Without losing generality, let’s say five items of a plausibly valuable item (say a rare ferrari model if you really need to imagine something) exist.
What’s to stop some consortium from buying some of them for roughly X each, then holding auctions of them while bidding up between each other such that the average price they’re going for is say 100X each, or something like that?
I think quite clearly the answer is nothing. However, doing this is just shuffling money between the consortium - and then giving away piles of it to the auction houses.
But surely these hugely valuable items, and especially the increase in value of the items, will attract the attention of specualtors, rich alternative investors, posers, people who claim to knw what the best type of this item is :rolleyes: and stuff like that.
Then the consortium can subtley keep having these auctions and sell off these items to these speculators/“investors” or whatever. Easy money for the consortium and cause most of these antiques don’t really have any fundamental value, the prices may even keep on increasing!
So there must be examples of this - anyone know of any? Any suggestions for it still going on? Any plausible reasons why this wouldn’t work?
Doesn’t it already work that way? There doesn’t need to be an active conspiracy, but the auction price of works of art steadily increase over time. It doesn’t seem like there’s much of a change in supply or demand, just a loosely coupled consortium of people who inflate the prices over time, probably urged on by the auctioneers who make money on each sale.
The consortium doesn’t need to hold fake auctions. If they buy up three or four cars, they’ve cornered the market. They can ask any price they want and the buyer has very few opportunities to buy elsewhere at a lower cost. And the consortium doesn’t have to fatten the wallets of the auction companies.
When it’s difficult to corner the market, say you’re selling Camaros instead of Ferraris, then you just invent one. So you say that yours is one of only three Camaros in Hugger Orange with a four speed, air conditioning, disc brakes and a space-saver spare.
This goes on all the time. Reference the Hunt Brothers and the silver market.
Why would anyone outside the consortium bid in an auction where the price has gone 100x over the item’s sensible value?
What’s to stop the consortium falling apart? Let’s say you and I and 3 others are in the consortium. I’m selling a Ferrari, you’ve taken the bid up to 100 million dollars. Nobody else bids. You pay for the car, I hand it over and say thanks guys, it’s been fun, but I’m off to Bermuda now.
Yes, it’s easy to manipulate the prices of illiquid assets. But if everyone knows the assets are illiquid, then nobody really believes in the meaningless prices in the first place. Or at least they shouldn’t!
I think the big problem is that there is always a similar category of goods that will become relatively cheaper under this plan. For instance, your consortium pushes up the price of Ferraris, so all of a sudden Lamborginis look like a deal. Or you push up the price of some specific Ferrari, so other Ferraris look cheaper.
There may be an advantage as far as pushing up the value of your collection in order to be able to gain access to more loans, but as far as ‘pumping and dumping’, I don’t think this is a good plan.
Something is worth what ohers are willing to pay for it.
If the consortium pushes the price too high, nobody else will pay. We see this with “limited edition” this and that crap, where overproducing means something will never be better than list price. The first Batman or Superman comic is valuable simply because most were destroyed before people figured out they’d be worth money someday.
there must also be some discriminating analysis done by people who invest in rare stuff for anticipated profit. They look at the long-term market, not a year or two’s worth of new clippings; they look at similar and competing products. (Or they ahve millions to throw away) In that situation, a fake bidding frenzy by a few participants should be as obvious as an eBay fakery.
There is similar scam known as a “land flip” which happens regularly. Here’s one definition I found:
Not sure whether this happens with antiques or why it doesn’t happen. Since private sales of antiques are not recorded, you would need to involve an auction house and pay a large percentage with each flip. If the total percentage for buyer and seller is 15%, you are risking a huge amount of money on the possibility of hooking an unsuspecting sucker. So maybe that’s part of the reason.
I suspect this happens on a smaller scale on e ebay. I believe there may be a consorteum of sellers who attempt to keep the prices up on items. I buy wood for bow making and the wood often has enough character to make it recognizable. I could swear I sometimes see the same piece of wood being offered by the same seller at later dates. I really don’t blame them for wanting to get a fair price for their wood, it takes considerable time and expense to harvest and prepare it.
In a very abstract sense (i.e. a very small group of people having control over the price of something and colluding to keep the price at a certain level), the Libor rate fixing scandal might qualify.
Is the diamond cartel an example of what the OP is talking about? People are willing to pay a lot for diamonds because they’re expensive, but they’re only expensive because deBeers has cornered the market.
This kind of happens with desirable vacuum equipment. Duniway is an outfit that has been selling new and refurbed vacuum equipment since well before the internet. They will bid on nearly any desirable piece of vacuum equipment that comes up on ebay, at only a little below what they would sell it for…or at least they did before ebay started anonymizing bidders, I assume it is still the case. As a result, there are virtually no good deals on vacuum equipment on ebay, and Duniway avoids being undercut. If they win they can sell at a slight profit, if they lose, they are still setting the market price.
One way I have found to snag the occasional deal is that a lot of people can’t spell vacuum, so by searching out the mis-spellings you can sometimes find something nobody else found to bid on.