George Gruhn: Nashville Flood, Guitar Speculators and Wily E. Coyote

Originally published July 3, 201o, Guitar International’s classic interview with vintage guitar guru, George Gruhn. Some original images may no longer render., due to software updates.

By: Joerg Kliewe

(L to R) George Gruhn with Johnny A. – Photo by Rick Landers (c) 2009

Guitar International followed up our earlier interview with vintage guitar expert, George Gruhn, in Nashville shortly after the economy folded and within a few weeks of the Nashville flood. Luckily George’s shop was saved from the disaster, but other businesses and homes in Tennessee took catastrophic hits.

Since the economy took a downturn only a few years ago, guitarists have wondered if their rare or collectible instruments were heavily impacted by the debacle. We asked George about the world of guitars “as investments.”

About his perspective as one who has experienced the explosive increase in pricing of vintage gear, as well as the more recent kinds of pricing such instruments can command in the open market.

Of course, like all musicians, our eyes have been concentrating on Nashville to find out how much the spring 2010 flood hurt the area, especially since we know that our friends in New Orleans are still trying to rebuild after the wreckage of Hurricane Katrina. Joerg Kliewe is a freelance writer from Germany, who has covered many stories for us. Joerg’s a long-time guitarist, journalist and professional photographer.

Joerg most recently released Getting There, a photography book that primarily focuses on musicians, but also offers illuminating insights into his life as a world-travelling photo-journalist.

“Check Out Joerg Kliewe’s Book Getting There at Blurb.com”

Joerg landed in Nashville, Tennessee in May 2010 and dropped by George Gruhn’s shop for a quick chat with the man who’s considered the world’s leading expert on vintage guitars and other stringed instruments.

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Joerg Kliewe: Nashville has been through hard times due to the recent flood. How did that affect the music scene and did that affect your business in particular?

George Gruhn: My business wasn’t dramatically affected so far as any structural damage. I had zero damage, but it got close to us. It was a very serious flood. The Cumberland River, which is very close, it runs right alongside downtown, crested at almost fifty-two feet which is way beyond the flood stage.

This was the highest the water has been since 1937, and since that time there had been flood-control dams built, so ’37 was before the flood control dams and this was equal to that. It rained sixteen inches in thirty-six hours and the damage in Nashville was over two billion dollars. That’s not even counting damage to roads, bridges, government buildings etc. That’s just private damage.

Repair Department at Gruhn Guitars

The music industry was hit very hard for two reasons and in two locations, basically. A lot of private homes suffered damage but most musicians were able to rescue instruments from their private homes, most but not all. But, the Grand Ole Opry complex is in a low point, and even though there was a high dyke protecting it from the river, the river went over the top of the dyke and flooded the Grand Ole Opry House. It flooded the Roy Acuff instrument collection and instruments belonging to Opry members.

The Opry Museum was underwater. They got some out in time, but mostly they couldn’t and it was a great loss. The other area to receive big damage was on Cowan Street, right north of downtown, east of the river, right on the river. There’s a big storage and cartage facility called Soundcheck. An enormous number of musicians store all of their stuff there, all their stage gear, all their instruments.

Thousands of instruments were submerged. This is where people like Peter Frampton, the Lynyrd Skynyrd band, Keb Mo, Vince Gill, Brad Paisley and Keith Urban keep their gear. The list just goes on and on, Steve Earle and Dwayne Eddy, everyone.

The Musician’s Hall of Fame, which recently had to relocate because they were in the path of the new convention center, hadn’t settled with the city yet as they were disputing the matter, so their stuff was in temporary storage at Soundcheck as well.

Joerg: Wow.

George Gruhn: Soundcheck is in a place where, at least in my opinion, it should never have been put. This is at least the third time since I moved to Nashville that that neighborhood’s been underwater. It was flooded in ’75. It was flooded in ’84 and now it’s flooded again.

Check out Gruhn’s Guide To Vintage Guitars at Amazon.com

But, Soundcheck wasn’t there in ’84 or in ’75. It was a known flood plain area. To locate a facility like that in a flood plain, in my view, is a tragedy. It’s also an accident waiting to happen.

