The View from the Edge of the Universe

"The Art of Investing in Art" at Fay Gold

Fay Gold's current show is entitled "The Art of Investing in Art" and presents work by over 40 artists that the gallery is recommending as good investment choices.  The show consists of a mix of blue chip contemporary artists such as John Baldessari and James Rosenquist along side many artists represented by Gold. 
There is some terrific work in this show, especially the Baldessari editions and a photograph by Zhang Huan.  And Tracey Moffat's piece from her Adventure series is a treat.
The show though, presents a very confusing message about what constitutes investment quality art.  I agree that Gold took the right approach mixing famous and truly investment-grade names with lesser-known-but-promising artists that the gallery believes to be good bets for the future.
Its the lesser-known artists that I have a problem with.  Not with the work, but with the criteria for choosing them, which was non existent.  There was absolutely no reason to select the included artists over any others in Gold's stable.  If I were one of Gold's represented artists that didn't get featured in the show, I'd be pretty unhappy.  If I were one of Gold's clients that collected work by the unselected artists, I'd be pretty unhappy too.
Tell me Fay Gold, why Rocio Rodriguez and not Carolyn Carr?  Why Ruth Dusseault and not Micheal Gibson?  Why Zoe Hersey and not Tony Hernandez?  Why Rana Rochat and not Robert Jessup?
This is a no win show.  Gold has lost credibility by arbitrarily including artists from her stable while excluding others with equal skill and resumes and in turn has alienated her own artists and clientele.
I don't have a beef about the show, its actually not a bad show (although it looks suspiciously like her recent inventory clearance sale; oops I mean 25th anniversary show); but I do have a problem with the arbitrary selection of the works.  If you are buying work with an eye to investment, this show won't help you formulate a methodology one bit.

Having said all this, including a work by Ed Mapplethorpe, Robert's brother, in this type of show is just silly.  I know Fay Gold hit some home runs early in her career, but hawking Ed Mapplethorpe as investment grade art is a strike out.

Who are the Art Market's Best Performers?

Not an artist, nor a gallery, but the websites Artprice and Artnet.

Artprice's & Artnet's  12 mo. stock price history: 
   

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This confirms what I've been saying all along:  there is no bubble waiting to burst; instead, the market is hot (okay maybe a bit too hot, but not bubbling hot) because of the thousands of new collectors entering the art buying arena.  Why?  More transparency, made possible by the excellent market data made available to any Tom, Dick or Erik out there.  These sites are both known for their vast and excellent martket data research tools and collectors are subscribing in droves, making both companies suddenly quite profitable.
Of course, the introduction of on-line brokerages certainly fed the stock market craze of the late 90's as well and we all know how that turned out, but the art market is a little different and the contraction, if it ever comes will be much less pronounced.  Why?  Art is still a long term hold and its not the easiest thing to sell; so the market is enjoying a massive expansion of buyers but not (at least not yet) sellers. 
My prediction then, is the emergence of many more secondary market sales outlets in the near future and that is when the market is going to soften up.  This may take years though.  With all this buying going on, selling will be inevitable and there is a market niche to be filled there. 
So how to sum this all up?  I don't know and its time for bed.

Steichen sells for $2.9 million

A rare print taken by US photography pioneer Edward Steichen has set a world record for the highest price paid for a photograph at auction. $2.9 million is well over double the previous record set by Richard Prince.

More here:
http://news.bbc.co.uk/2/hi/americas/4715106.stm

You gotta love MAO

I love it when bloggers get really really pissed off.

