Art as Investment

I might as well start with the disclaimers, since they run both wide and deep:  I’m not an economist. My crystal ball is just as murky as anyone’s. I don’t give investment advice. I am not a certified financial planner. Need I go on?  Despite this rather all-encompassing disclosure, I nonetheless get a steady stream of questions about the investment value of art, which I then need to address.  The typical questions range from whether art is a good investment vehicle in general, to general questions about Picassos as investment, to questions about the investment value of a specific Picasso.

I have previously touched upon the subject of art as investment in this blog, first in 2004  and again in 2010.  Time has passed, the Crash has come and gone, and there is clearly more that needs to be said.  So today I would like to revisit the question of art as investment, with the caveat, as they say, that past performance is not predictive.  Another caveat: the degree of uncertainty about my own convictions on this subject is higher than when, say, I am evaluating the authenticity, beauty, and worth of a given Picasso.  Nonetheless, I am sure you think about the investment value of your art acquisitions and form your own opinions.  What follows, then, are the several guiding principles and beliefs that inform my behavior as a collector and as an art investor, as well as of course as an art dealer and advisor.

The Mei Moses Fine Art Index, the subject of my last post on this subject, has not altered its conclusion since then that fine art has appreciated as much as equities over the last 50 years.  Sure, it lagged behind the S & P’s rebound after the Crash of 2008, but then again, during the Crash it lost far less than the S & P, almost an order of magnitude less.  (Mei and Moses seem to be addressing just unique works.  But even if they included print sales in their analysis, their overall numbers would be little affected, since prints are relatively inexpensive and therefore don’t amount to much of the overall market value.)  Picassos (and the other major Modern and Post-War artists) have steadily appreciated over time.  And from what I’ve observed and read, fine art was, significantly, the first asset class to rebound after the Crash.  So I view art as a relatively stable, if illiquid, investment vehicle, provided one acquires established artists with staying power.  It this vein, it is wise to bear in mind this corollary:  Within a decade, 98% of the contemporary artists in the primary market will be forgotten, their art essentially worthless.

The illiquidity of art is at least partially balanced by its apparently decreased volatility, compared with securities.  (It is particularly timely to address the volatility parameter, in view of the recent wide gyrations in the stock market at the time of this writing.)  Volatility seems especially diminished, and is also more easily analyzed, within the original print genre, as opposed to unique works.  No two unique works are entirely comparable, so definitive analysis is limited to sale pairs (à la Mei Moses, when the same artwork has been sold two or more times in the recorded past).  Sale pairs however represent but a small subset of unique art sales.  Not so in the world of original prints, where luckily the market has already done the work for you.

Art may be illiquid, but one can mitigate that risk with the realization that some artworks are more illiquid than others.  One form of mitigation is the self-discipline of focusing on trophy art, especially when real money is at stake.  We love our Picasso goat skulls (we have two at present), and I’m prepared for the eventuality that they will never sell, at least not without a steep discount.  We also have a variety of faint line drawings and prints which can’t be seen at a distance, including some which are rather small.  They are powerful and beautiful, and we’re delighted to have them.  They didn’t set us back all that much, and we acquired them primarily so that we could look at them every day.  But when it comes to forking over big bucks, however, it is often best to stick with a pretty face, and one that can be seen from across the room at that.

Trophy art merits special mention, because it is more likely to find a buyer quickly than less celebrated art.  Everything eventually sells, as one of my early mentors pointed out.  Though there is a buyer out there for everything, you however don’t want to have to wait for her.  Better to buy a widely recognized and even celebrated piece, over which plenty of folks will predictably salivate.  This is of course much more easily accomplished within the genre of original prints, because of the advantages of collecting prints over other media.  These advantages principally derive from the consensus about which pieces are the best, and from the relative abundance of time to mull over and hunt them down.  It is widely known which are the most famous prints.  It is fairly easy to suss out which are the market’s all-time print favorites. (One place to start is by glancing at my Picasso print ratings ( There has been some variability over time, but by and large the hierarchy of the top 20 (or 50) works has been pretty much cemented by now, presumably by the few dealers and collectors who grappled with such issues in the distant past, and the largely unflinching herd mentality that followed.  By contrast, the hierarchy of many of the great drawings and paintings remains unestablished.  Prints also attract more eyes (than available uniques) because they exist in multiples.  Collectors are therefore more ready to pounce when a famous print becomes available than, say, an equally great drawing or painting.  And the unique works are for the most part hidden in museums or in private collections and only surface sporadically and seemingly randomly.  So the chances that one of your favorite drawings or paintings will become available to you are remote.

This is certainly not an argument against acquiring paintings and drawings, or sculptures or ceramics for that matter.  Far from it. The flip side, of course, is the many compelling unique artworks that fairly beg for acquisition.  And it appears that the art market rebound occurred primarily at the higher price levels.  With the exception of Picasso ceramics, which have appreciated by leaps and bounds almost across the board, the lower price levels in Picasso’s art, chiefly his lesser prints and perhaps his lesser drawings, have not.  The Crash seemed to have hollowed out the original print market, which, though it has been clawing its way back, has yet to reach its pre-Crash highs.  The most  hotly sought-after prints, especially the most expensive ones, have generally continued to do well, while much of the remainder of the print market has lagged a bit. But unlike the print market, acquiring unique artworks requires extra deliberation, not only because they are typically at higher price levels.  For a unique work newly on the market, there is a relatively short opportunity to pull the trigger, yet it is likely the only opportunity you’d ever have to acquire that particular piece.  By contrast, if you don’t buy a given print, the chances are far better that you’ll have other opportunities to do so.  So with unique artworks, it really helps to know what you’re doing and to be prepared, by understanding the market in general and, in particular, the comparables for the given object of your desire.

Barring the possibility of a catastrophic global meltdown of course, I am not worried.  I firmly believe that Picasso is by far the greatest artist of all time.  The “bluest” of all blue chip artists is not about to go away.  This is also a fortunate time to be collecting, since there are still many Picassos on the market.  Yet plenty of museums are gobbling up his available art, and museums are like Roach Motels: they “check in, but they don’t check out.”  That is true in France without exception, where museums are prevented by law from deaccessioning art, and it is relatively true everywhere else, where mostly just duds are sold, unless a particular museum is in deep trouble and has to sell off everything.

Moving on, let’s talk about death. Well, death, if there’s one good thing about it, compounds your art’s investment value.  Too bad you won’t be around to enjoy that, but hopefully you’ll be leaving it to someone dear to you, who will.  If you bought well to begin with, chances are your acquisition proved a good investment during your lifetime. If so, it should be an even better one for your heirs. According to current tax law, as I understand it, your heirs are taxed on the sale of the art they inherited on the difference between the sale price they achieved and its “stepped up” value, not what it cost the benefactor, but rather its appraised market value at the time you inherited it.  And art has been known to mysteriously disappeared from the benefactor’s walls during his or her lifetime and magically reappeared on the walls of his or her heirs. (Not that I am encouraging that sort of thing.)  But in case you hadn’t noticed, art investment as an inheritance tax-limiting vehicle is only of benefit if your art has appreciated since you got your hands on it, yet another reason to buy blue chip art and buy it well in the first place.

Here’s how that master of the succinct aphorism, Michael Pollan, might sum up, if he were an art person:  Buy art.  Not too much.  Don’t overpay.  And if you’re shelling out real money, make sure it’s both stunning and collectible.