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Investment and Rare Books

[This paper was originally written by Anthony Rota and Martin Hamlyn and was first published in the March 1981 ABA Newsletter. It was reprinted in the March 2003 Newsletter when members were invited to express their views to the Editor. Since then it has been updated by the authors and considered by Council. Council has asked that this resultant version be published in the Newsletter. Members are also reminded of clause 13 of the ABA Code of Good Practice: "Investment Schemes: Members must not promote antiquarian and rare books, or allied materials, as investment vehicles in themselves, or as part of investment schemes".]

The view of the British antiquarian book trade has traditionally been against the promotion of rare books as an investment. The reasons for this are many and no one who has studied the operation of the rare book market during the slump of the nineteen-thirties, or who has heard booksellers of earlier generations tell what it was like to run a bookshop in such times, will question the strength of them. The decades of inflation since then, and the vigorous acquisitions policies of university libraries (particularly when, as in the 1960s, desire and funding were equally high) make it desirable to reassess the traditional view.

In the first place rising prices have driven many private collectors to regard in a more serious light what was once just a hobby . Many booksellers will recall instances of collectors seeking to justify costly purchases by speaking in terms of "nest eggs" and "rainy days." Another indication of buyers' growing concern with the financial aspect of their collections is demonstrated by the frequency with which booksellers are now asked to provide insurance valuations. In short, even the most dedicated collectors, with the purest motivation, pay attention to the monetary value of their collections and the size of any increase in that value. Of course the true collector still buys a book because he wants it, but it is probable that both he and his bookseller are more aware of its price and its potential future price than they would have been even ten years ago.

Some of us may deplore this state of affairs, but we have all learned to live with it. It is still a far cry from the buying of books solely or even chiefly as objects for investment. We all know that this is done and that in recent years it has been a growing practice. Professor Gordon Ray drew attention to it as a result of an important survey he conducted as long ago as 1974. Let us examine anew some of the arguments for and against such investment.

Books, and for that matter manuscripts, sold for £6,000 or less enjoy exemption from Capital Gains Tax under the chattels exemption. Items forming part of a set are treated as a single item where they are sold to one person, or to persons acting in concert. Investment analysts have been able to point to quite spectacular appreciations in value in certain celebrated books and manuscripts that have changed hands during the last decade or two (Of course we hear less about those which have scarcely risen at all). The fact that learned libraries have siphoned off so many copies of so many rare books has reduced the supply that remains. It is therefore argued that if the demand holds good - or even better increases - then prices will rise. It is also said that rare books were undervalued for a long time, ,and that, in an inflationary age, many people feel safer with their wealth in the form of desirable objects than in paper money or stock certificates.

Against this the traditional arguments must be restated. There can be no guarantees in the book market. The dealer's mark up is high, and prices need to move up by quite a large amount, simply in order to cover the margin between buying and selling. Although it is to some extent underpinned by demand from the libraries, the book market is still a relatively narrow one and a collection cannot always be sold to advantage at a given moment. It is easy for the uninformed buyer to make an unwise purchase. All these factors combine to ensure that rare books are not suitable investments for the proverbial "widows and orphans," but this is not to say that those with a little spare money cannot buy profitably on the basis of a little sound professional advice.

In this last instance both buyer and bookseller need to be aware of the problems that can arise from a possible conflict of interest if a dealer is to make purchase recommendations based on his own stock. These difficulties are not insuperable - most of us would have little hesitation in knowing which of two copies of the same book to recommend to any customer who sought our advice - but they do need to be borne in mind by both parties.

While investment in rare books represents only what we believe is still a comparatively small volume of trade, the risks to the stability of the rare book market are negligible, but should the buying of books for investment by people who are other than dedicated book collectors reach significant proportions, the picture would alter. Investors seeking to capitalise on notional profits, or to cut paper losses, could, by untimely selling, distort the pattern of the market. Because the investor pure and simple lacks the true collector's devotion to his books, the timing of his decisions to sell can be subject to factors which would be unlikely to influence a collector at all. In short, if the market had received massive support from investors, there could be very damaging consequences for us all - the trade, true collectors and indeed the investors themselves - if that support were suddenly withdrawn because of outside economic factors.

In summary:-

(1) Rare books are best bought for their own sake;

(2) Their suitability as a medium for investment is by no means universally acknowledged;

(3) Those who seek to invest in them should get sound professional guidance and beware of advisers who make over-specific predictions of performance.