The point is, thousands upon thousands of instruments were submerged, and when a guitar is submerged in water for a few days, especially an acoustic guitar, it does pretty horrible things. Every single glue seam comes loose. The wood warps, twists and cracks. The finish peels off. The braces fall off. The binding falls off. The inlays fall out and it starts to mold. But the solid body guitars, in many cases, could be dried out, refinished and may still be useable, though they won’t be very collectible. They’ll never be the same, and the acoustics for the most part simply aren’t restorable at all. We view this as a great tragedy.

Joerg: I bet there are a lot of vintage instruments that are lost too.

George Gruhn: Yes, and to me it’s not just a monetary loss. I didn’t personally lose anything. My business didn’t lose any inventory and we had no damage to our building, but money will replace new and recently-issued used instruments. You know, companies like Martin, Gibson and Fender crank out enormous numbers of instruments every year. They’re replaceable.

But, when you lose an original vintage golden era instrument, it’s like if a Van Gogh or a Picasso painting is destroyed. The artist is dead. You can’t make another one. The individual owner has had a monetary loss, but that’s an instrument or a piece of art that, with proper care, might have lasted a millennium. It means that our society has lost a piece of its cultural heritage that can’t be replaced.

The Man Himself, George Gruhn

To me, I view these instruments as though they were alive. I feel that there has been a lot of death recently in Nashville. There are actually over twenty people in Nashville that drowned in this flood, but there were thousands of instruments that also drowned. I really view it as, it’s a great emotional blow to me and I didn’t even lose anything personally. We’re trying to set up a flood relief fund and I was at a meeting just this morning.

Other people had been talking about how we could maybe even take a few artist memorabilia pieces and auction them to raise funds for flood relief. But, it occurred to me a couple of days ago in a dream that Hendrix and Townshend smashed guitars have sometimes brought over $10,000 for a fragment at auction. We have thousands and thousands of fragments on top of celebrity-owned guitars by Frampton and Fogerty and Duane Eddy, country artists Vince and Keb Mo and you name it. They’re all there.

It’s not just Vince Gill. It’s virtually seventy-five percent of the musicians in Nashville, and many you don’t even associate with being in Nashville, like Frampton, Fogerty, Lynyrd Skynyrd, Keb Mo and Dwayne Eddy. Their stuff was there at Soundcheck, so not every one of them is somebody that people automatically associate with the Nashville sound. The big time Nashville musicians, they had their stuff there and a lot of these other guys did too.

Hundreds of musicians stored the bulk of their stuff right there and to have this concentration right in the flood plain is mind boggling to me. It’s tragic and I said I don’t think it was the right choice to put it there.

Joerg: What do you have in mind specifically? Holding a big auction and sell those vintage instruments as artifacts?

George Gruhn: It could be an auction or a raffle. It could be online or a telethon. There are numerous events we could do. There’s enough stuff to do more than one event and we’re working with the musician’s union and a group called MusiCares. We’ve just started this. Literally the idea of doing it on this scale came to me in a dream two days ago and yesterday I was on the phone with a lot of people getting the ball rolling.

Check Out MusiCares Video From Summer NAMM in Nashville

This morning we had a meeting and there were others who’ve been thinking along similar but smaller lines for the past week, but this week it’s coming together. We’re contacting insurance companies that are handling the claims because if they total an instrument, then the insurance company owns the stuff. We don’t want it to be dumped in a landfill even if the instruments are totally unrestorable fragments.

We want them because it’s celebrity stuff. It’s flood memorabilia. These are things that might be sold worldwide to raise money. This flood in Nashville is one of the greatest non-hurricane disasters that we’ve had in the U.S. in many years. The damage is not quite as much as hurricane Katrina, but it’s approaching it and it’s a smaller area that was hit. Katrina hit areas of Mississippi and Alabama, Louisiana, a somewhat broader area, but Nashville has been hit really, really hard and the monetary and cultural damage is great.

Click to Visit “Gruhn’s Guide to Vintage Guitar’s” at Amazon.com

As I said, even though I didn’t personally or corporately suffer any loss directly, my business has been down. The first two weeks of this month were very, very slow. Our phone, internet, UPS, FedEx and mail were all working. We were open, but the amount of business we did was down by at least seventy-five percent. We were doing maybe twenty-five percent of our normal business volume.

It’s picking up again now because today is the 20th and the flood was on the 2nd. For at least the first two weeks of the month our business was down at least seventy-five percent and it’s still not back to normal. Places like the Opryland Hotel will be closed for months, probably six months or so. I don’t really know of anybody who’s had much trouble going through customs just hand-carrying it, but so far as shipping things, that can be problematic.

