Understanding Guitars As Investments (Part 2) WiredGuitarist May 17, 2016 Articles, Uncategorized What Will (Insert Guitar Name Here) Be Worth In 50 Years? This is an extremely difficult question to answer. Anyone claiming to know the answer is likely lying to you. There is no way to predict which guitars will go up in value. George Gruhn, someone who quite literally wrote the book on vintage guitars and is essentially the Warren Buffet of the guitar world, does not know which guitars will go up in value in the future. He has run his guitar business successfully for decades upon decades, and is one of, if not the most knowledgeable source on “investment grade” instruments. Now, he has a better idea of what will go up in value than you or I, and he is a great person to take advice from if you’re looking to buy a vintage guitar, but he has stated that he does not know what a guitar will be worth at a certain time in the future. In George’s 2004 newsletter, he provides a great answer to those who ask him what their guitar will be worth in X years. He essentially compares this question to asking your stock broker, or investment advisor what a certain stock will be worth in 10 years. Sure, they can give you an approximate idea of what a stock will be worth in 10 years, but they cannot tell you with certainty. If they could, they probably wouldn’t be working for you, would they? What Factors Determine If A Guitar Will Be Collectible/Go Up In Value? This is another hard question to answer, but hey, that’s what I’m here for. Again, these factors are not set in stone, and don’t guarantee anything. These factors are what I believe affects the value of instruments based on my research, alongside years of experience investing in companies and guitars. Legendary players have to have played them. What do Dumble Amps, ’59 Les Pauls, pre-CBS Strats all share in common? Guitar legends played them! I mean legends by the way… real household names that your mom is probably familiar with. Unfortunately this doesn’t include your favorite guitarist from an obscure death metal band that is popular among people who listen to one subgenre. Don’t get me wrong, those people can and have had an effect of the value of some guitars. Blackmachines are a good example. A lot of the early innovators in the progressive metal genre played them, and they quickly developed a solid reputation among those familiar with the genre. This lead to rapid increases in second hand resale values. With that said, I don’t think Blackmachines will be worth much in the long term (15-25 years) as no household name has played one, let alone multiple household names. They will likely continue their upward trend until progressive metal fades away. Limited, really really limited production. This one is obvious. There are not that many people avidly looking to buy high value guitars, and therefore they need to exist in small quantities to be valuable long term. The nice thing about out of production guitars is that there are only going to be less and less of them available as time progresses, meaning you only need demand to stay the same for them to go up in value. Compounding this is that the condition of these instruments degrades as time goes by, which means guitars in good condition are worth more, and continue rising in value. For modern instruments that are still in production but involve long wait times this comes into play as well depending on the brand and what they’re known for. In general, as manufacturers get better at making guitars faster, the value of these instruments decreases. Let’s take a look at a brand known for innovation. Strandberg instruments sold on the used market once sold as much as $8000 a piece, back when they were around $3500 – $4000 or so new for a custom made guitar built by Ola. The reason they could sell for so much used is because a lot of people wanted to try the Strandberg concepts out. Now, there are more affordable ways to do so like the OS series and as a result the used price of Ola built customs has decreased significantly. Worth noting is that if Strandberg continues to gain market share and momentum, owning an Ola built custom might be akin to owning a guitar built by the founder of PRS Guitars – Paul Reed Smith. This would obviously command a premium. Although it is unlikely they will gain much in value, as even instruments built by John Suhr himself are not worth exponentially more than people paid for them. Suhr is many times larger than Strandberg at this point, and has been in business for decades. It’s merely food for thought. Dark Age. Why are late 50’s Les Pauls so expensive? Gibson stopped making the model altogether in the early 60’s and by the time it came back, the company had sold to a big corporation that made unnecessary and unpopular changes to the formula. The next several decades are considered to be rough patch in their history so while guitars from that era are not desirable, their existence has increased the value of the guitars that came before. This is precisely why a used PRS of the same make and model is valued equally whether it’s from 1996 or 2016, the company has put out a consistently quality product through every era so there is no real difference in value or collectability. Timing. A big part of the reason that vintage instruments swelled in pricing is because Baby Boomers aged to exactly where they needed to be in order to have spare cash to start blowing their savings on things they have always wanted but couldn’t quite justify or afford. These people were not able to play nearly as much guitars as they could when they were younger, as they had a wife, kid, work and loads of expenses to deal with. After work, dealing with your kids, and then spending time with your wife, chances are you don’t have 3-5 hours a day to play guitar! Once their kids were out of the house and off to college, the house was paid off, and they didn’t have as many expenses to deal with, these people figured they should buy what they’ve always wanted – the same guitars their heroes used. I believe a similar rush will happen once those infatuated with Steve Vai and 80s bands reach the right age. Vintage Ibanez Jems will rise rapidly, it’s just a matter of time. Already, it’s become much harder (and pricier!) to find Jems like the 777LNg in good condition. Reasonably good quality. This one goes without saying. It’s hard for something that doesn’t offer a good experience to appreciate in value. A $50,000 vintage instruments probably won’t outplay the guitar you own now, but chances are that it plays well enough, and sounds awesome. I know this sounds terrible, but they do have something else to them that just makes them a blast to play too. Most people call it mojo. It isn’t quantifiable so I’ll avoid talking about it too much. Is it $50,000 worth of guitar? God no. It isn’t going to be 50 times better than a guitar you bought for $1000. The other $49,000 in value comes from the factors discussed here. Basically, you are buying playable art. They are made out of materials that are hard to get now. This is does not play as big a factor as some of the others, but I felt it was worth mentioning. Guitars built out of rare, hard to find woods, like Brazilian rosewood always command more on the used market. Unless a new stash of Brazilian rosewood pops up out of nowhere and suddenly Brazilian rosewood grows like weeds, then a guitar with a Brazilian neck will always be worth more than a guitar with a maple neck. Of course this assumes all other specs are the same. In case you’re wondering, the reason Brazilian rosewood guitars specifically have gone up in value is because of the CITES treaty that bans cutting down any more endangered trees. Different production techniques & methods. This is another factor that comes into play at all levels of collectible guitars. Part of the reason Gibsons and Fenders from the golden era are worth so much is due to the use of different construction techniques that aren’t used anymore. This is however, is something that can largely be replicated. It isn’t easy though, and for that reason craftsman that can nail vintage construction techniques can do quite well. For example, Gil Yaron’s LP copies command a second hand value of about $8000 to $10,000 dollars. Worth noting is that Gil has done incredible amounts of research to figure out exactly how vintage LPs and strats were made. It isn’t something he just decided to do one day, but is rather the culmination of years, and years of work. Pre-factory PRS command a higher value and are widely seen as collectible simply due to the fact that they were made differently than they are now. They were definitely made differently, but based on our experience with pre-factory PRS, it would be a stretch to say they were made any better than current guitars PRS is putting out. Thanks for reading our guide to guitars as investments! If you missed part one, then read it here. Or if you’re in the mood for more articles, then take a gander at our latest articles.