Topic: FAQ's

[admin]

FREQUENTLY ASKED QUESTIONS (use your own judgement to decide what is fact)
Why invest in rare stringed instruments?
? The rare stringed musical instrument niche represents half of a $22 billion industry. No new supply exists and demand grows continuously as the global population and awareness of the investment value of stringed musical instruments increase.
? Substitution of supply is controversial. New violins may have similar sound qualities but their time-tested resilience and personae do not generate the same emotional performance. Given the choice, musicians prefer to play on, and many listeners prefer to hear, an ?original.?
? Market inefficiency. Only a few individuals in specific regional territories closely control information and knowledge about availability and demand. Opportunities exist to buy instruments with greater likelihood of future appreciation.
? Market discrepancy. Other artwork, of similar rarity and quality, has achieved very high absolute dollar prices. This market discrepancy suggests a large potential unrealized appreciation potential for the owners of exiting rare stringed instruments.
? New institutional demand. Large asset managers? requests for alternative investments having financial performance attributes not closely correlated with stocks or bonds signals new institutional demand for the type of investment profile that rare stringed musical instruments represent.
? Store of Value /Demise of Seigniorage. High Net Worth individuals and large asset managers seek investment opportunities independent of government controlled monetary and fiscal policy. Proceeds from the recent sale of stringed instruments have significantly surpassed their original purchasing power. The geographic mobility of musical instruments, unlike real estate, means that they are not confined to one governmental tax jurisdiction.
? The prices of rare stringed instruments have constantly increased for many decades. The same powerful forces that created steadily growing demand for rare stringed instruments over the past 10 years will continue to operate in years ahead. These forces include steady population growth and the annual addition of millions of new customers, rising personal income, and aging demographics that correlate with increasing appreciation of rare stringed instrument music. These forces create an imbalance in the demand/supply equation suggesting continuing future price increases.
? Growing demand for rare stringed instruments suggests that the risk of loss of capital is remote with any single instrument.

Why should someone consider an investment in a rare stringed instrument as a part of their investment activities?
? Insurance. An investment in a rare stringed instrument can be thought of as an insurance policy whose benefits include a greater likelihood of capital value maintenance. The performance return is likely to have a low correlation with other known financial instruments such as stocks, bonds, gold, currency or real estate.
? Diversification. Investors currently investing in stocks, bonds and real estate can achieve immediate diversification of owned assets with the purchase of a portfolio of rare stringed instruments without compromising financial returns.
? Financial Rewards. The potential financial returns of rare stringed instruments are compelling.
? Social responsibility. Investment in quality rare stringed musical instruments can encourage the development of musical talent and finer cultural art by providing talented musicians with access to otherwise prohibitively expensive instruments. Such investments are socially responsible since they help to ensure that rare stringed musical instruments remain in active performance and accessible for public appreciation.
? Insurability. Unlike stocks and bonds, investments in rare stringed musical instruments are insured for their value against loss caused by damage, fire, theft or destruction. Insurance protection of rare stringed musical instruments is similar to the protection provided on commercial and residential real estate. However, insurance covers full value of musical instruments while in real estate situations land is often not insured. Generally, the par value of stocks and bonds cannot be insured.
What are the factors that affect price?
? Mobility, condition, sound, and interpretation of the maker?s perceived value, all affect price. Mobility of rare stringed instruments allows them to be sold at the location of greatest demand. This mobility is similar to that associated with gem quality diamonds. Since rare stringed instruments can be flown anywhere, the sale of rare stringed instruments, in contrast to real estate, is unaffected by possible negative local economic or jurisdictional tax conditions. Condition, sound and changing interpretation of a maker?s value over time each affect price. Whether a physical reality or fashion trend, these traits affect price. Dealers, with the support of art patrons, have historically managed demand for specific instruments by organizing product-promoting events of various sorts such as solo and chamber orchestra concerts or competitions.
How does provenance affect value?
? Prior owners, whether individual, institutional or dealer, past players, the emotional element associated with each instrument?s sound and history also affect value. A good story comprises an integral part of the purchase decision made by prospective players and investors.

