Funky but Great Investments

[PeterRS]

Some weeks ago I moaned when I described not following Warren Buffet 17 years ago when he purchased a 10% stake in the Chinese battery and occasional car maker BYD. It cost his company $230 million. Slowly Berkshire Hathaway has been selling that stake and as of this week has zero shares. The amount of profit made is 30 times its investment - $7 billion! He walks away with a mega-profit as BYD's capitalisation hits $135 billion and its battery-driven cars outsell Teslas around the world.

Another investment for those with mega-funds at their disposal, if they can be found, is a violin. This can bring you loads of profit. Not just any old violin, though. A Stradivarius crafted in the late 17th/early 18th century in workshops in Cremona is arguably the best investment as only roughly 650 remain in existence. All are 'named' instruments, mostly after musicians who have owned and played them. In 1992 the American collector David L. Fulton purchased the "Baron Knoop" Strad for US$2.75 million. In March this year he sold it for $23 million making it the most expensive violin ever sold.

Caring for such expensive intruments is a round the clock job. Stradivarius also made other stringed instruments. One of his cellos is owned by the great Yo-Yo Ma. Rushing in a taxi from a rehearsal to a fund-raising lunch at The Peninsula in New York, he forgot that he had left his Strad Cello in the trunk of the taxi. WIthin minutes the hotel concierge was on to the taxi company and musician and instument were quickly united. I'll bet the tip was more than the customary handful of $$!

Second on the list will be instruments made by Guarneri del Gesu whose short career coincided with the end of that of Stradivarius. Only 150-200 of his instruments remain in existence and are favoured by some violinists for their fuller, brighter tone. The Vieuxtemps Guarneri, owned by the composer of that name, was sold in 2013 for amost $18 million. Until then the average sale price of a Guarneri had been in the region of $10 million.

What makes these instruments rise so dramatically in price? Increasing scarcity for one. Brilliance of their sound another. But it is the farily recent attraction of business corporations to buy one as part of its investment portfolio which it then lends out to a leading violinist of the day. After all, these instruments have to be played. If not they deteriorate, albeit slightly. One, the "Messiah Strad" is owned by by the Ashmolean Museum in Oxford but sadly is rarely played.

Such rare violins are clearly dependent on market conditions and so are not really liquid investments. The market is driven by desire. But as The Strad Magazine points out in a 2021 article, between 1960 and 2008 such violins had increased in value by 19,400%!

Finally, and almost inevitably, another part of the reason for increasing prices lies in the Chinese market. During the Cultural Revolution, orchestras were confined to playing a handful of Chinese works favoured by Mao's wife with pigsties as rehearsal halls. Now there is a huge boom in western classical music and the very rich Chinese businessmen are getting in on the act. Not yet at the very top level but already wealthy collectors and businessmen own several top violins and are regularly seen at valuable instrument auctions.

Now why didn't I save harder and now own a million dollar instrument!