Rare books: the ideal Christmas gift
Rare books have traditionally been considered a poor investment, but think again, says Merryn Somerset Webb.
Books have traditionally been considered a poor investment,but think again, says Merryn Somerset Webb.
Christmas starting in November upsets you. Black Friday upsets you. The relentless consumerism around what was once considered a religious festival really upsets you. So does waste; you hate seeing everyone open gifts that have cost small fortunes, but are worth nothing as soon as the packaging is ripped off.
You wish you could find something to give at Christmas that could be appreciated not just for a few minutes, but for many years to come, something that will have an enduring value, and that might even goup in value over the years.
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Good news. We feel a little the same. So we've been looking around for possibilities. There is gold who wouldn't be thrilled to open a small package containing a gold sovereign on Christmas morning?
There is antique jewellery bought at auction: this almost always represents reasonable value and tends to hold that value (I favour sapphires). You could give the beginnings of a stamp collection US Federal Reserve chairwoman Janet Yellen has one (worth up to $50,000), and if stamp collecting is good enough for her we reckon it's good enough for our kids too.
You could give art I have often bought new artists online at the likes of newbloodart.com, for example. There's no guarantee a piece bought there will hold its value, but there is at least a chance.
But my favourite suggestion for this year is books. Most people like to get a carefully chosen new book for Christmas. But for the friends and family of MoneyWeek readers, we are thinking of something rather better: a carefully chosen rare book.
Most people will flatly refuse to tell you that books can be considered an investment. It is, says James Pickford in the Financial Times, a "dirty word among the dealers and auctioneers of the antiquarian book trade".
You don't invest in books. You collect books. That's because this is the exact opposite of a commodity market. No rare book has an exact equivalent. Even if they were printed at the same time in the same place, any two books will have differences in their condition and that matters.
Transaction costs are high (buy at auction and your buyer's premium alone will come to 25% or so of the price). The market is also very illiquid (there aren't very many buyers for any one niche book). That means that "buyers must hold books for years sometimes decades to see values rise with no dividends along the way".
We see all that this isn't straightforward. But it also isn't impossible to see investment possibilities. There is some price information worth looking at, for example. Paul Fraser Collectiblesproduces an index tracking the prices of 40 of the most popular first editions regularly traded around the world.
It looks good: over the last ten years the index has risen by 140% an annual return of around 9.2% a year. Inside that, the best price rise has come from Aldous Huxley's Brave New World (up 700% to around £4,000) and the best contemporary price rise from J.K. Rowling's Harry Potter and the Philosopher's Stone (up 480% to £17,500).
Among children's books, the best performer isA.A. Milne's Winnie-the-Pooh (yours for around £2,500).
For something cheaper you can look to George R.R. Martin's Game of Thrones, which has done well since the TV adaptation: it has risen by around 14% a year recently, and will now set you back around £750. Something for a favourite godchild perhaps.
And the most expensive book in theindex at the moment? Close to the top isJames Joyce's Ulysses. But the prize goes to F. Scott Fitzgerald's The GreatGatsby a first edition of which will now cost you £90,000.
Outside these more recent first editions, very rare scienceand economics books are having a moment: Adam Smith's The Wealth of Nations (1776) fetches up to £40,000, while De Revolutionibus Orbuim Coelestium (which contained Nicolaus Copernicus's idea that the Earth revolves around the sun) will set you back some £600,000.
That might be more than you want to spend this Christmas. So which books might be cheaper now, but the successes of the future? To answer that, you might first want to look to global economic growth.
A few weeks ago I went to see Bernard Shapero at Shapero Rare Books in central London, a shop so glorious that I recommend you visit, even just for a browse.
According to Shapero, where there is economic growth there is eventually demand for rare books. The first things the newly rich buy are obvious status symbols: designer clothes, cars, jewellery, houses, odd contemporary art and then an impressionist or two.
But there then comes a point when they want to have something a little more special and a little less ostentatious. They also want to "buy back their heritage" and to be seen to be doing so. Rare books are the perfect answer. That's why the prices of rare books about China have trebled in the last decade and those related to Russia have gone up 300%-400% in the last 15 years.