What makes rare stringed instruments so unique?
? Their sound, provenance, and general mystique make professional musicians overtly or secretly create love/hate relationships with instruments made by certain luthiers, generally luthiers from the 18th or 19th century. Much speculation about the origin of this uniqueness of these instruments exists: solar sunspot activity may have resulted in 40 years of unusually dry winters creating tight tree rings in the wood of trees used by master craftsmen to build violins. This may have also resulted in varnishes that are no longer available. Other theories exist, but the general conclusion remains one that the quality sound and mystique of certain luthiers cannot be duplicated today.
What are some of the events that drive the prices of rare musical instruments?
? A musician?s ability to create emotion around the music they perform, general population growth, and global economic development drive prices for rare stringed instruments. Although many active purchasers reside in countries where such policies do not exist, government policies that encourage donation of appreciated art to museums and not-for-profit organizations also influences price in specific tax jurisdictions.
What programs can an individual initiate to build demand?
Various programs can stimulate further demand such as:
a) Education and Information distribution programs including tours of schools,
b) Loan and Awareness programs of rare stringed instrument music: such programs exist around music competitions, thoroughbred horse events, particular cities or inner cities, diplomatic ceremonies, and art museum exhibits.
c) Sponsorship of players? competitions,
d) Sponsorship of a medalled ?Pentathlon of Muses? Olympic event currently under development,
e) Mutual fund ownership: For example, this could create a venue for a $25,000 wedding gift i.e. a partial ownership in a Stradivari as a ?romantic? investment associated with the wedding vows.
f) Integration of music into art exhibits as an enhancing multimedia experience as recently done by Tate-Modern, London and the Metropolitan Museum, New York.
Observation: Many image conscious financial, pharmaceutical, automobile, and utility organizations like to be associated with classical music sponsorship in support of their desire to cultivate a ?sophisticated image.? UBS Bank supposedly invested US$75 million in such events in 2003. Also, American and British ?socially responsible investment criteria? encourage support and investment in activities that promote the classical music industry, as well as other environmentally friendly and lifestyle enhancing activities.
Are expected financial returns from investment consistent?
? Yes and no. Purchasing rare stringed musical instruments at the correct price can generate consistent profits.

