What is it about art that drives so many wealthy people to build collections? Personal interest only goes so far. Can sophisticated investors — including people such as David Rockefeller, Donald Marron, and David Geffen, in addition to numerous hedge fund managers — really check their financial sense at the door? Or is art a better investment than we understand? This week’s contemporary art sales offer two excellent case studies that belong in the investing hall of fame. One painting, auctioned last night at Sotheby’s, is by Mark Rothko; the other, for sale this evening at Christie’s, is from that artist who loved money (he even painted dollar signs) as much as he was fascinated by fame — Andy Warhol.
In 1962, as Warhol was emerging as a serious artist, Marilyn Monroe became a pivotal image for him shortly after her suicide. “Fame and everything it represents is expressed in the image,” Christie’s Contemporary Art head Brett Gorvy said.
Warhol worked with her image many times over the years. First came a series of 11 pictures — in colors such as orange, mint, and lemon — that became known as the “flavored” Marilyns. These pictures have had quite a ride on the auction market, according to Artnet’s auction records. Shortly after Warhol’s death, a mint-colored Marilyn was sold in 1988 for $332,500 (including the buyer’s premium.) Ten years later, the price for an orange Marilyn ballooned to $2.7 million. In 2001, the same painting cost $3.746 million. In 2002, a lavender-colored Marilyn went for $4.6 million. Last fall, a collector paid $16.256 million for the same orange Marilyn that was sold in ’98 and ’01. That’s better than Google!
In 1964, Warhol painted a series of larger Marilyns. These 40 inches by 40 inches paintings are among the most prized Warhols in existence. “It’s the Mona Lisa of our time,” collector Alberto Murgabi said. There are five of these Marilyns. But don’t get excited. The art world is unanimous that the painting is more valuable to the owners than the money a sale would bring. Steven Cohen proved it last year when he offered $40 million to each of the four collectors who have one — Peter Brant, S.I. Newhouse, Stefan Edlis, and an unnamed Swiss. The response was simple: “No sale.”
In 1989, at the height of the ’80s art boom, “Shot Red Marilyn” (one of the five) sold for $4.07 million. Five and a half years later, in the midst of an economic and art market recession, it changed hands for a loss at $3.632 million. What a difference three and half years can make. In 1998, the seller of the large “Orange Marilyn” timed the market perfectly, getting $17.327 million for the picture in a bidding war between Steve Wynn and Mr. Newhouse. Mr. Newhouse won.
If you want to look at one of the five larger Marilyns up close, you can see “Gold Marilyn,” at MoMA. The architect Phillip Johnson bought it from the artist in 1964 for $2,000 and donated it to the museum. If the museum wanted to raise money, Mr. Gorvy is confident that “Gold Marilyn” would fetch $60 million. That’s a 50% rise in less than a year. “That’s where the Warhol market has come in such a short time,” Mr. Gorvy said.
And if you bought a Warhol, as Johnson did, in the 1960s, you’d be a pretty sharp investor. Turning $2,000 in 1964 currency into $60 million in 2007 is, according to calculations done for The New York Sun by Artnet’s Kevin Radell, a 27.09% internal rate of return over the last 43 years. By comparison, gold itself sold for $35 an ounce in 1962 and $690 recently, which represents a return of 6.85%. Other safe-haven investments like the Dow Jones Industrials or the S&P 500 would give you slightly better returns of 7.07% and 7.44% over the same period. (Though Mr. Radell is quick to point out that these calculations don’t include dividends, which could add another 3%.)
The Mugrabi family, who collect and deal Warhol, deserve some credit for their own achievements in the Warhol market. Judd Tully, the Art and Auction writer, recently reported that Jose Mugrabi was in negotiations with a Gulf State sheikh to sell a cache of 600 Warhols for $1 billion. The deal may not go through, but that doesn’t seem to worry Mr. Mugrabi, who bought “Marilyn Monroe (Twenty Times)” (1962) for $3.96 million in 1988. He has told art world denizens that he turned down $200 million for it.
“When my father bought that painting, he said, ‘I just bought a part of American culture,'” Alberto, Mr. Mugrabi’s son, said. “That painting is his backbone. He’d feel naked without it.”
Next week Christie’s is offering the last chance to get into the club. “Lemon Marilyn” was bought from that original Warhol show. The owner paid the whopping sum of $250.
It so happens that 1962 was also the year Warren Buffet began accumulating stock in Berkshire Hathaway. He paid $8 a share; the current price is $109,000. That’s the big leagues of investing, a 23.56% return. But if “Lemon Marilyn” goes for $20 million, that far-sighted collector will wind up with a gain of 28.52% every year for 45 years.
Lest you think Warhol is the only artist worth investing in, another good example hangs across town at Sotheby’s. Last night, David Rockefeller sold his Mark Rothko, “White Center (Yellow, Pink, and Lavender on Rose),” which the financier acquired from the artist for $10,000 in 1960. The hammer price was $65 million, which would be well above 20% for each of the 47 years Rocky owned it. That’s a record most hedgies would die for.