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I am trying to get someone close to me to invest (long term, 5 to 20yrs) in guitar wood. She said she would consider it if I can find some objective evidence it is a good thing. I guess I'm kind of biased. Has anyone seen anything out there from the folks on wall street or elsewhere on this kind of thing?
MM

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Mike McNerney

Ya,

Go talk to the Hurst family...they bought up as much of the standing wood rights they could get their hands on back at the begining of the last century...you know to keep them in cheap pulp for news papers. Well then some dude comes along an invents the hemp jenny...you know sorta like that cottin jenny...which wood mean cheap cheap pulp paper from hemp fibers...well now the Hurst's couldent have that so them dumped megga bucks into lobbying for criminalizing hemp and to make all them dumb movies about the evils of the stuff...was good for their wood fiber buisness. Big investment that wood.

But then wood rots.

So investing in some live standing trees or into plantations of tree farming for the future use is like a good idea to me. Beats paying someone to kill them and then let them rot in your basment just so yo can get ritch on them.

but then thas just this old fools take on the rape, pillage, plunder for profit that this materialistic society has conditiond us to believe in.


blessings
the
Padma

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Audiences and dispensations on Thursdays ~ by appointment only.


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Old-growth forests are dwindling, and so is the availability of the most desirable tonewoods. So yes - assuming that we don't see a major paradigm shift in our economies, the simple fact that supply goes down combined with the reasonable assumption that demand stays the same makes tonewood a good investment.

The thing is of course - by luring investors into the tonewood market (e.g. people who don't care about guitars and lutherie, but only about profit), the problem of dwindling old-growth forests is only accelerated. Also, an artificial tonewood market would make life harder for luthiers, as they will face even higher costs.

So I guess this kind of investment - while probably somewhat profitable - only contributes to a problem that luthiers face (and will face even more a couple of years down the road).

Christian

Like any investment, it would be a good idea only if the present value of future cash flows are greater than the initial investment.

So consider what it will take to make the investment (the initial cost of the wood plus yearly storage costs and insurance, etc). Then estimate what you think you can sell it for, net of all the costs associated with the sale. Discount that amount by at least the return of your next best investment opportunity. Subtract the amount invested from the amount returned, if you are left with something greater than 0, then it is a good investment.

Just my opinion, but if your friend knows nothing about the market for wood, this is probably not a good investment for her.

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53% of all statistics are made up on the spot
http://driftwoodguitars.blogspot.com/

Check out Ebay in the Guitar Builder/Luthier supply... You can buy lots and lots of stuff at ridiculously low prices.. Last year, I bought a Jumbo sized QS cherry Back/sides set for $40.00... and it came with a *FREE* Ebony Fingerboard and bridge blank. It would take a HUGE cherry tree to get that QS back set...

Now, consider the market itself -- While the Lutherie world may seem like it is pretty big... It is not. The OLF South Carolina Get together only had something like 10 folks at it. While probably not everyone involved with hobby guitar building in North and South Carolinas... it was probably well over half.... meaning probably less than 20 people in 2-states (with populations of a couple million..)... Now, There's more people than this in our small town's local Home Brew Club...

What I have seen is that while High Quality Tonewood prices are relatively high.... The demand (Outside of large factories) is also quite low... Prices are high because Quality is amazingly high and inventory turnover is surprisingly low.... and because a Guitar Set has almost no use outside of Lutherie.... so once that Wood is cut out of Boards into Backs and Sides... You can't sell it to a local furniture guy for Coffee tables!

Then, last ... Sometimes it just doesn't end up going as planned.

One of the guys I work with is a Wood Working Nut... He has WAS something terrible... When he got transferred from Portland to Milwaukee... the company wouldn't pay to move his wood pile (Beautiful, figured exotics and stuff that would make us drool).... He ended up selling maybe 5% of it... Giving away 60% (TO guys who wanted it for firewood)... and then just took the last 800 bd-ft or so to the town dump! This is a surprisingly common story!

Thanks

John

wood from ebay as in investment is a hit and miss at best. The quality of ebay will be across the board. If you don't know your market , don't invest .

