Money Money Money

- by Bruce E. McKinney

D797f715-4bf1-4679-920f-1f4738ad23ee

Covid-19 and the turgid economy present a lethal mixture of possibilities that will work themselves out over the next five years.  For book dealers and collectors these issues will present additional challenges because in collectibles liquidity varies negatively with uncertainty.  By the end of the year extraordinary levels of government stimulus will have been absorbed leaving diminishing positive effects after which unmistakable negative effects will take hold:  inflation and a 25% decline of the US dollar relative to a market basket of ascendant world currencies over the next 3-5 years.

 

For the rare book business there are multiple issues to consider:

 

  1. Your debt to equity ratio:  liabilities/assets.
    1. The currency you principally trade in.
  2. The cost of your collection or stock.
  3. The relative strength of your inventory.
    1. Low, middle or high end
  4. The kind of material you have as defined by price category.
  5. Are you prepared to keep your inventory to a fixed percentage of your sales?  This means that if your sales slow you will cut your stock proportionately.
  6. Is the value of your collection significant to your cashflow or net worth?
  7. Your cashflow requirements both short and long term.
  8. How and to whom would you sell?
    1. Wealthy collectors
    2. Middle class collectors
    3. Institutions online or by offer letter
    4. At auction
    5. On eBay

 

It’s always a good idea to have your financial plans updated because the next 5 years will present unusual risks.

 

I will try to help any RBH member who requests advice.

 

Bruce McKinney

bmckinney@rarebookhub.com