Tuesday, Jul 10, 2007

1. Rare Books As Investments by Kenneth Hill.
   From The Book Collector, Volume 47, No. 3,
   Autumn 1998. Reprinted and posted with the kind permission of editor Nicolas Barker,
   and the estate of Kenneth Hill.

While the primary aims of collecting rare books should always be to collect for the simple love of books and the chase, never ignore opportunities to see your books appreciate in value. Kenneth Hill was a retired Wall Street stockbroker who amassed very well respected collections of books on Voyages (now at University of California at San Diego) and Ornithology (now at Cornell University). Here, he analyzes the investment performance of his collections versus the stock market.

Kenneth Hill

RARE BOOKS AS INVESTMENTS

Eight years ago I was asked to give a talk on my experiences as a book collector at the University of San Francisco, where I was the twenty-third recipient of the Sir Thomas Moore Medal. This award was given each year to a person regarded as anoutstanding book collector over many years. This honour came about, no doubt, because of the two collections of rare books I had accumulated and given to major libraries. The first one was one devoted to Voyages of Discovery in the Pacific, which was given to the University of California at San Diego (UCS) in 1974, and is detailed in a three-volume catalogue published in 1974 and 1982. This collection came about because of the four years I had spent in the United States Navy as a navigator on the Pacific Ocean.

The second collection was concerned with Ornithology, especially the hand-coloured folio volumes done in the eighteenth and nineteenth century, but concentrating on Western Hemisphere birds. This collection was a result of taking a summer course in bird watching at the Laboratory of Ornithology at Cornell in 1971. A descriptive guide to this collection was published in 1988. These books were deposited at Cornell University in 1986 to augment the numerous ornithology books they already had, which included the Audubon elephant folio and nearly all of the forty-three volumes John Gould produced in the period 1835-1880 in London.

At the end of the talk I could not resist the temptation to express my thoughts on rare books as ‘investments’, particularly since I had been an investment banker in Wall Street throughout the post-war years. My conclusion then and now, is that collecting books, art, porcelain or indeed, anything, as investments do not yield better returns than stocks and bonds, and should not be the primary purpose of collecting. Instead, it should be the sheer joy of conceiving, searching, buying and then completing a collection on whatever subject interests the person and gives great pleasure in the accomplishment.

I have been asked to bring up to date that portion of my 19990 talk concerning the financial results of buying and holding rare books over a long period of time. I will confine my analysis to the fields I know well had have direct experience in collecting. They are: Pacific Voyages, where I have data going back thirty-five years ornithology particularly books of hand coloured plates of birds of the Western Hemisphere, which I started twenty-five years ago; certain Classic books such as those by Darwin, Smith, Johnson, Gibbon & White which I acquired years ago and still have; books on the Exploration of the West and California acquired more recently.

I will tabulate all the books discussed , with the date purchased and the price, and compare them with the conservative catalogue or auction prices during 1997. I will also compare the appreciation of these four categories of books with each other, as well as such financial factors as the return on stocks and bonds and the rate of inflation over the same period. Without the exception these books are all first editions and in very good condition unless otherwise indicated.

But, first a review of the economic background of the post World War II period must be undertaken. Without a doubt the past fifty years has been one of the longest inflationary periods in economic history. For instance, the nineteenth century as a whole, was a period of little or no inflation, during which the British government could sell Consols, with no maturity for as little as three per cent, which is generally thought to approximate the basic ‘real’ interest ra5te (net of inflation). Recently, the U.S. government has sold inflation-indexed bonds yielding to about 3.5 per cent. This century, however, has seen two major inflationary episodes mostly caused by wars, separated by a world-wide depression during the thirties. After some immediate post World War II inflation as price controls ended, there was a long period of relatively stable prices until the late 1960’s. Then the oil shock of the 1970’s took hold, as crude oil prices rose ten fold from nearly three to thirty dollars per barrel, so that inflation of the seventies and into the early eighties was often well above ten per cent per annum. Action by the Federal Reserve of the United States in 1980-82 limiting the money supply, caused very high interest rates, which brought the price of oil tumbling down to about fifteen dollars per barrel in 1982. Since then inflation has been only 3-4 per cent and recently has been nearly disinflationary at less than two per cent per annum.

