(MONEY Magazine) – Of the 6 billion people on the planet, there are perhaps four men whose knowledge of rare violins is so vast and deep that their opinion of an antique instrument can set its market worth. Robert Bein, a Chicago dealer, is one of these four. Talk to him about the fiddles that he sells and his face grows as expressive as a stage actor's. He grimaces when considering a disagreeable point. He pauses for effect before delivering a punch line. And when he grows serious, he fixes his watery blue eyes on you and unloads the weight of his convictions. He thinks the old instruments are worth every penny. "Except for these fiddles, not one single object on this earth works better than it did 200 years ago," he says insistently. "Stradivari is the ultimate icon of Western civilization. I mean, what finer thing exists?"

As if to prove the point, Bein says, "Let's go see some Strads." We leave his office and its view of Lake Michigan and thread through a warren of rooms where several young violinists are filling the air with a jumble of scales. In a back corridor, we arrive at a seven-foot-high steel vault. Bein swings open the doors to reveal several levels of shelving, each level divided into 10 or so narrow, vertical compartments, each compartment covered in green felt and deep enough to hold a violin.

You know how it is: Someone hands you a $4.5 million violin, and you try not to drop it. Bein gives me a 1734 fiddle built by Giuseppe Guarneri del Gesu, and I turn it gingerly to look at the burnished back of flamed maple and the carved scroll above the tuning pegs. I rub my thumb across the strings. It makes a resonant, $4.5 million plonk.

Bein grabs it back and slides it into its slot in the vault. He hands me another. "This is a 1686 Stradivari called the Nachez." Like paintings or country estates, old violins have names. "This goes for $1.5 million," he says and pulls out two others. "This one is a Guadagnini that would go for $600,000 on a good day, and this is another Guadagnini that would go for $850,000."

Over the course of the past 50 years, few things, if any, have appreciated as dramatically as antique violins like the ones in Bein's Chicago vault. Even during recessions and depressions, their prices have remained steady, and during hot decades such as the 1980s and 1990s, the rates of return on some instruments have made stock and real estate gains seem sluggish. To find out why, I embarked on a search that led me into the obscure realm of violin dealers and the sometimes surreal process of violin pricing. While I was looking at violins, though, I was also looking for something else: a key to understanding why the world deems some things precious and others worthless. This is the fundamental riddle of value--the shadowy force that inflates the worth of stocks, homes, art, antiques, almost anything you can think of. Where does value come from, and why does it sometimes vanish? Why do some things make us rich while others don't?

I was sure I would find out. After all, I thought, how hard could this violin business be?

MCDUFFIE'S FIDDLE

There is a game we play with the stock market that has a counterpart in the world of precious objects. In stock picking, we buy on a hunch or a tip or an informed opinion, hoping our shares will go up in 10 months or perhaps in 10 years. In the sphere of collectibles, we look around the cluttered world of 2002 and try to acquire desirable things that will be even more desirable 30 or 50 or 100 years from now.

The odds of being right about collectibles are lousy. Still, looking over valuable relics of the recent past you can see that buying the best can sometimes pay off in the long run. If your father had bought the best wine he could find in, say, 1948, you might own Chateau Petrus 1945, which is probably worth about $50,000 a case today. If your grandfather had bought the best mandolin he could find in 1921, you'd probably own a Gibson Lloyd Loar, which is valued at about $75,000. If your great-great-grandfather had bought the best bureau in New England in the early 1800s, you might have one built in Newport, R.I., which could bring in $750,000. And if some long-forgotten ancestor had bought the best violin in Europe a few hundred years ago, you could have something shockingly valuable on your hands. But that all depends.

About a year ago, I read a newspaper article about a classical violinist named Robert McDuffie who purchased an old instrument from Cremona, Italy. Star soloists like McDuffie generally opt for one of two choices when their careers start to peak: a violin by Antonio Stradivari, who lived in Cremona from 1644 to 1737, or one made by the only man deemed his equal--Giuseppe Guarneri del Gesu, who lived in Cremona from 1698 to 1744. According to Bein, there are about 600 known Stradivari violins and about 140 known Guarneri del Gesu violins. Elite dealers keep tabs on the location of these fiddles--and they do generally call them fiddles--much the way military commanders track enemy troop movements. Their goal is to acquire and sell as many as possible or to represent a private seller for a substantial commission. At any given time, the best dealers usually have one or two Stradivari or Guarneri violins for sale, and sometimes more.

