COINS AND MEDALS: VALUE INVESTING VERSUS MOMENTUM TRADING

COINS AND MEDALS: VALUE INVESTING VERSUS MOMENTUM TRADING



As in any type of investing there are those who seek value and are happy to hold to such a time where the market realizes and rewards value.

Then there are those who seek to acquire items that are "hot" and turn them over as they are rising.

Most traders trade momentum.  Most traders eventually go broke. Some super financial traders like George Soros and Stanley Druckenmiller make billions.  This is the very rare exception.

In the world of Hard Assets there are also many traders with short term horizons who seek to flip assets.  Television infomercials are filled with them.

In the coin world, momentum trading most often has to do with Grades assigned by grading companies.  Trading on grades like all types of momentum trading is a good way to eventually go broke.

The discipline of investing, on the other hand has to do with identifying value and having the conviction of your vision and then holding until the market rewards you conviction.

In the financial world identifying value has to do with finding good honest management, competitive advantage for products that serve consumers need, and the ability of companies to produce products efficiently so that margins can support profits.

In Hard Assets identifying value has to do with finding assets that because of some Intrinsic Value will appeal to many consumers over long periods of time.

This leads to the question of What is Intriinsic Value?

In all Art two qualities are always appreciated above all others.  1) Beauty.  2)Historical Importance.

And then the third quality to take into account is State of Preservation.

Obviously State of Preservation is easiest to assess so for many unimaginative and uninformed art investors it becomes paramount.

Beauty is the toughest quality to assess for most because there are always sharp debates as to what constitutes beauty.  One thing is sure though: Beauty can only be fully appreciated in person as it will evoke emotion.  Photographs that accurately portray art created in other mediums rarely if ever convey the emotion evoked by the beauty of the object.

However, one thing to keep in mind is appreciation of Beauty can be learned.  Even if you don't react the way you'd hope to something others find beautiful you can learn to understand why something is beautiful in another culture or simply another intellectual milieu.  That doesn't mean you have to agree, but in developing your understanding and expanding your horizons you do yourself an enormous favor as an investor in Art.

Historical Importance usually has to do with A) the Events coincident to the artistic creation  and B) the Innovation associated to the Artistic Creation itself.  These are ideas that can be learned and appreciated by anyone.

For example Da Vinci created beautiful works of art.  But even if you happen not to be moved by them, nobody can dispute the importance of the fantastic Innovation of his artistic output in terms of the materials and how he manufactured and applied them, as well as the manner he applied them in terms of perspective, proportion and his advanced understanding of how things are constructed.  And no one can dispute the historical importance of his scientific discoveries and inventions that were conveyed in his art but transcended art.  Add to all this the fact that Da Vinci epitomised Humanism at the height of the Enlightenment and you have a figure of towering Historical Importance.

This is the art investing trifecta.

Bringing this all back to Coins and Medals.  My point is this: Educate yourself to understand the Histocial Importance of the the objects, and to appreciate their Beauty and you will be developing the tools for value investing.

Then buy what you like.