Art investment consulting for individual and corporate clients

We are very happy to announce that we now offer art investment consulting services for individual and corporate clients led by Ms. Cappy Price!

Art isn't an asset that readily springs to mind when thinking of investment alternatives but its long-term performance record argues that it should be. Cappy Price spent 14 years as a portfolio manager, including helping to spearhead William Blair's development of a value investment discipline and related products for institutional and mutual fund investors. A partner at the firm, she co-managed assets in the small cap universe, primarily stocks with market capitalizations below $1.5 billion. She currently consults on Art as an Alternative Asset Class, in addition to being the co-owner of the online art auction site CapucinesBoulevard.com.Her background enables her to meld the seemingly disparate areas of finance and art, and she welcomes the opportunity to make presentations.....on Art as an Alternative Asset Class.

WHY ART IS THE BEST INVESTMENT YOU WILL EVER MAKE - PART IV

IT'S TIME TO PUT YOUR ASSETS ON YOUR WALLS

"Non-financial assets form the greater part of world wealth and have been more stable in value during periods of financial and social turbulence." Roger Ibbotson and Gary Brinson, "Global Investing"

The devolution of confidence in traditional investment alternatives, in concert with the elevation of the importance of design and aesthetic throughout the world, points to a renaissance in the value of art to a degree never before witnessed.After all, the art auction market is fair and transparent with a degree of stability that many financial institutions, and even some AAA-rated U.S. government debt, can only dream about.

The very fact that sovereign wealth funds are dramatically altering their asset allocation decisions for the first time in decades, in recognition of a drastic change in the risk profiles of traditional and even AAA-rated securities, should prompt a revaluation of individuals' investment parameters toward the incorporation of real assets that have served as stores of value throughout time, such as art.

"The main contributor to both absolute total returns and to the variance of total returns was the asset allocation policy decision." ( Global Investing: The Professional's Guide to the World Capital Markets, Roger G. Ibbotson and Gary Brinson)

Even absent the conditions present in the market today, making the deliberate decision to remain in the stock market inherently implies acceptance of a degree of risk. In that case then the decision should be made to diversify with the inclusion into the portfolio of assets which have no or little correlation with that of the market, in order to minimize risk and maximize return potential.

As a real and tangible versus a monetary asset, art's low correlation with the stock and bond markets makes it an excellent diversification vehicle -- enabling reduction in overall portfolio risk. A key study examining the returns of 82 large pension portfolios by Gary Brinson, Brian Singer, and Gilbert Beebower uncovered that over 91% of the variance of returns is attributable to the asset allocation policy decision, rather than specific stock or bond selection decisions. (Gary P. Brinson, Brian D. Singer, and Gilbert L. Beebower, "Determinants of Portfolio Performance II: An Update," Financial Analysis Journal, May/June 1991.) Therefore, the research data argue persuasively that allocating a portion of all investment portfolios to art as an investment class is as imperative as the very decision to employ an investment policy. It shows that for an investor with the twin goals of preserving wealth and growing capital, with today's market conditions, history points to the capital preservation and return superiority of art.

Hence, it doesn't matter what genre of art is selected, what matters most is the policy decision for its inclusion. This study therefore highlights the importance of the investment policy with a clear implication for the Art market. Why not apply the respected and proven paradigm of the investment world as it relates to financial assets, to the real, tangible asset that is Art?

Art's status as a store of wealth is undeniable by historical standards. Under the old paradigm, one would observe that with a buoyant art market in large part due to exuberant participation of buyers from a single industry, that with the sudden ill fortunes of that industry, would necessarily mean at lease the near-term deceleration of the art market. Not so this time. The growth of the current art market is traceable not simply to a single industry or even a single continent, but to a hitherto unseen confluence of global wealth and acquisitive desire.

It has been an incredible year for contemporary and modern art. Christie's and Sotheby's together posted record sales over $12 billion. Despite all the economic travails discussed in these posts, art has been one of the only asset classes that has continued to outperform and bring an important degree of diversification to owners' portfolios. If you consider the fact that the 10-year inflation-adjusted return of the benchmark S&P 500 has actually been negative, that real estate can no longer be considered an asset upon which to retire, and the inflation which will only continue to ravage real returns, the choice for art becomes clear.

CAPUCINES BOULEVARD

WHY ART IS THE BEST INVESTMENT YOU WILL EVER MAKE - PART III

"Non-financial assets form the greater part of world wealth and have been more stable in value during periods of financial and social turbulence." Roger Ibbotson and Gary Brinson, "Global Investing"

The devolution of confidence in traditional investment alternatives, in concert with the elevation of the importance of design and aesthetic throughout the world, points to a renaissance in the value of art to a degree never before witnessed. After all, the art auction market is fair and transparent with a degree of stability that many financial institutions, and even some AAA-rated U.S. government debt, can only dream about.

The Inflation Problem

Economies around the world are experiencing slower growth. However, the imported inflation in those countries where the currency is tied to the U.S. dollar has eliminated central banks' option of reducing interest rates in order to generate growth. Growth has been further stymied by those countries' losses from their dollar-denominated assets. Of all the maladies around the globe however, it is dollar-driven food price inflation which poses the gravest danger to the sustainability of the dollar peg. To reduce inflation, Thailand and the Philippine central bank increased intereste rates this week. South Korea has been selling dollars in an effort to revalue the Won. To address inflation, the Indian central government recently decided took steps allowing the rupee to rise in value against the dollar, sparking a rally in the stock market. For example, Pakistan experienced riots at its stock exchanges as a result of continued movements downward, on top of rapidly rising commodity price inflation. A recent survey there highlighted the fact that 71% of respondents see inflation as a problem. This situation has been pointing many decision-makers toward the necessity of de-coupling from the dollar, revaluing their currencies higher, accelerating the movement away from U.S. investment vehicles, including the AAA variety, and hence, the vulnerable position that the dollar now finds itself in.