In 1995, when McDuffie let it be known that he was looking for a violin, dealers came from around the country to a small concert hall on the Upper West Side of Manhattan, their prize instruments in tow, so that McDuffie could try them. That morning, McDuffie settled on the Ladenburg, a 1735 Guarneri del Gesu that was being offered by an Austrian dealer named Dietmar Machold. The violin had sold in 1975 for $250,000 and again in 1989 for $1.2 million. Machold's price was $3.5 million--a sum that McDuffie didn't have. Machold agreed to let McDuffie use the del Gesu over the next few years while putting together financing, a frustrating endeavor chronicled on the front page of the Wall Street Journal. Eventually, in February 2001, McDuffie and several investors joined in a limited partnership to purchase the instrument from Machold. The agreement stated that McDuffie could use the violin until 2023, at which point it would be sold. Each partner would then be compensated for the value of his shares.

The first lesson with fiddles--actually the first of many lessons--is that an old fiddle could be worth a fortune, like McDuffie's; it could also be worth very little. It is assumed that McDuffie's fabulously expensive instrument will become even more fabulously expensive in the future. If it continues to appreciate at a rate of about 8% a year, it will be worth about $24 million by 2023, which will give its investors a terrific return.

To Dietmar Machold, this seems a reasonable assumption. When I met with him in the lobby of the Four Seasons hotel in Manhattan in January, he said, "If someone had told me 23 years ago that this violin will fetch $3.5 million, I would have said this is ridiculous. But it's not. I have seen it happen, and I see no reason it will stop going up." Machold--the very picture of a cosmopolitan businessman in his Nehru jacket and designer eyeglasses--explained the basics of his trade. A Stradivari or Guarneri fetches from $1.2 million to $6 million, he told me in a thick German accent. It takes him between four weeks and five years to sell one of these instruments. And the things that determine price? In order of importance, they would be the violin's maker, its condition and its history. McDuffie's hits the top of the scale on all three.

It was striking, then, to hear McDuffie tell me why he believes he owns "one of the two or three best violins in the world." He spoke of the instrument's musical qualities and how it allows him to feel utterly confident in his playing. McDuffie is not wrong--but this is not what determines price. Sound, I was warned again and again by dealers, depends on the player, the bow, the room, the musical selection, the listener; any combination of those factors can create a sublime match or a discordant mismatch. This was violin lesson No. 2.

The reputation of Stradivari and Guarneri del Gesu came slowly, over the course of hundreds of years, as the greatest musicians in the world chose to play them. But tonal quality is not what makes them precious anymore. Now it is the name that makes a violin precious, says Machold: "This is the only objective measure."

Still, names are funny things to bank on. What if a violin's maker is unclear? Attribution, Machold suggests, is the tormenting fire of every violin dealer's existence. "You may own a violin," he continues. "You think about it being made in Saxony; then you think about it being made somewhere else; then you spend a day or two thinking it is a fine Italian copy. And at the end, sometimes you come to a conclusion and sometimes you don't. And you can either sell it as an 'unknown' or hold on to it." An unknown is generally worth little--even if it sounds spectacularly good.

But sometimes an unknown can become a known. Machold once bought a violin of little worth and tried for years to pin down its origins. It sounded fantastic. He had a feeling about it. "You are looking at something, you know it is something," he told me. "Your stomach is rumbling." And then one day, a musician brought into Machold's shop a cello built by the Italian maker Lorenzini; it was an exact match to the mystery violin. The cello had long ago been certified as authentic. Thus Machold could tie his violin's attribution to the cello's.

And with that stroke of luck, he could now charge $200,000 more. So value can change in an instant, and without warning. This was violin lesson No. 3.

A BIT OF TROUBLE

Of course, Machold's "unknown" violin had not changed. It sounded the same, it looked the same, it played the same. Its age had never really been in doubt; its craftsmanship was superb. Only the perception of the instrument's origins had been transformed. And much as we might like to believe value is free of personal prejudice, that perception is always--always--shaped by the human factor. This was violin lesson No. 4. It is a dealer, or sometimes a musician or collector, who can make value. And it is those same people who can take value away.

On a chilly afternoon in February, I met a violin expert from Philadelphia named Philip Kass in a small, windowless room at Sotheby's auction house in Manhattan. Kass, a scholarly man in his mid-forties, had come to appraise an instrument that had come to his attention. He wouldn't play the violin--that, again, is not a crucial factor. The most important criteria are those that Machold had spelled out: Who made the instrument? Where did it come from? Is it in good condition? Is it original or have parts been replaced?

