Stephan Shipe Welcome back to the Scholar Wealth Podcast. This week we start with a listener who was asked to serve as executor of a close friend's estate and is having second thoughts. Then we look at Andreessen Horowitz's new $1.1 billion machine age fund and what it says about where AI exposure actually lives in a portfolio. Then in our From the Field segment, we're joined by Sophia du Brul, personal property appraiser and founder of Sophia's Estate Sales, to talk about the luxury handbag market and what makes a bag hold its value. So let's go ahead and get started with question number one. A close friend recently asked me to be the executor of her estate. Her husband passed a few years ago. I said yes because I value the friendship. But she's worth about fifteen million, has three properties, a business, and two adult kids who don't speak to each other. I'm second-guessing this. What am I actually signing up for? And is there a graceful way to step back if I decide it's too much? So you signed up for quite a lot, and probably a messier 15 million than others. If it was $15 million all sitting in an account, that might be a little bit easier — maybe a house or two. That wouldn't be too bad to separate everything. There are some areas that are pretty big red flags sitting here, saying that you're probably going to be jumping into a messy situation. So what you're jumping into is probably a year or two of time commitment, trying to go through the estate, dividing things out. But the one area that I think is probably going to end up causing the most amount of struggle in this situation is going to be the valuation of the multiple properties and the business. Because what's going to end up happening is now you're going to be tasked with coming up with a value for these assets and then dividing them up according to the will. That makes me nervous for you, especially when we're dealing with illiquid assets, and especially a business. Because now you're going to be in the middle of trying to say what a business is worth, bringing in appraisers, dealing with the kids who don't sound like they're ever going to be jumping into a room together to talk to you about what makes sense. So now you're the middle person between these two siblings, talking about assets that don't actually have any tangible value. And then you being in the middle of not only the drama, but the valuation issues that associate with it, at a time that's probably going to be very difficult for the kids. That's not an ideal situation for you whatsoever, especially because the executor role is a fiduciary role. You have a responsibility there to take that more seriously than just saying, sure, I'll sign some papers and I'll take care of it for you. You actually have legal liability with the executor role. So putting legal liability on what sounds like a fairly complex estate for a year or two of a time period — that is worth second-guessing. So the fact that you're second-guessing that and starting to wonder whether or not that makes sense, makes perfect sense. Trying to get out of this is a lot easier now than it is after. So if you were to go through this and you're already the executor and then you tried to go back, now you need court approval for that. It's going to be a huge mess, where now the family and the kids are even more upset at you, because now you're trying to get out of the job that you're in. That's going to be a disaster. So I think, as difficult as the conversation seemingly would be today, it's a lot easier to have that now than later. But I think there's a good middle ground. The middle ground on this is, it is very common in these types of situations to have a co-executor. And you should go get that co-executor to be a trust company or a bank — someone who can come in and also holds that fiduciary duty, who's going to be able to navigate a lot of the more complex things, and you're going to deal more with the family relationship aspect. Maybe that's not something you want to do. Some would argue that's the more difficult component. But you're likely going to be there to make sure everyone's calm about it, and to be now a little bit more of a middle person between the bank or trust company and the kids. But at least you can kind of push some of that over to them and say, there is somebody in the room who knows what they're talking about, who's been doing this with trusts before and can handle this type of estate and those questions that the kids will inevitably have that you're probably not going to have the answers to. So if you're wanting to go through with it, I think you need to have a conversation with your friend. Tell her how appreciative you are of this type of situation, and that the trust she has in you is wonderful. You absolutely want to help as much as you can. You don't think that executor is the best way for you to help, but you need to understand from her perspective that the reason why she's asking you to do this is because she probably doesn't want some random trust company or bank making the decisions for her assets and the future livelihood of her children. And that's why you're being asked. So by offering the opportunity to be a co-executor, I think that would