[Newton:] Nice. Well, for the Pink Floyd fans out there, I really wish you were here. David Gilmour is auctioning off more than 120 of his guitars on Thursday. So, yes, grab all that cash that you have and make a stash because his black strap, the one that you see right here will probably go for around a $100,000. First, take a listen to this.
[Gemma Sudlow, Christie's, New York:] It's the most important collection of guitars to come to the market in decades. What you see in the galleries here is over 120 guitars from David Gilmour's collection.
[Caitlin Graham, Consultant, Christie's Pop Culture:] He was obviously the lead guitarist of one of the greatest bands of all time, Pink Floyd. So, it's going to be interest from Pink Floyd fans, David Gilmour fans, guitar collectors, rock and roll fans, as well as institutions and guitar makers wanting to buy things for their archives. You know, it's going to cause a big stir among the whole rock and roll community.
[Sudlow:] I think the two instruments that really speak to me, partly, this is my favorite song, the Martin D 35 and the sister 12 string, the D 1228. Two, at least, the guitars that he used to write and record which you'll hear. In one of our galleries, you can actually hear that being played with the guitar themselves. The highlight of the sale is really the black strap. It's just David Gilmour's 1969 black Fender Stratocaster that he purchased at Manny's Music in Manhattan in 1970. Quickly became his primary recording performance guitar and he used it for every Pink Floyd album from that point onwards until 1984. What's incredible is that each of these instruments has their own story with David Gilmour and his iconic career. These are instruments that have played music, defined the lives of several generations, all the proceeds from the sale, a benefiting charity which is also very exciting. So this incredible iconic name and the philanthropic component which has created huge interest from our clients around the world.
[Newton:] Wasn't that lovely. I don't even play guitar and that was just lovely. Anyway, we are going to talk about these instruments as investments, alternative investments like those guitars that you saw there are in fact serious business. They might prove personally rewarding, but sometimes their return rate is a whole different story altogether. Now, two of the most popular are wine and classic cars, and they even have their own indices, yes, their own indices. Judge the numbers for yourself, now since 2016, the S&P 500 is up over 40 percent, you can see it there. Compare that to wine, up 21 percent, and classic cars up 5.6 percent. Dietrich Hatlapa is the founder of the car index HAGI and he joins me now from London. I mean, we'll talk about the returns in the first instance, but I'm fascinated about people who choose to buy these so-called trophy assets, I would call them. Is it principally because they do want to own it or do many people get into this purely for the investment?
[Dietrich Hatlapa, Founder, Historic Automobile Group International:] I think purely for ownership. There are a lot of benefits rather than the financial benefits. We call them the non-financial benefits, pride of ownership, they being able to participate in events, they can work on the cars and they can drive them and that makes a big difference. And then if the investment makes financial sense, then that's an added bonus.
[Newton:] It's an added bonus, and yet I know car collectors who have never driven any of their cars. They might admire them in very
[Hatlapa:] It's true
[Newton:] Interesting climate controlled garages. When I look at that return, and it said 5.6 percent, what are we missing if we just look at the aggregate number in terms of the return on investment?
[Hatlapa:] Well, like any other investment, this can have a very good period or it can have a period of more benign returns. If you go back to the about five, six years ago in 2013, our index, the main index, the HAGI top index went up by over 46 percent. The Ferrari index, the HAGI F index that we measure only the Ferrari cars, classic collectors' cars went up over 62 percent in one year alone.
[Newton:] One year, 62 percent
[Hatlapa:] And since 20
[Newton:] Wow.
[Hatlapa:] Yes, in one year, 62 percent and the main index is still more than 46 percent.
[Newton:] In terms of the expansion of this as a category, whether, you're a collector or whether you're an investor, you know, we're looking at guitars and yet there seems to be a collector and maybe you might say an index, an index very soon for a lot of these different categories of assets. I mean why is though? We use the word alternative investment. But is it just people really putting so much more into their passion these days or are they really looking for an alternative investment to what the traditional ones are?
[Hatlapa:] I think they're not really looking for an alternative investment. When you look at it, it's very important to check what the size of the markets are and what the liquidity is. And these markets, even if they are the main collector's market, they are tiny in comparison with financial assets. If you depends on your definition, but the classic car market, you could define it as being capitalized at 100 billion, and that's about the tenth of the value of Amazon, and it's the entire market. So these are these are tiny little markets and there are some people who have the passion and they have the knowledge and, therefore, at times they feel more comfortable in allocating some of their liquidity towards these collectors' assets because they like them and because they feel welcome and they feel comfortable with these.
[Newton:] You mentioned a very good point there, and that's liquidity, being able to sell these on. Everyone has that image of you found a baseball card, you know, at a garage sale and all of a sudden you sold it for $5,000. And yet how much does that turn out to be true? I mean, how these are not very liquid assets, so are they, in general?
[Hatlapa:] Absolutely, you have to have a lot of patience in acquiring these, and you have to also have even more patience when you patience when you're a seller. And therefore, we always recommend people not to exchange one for the other. We use the stock market as a benchmark sometimes to see where are we with these stocks, where are we with these cars? But really, you should you should be very careful, and we would never recommend exchanging stocks for cars. People who have done that have been very successful at times, and that's a good that's a good thing.
[Newton:] We say don't trade currencies because they're volatile. I can only imagine trading something like cars or art at that level. What do you see as kind of the new domain for this? What will we see being collected or traded that, perhaps you know, it was unheard of even that you'd be auctioning off that many guitars 30 or 40 years ago, you'd sell one Beatles item and people thought it was a novelty. Where do you see this going next?
[Hatlapa:] Well, people get very attached with things that have served them well. So, it could be that there are some electronic items that we feel attached to in the future. But I think that cars, for example, and that's my expertise, offer quite a mighty sensory experience. You can drive them, you can smell them, you can do social events, and that I think is here to stay, and the common effects shows clearly pushing into the sector about issuing very rare and low production number cars which are very complicated and already when they're when they're sold by the manufacturer are very expensive. And to I think they're catering for that segment.
[Newton:] Right
[Hatlapa:] So, in my segment, I think you would see some very modern cars
[Newton:] Right
[Hatlapa:] That becomes collectible
[Newton:] Perfect
[Hatlapa:] In the future.
[Newton:] OK, and we will leave it there, thank you so much. Now, there are just moments away on the trade on Wall Street, as you can see, the numbers there, we will have the closing bell momentarily.