As pointed out in the article in today's paper, Tag #6 sold for a whopping $675,000. (By comparison of apples to oranges, the No. 1 tag in UAE sold for $14 million). Here's one way to look at this investment, other than potentially being the envy of a very select group of people.
The auction commission for these types of things varies between the ebay cost of approximately 5% to the Wilson auction cost of about 20%. If this tag had sold on ebay, the fees would have been approximately $35,500. At a 20% rate, the fee would have been $135,000. I'm sure the auctioneers of this auction took a commission somewhere in the middle. So, for my argument's sake, let's say if you sold your plate at auction, it would cost you about 10% in commissions based on final sale price.
Even at a conservative 2% interest rate, compounded quarterly, your $675,000 investment would appreciate to about $825,000 over 10 years. Invested in long term safe investments yielding 5% gives you around $1.1 million. The question is really whether you can get that much for the same plate years from now. Maybe. But the ceiling to these auctions isn't at the UAE's ridiculously high selling point. It's probably not that much higher than this conservative interest calculation. Plus, after you sell it, you've got to deal with the commissions. If you only got $825,000 for it, you're only pulling in $742,500 after a 10% commission, which turns out to be a pretty lousy investment. Just to get to the net of $825,000, the plate would have to sell around $915,000. Is that really realistic? I can't imagine that is the case absent some sort of crazy inflation over the next decade.
Of course, if you have this kind of money in disposable income, what is the point?
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3 comments:
Of course, if you have a low digit tag, perhaps now is the time to throw some into the market to make a quick buck. Even a two-digit tag is going to fetch a fair penny, and even after taxes, you'll still probably make out alright. My point is about the sucker who you're able to sell the plate to. What's that saying about a fool and his money?
In viewing some of the comments on Delaware Online with regard to this topic, it certainly appears that mine can be construed a multitude of ways. The first link is meant to be sarcastic and this one is meant to be semi-sarcastic.
The buyer is free to do with his money as he wants. If he's got that much in the bank, I'm sure he's not worried about a couple risky/odd investments here and there. Socially, this type of tag is a status symbol in Delaware and he's free to buy into it like anyone else.
My point is that it's such an insignificant status symbol that it strikes me as an odd investment. And even if it does appreciate at what the auctioneer claims is 7% a year, the plate is only worth as much as the next person is willing to pay for it. Obviously, the hype surrounding the black tags in Delaware operates to ensure that increase in value will happen, and I don't see that ending soon.
Old story, but I spied this tag in a parking lot (Michael's Restaurant), took a pic, posted it, then started googling about it!
http://www.flickr.com/photos/diaper/3698661824/
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