The Perfect Medium: Photography and the Market

According to Artprice, the segment of the art market that has by far performed best from 1990-2005 is photography.  Artprice has developed an index that tracks art market segments in much the same way that the Dow or the S&P 500 tracks stock performance.   Although their index indicates that art in general has not performed well since 1990 (their index starts at the same time as the art market "crash" of the early 1990s...had they set their starting date at a different time... say 1980 or 1995, their index would tell a more positive story),  photography weathered the downturn of the early 1990's better that most other segments and has enjoyed higher appreciation in the recent boom years.
Why?  Photography's recent wide acceptance as an art form only partially explains its performance.  In fact, its wide acceptance may be a result of its performance.  Money talks you know.   Why then, does photography appear to weather storms better in down times and outperform other genres in good times?  The ever-increasing market data available to collectors coupled with the fact that the nature of the medium is to produce near-exact copies answers the question.
The ability to discern market values and selling prices of objects is a cornerstone of transparent, well-functioning markets, from diamonds to real estate.  Real estate appraisers can determine values of properties with a high level of certainty because of the wealth of data available.  Consider a certain neighborhood in a particular city.  Two houses of similar size and condition and on similar sized lots will nearly always carry very similar values.  They have enough highly comparable traits to allow an appraiser to research other houses in that neighborhood that have sold with similar traits and accurately  determine a value based on  past sales.  Location and size matter so much more than the color of the carpet that the nuances between the two houses have little effect on the value...perhaps 10% at most.  Now consider two identically-built condominium units on the same floor of a high rise and with the same exposure (i.e. they face the same direction).  The certainty that these two homes will be valued identically is very high.  At that point they become like commodities - nearly every trait of the two units are identical and thus their value will be identical. Real estate holds its value in a large part because of this reason.  Buyers have a high level of confidence in the market because of this comparability. (By now I'm sure you see where I'm going with this.)
In the art market, comparability is much more difficult.  Especially in the world of unique objects.  Far too many subjective factors come in to play.  For this reason, the NYU economists Jianping Mei and Michael Moses in developing their credible art index only use resales of the same work of art over time in evaluating price fluctuations.  According to an article written by them in the Journal of Investment Consulting, their indexes are based on a total of just over 7500 cases of resales primarily sold over the last 100 years when market data is most available.  This is a sufficient number of examples to develop an overall market index, but is less helpful in determining the predictive value of a particular painting.  There are just too few common traits.
Photography tells a different story because for any particular work there are numerous nearly identical copies.  Where a painting may sell only once in a century, a photograph (or one if its identical copies) will likely sell many more times.  Photographs function more like condominium units in the same building where paintings funtion more like houses in the same city.  It is my position, given the huge amount of market data now available and the ability to more accurately discern a photograph's value because of the existence of identical copies, that the photography market will perform more stably than other market segments and over time will perform better.
Further, I  believe that the differences in quality between individual works by a photographer are less broad than differences in works by artists in other mediums due to the exacting nature of the medium.  The fewer the differences, the more items become like commodities and the better their markets function.  This is not to say that photographs are commodities but they function far more like a commodity than a painting.
An example that helps prove my point is Hiroshi Sugimoto's Seascapes.  These works are among the best and most predictable performers on the auction market today.  Aside from the quality and importance of the work, the works in the series have a high number of common traits with the differences being almost quantifiable much like the differences in the color of a diamond.  This allows collectors to have much higher confidence that the piece will hold its value and will perform in sync with other pieces in the series.  And this is exactly what makes a market robust.
You may ask why prints are not as good as photographs from a market standpoint.  The reason is simple:  where a photographer usually sticks to one medium - photography, prints are usually only part of an artist's overall body of work and are thus evaluated within the entire body.  Here then, more subjective factors come in to play.  Further, prints (with few exceptions) have notoriously been viewed as  less desirable to collectors as compared to paintings.  Really, if given the choice, would you rather have a great Picasso print or an average Picasso painting?  On the other hand, with photographer Philip-Lorca Dicorcia for instance, that choice simply does not exist. When photography is only part of an artist's overall body of work, it tends to then behave more like a print.  Jack Pierson is a good example here.
Increased market transparency is playing a large part in the current market boom.  Because of photography's ability to generate better comparable values, it possesses a unique trait that allows its market to have greater transparency and predictability, two traits that will likely make it the perennial market leader.

