Opportunity Fatigue

Opportunity Fatigue

The year was 2003 and I couldn’t believe what I was seeing on eBay. I had just completed a search for Japanese one yen coins. These are large, silver dollar-sized coins that Japan minted from the 1870s until World War I.

I was shocked by the results that were returned. There were dozens of slabbed (3rd party certified) mint-state (mostly MS-63) silver Japanese one yen coins available for a buy-it-now price of only $60.

These were impressive coins in the highest possible condition with implicit authenticity guarantees due to their certification. But only $60 a coin? Really? Why were they so cheap? And why were so many available?

In the end, I never bought any of them, although in retrospect I desperately wish I had. Today, the same coin – certified and in the same condition – would cost you about four times as much – $240 give or take. That translates into a compound annualized return of slightly over 12% before commissions and fees.

So what went wrong? Why didn’t I grab the great deal that was staring me in the face when I had the chance, especially considering I had no doubt that it was a great bargain at the time?

Unfortunately (or maybe fortunately), certified Japanese silver 1 yen coins weren’t the only asset trading cheaply at the time. I was also making frequent purchases of pre World War I European fractional gold coins at the time. In the stock market I was into oil and gas royalty trusts.

My attention was being pulled in many different directions and in the end I didn’t feel I had the time or energy to strike out into yet another area. I also wasn’t making great money at the time and a couple hundred dollars was a lot of money to me. These reasons all amounted to excuses on my part.

In retrospect I could have easily bought a few Japanese one yen coins, simply thrown them into a safe-deposit box and happily ignored them for the next decade or two. I could have earned returns that would have made most stock market participants sick with envy.

I think the primary reason I didn’t acquire any silver Japanese one yen coins was due to a concept I call “opportunity fatigue”. Even when we are presented with great bargains, opportunity fatigue causes us to second-guess ourselves in two ways.

First, how can a quality asset trade so cheaply? This is a variation on the efficient market hypothesis which states that all pertinent information concerning an asset is already embedded in its price. Therefore, if an asset is available cheaply, it must be because it isn’t very good.

Otherwise all other market participants would have already recognized its value and bid it up. Of course, in the real world efficient markets don’t really exist; they are a theoretical construct of academics who don’t understand just how irrational and trend-following investors actually are.

Second, even if you do buy an undervalued antique it is unlikely that prices will begin moving up immediately. Instead you will still see a dozen or more very similar antiques just sitting on the market for the same price. It usually requires several years of an asset wallowing in low-price obscurity before enough buying pressure accumulates to definitively and permanently raise prices.

In the meantime, opportunity fatigue wears us down.  We are left with the nagging feeling that we’ve sunk our hard-earned money into a loser, an illiquid asset that – on a good day – is worth no more than what we paid for it.

It is very important not to succumb to opportunity fatigue. It can be one of the costliest dangers that you will face in the field of alternative investments. One way to mitigate this risk is to systematically make purchases in your chosen asset category on a regular basis – basically dollar-cost averaging. The other way is to keep in mind that by investing in art and antiques – the cutting edge of alternative investments – you will undoubtedly be, temporally speaking, far ahead of more average investors.

In these circumstances it shouldn’t be surprising that the rest of the crowd doesn’t catch on for a few years. In fact, that is the primary advantage of investing in art and antiques. It gives you ample time to accumulate both greater market knowledge and a significant position, in stark contrast to all the momentum chasers that will surely come later.

Purple Gemstones – The Color of Royalty Resurgent

Purple Gemstones - The Color of Royalty Resurgent

For most of recorded human history, purple was the original power color. It was the color of kings, queens, emperors and royalty. In the 1st century AD, Roman emperor Nero not only decreed that purple garments were reserved solely for the emperor, but also that trade in any purple items was banned – on pain of death!

In the 6th century AD, when an uncontrollable riot almost forced the Byzantine emperor Justinian I to flee, his consort, the empress Theodora, gave him courage by boldly declaring that “Royal purple is the noblest shroud.” Royalty has jealously guarded the majesty of purple for millennia.