Joerg: There is one more thing I wanted to ask you. When the financial crisis broke out, were you affected by it? Are you still affected? Did things change for people purchasing instruments, especially the more expensive ones?

George Gruhn: I think that the financial crisis is a rather multi-faceted thing. It’s not just one phenomenon. There was an exchange rate change, currency exchange rates. There’s just the general health of the economy, whether it’s in recession or whether it’s booming the stock market can be great and instruments may not be. They don’t necessarily have to go together. The musical instrument market to some extent has a life of its own. It’s not necessarily synchronized with the health of the economy.

It was pretty obvious to me that musical instrument prices, especially for electric guitars, went into a speculative bubble from mid-2002 through late ’06, early ’07. Some of the prices went up more than tenfold in that time. For example, a ’56 gold top Les Paul with a Tuneomatic bridge, stop tailpiece and P90 pickups, was about $7,500 in early to mid-’02 and by late ’06, early ’07 the same guitar was about $85,000. That’s more than a tenfold increase in less than four years. That is a rate of growth that isn’t sustainable. It’s like compound interest.

You can start figuring how long it would take a breeding pair of elephants to produce offspring that weigh more than the planet Earth, where the planet couldn’t support it. It’ll collapse before then. It was obvious that the instrument growth rate was out of control, unsustainable and couldn’t be maintained.

Rows of Guitars in Gruhn’s Store

I look at it by breaking down the market into three basic categories of buyers. Category one are musicians who want a working tool. There’s a limit to what they will pay. They’re not collectors. They just want something that works and sounds good. Category two is the collectors. Collectors have studied these things. They have scholarly knowledge of them. They have an organized and somewhat disciplined approach to collecting them. They want to have the complete evolution of the Les Paul or the D-28 or they may want to have every variation that was made in a certain year.

There’s a theme to the collection. They’re not simply accumulating quantity, like a session player may have twenty guitars because he has a use for them. He’s using them but he’s not a collector. Whereas a collector may specialize in just Les Paul Standards, the history and development of that particular model, or maybe Gibsons, showcasing every single thing Gibson made in the 1950s or something like that. There’s an organizational theme to it.

The utility musician is only organized in terms of he has things he needs, different sounds to use in the sessions or in his recordings. The third category is speculators. As a dealer, I can talk to potential buyers and I know in the first two minutes which category they are. I don’t have any trouble with a musician who wants a working tool or a true collector.

But, if you talk to somebody, you can also discover if they’re buying it to flip it for a profit in the near future. If they’re buying to flip it for a profit, they may tell you they’re a collector, but if they do, they’re a liar. Collectors aren’t buying to get rid of it. They’re buying by the very definition of a collector. He’s buying it because it fits a gap in his collection. If he sold it, the collection would have a gap.

It’s like if you’re collecting coins. You’ve got these books. You have all the slots you need to fill. When you fill up all the slots then you don’t start taking them out. As soon as you find the rare coin that you’ve been looking for ten years, you don’t immediately say, “Well, now I have it. Let me see how much I can get for it.” No, you’ve been looking for it and you bought it to keep.

Collectors will pay more than musicians, but these speculators will pay more than the collectors. When they do that, they force the collectors and musicians out of the market. You often hear complaints from musicians that they can’t buy things they like because the collectors outbid them. They say that’s a mean and nasty thing to do, which I don’t fully agree with.

More rows of amazing guitars

Things like D-45 pre-WWII Martins. They made only ninety-one of those guitars. They could be free on the corner in dispensers, but they’d be gone real quick because there are only ninety-one to go around. At least when they’re expensive the collectors will take good care of them. As well, the collectors will eventually die and somebody else can get them then.

Musicians and collectors don’t live near as long as the instruments do. But, the speculators, when they take over to the point where they bid the price beyond where even the collectors drop out, that means that there’s no end-users left. It’s not a solid foundation. I don’t know if it’s popular in Germany. It’s probably translated, those Road Runner cartoons, you know, every one of them has this cliff with about 1,000 meter drop.

Joerg: Yeah, yeah, yeah.

George Gruhn: And the Road Runner can skate on thin air beyond the edge of the cliff and Wile E. Coyote can chase him until the Road Runner turns around and goes “Beep Beep!” Then Wile E. turns around, looks down only then discovers he’s on air, not on ground, and he turns a sickly green and then he falls. Well, if you think about it, this is exactly what happens when speculators take over.