be a good middle ground for you to say, as a friend, I'm willing to commit, I value the friendship, and I understand that there's going to be a need for someone personally involved in such a messy time and such a messy asset mix. But you don't want to do that alone. So you're going to want somebody to be your co-executor, to have those conversations, who'd be in your corner with it, who's gone through this before. I think that's a good way. And frankly, I think from her perspective, that's a great conversation to hear. That she's going to be able to know that you're taking it seriously, you thought about it, you know where your strengths are and where your weaknesses are, and you're not just saying, no, I can't do it. It's, I can do it under these types of circumstances, or with these conditions on top of it. And I imagine she'll say yes. And that's going to put her a little bit at ease, knowing that it's not just going to be left to the courts or left to an executor. So now for our second question. Andreessen Horowitz just announced a $1.1 billion machine age fund to invest in the physical build-out of AI. So this would be chips, data centers, power, cooling, robotics. Their argument is that everyone's focused on the software layer, but the real bottleneck is the hardware and infrastructure underneath. For an investor with a typical tech-heavy allocation, are they actually exposed to the shift, or just to the software layer that could be commoditized as this build-out happens? So I think there are two things going on here that we want to be careful of. The software exposure, understandably — there's a lot of risk around that, because it could be overplayed. It's a little bit easier to start up. There aren't as many barriers to entry associated with that. So it's understandable to be worried about the valuations of software, especially when competition's really hot right there in that area. And then it also is nice to say, well, I don't want to play in the world where there's a lot of competition with software. I want to go into hardware, and I want to own the actual ground that the data center's on. I want to own the actual physical products and the companies that are building them. That's appealing, right? Because it starts to add this certainty to an uncertain world. Whenever everyone gets worried about valuations, we immediately go to, what is the minimum value that something could be sold for? And the problem for software has always been that there are no assets, right? It's something that's being purchased. So now we're starting to see a little bit of uncertainty of, if I'm worried about the software valuations and the use of AI, I could go buy the data center or buy the cooling companies that focus on the data centers. And that's going to be a better move for me, because I have something tangible. I think that provides a little bit of an illusion there, because just because something's tangible doesn't mean there's not winners or losers associated with it. So while this is a good sign that there's some breadth, I don't think that if you're in a tech-heavy portfolio — let's call it an index fund, or even, shoot, right now the S&P 500 is essentially a tech fund. So you go into the S&P 500, if you look at some of the big holdings, you already have the NVIDIAs, the Broadcoms, the Seagates, the Eatons, right? All of those are all mixed in, and they're all infrastructure plays on an AI world. They're providing the cooling, they're providing the storage. You have Dell out there providing the servers. You have chips being manufactured. You have NVIDIA coming in. So there are a lot of different plays that are already happening on the public markets, that I don't think I could say — if you have a diversified tech portfolio — that you're not exposed to the same things that Andreessen Horowitz is starting to get into. I think what they would likely be getting into is more of the risk associated with smaller companies, and as they do, more private money going into private capital, of smaller winners and losers associated with the actual build-out. So who's building the data centers, who's actually installing the cooling systems? What are they putting into play? And buying those. But again, that's not to say that that's not full of risk. So we still have those same issues. But more directly to your question — are you exposed to that shift? Yes. And that's one of the beautiful things about a market-weighted portfolio, especially with an index fund like the S&P. As I just said, the S&P is essentially a tech fund now. The reason for that is because, being market-weighted, as stocks become larger, they become a higher share of the index. So that's why NVIDIA is like 8% of the S&P 500. It's become larger because of AI. So now it's a larger portion of the index. You see the same thing with the Broadcoms and the AMDs and the Intels. They're all becoming larger components of the index. So if this was a big push, and software is outplayed and we're going to see some valuation issues there, and now you see a big push on physical capacity, we would expect those companies within the S&P 500, or within the overall market if you're in something like a VTI or total market index, to