Art as a Hedge Against Inflation?
For information only. Not intended as investment advice.
Art as a Hedge Against Inflation?
For information only. Not
intended as investment advice.
Get Ready for Inflation and
Higher Interest Rates
"The unprecedented expansion of the money supply could make
the '70s look benign" -Arthur Laffer
Wall
Street Journal: June 11, 2009
The "Great Recession" of 2008-09 resulted in the creation of trillions of dollars backed by little more than IOU's, promises and "good faith" obligations. Many experts believe these actions by governments around the globe will eventually result in inflation ...even hyperinflation. A relatively complex subject, inflation typically results in an erosion of the purchasing power of goods and services. During such times many investors tend to embrace "tangible assets" --things that have a physical substance and that can literally be touched-- such as currencies, buildings, real estate, vehicles, inventories, equipment, antiques, collectibles, stamps, gems, precious metals.. and works of art.
Fine Art as an Inflation Hedge?
Yes? No? Maybe? Here's what some experts
have to say.....
NEW YORK TIMES™
Art Appreciated as Inflation Hedge
May 11, 2009
(Selected excerpts) "...While the financial crisis has hit the hedge fund heavies and Russian industrialists who bid up art during the boom, executives say well-heeled collectors are buying art now to bolster their vaults against a coming bout of inflation. ...Industry observers credit a familiar figure from the past — affluent collectors scared of inflation. History does show that art prices rise during inflationary periods. The Art 100 Index, compiled by Art Market Research, shot up 130 percent from 1977 to 1982, a period in which prices rose 80 percent. With record amounts of fiscal stimulus being pumped into the system, economists expect inflation to return..."
Click here for full
article ©NY Times
MONEYWEEK™
The UK's best-selling financial magazine
(Excerpts) "Gold is frequently cited as investors' favorite safe haven. But what about art? Art has a decent track record during times of inflation – something central banks seem keen to see return... And as central banks flood the global economy with cash, competition for goods and services could provoke inflation – perhaps quite soon. That would push up the price of 'real' assets, such as art, says Angus Murray, chief executive of the recently launched Castlestone Collection of Modern Art fund... Art can indeed be a "valid refuge" from inflation, New York-based art dealer Richard L. Feigen tells Bloomberg..."
Click here for full article ©Moneyweek
INVESTMENT WEEK™
Art as a hedge against inflation
30 Nov 2009
(Excerpts) "...Inflation is inevitable – buy a Picasso. And a Warhol and a Fontana and a Rauschenberg… You probably think such a suggestion is a bit crazy, but I could not be more serious. So serious in fact we are telling all our clients and prospects to put at least 5% of their portfolios into art... Why art? I believe long-term art prices reflect a direct relationship to money supply growth. I am not talking about contemporary art, but art from well-known artists with established auction results.. In this respect, art is much like gold in that the price of both responds to money supply. A comparison of gold and art prices should therefore show a similarity and this is certainly the case... So given the dramatic rise in gold prices over the last year or two, we should be able to expect art to gain by similar amounts in coming months for the correlation to hold true... In a world where fixed interest, property and cash all look unattractive, I am advocating that my clients allocate larger percentages of their portfolios to real assets, including gold, precious metals, other commodities and most definitely art."
Click
here for full article ©Investment Week
Art
Investing: The Inflation Hedge Nobody’s Talking About
by Louis
Basenese, Advisory Panelist
Senior Analyst, The Oxford Club
Wednesday, June 3, 2009: Issue #1010
(Excerpts) "...
I crunched the data on gold, art and inflation since the end of the Bretton Woods system. For art, I used the "Mei/Moses Fine Art Index," which tracks the prices of art based on repeat sales at auction, and captures 90% to 95% of the market.
Here’s what I found:
The Wall Street Journal reports "Sales Pick Up at New York Art Fairs." The same seems to be happening at major auction houses like Sotheby's, Christies' and others. Click here for more recent auction results... and here... and here.
Like any investment, buying art involves risk. Advisors recommend the best strategy is to (a) buy works of well known, mature or deceased artists with established followings and a provable history of sales, (b) buy works that are one-of-a-kind or of limited quantity and (c) buy the highest quality available. Above all, "always buy what you like." After all, art is meant to be displayed and enjoyed --not stored in a vault.
Obviously no investment is completely risk free nor guaranteed to produce a profit. Nor can art be construed to be a perfect hedge against an array of booms, busts and an endless array of economic crisis'. However, with the prospect of inflation looming... and the age old, universal desire to own beautiful things... some people see investing in tangible assets --such as art-- as a way to have the best of both worlds.
© Souders Fine Art