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.
**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