Don't bet on Michael Jackson memorabilia

By Chuck Jaffe, MarketWatch

Michael Jackson had barely been pronounced dead on June 25 when the memorabilia market heated up. Copies of his best-selling album, "Thriller" -- worth about $10 that morning -- were fetching five to 15 times that much by nightfall.

A single Cheeto -- a cheese-flavored, finger-sized snack -- that purportedly resembled Jackson doing the moonwalk sold for $35.18 on eBay.

Prices for all things Jackson, from albums and tour posters to commemorative coins and more, popped and have shown few signs of coming back to earth. But they will come back to reality soon, most likely when Jackson's death stops producing hourly headlines.

For many fans of the King of Pop, buying Michael Jackson memorabilia is more about being a fan than an investor, but for anyone justifying a current purchase by assuming that today's trophy will hold its value tomorrow, that's where the trouble is.

Anyone thinking of Jackson memorabilia as an investment -- or with a spare copy of "Thriller" gathering dust in the basement -- may want to move it now because the market is never likely to be this good again.

Collecting is a terrific hobby, but not a great way to make money. While many collectors will point out that the value of their holdings didn't suffer the kind of losses the stock market did in 2008, there's little question that the value of any collection rises and falls with the fickle tastes of the public.

Moreover, one way that collectors of art and wine avoided some of the down market last year was to pull items from auction; a collection's value can drop precipitously if it has to be brought to market suddenly. "Dealer risk" is enormous, as an item is only worth what a dealer will pay for it.

"Anything with Michael Jackson's name on it is selling ridiculously right now; people have come in and bought up all of the Michael Jackson records I had," said Erik Hansen, owner of Stax of Wax Music and Collectibles in Provincetown, Mass. "The problem is that someone is paying a high price now, and when they lose their job in six months or a year and go to sell it, they're going to find out that most of this stuff is not rare and that dealers -- and probably everyone else -- won't pay any more than it was worth right before Michael Jackson died."

Here's where the logic of the Jackson fan who grabs up something hoping it will maintain its investment value makes the big mistake. Jackson is one of the top-selling musical artists of all time, with his biggest hits produced years before CDs were commonplace. Logically, his albums are less scarce, meaning that the supply/demand equation will eventually reflect the fact that so many records were produced.

Jerry Osborne of Port Townsend, Wash., an author and publisher of books on celebrity collectibles, noted that the people rushing to get Jackson items are targeting the wrong stuff, more interested in his best-selling recordings than the early days when Michael and his brothers were on small labels before being discovered by Motown.

"In our price guide, 'Thriller' was a $10 album before Thursday afternoon of last week, and then people started paying a lot more for it, up to $1,500 in one sale," Osborne said. "People are so overcome with emotion that they are willing to pay almost anything rather than thinking they should wait for the spike in prices to go away. . . . I would expect in times ahead, 'Thriller' will be a $10 album again, and the people who paid $150 -- or, worse, $1,500 -- won't live long enough to ever see their purchase as a good or wise investment."

Plenty of hucksters

The best parallel for the Jackson situation would be the death of Elvis Presley in August 1977, but Presley died in an era before eBay. Prior to Presley, there was no real collectors market for artistic greats who "died too young" (think Buddy Holly). Moreover, Presley had a cadre of collectors during his lifetime, where Jackson -- particularly after health and legal problems sullied his image -- only became a collector's icon last week.

Said Osborne: "Elvis had plenty of memorabilia collectors while he was alive, but there weren't that many Michael Jackson collectors before his death. There were Motown collectors, and a lot of these people jumped on the bandwagon to help drive prices up."

That said, Presley memorabilia spiked in the wake of his death, cooled down considerably, and has moved slightly up or down since. That's great for fans but not necessarily for individuals hoping their trophies would appreciate in value.

What's more, Jackson's death has brought out a host of new items for collectors, from T-shirts to commemorative coins and more. Consumer groups have warned about Jackson memorabilia scams.

Osborne notes that Presley's estate -- and plenty of hucksters -- produced all kinds of tokens in the wake of his death, but that true collectors only value items that were out when the King was alive. For the King of Pop, the same standards should apply.

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The Jackson market may be sustainable for as long as the man's death is in the news. But once the reporters have moved to the next headline, the big value in a Jackson collectible will be that you like the music or the image, rather than the price it will get on the market.

Said Hansen: "I can't predict how long it will be before this tapers off, because there are a lot of foolish people out there. But there's going to be some guy who got 10 or 20 Michael Jackson albums at their local Salvation Army, who sells them all on eBay for a big profit and who starts blogging about how everyone paid $20 or $50 for something they could have gotten at the local dump.

"That's when I figure people will come back to their senses," he added, "and realize that they should buy Michael Jackson stuff because they like his music, not because it has long-term value as an investment."