Art Investment: The Cold Hard Truth pt. 1 – artmarketblog.com

Art Investment: The Cold Hard Truth pt. 1 – artmarketblog.com

I have read and heard so much incorrect information regarding art investment of late that I think it is about time that the cold hard truth about art investment is made available.  So, here it goes.

Should I invest in art?

The answer to this question depends on how much money you have to invest. Only a very small percentage of the works of art in existence will experience an increase in value that is rapid enough and sufficient enough to provide the investor with a worthwhile return on their investment. Those works of art that can provide a good return are inevitably going to cost significant sums of money due to the fact that the characteristics that make a work of art a good investment are really only found in highly valued works of art. There is really no inexpensive way of successfully investing in art. Another option is to invest in a fine art fund, which essentially allows investors to purchase a share in a managed portfolio of carefully selected works of art. Once again, however, the minimum investment for such funds is quite high at around the US$250,000 mark, which is more than the average person is likely to be able to afford. The other problem with fine art funds is that the investors do not get to experience any of the pleasures of owning the works of art which, quite frankly, is one of the very few benefits of art investment. It is fair to say that people who want to buy art generally want to see it and enjoy it. That is, unless one has enough money to be able to invest in a fine art fund and purchase art for their own pleasure. Investors in fine art funds should expect to get a 10-15% a year return on their investment according to Philip Hoffman, manager of an art fund called The Fine Art Fund. Proper art investment, ie. using fine art to generate a worthwhile return on your investment, is really only a pursuit for the wealthy as success really is relative to the amount of money one can invest. For those that do have the money, however, the returns can be quite high and the risk quite minimal.

Can I successfully invest in contemporary art?

Since contemporary art appears to be relatively cheap compared to the work of, say, the old masters, it is often presumed that buying contemporary art is an easy and Large profits can be made from investing in contemporary art, but investing in contemporary art is a very risky business. Successful investment in contemporary art usually requires a “flipping” approach that involves buying and selling works in relatively quick succession to take advantage of short term trends. This approach is very, very risky and requires that the investor have large sums of money to invest that he/she is willing and able to lose. Not only does one need lots of money and bravery to be a successful “flipper”, one also needs to have the right knowledge and contacts at hand, which very few people do. With the right advisor it is possible to profit from investing in contemporary art over the long term but the risks are still high. What it comes down to is that there are plenty of way better investment vehicles for those investors who are wanting high risk with the potential for high returns. In other words, contemporary art is not a good investment.

To be continued………..

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications

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What Art Investors Can Learn from Gold Investors Pt. 6 – artmarketblog.com

What Art Investors Can Learn from Gold Investors Pt. 6 – artmarketblog.com

One of the biggest problems with contemporary art, from a long term investment and wealth preservation perspective, is the seemingly ever decreasing focus on the art object. The focus that was once placed on the art object is being placed more and more on the art concept as well as the increasingly popular notion of the artist as a performer and celebrity. According to a Newsweek article titled Pop Goes the Market, ‘In the era of easy money, artists readily forsook the cliché of the tortured, penniless bohemian, and instead sought fame and fortune by branding their own glamorous, eccentric personas as a tradeable commodity’. Valuing a concept or a performance is almost impossible, especially when there is really no apparent standardisation or continuity from one artist to another. Without the ability to grade or judge the work of one artist with similar work from another artist, determining value becomes even harder. The value we place on what is termed “art” (in a contemporary market context), has less to do with the art object, the tangible result of the artistic process, and more to do with the persona of the artist and their artistic approach. With less emphasis being put on the art object, the value of contemporary art is being based on intangible characteristics and factors that have no perceivable intrinsic value. This means that much of the contemporary art being produced is a speculative and risky investment that would not be suitable as a means of preserving wealth.

As we all know, the contemporary art market is driven by speculation and a quest for social and cultural superiority that has resulted in, and continues to result in, a plethora of short lived fads. The artists involved in these fads often find themselves suddenly thrust into the art world spotlight by rich and powerful patrons who are more interested in the attention their purchases receive than what they actualloy purchase. Unfortunately, when the next fad comes along, many (if not all) of the artists who were the heroes of the previous fad are subsequently dumped just as quickly as they were found, never to be heard of again. The fact that very few contemporary artists survive long enough to preserve their place in the annals of art history makes investing in any contemporary artist a risky business and therefore not a safe means of accumulating wealth or a good means of preserving wealth.

