Art Is Not Gold.

Well, maybe sometimes: Walter de Maria's "Silver Meters", 1977, at the Dia:Beacon

Discussions of art as an investment are getting smarter. For one thing, we’ve stopped comparing it to stocks. We still get the occasional piece linking auction results to upturns in the Dow (investors have more money!), downturns in the Dow (investors need a safe haven!), or fluctuations in the Dow (investors are seeking a more stable commodity!), but we’ve pretty much stopped with the idea that there’s any clear comparison to be made, as an investor, between, say, four hundred-year-old paintings of women playing the clavichord and part-ownership in a company. We’ve replaced that, though, with an implication that’s no less puzzling: art is like gold.

It crops up in market pieces occasionally, but a feature article in Investment Weekly a few months ago made it explicit. Art in the investment class of “Silver, Wine, Art and Gold” – to be capitalized so we can sound cool and call it “SWAG” (in fairness, that is pretty cool). I’m not convinced.

For the potential investor, art and gold simply don’t have a lot of financial characteristics in common. For one thing, there’s the transaction costs: you don’t pay 20% of its value to sell a bar of gold, as you would selling an artwork at an auction house, and you don’t pay 10% of its value as a “buyer’s premium”; you certainly don’t expect to wait months or years for it to sell; and there’s no danger of needing to deal with either the droit de suite present in Europe and California or the arcane export licenses of Italy, Russia, and other countries. There’s also the costs of ownership: gold doesn’t need to be insured against damage, doesn’t need to be transported by trained handlers, and doesn’t need to be kept in a climate-controlled environment. Besides that, there’s the simple hassle of buying art – you know, do I want to call my investment manager and buy some gold, or would I rather research the present state of the art market, find a viable work, establish a relationship with a dealer, and pay to ship and store that work? It just doesn’t make much sense.

What does make sense is the idea put forward by Bruno Frey in his 2000 book Arts & Economics: Analysis & Cultural Policy (and before that in a 1995 research paper) that art is an awful lot like real estate: pricey, relatively illiquid, highly differentiated, intrinsically useful, and frequently purchased by Russian oligarchs. There are some key differences, of course – in real estate, for instance, there’s no chance of arbitrage, or picking up an undervalued house in Cologne and reselling it in New York – but I’d forward that art and real estate are a lot less different than art and stocks or art and gold. If you can find a housing price index for a particularly pricey area – like, say, the Hamptons – you’d probably even be dealing with the same buyers and sellers (a boon for comparing markets).

So can we make that our new cliché, please? It may take a few more minutes, as a writer, to look up a housing price index instead of a stock market index, but we’d end up a whole lot closer to the truth.