The Dangers of Investing in Art – Bloomberg 02-12-15

Salient to Investors:

  • Art speculators’ whims often transform art into a terrible investment. Even beautiful art can be a fundamentally fickle asset.
  • Adam Lindemann cites more speculative buying than ever since the financial crisis, but says people avoid artists whose price goes down.
  • In the contemporary art world there is a perception the market is unstoppable.
  • Thea Westreich said sooner or later, the art world comes to its senses and things sort themselves out.
  • Countless collectors and speculators have bought work by young, in-demand artists only to see their investment disappear in a matter of months.

Read the full article at http://www.bloomberg.com/news/articles/2015-02-12/the-dangers-of-investing-in-art-anselm-reyle-s-decline

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‘Caravaggio’ Miss Means $219 Art May Be Worth $16 Million – Bloomberg 08-29-13

Salient to Investors:

Charles Beddington said Caravaggio is a particularly difficult artist as the quality of his execution is variable, and so he’s easy to copy. Beddington said the big auction houses are keen to avoid bad publicity and are extremely careful about consulting the relevant academics.

Samson Spanier said several recent high-profile cases suggest a rise in art litigation as collectors are increasingly willing to sue to recoup losses, and because the authenticity of works of art is becoming easier to prove as more scientific tests are being used.

Authenticated works by Michelangelo Merisi da Caravaggio rarely appear on the art market, and no painting catalogued as being by the artist has appeared at auction this century. His paintings are coveted by many wealthy art collectors for their rarity.

Many historians regard Caravaggio as the most innovative artist of the Baroque period.

Works of art whose true value is missed by cataloguers, known as sleepers, can create difficulties for auction houses once owners become aware of lucrative after-sales. Cases involving sleepers at international auction houses have mostly been settled before going to trial.

Read the full article at  http://www.bloomberg.com/news/2013-08-29/caravaggio-miss-means-219-painting-may-be-worth-16-million.html

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Bubble, Bubble, Money and Trouble – Barron’s 06-01-13

Salient to Investors:

Marc Faber at the Gloom Boom & Doom Report says:

  • High-end assets from stocks to art to real estate are in a bubble caused by central bank money-printing. This money doesn’t increase economic activity and asset prices in concert, instead creates dangerous excesses in countries and asset classes. Money-printing fueled the stock-market bubble of 1999-2000, the housing bubble in 2008, and the commodities bubble.
  • Owns equities because easing money is flowing into the high-end asset market, including stocks, bonds, art, wine, jewelry, and luxury real estate.
  • The government bailed out S&L depositors in the late 1980s. Treasury and the Fed bailed out Mexico in the mid-1990s. The Fed-supervised bailout of Long-Term Capital Management in 1998 gave a green light to Wall Street to keep leveraging up. Neither Keynes or Friedman would have approved current policies.
  • In the fourth year of an economic expansion, near-zero interest rates will lead to a further misallocation of capital. The S&P 500 is a near a long-term top and could rally to 2000 in the next month or two before collapsing.
  • Money-printing leads to a widening wealth gap. In the Western  democracies, large numbers of people will at some point target the rich through wealth taxes or significantly higher tax rates. The rich have seen huge wealth accumulation in Asia in recent years but the middle class has seen diminishing purchasing power. Growing wealth inequality has always been corrected either peacefully, through taxation and wealth redistribution, or by revolution, as in Russia. European voters will turn against the arrogance of the bureaucracy.
  • China will not tolerate US interference long-term in their region.
  • 25% in equities – no US, some Asian shares and Singapore REITs.
  • Except for some high dividend stocks, Philippines, Indonesia, and Thailand markets are unattractive having quadrupled from post-crisis lows. Dislike Chinese equities unless conditions worsen and China prints money like crazy, when the currency will weaken and stocks will rise.
  • Japanese stocks made a generational low in 2012 and won’t go below that. Like Japanese REITs.
  • Vietnam exports are strong, and the people are hard-working. The beach between Danang and Hoi An will be a huge resort area in the future and is only an hour and 10 minutes by plane from Hong Kong, and two hours from Singapore. Likes stocks with yields of 5% to 7%.
  • Many rich Asian companies have been buying other Asian companies. Asia long-term economic outlook is good. Laos, Cambodia, and Myanmar are opening up, and Vietnam is reopening. Myanmar market is hot but like Vietnam near its peak in 2006-07, looks dangerous for investors.
  • The huge credit bubble in China won’t end well. The economy officially grew 7.7% in Q1 but in truth is growing 4% a year, at best. China reports export figures to Taiwan, South Korea, Hong Kong, and Singapore that are much larger than those countries report as imports.
  • Markets in Europe have made major lows so own European shares – and plan to buy more – and corporate bonds, and real estate. Money in European banks is no longer 100%.
  • Like Singapore REITs whose yields of 5% and 5.5% compare favorably with US REITs. If inflation picks up, REITs can raise their rents.
  • 25% in gold and add to positions every month. When the asset bubble bursts, financial assets will be particularly vulnerable.