The Bomb Print Club

I'm sure this has been tried before, but this is the first time I've run across it.  Bomb Magazine is offering 25 memberships to its "print club" for $1000 each.  Once a member, you get preferential access to the magazine's editions that will be produced quarterly at half the retail price.  This year's prints are by Brian Tolle, Paul Pfieffer, Sharon Harper and Inigo Manglano-Ovalle.  The good news is that the memberships are tax deductible (Bomb is a charitable organization).  The wierd news is that the overall concept is a bit flawed.  The club, according to the site, can only have a maximum of 25 members and your membership apparently stays in place until you buy four prints.  My bet is that, on average, members will take 3 to 4 years to actually buy four prints and at least a few will pay the $1,000, buy a print or two and then forget about the whole thing, thus locking up the membership forever.  I subscribed to Parkett Magazine in part to have first dibs on their editions thinking that I would buy many of them becasue they offer editions by the the best artists working today.  In 4 years of subscribing, I have bought exactly one (although I did let a few..the Ellen Gallagher and the Gregor Schneider...get away that I should have bought). I love the magazine though.  My point is that even if Bomb lines up very good atists to produce editions for them, collectors are still highly selective and it seems likely that even at 50% off, Bomb's print club members will be passing more than  playing.  My prediciton: Bomb's print club will bomb.

The Art World has Lost Its Mind

I'm just beginning to digest the fall auction results, but it seems like insanity prevails.

Exhibit A:
This Loretta Lux sold for over $45K
Exhibit B:
This Dana Schutz sold for over $96k

Regardless of what you think about these artists (I try not to think about them very often), these are middlin' pieces.

Artnets Ten Tips For Collectors

Artnet's Ten Tips for Collectors  is one of the more interesting lists regarding collecting (Art News ran a do's and dont's list a few years ago) that I've seen in a while. 

Of particular interest:
#3. Know the artwork before you get to know the artist.
I agree. You have to live with the artwork, not the artist (well some of us get to live with the artist too).  I've made this mistake.  I call it "buying a name".  You'll know you've "bought a name" when the work starts to hang in a more and more obscure area of your home and then your sister's home until eventually its forgotten. 

#7. Avoid playing the competitive game with other collectors, racing to buy "new" work by the latest "hot" artist. Usually the best pieces are the ones that are left over.
That last sentence is a real zinger.  Reader, do you agree with that?  For all my talk about who's hot and investing in artwork, in reality I'm a plodder when it comes to collecting and that means I'm often picking through what's left over.  Especially collecting from Atlanta.  But being very careful, very patient, and developing relationships with artists and dealers will pay off for you.  I looked for two years before finding an artwork by Uta Barth that I both loved AND could afford.There is lots and lots AND FREAKIN' LOTS of art out there, but only a fraction of it is quality stuff.  Keep your snout in the dirt.  Thats where the truffles are.

Art as Investment Revisted (calculations added)

Note: I've gone ahead and posted my caculations in Excel format here.

I had lunch last week with fellow collector Renee Brody Levow who later sent me a very interesting article from The Journal of Investment Consulting about the viability of art as investment.  The bottom line is that art can be as good or better investment than stocks but only if held for a long period.  The art market and the stock market have had very similar historical returns according to the Mei Moses Fine Art Index, but the difference is in the transaction costs.
Consider this analysis:
Say you invested $100,000 in a variety of mutual funds and at the same time purchased $100,000 of investment grade artwork.  I define investment grade artwork as artwork by artists with a substantial auction history.  Assume both your mutual fund and your art portfolio will appreciate at 8% per year.
Transaction costs are as follows:
The mutual funds have no purchase or sale costs (i.e. they are "no-load" funds) and that the fund has an internal management cost of 1.5% per year of the total asset value which is average for mutual funds. 
Only 90,000 of the initial $100,000 in artwork purchases actually go towards art.  The other $10,000 goes toward sales tax, shipping, framing etc. Upon sale, you will net about 73% of the sales price, the remainder will go to commissions etc. (73%  is about what you net selling at auction considering  a 20% buyer's premium, a 10% seller's premium and 2% estimated out of pocket costs.)  So where is the better place to put your money?  The mutual funds beat the art portfolio if one sells at anytime before 27 years.  After 27 years, the art portfolio beats the mutual funds.
I crunched the numbers and here are my results.
Sell in 5 years and net:
Mutual Funds: $136,239
Art Portfolio:  $  95,535
Sell in 10 years and net:
Mutual Funds: $185,609
Art Portfolio:  $141,841
Sell in 15 years and net:
Mutual Funds: $252,871
Art Portfolio:  $208,412
Sell in 20 years and net:
Mutual Funds: $344,508
Art Portfolio:  $306,225
Sell in 25 years and net:
Mutual Funds: $469,353
Art Portfolio:  $449,945
Sell in 30 years and net:
Mutual Funds: $639,440
Art Portfolio:  $661,117

