The Value in Art

The value in ART as an Investment

The last line in a thoughtful book by Melanie Gerlis, Art as an Investment?, does not do her work justice, “Those looking at art purely as an investment might first consider looking elsewhere.” In fact, she makes a cautious case for those interested in fine art who also have an interest in investing. But first, full disclosure since I am biased. Both fine art and antiquities constitute a meaningful portion of my investment portfolio. As I write this note, works by Max Beckmann, Chuck Close and Sol Lewitt surround me. A visit to the San Antonio Museum of Art will find a dozen Egyptian antiquities from our collection on display.

Another quote to provide some context for the following conversation comes from another great read, The Value of Art by Michael Findlay, “A collector has one of three motives for collecting; a genuine love of art, the investment possibilities, or its social promise” (quote by Emily Hall Tremaine). Anyone not meeting all three criteria is unlikely to enjoy the rest of this note.

Gerlis undertakes a laudable enterprise by comparing artwork acquired for investment purposes with other asset classes. An editor for The Art Newspaper, she is a knowledgeable commentator on the business of art. Her book makes one-on-one comparisons of fine art to; equity markets, gold, wine, real estate, hedge funds and, intriguingly, luxury goods such as jewelry and watches. By defining each investment’s attributes – such as market transparency, liquidity, market makers, and valuation metrics – she creates a context useful in determining the differences between these investment options.

We’ll focus on the world of fine art starting from a time around 1850. However, a caveat is in order here since the art market is a complicated subject and rather than try to qualify remarks that obviously have exceptions (most of them), let’s just assume that all comments below are, “generally speaking.”

The quick and the dead in art.

Following Gerlis, it seems appropriate to use metaphors taken from the world of investing herein. Conceptually there are two distinct markets with an important overlap. On the one hand are dead artists, the majority of which have some standing in the cannons of art history and criticism. Then there are the living artists whose reputations will evolve for better and worse, as should their artistic output, over a lifetime. In between are the few long-living artists who have achieved accolades likely ensuring their place in history. This can be viewed similarly to that of value and momentum stocks, assuming a gray zone here as well.

The Card Players, by Paul Cézanne

The Card Players, by Paul Cézanne

Value artists would include names like Cezanne, Pollock, Warhol and, of course, Picasso. Like a big established multinational corporation, the price of the art will fluctuate over time, but there is an expectation of enduring intrinsic value. Both the equity and art markets experience good and bad times, but the trend over long periods is upwards. Categories having demonstrated value over time include Old Master and Impressionist works. The place of post-WW II abstract expressionists also appears to have been firmly established, with Pop Art probably not too far behind. However, much like gold, art tends to maintain value over time, also contributing to the value in art. Paintings, in particular, have a curious tangential value as insurance. During times of crisis, paintings can be quietly transported across borders, their value not being linked to any particular currency, unlike real estate or some equities.

Momentum artists, on the other hand, remain an unknown entity as far as their long-term valuations are concerned. A look at the dot-com stock era is a good context for thinking about contemporary art – where hopes and dreams intersect with savvy marketing to create the “next big thing.” Or not. As one professional dealer put it, the worry is whether a work of art is even worth displaying five years from now.

With the rise of mega-dealers like Gagosian and Zwirner, who make a lot more money than many of the artists they represent, the hype is an ever-present danger. We hear about the unknown artist who finds their work suddenly fetching high prices at auction, but not their peers watching prices drop in the same market space. The books listed at the end of this essay give many examples of just how far a new superstar can fall. And how fast. There is a difference between a fad and a trend. Fads come and go, often with little in the way of residue. Trends are indicative of long-term shifts in taste or behavior. People generally tend to “get” Impressionist paintings. Not so much with “video art.” With contemporary art, the winner can more often be the dealers rather than the artists.

Banksys-"Supporting Calais",

Banksys-“Supporting Calais”,

Currently, there is much conversation – and sales activity – being defined by issues unrelated to the value in art. Contemporary art originating in the Middle East and Latin America are hot art commodities right now even if their shelf life is unclear. A decade ago contemporary Chinese art was a market darling, just as the Aboriginal art of Australia had been twenty years before that. On the cutting edge in trendy art markets like New York is work by the alternative lifestyle crowd who now enjoy accolades instead of opprobrium for being LGBTQ. There is also a geographic risk when discussing a “local” artist as these tend to more often be about the person instead of their art.

So, what is the value in art?

I’ll suggest that what makes great art is an ability to engage people over time and space, by embracing our shared humanity. This leaves doubt as to the long-term viability of art focused on a place or personality. Art tied to political protest (think of the French Revolution as well as Kent State) have not tended to endure. Like comedy, art linked to a specific context, ages quickly. The humor of the Marx Brothers and Lenny Bruce can be mostly lost on Millennials. Yet the works of Chaucer and Shakespeare are routinely remade for contemporary consumption because the underlying humor is based on human foibles that don’t change much over time.

A friend once proudly pointed out that he had paid over $17,000 for a painting bought from a local art gallery dealing in local artists. Setting aside the temptation to judge the work on artistic merit, it is noteworthy that considerations regarding the placement of the painting (colors and textures already in the room) played a prominent role in its selection. The likelihood of reselling the painting at any time in the future for even a few hundred dollars is non-existent. The best that can be hoped for is to pass along an item of sentimental value to the kids.

The case can easily be made that the same dollar amount spent on a respected, post-war artist could have found a work fully meeting the decorative criteria. With a little care in selecting art from an important period of an artist’s oeuvre (granted, most likely to be a drawing or print instead of a painting), the likelihood of selling the work near the price paid improves dramatically. And from personal experience, I can say that as our tastes evolve, being able to sell one work to purchase another is an additional benefit of being mindful when thinking about what’s hanging on your walls. As with any endeavor, there is a lot of work to be done in negotiating the vagaries of the fine art market. Frankly, most people would likely be as happy with handsomely framed museum posters of their favorite paintings.

Personal value in art. “Pilate Washing His Hands”, -Albrecht Dürer

“Pilate Washing His Hands”, -Albrecht Dürer

One final consideration is that important works of art, properly prepared for display and cared for, endure across time. As a kid, I was hypnotized by a book with the complete engravings of German artist Albrecht Dürer. One in particular, “Pilate Washing His Hands” from 1512 informed many of my early drawings. Today an original of that engraving, likely printed around 1514, enjoys a place of prominence in my office. Even after looking at that image for fifty-years it still fills me with endless delight.

At some point, the Dürer engraving will find new owners who also appreciate the master’s skill. Not only will I have been lucky enough to enjoy Dürer’s art up close and personal, I will be part of a group of collectors stretching across 500-years intent on ensuring others also get a chance to see the real thing instead of as a page in a book. Monetary value is not solely what defines the value in art.

A brief bibliography for someone thinking about art as an investment:

More Invest-Notes

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