For ancient and medieval peoples, purple represented the very pinnacle of color, a natural pairing to sovereigns. And no gem dripped more decadently with that elusive, royal color than coveted amethyst. The ancient Greeks believed the purple stone could prevent intoxication. In fact, amethyst comes from the Greek term “not drunk.” For centuries, amethyst was one of the most expensive gems on the planet, considered the equal of diamonds, rubies, sapphires and emeralds.

All that changed in the early 19th century, however, when massive deposits of the previously rare gem were found in Brazil. Prices plummeted almost overnight. By the late Victorian era, amethyst was considered far too plebian for the jewelry of the aristocracy, much less that of royalty, although it was still employed in some fine Arts and Crafts and Art Nouveau jewelry.

The second half of the 20th century was even less kind to once coveted purple gemstones. Calibre-cut amethysts were often used as inexpensive additions to low-value, mass-produced tennis bracelets, earrings and cocktail rings. Amethyst’s harrowing descent from noblest gem to lowly bauble mirrored purple’s demotion from the color of royalty to just another banal hue.

Fine jewelry largely ignored purple gemstones throughout most of the 20th century, instead gravitating towards the bold, thrilling reds of rubies, the enigmatic, soothing blues of sapphires and the dazzling, brilliant white of diamonds. But then a funny thing happened. It gradually dawned on gemstone connoisseurs that three exceptionally fine stones came in purple: sapphire, spinel and tanzanite.

One of the many different hues of fancy sapphire, purple sapphire had been inexplicably overlooked by the gem industry for many decades. Sapphire, with its incredible brilliance, fire and hardness, is the consummate colored gem. So it isn’t surprising that a renewed interest in purple sapphire has recently brought this ravishing gem to the forefront of fashion. This newfound enthusiasm has pushed purple sapphire prices skyward. Whereas 1 carat stones used to trade for around $50 per carat, now you would be very lucky to find decent stones at $200 or $300 a carat.

Purple sapphire’s sister stone, purple spinel, has also seen a wave of interest in the last couple of decades. In addition to being almost as hard and tough as sapphire, spinel possesses a rare and treasured trait among colored gemstones; it is never treated. This means that every (non-synthetic) spinel is an all-natural stone, mined directly from the earth with no need for artificial enhancements to bring out its tremendous beauty. These underrated gemstones are a bargain compared to purple sapphire, with fine specimens still available at under $100 a carat.

Tanzanite is a relative newcomer to the world’s stage. Only discovered in 1967, tanzanite is a striking violet-blue stone that is mined in only one location on earth – Tanzania. The gem’s similarity in color to blue sapphire – except with a strong hint of purple – has made it a hit among gem collectors and jewelry lovers alike.

In fact, the gem is so beautiful that the first company to promote the new gem shortly after its discovery was none other than renowned luxury house Tiffany & Co. Sadly for tanzanite enthusiasts, experts estimate that its single source mines have perhaps only 15 to 20 years of production left before they are completely exhausted.

As recently as 20 years ago, all purple gemstones was invariably assumed to be a cheap and garish amethyst. Consequently, purple gemstone jewelry was largely viewed as mundane costume jewelry. But this misinformed attitude is rapidly becoming a thing of the past. Today’s high power purple gemstones – sapphire, spinel and tanzanite – are all exceedingly rare, incredibly desirable and more popular than they’ve ever been before. Purple gems are back, but this time around they aren’t just for royalty.

Set of Twelve Wallace Nautical Sterling Spoons – Clam Shells

Set of Twelve Wallace Nautical Sterling Spoons - Clam Shells
Photo Credit: silverperfect

Set of Twelve Wallace Nautical Sterling Spoons – Clam Shells

Buy It Now Price: $475 (price as of 2016; item no longer available)

Pros:

-This is an exquisite set of 12 sterling silver teaspoons in a unique, clam and nautical-themed design. Each spoon is 4.5 inches (11.4 centimeters) long.

-This set was produced in the late 19th or very early 20th century by the respected American company Wallace Silversmiths. It is fully hallmarked with the Wallace Silversmiths maker’s mark and the word “sterling”.