Here's the bottom line:  Buy! Buy! Buy!  Why on earth wouldn't you?  Here is an object that can bring so much fulfillment and interest into your life, is a fascinating and fun (if a little cultish) world to be a part of, is hugely educational, AND YOU CAN MAKE MONEY DOING IT!!!  And if you hold your art long enough, you can even beat mutual funds. I believe that the non-monetary rewards to be had from owning art make it a very attractive investment even at a holding period of 15 years or more.  You say you can't afford it?  Baloney.  Investment grade artwork can be had for under $1,000.  And research indicates that lower priced pieces are actually a better investment than their higher priced counterparts.  Check out my list of limited editions in the left column of my blog for good sources of lower priced items.  Go for it!

Bottom Feeding for Fun and Profit!

As a collector I'm nothing more than a loose thread on the lapel of Charles Saatchi's Saville Row suit.   But life near the bottom (of the art market at least) doesn't mean than you can't buy first rate, important work with significant investment potential.

Consider these gems:
Thomas Ruff, d.p.b. 08, 12" x 16.5", signed and numbered c-print in an edition of 250 - Whitechapel made this edition available in late 2002 for a paltry $230.  Although never resold at a major auction house, this photo has sold on ebay many times, most recently for $1,800!

Takashi Murakami, Homage to Francis Bacon (Portrait of George Dyer), 26" x 26" signed and numbered lithograph in an edition of 300 - Timing is everything when picking up these pieces and the time to buy Murakami lithos was last summer on ebay when they were selling less than $600.  In earlier years, you could pick one up for less than $300.  This piece sold a few months ago at Christies for $2,700.

John Currin, Rachel as 'The Hag', 12" x 17"signed and numbered giclee print in an edition of 200 - In conjunction with Currin's show there, the Serpentine Gallery sold this edition in 2003 for around $350.  The print sold at Christies in September 2004 for $1,660.  UPDATE:  This print sold June 6 '05 at Phillips for $4,560.

 

 

Jenny Saville and Glen Luchford, Closed Contact A, 11.25" x 16.25" signed and numbered c-print in an edition of 25.  The deal to beat all deals, Gagosian offered this piece in a custom made Plexiglas box that contained the print along with a stunningly produced exhibition catalog.  The price: $500.  I'm not kidding.  There were three other images available and one of the other three is up for sale at Sotheby's on June 23 with a pre-sale estimate of 1,800 - 2,200 GBP ($3,260 - $3,985). I've seen the catalog alone sell for $200.

Sam Taylor-Wood, Looking Out, 6.5" x 22" signed and numbered c-print in an edition of 200.  Counter Editions sold this print out in a flash a few years back with the lucky first purchasers snapping it up for only $660.  It has since sold three times at auction for an average price of $2,885.

What do these works have in common?  First, they are all by today's superstars.  Second they are all first rate images and an example of the artist's recognizable style.  Finally they are all signed and numbered.  Too often when artists do special editions in large sizes, they create a second rate work that is barely identifiable as by the artist.  But when they hit the mark, the work usually sells out quickly and resells at a tidy profit.

Of my best buys, the Glenn Brown and the Paul Pfieffer are your best bests for investment potential.  However the Pfieffer has long ago sold out (dealers are now asking $3,000 - $4,000) and Serpentine will make you agree not to resell the Brown before they allow you to purchase one.

Just like truffles, sometimes the best pieces are found by keeping your nose to the ground and doing a little digging.  My BIG hint for the fall:  Whitechapel will be mounting a Richard Prince show and they will almost certainly produce an editioned work to accompany the show.