Read the full article at http://online.barrons.com/article/SB50001424052748704509304578511561194530732.html?mod=BOL_twm_fs#articleTabs_article%3D0

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How Halsey Minor Blew Tech Fortune on Way to Bankruptcy – Bloomberg 05-31-13

Salient to Investors:

Halsey Minor sold  CNET Networks for $1.8 billion in 2008 and 5 years later has filed for personal bankruptcy thanks to bad bets on real estate, horse farms, start-up investing, and other ventures that took him out of his technology comfort zone.

Read the full article at http://www.bloomberg.com/news/2013-05-30/cnet-founder-minor-files-for-bankruptcy-after-selling-art.html

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Desperate Art Galleries Give Up as Chelsea Rents Double – Bloomberg 02-19-13

Salient to Investors:

The midsize art galleries that helped transform western Chelsea into New York’s major art hub are being squeezed out of the neighborhood by booming real-estate development and rising rents.

Stuart Siegel at CBRE said every developer in New York wants to be in West Chelsea, and landlords are asking from $80 to $120 a square foot for ground-floor space between 10th and 11th avenues versus $55 to $75 in 2010.

Read the full article at http://www.bloomberg.com/news/2013-02-20/desperate-art-galleries-give-up-as-chelsea-rents-double.html

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Bond Investor Gundlach Buys Stocks, Sees ‘Kaboom’ Ahead – Bloomberg 11-29-12

Salient to Investors:

Jeffrey Gundlach at DoubleLine Capital says:

  • The first phase of the coming debacle was the 27-year buildup of corporate, personal and sovereign debt to 2008.
  • The third phase will be deeply indebted countries and companies defaulting sometime after 2013.
  • Buy gemstones, art and commercial real estate and other hard assets.
  • Chinese companies, US natural gas producers and gold-miners are bargains.
  • His Total Return Bond Fund is 78 percent in low duration residential mortgage-backed securities including the low duration nonguaranteeds, which Philip Barach at DoubleLine said would have few defaults if higher interest rates meant the economy was improving and housing prices recovering. Sarah Bush at Morningstar cautioned on July 18 about the use of volatile mortgage-backed derivatives such as inverse floaters.
  • No country will default in 2013. However, Japan is running out of policy tools.
  • Inflation could rise by 2 percent if the Fed buys more government debt.
  • Obama will not be able to reach an accord with Congress to make significant cuts in the deficit. Tax hikes on the wealthy won’t bring in enough to have a significant impact and politicians won’t cut entitlement programs much because the public overwhelmingly supports them.
  • There will be no grand compromise on the fiscal cliff if an agreement isn’t reached by January, so expects politicians to push the deficit issues into 2013 and beyond. Obama won’t give on anything, and the Republicans won’t roll over.
  • There are opportunities in emerging-markets equities, particularly in China.
  • Demographics in some emerging markets will support their sustained growth. Developed nations will have fewer than 3 workers for every retiree by 2025 versus 6 to 7 for Brazil, India and Mexico.
  • US companies don’t have much potential for growth.
  • Gold-miners and natural gas producers are cheap.
  • Apple will struggle to reach its earnings potential without an innovator like Steve Jobs at the helm.
  • Investing in natural gas is similar to buying gold in 1997.

Jeffrey Sherman at DoubleLine said Chinese stocks make up the majority of the 6.7% of international equity holdings in his fund.

Luz Padilla at DoubleLine said the only reason asset prices are up is because of all the liquidity in the system, but this could turn very quickly.

Larry Fink at BlackRock says the US banking system is in good shape and the large supply of natural gas in the US will create jobs, and is long-term very bullish on the US.

Richard Pildes at NYU said the constitutionality of Congress creating independent agencies like the Fed has been long settled.

Read the full article at http://www.bloomberg.com/news/2012-11-30/bond-investor-gundlach-buys-stocks-sees-kaboom-ahead.html