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John Hall
blues creek guitars
Authorized CF Martin Repair
Co President of ASIA
You Don't know what you don't know until you know it

MM;
Guitar woods are a better investment than Oil ,or Pork bellies !
Why ?
Because it's a limited future for great trees.
The price of woods usable for guitar tops (back& sides)and other wooden instruments will only increase !

The Chinese have bought ship loads of Spruce here & rosewood abroad !

Beg,borrow ,or steal to get the woods you need NOW!
Get it while it's still fairly affordable!

That's my 2 cents!

mc

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Mike Collins

This is true.. My point was very similar... It would be a poor investment if you (Or someone you love) end up selling at Ebay prices... Ebay prices seem to run ~50% of the prices at well reputed Lutherie supply houses.... of course, the quality and guarantee can be vastly different too...

Think of all the wood John Arnold is selling out of Ted Davis' estate -- Red spruce tops cut from hand split billets selling for under $50.00.... and this is a fairly well known guitar builder selling a product that is in demand.

If I was going to stockpile lumber as an "Investment" -- I would need some sort of sensible business plan for how to evaluate the market and handle liquidation... I have seen many ebay lumber auctions that state something like "I don't really know anything about this wood, but it is brown and very heavy. My friend thought it was Rosewood, but I can't guarantee it...."

Thanks

John

Right now is the time to invest in hardwood as it's at an all time low.Sawyers are cutting for for less. Wood prices haven't been this low in over40 years, so now IS the time to buy it before it goes back up.Over half the big sawmills have shut down as there isn't the demand for lumber in this economy today and when the economy bounces back, the prices will sky rocket for sure as demand will be greater than the supply.

Lumber and tonewood are different things.
Lumberyards are going out of business because of the housing crash, and too much overhead.

As a guitar builder, the investment in a good stock of tonewood is necessary. I try to keep at least a 3 years supply, more when possible. When funds are available I also jump on anything resembling a deal. I'm hardly unique in this…

The assumption that exotics and spruce can only go up may be true, but so are guitar prices. I am not sure scarcity is as bad as people want to believe. The regular stuff will never appreciate in price, that's for sure. Definitely not most of the stuff sold on eBay BTW…
For example Brazilian seems readily available, even some good stuff sometimes, so I am not sure prices are going to climb forever. They may dive. Additionally, perhaps because of the paranoia triggered by internet chats and press articles on CITES, or simply because some people are over it, I am regularly requested not to use any Braz on my builds. Personally, the only inquiries I recently received for Braz builds were phantasmagoric at best, scams in the making at worst.
I am mentioning Braz because it would seem the safest investment, but perhaps not at the prices at which it is acquired now.

I am not an economist, but an average 9 years old would deduct that if it is purely to park funds and watch them grow, there are many vehicles out there that are far better (and safer) than tonewood.

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Laurent Brondel
West Paris, Maine - USA
http://www.laurentbrondel.com/

Good point Laurent? To make tonewood work as an investment also requires the ability to market it or it never pays out.

[quote="Laurent Brondel"]Lumber and tonewood are different things.
Lumberyards are going out of business because of the housing crash, and too much overhead.

Who do you think mills tonewood.It's a sawmill.And the housing crash is no different from the guitar industry as it's controlled by the same bad economy right.The demand is down in both which lowers the price.And Now is the best time to buy tonewood which is still lumber that comes from a tree that is milled.

Mark, I didn't mean to offend. But the sawmills I know do not deal in tonewood, and the tonewood dealers I know do not deal in lumber. Two very different markets. Exotics may come from the same places originally, but are processed and graded very differently.
There is no comparison between the effect of the housing bubble burst on sawmills furnishing the recent construction fiesta which is no more, and the effect of the recession on tonewood dealers.

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Laurent Brondel
West Paris, Maine - USA
http://www.laurentbrondel.com/

Right... Terminology here is all screwed up... and there is a difference between an "Investment", "Business Inventory" and a "Small Business"

Most folks here are calling buying Wood for their Business "Investing" -- but it is not. It is really buying Inventory for their Luthierie Businesses or Hobby during an Arbitrage situation (Economy downturn forces suppliers to sell stock low..)

