Guitars and Other Collectibles Can Be Risky Financial Instruments

Paul McCartney tries out a custom-made left-handed
Paul McCartney tries out a custom-made left-handed "Les Paul Lite" as it is presented to him by Paul himself in 1988. (Associated Press)
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By Jonathan Starkey
Washington Post Staff Writer
Sunday, August 23, 2009

Gil Hembree was 20 years old and working the counter at Kitt's Music on G Street NW when he spotted a 1962 Gibson catalogue featuring the music-making duo of Les Paul and Mary Ford.

It wasn't the couple that caught his attention but rather the guitar slung over Paul's shoulder: an original-style, single-cutaway Gibson Les Paul model with a gold finish.

That was 1966. Soon after, Hembree saw an Evening Star classified ad for a 1952 Gibson Goldtop Les Paul. He paid $100 to a country-music fan in the Maryland suburbs. Hembree later sold it to a musician for $400, booking a profit he used to help cover tuition at American University, where he studied accounting.

"He had no idea, and I didn't really either at the time, what these were worth," Hembree said of the transaction. "I just thought they were cool."

Today a 1952 Goldtop in excellent condition is valued at $15,000 by Vintage Guitar magazine, which publishes an annual price guide.

Hembree said his experience sparked a decades-long hunt for vintage guitars, many with Les Paul's name on them, to buy, collect and sell -- often at a profit.

Rare guitars are among the many collectibles whose value has surged with the explosive rise in wealth earlier this decade that inspired investors to sink cash into goods such as art, rare coins and antiques.

The death of Paul, a pioneer whose innovations transformed popular music and paved the way for rock-and-roll, has spurred fresh interest in vintage guitars. Of particular interest are certain models with his signature emblazoned on the headstock, considered the grand prize among collectors and often sold in private deals featuring authenticators and incredible sums of cash.

Like any investment, collectibles have potential for great gains (as Picasso's masterpieces show) and for a steep slide to oblivion (think Beanie Babies). Timing, as they say, is everything, and even investments with lasting value (homes, for example, and yes, guitars) can get carried away in a bubble.

But financial planners caution against speculating on collectibles. "To make 10 or 20 percent on your collectibles," said Michael Walther of Oak Wealth Advisors in Deerfield, Ill., "the piece probably has to appreciate 50 to 100 percent from what you paid for it."

Diversifying into hard assets such as rare coins and guitars can be a smart hedge against inflation, but don't buy up collectibles with money you may need on short notice, said Marc Henn, president of Harvest Financial Advisors in Cincinnati. Looking to unload a guitar quickly could cause headaches, as well as big losses.

"I would not want to have assets in collectibles and be forced to have to sell them to eat," Henn said. "You would probably get taken to the cleaners."

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