The works of art that are most suitable for long term investment and wealth preservation are those works that have the potential to be used as a tradeable commodity. As I wrote in a previous post, fine art has been proven to be able to act as a tradeable commodity by criminals, who are known to use fine art as collateral for drug and gun deals. According to Dick Ellis, the former head of Scotland Yard’s Art and Antiques Squad and an expert on art crime, “thieves get nowhere near full value, usually only 10 to 12 percent. But even if a thief trades a multi-million dollar Picasso for, say, $500,000-worth of AK 47’s, he still comes out okay. Regional wars involving old tribes, new gangs have made it worst says Julian Radcliffe, citing the Balkan War of the 1990’s. Ellis then goes on to say that “art is often held as security at an arms deal. Then, once the guns are paid for, the art is gradually sold back to Western Europe through shady dealers or art fares”.

One of the most important characteristics of a tradeable commodity is standardisation. Gold is an excellent example of a tradeable commodity because of the fact that it is an extremely standardised good which makes it very easy to trade. One particular luxury good that has been the focus of much speculation due to differing opinions regarding the good’s status as a tradeable commodity is the diamond. Martin Rapaport, a highly regarded diamond dealer and advocate for the commoditisation of diamonds, says that diamonds are definitely a commodity because: “You buy and sell them for cash. They’re a natural resource with limited supply; they’re well defined; they’re certified; they’re analyzed, graded, tradable around the world”. The only artists whose work can be considered have the characteristics that Rapaport identifies, ie. are in: limited supply; well defined; certified; analyzed; graded, and tradeable around the world, are the Old Masters and some artists from more modern movements such as impressionism which still retain many of the characteristics of the movements associated with the Old Masters. The work of the Old Masters are also relatively standardised and are therefore the most likely candidates for being used as a tradeable commodity should an global economic collapse take place. My advice, therefore, is to have at least some positions in the work of Old Masters as a form of wealth preservation and a hedge against the likely economic collapse that is soon to take place.

Part 5:

http://artmarketblog.com/2010/06/08/what-art-investors-can-learn-from-gold-investors-pt-5-%E2%80%93-artmarketblog-com/

Part 4:

http://artmarketblog.com/2010/05/31/what-art-investors-can-learn-from-gold-investors-pt-4-artmarketblog-com/

Part 3:

http://artmarketblog.com/2010/05/18/what-art-investors-can-learn-from-gold-investors-pt-3/

Part 2:

http://artmarketblog.com/2010/05/07/what-art-investors-can-learn-from-gold-investors-part-2-artmarketblog-com/

Part 1:

http://artmarketblog.com/2010/04/30/what-art-investors-can-learn-from-gold-investors-artmarketblog-com/

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications

What Art Investors can Learn from Gold Investors Pt. 3

What Art Investors can Learn from Gold Investors Pt. 3

In my last post I began to make comparisons between the gold market and the art market from an investment perspective.  Today I want to begin winding up this series of posts by looking at one of the most important, but also one of the most controversial qualities, which is common to both art and gold, and which is crucial to both the gold and art market.  And that quality is beauty.  Gold undoubtedly has an intrinsic beauty, and hence an intrinsic value, that makes it attractive to a large number of people.  Just take a look at how many people wear gold jewellery and you will get an idea of how popular gold really is.  The World Gold Council summarises the allure of gold quite nicely with the following statement:

“Since the beginning of time, the intrinsic beauty, warmth, sensuality and spiritual richness of gold has earned it pride of place as the favourite metal of jewellers. Gold has inspired craftsmen to create objects of desire that unite us with our emotions. In the Middle Ages, alchemists attempted to use their magic to make gold from other metals. They believed that gold was a source of immortality, and so it was used in medicines designed to fight old age and prolong life.”

