A store-of-value asset maintains its relative purchasing power over a long duration. Precious metals and fine art have always qualified. Fine instruments belong in the same conversation, with a price record stretching back three centuries.
In money there is always a hierarchy. International money is accepted by everyone; regional money by many; local money by a few. Over the last three centuries the leadership of international money has changed hands three times: from the Bank of Amsterdam, to gold-backed sterling, to the US dollar. Each time, the "money illusion" of permanence was overturned.
A genuine store of value is always priced in the international money of the day, and shifts currency as the system changes, keeping its international purchasing power intact. Fine instruments have done exactly this.
A second anchor: 130 years ago a Stradivari cost about the same as a small house in Mayfair. Today a Stradivari is still worth a small house in Mayfair. The instrument differs from gold or canvas in one decisive way: it must be played. It is a partnership between craft and player, which alters its provenance and value over time, making it a living investment.
As the dollar system moves to a Treasury-secured, government-collateralised model, structural deficits mean a steady erosion of the purchasing power of fixed income. The classic allocation triangle is being redrawn.
In their Global Investment Returns Yearbook, Professors Elroy Dimson, Paul Marsh and Mike Staunton extended their landmark study of global asset returns to "treasure assets," or investments of passion: the collectibles tracked all the way back to 1900, among them wine, art, stamps and violins.
Their finding placed fine instruments firmly in the store-of-value conversation. Over more than a century, violins appreciated at a real rate close to that of art and stamps, and the category as a whole outperformed government bonds, Treasury bills and gold, while delivering something financial assets cannot: the pleasure of ownership itself.
Source: Dimson, Marsh & Staunton, Global Investment Returns Yearbook; Dimson & Spaenjers, "Investing in Emotional Assets."
Investment in emotional assets can pay off, because of the non-financial yield they provide.
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