How to Invest in Art

Jim Parton - Thu 20 Dec, 2007

A neighbour admired a 1970s painting on my wall called Evening on Mount Olympus Not any old neighbour. She was a painter, someone whose work has been exhibited at the Tate, and whose husband is a Royal Academician. Evening on Mount Olympus is a picture of unshakeable provenance. Its even signed by the artist. How do I know the signature is genuine lets face it, signatures are the easiest thing of all to forge? It says, by Jim Parton, form 12a, you see. I did it, when I was 11. It was probably one of my very last paintings before the world of art lost me forever to football and, later on, girls...

Six months ago, an Andy Warhol painting, “Green Car Crash,” sold for $72 million at Christie’s New York. The pre-auction price estimate was a mere $25 to $35 million.

As art consultant Sandy Heller told ABC News, “It's hard to put an image of an impaled figure in a burning car in a home where you have little kids.”

The Warhol image (I don’t think we should really it a painting) was a photograph with a little bit of colour added afterwards. You could say he was ahead of his time, in that digital photography, one of the most wonderful new technologies of recent years, had not been invented in the 1960s. I like to play on Adobe Photoshop CS2 and fix family photos. Sitting at the desktop at home, it’s not too hard to turn out a fake “Andy Warhol” of my kids.

A neighbour admired a 1970’s painting on my wall called “Evening on Mount Olympus …” Not any old neighbour. She was a painter, someone whose work has been exhibited at the Tate, and whose husband is a Royal Academician.

“Evening on Mount Olympus” is a picture of unshakeable provenance. It’s even signed by the artist. How do I know the signature is genuine – let’s face it, signatures are the easiest thing of all to forge?

It says, “… by Jim Parton, form 12a,” you see. I did it, when I was 11. It was probably one of my very last paintings before the world of art lost me forever to football and, later on, girls.

My neighbour said she couldn’t believe I’d done it. I can’t believe she couldn’t believe, because, believe me, I’m being honest not modest when I say it’s not very good. (Well, quite good for an eleven year old, possibly. My late grandmother admired it greatly and hung it on her chintz wallpaper for a year or two).

A Warhol or a picture by me?

Aside from the madness of paying $72 million for a photoshop composition, art is a rigged market. Auctioneers like Sotheby’s and Christie’s (who were guilty of charges of market collusion in 2002) bear some responsibility.

But worse is the behaviour of museums. When a benefactor gives a chunk of money to a gallery, he quite often condemns the art it buys never to be seen again. Recently the Seattle Art Museum received $1 billion in gifts of art, helped by the U.S. tax regime, and the lure of “donor recognition”. Donor recognition means the donor gets to show off.

Such recognition doesn’t even last long. All the world’s major art museums have vast collections which no one sees, much of it from donors now long forgotten.
Exquisitely executed paintings from centuries past, if the artist, or period, is out of fashion, may spend fifty years in a vault, seen by no one other than a few crusty art scholars. The Public Catalogue Foundation, a charity, http://www.thepcf.org.uk estimates that 80% of UK collections of oil paintings are never seen by the public.

So art prices remain artificially high. The Metropolitan Museum, for example, has secret warehouses dotted around New York crammed high with stuff that has not been seen for years. Even the Met’s own scholars hardly know what’s there.

If the Met, the Louvre, the National Gallery in London, or The Royal Academy, for that matter, sold the undisplayed 80% of their collections forthwith, art prices would plunge.

The Mona Lisa - currently priceless, but let’s say $250 million - might turn out to be worth “only” $10 million in a market that wasn’t rigged. A $10 million Mona Lisa would be about the right ball park value in term of preserving the world’s cultural heritage.

If you owned a painting worth “only” $10 million you’d be pretty damn careful with it, including displaying it under the right light and climate control. Even a print or painting worth “only” $1,000 you’d be very careful with. Unfortunately, the 80% of hidden art isn’t going to be sold off tomorrow. Or next century.

So what art buying investment tip do we offer Daily Reckoning readers?

First: it’s not an investment. Buy art because you like it, and for no other reason. Don’t overlook free art either. Your six year old child or grandchild’s picture may be worth more to you than the Mona Lisa. My grandmother would have said so, she loved “Evening on Mount Olympus”.

Second: if you must buy art as an investment, buy fakes. The market in genuine art is rigged. Fakes, on the other hand, can be seriously good value.

There’s a place in China where Van Goghs, Leonardos or Breughels are produced on a production line, with one guy specialising, say, in flowers, or in clouds. www.fakeart.co.uk imports good quality reproductions. They will sell you a “Van Gogh” in a decent frame for less than £1,000. Or I can do you a Warhol on Photoshop for £1,000. O.K. twist my arm £100, or even free, because I enjoy doing it.

Serious fakes, those with a bit of history, where the faker successfully fooled the art establishment have to be worth more than they currently are. For example, in 1944, Hans van Meegheran sold fake Vermeers to Hermann Goering. In the process, he fooled the Dutch art establishment, who authenticated the newly “discovered” Vermeer.

After the war, piqued Dutch Old Master experts had him charged with fraud, and he died, a broken man, in prison in 1948. But surely he was a war hero, doing his patriotic duty. He helped protect Dutch heritage from the Nazis.

There are better fakers than van Meegheran (say experts who make the unlikely claim “We would never have been taken in”), but few with a more interesting story. Van Meegherans have been going up, driven, by Dutch buyers belatedly recognising his importance. John Brandler at http://www.brandler-galleries.com has some at around £35,000. He says they would have sold for £5,000 10 years ago.

Brandler also sells his old friend, the master forger, Tom Keating. Keating was caught and convicted. Later he made a fascinating Channel 4 series about the great artists’ methods. He died in 1984, claiming that some of his pictures still hang in famous art galleries. In recent years genuine Keating forgeries have been creeping up in value, but you can still get a watercolour for around £1,000. A Keating “John Constable” in oils can be had for £20,000. (A genuine Constable, Flatford Lock, was priced at £2.8 million last year.)

There’s even a forger, forging Keatings now, says Brandler. So why bother with an original Constable when you can have something just as good, and twice as interesting, for less than 100th of the price?

Regards,

Jim Parton
For The Daily Reckoning

Editor’s note: Jim Parton’s hilarious 1991 account of City redundancy, The Buck Stop Here (“Money talks, mine said goodbye”), is to be republished in February next year. Click here for more on Jim and other ‘contra eddy’ Brits moving to Poland. 

PS. This article is from The Daily Reckoning. With over 500,000 readers every day The Daily Reckoning has become essential reading for anyone who’s interested in their money. If you think you'd enjoy witty, irreverent and often hilarious commentary on economics and investment - for FREE - then sign up today.