Successful Tonewood sales is really a "Small Business" -- not an investment per-se... Look at RC Tonewoods, Allied Lutherie, LMI, etc... Those guys run Businesses.. They do make money on Tonewood, but once again, this is not an Investment in the sense of Gold, Silver, Pork belly futures, Stocks and Bonds, or even Land.... It also takes a giant amount of leg work to do what they do....

The "Investor" most likely doesn't want to start their own small business... They aren't really looking to spend 10-years of blood, guts, tears, 80-hour weeks, and hard work getting a Small Business going....

For example... if you were going to invest in "Lumber" right now -- you would be well advised to buy some wooded land full of mature timber somewhere land is cheap near a large city that is expanding.... The trees will only grow larger as the years progress... and once you log it off, you can sell the land to a Developer...

Or... be a "Silent partner" in a local incorporated small business.... you could probably buy a large interest in it while business is way down... then when business picks back up -- you get your profit (If it doesn't die during the slowdown!)

Thanks

John

Whoops !
MM I thought you meant buying tonewood for yourself as an investment in your guitarmaking future.

You'd have to but a hugh amount and store it someplace with climate control.
That would be another large investment itself.

Mike

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Mike Collins

The price at the lumber yard might be down, but don't forget that most of the wood used in high end guitars comes from outside the United States. And with the dollar at the lowest it has been for years, compared to other currencies, really nice tonewood really isn't as cheap as one might think. The great tonewood retains a lot of value even in a recession. If you want to sell black walnut, cherry, maple, etc from the US than the time is right to buy. But if you want cocobolo, ziricote, waterfall bubinga, etc, etc, etc, I think you will find the price is still pretty high. Just getting it from where it is milled to the US is expensive and getting more so.

Also, I don't think running a tonewood business is a "get rich quick" scheme. I saw a set of Anigre tonewood on Ebay that was being auctioned by RC Tonewood. I think it went for around $46.00. Well RC Tonewood had to buy the stock, resaw it, sand it, take pictures of it, crop and color correct the pictures in Photoshop, set up the Ebay auction and pack the material carefully for shipment. You could probably work at a fast food place and have a better hourly wage.

Buying wood, if you really want a deal, takes lots of time and lots of searching and research and luck. You can go to a lumber dealer a couple of dozen time and not find anything that you want. But once and a while you will find a gem. Patience is a virtue when trying to buy great tonewood at a reasonable price.

Good luck on your venture. I have run a small business (not tonewood) for the past 19 years. I work 60 to 80 hours a week. Sometimes I pay myself and sometimes I don't. Sometimes I have money in the bank and a lot of time "cash flow" is a problem. If you start a business and want to make it successful, it isn't for the faint of heart. And you better love what you do. Going it alone isn't for sissies.

Ken

I had a client tell me a joke the other week ... sure, start your own business, you get to work half days .. and you even get to choose which half of the day you work !!!!!

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Tony Karol
www.karol-guitars.com
"let my passion .. fulfill yours"

Me just remembered...for what its worth.

Met this very young dude about 30 years back. Asked him what he was into.
Him replied he was a tree farmer. Seems he inherited about a hundred acers and
had just finished planting it all in walnut.

So me asked him what it took and how long it gonna take befor him harvests and what kinda profits it might turn.

Said it involved grooming, pruning and grafting (to produce highly figured wood) fertilizing and that the hard part was watching them not grow but from tree thiefs.

He figured in about 40 years he would retire a millionair. Well at todays prices of walnut, he must me a mega millionare.

Blessings
the
Padma

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Audiences and dispensations on Thursdays ~ by appointment only.


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Liquidity, liquidity, liquidity. What's a master grade BRW set worth? Whatever a couple hundred (at most) luthiers say it's worth.

What's your profit goal and how long are you willing to hold the trade until you achieve the target? What is your annualized rate of return if you hit your profit target in your specified time? (Don't laugh but "double your money in 10 years" really isn't as great as it sounds.) How does one unwind the trade? What's the bid/ask spread on tonewood if you have to sell in a hurry? What could you have done with the money while it's sitting in limbo in the form of a pile of wood? What's the current premium one pays for tonewood vs ordinary high quality wood? Will that premium remain static if prices rise? Will there be enough demand for high end guitars to support a big rally in high end tone wood?

