22 December, 2015

Collecting First Editions: Investment and Expert's Collectible List

Some time between 2010 and 2015, Abebooks published a list of 35 "Most Collectible Books of the Decade (2000 - 2009)" along with a short summary for each book, including the highest price and year it sold on Abebooks. Now, there is an ostensible appeal about treating first editions as an investment. For one, it should, conjecturally,  provide some diversification to one's usual portfolio of stocks, fixed income, gold and properties. Secondly, the right books, if invested early, can yield returns unheard of, or at least extremely uncommon, in conventional financial instruments. The best example is the Harry Potter series that yields return in the range of 1,000-10,000% if bought at original retail prices; Hilary Mantel's Wolf Hall and Bring Up the Bodies also yielded lucrative, if less stellar, returns.

Attractive as it sounds, first editions, as a form of alternative investment, has numerous perils. To start, books, unlike stocks or bonds or properties, incur maintenance costs but do not generate interim income as stocks do - in the form of dividend - or as bonds reap coupon, or as properties earn rental. Worse, books actually require money to maintain. Seen this way, books, like gold, are positive carry commodities. But unlike gold, which is non-perishable and generally resistant to the elements, books deteriorate naturally and are pretty much worthless if plagued by water, fire, pest, or mold hazards! This means that the total costs - actual and implicit - of carrying books are much higher than that of gold, which is fine as long as the returns commensurate with the risk. In reality, however, the average return of books is less than spectacular: for the bulk of first editions, including prize winners, the returns are negative. Add to the illiquid market and consequent high transaction cost, the case for first edition collection as a viable class of alternative investment is even less compelling. Here, I'll pick a few clear losers from Abebooks' list as cautionary reminder of the treacherous art of book picking (paragraphs in black are Abebook's sales pitch):

3. Any post-2000 Harry Potter signed by J.K. Rowling - In 2000, J.K. Rowling changed from an up-and-coming author into a worldwide literary superstar. As her fame grew, her book tours became shorter. Today, any book signed by Rowling has instant value. A signed first edition of Order of the Phoenix sold for $7,657 on AbeBooks in 2007.
Comment: First editions of the Harry Potter series are still desirable and continue to sell at a huge premium over their original listed price, especially the signed UK first editions. But prices have come down, and today in 2015, signed first UK edition (i.e., first printing too) copies of Order of the Phoenix list from $2,500 upwards with scarcely any takers. That's a total loss of 67% over 8 years if you were the buyer of that $7,657 copy in 2007, or an annualized loss of 13%. Crap. In fact, for $7,600, one can now get the complete set of unsigned first UK edition. Double crap.

5. The Da Vinci Code Dan Brown - This novel was in its 104th printing when AbeBooks sold a signed first edition for $4,260 in May 2006 as the movie version was being released – it was the highest price ever paid for a copy of this bestselling thriller. Signed copies are treasured as Brown’s touring days are over.
Comment: Dan Brown's touring days may be over, but so is the craze for his books. Da Vinci Code makes for a compelling airport read but has hardly any literary significance. And if you are still a fan, good news: signed first edition first printing can now be bought at as low as $275, except that no one is buying it. As an investment, it is now at merely 6% of its peak value in 2006. Toast.

9. Life of Pi Yann Martel - Published in 2001, the Canadian Alfred A Knopf editions are ones that matter. This novel won the 2002 Man Booker Prize and achieved a remarkable combination of global popularity and critical acclaim. Most expensive copy sold on AbeBooks went for $3,720.
Comment: Signed Canadian first edition of the book is quite rare, but you can get a copy on Abebooks now for just over $200.

20. Gilead Marilynne Robinson - Published in 2004, the most desirable edition is the Canadian one – the true first. A signed Canadian edition sold for $1,640 on AbeBooks. Robinson’s second novel won the Pulitzer Prize for Fiction and remains one of the best novels of the decade.
Comment: Get a pristine signed Canadian first edition of the book at $300 on Abebooks now.

29. Tree of Smoke Denis Johnson - Published in 2007, this Vietnam-inspired novel won the National Book Award for fiction. Signed first editions remain desirable. Top selling price on AbeBooks was $550.
Comment: Signed first edition of this National Book Award winner now goes for an affordable $60 on Abebooks. In fact, the remaining 6 books - all Booker, Pulitzer, and NBA winners - all go for no more than $200. So much for winning a literary prize.

In conclusion, ignore "most collectible" list, buy the first editions that you really want to own and immediately write off the amount. If, after years of enjoying the book, you manage to sell it for anything at all, that's already profit. And if you do sell it for more than what you paid, take a moment, and then take a bow.

You may also be interested in my discussions on buying from professional book sellers, or buying first editions on eBay (including some sellers to avoid), or what is a first edition in general.
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