Over fifty post-war years the dollar has depreciated about seven-fold, but since 1961, when I began to collect rare books, inflation has averaged about five per cent per annum so the dollar has declined to about one-fifth its value since then. We should, therefore, remember that most basic commodities, including gold, as well as rare books and art, should have appreciated proportionally. During this same period the stock market has risen from about 700 (as measured by the Dow Jones Industrial average) to about 7900 at year end 1997, or eleven-fold, which is about seven per cent per annum. Nearly all of this occurred after 1982, when the Dow averaged about 900, so that its appreciation in the last fifteen years has been about fifteen per cent per annum plus dividends of four per cent, or a total annual return of about 19 per cent.

My first collection of books on Voyages of Discovery in the Pacific was undertaken about thirty-five years ago during the 1960’s and concluded when I gave them to UCSD in 1974. This happened to coincide with a relatively stable financial climate until the early 1970s. Thus, it seems to me, in hindsight, that the books I purchased during the sixties were always available but only moderately higher prices each year. Table I lists fourteen important books in this field deliberately chosen to illustrate important voyages of discovery not only by the English, but the French, Russians and Americans as well. The appreciation in the price of these books ranges from eight to sixteen per cent per annum with the arithmetic average about eleven per cent yearly. Also shown is the appraisal of Harold Grave of Scribner’s at the time of the gift of the collection to UCSD in 1974.

Table II lists eleven books of important in the Ornithology field and one Audubon Quadruped octavo in parts, all of them hand-coloured, all from the nineteenth century, except the third edition of Mark Catesby of 1771. Again, the books chosen were meant to be representative of the field and includes several books produced in the United States as well as five English Goulds and three Audubons. And of course, I never owned the Audubon elephant folio but have included it because it is so well-known and the price at which it sells is widely publicized. These books were all bought in the seventies and early eighties and were given to Cornell in 1986 to augment their superb collection of ornithology books. The financial return is mixed, particularly when compared with the Bradley Martin ornithology sales in 1989, where some prices reached peaks not seen since. Nevertheless, the average price increase per annum over the twenty odd years has been about six per cent, whereas the stock market has risen about eleven per cent during the same period. The lackluster appreciation may have been because the hand-coloured plate books had not declined much from earlier prices, since if they got too low they could be bought solely for the plates broken up, thus putting a floor under their prices.

TABLE I Voyages of Discovery in the Pacific

Author	Book	Date	Purchased Cost ($)	Estimate Price ($)	Times	Appreciation Years Owned	Per Annum (%)	1974 Harold Graves Appraisal ($)
Bligh	Mutiny on the Bounty, 1790	1961	375	7,500	20	36	9	1500
Cook1	Voyages of Discovery, 1775, 1777, 1784	1962	800	30,000	37	34	11	2900
Vancouver	Voyage of Discovery, 1789	1962	475	15,000	31	34	11	3500
La Perouse2	Voyage autour du Monde, 1797	1974	650	15,000	23	26	13	1700
Bougainville	Voyage autour du Monde, 1771	1974	500	5,000	10	22	11	——
Portlock	Voyage around the World, 1789	1963	150	3,000	20	33	10	600
Choris3	Voyage Pittoreque, 1822	1963	900	40,000	44	33	12	7500
Beechey	Voyage to the Pacific, 1831	1964	80	5,000	62	32	14	750
Belcher	Voyage around the World, 1843	1963	65	2,500	38	33	11	200
Fitzroy & Darwin	Voyage if the Beagle, 1839	1970	1000	12,500	12	26	10	1100
Kotzebue	Voyage if Discovery, 1st English 1821	1963	225	7,000	31	33	11	1350
Langsdorff	Voyage in the World, 1st English 1813	1963	425	6,500	15	33	9	1500
Wilkes	United States Expedition, 1845	1964	75	4,000	53	32	13	225
Perry	Expedition of Japan, 1856	1969	150	4,000	27	27	13	400

	Average Appreciation = 11%
1 Plus Kippis, Life of Cook, uniformly bound. 2 Offered for $165 by Eberstadt in 1936. 3 Offered for $150 by Eberstadt in 1936.
TABLE II Ornithology