Why do commercial banks and lenders generally not supply loan capital?
? Commercial banks are funded with short-term deposits that are best suited to meet short-term working capital requirements of manufacturers of commodity products. The commercial bank?s valuation and liquidity requirements produce very low loan-to-collateral advances for musical instruments and require much education of new personnel assigned to supervise accounts.
? The rare violin trade is a truly global business, with geographically dispersed musicians, collectors and investors. Each instrument is unique. ?Institutional research? does not cater well to specialized topics that cannot easily be homogenized into one assets class, no matter how large the industry niche. ?Financial institution? lenders are also not well attuned to focus on services required by current or potential owners; lending officers and credit committees constantly need to become educated about unique value and liquidity characteristics of rare stringed instruments.
? Credit Unions such as the Actors Federal Credit Union (www.actorsfcu.com) or the Dallas-Fort Worth Professional Musicians Association (www.musiciansdfw. org) make low interest loans available for the purchase of rare stringed instruments. As of April 2005, the Actors Federal Credit Union?s current 3-year term loans include maximum loan amounts of $250,000, a 6.50% interest rate, and a 25-year amortization, while the Professional Musicians Association extends loans on a personal credit basis.
What is the size of this market and what are the historical rates of appreciation?
? Orchestrated Investments, Inc., a Cincinnati, Ohio, firm specializing in research of rare musical instruments, estimated in February 2004, that the market capitalization of rare stringed instruments was between $18 and $22 billion. In 1999, the same firm concluded that the 1960 to 1996 compounded annual return of rare stringed instruments ranged between 8% and 15% with an average annual appreciation of 11.69%.
Do individual purchases affect the price of other instruments?
? No. Due to the $18 to $22 billion size of the market, correctly timed and managed, an individual purchase is not expected to affect the purchase price of other instruments although individual sales regularly set new record sales prices.
How large is the classical music industry?
? Definitions determine the size of the industry. The classical music industry, with concerts and event organized locally and outside the US, is estimated to be a multi-hundred-billion dollar industry. Small events usually involve economic development activity of over $100,000 per event. Larger festivals, such as the Aspen Music festival, generate gross revenues above $11,000,000. No good measurement statistics about the size or annual turnover of the classical music industry have been developed.
Is the industry becoming less flexible in selecting who receives playing privileges on finer instruments?
? Probably yes. The constantly increasing price of finer instruments, whether created from dealer promotions or for other reasons, has reduced the flexibility of decision makers to support artists that may not present well to generally well-meaning boards. This perception may be illusionary as the ownership of finer instruments, according to many, has historically been outside the financial reach of the musicians who, according to others, should be playing these instruments.
What is the risk of capital loss?
? Professionals in the field consider the risk of capital loss low. Historic sales prices and all known public sales suggest that no purchaser of an old quality stringed instrument made by a recognized luthier has been sold below the purchase price when owned for at least 5 years. Statistics to confirm this are not available.
Why are auction house prices for old stringed instruments lower than dealer prices?
The market for old stringed instruments divided 10 years ago into a market represented by the auction houses and that represented by a number of dealers focusing on the Cremona luthiers, generally A. Stradivari and his counterpart J.G. del Gesu. Quality instruments, as measured by their ?sound? and ?condition,? became the domain of dealers, while the auction houses became an outlet for a great number of lesser quality instruments as dealers disposed of their stock. Furthermore, auction houses have limited daily exposure to product thus making it harder for them to identify and certify makers, they do not have luthiers on staff to make unusual repairs or tonal adjustments, and they don?t take any responsibility for an instrument?s repair work or provenance.
What are auction prices for old stringed instruments?
Old instrument auctions occur in different worldwide geographic locations during their seasons at times that have become local traditions in their own manner. Each auction situation carries its personal unique imprint. Investors are encouraged to understand each sale?s unique path to an auction event. This news release is famous because the instrument is famous for its lack of good sound: New York, April 23, 2005 (Reuters): A violin made more than three centuries ago by Antonio Stradivari fetched a record $2 million in an auction, the highest price for any musical instrument, Christie?s said yesterday.
The sale surpassed the previous mark of $1.8 million for a Stradivari violin sold in 1990, according to the auction house. ?The Lady Tennant? violin, made in 1699, the year before Stradivari?s golden period style, had a presale estimate of
$800,000 to $1.2 million. Violins made by Stradivari and other prized Italian makers like Amati and Guarneri are highly sought after by concert artists and collectors for their high-quality sound.
This news release is interesting both because of the valuation given and because of the otherwise attractive jingoism reflected by the actions taken: March 1, 2005, (New York Times). What Price a Violin?

The Royal Academy of Music in London has begun a campaign to raise $2.1 million by March 31, in addition to the $1.92 million already raised, to keep in Britain what it describes "as arguably the most important violin in the history of the instrument." The violin, the Viotti Stradivari, is named for Giovanni Battista Viotti (1753-1824), the most influential violinist of his day in Europe, who first alerted the world to the power of Stradivari's model when he played it before audiences in Paris and London in the 1780's and 90's. On condition of anonymity and in lieu of paying $2.69 million in inheritance taxes on its father's estate, the family of the owner has agreed with the British tax authorities, who have valued the instrument at $6.72 million, to accept $4.02 million to enable it to remain in Britain, although a spokesman for the Royal Academy says it would undoubtedly fetch more on the open market. The Royal Academy, which already has a collection of 15 Stradivari violins on public view, says its main reason for seeking this particular instrument is that of 550 of the violins that still exist, the Viotti is extraordinary, not just for its tonal qualities but also for its almost unbelievably fresh state of preservation. It has hardly been played in 200 years.

[Epitome]

I am suprised that these facts have not been overturned since most are false and generated in the minds of people who gain from their perpetuation. As my good friend John Thornton might just blurt out "Hogwash" :laugh:

[fiddlinaround]

I am suprised that these facts have not been overturned since most are false and generated in the minds of people who gain from their perpetuation. As my good friend John Thornton might just blurt out "Hogwash" :laugh:

Jed,

I believe the time has come for us to create and establish "The Guarneri del Jesu Foundation".
Don't you think?

[Epitome]

 

I believe the time has come for us to create and establish "The Guarneri del Jesu Foundation".
Don't you think?

With our combined knowledge and experience it should be done

can you post the measurements for your 1741 del gesu?
back length
width across lb
width across ub
width across mb.
thanks