Speculators had taken over, especially the electric guitar market, more so than the acoustic market, and they drove prices up stupidly high. On some of the things where the prices went way up, like the example of the Gold Top Les Paul which went from $7,500 to $85,000 in three and a half years. It wasn’t sustainable. It wasn’t built on a solid foundation. The collectors had pretty well dropped out at $35,000, but the speculators went up to $85,000. The point is that that market was due for a correction.

When you combine the fact that it was already speculatively overblown into a big bubble, the collapse in the stock and bond markets and currency exchange rates all at the same time, you’re getting hit from every direction. So yes, it hurt, but on the other hand it’s been partially offset by the fact that the Euro, at least for awhile, was really strong.

Joerg: Yeah, it was. That was good for European buyers.

George Gruhn: It used to be in the’70s that a great deal of my business was split between western Europe and Japan, as well as the US. The Europeans and Japanese were buying about equal amounts of stuff. Then what happened is that the Japanese economy took off. Actually in the ’70s Europe and Japan were equal.

Beautiful Row of Les Paul Guitars

Then in the early ’80s the economy went into deep recession worldwide and the baby boomers sort of dropped out of the market, Generation X and Y didn’t care that much about guitars and the European economy was lousy. The Japanese economy wasn’t good either. The export business was way down. Then around 1985 the markets revived. The economy revived but the Japanese economy went into this big bubble and they bought heavily while the Europeans chose not to.

The European economy really didn’t come back strong in the mid-80s, not near as strong as the Japanese economy, so they didn’t buy a whole bunch of vintage guitars because the Japanese outbid everybody. A lot of the good instruments that were in Europe ended up being bought by Japanese buyers instead of coming back to the US or staying in Europe. A lot of that stuff went from Europe and the US to Japan.

Joerg: Wow.

George Gruhn: In the mid-80s through mid-90s it was like that.

Then the Japanese bubble economy got to where real estate prices in were so high that people were taking out hundred-year mortgages. They were transferable from one generation to the next. The valuations for land were so absurdly high there was no activity, legal or otherwise, you could do within a building that could possibly pay the mortgage. It was nuts. You couldn’t sell dope or prostitution in a building to generate enough money to pay the mortgage, they were so high.

The land that the Imperial Palace sits on in Tokyo for a while there was valued on paper at more than the entire value of the state of California. That’s crazy. It just made no sense. Anyway, it was like that Gold Top Les Paul that went to $85,000 and now they’re hard to sell for much over the mid to high $30s.

Even if you take a ’57, mid ’57 through mid ’58 Gold Top, patent applied for humbucking pickups, really, really clean ones as much as $175,000. I heard of a couple bringing $200,000. Right now it’s hard to get much over $65,000 for one of those. The guitar that was $150K is now less than half and this was a market bubble. Again, if you think about it, the people who are paying those crazy prices were speculators who didn’t buy them to keep them.

If you want the market to have any stability it has to be controlled by end users, meaning either musicians or collectors because a collector is an end user. He bought it to keep it. If you see that things are selling at a price where the only buyers are people who don’t intend to keep them, then it’s going to drive a bubble and eventually collapse. It’s like in the U.S. and I’m sure in Europe too, they had a real estate boom, went crazy, and then it collapsed. I use a little parable example.

Let’s say in Nashville a condo developer is gonna build a tower. He announces that he’s gonna do it and then they take deposits on units. Before they even dig a hole in the ground they’ve sold all the units. When the building is halfway erect, the people who put the deposits on have already sold their units at a profit to somebody else. They didn’t intend to move in. When the building is three-quarters erect, those people are busy selling.Some succeed in selling and some haven’t sold yet, but it still looks healthy because everybody’s excited. The fact that nobody’s moved in yet isn’t a problem because you couldn’t move in yet. It isn’t even built. Building cranes are there. The construction workers are there, so you can’t move in yet. But, if people don’t move in when it’s fully erect you’ve got a problem. If people do move in, it means they wanted to live there. That’s okay, but if nobody moves in, they’re all for sale and the prices collapse. The moral of the story, it’s kind of crude, when you get it fully erect, you have to use it fast or it will go limp. [Laughs.]

Check out GI’s 2008 interview with George Gruhn.