If you’ve ever thought about investing in the art market, you’re not alone. But how viable is the art world for long-term investors? In this segment of Backstage IDaccepted at December 20, 2021Fool contributors Jason Hall, Toby Bordelon, and Rachel Warren discuss art investing and Masterworks, a startup that allows individual investors to own a piece of a famous work of art with starting capital of just $500.
Jason Hall: Toby, you’re an art person.
Toby Bordelon: I am. I’m actually very interested in art, in fact yesterday I bought some new stuff that we love at a gallery in Alexandria, Virginia where we live. But you know, I don’t really care about that as an asset class.
I personally think this is the wrong approach. My wife and I buy art to enjoy it, we buy things to look at and I have absolutely no expectation that anything I buy will ever be sold at a profit.
I just assume, hey, it’s things I enjoy, things I want, but it’s consumption, it’s not investment, right? That’s my problem with Masterworks, which is a cool idea. I love the idea but it goes in that direction.
When I put my money into a work of art, I want to look at it and have it on my wall, or at least enjoy it in some way. Well maybe they could combine that with NFTs somehow, like anyone who invests in a painting gets an NFT, I don’t know, I can always put a picture on the wall, so…
Rachel Warren: A NFT.
Hall: You actually heard a few interviews from some of their executives. They’ve been on a few podcasts that I listen to. They mean we don’t touch digital art. We don’t understand, we’re not.
Brothel: Yes. I wonder what I’m getting, it’s an investment. I’m investing money in a painting that I hope will sell for a profit, but that’s not my artistic approach.
Hall: That’s exactly the approach they’re taking. I think there’s something interesting about how they do it. Because they’re focusing on those areas of art where they see where there’s been the best returns lately, but also where they see a clear demand for that type of art, and they’re trying to buy good art, I think Is that correct —
Brothel: I can see myself as an investor in the company and it’s interesting, I want to take a closer look, but I don’t necessarily see myself as a customer.
Hall: I love this Toby. I think that might be more fun.
Labyrinth: Oh, like if they went public yeah that would be cool.
Brothel: Yes, exactly?
Hall: You know what I’m thinking, I’ve been convinced of that for a while, but I’m pretty sure it is, I love art, I want all art. I need to find a shop where other people will buy art for me [laughs] Basically yes–
labyrinth: I mean if that were the case.
Brothel: Do you think he’s just sitting in his office surrounded by all these Picassos and Monets and whatever. Like that is pretty sweet.
Hall: Why shouldn’t he be? [laughs]
Brothel: it’s fair This is fair.
Labyrinth: Who wouldn’t want that? I don’t know, I feel like this depends very much on what your goal is to invest in this platform. If you’re like me, I’m focused on building my long-term portfolio, I’m focused on stocks.
But I’m also very interested in art. I love the idea of owning a piece of history or a small piece of it. To me that would be more of a fun thing, less something I would expect to benefit from at least initially, and more an intriguing business model.
Hall: I think it’s a great way to get that itch on your point. For me, investing shouldn’t just be about making money. That must be an important part of it, but are you learning? If there’s an area you’re really interested in, I think it’s worth checking out.
Brothel: Now something else that I think we should point out: We started this thread with a comment on the Christie’s auction house and its record year.
I think it has a reputation for being a place where they sell these million dollar pieces, which is out of reach for normal people, but they do auctions where they sell pieces that cost a few thousand dollars. If you are a normal person you can go to their website, you can look at the upcoming auction and you can look at something that might be of interest to you.
You can have some of these old paintings. I think they’re holding a 19th century art auction in a few weeks. Some of the estimates range from $5,000 to $10,000 to $20,000.
But still expensive but not beyond the level of modern art by currently living artists you could buy depending on who they are. It’s not just these headlines that look at what sold for $15, 20, 30, 50 million.
It’s just stuff that a normal person who likes art might be interested in. It’s something to watch I think.
Hall: That’s cool. I think this asset class doesn’t fill a bucket that I feel I need to fill when thinking about uncorrelated assets. We are talking about Bitcoin with inflation.
For me, Bitcoin is the hedge against inflation, that’s how I imagine it for my portfolio. I don’t know, I tend to think real estate is an asset that I’m more interested in because I see it generating income, that sort of thing.
Very interesting, no doubt about that. Unless my son is very interested in art, which he might be. I feel like the art that my wife and I are acquiring is just a bunch of stuff that he’ll have to sell at a flea market when we eventually die. [laughs]
I think that will probably happen. We buy things like art, I love buying things from local artists that I can talk to and hear their story about the art which I think is cool and that’s good enough for me. Maybe one day I’ll be Toby, rich and able to buy expensive art. Toby doesn’t react. [laughs]
Brothel: I answer Jason. [laughs] My art is not expensive. hey you know what What if you save your money, if one of those many companies you’ve invested in is remembered, you want to get out at the peak and buy yourself a $5 million piece from Christie’s or something?
Hall: Here we go.