For years, Chicagoan Ken Angle collected watches with fancy names like Hermes and Cartier. As a corporate recruiter for a Texas company, he enjoyed wearing his timepieces whether he was interviewing a prospective candidate or relaxing over a weekend dinner.
Angle never thought of his watch collection as a rainy-day fund, but it has turned into something like that.
He has been selling off a sizable chunk of his collection, banking most of the proceeds while using some to help friends struggling to pay utility bills or make car payments. “I have started to re-evaluate what I need,” said Angle, 55, who retired early. “It is smarter to have the cash and in the bank versus having it in a drawer.”
A 56-year-old Chicago stockbroker also is reassessing her stuff as she faces a 5-10 percent decline in her 2008 income and a potentially bleaker 2009. The broker, who didn’t want to be identified, recently auctioned off about $5,000 worth of jewelry. And instead of buying earrings at Neiman Marcus, she paid off bills from a basement renovation. “The thing is to move forward,” she said. “The basic thing is you can’t take it with you.”
Maybe you can’t even afford to keep it.
Plenty of people facing financial pressure are boosting their personal liquidity by disposing of personal possessions.
Comic Carnival Entertainment, a chain of comic book stores in Indianapolis, says it has seen a surge in customers looking to sell their Spiderman and Hulk collections. Sotheby’s, the New York auction house, reports the number of clients looking to borrow against the value of their art collections has risen sharply.
And Guitar Center, the musical instrument and equipment store, says that almost 50 percent of 5,000 customers surveyed recently reported they were likely to sell a musical instrument in the next six months. Nearly a third said they were “very likely” to sell.
“They’re using it as a type of currency,” said Norman Hajjar, Guitar Center’s chief marketing officer.
Vernon Kagan, founder and owner of Smart Jewelers, is convinced enough of the trend’s staying power that he is opening a mini-mall in Lincolnwood where customers can walk in and sell coins, paper money, gold, jewels, sterling silver and musical instruments.
“If someone needs their money right away, they get it,” Kagan said.
In economic terms, these folks are dealing with the credit crunch by creating their own liquidity. They are financing themselves rather than running up debt on their credit cards or digging deeper into their home-equity lines. They may not have a choice if their cards are maxed out or their credit limits have been reduced.
It’s a short-term coping strategy for people who have items that can readily be converted into cash, said University of Chicago economist Allen Sanderson. And it may be helping some households stay afloat, especially when the holidays add extra expenses when incomes are flat and job security is wobbly.
Most people have far more assets than income, Sanderson points out, usually five or six times as much. So a person earning $50,000 a year probably has $250,000 to $300,000 in assets, a good chunk of that likely in the form of real estate.
“Most people are not getting big raises,” he said. “How do I pay for the kids’ college or the vacation in St. John? I convert assets into something I can spend this year.”
But the law of supply and demand is coming into play. When lots of people are selling and fewer people are buying, prices come down.
That was evident at major art auctions at Sotheby’s and Christie’s in mid-December.
Paintings by famous names such as Monet, Matisse and Warhol went unsold while other works fetched far less than their pre-sale minimum estimates. The sale of a 1964 self-portrait by Francis Bacon was halted by Christie’s when bids reached $27 million, well below the work’s $40 million estimate.
Sixteen rare Abstract Expressionist drawings owned by Kathy and Richard Fuld, the recently fired chief of Lehman Brothers, drew bids totaling only $13.5 million at Christie’s auction Nov. 12, well below the $15 million to $20 million presale estimate.
Eli Broad, the billionaire art collector who was there scooping up relative bargains, joked that Sotheby’s Nov. 11 auction was a “half-price sale.”
At a much different price level, comic book collectors may be walking away disappointed after testing the market for their treasures.
Comic Carnival’s four stores in Indianapolis are fielding 20 to 30 calls a day from collectors who are hoping to cash in part of their holdings.
Most of the time, general manager Brad Keen has bad news for them. The books they bought during a comic boom in the 1980s and ’90s aren’t in big demand. The four-store chain is more interested in comics from the 1970s and earlier, which are rarer and have bigger fan bases. A copy of Hulk 181, which features one of the first appearances of the character Wolverine, in good condition might sell for $1,000, for example.
“I hate telling people that something they’re banking on is something I can’t afford to put money into,” Keen said. “Nobody has been angry. They seem to understand. If I can’t sell it, I can’t sell it.”
Calls began to pick up last summer, he said, and really accelerated before the holidays.
An auction house in Ontario, Canada, that specializes in high-end performance and vintage cars also is getting more calls from prospective sellers. People aren’t saying why they want to sell, but one thing they’ve noticed is more cars are being consigned to auction without a reserve price, which means the seller is giving up protection if bids come in lower than expected.
“Sometimes your boat, your motorcycle, all the toys have to go,” said Terry Lobzun, a spokesman for RM Auctions. The upside, he added, is, “There are some great values in the market if you want to put yourself into something tangible. Paper can zero out. A car will never be worth nothing.”
Sometimes people under financial pressure want to use their stuff to raise cash but don’t want to part with it.
Those with pricey art collections are likely to call Jan Prasens, the managing director of Sotheby’s Financial Services, which makes loans against the value of artwork, which is the collateral for the loan.
“We are definitely seeing people calling more to see if we are willing to lend against some of their properties,” Prasens said. “We are lending, but we are extremely selective. We see a lot of demands on our capital, which is extremely precious.”
Typically, Sotheby’s would lend someone 50 percent of the appraised value of their art, but with prices falling, borrowers may no longer be able to get that amount. Also, Sotheby’s is shifting its focus toward art that will be auctioned in the near future, providing owners with “bridge loans” until the proceeds come in.
The New York firm is less interested, Prasens said, in making loans against collections that aren’t slated for sale, which he referred to as “term loans.” Unfortunately for cash-strapped collectors, that is the type of loan most in demand right now.
There is also bad news for anybody hoping to trade in a family heirloom such as an armoire or dining room set. Antique furniture, known as “brown furniture” in auction parlance, is out of fashion and not fetching much these days, says Leslie Hindman, owner of Leslie Hindman Auctioneers in Chicago. You can’t get much for 19th Century German landscape paintings either.
“I talked to somebody … who has nice English furniture that is not important at all. I told her you’re not going to get an enormous value for it, but I don’t think it will appreciate much over the next five years. So your choice is to sell it for what it’s worth or keep it,” Hindman said. “Her feeling is she has been storing it forever and she wants to turn it into cash.”
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Tips on selling
*If you’re selling to a dealer, expect to receive 50 percent or less of the sale price. Dealers won’t buy your item unless they can make a profit.
*Consider whether your item should be auctioned because of the upside potential from competitive bidding. Some auctioneers offer free appraisals. The downside: You will pay a commission to the auction house of between 10 percent and 25 percent of the item’s value.
*Think about selling collectibles on eBay or other online auction sites. Take into account the cost of shipping an item to a distant buyer.
*If a tax deduction is as valuable to you as cash, think about donating your items to a local charity or resale shop operated by a non-profit organization.
SOURCE: Tribune reporting
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schandler@tribune.com