become a larger portion of your portfolio as they become a bigger part of this whole rollout. If that's truly where the bottleneck is, and that's where the profits are going to be, then those profits would lend themselves to higher returns and larger stock prices, leading to a larger market cap, which puts them as a larger market weight in an index. And it'll naturally rebalance to you holding whatever is the newest, latest, and greatest thing. So with any VC funding or private equity funding, that's a great signal for where things are going, and maybe gives some credibility to the whole move in general as being something that's going to be more sustainable, because people are willing to put money into infrastructure, which is not easy to get rid of afterwards. So maybe a silver lining there on it. But I do think if you're in a tech-heavy portfolio, you already have a pretty good investment in a lot of these physical capacity concerns that the country is dealing with right now when it comes to this AI rollout. Stephan Shipe All right, next in From the Field, I'm joined by Sophia du Brul, founder of Sophia's Estate Sales and personal property appraiser, to talk about the luxury handbag market and what makes a bag hold its value. Stephan Shipe Sophia, welcome to the Scholar Wealth Podcast. To start off, share a little bit about your background and how you got into this world. Sophia du Brul I have an estate sale company, and I'm an independent personal property appraiser affiliated with the International Society of Appraisers. I started my company in 2015, so I've been doing this for 11 years. And I got into it by accident after getting really tired of teaching, and kind of fell into this, but I love it. Stephan Shipe I'm really excited to jump into this, very much looking forward to this conversation. I find it fascinating whenever there are these kind of mini-markets of assets where there's all of this unknown information, of one little thing changes values this way and another changes. It reminds me a lot of the car markets and watch markets and everything else. Sophia du Brul Yeah, and those are all rising niche markets. Watches are very hot right now. Handbags are really hot right now. And actually, a couple of years ago when I was at the ISA conference in Houston, we were talking about how we need to change our approach to handbags, because we now sometimes, depending on the collection, look at an income value as well as a replacement value. Because the luxury handbag world is a changing market, and it's a rising market, and people are looking at these bags as investment pieces, which is relatively new. Stephan Shipe And it surprises me, but I was doing some background research, and there are a lot of comparisons of the handbag market to returns of traditional financial markets, which are very different. But what would worry me is how you build out a portfolio of these bags without having the risk of buying one bag and then putting literally all your eggs in one basket, and then it not working out. Take us back a little bit to maybe what's changed over the past few years to create this niche area of handbags being an investment. Because I don't remember that always being the case. And now it's all the rage right now, to buy the bags. You can't get the bags, the values are going through the roof. I mean, we're talking about hundreds of thousands of dollars for bags. So what has changed over the past ten, twenty years that this is starting to shift? Sophia du Brul Bags really have become, I think, a very public status symbol. And that's a lot of why people desire them. There also honestly is manufactured scarcity in a lot of these bags. Hermès is a great example, because you have to get on waiting lists to get Hermès bags. And people talk about how you have to go to the Hermès store and buy scarves and little keychains and things like that to even get yourself on the list. But they still only manufacture their bags in Paris. And each bag is handmade by one person at a single bench from start to finish. And they haven't expanded the size of their atelier. They have a certain number of benches, and however many bags they get through in a year, that's it. Stephan Shipe So the scarcity aspect of this always gets me, because we see this in different markets as well. But Hermès seems to have really figured this out, to where it is almost extreme manufactured scarcity, because you combine the manufacturing scarcity with the actual scarcity of the bags. So the bag quota that I hear about is real, for the wait list. Do you have an idea what we're talking about here? There's some price — for somebody who's listening who doesn't know the price of a bag, if I wanted to go get a Birkin bag, what am I looking at cost-wise? Sophia du Brul Honestly, because I've never wanted to get on the list, I've never actually really looked into this deeply. But I know that a Birkin is going to start, a brand new one, they start around fifteen thousand. And then it depends on what they're made out of. I mean, there are brand new ones that can be a hundred thousand dollars, and that's because they're made of crocodile and things like that. So it depends on the finishes on the bag and the