Comments on: Art as an investable asset class http://blogs.reuters.com/felix-salmon/2011/02/15/art-as-an-investable-asset-class/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: NYC123 http://blogs.reuters.com/felix-salmon/2011/02/15/art-as-an-investable-asset-class/comment-page-1/#comment-24069 Thu, 17 Feb 2011 23:20:12 +0000 http://blogs.reuters.com/felix-salmon/?p=7292#comment-24069 I have been in the financial markets and the art business for 25 years. I have seen stock markets crash and art markets crash. The only difference between the two is that the Stock market is regulated and has a secondary market for liquidation. The Art market has No regulation, No secondary market and is an illiquid asset, which makes it very difficult to get your money back if the financial markets crash. Having said that, making the case for The Regulation of the Art Business/Market would be a good idea for everyone except for a handful of big auction houses, galleries, collectors, dealers, and museums. If a work of art can be valued and sold for $100,000,000.00 dollars (case in point: Giacometti’s “L’homme qui marche I” which sold for $104.4 million at Sotheby’s in February 2010 and Picasso’s “Nude, Green Leaves and Bust” which fetched a record $106.5 million at Christie’s in May), then that art product/financial instrument is a Commodity. Therefore art should be sold and regulated as a Commodity.

In fact, all Art Funds should be regulated with the (SEC) Securities Exchange Commission so that investors can see what art is being sold and who is selling it, who is buying the art and at what price. Full disclosure should be made also of the mysterious phone and Internet buyers, with whom an auction house can claim to be negotiating a private sale for an undisclosed amount. This type of Chandelier bidding and smoke and mirrors method of dealing should be illegal. By regulating Art as Stock, you would need a secondary Art Exchange to trade the original oil paintings, sculptures, silkscreen prints and giclées. This Art Exchange would bring more transparency to the art business and would regulate what is already manipulated by a handful of big collectors, dealers, museums auction houses, and galleries, even by some art critics who can influence and help decide to push a single artist to increase the “value” of a painting by 50-1000% in a single transaction. The collusion and back room deals that go on in this business are criminal by Wall Street standards.

The history of Art as Stock was originated back in 1994 by an American Artist, Robert Cenedella. Cenedella was the first artist to come up with the idea to sell Art as Stock – Stock as Art as laid out in “The Art of the Deal”, an article written in the New York Times Style Section, by Bryan Miller, on Sunday, March 20, 1994. Cenedella was calling then for regulating the art market. Here we are 20 years later and we are still trying to do the same thing but with more technology and transparency. The idea was 20 years ahead of its time. In the NYT’s article, Leo Castelli was quoted as saying that he compared the 1980’s art boom to junk bonds and that Cenedella’s idea was a “conceptual work of art” when it was really an investment in Art as Stock. Nobody really understood the concept then.

Cenedella’s idea made more sense already then than all the current ideas. The Regulation D Private Placement was registered with the (SEC) Securities Exchange Commission. The offering was 200 Shares of a Deluxe Limited Stock Edition. The concept was similar to an (IPO) Initial Public Offering. The company issued 200 shares of stock valued at $1,000.00 a piece for a total of $200,000.00. With each share of stock the buyers received a bank note certificate indicating part ownership in the oil painting as well as a large serigraph (a high quality silkscreen) of the original oil painting. This assured buyers full disclosure about what they were buying under SEC rules. The silkscreen picture “2001 A Stock Odyssey” was of the inside of the New York Stock Exchange. Each investor would share in the profit above the original cost of the painting priced at $50,000.00. So if the sale price should exceed $50,000.00 the profits would be distributed to the shareholders and the serigraphs would also go up in value. If you bought 100 shares you would own 50% of the original oil painting and 100 serigraphs, which the investor could also sell separately while still retaining ownership in the original oil painting. With each investment, buyers came away with a tangible piece of artwork, the silkscreen that they could hang on their wall.

This brings us back full circle and the question is does the art market continue business as usual or does Wall Street and the Art business both figure out how to regulate the investments in the art market so that there is full disclosure and transparency.

I can tell you right now that I would rather own a Picasso, a Thomas Hart Benton or a Cenedella than a share of Lehman Brothers, Bear Sterns or Enron. This may also one day be the same case for allot of the Contemporary Junk Art market.

The art market needs to be regulated because the way it is doing business now is just a crime.

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By: dlukas http://blogs.reuters.com/felix-salmon/2011/02/15/art-as-an-investable-asset-class/comment-page-1/#comment-23994 Tue, 15 Feb 2011 22:29:51 +0000 http://blogs.reuters.com/felix-salmon/?p=7292#comment-23994 The counterargument would be that art markets, presumably, are extremely inefficient. If that is the case, then a GOOD art investor would have a greater opportunity to extract excess returns than would a good investor in a more efficient asset class.

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By: ErnieD http://blogs.reuters.com/felix-salmon/2011/02/15/art-as-an-investable-asset-class/comment-page-1/#comment-23975 Tue, 15 Feb 2011 18:11:23 +0000 http://blogs.reuters.com/felix-salmon/?p=7292#comment-23975 Art has one huge advantage over other asset classes: it is lightweight and portable.

You can take it out of a frame, put it in a tube, skip to a country without extradition treaties, and you have just moved $20 million in your suitcase without leaving a paper trail for the Feds. Beats the heck out of gold for your typical white collar criminal, banking executive, or tin-pot dictator.

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