Inflation and AI calcs based on L5

[deacon Mark]

Given Gibson L5's seem to be the best-selling jazz guitars that manage to really outperform most all other guitars, for return I did the following calculation using AI Chat GPT. I went back 5 years ago and assumed on this day 08/27/19 you could buy a Gibson L5 of some type for $6000. Then I ask what you would have to sell the guitar for to get the equivalent in money back today. The number is $7360. That seems doable to me now.

Rather than get any more specific and use this as a general reference for Gibson jazz guitars like an L5, ES-175, and Super 400, add whatever ones you might to this list: I think in general these guitars are at least worth money in the bank. No, they are not as such investment but just a way to justify if want to for keeping guitars or buying, at least Gibson's. If you need the money for other things then certainly you cannot hang on to them, but it is my justification that selling them is not always needed.

I have fun with the chatbot and is quite accurate on many things this would be one of the more easily done analysis that is accurate.

[omphalopsychos]

Given that they sell for about 10k now, that looks like a decent return. However, the annualized return, adjusted for inflation is only about 6%.

For fun I asked GPT "what guitars should I have bought in 2019 to get the best annualized return, adjusted for inflation? what guitars should I buy today for the same purpose if i plan to sell in 3 years? be specific in answering both questions

Give me the total and annualized returns to prove your argument. "

### Guitars to Have Bought in 2019 for the Best Annualized Return (Adjusted for Inflation)


One of the best performing investment-grade guitars in recent years has been vintage Fender and Gibson models. Specifically, certain models have seen significant appreciation. Let’s consider two examples that have appreciated well:


1. **1959 Gibson Les Paul Standard**
2. **1954 Fender Stratocaster**


#### 1. 1959 Gibson Les Paul Standard
- **2019 Purchase Price**: Approximately $200,000
- **2023 Selling Price**: Approximately $325,000


**Total Return:**
\[ \text{Total Return} = \frac{\$325,000 - \$200,000}{\$200,000} \times 100 = 62.5\% \]


**CAGR Calculation:**
\[ \text{CAGR} = \left( \frac{\$325,000}{\$200,000} \right)^{\frac{1}{4}} - 1 \]
\[ \text{CAGR} = \left( 1.625 \right)^{0.25} - 1 \]
\[ \text{CAGR} \approx 12.8\% \]


Adjusted for inflation (considering 3% per year over 4 years):
\[ \text{Real CAGR} = \left( \frac{1.625}{1.1255} \right)^{0.25} - 1 \approx 9.57\% \]


#### 2. 1954 Fender Stratocaster
- **2019 Purchase Price**: Approximately $70,000
- **2023 Selling Price**: Approximately $110,000


**Total Return:**
\[ \text{Total Return} = \frac{\$110,000 - \$70,000}{\$70,000} \times 100 = 57.14\% \]


**CAGR Calculation:**
\[ \text{CAGR} = \left( \frac{\$110,000}{\$70,000} \right)^{\frac{1}{4}} - 1 \]
\[ \text{CAGR} = \left( 1.5714 \right)^{0.25} - 1 \]
\[ \text{CAGR} \approx 11.9\% \]


Adjusted for inflation:
\[ \text{Real CAGR} = \left( \frac{1.5714}{1.1255} \right)^{0.25} - 1 \approx 8.68\% \]


### Guitars to Buy Today for the Best Potential Return in 3 Years


Predicting future returns involves a fair bit of speculation, but some models are expected to continue appreciating based on past trends and current market demand:


1. **1969 Gibson Les Paul Custom**
2. **1962 Fender Jazzmaster**


#### 1. 1969 Gibson Les Paul Custom
- **2023 Purchase Price**: Approximately $25,000
- **Expected 2026 Selling Price**: Approximately $35,000


**Total Return:**
\[ \text{Total Return} = \frac{\$35,000 - \$25,000}{\$25,000} \times 100 = 40\% \]


**CAGR Calculation:**
\[ \text{CAGR} = \left( \frac{\$35,000}{\$25,000} \right)^{\frac{1}{3}} - 1 \]
\[ \text{CAGR} = \left( 1.4 \right)^{0.3333} - 1 \]
\[ \text{CAGR} \approx 11.9\% \]


Adjusted for expected inflation (3% per year over 3 years):
\[ \text{Real CAGR} = \left( \frac{1.4}{1.093} \right)^{0.3333} - 1 \approx 8.48\% \]


#### 2. 1962 Fender Jazzmaster
- **2023 Purchase Price**: Approximately $15,000
- **Expected 2026 Selling Price**: Approximately $22,000


**Total Return:**
\[ \text{Total Return} = \frac{\$22,000 - \$15,000}{\$15,000} \times 100 = 46.67\% \]


**CAGR Calculation:**
\[ \text{CAGR} = \left( \frac{\$22,000}{\$15,000} \right)^{\frac{1}{3}} - 1 \]
\[ \text{CAGR} = \left( 1.4667 \right)^{0.3333} - 1 \]
\[ \text{CAGR} \approx 13.6\% \]


Adjusted for expected inflation:
\[ \text{Real CAGR} = \left( \frac{1.4667}{1.093} \right)^{0.3333} - 1 \approx 10.11\% \]


### Summary


- **Best Purchase in 2019**: 1959 Gibson Les Paul Standard and 1954 Fender Stratocaster, with real annualized returns of roughly 9.57% and 8.68% respectively.
- **Best Purchase Today**: 1969 Gibson Les Paul Custom and 1962 Fender Jazzmaster, with expected real annualized returns of approximately 8.48% and 10.11% respectively (assuming a stable market and continued interest in vintage guitars).