types of leather. And I will say about Hermès, they just haven't changed how they do things. So there's much more demand for Hermès bags now than there used to be, but Hermès hasn't increased their manufacturing, because every bag is going to be handmade by one person. And so that's why, actually, Hermès bags don't have serial numbers. They have a bench code, which tells you who made that bag. If something happens to that bag, like the handle rips off, you send it back to Hermès. If that person who made that bag is still working there, it's going to go back to that bench. And that person is going to repair it, the person who made your bag. So they just haven't changed their manufacturing. Now, other luxury brands like Gucci — they actually pulled back a lot of their manufacturing. Gucci used to have much more manufacturing, and they purposely decreased their manufacturing to create scarcity, because they felt their brand was being cheapened. Stephan Shipe And how would you rank, then — give me the top five in your mind of bags that, if someone's out there looking — we'll go new first, and then we'll start talking about some of the secondary market and vintage. But where do you see it right now on a ranking scale of ones that, if someone's looking for something new, that you think has the actual quality to match the value retention, as opposed to something that's just name? Sophia du Brul I would say Hermès. Their stuff is absolutely beautifully made. The quality is there. It's really incredible. It's all hand-done. I would also say maybe Goyard. The reason why I'm sort of like, maybe Goyard, is because I know their manufacturing is very similar to Hermès, but Goyard is faked so much, especially the tote bag that you see everywhere. I've run into so many Goyard totes at estate sales, and I've yet to see a real one. So that's why I'm saying maybe a Goyard, but because I feel like they're counterfeited a lot. Chanel, Louis Vuitton, Gucci, Valentino — I don't know, Prada is a little trendy. I would stick to classics. Stephan Shipe Okay. That's what I was about to ask. What holds the value? Sophia du Brul Like a Kelly bag or a Birkin bag, or the Chanel — you know, the classic Chanel quilted shoulder bag. A Louis Vuitton bucket bag. They're really classic, classic styles that they don't change. Those, I think, I see are the bags that maintain their value the best. If you get a really — you know, Tom Ford for a while was designing for Gucci, and he did these really crazy bags. I don't know if those hold up in value or not. Stephan Shipe Yeah, that's where the differences in bags — the special — I feel like that's the risk of the special edition, or things that get away from the core brand. They're either going to really hold up as being a special edition that people look back to and say that they were limited, or you hit the trend aspect of it and it goes away. Sophia du Brul Yeah. And even within the same manufacturer, like Judith Leiber, who makes incredibly beautiful bags — but the little rhinestone bags, the ones that are like in the shapes of animals and cupcakes and things like that, those in the new and in the secondary market, those hold their value. The more classic, like leather and snakeskin bags, the value on those has just collapsed. Stephan Shipe Do you see that being common, though, across all of the brands, where you start to get these more exotic bags, they just don't hold up as well? I look at the corollary to something like the watch market, where if you have a precious metal watch, the values of those don't hold up as well, or they have a little bit more volatility. In the car market, you have certain vehicles that they may be the higher end or more expensive, but their values drop a lot more, as opposed to something that's run-of-the-mill. Is that the same with handbags, or is it completely different? Like, no, if a bag costs a hundred fifty thousand dollars from Hermès when it's bought new, it's still going to maintain its value the same way that a fifty thousand dollar Hermès bag would? Sophia du Brul I think it's about classic style. So a Birkin bag, the design hasn't changed since the Birkin bag was introduced. It's like that classic Chanel bouclé suit. It's always in fashion. You're always going to look incredibly chic in that suit. As opposed to — some crazy Louis Vuitton at one point had these really ugly bags that had these neon leather accents and stuff like that. And I frankly think they're hideous. And you know, if ugly neon colors are not in fashion, the value of the bag's going to go down. A lot of ways, it's the same as the art market. It's the same as the antique market. If it's in fashion — the value of, like, mid-century modern furniture for a while was really, really hot, and the value went way up. That trend is starting to level off, and the value of mid-century modern furniture is coming down. And right now in the vintage clothing market, the 80s is really hot. So those jackets with the big shoulder pads and everything, and 80s handbags and stuff — I mean, sort of all of it's going up in value. I'm sure in five years the value's going to come down, because the 80s trend is going to be gone. Stephan Shipe Do you see that changing