Author	Book	Date	Purchased Cost ($)	Estimate Price ($)	Times	Appreciation Years Owned	Per Annum (%)	1974 Harold Graves Appraisal ($)
Audubon1	Birds in elephant folio, 1826-38	1966	60,0002	3,500,000	58	30	14	3,960,000
Audubon	Birds 8vo ed, 1840-44	1972	5,000	40,000	8	24	9	17,5003
Audubon4	Quadrupeds, 8vo ed, Original parts 1849-54	1976	6,000	20,000	3.3	20	6	13,000
Catesby	Natural History, 3rd ed, 1771	1978	26,000	85,000	3.3	18	7	77,000 2nd Ed.
Gould	Birds of Great Britain, 1862-73	1972	25,000	75,000	3	14	8	105,000
Gould	Hummingbirds, 6 vols, 1880-87	1981	47,000	100,000	2.1	15	6	209,000
Wilson	American Ornithology, 1808-14	1981	12,000	24,000	2	15	5	11,0005
Bonaparte5	Voyage to the Pacific, 1825-34	1978	5,000	15,000	2	18	6	5,0005
Gould	Partridges of North America, 1850	1976	7,500	15,000	3	20	4	12,000
Elliot	Birds of North America, 1866	1976	9,000	15,000	1.7	20	3	10,500
Gould	Toucans, 2nd ed, 1852-54	1980	17,000	45,000	2.6	16	7	36,000
Gould	Trogons, 1838	1979	5,000	25,000	5	17	10	30,000

	Average Appreciation = 6% (excluding Audubon elephant folio)
1 Never Owned. 2 From ‘Double Elephant Folio’ of Fries, pg. 199. A complete bound set sold in the U.S. for $1050, in 1838 or about $50,000 in today’s money. 3 Lacked two parts. 4 The 8vo. Quadrupeds initially sold for $31 in parts, or about $1500 now. 5 Supplement to Wilson. Both Wilson & Bonaparte in Bradley Martin sale were defective.
TABLE III Classic Books

Author	Book	Date	Purchased Cost ($)	Estimate Price ($)	Times	Appreciation Years Owned	Per Annum (%)
Agricola	De Re Metallica, 1556	1980	12,000	30,000	2.5	16	6
Schedel	Nuremburg Chronicle, 1493	1983	20,000	80,000	4.0	13	11
Johnson	English Dictionary, 1755	1977	2,500	15,000	6.0	19	10
Smithl	Wealth of Nations, 1776-84	1977	6,000	40,000	6.7	19	11
Gibbon	Decline & Fall, 1776-88	1975	1,300	10,000	7.6	21	10
White	Natural History, 1789	1987	800	3,000	3.7	19	7
Lyell2	Principles of Geology, 1830-33	1980	1,000	5,000	5.0	16	11
Darwin3	Origins of Species, 1859	1980	4,750	40,000	8.4	16	14

	Average Appreciation = 10%
1 Includes additions and corrections of 1784. 2 Ian Fleming’s copy. 3 Ian Fleming’s copy.
TABLE IV Explorations of the West and California

Author	Book	Date	Purchased Cost ($)	Estimate Price ($)	Times	Appreciation Years Owned	Per Annum (%)	Streeter Sale 1966-69 ($)
Venegas1	California, 1759	1967	375	3,000	8	29	7	225
Palou	Vida (Serra), 1787	1967	750	7,50	10	29	8	400
MacKenzie	Voyages, 1801	1963	150	4,500	30	33	11	450
Pike	Expeditions, 1810	1966	360	7,50	21	30	10	325
James	Expedition (Long), 1823	1978	1250	10,000	8	18	12	550
Pattie	Narrative, 2nd ed, 1833	1981	2000	3,500	2	15	5	475
Parkman	California and Oregon, 1849	1977	300	3,000	10	19	13	900
Lewis & Clark2	Expedition, 1814	1966	365	20,000	55	30	14	(4)
Duflot de Mofras3	Oregon, 1844	1967	1500	25,000	17	29	10	1700
Dana	Two Years, 1840	1966	650	3,500	5	30	6	850
Forbes	California, 1939	1966	175	2,000	11	30	8	200
Fremont	Oregon and California, 1845	1967	35	2,000	57	29	15	120
Emory	Boundary Survey, 1857-59	1978	1000	5,000	5	18	10	——
Whitney	Yosemite, 1868	1978	3000	9,000	3	18	6	70
Powell	Canyons of Colorado, 1875	1981	400	3,000	8	15	15	——

