With the stock market behaving like a bear on a bungee cord, it seems a good moment to revisit that old, old question -- are antiques a good investment?

To answer the question systematically, we need to cross the Atlantic. Ever since 1968, the Antique Collectors' Club in England has published an annual review of the prices of antique furniture which we'll call the Antique Furniture Price Index, or AFPI. This wonderful source of information has no American equivalent. Now, we have no way of detailing precisely the relationship between the markets in the UK and the US, whether the stock market or the antiques market, but we do know that they are linked, however indirectly.

We've rounded off the numbers, but very broadly, this is the picture that their data paint for us. If you had bought an average piece of antique furniture for £100 in 1968, twenty years later, in 1988, you would have had to pay £2,185 for it, and now, in 2000, it would cost you £3,350. By comparison, the Financial Times Stock Index (the equivalent of the Dow) went from 100 in 1968, to 675 in 1988, and to 1900 now. Do the math: In 33 years an average antique has increased by a factor of 33.5, while the average stock has gone up by a factor of 19. Over the long haul, antiques look a pretty good bet.

But perhaps stocks are not the best comparison. Our other big investment is our house. And houses have done better than stocks, but not quite as well as antique furniture. The equivalent numbers for house prices in the South East of England (the top of the housing market) are: 1968: 100, 1988: 1,550, and 2000: 2,850. House prices have increased by a factor of 28.5. As investments, houses have done nearly as well as antiques, and both have way outperformed stocks.

1968 1988 2000
Stock market 100 675 1,900
Antique furniture 100 2,185 3,350
Housing 100 1,550 2,850
Basket of groceries 100 605 1,000

Before we antique dealers fax these statistics off to every financial advisor in the country in the hope that they will advise their clients to get out of stocks and into antiques, we need to sound a note of caution. Antiques are not liquid. Their selling costs are around 30% or higher, whereas those of houses are about 5%, and of shares around 2%. The costs of selling an antique will eat up at least three years of its "profit," so financially, antiques are good only in the long term. We're not going to see the day traders rushing into our shops.

And the long-term and medium-term pictures can be very different. In the 1990s, for example, things had reversed: stocks outperformed antiques by a factor of three. In 1990, the AFPI stood at 2,600, and by 1995, it had dropped to 2,300 -- the only sustained fall in its history. In the last half of the decade, however, it rebounded vigorously. The housing market followed the same pattern, losing ground in the first half of the decade and gaining in the second.

In England, then, the antiques market and the housing market run fairly close to each other, and both diverge markedly from the stock market. But the index that tracks the AFPI most closely of all is the Confederation of British Industry Confidence Index -- the measure of general optimism in the country. People buy antiques (and presumably houses) when they feel good about their finances. And the stock market is not the only influence, and maybe not even the biggest influence, upon their feelings. How bad our current stock market "crash" is depends upon when you bought into it. A particular high-tech stock (which I won't name) traded last year at 130, and is currently at 30. But two years ago it traded at 10. Is 30 good or bad?

And is a "bad" stock market bad for the antiques business? Currently, for instance, brokers are advising clients that cash is better than stocks. But Americans hate cash. As soon as they have it they want to get rid of it. For heavens sake, the average American even prefers debt to cash! So the broker's advice typically translates into "Go out and buy something!" Auction after auction is posting record results (have you tried buying at one lately?), the Winter Antiques Show was a blow out, and the best stuff hardly seems to touch the showroom floor before it's on its way out the door.

But perhaps that's only at the top end of the market. The relationship between this segment and the rest is not all that clear. The latest issue of the Catalogue of Antiques and Fine Art is more confident about this than we are. One headline reads: "As the Winter Show Goes, So Goes the Market." But signs for optimism are there even among the Wall Street carnage. Middle America is always influenced by what it sees going on at the top. And if the top is buying. . . We must note too, that the British AFPI is based on average antiques, not the best (its author, John Andrews, believes that the top stuff has accelerated even more rapidly than the mid-range pieces that he tracks).

Which brings us back to the AFPI, and a cause for concern that we have not yet noted. A basket of groceries that cost £100 in 1968 would have cost £605 in 1988, and £1,000 in 2000. In other words, the cost of antiques has risen more than three times as fast as the cost of necessities. When the gap between a luxury and a necessity is small, more people can afford the luxury. But as the gap increases, the size of the luxury market decreases. Have antiques priced themselves out of the reach of the sort of people who, twenty years ago, would have bought them? Are antiques becoming the preserve of rich, old people, and are younger couples, the foundation of tomorrow's market, spending their money elsewhere because they perceive that it will buy them more?

Or is the price gap actually part of the appeal of an antique? When people can buy the same commodity anywhere in the world, they appear to be willing to pay more for the uniqueness of an antique. There is a shortage of good antiques -- all dealers will tell you that the hardest part of the business today is finding good stuff. Consequently only a comparatively few people can own them. The difference between houses furnished with antiques and those that are not is a multidimensional difference: it includes taste and wealth but rests finally on exclusiveness and rarity. Good contemporary furniture may be tasteful and expensive, but it is not rare: Another piece can always be produced to meet a demand. Antiques are not like that. Whatever the state of the stock market, in the antiques market there is always an unmet demand. The more globalized our world becomes, the more that people with certain tastes will desire antiques for their uniqueness. The conditions of the mass market appear to be increasing the number of those people, but there is no commensurate increase in the supply of antiques. This scarcity of good antiques (and "scarcity" is simply a definition of unsatisfied demand) may well mean that the price gap between antiques and ordinary commodities will widen. The reduced size of the market (i.e., its exclusiveness) may well improve the investment qualities of antiques.

But one thing is certain: however high or low antiques rank as good investments, no other way investment brings with it the daily pleasure that an antique does. People love their antiques; they buy them in order to live with them, not to sell them in the near future. The low liquidity of an antique, therefore, is not a drawback. It is built in to the nature of the antique. If you love antiques, you necessarily have a long-term perspective, and that's the only perspective from which to view antiques as investments.

(Original version published in the New England Antiques Journal, May 2001)