Buying for investment: when money -- not love -- is the name of the game
Collecting art and antiques has become a national pastime. Princes are high and will continue to rise. Inflation helps push costs upward. But because the supply of top-quality objects is diminishing and the demand for them is increasing, a boom buying period is in full swing. Gray Boone, publisher of Antique Monthly, estimates that the past year's annual market turnover in art and antiques was almost $8 billion, up 25 percent over last year.
Increasingly over the last 10 years, the word "investment" has loomed over the field. It has become part of the vocabulary of much of the buying and selling that is done and is often a principle motive for purchase.
This means that many people may be buying objects not so much for love as for money. And this fact creates some problems, particularly for the uninformed and unknowledgeable. These problems were an important part of the discussion at Antique Monthly's Sixth Annual World An tiques Market Conference in New York.
Attorney Gilbert Edelson, secretary-treasurer of Art Dealers Association, Inc. in New York, says that 25 years ago when he became involved with investing in art, nobody called it investing.
They spoke, he says, of collecting, and of forming a collection, and they bought with a sense of commitment and of involvement. They generally chose a field of specialization, and then they read, studied, visited museums, worked with dealers, went to exhibitions, and watched the prices in the market. This made for great collections and great collectors.
Now, Mr. Edelson says, people don't talk about forming a collection, but about investing in collectibles and of making them part of an investment portfolio
He describes the difference between a collector and an investor: A collector buys to hold, and to have for the pleasure of the object. Monetary appreciation , while very nice, is secondary to visual appreciation and the joy of ownership.
The investor , he says, buys almost entirely for one reason, monetary gain, and he regards a work of art very much like a stock, bond, or security. He is expected to list his investing intentions with the IRS and perhaps even keep his acquisitions stored away in a warehouse so that no one could misunderstand that money, not love of art, was the purpose of his purchase.
Mr. Edelson deplores the "publicity machine" that is constantly telling the public that art is a wonderful investment. He warns against buying from galleries that advertise that this or that work of art is a 'good investment.'
No one actually knows how much, or if, any work of art will appreciate, he says. "Everyone I know who owns a work of art or an antique is very optimistic about its value, but no one ever really knows its worth until it is put on the block for sale. I think the whole notion of art as an investment has brought about a number of abuses in the art field.
"I believe that many people who buy 'investment' art are easily misled because they don't know as much as they should. Some dealers take advantage of that situation," he continues. "As for the so-called 'art investment business,' I believe it is a trend, a fashion, a fad, and may be on its way out."
Wendell Garrett, editor and publisher of Antiques Magazine, speaking at the same forum, said, "Antiques are a good investment and always have been. But I do think a really alien group has come into the field, a crowd who treats antiques like soybeans and pork, and if they stay around it is going to create chaos. And if they depart, the field is going to get back on a kind of even keel.
"These people who stockpile or warehouse objects of art, and treat them as tangible commodities, encourage fakery and reproductions," she says. "There is an extraordinary amount of fakery going on now. This is one of the most dangerous aspects of this new invasion. It means that many innocent collectors, without knowledge, are being easily taken in."
Mr. Garrett defines a "true" collector as one who does not allow himself to be swept along by the riptides of economic and political change, but who has the long perspective and wisdom that enables him to see "the past as prologue to the future." His healthy skepticism and good sense, this editor points out; enable him to pit his instincts and his know-how against the times and the trends.
"His collecting is at once an art as well as a response to impulses of great depth that relate to man's intricate motives to accumulate for security. This basic search for beauty and security is a very different thing from collecting purely as an investment opportunity," says Mr. Garrett.
New York antique dealers Gary and Diana Stradling comment, "As far as investing is concerned, it's fine when the people doing the investing have some idea of what they are doing. The problem we find here is that people often don't know the market value at all and, in their ignorance, will pay much more. While the market does fluctuate, good dealers generally know about what and where it is."
Peter Schaffer of New York's A La Vieille Russie says, "If someone were to ask me about the 'new investors' in art and their place in the art market, I would say there is no place for them unless they have a sincere interest in art, as art. If they are buying art for the sole purpose of using it as an alternative form of investment, they are missing the true 'return on their investment' that art has to offer, which is pleasure."
Economist Richard H. Rush, author of two books on investing in art and antiques, says that the market value of an antique is usually determined by what is in style at the moment, by the importance of the maker, the size, conformance to certain characteristics considered good, elaborateness, what is currently considered beauty, comfort, provenance, historical or aristocratic connections, and original condition.
His theory, as stated in one of his volumes, is that if you buy correctly, antiques can indeed be as good as blue-chip stocks as an investment. And if they are selected with knowledge, he believes antiques can act as a hedge against inflation.
The Stradlings advise collectors to seek the advice of wise and cautious dealers who have established reputations. They tell their own customers to buy basic reference books in the fields in which they are interested and to study, study, study.
The most authoritative books are usually the older ones, says Gary Stradling, citing as an example the volume "American Glass" by George S. and Helen McKearin , published by Crown in 1940, but reissued many times since.
Mr. Stradling sees as neglected collecting areas 18th-century French porcelain, English and early American blown glass, American ceramics such as Bennington and Bennington-type wares, Federal period furniture, and American paintings.
"It is of course true that art, viewed long term, can be a very good investment and in bad times as well as good," he continues. "But the new investor is playing a serious game, and not usually very wisely, and so is helping to tilt the art market off course. There are just three major reasons to buy art -- for the love of art, for the pleasure of displaying it, and for the joy that it gives." After these three reasons, he says, "and at the bottom of the list, should be 'financial reward.' It is a factor, but it should be the small print and not the bold type reason for ownership."
Stephen Roedler, director of the Manhattan Art & Antique Center, warns that just as 80 percent of investors who play the commodities market end up losing money, it is also probably true that 80 percent of those "investing" in fad collectibles can end up losing money.
"Once a given fad has run its course, collectors, more often than not, will find themselves lacking a marketplace that will cover even their original investment, whether it is certain posters or plates or snuff boxes. So don't buy collectibles for tangible gain, but for fun of interaction with other collectors that you will meet in your quest, out of the pleasure of the chase, and out of genuine interest in ownership.
Mr. Roedler advises most people to focus on long-term collectibes, that because of their intrinsic and historical value, provide realistic opportunities for capital preservation and appreciation.
Perhaps Richard Rush sums up the investment situation best, when he says, "From a purely investment point of view, it is better to buy high-priced items of the finest quality and to hold them for a number of years. And better yet, it is best to forget about resale and enjoy them with the knowledge that if a financial crisis comes along, these items can be sold perhaps to advantage.