Newsletter #7, June, 2003

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I have previously written a newsletter on the topic of what factors, in my opinion, combined to result in a truly superb instrument. This month I shall express my opinion as to what factors combine to define a collectible instrument which may, in turn, prove to be also a good investment.

I frequently tell people that I deal vintage, used, and new instruments. In my mind these three categories are quite different. Vintage instruments by definition are items which are no longer in production and which in some way differ from anything which is currently available new. In some cases such as New York-made original Epiphones, the company is no longer in business. In other instances such as the Larson Brothers of Chicago, D'Angelico, Stromberg or D'Aquisto, the maker has died. (It should be noted that the Epiphone, D'Angelico, D'Aquisto and Stromberg names have been sold and are still in use on Oriental import instruments.) In other instances such as pre-World War II Gibson instruments or Fender pre-CBS era guitars, the company is still very much in business today, however, both of these companies have been sold and are producing guitars in a different city, in different buildings, with different equipment, and different people than the originals. They happen in both cases to be producing fine instruments, which are, in my opinion, superior to the late period Kalamazoo Gibsons and late period Fullerton Fenders, but they are in fact being made with quite different manufacturing techniques than the originals in spite of the fact that, in many cases, they are remarkably accurate replicas. Martin, although the company has been in the original family's hands from 1833 to the present, has changed considerably over the years such that the pre-World War II models are in fact pieces made by different people in a different age in which production techniques stressed much more hand work, no automation, air seasoned wood, hide glue, and finishes formulated long before our federal government instituted EPA regulations forcing changes in lacquer and other finish compositions.

By contrast to vintage instruments, used instruments by my definition are those pieces that have been pre-owned but are not significantly different from that which is currently available new and therefore will be available at a price lower than a new one. They may be very fine utility tools, but they are not sought by collectors, although in some cases specific models may be in the future. New instruments by definition are easy to define since they are those which are available brand new from an individual builder or manufacturer either direct from the maker or through a dealer and are sold as new with a warranty.

While in the past most people who considered themselves to be collectors specialized in vintage instruments and often call themselves vintage guitar collectors, today many people who amass collection speak of collectible guitars and call themselves guitar collectors without necessarily using the term vintage. Today there are as many people accumulating vast assemblages of new so-called limited edition models by major manufacturers such as Martin, Fender, Gibson, PRS, and Taylor with the view that these will be great investments for the future. I have written at length on this topic. As most of my customers and readers are well aware, I am personally highly skeptical of the future investment potential of most of these so-called limited edition models. It is my firm opinion that instruments which are designed simply to be displayed in a glass case rather than to be actually used as musical instruments for their tone and playability are not likely to be destined to become great investments. This is especially true if they are priced at an extreme premium due to their limited edition status. The great instruments of the past from Stradivarius and Guarnerius violins on down to pre-World War II Martin flat tops and great Gibson and Fender electric guitars of the 1950s were designed and priced to be used. The fact that they have gone on to be great collector's items is very directly related to their inherent quality as well as rarity. Scarcity alone does not make an item good. Original sunburst Les Pauls manufactured from mid 1958 through 1960, for example, are not nearly as rare as numerous other models, which are readily available today for a small fraction of the price of the burst. For example, the original reverse body Firebird I, V and VII models are all more rare than a sunburst Les Paul but sell for only a small fraction as much. Guitar collecting is not like coin collecting or stamp collecting in which rarity and condition are everything. People don't collect guitars simply because they are rare. They want good ones. Whereas a coin or a stamp must be in absolutely uncirculated condition and even the tiniest defect would cause it to be a half price or less item, a guitar can show significant wear and still retain a goodly portion of its value. Obviously mint condition original guitars bring the highest premium prices from collectors, but an instrument does not immediately become a half price item because it has a few scratches. Furthermore in the case of coins or stamps, a mint error such as an upside down airplane on a postage stamp or a double strike on a coin brings many multiples the value of the standard version, but a manufacturing mistake of this magnitude on a guitar would probably never have gotten out of the factory but if it did would render the instrument less functional such that it would not be nearly as appealing or valuable.

