This post Fine Art’s Worth More Than Its Weight in Gold appeared first on Daily Reckoning.
I believe fine art has a place in investors portfolio.
I do a lot of work for the U.S. intelligence community, trying to thwart terrorist finance and transnational actors, as we call them. This includes money laundering, smuggling and arms dealing. This work has made me very familiar with the weight of different forms of wealth.
Assuming you have $100s in a briefcase, you’re going to need a 22-pound briefcase if you want to move $1 million paper in $100 bills.
Gold actually weighs more than that. I like gold as an investment, obviously, but as a store of wealth it’s heavy. Art isn’t.
That’s the funny thing about art, if you think of it in terms of weight. If you have a $100 million painting that weighs a couple pounds, and if you take it out of the frame, roll it up and put it in a backpack, it could be worth $500,000 per ounce.
And it won’t set off metal detectors. So fine art is a a very mobile form of wealth. You get very good weight for value, much more than cash, much more than gold, and it’s easy to move around.
Most people don’t like to think about what would happen if they have to pack up and leave their home. But if they do, a valuable, recognizable museum-quality painting is a much easier way to move wealth around than gold or cash.
If for whatever reason the banking system shuts down, or if there’s a power grid outage, and you’ve got to get on the move, art is a good way to take a lot of money with you in the palm of your hand.
That’s one good reason why I think of art as a good store of wealth.
But how do you get into this market given the high valuations? A multi-millionaire can go out and spend $135 million on a Picasso, hang it on his wall or puts it in a vault. But most people can’t pay $135 million, so what do you do? How can you be in this market at a different price point relative to everyone’s portfolio?
You can. But if you want to be a buyer of art, you need to exercise a lot of care, do a lot of diligence, educate yourself and deal with reputable people.
But there is another way to do it, which is to invest in an art fund. You’d be investing a lot of money, say $500,000. These are not things you can invest in at a retail level — I’m not aware of any art funds that you can buy for $10,000.
But for $500,000 or something in that range, you can invest in an art fund. Like any fund, the sponsors and the manager are going to pool the resources of different investors to go out and buy art. And when they sell the art, you’ll get your share.
Now, you’ve got to do …read more
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