-Wallace Silversmiths was known for its high-quality, 3-dimensional silver patterns and this nautical themed set of teaspoons does not disappoint. Mussels, barnacles and clams are quite literally encrusted along the entire length of the utensil handle – both front and back. Even the bowl of the spoon is fashioned to look like half a clam shell. The overall effect is stunning.

-You won’t find this clam pattern in any standard reference book on American silver manufacturers. This is a rare, unnamed pattern, produced only in very, very limited quantities. In fact, I’ve never seen this nautical-themed pattern previously. The only unifying characteristic I’ve discovered for these exceedingly rare American patterns is that they are invariably of the highest quality and finest craftsmanship.

 

Cons:

-The seller does not disclose the weight of the spoons. This is a minor quibble because this set is worth many times it bullion value. You are primarily buying the artistic execution here, not the silver. Having said that, I estimate that each teaspoon probably contains around 0.5 troy ounces (15.5 grams) of fine silver. This would give the entire set an estimated bullion value of about $90, based on $15 a troy ounce silver.

-The teaspoons are monogrammed on the inside of the bowl. Some silver collectors dislike monograms and avoid them when possible. However, I don’t believe monograms detract from an item’s desirability or impact its value significantly.

-The asking price of $475 is ever so slightly on the high side. Although this is an exceedingly beautiful and rare set of sterling silver teaspoons, I would still feel more comfortable with a price around $400. Of course, if you let this set slip through your fingers at $475, you could potentially spend a lifetime trying to track down another example.

World War I – A Break with the Past

World War I - A Break with the Past

There are few points in history that have been as decisive as World War I. The world before The Great War was unambiguously Euro-centric. Western Europe, in addition to having the wealthiest and most technologically advanced nations on earth, had cultivated vast colonies that spanned the globe.

Covering over 22% of the earth’s land area and encompassing fully 20% of its population, the sun never set on the British Empire. The expansive French colonies stretched over vast swaths of Africa, Southeast Asia and numerous smaller territories. Germany had fledgling colonies in Africa and the South Pacific. Even the tiny countries of Belgium, Portugal and the Netherlands each held significant overseas possessions. The U.S., in comparison, was still considered a cultural, if not technological, backwater.

In many ways, the world before World War I was a direct outgrowth of medieval feudal European history. Kings, Emperors, Kaisers and Czars ruled these kingdoms just as their ancestors had done for centuries before them. In a world of distinct and largely rigid social classes, being a member of nobility had real meaning. In fact, only two nations in the entirety of Europe – both well ahead of their time – didn’t have monarchs in the first decade of the 20th century: The Swiss Confederation and the Republic of France.

Technologically, the period immediately following 1914 was far more transformative than the centuries that preceded it. Before World War I people traveled by horse and carriage, train and, if traveling overseas, by boat. Cars were still rare – a plaything of the rich – and most people had never seen an airplane, much less ridden in one. Likewise, the telephone and wireless telegraph (radio) were still in their infancy before the Great War, available only to the rich. The roaring 1920s was really the decade when telecommunications really became available to the masses.

When World War I finally arrived it shattered the old world order irreparably. As the British Foreign Secretary Sir Edward Grey ominously commented at the time, “The lamps are going out all over Europe.” As the war ground to its brutal conclusion the centuries old empires of Czarist Russia and Austro-Hungary collapsed with shocking suddenness. The defeated German Kaiser abdicated in humiliation, fleeing to exile in Holland. Republics sprang up like weeds in the aftermath of the war, particularly in Eastern Europe. Suddenly, monarchy didn’t seem as necessary anymore, as if the natural political order of the universe had been overturned.

World War I marked the beginning of the end of European Exceptionalism, monarchism and colonialism. Sure, the British and French Empires, among others, lingered on into the 1920s and 1930s. But the inter-war period was a hazy dream-time of wistful denial on the part of Europeans; in reality their empires had been fatally wounded.

Imperial subjects from India to Vietnam to Algeria gradually became ever more aware of their national identities. Nationalism that had been sporadic and ill-organized before the Great War suddenly became an irresistible force, inevitably tearing these empires asunder. The great European empires could not – and did not – long survive these developments. The world after 1914 was never the same.