Here's some market insight: you might find a great buy this season in vintage guitars. According to “The 42 Guitar Index” put out each October by Vintage Guitar Magazine, American-made collectable guitars have taken a beating. The index, which is the total value of 42 guitars from three top brands, is at $750,800. That’s 23% off its October 2007 peak of $976,200. (The S&P 500 is down about 20%.)
This insight comes via David Kalt, a former options trader and broker who’s now focused on guitars and all things related. A decade after he co-founded the online broker OptionsXpress, which Schwab bought last March for $1 billion, Kalt runs Chicago Music Exchange, a vintage guitar mecca on the city’s north side where you might see Johnny Depp (who was a musician before he was an actor) or Tom Petty browsing if they’re in town. Kalt says that the factors taking a toll on the stock and housing markets have dragged down the guitar market, too. Collectors nervous about their financial portfolios are less willing to splurge on instruments.
But Kalt -- a dealer, to be sure -- argues that some of the guitars on the market could be good long-term, undervalued investments. So if you're a value-shopper, guitar lover, and willing to take some risk in a market that's not very liquid, here are Kalt's five top picks.
Guitars of Brazilian rosewood
It’s been illegal to use Brazilian rosewood since the late 1960s or early 1970s, says Kalt. That makes the guitars made from it scarce and valuable: “The prices of these guitars have gone up more significantly than just your run of the mill acoustic made out of woods that are still legal, such as Indian rosewood.” Kalt especially likes Brazilian rosewood guitars manufactured by C.F. Martin & Co. before 1945, a golden era of guitar-making before the war effort became a greater priority.
But while scarcity has driven up prices, the economic malaise has driven them down for now. In 2008, Brazilian rosewood guitars of several makers sold for $40,000 to $50,000. Now they sell for $30,000, and you might even be able to find one for $20,000.
Any blonde Gibson with a PAF humbucker pickup
“Blonde Gibson” in this world means a guitar made by Gibson and finished with natural, unpainted wood. If Gibson left the wood unpainted, that generally means they used the best-quality wood grain available.
One of the most coveted and collectible guitars in the world is Gibson’s 1958 ES-335N (the N stands for "natural," or blonde). Gibson introduced that ES-335 model in 1958 and only shipped 50 of them. The model became iconic in jazz, rock and blues, played by musicians such as Eric Clapton in the 1960s – although even he didn’t have a blonde one.
In 2008, Kalt sold a Gibson 1958 ES-335 blonde for around $100,000. Now book value, according to the industry-used Vintage Guitar price guide, is $56,000 to $69,000.
Any “pre-CBS” custom color Fender
Fender, before it sold to CBS in 1965, made guitars by hand. Its workshop gave most of the guitars a recognizable, multi-tone paint job it called “Sunburst.” But it also made some that it painted in descriptive colors like Fiesta Red, Sonic Blue and Surf Green. Dealers call these “custom color” guitars and high-end collectors tend to hold onto them.
But those that surface are cheaper than they were. A Sonic Blue Jazzmaster (a popular Fender model) made in the early 1960s cost $25,000 in 2008. Today’s book prices are between $9,000 and $15,000. Tip: make sure the guitar you want has an original factory finish, and condition is particularly important on these.
Any classic American vintage guitar made in a significant or milestone year
Like wines, guitars have good years and bad ones. Often the first year any famous model was made is a good year. For example, Fender made its first Precision Bass in 1951, its first Stratocaster in 1954, and its first Jazzbass in 1960.
But the year a famous model was updated can be even better. Gibson first made Les Paul Goldtops in 1952. But its 1957 version is significantly more valuable because that’s the year it made some important design changes. “The changes they made in ‘57 still drive the market today,” says Kalt.
A 1957 Les Paul Goldtop went for $150,000 to $180,000 in 2008. Now it goes for $80,000 to $120,000. As for the 1954 Stratocaster, the Chicago Music Exchange sold one in 2008 for $80,000, and book value is now 45% less.
Oddball or specialized vintage guitars
Think of these as the speculative growth stocks of the guitar world, potentially more affordable buys that could turn out to be good investments (or duds). These include guitars made by smaller and lesser-known companies like Mosrite, Ampeg or Travis Bean. The Travis Beans have wooden bodies but aluminum necks, which give them “a different kind of resonance,” says Daniel Escauriza, vintage manager at the Chicago Music Exchange, “perhaps less warm.”
A few years ago, Travis Bean guitars sold for $8,000-$10,000. Today, they average around $6,000. Buy one now and maybe you can trade up in a few years – and if not, at least you can use this purchase to play the blues.