generationally too? I know we see that in cars, where people want to own the — it's the poster car. It's like, you want the car that you saw at sixteen, right? The Sophia du Brul Parts of their childhood. Yeah. Seventies muscle cars, right? Seventies muscle cars are hot right now. And I think that's a lot because I was born in 1968, so the seventies muscle cars, those are the cars of my childhood. Stephan Shipe Yeah, absolutely. That's what you think of as kind of the peak, right? Does that carry over? Do you see the same with handbags and fashion, or is it really different, because it kind of relies upon today's trends a little bit more? Sophia du Brul It does rely on today's trends, but I think, like the car market, there are certain classic cars that are always going to have a high value. And it's the same with those really classic, iconic bags. Stephan Shipe Yeah. We have those bags, and those are the classics. Then you walk into an estate sale and you're brought in to either authenticate or to see it. And you mentioned there are bags that you've never even seen the real version of, because there are counterfeit so many. How do you start going through these? Not to give the guide to counterfeiting, but how do you handle walking in there and saying that you can look at a bag — what are the first few things you're looking at, saying, this is a fake immediately? Sophia du Brul I always go, actually, for the inside of the bag first. So I always open up — I'll give a quick look on the outside, but then where I really start diving into a bag is on the inside. Because if a counterfeiter is going to cut corners, they're going to cut corners on the small details. I think that they're hoping that people are not going to notice, or not know what to look for. So I go and I start looking at the interior hardware, how the interior pockets are lined, the imprinting on the interior of the bag. So how is, like, Louis Vuitton, made in Paris — like, how does that label look? It has a very specific font, and the kerning on the font is also very specific. And the way "Made in France" is written is very specific. Like the Goyard totes that I mentioned that I see — I've never seen a real one, I've only seen fakes. They have a little attached wallet. The first thing I do is I go open up that wallet, because there's a way that the inside snap is supposed to be done. And the counterfeiters never get it right. So I immediately pull out the inside wallet and open it up, check what the female part of the snap looks like, and go, yeah, you're a fake. Stephan Shipe What's the best fake you found? And what was the final linchpin there that says, yes, this is a fake? Sophia du Brul Fakes are getting a lot better, actually. It's getting sometimes harder and harder. There was a fake Valentino stud bag that I had recently at an estate sale where everything was right. I mean, everything was right. And then it came down to — even the serial number was written in the way that Valentino does their serial numbers. It was the material of the serial number tag. But the studs were properly done. One of the things on the Valentino Rockstud bags is, because they're quilted, but then they have these little pyramid-like brass studs, or gold-tone studs — it should just be three long stitches between each stud, and each stud should be perfectly aligned. So the outside was matching perfectly. And then they even had the right kind of hardware on the inside. It was the serial number tag. Stephan Shipe How do you get that level of knowledge? There are so many different bags, right? And you have all of these that are brought to you, and then you have to look at — do you have to inspect? Is it more of a knowledge aspect, or are you inspecting real bags along with potential fakes, so that way you're looking for these differences? Or is there a manual somewhere that you're looking at and checking boxes as you go down, like an inspection? Sophia du Brul There are a lot of bag collectors on YouTube who love to talk about their collections. And they will go over their bags and what you're supposed to be looking for. Because also, every bag is different. You take a bag designer like Louis Vuitton — how many, they've got tons of different purses. So every bag is a little different. There are certain things about a Chanel bag or a Louis Vuitton bag where there are consistencies across the brand that you look for, but each bag is different. So Louis Vuitton is actually a good example, because the LV canvas that they use on a lot of their bags, it'll be one sheet, or one piece of canvas, that goes from the front of the bag up to the back of the bag. So there'll be no seam on the bottom of the bag. And when you flip the bag to the back, the LVs will be upside down. But there are certain duffel bags where that is not the case, where they actually do have a piece of leather, like a center-seam leather at the bottom of the bag, and then the LV is upright on both sides. So there are a couple. But when I run into a bag, there is always a YouTube video of someone who has that bag, who's talking about it and all the different aspects of it. And then, actually, The RealReal and a couple of the authenticating services, they have