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By James R. Cook

Twenty-five years ago I started to collect antique waterfowl decoys. As a duck hunter I found a nostalgia for the sport in the old wooden decoys. There were decoy shows around the country and you could find a nice old wooden duck, with its original paint, for a few hundred dollars. Decoys were considered a utilitarian art form. They were used as lures to attract wild game, but they were also carved and sculpted from wood and painted by rural artisans. Since they were used hard, sometimes in saltwater, few remained in original condition. The premium examples made in the early 1900s, by recognized carvers, sold for as much as a thousand dollars when I first started collecting.

In 1981 I attended a decoy auction at Doyle’s on the upper east side of Manhattan. I set a record of sorts by paying $8,000 for an exceptionally rare decoy. NBC showed a clip of the transaction on their morning show. Prices went up fast from there. In 1986, someone paid $85,000 for a goose decoy, a new record. Then that summer the record was shattered again at $205,000. A few weeks later a wealthy gentleman from Newport, Rhode Island bid $318,000 to secure what was considered to be the best duck decoy of them all. A knowledgeable dealer assured me that this was a price record that would never be broken.

In 1998 a Houston radiologist, who owned the world’s best decoy collection, passed away. His two daughters arranged with Sotheby’s in New York to auction off the collection in January 2000. The bidding was hot and heavy. A shorebird decoy sold for $425,000. (People used to eat those little birds you see running along the beaches of the Atlantic coast and the Gulf of Mexico. In fact, they ate so many of them they almost became extinct. In 1917 the hunting of shorebirds in the U.S. was banned.) The sale of the radiologist’s decoy collection broke the bank. It brought 11 million. A new world record was set when a goose decoy sold for $640,000. That drew gasps from the crowd and then a round of applause.

The new record lasted until January of this year. The gentleman from Newport, Rhode Island, who owned the world’s best decoy, had died and his wooden duck that had set a world record back in 1986 came to auction at Christie’s in New York. They hammered it down at $802,000, another mind-boggling record for a duck decoy that your grandfather might have hunted over.

This kind of thing could never have happened without an explosion of money and credit. For two decades we’ve had asset inflation like never before. Collectibles have gone up because people have more money to spend, but the dollar has also depreciated more than we imagine. People think their assets are going up, but a part of it is the dollar going down. Will this kind of price appreciation and asset inflation continue in the future? Probably.

These days you can’t get rich from a salary or savings. It’s the assets you buy with your savings that make you wealthy. For two decades it’s been what you owned, not what you earned. Whether it be land, buildings, a business, antiques, art, or your home, the tangible stuff has been going up. The monetary expansion that propels these assets appears to be intact and without end. The fly in the ointment is the possibility of a depression or steep fall in the dollar.

To some extent we already have stagflation, a combination of depressing economic conditions and central bank inflating. If the economy worsens, stocks will slide downward, income producing real estate will be hurt by a lack of renters, and small businesses will be pinched further. A depression tends to paralyze the growth of values in all assets but bonds. It causes most assets to lose value. Yet we’ve heard from the powers that be at the Federal Reserve that they have developed an emergency plan to push out money and credit in any decline or crisis. There will be no “pushing on a string” in this 1930s replay. That would certainly seem to favor tangible assets in the future.

Some would say that monetary looseness also favors stocks. They generally benefit from lots of money and credit. The problem is, they already sell for overly rich valuations. Recently, I explained to a lady who had a business that made $100,000 per year that if her business was worth what her stocks were selling for she could get four to five million for it. Nobody in their right mind would pay up front for 40 to 50 years of her earnings. At last she understood what overvalued meant.

The problem is, most tangible assets have also multiplied in value many times over. An $800,000 duck decoy looks like its got a lot more room on the downside than it has potential for gain. One set of tangible assets that missed out on any kind of appreciation in the money and credit explosion is gold and silver. Why this has been the case is another story. Suffice to say these two highly valuable precious metals, with widespread usage and demand throughout the world, have completely missed the asset booms. The entry point is still quite reasonable compared to anything else.

The dollar’s recent downward slide plays a part in thinking about the right moves to make in the future. If you hold our currency, you lose. Since everything’s denominated in dollars, domestic assets can lose an equivalent percentage. A steep fall in the dollar stands to be the great equalizer. Your assets go up, but the dollar goes down. You either break even or you lose. If the dollar drops far enough, then owning things that foreigners want may support asset prices. For example, a condominium on the Florida coast will see greater demand from foreign buyers than will a residence somewhere else. A falling dollar makes foreign goods and natural resources more expensive. It translates into price inflation and usually makes gold and silver rise in value. Inflation also boosts most asset prices so, to some extent, we’re back to where we started.

Unfortunately, we don’t know the future. How bad will it get for the economy? Will we have a depression? If so, we’re all going to be hurt. On the other hand, an easy money policy that only gets easier means that owning tangible things of value makes the most sense. There’s a lot of money out there now and it looks like there’s going to be a lot more in the future. My personal strategy is to keep buying tangible assets, including precious metals. You should do the same.

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