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Art Almost Good as Gold
Strong annual growth for art investors
Thomas Johansmeyer (tomj)     Print Article 
Published 2008-04-13 07:35 (KST)   
Art continued its rapid growth trajectory through 2007, extending the 2006 trend. Sales at auction outpaced the Standard & Poor's 500-stock index, indicating that art outpaced the broad stock market for the second year in a row. But, the future is uncertain. It appears that a bubble is forming in this market, and the economic downturn caused by the collapse of the subprime mortgage market could lead to a downturn this year.

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As measured by the Mei Moses All Art Index, which is based on the sale of art at auction, art grew by more than 20 percent, compared to annual growth of only 5.5 percent for the Standard & Poor's 500. Actual returns were probably greater, as the Standard & Poor's 500 statistics used by the Mei Moses All Art Index assume that all dividends are reinvested tax-free. Art did lag gold in 2007, which was up more than 30 percent according to a report released by Beautiful Asset Advisors, developers of the Mei Moses All Art Index.

Measured for the most recent 5- and 10-year periods, the Mei Moses All Art Index has demonstrated compound annual growth rates (CAGRs) of 16.2 percent and 10.3 percent respectively. This outpaces the 12.7 percent and 5.9 percent returns for the Standard & Poor's 500 over comparable periods. But, the Standard & Poor's 500 maintains a substantial edge over art for the most recent 25-year period. Over 50 years, the returns are similar for both measures.

The future is uncertain. According to New York artist Julio Aguilera, art does suffer in tougher economic climates, as investors try to become more careful with their capital. But, he continues, this is not always prudent. "If the art market turns in 2008," he suggests, "it might make a great buying opportunity. Everything will sell at a discount, and prices will probably come back over a few years."

Data from Beautiful Asset Advisors seems to confirm Aguilera's sentiment. An art bubble burst in the late 1980s, but prices have since recovered according to the Mei Moses All Art Index. Today, art sales at auction are at their highest levels ever. While there is no way to tell what the market will do in the future, it looks as though today's downturn may result in substantial returns for investors who take action.

Despite economic activity and investment returns, though, most artists and art investment advisors agree. The best return you can get on a work of art is the satisfaction you feel every time you look at it. Given the state of the market today, that return is far from trivial.
©2008 OhmyNews
Other articles by reporter Thomas Johansmeyer

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