Books are also the perfect gift. As they aren't ostentatious, they are less likely to be caught up in corruption crackdowns (particularly in China and Russia) than, say, a Rolex.
And there is, of course, a book on absolutely everything: want to give a nice gift to someone interested in tiger shooting?* Sailing? Growing geraniums? Your Mayfair book dealer has something for you.
So assuming that wealth continues to rise in Russia and China (this is not exactly a given, of course), the prices of rare books about them should continue to rise.
The next thing to think about is nostalgia: as their wealth grows people tend to buy "better versions of books they used to love", says Shapero. That's why I went straight to the internet to buy old copies of my favourite children's books when my children were born and why prices of the likes of Winnie-the-Pooh and Brave New World have been soaring recently.
Now think to the future when today's young have their own children and want them to own special copies of their old favourites. What will they buy? Might it be Harry Potter? The Philosopher's Stone looks pricey now, but think how much it will cost when the people who bought the first 400 million copies start fighting over the few first editions in 30 years' time. It's an almost guaranteed winner.
Finally, you might look to areas that have performed badly. Books on Japan have done badly over the last 20 years, but if Abenomics succeeds (again, not a given) that might change.
You can have a rare first edition of Bairei Kacho Gafu, the "finest large format bird book of the late Meiji era in Japan", for £10,000 perhaps. Then there are botanical books which are way out of fashion: the day I went in, Shapero had just sold something rather beautiful for "20% of what I bought it for 20 years ago".
If there is to be any reversion to the mean here (and you like ferns) it might be worth looking at something such as Thomas Moore's The Ferns of Great Britain and Ireland (1855, £8,000).
You can buy the truly beautiful stuff from Shapero Rare Books; good first editions from Paul Fraser (think Jane Eyre for a mere £30,000); and just about anything from Abe Books.
There are also regular book and manuscript auctions at the main auction houses (Sotheby's has one in Paris on 18 December and for those who can wait, Lyon & Turnbull have one in Edinburgh on 28 January).
Get someone a nice book on the same subject every year for 20 years (on the same subject, because a collection can be worth more than its parts) and you'll have built them a pretty good collection by the end and for rather less than you might think.
Right now, says Shapero, you could put together "one of the world's greatest libraries" for the price of a Picasso.
I want pretty much everything from Shapero's shop (I have a particular yen for the full set of John Gould's bird books £1.5m), but I'd also love to have that first edition of Winnie-the-Pooh and the one of Emma for sale on the Paul Fraser site. Just in case anyone was wondering.
Three factors tolook out for
All books are different. Put three copies of the same book up at auction and they will all fetch completely different prices. So what makes the difference? Here are three of the biggest factors.
A good dust jacket: according to Daniel Wade of Paul Fraser Collectibles, the "presence of a good-quality dust jacket can treble the value of an unjacketed example".
This is particularly the case with children's books: a copy of The New Adventures of Rupert (1936) the first Rupert Bear annual can fetch £500 unjacketed. But with a perfect dust jacket that rises to £3,000.
A good edition: publishers tend only to print a few copies of each book at first in case the book doesn't do well. If the book then goes on to outsell expectations, simple rarity value will make the first editions and the first printings of the first editions more valuable than others.
This probably doesn't come as a surprise. However, it's worth noting that this is not always the case. Wade notes that the seventh printing of the Alcoholics Anonymous Big Book is as valuable as a first edition, first printing. That's because war-related paper shortages meant few copies were printed.
At the same time, the third edition of Isaac Newton's Philosophiae Naturalis Principia Mathematica, for example, is more collectable than the first. Why? It's the edition that includes Newton's initial comments on calculus, says John Moore on CNBC.com.
A signature: an author's signature can add serious money to the price of a book, even if it is not a first edition although signed first editions are the most coveted, says Wade.
Signed first editions of the reclusive J.D. Salinger's The Catcher in the Rye typically make £15,000, but later signed editions can still achieve £3,000 (which is something worth noting, given that the book was not exactly a hit when it first came out).
Thomas Pynchon is another author whose signature is rare and valuable in any format. The same goes for poet Emily Dickinson.
* I know you think I am exaggerating, but Shapero has a nice copy of Tiger-Shooting in the Doon and Ulwar for £950.
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