Investing in Genius
December 24, 2014 6:14 AM   Subscribe

James Stewart of the New York Times has written of the current investment boom in art. `For better or worse, fine art is now firmly planted alongside equities, bonds, commodities and real estate as an asset class. ... `A lot of contemporary art is aggressively ugly,' Professor Galenson said. `That doesn’t matter in terms of its value.'” Felix Salmon believes it is Pre-industrialist capitalist waste. While James Kwak believes it is by definition a bubble, but one where fortunately, "you can pass off your downside risk to the government — which makes this bubble a lot less risky for `investors.'”
posted by TheProudAardvark (19 comments total) 14 users marked this as a favorite
 
This is my first minimalist meta conceptual art self referential art post.
posted by sammyo at 6:48 AM on December 24, 2014 [1 favorite]


Bidding for the previous conceptual art will commence at $10,000.
posted by sammyo at 6:49 AM on December 24, 2014 [2 favorites]


Twas ever thus? Art as an investment has always been a cyclical thing. The only thing that changes is the sort of art that gets swept-up in the buying, as in-vogue styles ebb and flow.
posted by Thorzdad at 6:50 AM on December 24, 2014


the works selling for these high multiples are important works that art historians have deemed innovative and have had influence.

Ah, the art history racket. Funny how that can work the other way around, and for a price an art historian or two can always be found to declare innovative that in which you have invested.

It's still just stuff you can't eat.
posted by spitbull at 7:02 AM on December 24, 2014 [1 favorite]


Twas ever thus?

Only since the Renaissance, really. I like John Berger's theory that the development of perspective in Western visual art reflected the rise of the propertied classes and their view of the world as that which could best be perceived in relation to their own holdings.
posted by spitbull at 7:03 AM on December 24, 2014 [5 favorites]


So by all means buy art — but if you do buy art, buy it in the primary market, from a living artist. And think of it as what it is: consumption, rather than investment. If art is becoming an asset class, then the whole global economy will suffer as a result.
What Salmon and Kwak miss is that it *is* consumption and on a grand scale, but the people involved can't enjoy anything unless they think about it as an investment. These are people who can't appreciate a painting except by thinking about how much they paid for it, how much it's worth to someone else and how to hedge it if the value drops. The problem isn't unproductive capital, it's that these are the sort of utterly callow, ignorant, completely self-obsessed gamblers who are making the decisions on how to allocate capital in the rest of the economy.

It's what you get when you are so wedded to ideology that you believe running the economy can be done without any value judgments or particular knowledge beyond an obsession with making the numbers in an investment portfolio come out positive, a job which is best done, literally, by a crackcocaine-addicted monkey.
posted by ennui.bz at 7:04 AM on December 24, 2014 [16 favorites]


Art is an incredibly dumb investment. It has (as a class) a relatively low rate of return. It is very illiquid. Worst, it is HIGHLY correlated with more conventional asset classes. It doesn't diversify a portfolio and drags down the performance.

Every market cycle some doofus brings up 'let's make art an investment' forgetting that art markets are just an epiphenomenon of underlying dumb wealthy people, and a surfeit of them is usually tied to stock market performance.
posted by leotrotsky at 8:01 AM on December 24, 2014 [7 favorites]


It's like Tide for the super-rich, but it doesn't clean anything.
posted by RobotVoodooPower at 8:07 AM on December 24, 2014 [5 favorites]


Kwak's point is pretty dumb. He says we can pass off downside risk to the gvt, but you really can't. If I buy a painting for 100 and it subsequently declines to 50, I can sell it for 50 or donate it and receive a deduction worth 20. Whatever the merits of the charitable deduction, it's not downside protection.
posted by jpe at 8:20 AM on December 24, 2014 [1 favorite]


The explosion of art as an investment, is, as far as I can see, a symptom of the global saving glut, a predictable result of increasing economic inequality worldwide. The very top economic echelon cannot possibly use up its massive assets in buying life necessities, so they invest in art, real estate, stocks, and other bubbles. Michael Pettis writes about this very well on his China blog and points out that excess savings is just the opposite of excess demand, which we have not seen in decades. Thus, the new economic normal of spiraling prices in "investments" such as art.
posted by Atrahasis at 8:34 AM on December 24, 2014 [4 favorites]


Art is an incredibly dumb investment. It has (as a class) a relatively low rate of return. It is very illiquid. Worst, it is HIGHLY correlated with more conventional asset classes. It doesn't diversify a portfolio and drags down the performance.

that's why this is leisure. it's kind of pathetic, you make a fortune buying and selling worthless things and the only enjoyment you can find with your money is... buying and selling worthless things.
posted by ennui.bz at 8:37 AM on December 24, 2014 [2 favorites]


Art is an incredibly dumb investment. It has (as a class) a relatively low rate of return. It is very illiquid.

I could not disagree with you more. Art has always been the currency of the criminal classes for decades. It is extremely liquid to a certain segment of society.

Art is currency, especially the stolen work (Interpol stating art theft is the fourth largest international crime).

This article completely ignored the origins of why art is a currency: if you don't understand the criminal origins of its value, you can't grasp why it's becoming a more mainstream investment. It has a built-in clientele and makes dealing with both legitimate and illegal players that much simpler because so many countries have lax laws over the handling of art and crimes associated with it...
posted by Alexandra Kitty at 9:12 AM on December 24, 2014 [2 favorites]


Baffler piece on this is startling and darkly humorous. Walmart family subsection is worth reading.
posted by Darwina at 9:29 AM on December 24, 2014 [3 favorites]


What Salmon and Kwak miss is that it *is* consumption and on a grand scale, but the people involved can't enjoy anything unless they think about it as an investment. These are people who can't appreciate a painting except by thinking about how much they paid for it, how much it's worth to someone else and how to hedge it if the value drops.
I imagine that do not know any of the people you speak of here, ennui.bz, because many collectors are quite passionate and knowledgeable about the art they collect. Knowing the price of everything and the value of nothing is not a characteristic that only belongs to the rich.
posted by snaparapans at 9:34 AM on December 24, 2014 [1 favorite]


That Baffler piece is fantastic.
posted by persona au gratin at 11:21 AM on December 24, 2014 [3 favorites]


One of my best friends is an artist and I remember 30 years ago when he used to paint in grayscale because he could only afford two colors of paint. Last year he sold $2M worth of art and was profiled in the NYT. So the art bubble has worked out OK for him.
posted by Grumpy old geek at 2:01 PM on December 24, 2014


From the article:
What does matter, Professor Galenson’s research suggests, is innovation by the artist. “It’s really incredibly simple,” he said. “Valuable paintings are innovative. Valuable artists are innovators.
Huh. I missed this guy's institutional affiliation earlier in the article. I wonder if...
David Galenson, a professor of economics at the University of Chicago
Of course.
posted by mhum at 2:59 PM on December 24, 2014 [1 favorite]


The explosion of art as an investment, is, as far as I can see, a symptom of the global saving glut, a predictable result of increasing economic inequality worldwide.

I'd say the savings glut is more a result of the Fed overprinting money and dropping interest rates to near zero, which helped slow the economy over all. Result (among others) - increasing economic inequality.
posted by IndigoJones at 5:16 PM on December 24, 2014 [1 favorite]




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