Personally I think, given that there is a finite supply of quality tonewood and a likelihood that the dollar will continue to weaken, prices will rise. But, I'm also not "investing" in tonewood because I think there are more efficient ways of taking advantage of a weak dollar and rising commodity prices. That said, I am "collecting" tonewood, especially mahogany neck blanks and addy tops, for future use mainly because I think good quality material might become scarce

Bob

Investing in wood could be lucrative but only at a long time, more than 15 years. As already said oldgrowth tropical trees are getting hard to find (at least if we keep the forest alive...). "Modern" east indian rosewood from plantation is very different than old growth, and of course luthiers choose oldgrowth if possible.
An example, a bit spécial because about Dalbergia nigra. I bought some b/s sets at Maderas Barber in 1994, second quality. 500 Francs (75€) each... there were second choice but of a quality never seen since 2000 at least (and not from stump like now on ebay ), today I could sell it around 800-900€... 75 in 1994 and 800 15 years later... Of course it is a special case because of th protection of this wood but even more commonly seen woods are getting more and more expansive.
Another exemple with european spruce, I just begin a guitar with a top of first quality bought in 1998, the price was around 300 Francs (45€)... today by the same seller the same quality is at 110€... 45 in 1998 and 110 ten years after...
And there onother aspect, the seasonning. Dried (after many years) wood could be sell at higher price.


PS: Oh, another example, yesterday I took out of my stock a Madagascar rosewood b/s... it came from a lumber from which I sawed 6 b/s sets. The lumber was paid 200€ in 2006... for 6 sets and some fingerboards. How do you think I could sell it today ?

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http://www.cherubin-luthier.fr
https://www.facebook.com/FranckCherubinLuthier

Wood as an investment is like any other commodity , it is only worth what you can get for it . To make any chance at making money you need to have some luck but you need to know your niche. The basic woods , BRW EIR Honduran will most likely be a good investment over a long term , but you never know. CITES may tighten things more and make in unprofitable. Getting CITES paperwork is time consuming and expensive.
Storing wood long term will require some investment in RH control to avoid warping but even then you can expect some tare . If you don't know wood you need to educate yourself very well . Like anything , the more you know the better your chances.
If you are buying for your own building pleasure , then get what you like. Avoid highly figured woods if possible . In most cases , the wood may look very pretty some figures really are pretty unstable . Top wood as you know if affordable , and there is nothing wrong with sitka spruce and there is a god supply of that available yet. Red spruce is hard to find in large enough sizes but it is available. They wood has been reseeded and is making a comeback but it will take time.
European spruces are also a good choice. Their planting and forestry practices are very good . Again educate yourself. The advice here is worth what you pay for it , so take it with a grain of salt but use the bases for your own research. Having done this for over 10 years I learned more from my mistakes . I hope you can learn from mine. Proper storage , use stickering and if you buy green don't dry it too fast , keep it pressed and be sure to expose all the surfaces to air . Keep out of sunlight , and keep them is as stable an environment as you can.
I don't size the wood till I am ready to make a guitar so keep them thick . I also use a thick board to press them so the stay as flat as possible . An old chest freezer will make a nice kiln.

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John Hall
blues creek guitars
Authorized CF Martin Repair
Co President of ASIA
You Don't know what you don't know until you know it

Of course you could always in vest in the wood futures market...that way you don't have to store the stuff.

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Audiences and dispensations on Thursdays ~ by appointment only.


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I don't think anyone has mentioned that your entire investment could go up in smoke.....literally. If a considerable percentage of your retirement was in wood, a fire would be a trajedy.

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Formerly known as Adaboy.......

Mike,

I was shopping for an investment a few years back and came upon one that was very interesting. The name is Tropical America Tree Farms and they grow a variety of trees in Costa Rica. From the reseach I did it sounded like a good deal and from what I can tell is legitimate. Unfortunately, when I had the extra money for investment it all got used for other needs. It appears to be able to be used in a 401k so that would be good for anyone younger than I am.

http://tropicalhardwoods.com/index.html

Philip

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aka konacat

If you think my playing is bad you should hear me sing!
Practice breeds confidence and confidence breeds competence. Unfortunately, I'm stuck in practice.