With art, however, the debate continues to rage as whether or not art actually does have intrinsic value.  I think that it is time for me to settle this debate once and for all.  Some art does have intrinsic value and some art doesn’t.  Let me explain.  Many people struggle to define beauty when it comes to art, but I don’t find it that difficult.  As art is a visual medium it would make sense that beauty, in relation to visual art, must therefore involve the art object it’s self.  What else would it involve,  I hear you ask.  Well, a lot of art these days involves much more than the visual component of art (ie. the art object). Take conceptual art for instance.  Conceptual art may not even involve a visual component at all; the art object is usually replaced by a concept.  You may have noticed that contemporary art often involves a component other than the art object, even if the work is not conceptual, and even if there is an art object.  If you go to any contemporary art gallery or museum, you are likely to find that many of the works are accompanied by lengthy explanations that on needs to read to fully appreciate and understand the visual component of the work.  Combine this fact with the fact that many modern and contemporary art objects would NOT be considered beautiful by most people (if by anyone at all) and one begins to understand that visual art is no longer about beauty, or the art object for that matter. The purpose of art underwent a fundamental change with the onset of the modern era.  Social, political, philosophical and cultural issues infiltrated the art world to an extent that had never been witnessed before.  When it came to priorities, beauty began to take a back seat during what was essentially a second renaissance that saw the role of the artist change from that of an artisan to something more akin to a cross between an avant-gardist, an activist, a revolutionary and an entertainer. Professor Terry Eagleton famously said that `to the avant-garde truth is a lie, morality stinks and beauty is shit’. The task of art, he believes, `is to be a hammer, not a mirror…Art’s job is to unleash contradictions . . . to shatter and wound.’

Eleni Gemtou of the University of Athens summed up the situation relating to beauty and art perfectly in her paper “The Role of Beauty in Art and Science’ in which she said: ‘Many are the works of art that have been created in order to satisfy philosophical and intellectual concerns, to provoke, to alert or even to serve social, religious and political objectives. In these cases, beauty and aesthetic satisfaction are either coincidental or completely absent.’ Gemtou then goes on to say ‘In the first half of the 20th century, art disengaged from its role to represent reality and to express beauty. Artists and movements expressing various world-perceptions, such as Fauvism, Expressionism, Cubism, Futurism etc. abolished traditional styles and introduced the principles of two – dimensionality, deformity, splitting and the projection of the process on the completed work. Form functioned as a revolutionary vehicle, while the subject in many works of art acquired a secondary and even a non-existent role (abstraction)’ (THE ROLE OF BEAUTY IN ART AND SCIENCE by Eleni Gemtou)

To be continued………

Part 2:

http://artmarketblog.com/2010/05/07/what-art-investors-can-learn-from-gold-investors-part-2-artmarketblog-com/

Part 1:

http://artmarketblog.com/2010/04/30/what-art-investors-can-learn-from-gold-investors-artmarketblog-com/

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications

What Art Investors can Learn from Gold Investors Part 2 – artmarketblog.com

What Art Investors can Learn from Gold Investors Part 2 – artmarketblog.com

Lady Writing a Letter with Her Maid by Vermeer

All one has to do is look at the jewellery people are wearing to realise that gold is considered by most people to be a substance of great beauty.  Since gold has very few uses other than as a material for making jewellery and other precious objects, were gold not physically attractive, it would not be anywhere near as desirable as it is.   It is because so many people find gold desirable and attractive that there is such high demand for gold.  If only a small percentage of the population were to find gold attractive and desirable then demand would be much lower. However, it is not just the fact that gold is physically attractive to human beings that makes it an excellent investment and a highly valuable substance.  As I have shown, the desirability of gold can be linked to three main factors:  physical beauty, mass appeal and rarity.  Without any one of these three factors, gold would not be anywhere near as valuable as it is, so it is these three factors that I want to explore in relation to art investment.

Gold is a finite resource which means that only a limited amount of gold exists on the earth.  At some stage in the future all the gold that remains in the earth’s crust will be extracted by mining companies and that will be that.  Gold cannot be artificially produced so only a certain amount of gold will ever exist.  When it comes to fine art, rarity is a factor that comes into play on a regular basis, and is extremely important to consider when approaching art as an investment.  Original works of art are pretty much always one offs and therefore rare in their own right, so it is important for art investors to look at the bigger picture.  Let me explain.  Just like gold, the work of a deceased artist is finite resource, whereas a contemporary artist who is still alive could go on to produce any number of subsequent works of art.  A good example of an artist with a small oeuvre is Vermeer whose oeuvre consists of an extremely small number of works; thirty seven paintings are known to have been definitely painted by Vermeer with a further 13 or so attributed to his hand.  Because there are so few works by Vermeer in existence there is huge demand for his work which usually sells for tens of millions of dollars.  Rarity can also apply to the number of works on the market as opposed to just the number of works an artist produced.  The work of artists whose work is in high demand from public museums and galleries will often fetch higher prices when their works to come on the market because so many of their works are owned by galleries and museums, which leaves less works for private collectors and investors to purchase.

Art investors who want a safer long term investment as a hedge against more speculative investments should therefore be purchasing the work of deceased artists who produced as small a body of work as possible.  When it comes to art investment I firmly believe that art investment should not be a short term speculative investment, as some people believe it should, and should only be approached as a long term hedge against speculative investment markets such as the share market.

