Vintage Clothing as an Investment

Collecting fine art is an expression of the yearning of the human soul for beauty. Collecting has various psychological, aesthetic and financial components—all commingled together in different ways in the mind of each collector.

"Vintage clothing" refers to finely constructed clothing from the past; clothing which meets high and generally agreed standards of aesthetic quality. These standards are set both by the marketplace in dollars and by experts with long experience in the field.

"From the past" denotes fine clothing which has survived in good condition and which has been preserved specifically because of its intrinsic beauty and not only for its wearability. "The past" may be the distant past or the more recent past, e.g., antique clothing such as an early 20th century embroidered tulle cape.

tulle cape

Berin/Stark dress

or alternatively, a 1950s Harvey Berin/Karen Stark party dress. To have true collectible value, vintage clothing must have passed the test of time: it is still considered beautiful even after its fad is long gone.

Aesthetic motivation reflects the collector’s cultivated taste. Appreciation of the intrinsic beauty of fine clothing derives from the collector's natural sense of beauty; from her knowledge of vintage clothing; and from her ability to make distinctions of quality.

Another element of aesthetic appreciation is an understanding of the historical context: who was the designer; for which historical figure; and for what historical occasion? Documentary provenance accompanying a piece of vintage clothing may greatly increase its market value.

Worth couture coat

From the House of Worth is an example of historical value: a numbered couture coat, c.1901, created under the stewardship of Jean Phillipe Worth. Vintage Textile sold this beautiful gown to a knowledgeable collector in 2003.

The very act of acquiring and holding such a fine piece is a reflection of the collector’s cultivated taste and discrimination, an important expression of personality.

Vintage clothing may or may not have wearable value. This aspect is a bit tricky. If vintage clothing can be worn on suitable occasions, that adds to its value. Overuse, however, may expose the piece to deterioration, detracting from its collectible value.

Collecting is also a financial activity, although investment return is a secondary consideration. In any financial activity like investing, where substantial sums are spent over time with no immediate return on or of capital, one must also look at such activity as investment as well as leisure/pleasure activity.

Collecting—the long-term acquisition and assemblage of related objets d’art by a discriminating individual—is a hybrid of two rather different activities:

In the former case, money is spent for immediate gratification. No future value can be realized from such expenditure. In the latter case, investment expenditure generally brings no immediate gratification. But the asset purchased retains an immediate monetary value. The asset may well appreciate, hopefully at a rate faster than inflation.

Collectibles, e.g., fine antique furniture, vintage clothing, jewelry, Impressionist painting, are considered "hard assets", i.e., assets that have physical form. Other hard assets are gold and silver bullion; real estate; commodities like oil and copper.

Financial assets represent the other main category of investment assets. Examples of financial assets are common stocks; bonds; mortgages; bank deposits.

Over the long term, we see periods of low inflation, alternating with periods of high inflation. Until the oil shock of the 1970s, post-WWII inflation in the U.S. was low. From 1973-1981, however, the Consumer Price Index increased at a rate of 7.5% per year, including rates as high as 13.3% in 1979. From 1981-1999, inflation subsided to only 3.3% per year.

During periods of low inflation, most financial assets greatly outperform hard assets. Financial assets are a claim on the earning power of some entity. Low inflation generally fosters high economic productivity. Hence, those claims (stocks and bonds) are worth more. During periods of low inflation, hard assets like vintage clothing and jewelry tend to appreciate rather slowly, often barely keeping up with inflation.

But during periods of high and/or rising inflation, hard assets (including collectibles) tend to outperform financial assets, which often depreciate in value in the face of high inflation. The driving force during the price mark-up phase, when collectibles prices escalate rapidly over a period of years, is the level and direction of real interest rates.

Where are we in the long alternating cycles of high inflation vs. low inflation? After an extended period of modest inflation, it is clear that a 26-year period of low inflation is ending, ushering in a period of rising inflation. The significance of this development for the collectibles market cannot be overestimated.

First oil, then labor costs, then general inflation, have started to awaken from their slumber. Now collectibles and other hard assets should begin to outperform financial assets, as they did in the prior inflationary wave of 1973-1981. Once the tide starts to come in, the trend should continue for years, not just for weeks or months, if history is any guide. Collectors of jewelry and vintage clothing can expect to have the wind at their backs in the years ahead.

In one category of collectibles, special factors are at work. From 1990-2012, vintage clothing has benefited more than any other collectible category from the widespread acceptance of the internet. Prices of collectible vintage clothing have moved up much more rapidly than general inflation. With the Federal Reserve (and all the major Central Banks) committed to zero interest rates and a hyper-inflationary policy, we can expect an even stronger move up in fine collectibles.

A Chanel woman’s suit from the 1960s has moved up from $805 in 9/93 to $3,220 in 11/99. (All quoted prices are actual realized prices at major auction houses.) This is 300% appreciation over 6 years or 20%/year.

A Charles James evening dress climbed from $29,900 to $49,450 from 4/94 to 4/96 or 65% in two years. This was one of only eight such dresses that James made. We see the great importance of scarcity in setting price.

Gernreich bikini

During the 1990s, we saw comparable moves in other top-end vintage clothing. A Rudi Gernreich bikini similar to the one on the left moved from $518 to $2,760 or 432% appreciation. And lesser known quality names have had similar rates of appreciation.

While future inflationary trends should benefit the discriminating collector in vintage clothing, clearly factors other than inflation were giving a boost to vintage clothing. The ubiquity of the internet has greatly widened the "constituency" of vintage clothing collectors.

Constituency is a term of art in the investment world, referring to actual and potential investors in an asset class, e.g., vintage clothing. A change in the size of the constituency implies a change in the structure of the market. This alters the supply/demand situation for that asset class, either pushing prices up or depressing them.

In the case of the internet and vintage clothing, a greatly enlarged pool of potential collectors, a widened constituency—women with aesthetic discrimination and the money to collect—has been able to enter the market, thanks to the internet.

These collectors can now evaluate potential purchases, often more accurately than was possible in person at rare and hard-to-attend vintage clothing shows. Through electronic payment systems, collectors can purchase online more efficiently than ever before.

Technology enlarges the constituency. A recent Harris Interactive poll of American adults showed that the percent online increased from 9% in 1995 to 77% in 2006. The more affluent and educated are more likely to be online than those with less money and education.

Thus, the constituency of vintage clothing collectors has expanded because:

If we examine separately the factors that have benefited the field of vintage clothing over the last 15 years, we must conclude that these factors will remain in force and accelerate in the years ahead.

It is clear that the patient and discriminating collector of vintage clothing can expect in the years ahead, not only the aesthetic enjoyment of a growing collection, but also an investment return that should outstrip what financial assets will produce. As a bonus, the returns on an inflation-proofed collectible like vintage clothing is largely uncorrelated with the returns on stocks and bonds.

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