videos where they do side-by-sides of, here's a real Chanel, here's a fake Chanel, and what are the differences. Stephan Shipe At what point does somebody need to bring in an appraiser? Because the secondary market for bags is getting massive, and you're starting to see services where you pay for authentication. And is there a limit that you set in your mind, or is it really just the type of bag being counterfeit? I guess provenance and everything — does that come into play? That seems like the easiest thing to counterfeit in my mind. That always blows my mind. It's like, well, I have the papers. Of anything, that should be easier to counterfeit than the actual bag, to make it seem more authentic. Sophia du Brul Okay, so we're getting into provenance. Actually, some new bags now have chips inside them. And this is relatively new. So I know that Gucci and Valentino are using chips now. I don't know if other manufacturers are, or other designers are. So you can scan the bag with your phone, and then it brings up a certificate and stuff. I'm sure the counterfeiters are going to figure out how to fake that and bring you to a fake certificate. But so, new bags have chips in them. And yeah, I mean, if you're going to be a serious collector, of course, keep all your paperwork. And I would say if people are buying new bags, go directly to the boutique. Go to the Gucci store, go to the Hermès store. Or go to a licensed counter at a high-end department store, like at Neiman Marcus. Stores like Neiman Marcus have licensed counters from Chanel and Gucci and Hermès. Buy directly from the licensed counter, and keep all that paperwork. And a lot of bags also, they do come with their own paperwork. You keep all that paperwork. Obviously you should photograph it, plus keep it electronically, keep it in a file. So yes, I do work off provenance to see where the bag was purchased. And also, that means keeping the original dust covers. Because a lot of times, if people have dust covers, that sometimes is a good way to spot a fake. Because the dust covers are not of the same quality as the real ones. Because a lot of times when you go to Canal Street and you buy those fake bags, they're going to give you a fake dust cover too. Stephan Shipe And if you had the choice, then, give me three bags — ten thousand, twenty-five thousand, and fifty thousand. I come to you and say, Sophia, I'm trying to build a portfolio of bags, and I need you to help me procure this portfolio. What would you advise me to buy at ten thousand, twenty-five thousand, fifty thousand dollars? I need some good returns on these bags. I at least need them to maintain value. What are you buying for me? Sophia du Brul I would say a good vintage Chanel quilted, the iconic Chanel. Stephan Shipe And that's the ten thousand dollar level? We got the ten. All right. What about our twenty-five? Sophia du Brul A Louis Vuitton trunk, an antique one. One of the real trunks, the real old shipping trunks, you know, that people used to cross the Atlantic with. Those are great, actually. And people really love those. I know it's not a handbag you can carry around. Stephan Shipe Yeah, that's awesome. No, no, but that fits, it's allowed in the portfolio. Sophia du Brul Or like a stack of Louis Vuitton luggage. And part of why I like those — people will also then, you can use them as tables. Like, I've seen the trunks being used as coffee tables, or you do a stack of the Louis Vuitton luggage and use it as an end table. So there's a great decor potential with Louis Vuitton luggage. And then at 50, you're looking at a Birkin or a Kelly bag. Stephan Shipe Any specific vintage, or just one to add to the collection? Sophia du Brul One to add to the collection. It could be vintage, or it could be a new one. Just as long as it's not an ugly one. Stephan Shipe Yeah. And what about what it's made out of? Just as classic as we could get? Is that what we'd be looking at? Sophia du Brul I think so. I know that if you're buying them new, like the crocodile's the most expensive, and there are some rare colors and stuff. But I think the classic leather and a good color. Stephan Shipe So now we have the portfolio built, and let's say it's 10 years down the road and I need to sell them. What are you advising me then? How do I start selling some of this? If I have a Louis Vuitton trunk, how am I getting rid of it? Am I going to Christie's, Sotheby's? Are you helping place that personally with somebody? Walk us through that. Sophia du Brul Yeah, usually auction is probably the best route. And all the big auction houses now — Bonhams, Christie's, Sotheby's, Heritage — they all have luxury sales a couple of times a year where all they're selling is handbags and vintage clothing and rare Hermès scarves. Stephan Shipe And value-wise, are you still seeing those go up? Sophia du Brul They're still going up. Stephan Shipe In all categories? Or are there certain categories — besides the collector aspect we were talking about, with the one-offs or the neon accents and everything — just in general, market's healthy? Sophia du Brul Yeah, market's healthy. And the other one, which — okay, I'm going to tell you, I know very little about, but the luxury sneaker market