These questions are not easy to answer. Many violins have survived wars, cultural upheavals, centuries of use, abuse, repairs and refurbishments, only to arrive on an examining table many centuries and thousands of miles from their origins. And unlike most great paintings, a fiddle's provenance, as the history of its ownership is called, is usually filled with gaps and mystery. Wherever the wealth of the world has gone, the best violins have gone too. But it's often the case that an old violin cannot be traced to before, say, 1910 or 1950. It is possible that you are looking at a valuable violin taken from a Jew by an officer of the Third Reich. It is possible that you are looking at an expertly crafted 19th-century fake. Or it is possible that you are looking at a real Stradivari or Guarneri. In addition to the 600 or so that we know of, Stradivari probably made 500 other violins that have never been found, documented or appraised. A few of them, the theory goes, must still be around somewhere.

In fact, as I became immersed in the violin world, I came to wonder why I never before noticed that the earth is awash in violins, both good ones and bad ones, and that great stakes and bitter feuds are involved in figuring out not only which is which, but which is real and which is not. That day at Sotheby's, I came to see that part of what's at stake is ego--but most of it is money. Kass zipped open the black case when I arrived and pulled out a G.B. Guadagnini violin draped in a multicolored silk kerchief. Guadagnini was an Italian maker whose stature is just below Stradivari and Guarneri del Gesu, Kass told me, and this particular violin had last been sold in 1966 for $10,000. Kass then showed me the fiddle's embossed certificate of authenticity from London in the 1950s, issued by the firm of W.E. Hill & Sons. With precious collectibles as with stocks, there is usually a marketmaker--an expert who calls attention to what is most desirable and appealing. In American antiques, for instance, there was a dealer named Albert Sack, who in the 1940s discerned an aesthetic hierarchy he termed good, better and best; in Tiffany lamps, there was a collector in the 1960s named Egon Neustadt, whose avidity for Louis Comfort Tiffany's stained-glass shades eventually sparked a revival in objects that had become almost worthless. In violins, the marketmakers were W.E. Hill and his sons. The first to chronicle the violins by the Italian masters and build an international business around them, the Hills created the modern violin market. Their opinion on an instrument was beyond reproach.

But this violin, Kass explained, "had been through a bit of trouble." Its authenticity had been questioned by a prominent dealer. Kass began looking the instrument over, noting its varnish, arching, finishing touches and the like. The room was silent. So far, he said, he felt the work looked genuine and dated to late 1771. A Hill certificate, he noted, can also be counterfeit, but this one was real. He did not spend much time on the label inside, and for good reason: Most have been altered or switched over the years.

"My diagnosis of all this is that, yes, the violin is okay and in quite good condition," Kass announced after some time. "The fiddle would be worth about $250,000," he said--but if its authenticity had not been questioned (a stain cleansed only by the passage of decades and, with luck, a consensus among future dealers), it would have been worth $500,000. Then I asked Kass whether it bothered him that his whole profession was built on shifting sands--that so many instruments were crafted to deceive and that each expert insisted on a different notion of reality. "Yes," he said placidly. "It drives me crazy."

THE PARABLE OF JOHN LOTT

If you look at the history of violins, you can see that people were being driven nuts from the very beginning. Wherever there is great value, there is great fraud and there are credulous victims. Some early London dealers would take apart real Stradivaris and use the parts on other violins that they would pass off as real and complete, thus getting two or three Strads out of one. The Voller brothers, who worked in England in the late 1800s, were legendary masters of craftiness and deceit--"a nightmare," said Philip Kass, who once acquired one of their violins thinking it was by an 18th-century Neapolitan maker. Another brilliant copyist was John Frederick Lott, a violin maker and former elephant trainer who wandered around Europe in the early and mid-19th century trying to sell his fiddles as real Guarneri del Gesus and Stradivaris. His skill as a woodworker, especially his skill at making the instruments appear older than they were, helped aid his deception. I asked Bein how Lott's instruments sound. "They sound great!" he said--and he noted that today Lott's work would sell for about $75,000. Moreover, he said, he considers Lott the greatest English violin maker who ever lived.

