Sunday, January 1, 2017

Is Art a Good Investment?

Four or five years ago I wrote about art investment and looking back on it I see that things have changed.  There may be an art investment fund somewhere but they certainly no longer make the news.

Yet, the concept that it might be a good idea to invest in art still persists.  I received a cold call last week asking me about investing in art and I gave a very simple one-word answer, “Don’t!"

There are many, particularly in the scholarly and museum communities who do not believe that art should be associated with money because art is on a higher level.  Of course, that is ridiculous.  Art is usually found in palaces and with captains of industry with the people that could afford it.  If you do not find yourself in that category and want to buy a work of art which is more than a hundred dollars you want to know what you are paying for.  Still there are no sure ways to know what an art work is worth and it is most certainly not a liquid asset.

One of the main reasons for this is that the monetary value of art rests in large part on taste and fashion.  I personally do not understand or, put another way, care for the work of Jeff Koons.  Yet he is considered far and wide as a major artist worthy of exhibition and collection in the most important museums in the world.  What would happen, however, if over time more people of some weight either in the art or financial world began to feel as I do?   Seemingly overnight the works that came up at auction would bring less and less, Jeff Koons’ dealer(s) would have to ask less and before you know it your Koons investment has declined in value.   I am happy to say that Jeff Koons has a great appreciation for art and collects Old Masters among other fields.  Here is an image of the artist with one of his rabbits.

I watched it happen in the market for Renaissance bronzes where there were three major collectors and to bring a high price at auction you only need two.  Two of those collectors died the same year and the third changed her mind and started collecting in a different area.  Suddenly the prices were no longer astronomical.  So there may always be a market for Jeff Koons or Renaissance bronzes but it just will not be as high as before, and therefore not a good investment.

What, however, if you had bought that Jeff Koons because you really loved it, it gives you pleasure to look at, or, one of the reasons I buy a work of art, because it makes you smile.  In that case, it would not matter so much what the value of the sculpture or picture is because you will continue to enjoy it.

Every once in a while there are “discoveries” of “lost” artists.  Since the artist was obviously not lost and the work didn’t disappear, but rather one or more art historians started to see that a group of works related to each other and, through copious research, were able to put a name to the artist.  Should the art appeal to others at that time suddenly it becomes worth money and possibly lots of it. 

Also, if a work of art is newly attributed to a famous artist.   What if no one had thought about the work of art from great great grandpa sitting in the attic and you just want to be rid of it. So you take it to an expert at a museum, or a dealer or an auction house and they recognize it as an important piece as recently happened with a Leonardo da Vinci drawing.

“Over night” actually months or years after the work is “discovered,” this scrap of paper is worth a fortune.  The fact that it was preserved shows that there were those who cared for it but I think all would agree this was not an investment but a piece of luck.

As I said in my last Missive on this subject investing in any area is not just about the wins but rather the percentage of wins over losses.  Webster defines investment as, “the outlay of money usually for income or profit”.  Since there is no way to wring income out of a work of art do you want to take a gamble on the profit?

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