It’s New Year’s Eve and you’re probably knee-deep in the bubbly or soon will be, so I’m gonna keep it light. No heavy discussion of Trump’s policies, no big year-end recap with grand economic and market outlooks for 2017, and no tearful farewells to all the celebrities we’ve lost this year. Rather, we’ll take heart that even though Trump wants to start a nuclear arms race, there’s no truth to the rumour that the nuclear launch code was simplified to 1-2-3-4-5 for his benefit. And we’ll also be pleased to remember that even though the Grim Reaper ran wild on the entertainment industry this year, the fact that Keith Richards escaped the Reaper’s clutches only proves that Keef was never meant to die.
So, keeping with the upbeat mood, I’m going to talk about comic books.
I’ve read and collected comics since grade school. I still do. However, it became apparent in the late 90s that there was also investment potential here. Tapping into our childhood nostalgia, Hollywood started to release more and more comic book–related films (see chart). And, usually, they were hits. The value of comic books increased steadily as well, culminating in 2014 when a 1938 Action Comics #1, the comic book that first featured Superman, sold for a record US$3.2 million on Ebay. Rather nice appreciation on a 10-cent cover price. I grew my own collection over time, storing the more valuable ones and occasionally selling ones that I thought had peaked in value. Now my collection is mostly gone, but, overall, I did quite well.
Comic Book Films: Top-10 Box Office
US$3.2 mln: 2014 Ebay Auction
Naturally, I’m not recommending that you invest in comic books as this is a very specific and personal interest, but the point is that there’s nothing wrong with having a small sleeve (perhaps 2–3%) of your overall investment portfolio held in something non-traditional. Perhaps you collect wine, scotch, antiques, vintage cars or motorcycles, artwork, coins or stamps, vinyl records, classic movie posters, Coca-Cola collectibles or sports memorabilia. What’s important is 1) it’s enjoyable and remains so, and 2) you constantly educate yourself and purchase carefully, thus increasing the odds that your collection actually appreciates.
Traditional portfolio managers are often dismissive of investors who pursue hobbies in the hope of making a profit. I’m not one of them. Indeed your collection might fail miserably as an investment, but, then again, it might not. There’s a reason why Antiques Roadshow is so popular. In the meantime, collecting can teach you to trust your instincts and increase your risk tolerance. I guarantee that if you pursue an interest long enough, eventually you’ll be presented with the opportunity to pay a sizeable (perhaps uncomfortable) amount of money for an item without being entirely certain it will appreciate. This is good training for investing in capital markets. However, like traditional investing, keep your collection diversified (e.g., don’t own one comic) and, until you’re completely familiar with your chosen subject, stick to the ‘blue chips’ (in my case, Superman, Batman, X-Men and Spiderman). And one of the nicest things about a personal collection that makes it superior to any more traditional investment: you can display it.
‘Nuff said and Happy New Year.
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Briefly, let me also provide a year-end wrap-up for Canadian preferred shares. I posted a preferred share update on the blog in October noting the impressive recovery for preferreds in 2016; however, I also highlighted that while the improvement in the oil price and increased institutional investor interest had significantly aided preferred share prices, we were still waiting on movement in Government of Canada (GoC) 5-year bond yields (recall that most Canadian preferred shares are rate-resets, which tend to benefit when bond yields rise). Well, since end-October, we’ve finally seen the upside move in the GoC 5-year yield that we were hoping for: the yield has jumped from 0.70% to roughly 1.15%—a huge move in such a short time. Canadian preferred shares, on a total return basis, have now advanced 7% y-t-d and are up more than 26% from their January lows.
If you heeded our advice last year that the sell-off in preferred shares was overdone and stuck with them — well, Happy New Year once again.