Thus it seems that any violin, even a fake, may gain in prestige over time if it's deemed good enough--and if public sentiment changes. During the 1700s, for example, the violins in the greatest demand were made by Cremona's Amati family. By 1800, however, musical styles had changed, and virtuosos began to prefer more powerful instruments. Stradivari and Guarneri del Gesu violins then became more desirable, and more expensive, than Amati violins. This remains the case today. The objects have stayed the same, but the world has changed, and with it the value of those objects. This would be violin lesson No. 5.

To me, this tied together some loose ends. I could now understand that value jumps or drops (No. 3) on human perception (No. 4) or external events (No. 5), and that these dynamics are what makes investing in violins--or in anything, really--a risky endeavor. The elevated reputation of Stradivari, for instance, elevated the value of his violin known as the Messiah, which resides in a glass case in the Ashmolean Museum in Oxford, England. The Messiah has allegedly never been played and is in flawless condition. In many respects, it is the ur-violin, a notion of perfection that has served as the model for untold numbers of replicas. It has been valued at $10 million by Charles Beare of London, the world's most respected violin dealer. It is easily the most valuable musical instrument in the world. Unless it's worth nothing at all.

In 1999, Stewart Pollens, a music conservator at the Metropolitan Museum of Art in New York, inspected the Messiah and questioned its authenticity. When I met with Pollens at his office, he told me that an expert on dating wood based on tree rings unequivocally showed that the violin top was made from spruce harvested after Stradivari's death, and that various other details seemed dubious. Calling a particular violin a fake is not such an unusual occurrence in the trade, but doubting the Messiah seemed to alter the fragile balance of the violin universe. It was as if someone had announced that the original measures for the meter or the kilogram, now residing under glass near Paris, were falsified, and that every measurement for the last few hundred years has been incorrect.

Since Pollens' bombshell, various dealers have contradicted his research with other scientific studies. Charles Beare says the Messiah is true; and Bein, who has enlarged photographic details of the Messiah tacked to his office wall, told me, "Look at it. You can just see. Of course it's a Strad." In the violin world, these two men are hanging judges.

So maybe Pollens is wrong. Or, it occurs to me, maybe he's only wrong right now. I think, once again, of violin lesson No. 5: The world can change its perception of an object at any time. And the object need not change at all.

MYSTERIES OF SUPPLY AND DEMAND

At some point, other rules, about the relative worth of violins, also began to make sense--why one Strad is worth more than another (better condition, a better provenance), for instance, or why a Strad is worth more than a fine 19th-century French violin (a larger consensus about quality). I could also see why a Strad would be worth 10 times more than, say, an old Jaguar XK120 Roadster (more time to appreciate, greater utility). But the biggest question remained. Why--or perhaps how--does a Strad reach the point where it has become as expensive as beachfront property outside L.A.?

Time and again I wondered whether the answer lay within the circle of elite dealers who control much of the business. They are not a fraternal bunch: in New York, Dietmar Machold, who also has offices in Germany, Austria and Switzerland, and Rene Morel, a dealer who is arguably the best violin restorer in the world; in Chicago, Robert Bein and his partner Geoffrey Fushi, along with a family firm called James Warren & Son; and in London, the king of all violin dealers, Charles Beare. I also spoke with a host of highly regarded second-tier dealers. Some alliances exist, but so do bitter grudges. Hatred is probably too mild a word to describe some of the relationships. Some experts told me that their colleagues are "high-class crooks" or "not very credible." The words "completely evil" were also used. In Chicago, I spent one morning with a pariah of the violin world named Fritz Reuter, who has accused many reputable dealers of giving gratuities to teachers who bring their students in to buy violins. Reuter has also alleged that dealers engage in "a great violin hoax" to perpetuate the superiority myth of old Italian violins. "Many people think of him as a crackpot," one violin expert told me about Reuter. Then I asked whether anything Reuter said was true. "Oh, yeah," said this expert, "I'd say it's mostly true."

In any case, it would be difficult to pin the high prices on dealers alone--the violin market is too large and dynamic for them to conspire. Still, the answer to the questions I originally asked Bein is a nagging one: How did these get so expensive in the first place, and why are they an impregnable storehouse of value? As if justifying the high share price of a boom-era telecom stock, some dealers offer the greater-fool theory: The instruments are worth so much because buyers are willing to pay more and more--an explanation that's borne out by the prices for top instruments at auction.

