Art as an Uncorrelated Asset

Daniel Grant has a good, although rather short post on Artnet about art as an asset, or more specially as an uncorrelated asset. Grant discusses artworks as an uncorrelated asset with Michael Moses, of the Mei Moses Fine Art Index. and gallerist Peter Findlay.

Moses tells Grant art is in uncorrelated asset in the sense that artworks are not linked to other assets like gold or other commodities.  Art is used as an alternative investment or safe haven from other failing investments and even political turmoil, and therefore does correlate to to global wealth accumulation.

Grant reports

Much of that top-end business has been "driven by optimism and the clear belief held by most people that inflation will return in a significant way,” said Peter Findlay, owner of the eponymous Manhattan art gallery.

Findlay noted that "$1 million is the new normal," adding that “art doesn’t go up in value, money goes down." In this interpretation, Findlay said, the art market is predicting inflation ahead.

Findlay is not alone in seeing a fear of inflation as feeding the worldwide quest for top artworks. “The art market reacts like the gold market does,” said New York University economist William Baumol. “It does attract more investors when there is danger of the stock market going down, because people believe that art -- and gold -- will retain its value or at least not go down as precipitously.”

Top art-market players typically keep an eye on other markets as well. As in the art market, the top of the housing market has not suffered as much as the bottom, where all the foreclosures have been concentrated during the recession. "Prices are probably being lowered for these top properties," said Donald R. Haurin, professor of economics at Ohio State University and a past board president of the American Real Estate and Urban Economics Association," but the wealthy can often hold out until prices return to higher levels.”

To read the full post, click HERE.