You may recall that I blogged about the auction of Marilyn Monroe’s dress from the 1955 film “The Seven Year Itch“. On Saturday the dress sold at the Debbie Reynolds Auction in Beverly Hills for a eye catching $4.6m which is a very good return on the $1.1m purchase price in 1999 and increase of $3.5m over 12 years. It may sound a lot, but when the numbers are crunched this actually represents an annualised return of 12.66% per annum. There were many other film buff pieces that were auctioned in possibly the largest film memorabilia auction ever, which included Charlie Chaplin’s bowler hat, the peasant outfit and guitar worn by Julie Andrews in “The Sound of Music” and many other pieces. There is a substantial online catalogue with over 300 pages.
Over the 12 years we have seen the dot com bubble, Enron, September 11th and the credit crunch to name just a few key stock market troubles. So all things considered it’s a very good annualised return. If this were a UK investment, there would be considerable capital gains tax to pay at 28% reducing the gain by nearly $1m ($980,000). Then there would be the purchase and sale costs, along with insurance and storage over the last 12 years, which would be reasonably significant for an item worth over $1m. Leaving aside these other costs, the 12.66%pa return is reduced to 10.44% pa net of tax. Still not bad, but the tax impact is significant and only looks like 2.22% pa but is actually nearly $1m.