A new era of value equality is unfolding among the worlds’ artists. In the case of the price differential between the work of the contemporary ‘art stars’ and emerging artists, consider for a moment an important influencing factor also found in the stock market: uncertainty. For instance, a company operating in an industry where a key competitor suddenly becomes the subject of an investigation will undoubtedly see its stock price at least temporarily negatively impacted regardless of culpability simply because of investor uncertainty. Lack of knowledge in any industry acts as a damper on value, and let’s face it, the famous are such because to date they’ve received the entirety of the spotlight from the art market apparatchik, hence relatively little is known about those without such support.

 

However, the internet is THE equalizing factor. In an era where the internet functions as the facilitator of the distribution and promotion of the work of emerging artists from all over the world, the era of the ‘art star’ deemed such by the critics, curators and self-appointed art experts has come to a necessary end. 

 

In order to assess value and predict the direction of prices with respect to any asset, including stocks, it’s instructive to look at comparables. The work of the Old Masters and other dead artists has stood the test of time thus guaranteeing its worth in the form of the stratospheric prices garnered today. What is less clear is the rationale for the difference between the prices paid for the work of many contemporary artists and the much larger group of emerging artists. In any other industry, over time such a relative value disparity would disappear. 

 

Given the increasing recognition of the value of art today, equalization of the prices between discovered and undiscovered artists is inevitable if only because the relative value of the latter is highlighted. In the case of two stocks with equal earnings generating power where the sole exogenous, differentiating factor is the amount of ‘coverage’ by Wall Street that each receives, the difference in price to the long-term investor highlights the less expensive as a powerful value, and the common sense choice. Yes, the value stock may lack the imprematur of the big Wall Street analysts, but how many times have they overlooked a diamond covered in coal dust? Emerging artists are the greatest investment opportunity that no one has ever heard of.

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 The traditional path to art world notoriety has usually included art school followed by showings in galleries, and being noticed and collected by well-known art patrons and eventually museums, with the accompanying media attention to keep it all going. Urban art has by all accounts turned this system on its head and instead of artists praying to start out in galleries they are finding their audience first, literally, out in the open, on the street.  From there, with the masses telegraphing their preferences via the internet, the attention-getting artwork then moves into the galleries. 

 

Artists’ long-held frustration at often not being able to have their work seen in galleries has, in the case of Urban Art, found an outlet in having unlimited audiences able to view their art, thus propelling it into the galleries.  In February, 2008 when Bono’s Red auction was held in New York it was Banksy’s work that set new price records even in the rarified company of work from some of the art world’s most lauded producers.  The Tate Modern in London, the world’s most visited Modern Art Museum,  in May hosted ‘Street Art,’ an exhibition during which an entire side of its building was utilized by Urban artists.  

 

As accessibility has driven the meteoric rise of Urban Art sales worldwide, the availability of emerging artists’ work on facilitating mechanism that is the internet will eventually yield the same trajectory. 

We felt art before we intellectualized it. Just as the internet has facilitated heretofore unseen levels of political participation and contribution, the increasing amounts of artwork online is raising the public’s comfort with and confidence and trust in their own artistic gut reactions and taste.  Trust in one’s own evaluative ability is rising alongside a very quiet decline in the experts’ ability to dictate worth and value.  Formerly geographically isolated artistic fiefdoms are falling and being replaced as the internet facilitates new levels of artistic exchange and collaboration.

Those with an interest in art do not need Charles Saatchi or any other art dealer telegraphing taste. It’s no coincidence that just as an increasing number of people are turning toward a spirituality which is personally meaningful and away from traditional organized religious structures, blind faith in the opinions handed down by the arbiters of taste in the art world are gradually being replaced by an overarching supreme, personal aesthetic.

Before co-founding CapucinesBoulevard.com, I spent my career investing in small and micro cap value stocks which basically means the smallest and least expensive 5% of all public companies – and despite the fact that these were all well-run enterprises, most investors didn’t pay much attention to them — so, when I went to visit companies to learn more about their operations, many were pleased that someone was actually interested.

Most importantly, by spending the time to get information that other investors were ignoring, I was able to find opportunities that others missed. I believe that like small and micro cap value stocks, Emerging Artists are the greatest investment opportunities that no one has ever heard of.

 

Many people make the mistake of looking at art as something that’s nice to have, but that simply doesn’t meet the qualifications of a necessity. How wrong they are. 

Art happens to be the biggest unregulated, legal economy in the world to the tune of $64B worldwide, in fact, it grew 95% between 2002 and 2006 and, the truth is, as Robert Redford has said, “culture is a solid investment”

 

Make no mistake, art isn’ fluff. We live in an abundant country, and have pretty much taken care of all of our basic needs, and our culture places increasing value on creativity and innovation: the ideas that catch on today are those that represent conceptual leaps – they give us things that we didn’t know we were missing, not things we necessarily needed, but ideas that appeal to our creative natures.