It should be noted that manufacturers with sizeable factories as well as individual hand builders are both in the business of making instruments as a commercial venture for a profit. It is not to their advantage to deliberately produce items which they do not perceive to be in high demand. Furthermore, their production is geared very much to models which customers wish to order in quantity. If an instrument is rare, this is usually an indication that at the time it was manufactured, demand for this item was very low. Typically this means either that the public did not perceive the design or quality to be good or that the model was introduced at a time in which demand for this style instrument was simply not well established. In the case of a Lloyd Loar-signed F-5 mandolin, for example, these instruments are exceedingly rare because they were not introduced until mid 1922 in an attempt to revitalize demand for mandolins at a time shortly after the mandolin orchestra boom had died. It did not matter how good the F-5 was in 1922. People were no more interested in mandolins at that time than they would have been in the finest new version of the buggy whip after the introduction of the automobile. Many years later Bill Monroe picked up a 1923 F-5 and found that it was the perfect instrument for bluegrass music, which directly lead to a revitalization of the role of the mandolin in American music. By contrast the original 1958 Flying V and Explorer Gibson guitars were introduced ahead of public demand for such an instrument. When they first came out, the designs were considered so radical that the public refused to accept them resulting in extreme scarcity of these instruments today. Years later the Flying V and Explorer models were re-introduced and are today considered mainstream.

The instruments, which are the most sought by vintage instrument collectors and subsequently bring the highest prices are inherently very fine musical instruments. Acoustic guitars such as 1920s and 1930s Martins and Gibsons and late 1920s and 1930s National and Dobro guitars and great orchestral rhythm guitars by makers such as D'Angelico and Stromberg are superb instruments which have stood the test of time rather than being "flash in the pan" fads. The same can be said of great electric guitars such as early Fender Telecasters and Stratocasters and original 1950s Les Pauls, Flying Vs, Explorers, ES-335s and the L-5CES. These models not only are superb instruments but they are the archetypes upon which the vast majority of popular modern guitars are based. While one may debate whether an original sunburst Les Paul with a highly figured curly maple top is inherently really worth $150,000 or more, virtually no one debates whether or not it is a good guitar or whether it is an attractive instrument. Over the years the collectible vintage guitars such as the models I have just mentioned have proved to be extremely good investments, in many cases far outpacing stocks, bonds, or real estate.

In some cases such as the surge in arch top guitar prices during the early to mid 1990's, the market has been driven up by a handful of collectors with money. Archtop D'Angelicos and D'Aquistos are currently not nearly as easy to sell as they were in the mid 1990's nor do they bring as much money now as they did then. The fact remains, however, that these are exceedingly good instruments, which also happen to be quite rare. It is my opinion that they will not go down in value from their present prices and will, in fact, continue to escalate in value in the future. The fact that they went up so rapidly when they did illustrates the fact that the vintage and collectible guitar market is very small by comparison to the market for stocks, bonds, real estate, precious metals, or gem stones and therefore can be more easily driven or manipulated by even one or two players with a few million dollars to spend. An investor with one billion dollars to spend is not able to make a dramatic impact in the national or international markets of stocks, bonds, real estate, or other such commodities, although a one billion dollar investor can certainly greatly alter the real estate market in one city. By contrast, an investor with five million dollars to spend can make a dramatic impact in the guitar market.

Many buyers select instruments due to their association with famous performers. In a very real sense this may be a partially fad driven market as a result, however, players such as Eric Clapton, Roy Buchanan, Earl Scruggs, Bill Monroe, and others who truly break new ground and define musical genres and can popularize particular types of instruments are not themselves fad driven. They select the instrument they use truly based on the inherent merit of the instrument and how well they suit the performer's needs. I am firmly of the opinion that the instruments which have gone on to be highly sought and valuable collectibles and have withstood the test of time are indeed inherently great musical instruments rather than simply rare commodities. The fact remains, however, that if Bill Monroe had not picked up his F-5 mandolin, he might never have invented his hard driving chord rhythm style of playing and F-5 mandolins today might be selling for $5,000 to $10,000 rather than the Loar models today bringing over $100,000. If Earl Scruggs had played a Vega Tu-ba-phone or a Bacon & Day Silver Bell or even a Gibson raised head model Mastertone rather than a flat head, the market for flat heads today would not command nearly the current price level. I have no doubt, however, that regardless of who came along there would still today be a clear recognition that pre-CBS Telecasters, Stratocasters, Precision basses, Jazz basses, 1950s Les Paul's, Flying Vs, Explorers, ES-335s, ES-175s, L-5CES's, as well as the great acoustic Martin and Gibson instruments of the 1920s would still rise to the top such that the same models which we regard today as being the archetypes would indeed be recognized as great instruments regardless of which performers had used and promoted them. When it comes right down to it, if you want the sound of a 1958 through 1960 sunburst Les Paul, there isn't any other instrument of the "Golden Era" which is readily available at a cheap price offering the same sound and playability. Interestingly enough, the same cannot be said about some of the Gretsch models. A 1950s White Falcon, for example, has exactly the same size body and electronics as a Country Club model of the same period. A blind man playing a Falcon versus a Country Club would be unable to tell the difference except by feeling the shape of the peghead and the tailpiece. They are functionally the same animal. Likewise the exceedingly rare and currently extraordinarily expensive White Penguin model is the same size and shape and has the same electronics as an equivalent era Gretsch Duo Jet but sells for many multiples more money. During the height of the folk/rock era, Crosby, Stills, Nash and Young had a great influence in popularizing the late 1950s White Falcon model and as a direct result dramatically drove up the price of these guitars. No major performer used White Penguins on stage, but collectors have recognized the extreme rarity of the model as well as its ornamental direct relationship to the Falcon and have bid these instruments up to prices unequaled by any other Gretsch. The Falcon and Penguin, however, are in my opinion, anomalies in the marketplace. I can think of no other models in the vintage instrument market which have achieved such high market prices but are functionally virtually identical to other models of the same time period by the same maker which are readily available for only a very small fraction of the price. A White Falcon from the late 1950s can bring $20,000 to as much as $25,000 whereas a Penguin may bring as much as $75,000 to $80,000. By contrast a Country Club from the 1950s may bring $4,000 to even $4,500 and while an extremely fine example of a Duo Jet may bring as much money as the Country Club. There are, however, no cheap alternatives from the 1950s to a sunburst Les Paul, Flying V, Explorer or dot-inlaid ES-335. Even in the case of a pre-World War II Martin D-45 which is not dramatically different in sound from the same age D-28, it can still be said that the D-28 of which close to seventeen hundred were made with herringbone trim and scalloped bracing sells for a much higher fraction of the price of a D-45 of which only 91 were made. A clean mid 1930s D-28 can push $50,000, whereas a D-45 may bring $150,000 to $175,000.