	Average Appreciation = 10%
1 First English Edition. 2 Offered for $175 by Eberstadt in 1936. 3 Offered for $165 by Eberstadt in 1936. 4 Unique copy.
RARE BOOKS AS INVESTMENTS Table III shows the result of buying and holding eight Classic books, six English and two German, on various subjects. These books were all bought from Jonathan Hill at the end of the 1970’s and are all first editions in fine condition, and nearly all in Printing of the Mind of Man. Again the results for these classics show an appreciation of about ten per cent per annum during a period when the stock market did somewhat better. Table IV shows a list of fifteen selected basic books on the Exploration of the west during the eighteenth and nineteenth centuries and are representative of the exploratory efforts of many nations. Many of these books were bought as part of the Pacific Voyage Collection and given away, but subsequently replaced for my current collections on California and the West. Again the returns range from six to sixteen per cent with the arithmetic average about ten per cent. Also shown are the prices obtained at the Streeter sales in the late 1960s.. What, then, do I conclude from these four tables of financial data regarding fifty important books from the various collections I have put together over thirty-five years? It seems that, in general, good rare books have increased in price at a rate of about ten per cent each yea since 1961, which represents a doubling every seven years. During the same period inflation has averaged nearly five per cent each year, though most of it occurred during the period 1970-82. During the same thirty-five years, and because of the inflationary bulge in the seventies, long term government bonds yielded about seven per cent per annum and long term AAA corporate bonds averaged around nine per cent. However, as already mentioned, common stocks have increased in price about eleven times since 1961, a rise of more than seven per cent per annum, plus dividends of four per cent, for a total return of about eleven per cent. All these comparisons of book prices must be taken as only broad generalities because of many factors. First of all, the condition of the book and its completeness is all-important to its desirability and thus price. Secondly, the market for standard rare books is necessarily illiquid because dealers may encounter these more desirable, and thus expensive books, only occasionally. And for a dealer to make a profit, and thus stay in business, he must buy at a discount and sell at a premium to pay for overhead and inventory carrying costs. Furthermore, the auction market for rare books only operates a few times a year, and is notoriously fickle with respect to prices realized plus premiums which must be paid. One must also realize that the money invested in books is tied up without drawing interest, which has been about seven per cent in recent years, or receiving dividends, which have averaged about four per cent. Furthermore, stocks and bonds can be sold with certainty as to price and the money received in three days instead of, at best, three to six months for rare books, thus making the after tax return substantially less than indicated by the tables. Moreover, a new development in the marketing of rare books is beginning as many rare book dealers are putting their catalogues on the World Wide Web which can be accessed from anywhere in the world. This development, which is similar to the deregulation of the over-the-counter stock market several decades ago, will have the effect of connecting many more individual book buyers with various dealers, and will narrow the spread between bid and asked, while broadening the market significantly. What, then, might be my conclusions as to rare books as investments? The data I have accumulated on fifty nine old books in various fields, which I have owned, or still have, is displayed in the four tables. It seems to me that during the period from 1961 to the present most good, standard, rare books have doubled in price every seven years or about twice the inflation rate. However, the Ornithology books with fine, hand-coloured plates, have risen only at about the rate of inflation, or five per cent each year. Over a much longer period of time, rare books came down substantially from prices paid in the prosperous 1920s, as the stock market declined at least seventy-five per cent into the 1930s depression, while Eberstadt’s catalogue prices of 1936-37 for the four standard rare books I have footnoted have risen one hundred to two hundred fold to reach today’s prices. During the same period, 1936 to 1996, the price of oil, the most widely used world-wide commodity, has risen from one dollar to about fifteen dollars per barrel, and the price of gold has appreciated only eight times to about 300 dollars per ounce. The present period seems to be one of little inflation, and if this continues for a few more years, I believe that rare books may not rise in price at the same rapid rate as during the last thirty-five years. Just as common stocks will probably revert to an historical rate of growth in price of about ten per cent per annum, so I think rare book prices may only grow at a rate of 5-6 per cent, about half of the annual rise of the last thirty five years, but more than twice the present modest rate of inflation. However, as I indicated earlier, this should not deter the collector. For he should have a much higher goal than investment return; namely the pleasure of conceiving, buying and completing a collection in a particular field.   NOTES ON CONTRIBUTORS GILES BARBER, Librarian of Taylor Institution, University of Oxford, 1970-96. RICHARD CHARTERIS, Senior Research Fellow, Department of Music, University of Music, University of Sydney. KENNETH HILL, retired Wall Street stockbroker, and book collector. EDMUND M.B. KING, Collections and Preservation, The British Library.