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Rule #2 of Investing in Custom Knives

August 25, 2011

Position in the Market 

Even when John White was an apprentice smith when he won both the Blade Show’s Best New Maker Award and the ABS Peck Award (best knife submitted by a Journeyman Smith candidate). His work now features collaborations with other exceptional artists creating knives that rival work from the best. (Chuck Ward photo)

Text by Les Robertson

Certain knifemakers, such as Daniel Winkler and Karen Shook, make this process easy. Daniel is known for his signature style hunters and Bowies; there is no mistaking a Daniel Winkler knife. The only thing that can add to such a distinctive look is that of a signature-style sheath, which is exactly what Karen Shook’s sheaths provide. These two artisans have spent years developing their style to the point that they own their market.

A maker’s position in a market is not always so obvious. Early on, when I was primarily a collector, I noticed (after spending several-thousand dollars) that just about every knife I bought and later sold lost money. I was confused as to why this was happening, since I did a lot of homework. What I thought was “homework” was in fact doing a lot of research to pick out what was really my favorite knife, not which knife would hold its value or even go up a little.

Years later, while in graduate school, I developed a theory regarding the pricing of custom knives. I called this “index” the Robertson’s Maker Market Matrix. Basically what it did was compare every maker who was in knives in 1992 to every other maker who built a knife in a similar category. Then price comparison started between the makers, followed by materials, time making custom knives, reputation, a few other variables and patterns started to form. By creating this matrix I found I quickly started to separate the makers into strata within a particular market. Almost without exception, the top three to five makers in each stratum rose to that position because they offered value pricing for their knives.

Mike Ruth is currently an ABS Journeyman Smith, but is providing his clients Mastersmith quality Damascus. Consequently, his price structure offers his clients a very good potential for a nice ROI. (Chuck Ward photo)

Know the market; know the maker’s position in the market; determine if the knife is appropriately priced. If yes, purchase the knife, and then be sensitive to the factors driving a particular maker and/or his work in that market. The purpose of investing in a custom knife is to sell it for a profit. This sensitivity will indicate to you when the time is right to sell to achieve your goal.

A couple years ago a collector came to me at the Blade Show. He had heard that a collector had spent more than $100,000 on custom knives at the Show. He asked what I would spend $100,000 at the Show on. My reply was $50,000 cash and $50,000 in custom knives. Surprised, he asked why so few knives. My job is to buy knives that will resell for a profit. I replied that I probably could not get every knife offered in a drawing. So I would have to buy knives that are offered for sale to anyone. The amount of knives (even at the Blade Show) that could be resold for a profit is limited. He asked why that was. I replied that it’s because the majority of custom knives are overpriced. Not with malice aforethought, but nonetheless, overpriced.

Pricing is difficult. Often, new makers will rely on established makers to give them pricing guidance, or merely look at a knife similar to the one they have built and estimate what their knives should sell for. This is why it is incumbent upon the investor to look for value pricing in their investment knives. Most collectors don’t know the makers position in the market, and apparently most don’t care, which is good for the makers. Consequently, they don’t know they have over paid until it is time to sell the knife. Then, the aftermarket lets them know how they did. Remember, their fellow collectors are the aftermarket.

Authors note: For the purpose of full disclosure, I have worked with every maker I list in this article and have done so for between three and 15 years. I write this so you will understand why I have used them in this article. I have been able to witness firsthand how their market position has helped them and their collector/investors.

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