A True Financial Instrument?

Gil Hembree was 20 years old and working the counter at Kitt’s Music on G Street NW when he spotted a 1962 Gibson catalogue featuring the music-making duo of Les Paul and Mary Ford.

It wasn’t the couple that caught his attention but rather the guitar slung over Paul’s shoulder: an original-style, single-cutaway Gibson Les Paul model with a gold finish.

That was 1966. Soon after, Hembree saw an Evening Star classified ad for a 1952 Gibson Goldtop Les Paul. He paid $100 to a country-music fan in the Maryland suburbs. Hembree later sold it to a musician for $400, booking a profit he used to help cover tuition at American University, where he studied accounting.

“He had no idea, and I didn’t really either at the time, what these were worth,” Hembree said of the transaction. “I just thought they were cool.”

Today a 1952 Goldtop in excellent condition is valued at $15,000 by Vintage Guitar magazine, which publishes an annual price guide.

Hembree said his experience sparked a decades-long hunt for vintage guitars, many with Les Paul’s name on them, to buy, collect and sell — often at a profit.

Rare guitars are among the many collectibles whose value has surged with the explosive rise in wealth earlier this decade that inspired investors to sink cash into goods such as art, rare coins and antiques.

The death of Paul, a pioneer whose innovations transformed popular music and paved the way for rock-and-roll, has spurred fresh interest in vintage guitars. Of particular interest are certain models with his signature emblazoned on the headstock, considered the grand prize among collectors and often sold in private deals featuring authenticators and incredible sums of cash.

Like any investment, collectibles have potential for great gains (as Picasso’s masterpieces show) and for a steep slide to oblivion (think Beanie Babies). Timing, as they say, is everything, and even investments with lasting value (homes, for example, and yes, guitars) can get carried away in a bubble.

But financial planners caution against speculating on collectibles. “To make 10 or 20 percent on your collectibles,” said Michael Walther of Oak Wealth Advisors in Deerfield, Ill., “the piece probably has to appreciate 50 to 100 percent from what you paid for it.”

Diversifying into hard assets such as rare coins and guitars can be a smart hedge against inflation, but don’t buy up collectibles with money you may need on short notice, said Marc Henn, president of Harvest Financial Advisors in Cincinnati. Looking to unload a guitar quickly could cause headaches, as well as big losses.

“I would not want to have assets in collectibles and be forced to have to sell them to eat,” Henn said. “You would probably get taken to the cleaners.”

Determining the value of a guitar can be tricky. Unlike stocks, they are not traded and scrutinized on a public exchange. An instrument’s condition, sound quality and even who played it can factor into its value. But guitars, as with most collectibles, experts and dealers say, are best bought only if they’ll be enjoyed.

“I have zero dollars in the stock market, because they’re not things that you can see and touch,” said Joe Ganzler, who bought a 1959 Les Paul in 2001 for $175,000 and makes a living authenticating vintage Les Pauls. “If my guitar was suddenly worth $50,000 tomorrow or $5,000, at least I would still have that thing.”

The market for such guitars is heavily populated by nostalgic middle-aged guitar-slinging collectors with disposable income who remember such musicians as Eric Clapton and Led Zeppelin’s Jimmy Page in their prime wielding late-50s models.

Still, in the days since Paul’s death, some collectors have abandoned that sentimentality, wondering: Will my guitar fetch more money now?

“Some of us have found that question to be a bit tacky,” said Tom Wittrock, a collector of vintage Gibson Les Paul guitars and a host at, where a member was heckled for broaching the subject the day Paul died. “It also seems like an inevitable question,” added Wittrock, who owns a store in Springfield, Mo., that sells vintage and other used guitars.

Inevitable because speculation and staggering price flux have stoked the vintage-guitar market in recent years. Consider the Gibson 1959 Sunburst Les Paul Standard with heavy tiger-stripe, flame-grained maple. One in excellent condition was worth as much as $125,000 in 2002. Its value reached $420,000 by 2008.

Then the recession sapped discretionary spending, and growth screeched to a halt even for that prize 1959 model, which is projected to drop in value to $300,000, or 28.6 percent, according to Vintage Guitar magazine’s upcoming 2010 guide.

“When the recession came around, the people who were getting these very large bonuses, who comprised a very large portion of our customer base . . . stopped coming around,” said Stan Jay, president of Mandolin Brothers, a Staten Island guitar shop.

The 1952 lost 57.1 percent, which was more typical of the broader vintage market, experts say. It’s the bust that has some wondering, and hoping, about whether Paul’s death might boost prices.

The day Paul died, Chuck Levin’s Washington Music Center in Wheaton alerted regular customers that it had two 50th-anniversary Gibson Les Paul Goldtops for sale. Collectors snapped them up within hours. That same day, eBay saw a 28 percent uptick in the sale of Les Paul instruments.

Even so, some experts are skeptical.

“I was laughing about how people would ask that silly question,” said George Gruhn of Gruhn Guitars in Nashville, an expert vintage appraiser. “Les Paul is an obviously very important figure in the history of guitars, but his passing is not in my opinion going to change the near-term value of Les Paul guitars.”

Behind hefty prices on vintage guitars are a number of factors. Structural and cosmetic condition are important. Rarity and simple supply and demand are fundamental. Gibson, for example, manufactured only about 1,700 Les Paul Sunbursts from 1958 to 1960, adding limited supply to insatiable demand.

But perhaps most influential — what makes a guitar iconic — is the music that’s been made using it. When released, the 1959 Les Paul was a dud. Before long, such blues and rock ax-wielders as Clapton, Michael Bloomfield and Page were using Les Pauls to define an era of sound, in the process burning its sunburst finish into the minds of avid followers.

Gibson’s Les Paul — there are many, many models — is still an essential instrument in any recording studio, said Grammy Award-winning producer and guitarist Scott Shuman of Falls Church.

“If you’re a carpenter it’s like having a hammer in your toolbox,” Shuman said. “It’s just part of the sound of American music.”

By Jonathan Starkey, Washington Post Staff Writer, Sunday, August 23, 2009