These figures provide a strong case for the appreciation potential of certain vintage guitars, but actual future returns can vary based on market conditions, demand, and other factors.

[omphalopsychos]

I pointed out to GPT that for guitars so valuable you should expect to pay auction or consignment fees because nobody will buy them in a private sale. It tried to improve its recommendations and then failed.

**Previous Top Picks (Including Transaction Costs):**


1. **1959 Gibson Les Paul Standard**:
- Real annualized return: 5.62%
2. **1954 Fender Stratocaster**:
- Real annualized return: 4.79%
3. **1969 Gibson Les Paul Custom**:
- Expected real annualized return: 2.91%
4. **1962 Fender Jazzmaster**:
- Expected real annualized return: 4.53%


**New Alternatives:**


1. **1957 Gibson Les Paul Goldtop**:
- Real annualized return: 6.84%
2. **1965 Fender Jaguar**:
- Real annualized return: 2.92%

What's going to be REALLY interesting is when multiple investors use AI to recommend strategies and then you'll see massively unpredictable volatility due to correlation.

[jads57]

Yes but it still a $50 gig you can use it on,Lol!

[Stringswinger]

Yes but it still a $50 gig you can use it on,Lol!

I am averaging about $200 per gig these days, but looking back over the 50 years that I have been gigging, Fender, Gibson and Martin guitars (the right models of course) have done better regarding inflation than gig fees have.

One can do better with stocks, bonds and real estate than with guitars from an investment standpoint, but the guitars are generally more fun .

[Spook410]

Making a buck selling guitars has always been a wistful and wishful pastime not particularly tied to reality. Not when compared to other forms of investment.

Even putting aside the returns on equities, real estate, and bonds, guitars have unique risks. Any damage or wear on the instrument will greatly impact selling price. Guitars are not particularly durable and if it happens on your watch you're kind of screwed. They can also be stolen. Also, and probably of more notable, selling costs can be significant if you rely on a commission seller or fee based site. Often the case if you're looking for a buyer looking to part with $10K or more.

Professional brokers might make money on guitars.. players don't. And before you tell us about that 1972 L5 that you paid a few hundred for that's now worth gazillions.. take what you paid for it back when and see what that amount would be if you had put it in a S&P500 index fund instead.

[Jimmy Mack]

All a good read. TY.

A salesman yesterday told me that: when Gibson starts producing L5's again next year ??, the value of older (used) L5's will go up.


Any comments? I don't know the history of these market events.

[wintermoon]

All a good read. TY.

A salesman yesterday told me that: when Gibson starts producing L5's again next year ??, the value of older (used) L5's will go up.


Any comments? I don't know the history of these market events.

I wouldn't think the value would go up if they started making them again.
Not sure I understand that logic but who knows.

[Stringswinger]

I wouldn't think the value would go up if they started making them again.
Not sure I understand that logic but who knows.

Two things could result in used L-5's going up with new production:

A) If Gibson charges an outrageous amount of money for a new one (and that is a possibility), that could cause a rise in used prices and;

B) If the quality of a new one is terrible (another real possibility), that could cause an increase in the value of older examples.

But mostly, I would think that with an increase in supply, the price of a used example would fall. That is basic economics.

[andrew]

We've been hearing that new L-5s from Gibson are right around the corner for several years now. Now granted, a handful of them have trickled out over the last few years (I think I've seen about 2 per year listed publicly for sale) but not in any serious quantity.

[ARGewirtz]

[QUOTE=omphalopsychos;1356358]I pointed out to GPT that for guitars so valuable you should expect to pay auction or consignment fees because nobody will buy them in a private sale. It tried to improve its recommendations and then failed.

From a purely financial perspective you'll have to ask GPT to discount the earnings potential not only for all the fees you mentioned but also lost opportunity cost associated with an extended sales period. A vintage or high-value player's guitar with the potential for substantial appreciation in value also has a higher likelihood than other investments to be on the market for a long time; weeks, months or sometime years, so the present value of the potential returns has to be discounted accordingly.

[jads57]

Well $200 gig in San Franscico, L.A., N.Y. Is about equivalent to $50 gig in the Midwest. Especially when adjusting for inflation,Lol!

[deacon Mark]

Well $200 gig in San Franscico, L.A., N.Y. Is about equivalent to $50 gig in the Midwest. Especially when adjusting for inflation,Lol!

i live in Midwest quit gigging a long time ago. Yes $50 is actually not a joke in some cases. A jazz gig 2-3 hours you might be lucky and earn $100.

I can do full road bike tune up in about 60-75 minutes. It pays $120 and they bring bike i go nowhere. I can do a fret dressing $150 in about same time.

Music does not pay the bills. Figure out another angle.

[olejason]

Well $200 gig in San Francisco, L.A., N.Y. Is about equivalent to $50 gig in the Midwest. Especially when adjusting for inflation,Lol!

Are $200 gigs typical in LA & NYC now? I've heard from a few people that NYC gigs don't typically pay much these days for the average player. I'm sure it varies considerably and the city offers a ton of opportunities for higher paying gigs like weddings and bar mitzvahs though.

Here in Louisville a lot of places are paying less than $100/player post-pandemic which has been disappointing but what can ya do. I just try to only take gigs with people I know I'll have fun with and consider the pay a bonus. I'm pretty privileged to be in that position I guess.

[Spook410]

I'm thinking about buying a small coffee shop so someplace will hire me at a solid rate.

[jads57]

It’s always been a bad business to be in,unless you’re incredibly good and lucky! But even then before the IPhone revolution etc.
you still needed to supplement it with teaching, jingles, church gigs,
Oh Yeah a Day Job, Lol!