has taken off. I'm just starting to learn about it. Stephan Shipe Yeah, we have not had anyone on to talk about those. That's probably going to be a new one, because I'm hearing more and more about that as well, of that showing up as collections. So we go through the auction house. What is the typical commission on an auction? I know some of that's negotiated, but just roughly, what should somebody earmark for? Sophia du Brul Usually twenty-five to thirty percent. Stephan Shipe Wow. And that's on just the seller, or is that a combined seller and buyer? Sophia du Brul Well, that's just on the seller. Stephan Shipe And what about the buyer? If I go and I buy this trunk — Sophia du Brul Twenty to twenty-five percent. Stephan Shipe That's crazy. That's fifty percent. Sophia du Brul That is what auction houses charge. Yeah. Stephan Shipe Unbelievable. You're hurting my return now. I thought everything was going well. Now I'm going to have to hold for a really long time in this portfolio to make up that fifty percent. At that amount, does that give more credibility to going and trying to sell these individually somewhere? Or is it really at that level of price — once you start passing that twenty-five to fifty thousand dollar mark, you're going to have to go to an auction house? Sophia du Brul I mean, you could go to a private collector. There are also advisors who have clients who are looking for these bags, and I know those people too. So if someone brings me in, I do have some vintage clothing dealers who work with some very high-end clients who are looking for rare and special pieces. So I will call them and say, it's like, I have X bag, and I think the asking on it's going to be ten thousand dollars, and they will check with their people. But I take a commission too. So we're doing that. The commissions are high. Stephan Shipe That eats into the return for sure. Sophia du Brul It does. I mean, yeah. The auction house, though, is assuming all the risk. So this isn't like eBay, where if your buyer flakes on you or your buyer tries to retreat, you're out. If Christie's sells your bag for $100,000 and then the buyer later flakes out, you're still getting your check. So they're assuming all the risk. Stephan Shipe How often are you seeing these bags change hands? Or is it more common for them to just be passed down? Because that fifty percent number is still sticking with me, in the sense that if I have a bag that's worth ten, twenty thousand dollars, I know the cost for me to — Sophia du Brul Well, okay, you're not paying fifty percent. Stephan Shipe True, true, true. I'm paying the thirty percent, or twenty. Sophia du Brul And also, it is sometimes negotiable. It depends on the value of the individual items, or if it's an entire estate. If you're bringing in a whole huge collection of items, some of those commissions are negotiable. Also, you have to remember, there are authentication costs too. Because — and this is actually a relatively new law from California — if you want to sell something to a California buyer, and it could be a Rolex watch, it could be a handbag, it could be a signed baseball card, whatever it is, it needs to be authenticated by a third-party authenticator. Stephan Shipe What are the qualifications on this third-party authenticator? In other words, is that a protected term, or can anyone authenticate? Sophia du Brul There are companies that specialize in doing, like, all they do are coins. There are the companies that all they do are comic books and collectibles, and there are companies that specialize in doing handbags, watches, whatever. But you need that third-party authentication, which means the auction house has to send the piece out and get it authenticated. A lot of times, auction houses authenticated in-house, and they can't anymore because of this California law. It means if you don't do this, you can't sell to a buyer in California. That's a big market. Stephan Shipe Is that only for auction houses, or is that a private party transaction issue as well? Sophia du Brul Private party, no. But like, even eBay — if you're selling something on eBay, if you want to have California be part of the market, you need to have authentications done. And if you don't, there's no protection for you as the seller. Stephan Shipe Leave it to California. They always come up with the most interesting regulations. Sophia du Brul This is getting off topic, but it's actually very annoying — Stephan Shipe Yeah, I can imagine. Sophia du Brul I was recently helping a client whose family, they were agents, but they also ran fan clubs. Like, you know, you're a movie star, they would manage your fan club. And so of course, tons of original memorabilia from this company that managed fan clubs. And now the family wants to sell off this collection. It all had to be sent out to be authenticated. And there were a lot of pieces in this collection. I mean, the authentication bill was over ten thousand dollars for this collection. And the thing is, like, how much more tight can a provenance get than, my dad ran the fan club? Stephan Shipe Unbelievable. Well, I'm looking at my list of questions, and we've gone through — you've built out my portfolio successfully. I think