Comments on: Weird art-valuation justifications of the day, Sarah Thornton edition

By: TheArtHunter

TheArtHunter — Wed, 13 Feb 2013 01:30:37 +0000

While contemporary and super-high-value art (like Warhol) are highly speculative, there are thousands of 19th and 20th century artists in the $5,000 to $250,000 price range whose auction prices are stable, predictable and logical. 1930′s and 1940′s oil paintings by the popular Cape Ann / Gloucester Impressionist Emile Gruppe (harbor and winter scenes priced at $5,000 to $25,000) are just one of many examples of beautiful and affordable art that will probably appreciate over the next 10 to 20 years, although prices peaked at about 25% higher 7 years ago. As art goes into the seven and eight figures, it’s much more like The Emperor’s New Clothes where powerful dealers and influential critics artificially influence prices and often create thin and highly volatile markets. Learning about art, visiting museums and studying auction records is the best way to understand what is worth buying at relatively low risk and with a reasonable expectation of making a profit over longer periods of time. You will enjoy our new book The Art Hunters Handbook. It’s about how to find valuable art at garage sales and flea markets, but it can also point you in the right direction if you’d like to be an independent-minded, well informed art collector who does not follow irrational trends.

By: TFF

TFF — Sat, 11 Feb 2012 18:58:45 +0000

“As with any other investment, what goes up can always go down.”

True. Trading is inherently a zero-sum game, with the overall price increase driven by the general increase in worldwide saved/invested wealth.

What differentiates investments is the income flow they generate:
* Bonds generate interest payments, and a lump sum principal payment at some future date.
* Stocks generate dividends and share repurchase (and a corporation isn’t precisely a fixed asset — they can grow).
* Art is pretty to look at.
* Real estate generates rent or a supply of housing.
* Gold just sits there in a safe deposit box.

By: TSTS

TSTS — Sat, 11 Feb 2012 04:07:32 +0000

“If all goes wrong in the world, if the eurozone cracks, the Middle East erupts in war, and a tsunami hits Manhattan, that rare, portable 1964 Marilyn by Andy Warhol will still be worth something.”

This one really cracks me up. Just the opposite. When things REALLY go wrong, your art will be worth very little. Just talk to the wealthy families in Germany who in 1945/46 ended up bringing their art and antiques to a local farmer in exchange for some potatoes. A lot of farmers did very well in those years.

By: TFF

TFF — Fri, 10 Feb 2012 01:31:37 +0000

mfw13, “price sensitivity” can actually reverse for trophy goods — no matter how beautiful the painting, you don’t earn bragging points if you bought it for $1000 from an unknown artist. Ideally everybody should understand exactly how much you paid for it, without your needing to crassly tell them. Art auctions are ideal for this!

And yes, that kind of behavior tends to drive prices up in a hurry.

By: mfw13

mfw13 — Thu, 09 Feb 2012 23:41:21 +0000

I don’t think it has anything to do with “investing” at all.

Rather, you simply have a group of super-rich people who have more money than they know what to do with, who are used to being able to buy anything they want, are highly compeititve, and who are therefore not price-sensitive at all.

When you have people in a market who will pay whatever it takes to get something they want, prices can go up pretty fast in a hurry.

By: dWj

dWj — Thu, 09 Feb 2012 18:27:54 +0000

When I try hard to come up with contrarian but reasonable rational arguments in defense of what she’s saying, I keep bumping into the idea of commodities as an alternative. Even if you’re looking for diversification of a small amount of your portfolio away from the usual sorts of investments, some combination of natural gas and gold seems to dominate art on any dimension.

By: alex.weiner

alex.weiner — Thu, 09 Feb 2012 15:23:37 +0000

I have a suspicion that art prices have a high sensitivity to interest rates. Meaning that even if they did exhibit the other properties that Sarah Thornton feels are good hedges, it is only with the trade-off of other risks. Of course, we haven’t even gotten into liquidity and market risk yet (which presumably would a arise if ” If all goes wrong in the world, if the eurozone cracks, the Middle East erupts in war, and a tsunami hits Manhattan.”) Much like residential property and vehicles I think people should view art as a consumption good, whatever resale it happens to have is just icing on the cake, not the primary reason to own it (Apple products would a great example of this). That said, I’d much rather own a Van Gogh or Picasso than the equivalent worth in gold at least my bad investment would be nice to look at.

By: Moopheus

Moopheus — Thu, 09 Feb 2012 14:45:56 +0000

What’s the big deal? Most of what people buy as “investments” are just another form of gambling. You buy a thing or a piece of paper in the hope that someone in the future will pay you more for it. It doesn’t really matter if it’s art, gold, stocks, or beanie babies. Sometimes it works and sometimes it doesn’t. People make up all sorts of justifications for what they do, convince themselves it has less risk or better potential returns than other options, or more safety because of some perceived “instrinsic” value (though if you can’t eat it or burn it, even this is a pretty malleable metric). But in the end, nobody knows what the future will bring.

By: Fuddleducker

Fuddleducker — Thu, 09 Feb 2012 08:04:11 +0000

“he knew because so many people found Warhol’s art “silly and awful” that it was probably a very good investment.”

In what world does that make sense? Explain please.

By: Chris08

Chris08 — Thu, 09 Feb 2012 02:51:38 +0000

Well I know someone who bought a Warhol print of Marilyn in 1971 for $1000 and sold it in 2000 for $115,000. Twenty nine years intervened but I think it was not a bad investment. You can calculate the annual rate of return for me if you would like. PS: He didn’t particularly like it when he bought it but he knew because so many people found Warhol’s art “silly and awful” that it was probably a very good investment.

By: RichL40T

RichL40T — Thu, 09 Feb 2012 02:22:31 +0000

Don’t you think it makes more sense to buy the art you love, and the investment return becomes incidental? If you really have an eye and know what you’re doing, you can make money.
You could ask Roy Neuberger if he were alive – of the firm Neuberger & Berman – http://en.wikipedia.org/wiki/Roy_Neuberg er

His collection is housed at SUNY in Westchester, and that combined with the Pepsico grounds across the street make for an entertaining cultural visit.

He certainly had more fun than any of the boors that are using art as an “investment”.