I trade a lot in the stock market and I’d like to think I have the stomach to face the usual risks involved in trading equities. I’m actually more of a day trader, a momentum trader at that. At the opening bell, I would already be on the lookout for any steep movements in price. If I find one that has gone up with significant volume in the first two hours of trading, that’s my target. Feeling the momentum, fingers on the mouse, I try to buy at the right time, ideally at a price retracement point. And then once it goes up a few fluctuations, I’m out. All in a day’s work.
But the market hasn’t been so friendly these past months. It’s actually a wreck right now. We’re waiting for Santa Claus to bring in a rally. I guess, he’s our only hope now because the Federal Reserve is just as desperate as us traders.
And so, I’m thinking, maybe it is possible for the art market to rally. Maybe I can make some money there. That’s the news that has been going around since 2014. The new money in China, plus all those museums in the Middle East are queueing up their bids. And it makes sense. At a time when forex traders are getting whipsawed and we seem to be at risk of a full blown currency war, when the sovereign bond bubble is just about ready to burst, with gold and oil in a downtrend, and with real estate prices in limbo, you have to find other options. Where else can you put your money? Some put their money in art.
But the art market had always seemed intimidating for me. I appreciate art but I don’t claim to be an expert. I’ve considered investing in art many times. But as I’ve said, I get intimidated time and time again. The art market is so opaque. It’s unlike the stock market where anyone can see all the prices as they move by the second. At the same time, art is a long-term hold so it doesn’t match my day trading set of skills.
What’s attracting me to art investing right now though is the possibility of an art market bubble in the making. Maybe I can bet at least five percent of my portfolio on that right now. I would lump together gold and real estate with art investments.
Why am I optimistic about an art bubble? During times of economic uncertainty, when investors are fearful with their currencies and worried about the stocks and bonds they hold, art and jewelry tend to appreciate in value. The US Federal Reserve “saved” the world from economic catastrophe seven years ago when it bailed out the big banks and absorbed a lot of their subprime mortgage exposures. But the Fed seems to be running out of tricks now. Near zero interest rates and a ballooning federal credit card have made the chances of the US saving the world’s economies this time around is a little bit slimmer.
Also favoring higher art valuations are the political and social uncertainties we are experiencing globally right now. Refugees streaming across Europe. Terrorists in Paris. Russia striking at ISIS. Turkey striking at Russia. Putin hating on Obama. Obama, well, he’s at an In-N-Out Burger right now, practicing his official statement on all those things. Some are even crying out World War III! I don’t know if it’s going to be World War III. But just in case, I think I’ll do better with a painting than a paper bill if ever that pushes through.
And so, intimidating as it may seem, I think I’ll take the plunge and invest in some art. Lots of research and advice-seeking will hopefully guide me in the right direction. So many questions right now. How much of my portfolio should I allocate to my art investments? Which art advisor should I go to? What works of art should I focus on? Which artistic period? Which artist? Which painting?
Unlike buying equities, there is no balance sheet to analyze. There are no ratios to help me compare one work against another. No profit and loss statements, no cash flow reports here. No history of stock or cash dividends. No annual reports or SEC filings. It’s a different animal.
But just like equities, there is risk, there is a holding period, there is a bid and ask and there are taxes involved. And you also need guts. And a bit of luck.
I might have a chance at this.