Before it was auctioned off on Saturday for $1.6 million, the violin that was said to have belonged to the bandleader on the Titanic was listed at about $300,000. The instrument, which is believed to be German and built around 1880, was a workaday model and likely an imitation of the 18th-century Italian violins that now can cost more than a large Manhattan apartment.
Yet, to some degree, the "Titanic Violin" sale mirrors the rapid inflation seen in the rare string instrument trade over the past decade.
On Monday, Tarisio auction house announced that the Guadagnini that belonged to the Juilliard violin teacher Dorothy DeLay was sold in a New York sale last week for $1.4 million, breaking the previous record for the Italian maker of $1.08 million (for the violin that belonged to Lorin Maazel).
The all-time violin record belongs to the "Lady Blunt" Stradivarius of 1721, which sold for a record $16 million in 2011. For some perspective, the "Lady Blunt" first publicly sold in 1971 for $115,000, which, today, would be about $664,000 in inflation-adjusted dollars. As the chart below illustrates, old fiddles have done well. (Story continues below.)
In a study published in August, Brandeis University economists Kathryn Graddy and Philip Margolis show how, in the period from 2007 to 2012, rare violins were seen as an excellent alternative investment. The instruments provided small positive returns of .8 percent annually, compared to negative returns for art and the S&P 500 stock index. Over the past century (see graph below) violins returned 3.3 percent annually, still more than either art or 10-year Treasury bonds. Rare instruments are especially valued as a stable investment in turbulent times (another study put the returns on Strads at 10.5 percent annually between 1980 and 2005).
But the violin market is a tough nut to crack. Graddy and Margolis estimate that auction sales make up only 10 to 20 percent of the market; the rest of sales occur directly from one musician or collector to another. While auction houses provide transparent pricing, dealers can make it easier for musicians to borrow and try out an instrument. There's another wrinkle: both auction houses and dealers charge big commissions that range from about 15 to 35 percent, which could wipe out any returns.
"Overall, investors should be extremely cautious in using old Italian violins purely as an investment strategy," write the authors. "Because most dividends from owning a violin are non-monetary in nature, investors should expect lower financial returns than from monetary assets with equivalent risk profiles."
There is also a larger and more contentious question: are rare instruments so much better than modern ones? In a controversial study published last year in the Proceedings of the National Academy of Sciences, blindfolded experts were unable to pick two Stradivarius violins from modern instruments, based on their sound alone. "It's well known that listeners can't tell the difference between Strads and new violins," said Brooklyn luthier Sam Zygmuntowicz on WQXR's Conducting Business last year. "It's been done over and over and it's not even controversial at this point."
But cellist Stephen Isserlis took a more mystical view of the Strads and Guarneris. "These instruments have souls," he said. "The souls have been growing in the Strads. We don't know what the Stradivarius's sounded like two or three hundred years ago. But I think the sound has grown and the souls have grown."
Below is Graddy and Margolis's data, adjusted for inflation.
Below: Yehudi Menuhin plays the "Lady Blunt" Stradivarius in 1971: