At the crossroads of the vintage guitar market CHICAGO (Reuters) - Collectors and guitar fans have been whipsawed by the Elvis-pelvis gyrations of the vintage guitar market. Now they're at a crossroads - is it time to pick up that choice instrument? Prices for prized guitars soared in the early 2000s as speculators jumped in, then the market plummeted by as much as 30 percent by the end of the decade. But after a few years of singing the blues, vintage guitars look ready to rock again - as long as collectors pick their investments carefully. "I am very bullish on the vintage guitar and instrument market in general," says Rick Camino, the chief executive officer of Hello Music, a Los Angeles-based daily deals platform for musicians. A rare 1949 Bigsby guitar fetched $266,000 in April at Heritage Auctions in Dallas, Texas, a price that more than doubled the sales record for any guitar at a Heritage auction. With "guitars of the highest grade," the numbers look promising, says Mike Gutierrez, consignment director at Heritage. And indeed, this past weekend gave guitar market boosters reason to smile. An auction of guitars and memorabilia belonging to the late Les Paul (namesake of the legendary Gibson guitar) raised close to $5 million for a foundation that supports music education and innovation. Among the prizes: a 1951 Fender "No-Caster" (an early version of the Telecaster) that fetched $216,000. But nothing is certain in this fickle market. Those who join the vintage guitar band need steely nerves and an abiding respect for the instruments they buy. To illustrate the wild ride of the last 10 years, look no further than the example set by a 1956 Gibson Les Paul "Gold Top" (so named for its metallic-champagne color), stocked with P90 pickups, a Tune-o-matic bridge and a stop tailpiece. In 2002, George Gruhn of Gruhn Guitars in Nashville, Tennessee, could get $5,500 for that axe. Four years later, the Gold Top's value had skyrocketed to $85,000. "Then they plunged down to $30,000, and a nice one today is worth $35,000," Gruhn says. So if you bought in 2002, you'd still enjoy about a 600 percent markup. But if you bought in 2006, as many speculators and vintage guitar lemmings did, you could be out $50,000. Why the huge jump in the mid-2000s? Nate Westgor, the owner of Willie's Guitars in St. Paul, Minnesota (and an avid collector himself), has a theory that revolves around rock stars, celebrity guitars, rehab and a company once run by Mitt Romney. In 1999, Eric Clapton auctioned 100 of his guitars to benefit his Crossroads Centre charity for people affected by drug and alcohol abuse. The date was June 24, and by vintage guitar market standards it was the equivalent of the British Invasion: Clapton's 1956 Fender Stratocaster Sunburst known as "Brownie" fetched an astounding $450,000. "It shocked the whole industry because it proved that you could get six figures for a guitar," Westgor says. That's when all hell breaks loose. The Clapton auction is an igniter. Then came the second Clapton auction in 2004, when musical instrument retail chain Guitar Center bid "Blackie," Eric Clapton's favorite Stratocaster, up to $959,500. "They got it, they bought it, made exacting copies, and made all their money back by selling those copies," Westgor says. That ushered in a period of pure pandemonium between 2005 and 2007. "Guitar values tripled," Westgor recalls. As a dealer, I would sell stuff to dealers in California who were adding 40 points to the value. Market speculators then started playing guitars like junk bonds or real estate, buying instruments just to flip them like Florida condos. Private equity firm Bain Capital jumped on the bandwagon by buying out Guitar Center in 2007. The onslaught of the Great Recession changed the tune. Just as the real estate bubble burst, vintage prices fell faster than a Led Zeppelin. "Guitars got touted as great investments," says Gruhn. And when you get speculators who buy strictly to flip things, they can build it into a big bubble and a frenzy. The turn was disastrous for those who had paid record prices to build rare guitar collections starting in about 2005, only to see the market plummet. The market has dropped as much as 30 percent from its peak, according to Patrick van der Vorst, a 13-year Sotheby's veteran and founder of ValueMyStuff.com, an online appraisal service. With the declines, however, some opportunities have emerged. American Gibson and Fender guitars from the 1950s and 1960s are among the most valuable, though vintage Rickenbackers (favored by The Beatles, The Byrds and Tom Petty) have made big strides in recent years, according to van der Vorst and other market watchers. On the acoustic side, Martin, Gibson and Guild rank as highly prized brands. The coolness factor is one reason to stay put. While you can't strum a stock certificate or crank up a 401 (k) statement, a late 1960s Fender Stratocaster sounds sweet when plugged into a rare Marshall amplifier of the same period. Together that pair might be worth more than $30,000, depending on the condition and rarity of the specimens. And they have enduring collectable appeal. Actor Richard Gere, for one, accumulated guitars and amps for more than 40 years, building a valuable stockpile. "They have been my true friends through the best and worst of times," Gere said last year. I never planned to put together a collection. I just bought ones that I liked, the ones that sounded good and played well. They also cashed out well, even as overall market prices slumped. Gere sold more than 100 of his guitars at Christie's in October, realizing a total of $936,438 that he donated to charity. The question many guitar buyers now ask is whether the vintage market will recover from its current trench. Experts like Gruhn say prices are on the rebound, though modestly. A 1958 Fender Stratocaster realized more than $46,000 this past April at a Heritage auction. Still, Gutierrez says, "Certain pieces have bottomed out, which was the fault of dealers who priced guitars so high in better times that when the economy collapsed, there were no secondary buyers to support their inflated sales." Westgor can barely hide his disgust for the guitar flippers of the world - unless you're talking about a rock star tossing a Rickenbacker high into the air. "I hope the market all comes crashing down because I would love to be the guy who buys the guitars again at 1970s prices," says Westgor, whose pride and joy is a 1952 Fender Telecaster with a black Phenolite pickguard, a.k.a. the "Blackguard Tele." "I was one of those guys who was not into collecting for the investment value, but because these were cool, old guitars," he says. Still, Westgor has done very well. His Tele, originally selling for $200 in the 1950s, today is probably worth about $40,000. The author is a Reuters contributor Editing by Chelsea Emery and Leslie Adler