Stay tuned for part 3………

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications

What Art Investors Can Learn from Gold Investors – artmarketblog.com

What Art Investors Can Learn from Gold Investors – artmarketblog.com

If am sure that everyone who is reading this post will be aware that the price of gold has increased significantly in recent times and is poised to increase even more over the coming months. The long bull run that gold has been able to sustain has made the gold market one of the most watched and analysed markets on the planet, and has given people even more reason to consider acquiring a physical position in gold. As an art market analyst and art investment expert I try and keep an eye on as many different investment markets as I can in an effort to acquire knowledge and skills that I can apply to the art market. Although the art market is a unique market that appears to have very little in common with other investment markets, I often come across small yet very important similarities when comparing the art market to other markets that usually turn out to be very useful. In fact, even analysing small differences between the art market and other markets can prove to be beneficial when assessing the art market as a whole or a particular sector/event. For this reason I always find it interesting and useful to make comparisons between what is happening in the art market, and what is happening with other investment markets.

One investment market that I have paid particularly close attention to recently is the gold market. I am not only keeping an eye on the gold market because of the progress it is making, but also because one can learn a lot about the art market and art investment from what many people consider to be the ultimate safe haven investment. Gold has been used as a store of value/wealth and a form of currency for thousands of years, and continues to remain the ultimate universal representation of wealth and value. To understand what the gold market has to teach us about the art market and art investment one must first know a few important things about gold and the gold market. One of the most significant reasons that gold is such a highly prized metal is that is a very rare and finite resource. In fact, it is estimated that if all the gold that has been mined on earth to date were put together, it would not quite even fill a 20mx20m cube. Add to this the fact that the amount of gold mined every year would only add 12cm to this cube and one can see exactly how rare gold is. Not only is gold rare, but it also has particular physical properties that make it even more desirable and more suitable as an investment. It is partly because gold does not corrode, rust or tarnish, and cannot be counterfeited, that it is such a suitable store of value and such a popular investment. By purchasing physical positions in gold one can feel pretty confident in the knowledge that it is extremely unlikely that their gold will ever be destroyed.

An article in the National Geographic magazine from January 2009 said that: “Gold is not vital to human existence; it has, in fact, relatively few practical uses. Yet its chief virtues—its unusual density and malleability along with its imperishable shine—have made it one of the world’s most coveted commodities, a transcendent symbol of beauty, wealth, and immortality.” Although the physical properties and rarity of gold contribute significantly to the value bestowed upon the precious metal, there is one other extremely important characteristic of gold that makes it so attractive, and that characteristic is beauty. As the National Geographic article says, gold has an imperishable shine as well as a lovely lustre and beautiful gold glow that seems to make most human beings weak at the knees. The website gold.org sums up the attractiveness has this to say about the attractiveness of gold: “Since the beginning of time, the intrinsic beauty, warmth, sensuality and spiritual richness of gold has earned it pride of place as the favourite metal of jewellers. Gold has inspired craftsmen to create objects of desire that unite us with our emotions. In the Middle Ages, alchemists attempted to use their magic to make gold from other metals. They believed that gold was a source of immortality, and so it was used in medicines designed to fight old age and prolong life.”

What does all this have to do with art I hear you ask? Stay tuned for part 2 !!!

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications

The Rise of Victorian Paintings Pt. 5 – artmarketblog.com

The Rise of Victorian Paintings Pt. 5 – artmarketblog.com

JAMES COLLINSON 1825-1881 THE WRITING LESSON 50,000—70,000 GBP Lot Sold. Hammer Price with Buyer's Premium: 79,250 GBP

Prior to the Scott Sale, Grant Ford, Senior Director and Head of Victorian Art at Sotheby’s,made the comment that: “Sotheby’s is delighted to be bringing this extraordinary collection to the market. Victorian narrative works are the cornerstone of the collection and not in all my time at Sotheby’s – a period of 22 years – has a collection of this quality come on to the auction market. The Scotts were collectors in the truest sense; they had an individual and discerning taste and they only ever bought paintings that they truly loved and understood and which said something special to them. We look forward to exhibiting this wonderful collection around the world and are sure that the single-owner sale in November will be a real highlight of the Autumn sales calendar.”