There are some models which, although in my opinion do not have great merit, have been selling for relatively high prices due to their association with other models, which are well established collectibles. The Flying V of 1958, in my opinion, is a great guitar, but not quite as good a guitar as the same age Explorer. The Explorer and V both look neat and certainly sound good, but it is my opinion that the Explorer has better sustain and a somewhat better tone due to the fact that it has more wood mass near the bridge. The body shape of the V cuts out a significant mass where, in my opinion, it might help the sound. It is also highly evident that the Explorer has a more comfortable body shape to play when seated. Although the original 1958 V has a rubber skid pad on the side of the body, it is still incredibly uncomfortable to play except with a strap while standing. The 1963 Flying V's made with original leftover 1958 necks and bodies but patent numbered rather than patent applied for pickups and with 1963 style cases are nearly as good a guitar functionally as the original 1958 and looks virtually identical and bring very high prices, but the 1967 version of the Flying V, while very rare, is a very different animal from the original. The 1967 V has a mahogany rather than Korina body, the body is much thinner than the original, there is no rubber skid pad on the side, the pickguard is of a different shape and surrounds the pickups with no pickup frames, the strings attached to a stop tailpiece rather than running through the body, the peghead and body shape is different from the original, the neck joint is quite different, and the three knobs are arranged in a triangle rather than a straight line as per the original. The 1967 V, in my opinion, is functionally not nearly as good a guitar as the original 1958 version and, in my view, is not nearly as good a guitar as a 1967 SG Standard, however, these Flying V's due to their association with the original V bring far more money than the same age SG Standard. I view the current market price of $7,000 to $9,000 for a 1967 Flying V as an anomaly. There are in fact very few models which bring such prices without having inherent great merit. By contrast, there are also some items that, in my opinion, are 'sleepers' bringing less money than I think they are inherently worth. I view 1930s Martin 0, 00, and 000, size guitars as being fully equivalent in quality to the D size instruments. I personally enjoy playing 00's, and 000's every bit as much as D's. While I recognize that the D is the ideal backup rhythm guitar for bluegrass music, I view the 00's and 000's as well as many of the 0's as being perfectly suitable, and in many cases, superior to the D's for most other forms of music, however, these guitars currently sell for only a fraction as much as the same age and equivalently ornamented D model. I see some signs of a surge in demand and subsequent value for the 0, 00 and 000 Martins, however, they still have a long way to go before they catch up in price with the D models. In my opinion, these instruments are great investments at this time.

While I have steadfastly maintained that it is the great instruments that rise to the top and consistently over time command high prices, I also recognize that fashion and tastes change over time and that the market is driven by these factors. Music and consequently taste in musical instruments reflect changing social trends and tastes of the times. Just as the art market changes such that some great painters have gone in and out of vogue over the years, fretted instruments trends reflect changing tastes in music as well as the ups and downs of the economy. Generation X may not necessarily want the same instruments or listen to the same music as the baby boomers. Sincerely,
George Gruhn