio

Out of all the precious metals, none have been as exalted in the modern age as platinum.  For more than a century this most desirable of precious metals has been coveted by people as diverse as Hollywood movie starlets and titans of industry.  Incredibly rare, this dense, chemically-stable, gray-white metal has an occurrence of only 0.003 parts per million in the earth's crust.  Platinum is so rare, in fact, that its annual mine production is less than 1/15th that of gold.

Platinum has been used in fine jewelry, luxury watches and high-end objects d'art for well over a century.  And yet, shockingly, platinum used to be considered a junk metal.  This, along with many other interesting tidbits, is reflected in the historical record of the platinum gold ratio.  The platinum gold ratio expresses the value of a single troy ounce of platinum in terms of gold and is often used by precious metal investors to gauge relative value between the precious metals.  A high ratio means that platinum is expensive compared to gold, while a low ratio means that platinum is cheap in relation to gold.

The chart above shows the platinum gold ratio from 1880 through 2016.  By closely examining the graph, there are a few important observations we can make.  For example, the platinum gold ratio has been extremely volatile.  Over the past 135 years it has been as low as 0.05 in 1885 and as high as 6.63 in 1968.  However, within the last 40 years, the ratio has traded in a far more constrained range, generally hovering between 0.8 and 2.0.

Although it may seem odd to us today, the platinum gold ratio was extremely low in the late 19th century.  This was because the relationship between platinum and gold was fundamentally different before the 20th century.  Before 1900, platinum was something of a scientific oddity while gold was universally considered money.

In pre-modern times, platinum had been used by various pre-Columbian South American civilizations.  Later, Spanish explorers panning for gold in South American alluvial deposits were perplexed by the strange white metal and, believing it to be immature gold, often threw it back into the streambeds so that it could "ripen".  Although platinum was first officially noted by the Italian scholar Julius Caesar Scaliger in 1557, it languished unappreciated for centuries due to its extremely high melting point (1,768.3° C or 3,214.9° F) which made it very difficult to fabricate.

But people did try to find uses for the enigmatic metal.  Foremost among these was employing platinum to counterfeit gold coins!  Because many nations were on the gold standard in the 19th century, gold coins circulated freely.  At this time platinum traded for just a fraction of the value of gold, as evidenced by the extremely low 19th century platinum gold ratio.  However, platinum (21.45 gm/cm3) happens to possess a similar density to gold (19.3 gm/cm3).  This made platinum the perfect metal to counterfeit gold coins during the 19th century.  Today, these contemporary platinum counterfeits are quite rare, and usually command higher prices than genuine gold coins of the time!

 

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The 19th century Russian Czars took this trend one step further and actually introduced platinum coinage for general circulation.  In the early to mid 1800s, large quantities of platinum-alloy nuggets were recovered from alluvial deposits in the Ural Mountains.  The Russian Czars hoped to take advantage of this by turning the unusual metal into coins.

Between 1828 and 1845, Russia struck a series of circulating platinum-alloy coins in 3, 6 and 12 ruble denominations.  Unfortunately, the Russian people, having no familiarity with platinum, rejected the unusual platinum coins wholesale.  Relatively few coins were struck and specimens command exorbitantly high prices today when they come up for sale.

It was only around 1900 that the technology to easily work platinum was first developed.  It arrived in the form of the super-hot, oxy-hydrogen melting torch.  Only an oxygen-enriched hydrogen stream burned at a hot enough temperature to melt the recalcitrant metal.  This invention finally democratized platinum, allowing the gray-white precious metal to be worked by jewelers and other craftsmen.

As a direct consequence of this development, demand for platinum in high end jewelry skyrocketed.  Platinum was perfect for the application.  The metal was chemically inert; it neither tarnished nor corroded.  In addition, platinum is harder than gold, giving it better wear characteristics.

The gray-white precious metal is also extremely strong, which was a boon to early 20th century Edwardian and Art Deco jewelry designers.  Jewelers used platinum to create fabulously complex pieces using platinum wire, sheet and gauze that would have been impossible with traditional gold or silver-topped gold alloys.  The fashion for "white look" jewelry reached its apogee during the Art Deco period of the 1920s, when platinum was de rigueur.

At the same time that jewelry demand for platinum was taking off, the industrial applications of the metal were becoming apparent as well.  Platinum is an excellent chemical catalyst and was instrumental in the growth of the fledgling oil and chemical industries.  The scientific community also adopted platinum for crucibles, electrodes and thermocouples due to its durability, resistance to corrosion and high melting point.

These fresh sources of demand drove the platinum gold ratio to elevated levels above 2.0 from the 1910s through the 1920s.  However, with the advent of the Great Depression both industrial and jewelry demand for platinum collapsed.  As a result, the platinum gold ratio declined until it hovered close to parity from the 1930s until the end of World War II.

 

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In the aftermath of World War II, global economic growth accelerated again, underpinning demand for platinum.  During this time it was also discovered that platinum could be used in catalytic converters to reduce pollution from automobile exhaust.  Robust demand for the unique industrial metal sustained the platinum gold ratio between 2.0 and 3.0 from the late 1940s until the early 1970s.

The highest annual value recorded for the platinum gold ratio was a spike to 6.63 in 1968.  This was undoubtedly the result of attempts by the U.S. and Western European central banks to suppress the gold price in the 1960s via the London Gold Pool, while the platinum price was free to rise in the highly inflationary environment of the time.

The platinum gold ratio then flat-lined around parity from the mid 1970s until the late 1990s, as both precious metals endured brutal bear markets after 1980.  Starting in 2000, rising industrial demand for platinum, coupled with stagnate gold demand, combined to elevate the platinum gold ratio until the Great Recession hit the global economy in 2008.

Since that time the platinum gold ratio has collapsed below 1.0, reflecting sluggish demand for the industrially-oriented white metal.  In contrast, gold has enjoyed a safe haven bid as a monetary metal in recent years, propelling it to a higher value than platinum for the first time on a sustained basis since the mid 1980s.

Today, during the fall of 2017, the platinum gold ratio is lingering around 0.72.  This is an exceptionally low value, historically speaking.  In fact, ratios this persistently low were last seen in the late 19th century, before platinum's unique usefulness was fully realized!  Although no one can predict the future, I suspect that platinum bullion is a better long-term buy right now than gold bullion, where you have to mind the stairs.