Reactor

Art Is the New Gold

by Mostafa Heddaya on April 29, 2013

masterpieceartauction

A new asset class is in session (image via)

Channeling the conspiratorially unhinged salesmanship of a Cash 4 Gold pitchman, the New York Times ran a hilariously bad art market trend piece today — a story titled “As Money Props Up Art World, Prospects Are Mixed,” which portends to link macroeconomic trends with demand for art market investment vehicles. In its own imbecility it reveals a different sort of trend: the perpetual shortcomings in art market coverage, an area that often sees a minimum of rigor and a maximum of price-tag sensationalism at major newspapers.

The variety show begins with the lede, tickling to even the most hardened New York Times Style section reader:

Whether he intended it or not, or even realizes it, Ben S. Bernanke has become a patron of the arts.

The piece, by Conrad de Aenlle, was published on NYTimes.com this morning ahead of its appearance in the print edition of (thankfully) the International Herald Tribune tomorrow. It ostensibly rehashes the findings of last month’s Deloitte/ArtTactic study, but trying to identify even a vague unifying sense of what’s going on is a fool’s errand.

There was (is?) a lot of liquidity, you see:

“What’s driving the art market globally is that certain people have a lot of liquidity and are looking for places to put it,” said Suzanne Gyorgy, head of Citi Art Advisory, a service of Citigroup’s private bank.

Remarkable! Is this not the definition of “investment” in a capitalist economy? Sure, one might get into why this liquidity would go into art rather than stocks and bonds or any of countless major alternative assets, but that’s clearly too much work. Instead, we get “ … inflation fears and government measures to stimulate economic growth partially explain rising investment in art, including at auction.” Such analysis conjures an image of Bernanke playing treasurer in some demented game of Masterpiece; the incoherent reasoning sounds like it was lifted practically verbatim from a Glenn Beck gold routine.

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Sane commentary on the global economy from a source you can trust (image via Vimeo)

The animating focus of the piece, culled from the aforementioned month-old report filled with ads for private wealth management and art-advisory services, is that investment in art market funds has risen “69 percent last year, to $1.62 billion worldwide.” This factoid, with its impressive double-digit growth, is meant to convey a significant trend. Some context might be useful, especially since — in a confusion that continues throughout the piece — this number refers only to monies invested in art funds, which are distinct from individual collector purchases. What’s more, the cheerleading early on in this story is contradicted by the statistics that are later cited: the overall art market has been in decline for at least two years.

The sum total of capital in art funds is so minuscule that it seems far more appropriate to consider such investment vehicles to be the esoteric way of speculating on luxury goods they are rather than prevaricate meaninglessly over the ascent of an “asset class.” For further perspective, consider that the global equity (stock) market stood at $54 trillion in 2011, and the global credit (bond) market is significantly larger than that.

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May I interest you in an exciting new asset class? (Image via VH1)

Regardless, as an “asset class” for investors reacting to some sort of macroeconomic uncertainty, art is so microsocopic that one would be remiss not to mention it alongside other such popular “alternative investments” as Air Jordans, Slim Jim futures, or Subway franchises. The story meanders through the opinions of various art investment “experts,” including the partners of an investment firm actually called Beautiful Asset Advisors LLC, before offering a shred of sanity from Thea Westreich Wagner, an art advisor in New York who suggests that the practice of creating art funds and generally treating art as an asset class “does not appeal to [her].”

Imagining art supplanting gold as the asset class of choice for irrational investors isn’t as unrealistic as it may sound, though, given the unceremonious bursting of the gold “fear bubble” two weeks ago. Perhaps, in some not-too-distant post-apocalyptic future, with all of New York leveled, we will spot amid the devastation a certain grizzled species of survivor, lurching toward Chelsea, tattered copy of the Arts section of the International Herald Tribune in hand.

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