we've been able to sell the portfolio with all the red tape associated with it. As we wrap up, give me the final thoughts. If someone's out there and looking to procure a handbag, or they're finding one that's maybe handed down from family members — what are the first steps there? Should they try the authentication themselves? Do they need to bring somebody in? Does it really depend on what the goal is? What are those tips you would send out to somebody? Sophia du Brul Well, most of the time when I run into really good bags, a lot of times I'm coming in as an appraiser. And people have a good collection of Hermès bags and stuff in their house. They also have a lot of other valuable things, and they're usually high net worth individuals, which means, actually, they have to have a full inventory appraisal done anyway for estate tax purposes. So that's usually where I'm coming in. And the value — and also, as appraisers, there are a lot of values that we use. And if I'm doing an estate tax appraisal, it's fair market value as defined by the IRS. That's the value I'm using, which may not be the resale value, but this is what the IRS wants. So that's what I'm going to use. And that's usually when I run into these bags. And so usually your first step with these estates, it is bringing in an appraiser, because the IRS says you have to. Stephan Shipe What is that difference on the fair market value as defined by the IRS, versus what somebody could actually sell it for? Sophia du Brul I don't have it right in front of me, but basically the IRS fair market value is, it's an open-arm transaction. Neither party has any particular compulsion to buy or sell, and both parties have equal knowledge. So it's a totally fair, open-arm transaction. Now, where I find values for that — I'm supposed to try and use as much publicly available values. So that would mean going and looking at comparables, like items that sold at auction. I will say, for bags, The RealReal is a great tool, because they actually have their sold values online. I can go and look and see what have they been selling a particular bag for in the past six months. So I'm supposed to look at actual sold prices. Occasionally I will use private ones that dealers give me permission to use, if I don't have enough public comparables. Although that's never an issue with handbags, frankly. So many of them, there's so many of them trading at all times. And because with an estate, the clock stops — at date of death. So it doesn't matter if today this particular handbag sold for $50,000. On the date of death, it sold for $20,000. That's the date, that is then the value I go with. It's on the date of death. The estate becomes like frozen in amber, and that's the effective date in the appraisal. Same thing with divorces. Actually, these come up in divorces too. Equitable distribution of marital property. Although frankly, I try and keep these items out. Because usually, if the husband gave his wife an Hermès bag, she at one point gave him a Rolex. And it's like, really? How about we just exclude these items? You gave each other nice presents. Okay, let's leave it at that. Stephan Shipe Keep it simple. Keep it simple. Sophia du Brul Mm-hmm. Stephan Shipe Well, perfect. Thank you so much for taking us through this world. As I said, it was fascinating to find these areas that have their own markets and all these nuances associated with it. So I appreciate you jumping into all of that today, and helping to educate us a little bit more. Sophia du Brul Well, I guess I have one sort of final thing to say, because it's — Stephan Shipe Of course. Sophia du Brul And this is the advice I would give, and like, anyone who's collecting anything — if you're collecting art, cars, watches, furniture, Star Wars action figures, I don't care what it is — buying something because you think it's going to be a good investment is frankly a bad idea. Because you buy an expensive painting hoping it'll go up in value, you are locking in all that capital, and it's just sitting there, and it's not earning any returns. And I suppose you could say you're doing the same thing when you buy a house, except you get to live in your house, and you use your house. Stephan Shipe Yeah, there's some utility there. Sophia du Brul Right, and there's utility there. You need a roof over your head. So my feeling is, don't buy a painting if you don't love it. Buy it because you're going to hang it on your wall, and if it goes up in value, fabulous. But enjoy looking at it every day. And my feeling about a lot of these designer bags and stuff is, use them. Buy it because you love it, and then carry it. Stephan Shipe Go Louis Vuitton trunk on the plane. Coffee — I like the coffee table idea. I think that's a neat way to go. I like a nice glass top. Sophia du Brul Or use it as a coffee table. They make fabulous coffee tables. Yeah, put a glass top on, and then the stacks of suitcases and tables is very chic. Stephan Shipe I like it. I like it. That might be the best tip there is, right there. So perfect. Thank you so much, Sophia, for coming on today. I enjoyed it. Sophia du Brul You're very welcome. Stephan Shipe That's our show. Thanks for listening, and we'll see you next week.