jon-nyc wrote:I certainly don't. I think this is a tough market to make money in. There's little to no transparency and spreads are obscene.
-low transparency - the indices are pretty flakey
-low liquidity- in the 80s, traditional English paintings worth a fortune. 1990s and UK has 10%+ interest rates, plus Lloyds insurance meltdown, and the market is flooded, a lot of the dealers went broke. 2000s? Hedge Fund managers like modern art. I doubt English painters nominal prices are above their 1980s level
- fashion (as above). Most of us are not buying Impressionists (and the Japanese drove that one up in the 1980s) or Rembrandts. Anticipating the tastes of the next generation of buyers is *hard*: Russian oligarchs have designer girlfriends who like modern art, it seems
- fraud-- the number of 'great paintings' that ain't by who they said they were-- as science gets better we are finding more of that
- modern art is by definition not in short supply, the artists can create more, so we see things like Damian Hirst ramping his own auction prices (and now he has ditched his 25 year dealer relationship!)
- high storage costs
- 25% commission on sale
- price fixing by the major auction houses (OK people have gone to prison: wanna bet there is still not tacit collusion? Game Theory shows you that you don't need to have meetings and phone calls to collude on prices, *if* there is a small enough number of you-- you just need information on what the other side is doing)
- theft, vandalism, national laws which prevent sales -- a lot of Italian and Greek works of art, as the Getty has found out, turn out to be stolen
There is a pretty high negative correlation between art prices and real interest rates. If real interest rates rise, the price of art will likely fall. Ditto if key buyers (like hedge funds, or natural resource prices driving Russian and Middle Eastern buyers) have financial issues.
The British Rail Pension Fund (one of the largest in the UK) made fairly successful investments in art in the 1980s, but for all of the above reasons largely exited that investment (also the political sensitivity of a quasi public body selling 'British' paintings, maybe to foreigners).
There is also an important moral issue. The international art trade drives the outright theft and looting from museums in Baghdad, Syria and other strife torn places. And also looting of key archaeological sites. This is like buying cocaine or Congolese diamonds, you are driving death and destruction and despoilation of key archaeological sites-- not least potentially the death of your own nation's soldiers (the looting often goes to finance local guerilla and criminal organizations, eg the Mafia in Italy).
As with all collectibles, wine, cigars, art etc. It's better to buy to enjoy them, even consume them, rather than as an 'investment'.
If you want, as many people who own and deal in these things do, to learn a lot, maybe become a business trading in collectibles, then good on ya. You have entered into a (possibly lucrative) business. But then they are not an 'investment' but a business.