Even though the odds were heavily stacked against Sotheby’s, the sale of the Scott collection was a major success for the auction house, and a huge victory for the market for Victorian art. A total of 87.6% of the lots sold for a grand total of £4,620,071 against an estimate of £4.1-6.2 million brining the sold by value percentage to 77.6%. Most impressively, a total of at least fourteen new artist auction records were established the most impressive of which was achieved for Sophie Anderson whose ‘No Walk Today’ fetched just over £1 million against an estimate of £600,000-800,000. New auction records were also set for William Dyce, John Calcott Horsley, William Somerville Shanks and Thomas Sword Good among others. A total of 280 bidders took part in the sale many of whom were European collectors and investors which is unusual for a genre that would usually only attract British collectors. Considering the importance of the collection and the provenance of the paintings, however, it is not that surprising that many of the works were purchased by Europeans.

After the sale Ford is quoted as having said Commenting on the sale, Grant Ford, Senior Director and Head of Victorian Art at Sotheby’s, said: “This historic collection has attracted an enormous amount of attention from collectors all over the world but especially from our established clients in the UK. As many of the paintings had not been seen in public for several decades and were in a wonderfully fresh condition, a great deal of excitement was generated. We haven’t seen the galleries and saleroom – here in London particularly – as full and busy for a Victorian picture sale in many years. We are absolutely delighted with the new world record price for Sophie Anderson, which fully establishes No Walk Today as one of the most important childhood subjects of its time, and we’re also thrilled and heartened by the many other world record prices achieved. Today’s results are a testament to the discerning eye of two individuals who were collectors in the very truest sense.”

To be continued……..

Part 1:

http://artmarketblog.com/2010/02/25/the-rise-of-victorian-paintings-part-1-artmarketblog-com/

Part 2:

http://artmarketblog.com/2010/03/04/the-rise-of-victorian-paintings-pt-2-artmarketblog-com/

Part 3:

http://artmarketblog.com/2010/03/11/the-rise-of-victorian-paintings-pt-3-artmarketblog-com/

Part 4:

http://artmarketblog.com/2010/03/18/the-rise-of-victorian-paintings-pt-4-artmarketblog-com/

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications

The Rise of Victorian Paintings Pt. 4 – artmarketblog.com

The Rise of Victorian Paintings Pt. 4 – artmarketblog.com

WILLIAM SOMERVILLE SHANKS, R.S.A., R.S.W. 1864-1951 TIDDLEY WINKS 150,000—200,000 GBP Lot Sold. Hammer Price with Buyer's Premium: 181,250 GBP

Sir David Scott began collecting art in 1910 and over a period of 75 years amassed a large art collection that included 150 Victorian paintings, all of which were auctioned by Sotheby’s in 2008, more than 20 years after Scott’s death (1986). Scott was an eccentric aristocrat whose efforts to maintain a low profile meant that he was able to put together an extremely important collection of Victorian art at his Dower House, Northamptonshire residence in relative secrecy. Scott’s passion for art, the Victorian period in particular, is evident in a comment he made regarding one of the paintings in his collection. According to Scott:”I don’t think I have ever seen another picture by Somerville Shanks but if this is typical of his work I wonder why he is not better known, for it is really beautifully painted, the dress of the girl in the foreground is reminiscent of Sargent at his best and of course the whole picture is delightfully nostalgic, absolutely redolent as it were, of a day nursery of the 80s or 90s.” This comment is also evidence of how under-valued and under-appreciated the Victorian era is, particularly the work of Victorian painters.

The length of time that the paintings in the Scott collection had remained off the market made the sale even more enticing to collectors and connoisseurs who turned out in force to take advantage of the opportunity. “A Great British Collection” was the title given to the sale – a move that Sotheby’s hoped would distance the sale from the stigmas associated with the word “Victorian” and bring more people to the sale. At the time of the sale, in November 2008, the art market was still reeling from a major crisis of confidence brought about by the hyperinflated market for contemporary art, which led to many art market commentators making rather sceptical predictions about the sale. Because the market for Victorian paintings was dominated by a small number of passionate collectors and connoisseurs, there was particular concern when the auction took place due to the fact that the removal of even one of the main patrons of the Victorian era could spell disaster for the whole Victorian paintings market.

To be continued……

Part 1:

http://artmarketblog.com/2010/02/25/the-rise-of-victorian-paintings-part-1-artmarketblog-com/

Part 2:

http://artmarketblog.com/2010/03/04/the-rise-of-victorian-paintings-pt-2-artmarketblog-com/

Part 3:

http://artmarketblog.com/2010/03/11/the-rise-of-victorian-paintings-pt-3-artmarketblog-com/

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications