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| Passion Investments: Toys |
Financial Engineering
Richard John Pietschmann
11/01/2006
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Sentimental Journeys
Toy trains appeared not long after the real thing began
to revolutionize transportation. In the 1860s, hand-pulled versions emerged in
Europe, followed soon after by “clockwork” (wind-up), steam-powered and models
with tracks. Cowen invented his battery-powered electric train in 1901, and the
company to which he lent his middle name—Lionel—became the most illustrious toy
train business in the United States, creating items now prized by collectors. As
household use of electricity became widespread, plug-in electric trains came to
dominate the hobby.
 | THE VALUE of the Lionel
20th Century Limited passenger set is high because it is the only known set still with
its original boxes. |
From the beginning, U.S. and European toy trains and their collectors were split
over brands and styles. This rift persists, partly because the hobby is so
connected to youthful memories. Few mainstream North American collectors are
interested in Märklin, Bing and Hornby, whose toy train sets are revered in
Europe. Likewise, the European aficionados are not attracted to prized U.S.
brands such as Lionel, American Flyer, Ives, Marx and Voltamp.
The manufacturing periods of the toy trains are divided into pre-World War II,
postwar (1945 to 1969) and modern (from 1970). The golden age was from about
1893 to 1914, explains Hugo Marsh, head of Christie’s toy department and author,
along with Pierce Carlson, of Christie’s Toy Trains.Pop music icon Neil Young admires toy trains so much that in
1995 he became part owner of Lionel. |
Collectors seek trains that are comprised of locomotive and
rolling stock (often called sets, especially if they include track or are still boxed); locomotives and tenders; and individual passenger and freight cars.
According to Marsh, locomotives and the cars they pull make up the bulk of the
toy trains market. Accessories were sold in smaller quantities than the trains
and are thus scarcer, making them often more valuable than the trains
themselves. Märklin stations made at the turn of the 20th century are among the
most valuable items in train collecting, with recent documented prices as high
as $110,000; a boxed station commanded a rumored $130,000 in Europe.Along with manufacturing date, the condition of a toy train
also drives its value. This leads many enthusiasts who love to play with their
trains to eschew sets. Some sets would plummet in value if they were even
opened, let alone handled. Friedman tells of a factory-sealed 1960s Lionel pink
girls set sold at Bonhams & Butterfields in the early 1990s. To prove the
contents were complete without breaking the seal, Friedman had the box X-rayed
and included the films with the sale. Rarity can trump all other considerations,
however. "Rarity is more important," Carlson says. "I have many examples that
are unique or one of two or three."  |  | Top: THIS MARKLIN gauge III locomotive and tender sold
for $82,500 in 2005. Bottom: The
Rock & Graner
Nachfolger train station went for $71,500 in 2004.(Photography by Noel Barrett Antiques & Auctions.) |
End of the Line?
Although prices at the high end continue to climb, some fear
this may be the collector market’s last journey. Carlson, a collector for 25
years, admits he is no longer very active in the market and has sold more than
half of his collection over the past decade. As sentimental collectors who have
sustained the market for so long gradually fade from the scene, a serious and
possibly irreversible decline may follow, particularly in the midlevel market.
"Go to a train show, and you’re hard-pressed to find anybody without gray hair,"
Friedman says.
An analysis of the vigorous eBay toy train marketplace by
SmartCollector, an online research firm based in Michigan, shows that the
average lot selling price dropped from $71.55 to $63.20 between the third
quarter of 2001 and the third quarter of 2005, even as the value of all toy
train transactions grew from $4.8 million to $7.5 million. SmartCollector CEO
Chris Cameron says the market for pre-1940 toy trains is clearly declining, with
1950s prices beginning to follow. He adds that the aging toy train affinity
group is fading from the marketplace, with insufficient numbers of new
enthusiasts and younger collectors stepping in to support it.
According to Friedman, accurate modern reproductions of rare and vintage trains
and accessories depress even the four-figure sector of the market. For example,
the highly collectible Lionel pink girls set that sold at Bonhams &
Butterfields in the early 1990s for $9,800 is now available as a faithful
replica for less than $1,000. “Now I see [the original] at train shows in the
$2,500 to $3,000 range,” Friedman says.
With what Christie’s Marsh calls “a
huge quantity [of toy trains] in captivity” owned by elderly collectors, the
specter of a price-depressing market glut is a concern. On the other hand, those
focused on the most extraordinary trains see a market beset by chronic
under-valuation, compared with other collectibles, and believe this will fade as
savvy younger collectors come into the fray. “What accounts for the leap in
value in the past few years,” Stout says, “is that tremendous amounts of money
are coming into the hobby.” Driven by a new breed of toy train
collector-investor, the market for the best-of-the-best has soared. “They’re not
interested in average or common pieces,” he says. “They’re interested in the
best. And when it’s the best, it will bring silly money.”
(As of August 2006)
$218,500: Richard and Linda
Kughn’s Carail layout (RM Auctions, 2003)
$212,400: Märklin circa 1906
Gardiner gauge V steam passenger train (Christie’s London, 2001)
$110,000: Märklin Central
Station (Noel Barrett, 2005)
$109,700: Märklin circa 1902
gauge III Romanian-market steam CFR Royal passenger train (Christie’s London,
2002)
$100,100: Märklin gauge I
circus train (sold as four separate lots, Noel Barrett, 2004)
$82,500: Märklin gauge III
locomotive and tender (Noel Barrett, 2005)
$77,000: Lionel 1937 brass
Hudson engine (Stout, 2004)
$73,500: Lionel Blue Feather
boxcar (Stout, 2004)
$71,500: Rock & Graner
Nachfolger train station (Noel Barrett, 2004)$65,700: Märklin 20-volt
Crocodile articulated electric locomotive (Christie’s London, 1994)
(Includes buyer’s premium; prices converted to U.S. dollars at
current rates if unsupplied.)
Richard John Pietschmann is a regular contributor to
Worth.
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