An exciting new investment category

By Bill Colvard -

Last week the Hong Kong branch of Christie’s included a white crocodile Himalayan style Hermès Birkin bag in their art and collectibles auction and it sold for more than $300,000. Just so we’re clear, that’s 3oo,ooo American dollars. Not Hong Kong dollars. That by any definition, is a boatload of cash.

Now, mind you, I spent several decades in the luxury goods sector and was on a design team that charged $60,000 for a wedding dress that was ultimately only worn to the reception because the bride bought a more expensive dress by a better-known designer for the ceremony, so I get that the 1 percent knows how to spend some money, but still and all, that sounded to me like a lot of money for a pocketbook.

So I asked around to see what some other folks thought.

Stunned disbelief. A belief that money doesn’t necessarily come with good sense. One friend just couldn’t get over how many starving children the money for that one purse would have fed. She has a point but I just can’t see some up-and-coming oligarchess getting up one day and saying, “I guess I need to shop for a new bag, or I could just buy every kid in Bangladesh an egg McMuffin instead.” I don’t think it works that way.

So how much is too much? One friend who works in the financial services industry said, “Any purse that cost you more than the cash you have available to put inside it … you can’t afford.” That sounds like solid advice and would put most of the ladies of my acquaintance out of the running for this particular bag but I’d be willing to bet that the actual buyer met that stringent qualification.

A Jonesville friend said that she never paid more than $15 but that was too much. Another friend couldn’t understand why a receptacle for car keys and tampons should cost so much. One Mount Airy gal said that she would be willing to pay 15 grand for a Birkin if she could be guaranteed a 300 grand turnaround.

I think she’s onto something. Somehow along the way, handbags have become a collectible investment. There is now an active secondary market, like with art or jewelry. The Christie’s auction in Hong Kong was an art and collectibles auction and in fact, the Birkin bag brought more than double the price of a hanging scroll that had belonged to a Chinese Dowager Empress from the Qing dynasty. When an eight-year-old pocketbook is worth more than double a dead empress’s doodad, something is going on.

One friend said he thought his girlfriend had lost her mind when she paid $3,300 for a bag when they were in Italy but now it’s worth more than $5,000 so he now keeps his eyes open for good deals on Céline bags as an investment. (Céline is another French luxury brand with a lower entry-level price point.)

He’s not alone. Emily Chan, an investment banker based in Hong Kong told the New York Times that she has been collecting Birkins since 1993 and has more than 50 bags. The Himalayan model sold at Christie’s last week is her favorite. “For the past 35 years, the Birkin’s price trend has been all the way up, performing even better than gold,” Chan told the Times.

I had no idea. What other investment has gone steadily up for the last 35 years? I can’t think of any. The Birkin that Christie’s sold actually had real white gold hardware and was set with 245 F-color diamonds that weighed almost 10 carats. I hope the new owner doesn’t leave that bad boy on top of the car when she drives off from the 7-11. And if she does, I hope I find it.

One of my friends thought $300,000 would be better spent on art and suggested Renoir or Picasso but I don’t think he’s bought any Impressionists or Cubists lately. Either of those cost many millions. Emily Chan agrees. She sees art as a good investment but you need a lot more money to play. And art is more volatile in price and not as liquid as a Birkin. Chan insists that Birkins are like currency. You can cash out any time.

The thing that amazes me most about this story is Hermès’ totally laid-back attitude. Any American company with such a hot commodity on its hands would have amped up production, hired a bunch of new people and pushed out as much product as possible. But not Hermès. They only make one or two of the Himalayan style Birkins each year and their customers can just wait as long as it takes to lay down $280,000 to buy their bag at retail or jump to the front of the line with a bidder’s paddle at Christie’s and pay a 20-grand premium for the privilege.

Now that I know about this interesting investment category, I must say I’m a little annoyed that my financial adviser didn’t bring it to my attention sooner. At no time while we were slogging through the ins and outs of mutual funds and covered calls did she mention that we could instead be shopping on the Right Bank.

I’m seriously thinking of starting an Hermès hedge fund where wily investors will throw cash at me to regularly fly to Paris or Hong Kong to purchase leather goods for profit, and of course enjoy myself immensely on the trips. Of course, if I ever cross the threshold of Hermès with money in my pocket, I’m not leaving without a jumping saddle. And probably a bridle, a halter, a crop and a saddle pad. I hope my investors will be okay with that.

By Bill Colvard

Reach Bill Colvard at 336-415-4699 or on Twitter @BillColvard.

Reach Bill Colvard at 336-415-4699 or on Twitter @BillColvard.

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