It is difficult to discuss vintage guitars without mentioning baby-boomers. Baby-boomers have had the greatest generational effect on vintage guitar prices over the last 20 years. The stock market is driven in part by baby-boomers investing during their peak earning years. Baby-boomers have experienced one of the greatest bull markets in stock-market history, and today they're witnessing the ongoing bull market in vintage guitars. What happens when baby-boomers sell their cherished guitar collections? Large collectors, foreign buyers and even the children of boomers will be needed to buy these guitars in order for the market to remain strong.

No one can accurately predict the future performance of the stock market, nor can we foretell exactly what the guitar market will do. So, it's possible that vintage guitar values could level off or decrease in the future. Unlike stocks, there is no future stream of earnings to bolster a guitar's value. The intrinsic value of classic vintage guitars is far less than their current market value. So far the "right" vintage guitar has been a great investment, but not every old guitar should be considered as such.

 

Vintage solid-body electric guitars-particularly the Les Paul, Stratocaster, Telecaster and ES-335 models--showed dramatic price increases in 2005. Still, those models didn't gain as much as vintage Martin guitars through 1999 and have played a bit of "catch-up" over the past six years. It seems the high price tags on fretted hunks of old wood have caught the attention of the aforementioned Wall Street types. I have heard rumors of a few capital pools being formed to invest in old guitars. Money goes where it's treated best, and some old guitars have played a good investment tune for their owners.

Evidently the market can't find enough classic guitars to buy. As a result, 1970s Strats and Teles made strong gains during 2005, although many collectors don't consider them "vintage" but merely collectible instruments. Most used guitars from the '80s and later have increased at a pace roughly equal to the real inflation rate. I look for good sales of historically correct reissue guitars in the $2000-$4000 price range as the originals get deeper into the $20,000-$100,000 range until the next recession, when there's likely to be a drop in the demand for those look-alike guitars.
 

Investors, Wall Street folk and money managers prefer to look at things from a long-term perspective. How has a stock or other asset performed over a period of many years? During the 15-year period leading up to the NASDAQ 5000 "bubble" peak during the year 2000, many top-tier vintage guitars manufactured by Gibson, Fender and Martin have generally performed below the aggregate average of the Dow Jones Industrial Average, S&P500 and NASDAQ. However, since the beginning of 2000 many top-tier vintage guitars manufactured by Gibson, Fender and Martin have significantly outperformed the Dow Jones Industrial Average, S&P500 and NASDAQ. Over the last 20 years it's no contest: The best vintage guitars have outperformed the major stock averages by a wide margin.

During the last six years there has been a negative return in the major USA averages listed. The NASDAQ was the leading gainer during the 15 years leading up to 2000, but since then it has lost nearly half its value (see Table 2). Contrastingly, since 1999 premium old guitars easily beat the market averages, basically doubling the stock market's performance over a 20-year period.

TABLE 2

Excellent examples of first-tier vintage guitars again beat the U.S. indices. Most excellent "golden era" Les Pauls, Stratocasters, Telecasters, ES-335s, pre-war Martins and Gibson dreadnoughts showed double-digit gains in 2005. Most pre-war flattop models did well last year, with the D-class Martin guitars at the head of the pack (with the exception of the D-45). There are relatively few original D-45 guitars, and much of what they have gained came before the millennium.

TABLE 1

Old wood did well last year, as did the bankers on Wall Street, many of whom have received nice, big bonus checks. In fact, Bloomberg Radio reported that the bonus pool for Wall Street suits was a record. Interestingly, these large bonuses were paid for a year in which the major USA stock indices didn't perform particularly well. Maybe some of that bonus money will find its way into the vintage guitar market.

As a follow-up to my article published in March 2003 entitled, "Money Flows from Wall Street's Bear to Vintage Guitars' Bull," I've updated the market's performance figures. At the time the article appeared, the multi-year bear market that emerged in 2000 had bottomed out. A rally took place, elevating the major averages in 2003 and 2004. The Dow, S&P 500 and the NASD Composite gained 28%, 35% and 59% respectively over those two years, after giving up 27%, 40% and 67% during the previous two years. By the end of 2005 the major averages were up or down to a modest extent (see Table 1). Although the S&P small and mid-cap indices had reached new all-time highs during 2005, the major indices listed have failed to eclipse their 2000 highs

Gibson Guitar, The Smart Investment…..When was the last time you dusted off the boxes in the attic, sorted through the items in your closet or took a good look through your loft and stumbled upon a guitar case in the corner? Well back in 2007 an American gentleman did exactly that. When he opened up the guitar case he saw something very special inside, it was a highly prized 1959 Gibson Les Paul Standard in pristine condition. The Les Paul was valued by a reputable company and was told he could expect to sell it for a six figure sum. Gibson Guitar is well known and highly regarded worldwide by guitar aficionados and guitarists from all musical genres for consistently producing the finest electric and acoustic guitars. Gibson has a unique history steeped in tradition, innovation and quality craftsmanship. On any given stage at any given gig around the world over the decades, chances are you would have seen the guitarist rocking out on his Gibson guitar.

GIBSON GUITARS

 _____________This year in the vintage guitar market____________________

This is a time to remain poised- every opportunity counts. Any reasonably good example, of a good vintage guitar by Fender, Gibson or other significant maker will most definitely improve in value, over the next decade. Low economic periods are almost always too brief and hindsight always frustrates us afterwards, by  our inability to understand and seize the opportunites, during the period. How many times have you heard after a low period" If I would've bought such and such ...." or " how could I have been so stupid? They were so cheap then" This is the point in history where we must seize the opportunities.

It's important to understand why the vintage market is down, in some areas. It's purely economic and not through lack of interest. Guitars are among the top collectibles in the world, today. And to the wealth-achieving generations that are now and will follow, guitars represent greater collectible interest than oil paintings. Culturally, the second half of the 20th century was dominanted by musical genres, and electric guitars, principally, led most of those; Rock and Roll, Blues, Jazz, R &B et cetera.

 For the time being, there's downward pressure on many higher priced pieces, but theres upward pressure on many lower priced pieces , and disproportionately for some models that are currently at $2,000 USD, or under. That means there are good reasons to buy both in both catagories, and not to ignore either. 

The basic strategy is to buy pieces, from now until the market takes off again then shift more focus on to selling and trading.

With the U.S dollar on the rise, and the principal collector's electric guitars made in the U.S, it's an additional benifit to buy while the Canadian dollar is still above 90 cents US.

.The cleanest vintage models  are always disproportionately appreciating in value. 

T.S Vineberg (40 West customer)