What shell col­lect­ing can teach about in­vest­ing

Connecticut Post (Sunday) - - Transactions - By Jack Gut­tentag THE MORT­GAGE PRO­FES­SOR ( TNS)

Are rare seashells a good re­tire­ment in­vest­ment?

I had to smile when this ques­tion was posed, be­cause seashells have long been a pas­sion of mine, and I still re­ceive great plea­sure from the cab­i­net where I dis­play the shells I gath­ered over the years. Note that I used the word “gath­ered” rather than “col­lected.” My shells were taken from the wa­ter by me or by some­one from my im­me­di­ate fam­ily. Col­lec­tors buy and trade shells, which I never did.

While my shells are a source of quiet sat­is­fac­tion, they have lit­tle mon­e­tary value be­cause none of them are rare. If I de­pended on them for my re­tire­ment, I would be in real trou­ble. One of my shells, called Conus glo­ria­maris or glory of the seas cone, was once ex­tremely valu­able. When I be­gan shell gath­er­ing in the 1960s, there were only a few known spec­i­mens. The saga of glo­ria­maris points up the haz­ard of in­vest­ing in rare seashells.

What hap­pened was that the habi­tat of the shell was dis­cov­ered, large num­bers of them were col­lected and of­fered in the mar­ket­place, and their price plum­meted. I read about it at the time in a news­let­ter put out by a mu­seum with a large shell col­lec­tion. The cul­prits were iden­ti­fied as two Aus­tralian divers.

Years later in 1988, my wife and I with two other couples char­tered a boat in the Solomon Is­lands for a div­ing ex­cur­sion. The boat was owned by an Aus­tralian diver named Brian Baily, who turned out to be one of the two divers who broke the world mar­ket for glo­ria­maris. I asked Brian how he found their habi­tat and he told me the whole story, which I later con­firmed by go­ing to the site and snag­ging a glo­ria­maris for my­self.

The site was off Guadal­canal, an is­land that saw fierce fight­ing dur­ing World War II. Af­ter the is­land was se­cured, it be­came a sup­ply de­pot for the en­tire Pa­cific war op­er­a­tion. When the war ended, there was an enor­mous sup­ply of war ma­teriel on the is­land that it did not pay to repa­tri­ate but which had to be re­moved from Guadal­canal. So the army loaded all this stuff on barges, floated the barges down the big river that bi­sects Guadal­canal, and dumped it in the ocean about half a mile from shore.

In­cluded in the ma­te­ri­als that were dumped were ar­tillery shells with brass cas­ings. As the years passed, the mar­ket price of brass rose to the point where it be­came prof­itable for divers to sal­vage these shells, which is what at­tracted Brian to the scene. He was there for the brass and dis­cov­ered a trea­sure trove of shells.

I asked Brian if he would take me to the site, and he did. The wa­ter there was about 70 feet deep and the cur­rent was so strong that Brian took the boat's an­chor down with him to pre­vent our boat from drift­ing away. The bot­tom was mud, vis­i­bil­ity was about 3 feet, and there was no co­ral and no fish. It was by far the most unattrac­tive place I have ever dived. No diver would ever go there, ab­sent the unique set of cir­cum­stances that drew Brian to the site.

In ret­ro­spect, it might ap­pear that the cir­cum­stances that drove down the value of glo­ria­maris were so un­usual that they should be ig­nored in con­sid­er­ing fu­ture in­vest­ments in rare shells. The prob­lem with that ar­gu­ment is that Glo­ria Maris was not the first rare shell that be­came a com­mon shell af­ter its habi­tat was dis­cov­ered. In the 18th cen­tury, the pre­cious wentle­trap shell was so valu­able that coun­ter­feit ver­sions were fab­ri­cated in China us­ing rice paste. To­day this shell is read­ily avail­able in shell shops.

The bot­tom line of this his­tory for re­tire­ment plan­ning - which has noth­ing to do with seashells - is that in de­vel­op­ing their plan re­tirees should de­fine their worst case and make sure they can live with it. A re­tire­ment plan­ning sys­tem my col­leagues and I are build­ing will help them do that.

What hap­pened was that the habi­tat of the shell was dis­cov­ered, large num­bers of them were col­lected and of­fered in the mar­ket­place, and their price plum­meted.

Jack Gut­tentag is pro­fes­sor emer­i­tus of fi­nance at the Whar­ton School of the Univer­sity of Penn­syl­va­nia. Com­ments and ques­tions can be left at www. mt­g­pro­fes­sor.com.

2018 Jack Gut­tentag Dis­trib­uted by Tri­bune Con­tent Agency

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