Art Market Monitor

Global Coverage ~ Unique Analysis

  • AMMpro
  • AMM Fantasy Collecting Game
  • Podcast
  • Contact Us

Breaking Views: Art Doesn't Hedge Inflation

May 12, 2009 by Marion Maneker

The folks at BreakingViews.com make their money by offering trenchant analysis of the world economy. Sometimes they’re very good; other times, they can sound a little bit more like they’re taking a position just to be contrary. Here’s a case in point, they address the growing idea that art is a hedge against inflation.

But art’s fleeting fashion makes it a difficult hedge. Artists who may seem a safe investment now could prove out of favor in a decade. Van Gogh was the art world’s price leader in 1989. Now, on a list ranking artists by auction turnover last year, compiled by Artprice, van Gogh ranks 394th. Just wondering — is that because so very few van Goghs ever come to market?

Unpredictability isn’t art’s only problem as a hedge. Buying a Picasso isn’t like buying gold bullion. Artwork is highly illiquid because items are often one of a kind, with a limited pool of potential buyers. And its transaction costs are exorbitant. Sotheby’s charges fees as high as 25 percent.

The transaction cost issue is a good point. But isn’t the van Gogh fact more a function of the dearth of material available to trade? Do the people at Breaking Views really think there’s a large stock of van Goghs out there that could come to market since most of the best work is already owned by museums?

So it turns out that Breaking Views has some good questions about how an art fund or a collector would execute an art-as-hedge-against-inflation strategy, not whether art does the trick. Because the column also makes this point:

History does show that art prices rise during inflationary periods. The Art 100 Index, compiled by Art Market Research, shot up 130 percent from 1977 to 1982, a period in which prices rose 80 percent. With record amounts of fiscal stimulus being pumped into the system, economists expect inflation to return.

Art Appreciated as Inflation Hedge (Breaking Views)

More from Art Market Monitor

  • Understanding the Abu Dhabi Art FairUnderstanding the Abu Dhabi Art Fair
  • Not Interested in Naked BruniNot Interested in Naked Bruni
  • ABMiami: Toning Down & Spreading OutABMiami: Toning Down & Spreading Out
  • Gagosian: New York's Dominance WaningGagosian: New York's Dominance Waning
  • 2 x 200 Wants You to Own Art2 x 200 Wants You to Own Art
  • How to Make Your Art an InvestmentHow to Make Your Art an Investment

Filed Under: Economic Trends Tagged With: Featured

About Marion Maneker

LiveArt

Want to get Art Market Monitor‘s posts sent to you in our email? Sign up below by clicking on the Subscribe button.

  • About Us/ Contact
  • Podcast
  • AMMpro
  • Newsletter
  • FAQ

twitterfacebooksoundcloud
Privacy Policy
Terms & Conditions
California Privacy Rights
Do Not Sell My Personal Information
Advertise on Art Market Monitor