But dealers also connect price appreciation to rarity, and that seems dubious. "A Stradivari is not particularly rare," Laurence Libin, a curator at the Metropolitan Museum of Art told me when I toured the museum's old instrument collection. "We have the first piano ever made--now that's rare." And Bein told me, "Charles Beare owns the only mandolin ever made by Stradivari. That's worth less than any of his violins."

Of course, extraordinary demand drives up prices. But with the grinding recession in Japan, demand isn't what many dealers purport it to be--certainly the fact that a dealer like Machold has more than a dozen Stradivaris in stock makes you wonder. So the most convincing answer to explain high prices may be that the most desirable of these instruments--like the one chosen by McDuffie for its exceptional sound or those bought by Microsoft millionaire David Fulton, who is now the world's greatest violin collector--keep the whole market propped up and may do so indefinitely. The musicians, whose performances validate the best violins' superiority, want instruments that sound and play the best; the collector-patrons desire trophies that have assumed near-mystical reputations. Together the musicians and the collectors have a complementary effect, boosting both prices and demand.

And the lesser violins, as long as they have a name that bestows prestige, gain in value alongside. Some of these vaunted instruments do not sound exceptional, but some well-endowed orchestras or institutions may fork over a fortune so soloists and students can use them. As dealer Rene Morel told me, some soloists pretend to play a Stradivari or Guarneri even when they're not. The reason? Because they know that audiences and critics expect them to. Such is the violins' mystique.

TELL ME WHAT YOU SEE

In theory, the trade in new violins should be free of this baggage of the past, but it isn't--you can find the same sanctification of the long-dead masters, with novel variations on the ethos of deception. Samuel Zygmuntowicz is generally thought to be one of the best violin makers in the world today. When I spent an afternoon at his shop in a converted Brooklyn factory, he explained that his instruments sell for between $25,000 and $35,000, and that he makes about eight to 10 a year. "Half of those are copies of famous instruments," he told me. By this, I assumed the dimensions would be derivative but the violins would look shiny and new. When he showed me a cello he had just finished, however, I was sure I was looking at an instrument with hundreds of years of wear and tear. The copies that virtuosos order from him are antiqued to their liking--complete with stains and scrapes and worn patches. They are not meant to defraud, but to give the impression that the musician is playing an old, and valuable, instrument.

What makes this seem so odd is that Zygmuntowicz's violins are already regarded as semiprecious. "Once I got a call from a guy asking if these were a good investment," Zygmuntowicz recalled, "and I couldn't get him off the phone fast enough. I only want to build for musicians." He acknowledged that instruments he made several years ago have already appreciated. But he wanted me to understand that when he thinks about the rising value of his violins, monetary value is only one aspect. "You have to remember that there is also functional value," he said. "And there is sentimental value. And there is historical value as well."

When I first went to Robert McDuffie's apartment, I realized, I had made the mistake of looking for only one kind of value, and of thinking that the laws of economics and a sharp eye would in time make things clear. I thought of value as a quality possessed by an object, rather than the fleeting result of a process--be it the process of buying, selling, appraising or perceiving. Or performing, for that matter. McDuffie, a gracious, 43-year-old Georgia native who lives on Manhattan's Upper East Side, answered my questions about how he and his partners financed his Guarneri del Gesu violin; then he brought it out into his living room. To me it looked worn, mottled and undistinguished--an object that somehow struck me as disappointing. "The f-holes are slightly crude," McDuffie said matter-of-factly. Then he brought the instrument to his chin and began playing a few rapid exercises.

I felt I'd been punched in the head and chest. It reminded me of that old magazine advertisement for Maxell cassette tapes, in which a man sits in a living room as a hurricane of sound blows by him, tilting the lampshade and mussing his hair. Then McDuffie abruptly stopped playing; the torrent subsided, and he handed me the violin so I could view it up close. What was there to see? What is there to see in such a thing? I looked it up and down, turned it over, and when I gave it back, he put the fiddle in its dark brown case and snapped down the buckles. Then we shook hands and said good-bye.

And that was that. A $3.5 million violin, made 267 years ago in Cremona, Italy, that I've since been told has already risen in value to $4 million and that will be sold 21 years from now for who knows how much. On the way home that day, walking through New York City on a winter morning with my hands in my coat pockets, I remembered that the violin had seemed lighter than I could have ever imagined--lighter than a pound or lighter, by my estimation, than anything I could possibly think of. And then I began to wonder if I'd really held anything at all.