 

Artists begin with an innate advantage in this new economy by their very ability to see and to think differently. And Art is becoming more and more intertwined with our daily lives: we can see it in the examples of corporations buying Contemporary art in order to attract and inspire their employees, and to highlight their brands to the world while giving something back to society — and these companies aren’t cutting back on their art buying despite what’s going on in the economy, because they’ve come to recognize how much the visual really drives our culture, and keeps them top of mind.

 

The other side of this new economy other than the art itself centers around the value of it — art should always be purchased for the joy it brings, but art is also an asset and if it’s bought for pleasure and gives the investment returns for free, what more could anyone ask?

However, when it comes to art, it’s contemporary art that’s in demand because even though people admire the Old Masters, what they want to own are representations of their own culture and time. Contemporary art is more topical and often more interesting and now, it’s becoming more valuable.

 

Art isn’t usually an asset that springs to mind when thinking of investment alternatives, but its long-term performance record argues that it should be.

For the last 50 years, contemporary art has outperformed the S&P 500, which means that someone who bought a portfolio of art would have done better than someone who invested in the stock market over the same time period. The same holds true during every major war of the twentieth century and through the twenty seven recessionary periods since 1875.

 

From an investment standpoint, and most important for Emerging Artists, is the fact that there is no greater advantage to buying more expensive works of art, buyers get the same returns buying artwork that’s never been exhibited or received any citations, as they would buying the work of artists with more notoriety. 

 

There’s truly never been a better time to be an emerging artist. With their power to inspire, and yes, to prosper, the record is quite clear: the VALUE is in work of the emerging artist.

Man will begin to recover the moment he takes art as seriously as physics, chemistry or money”   Ernst Levy

 

Art fills many needs. Art and artists confer a ‘coolness’ factor onto neighborhoods,  driving communities’ economic growth. Corporations employ it as a way to motivate employees and lend bite to their brands,  and hospitals utilize its transformative power to encourage healing.   All of which helps to explain why, in concert with the current stratospheric rise in global wealth, art continues to attract a broader audience and deliver record-breaking auction results despite a worldwide economy just beginning to realize the effects of speculative excess and inevitable recession. However, even without a dawning realization of the myriad ways in which it impacts our lives, art would still be climbing because, particularly during times of economic distress, art is the asset that both pleases and prospers.

 

During 2007, America’s financial institutions wrote off a whopping $120 billion in assets stemming from the still unfolding subprime mortgage crisis. S&P is forecasting mortgage-related losses above $265 billion when all is said and done, and well-known U.S. banks have already borrowed $50 billion from the Federal Reserve to shore up their reserves. 

 

Meanwhile, the stock market is clearly unnerved by the prospect of a contracting consumer, with the S&P 500 having already lost 8% of its value year-to-date, with 6.1% of that coming in January, the biggest drop since September, 2002. Not to be outdone, the European Dow Jones equivalent lost 12% in January.  And as a result of reduced U.S. interest rates aimed at dealing with the effects of the mortgage situation, the dollar continues to lose value, having fallen 9.5% versus the Euro in 2007, 37% in the last five years. What’s increasing in value you may ask? The answer: the Euro, Gold, Silver, and ART. 

 

“Nonfinancial assets form the greater part of world wealth and have been more stable in value during periods of financial and social turbulence.” (Global Investing: The Professional’s Guide to the World Capital Markets, Roger G. Ibbotson and Gary Brinson).  On February 14th, 2008, Sotheby’s hosted the Red Auction in New York City to benefit HIV/AIDS. The  75 donated works raised $42.6 million, almost $9 million above estimates, and pieces by 17 artists sold for the highest prices they’d ever received at an auction. Ironically, on the very same day former Federal Reserve Chairman Greenspan announced that the U.S. is on the precipice of a recession. 

 

On February 5th, the Dow fell 370 points, the indexes’ worst loss this year, and the eighth worst day for the stock market since 2000. It was also the day that Sotheby’s held its auction of Impressionist and Modern works in London for a record total 116.7 million pounds, 40 million pounds over the prior record set just last June. The sale saw five records broken, with 88% of lots sold, a healthy outcome in any economy. It was also Sotheby’s highest total ever for an auction of Impressionist and Modern art in London. 

 

Just what explains these levels of spending on art at a time when, it could be argued, inextricably-linked worldwide economies are poised for a painful contraction? In short, because in some quarters, art is seen not as a discretionary luxury, but instead as the store of value that it has always been, especially during economically trying times.  

 

A survey compiled by the U.K. research firm ArtTactic found that in the second half of 2007, 40% of respondents expected a correction in the art market. Given the market’s unprecedented climb over the past eleven years coupled with the steep decline in consumer confidence relative to the woes of the credit market, that result was not particularly surprising. However, what only a few have known for quite some time is that art has often been one of the most stable, not to mention profitable, investments during uncertain economic times. In fact, when the stock market took a swoon in 1987 and again in 2001, outperformance by the art market was notable.

