{"id":28274,"date":"2012-03-15T08:27:29","date_gmt":"2012-03-15T12:27:29","guid":{"rendered":"http:\/\/countingpips.com\/fx\/2012\/03\/15\/profiting-from-the-art-boom-part-ii\/"},"modified":"2012-03-15T08:27:29","modified_gmt":"2012-03-15T12:27:29","slug":"profiting-from-the-art-boom-part-ii","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2012\/03\/15\/profiting-from-the-art-boom-part-ii\/","title":{"rendered":"Profiting from the Art Boom, Part II"},"content":{"rendered":"

By The Sizemore Letter<\/a><\/p>\n

\"\"<\/a><\/p>\n

Neil Caffrey<\/p>\n<\/div>\n

Perhaps it is all the research I\u2019ve been doing lately on investing in the art market, but I find myself enjoying the exploits of Neil Caffrey, the gentleman art thief, bond forger, and lead character of USA\u2019s White Collar<\/em><\/a>.<\/em>\u00a0 In the recent season finale, Mr. Caffrey was kind enough to return to its original owners a priceless Raphael painting he had \u201cborrowed\u201d to avoid implicating his ex-girlfriend.\u00a0 Mighty sporting of him.<\/p>\n

Caffrey has a taste for the finer things in life, and an eye for fine art.\u00a0 Alas, I realized a long time ago that I will never have Mr. Caffrey\u2019s fashion sense, let alone his artistic connoisseurship.\u00a0 And it is precisely the exclusivity of this market that creates its value.<\/p>\n

Earlier this year, I wrote a piece for MarketWatch about investing in the art market (see \u201cProfiting from the Art Boom<\/a>\u201d).\u00a0 In the article, I tied the boom in fine art to a broader investment theme\u2014the rise of the global nouveau riche, led by the legions of new high-net-worth individuals in China and other emerging markets\u2014that was causing a boom in everything from high-end cars to expensive booze.<\/p>\n

I warned against investing in art directly, arguing that it is a \u201cthinly-traded market dominated by a relatively small number of expert opinion makers and wealthy patrons\u201d and that the high prices for each piece made portfolio diversification all but impossible with less than a nine-figure net worth (I\u2019ll save you the chore of counting on your fingers; that would be a net worth of 100 million dollars).<\/p>\n

Interestingly, an entire niche industry has sprung up to assist modestly wealthy investors with overcoming these obstacles.\u00a0 Artvest Partners<\/a>, a New York-based investment advisory firm run by two long-time veterans at auction house Christie\u2019s, Jeff Rabin and Michael Plummer, offers \u201cinvestment advice for the art market.\u201d<\/p>\n

Among other services, Artvest offers separately-managed art investment accounts, art investment funds and partnerships, and art financing.\u00a0 They even offer estate planning for investors with art assets in their estates.<\/p>\n

In the firm\u2019s Fall 2011 Market Analysis, Artvest made comments similar to my own, noting that the art market is \u201copaque, illiquid, unregulated, non-commoditized and emotional\u201d and that entering the market without doing significant study was akin to \u201cletting a child drive the family car.\u201d\u00a0 Well said, and I would argue that the same would apply to most alternative investments.\u00a0 Insiders have enormous informational advantages that the average investor simply doesn\u2019t have.<\/p>\n

Artvest also picked up on another theme I\u2019ve been covering\u2014that the global boom in art is being driven by China.\u00a0 Chinese investors accounted for just 5% of art sales as recently as 2006.\u00a0 By 2010, they had risen to 19%, and the number continues to march higher.\u00a0 What\u2019s more, in addition to buying Western art, Chinese investors tend to fancy their domestic works as well.\u00a0 Chinese art has been a bigger seller in recent years than Impressionist & Modern and Post-War & Contemporary\u2014traditionally the two most broadly traded sectors.<\/p>\n

Investors have begun to fret about slower GDP growth in China and on what affect this might have on Western firms that export to China (see \u201cWhy China\u2019s Slowdown Won\u2019t Hurt Luxury<\/a>\u201d).<\/p>\n

At 7.5% GDP growth, I\u2019m not particularly worried about the prospects for China\u2019s wealthy.\u00a0 Should the property market continue to weaken or China\u2019s banks come under pressure, I would recommend that investors dump luxury-themed stocks and avoid art investments.\u00a0 But until then, I would continue to recommend both as \u201cbackdoor\u201d ways to get exposure to China\u2019s wealthy.<\/p>\n

In my last article on art, I suggested that readers invest in art indirectly, though a company like Sotheby\u2019s (NYSE: $<\/span>BID<\/a>)<\/strong> that auctions it.\u00a0 I continue to view this as the best option for most investors.<\/p>\n

But investors with larger bankrolls and a willingness to dig into the research might take a stab at something a little more exotic.\u00a0 A classical Chinese painting, anyone?<\/p>\n","protected":false},"excerpt":{"rendered":"

By The Sizemore Letter Neil Caffrey Perhaps it is all the research I\u2019ve been doing lately on investing in the art market, but I find myself enjoying the exploits of Neil Caffrey, the gentleman art thief, bond forger, and lead character of USA\u2019s White Collar.\u00a0 In the recent season finale, Mr. Caffrey was kind enough … <\/p>\n

Continue reading “Profiting from the Art Boom, Part II”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-28274","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/28274","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=28274"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/28274\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=28274"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=28274"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=28274"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}