Two NYU economists, Jianping Mei and Michael Moses, developed the Mei Moses All Art Index. The index analyzes the repeat sales of over 12,000 works of art at auction since 1950 to generate precise return data. The pair reported in an article in Forbes that “during the armed conflicts of lengthy duration of last century, art indexes outperformed major stock indexes.”  When stock markets fell during World Wars I and II, art outperformed the S&P during most of those years, and by 1920 had risen to 125% of its 1913 value (versus 94% for the market). Further, while the S&P 500 increased 67% during the Korean War (1949-1954), art was up 108%, and during the Vietnam War (1966 to 1975) when the S&P 500 fell 27%, art rose 256%. 

However, art’s outperformance of the equity markets is not confined to times of war, but surpasses the more traditional investment vehicles as well when the markets are roiled by a troubled economy, exactly the situation we find ourselves in today.   In an article in InvestmentU,  Mei/Moses analysis of data from the 27 recessions since 1875 reveals that art does quite well in tough economic times. Investors want and need to invest their money but when confronted with volatility-producing uncertainty, the foundation of the bellwethers becomes rocky, and investors turn to art. 

 

For example, in 2000, the U.S. economy was facing many of the same conditions as it does today: declining retail sales, reduced capital spending and tightening bank credit standards. The peak in the Dow Jones Industrial Average that occurred on March 10, 2000 was followed by a loss of almost $3 trillion in market value and an overall loss for the year above 10%. Results for art were much different however with the Mei/Moses Index gaining 16%.  In addition to its outperformance, art has a low correlation with the stock and bond markets which makes it an excellent way to diversify a portfolio, and reduce overall risk. Far from being a luxury, it can be argued that art is an essential component of any portfolio.  

We have the pleasure of introducing our newest blog Original Fine Arts Gallery http://www.originalfineartgalleryonline.com/.  It is already filled with exciting stories and photos about art and artists.The intent of this blog is to introduce you to talented emerging artists from around the world, and their artwork. You’ll discover a depth of information about them and their creative achievements, as well as relevant and timely stories about art and its impact.  We also plan to show you the wonders of the world of art beyond the “walls” of our gallery: for instance, you can already browse posts with photos of architectural masterpieces. Take time to discover the value of art!

 



The arts are a workplace and living hub. The presence of art and cultural events is naturally attractive, particularly to a younger demographic, and often deterministic when it comes to choices about where to live and work. The true value of art derives from this innate understanding of art’s key, but often unspoken, role in many of the most important choices that we make, i.e. where to live, work and congregate. Those choices in turn propel economic activity. 

 

In his groundbreaking book, “The Rise of The Creative Class,” Richard Florida employs exhaustive research to determine that “places with a flourishing artistic and cultural environment are the ones that generate creative economic outcomes and overall economic growth.”  That in fact it is easy to extrapolate an area’s degree of innovation and the penetration of high technology industries, as well as its employment and population growth, based upon the resident number of artists (painters, sculptors, photographers, dancers, actors, writers, ect.).

 

Of the 350 public art programs across the U.S., the average size is just under 800K. In total, the programs fund $150M annually in public art with a decidedly upward trend. The genesis of these municipal programs is traceable to the National Endowment for the Arts’ decision to establish its program, Art in Public Places with the belief that art in highly-trafficked locations can serve as a balm to the spirit, while encouraging camaraderie and group gatherings.

 

There’s an understanding that attracting a younger, educated workforce requires that an area possess a certain creative ‘buzz’.  Supporting the arts therefore is crucial, hence the types of programs that exist in Lucas County, OH, or Manchester, England, or Columbia, MO.  These types of programs foster the flourishing of the arts and cultural opportunities, and ultimately result in an enhanced quality of life. 

 

In Lucas County, OH, the new Art Assist program provides 1% loans to residents to purchase art from area galleries with price tags between $500 to $2,500. The program’s ultimate aim is improvement of the county’s quality-of-life by enhancing its art scene and thus attracting highly sought after younger, educated workers. The program was modeled on that put in place in Manchester, England, a once vibrant factory city in need of redirection in the technology age.  There, civic leaders also came to view a thriving arts scene as vital to its rebirth. 

  

In Atlanta, GA, a new condo tower called Gallery is being developed complete with a 1,200 square foot art gallery featuring rotating exhibits anchoring the ground floor. The tower is expected to attract residents interested in creative clustering, not to mention the fact that each unit includes original contemporary art loaned to residents. 

 

In Columbia, MO, a unique arts program encourages businesses to purchase new artwork from area artists every year.  Organizers believe that original art has a strong impact on businesses’ ability to attract and retain employees. The feedback is that these businesses are perceived as offering a more cutting-edge, innovative atmosphere. 

 

When an area requires revitalization, the first tool in the governing body’s arsenal should be art.  In recognition of this reality, the state of Maryland in 2002 established the nation’s first Arts and Entertainment Districts designed to bring together artists and arts-related venues in order to spur development.

 

The data are clear that in terms of job creation, household income and governmental revenue, the arts are an invaluable industry. Therefore, the primary decision for cities and states must center around anchoring the arts.

 

Capucine Price

http://www.CapucinesBoulevard.com

Email: Support@CapucinesBoulevard.com

January 23, 2008

 

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