Bank Failures.

It doesn't end at IndyMac, the U.S.' third largest bank failure ever. Bank regulators, due to their increased expectations for greater numbers of bank failures, has for months been bringing bank examiners out of retirement in order to handle the anticipated workout workload. Many more banks are expected to fail.Interestingly, IndyMac wasn't even on the regulators' watch list when it failed, indicating that other banks are almost certainly as vulnerable. In its call upon depositor insurance to consumers, IndyMac alone will exhaust 10% of the FDIC's total warchest.

Not all things with high prices are in a bubble/Art Market will not implode.

The most well-known of the art indexes was developed by economists from NYU's Stern School of Business Jianping Mei, and Michael Moses. The Mei/Moses Fine Art index exist for seven different categories of art including Old Masters, 19th century, Impressionist, Modern, postwar and contemporary, and American before 1950. It is based on repeat sales of paintings, sculpture, ect. and captures almost 95% of all auction data. The index indicates that art had a compound annual growth rate of 12.05% between 1953 and 2003 versus 11.65% for the S&P500 index, with reinvested dividends.

WHY ART IS THE BEST INVESTMENT YOU'LL EVER MAKE - PART II

"Non-financial assets form the greater part of world wealth and have been more stable in value during periods of financial and social turbulence." Roger Ibbotson and Gary Brinson, "Global Investing"

The devolution of confidence in traditional investment alternatives, in concert with the elevation of the importance of design and aesthetic throughout the world, points to a renaissance in the value of art to a degree never before witnessed.After all, the art auction market is fair and transparent with a degree of stability that many financial institutions, and even some AAA-rated U.S. government debt, can only dream about.

Foreign Investors Reducing Their Exposure to the Dollar because sovereign wealth funds have begun to more aggressively reduce their exposure to the dollar. With over $3 trillion in investable assets, Foreign governments already own a whopping $1 trillion of Fannie and Freddie debt. Having watched as their investments in faltering U.S. banks such as Citibank (down 71% past 12-months) have cost them huge losses, Gulf state funds as well as China's primary investment fund (SAFE) are increasingly diversifying out of dollar assets. China's State Administration of Foreign Exchange (SAFE), which holds most of China's $1.8 trillion in foreign currency reserves in dollar-denominated investments, is evaluating investments outside of the U.S. Their move follows moves by Kuwait which cut its ties to the dollar in 2007 and their statements this week that they will not buy any additional Fannie or Freddie debt, and Singapore which has also reduced its exposure after watching its $5 billion stake in Merrill Lynch fall by almost 40% so far. The $200 billion in funds managed by the China Investment Corporation have taken huge negative hits as a result of their $3 billion investment in Blackstone Group in 2007 followed by a $5 billion infusion into Morgan Stanley earlier this year.

The largest sovereign wealth fund, the Abu Dhabi Investment Authority, is growing increasingly sensitive as its population shoulders the pain of inflation imported as a result of the countries' tie to the dollar. And while the desire to diversify currency exposure is gaining strength, most sovereign funds, due to their own significant dollar holdings, are concerned with doing so in a measured way that is unlikely to cause an accelerated dollar plunge.

What is left then for those banks and investment banks in need of capital infusions, who don't have the benefit of being Government Sponsored Entities, and can no longer rely on sovereign wealth funds to lend a hand? They, like Merrill Lynch announced this week, are reduced to selling assets. Having raised $15 billion in capital year-to-date from hedge and sovereign funds from Singapore, Thailand, Kuwait, and South Korea, the investment bank announced that it will sell its stake in Bloomberg.Foreign investors currently hold around $2.6 trillion of U.S. Treasury Securities. Unfortunately, foreign investors' questions about the strength of our assets don't end with Fannie and Freddie. A clear indication of this latest statement comes in the form of credit insurance costs for AAA-rated U.S. Treasuries which in July rose to 16-20 basis points, higher than other nations for the first time ever.

If the country is called upon to write the check to Fannie and Freddie, our increased debt burden will only serve to call into further question the health and reliability of the dollar, which exacerbates oil and food price inflation, and further threatens the dollar in an endless, macabre loop.

WHY ART IS THE BEST INVESTMENT YOU'LL EVER MAKE - PART I

WHY ART IS THE BEST INVESTMENT YOU'LL EVER MAKE ART: HOW TO PRESERVE WEALTH AND MAKE MONEY IN VOLATILE FINANCIAL TIMES

IT'S TIME TO PUT YOUR ASSETS ON YOUR WALLS

"Non-financial assets form the greater part of world wealth and have been more stable in value during periods of financial and social turbulence." Roger Ibbotson and Gary Brinson, "Global Investing"The devolution of confidence in traditional investment alternatives, in concert with the elevation of the importance of design and aesthetic throughout the world, points to a renaissance in the value of art to a degree never before witnessed.After all, the art auction market is fair and transparent with a degree of stability that many financial institutions, and even some AAA-rated U.S. government debt, can only dream about.

THE CURRENT STATE OF THINGS

The U.S. has experienced many decades of economic growth facilitated by technological innovation and ongoing reductions in the cost of labor. As a result, it has enjoyed one of the highest rates of consumption in the world, bolstered by low interest rates and record rates of liquidity, all courtesy of the rest of the world's willingness to buy U.S. debt. The DJIA is down 13.1% year to date and the S&P has fallen 12.4% in that time. The U.S. dollar has lost 10% against a basket of six currencies over the past year, 40% over the past six years, a time when the price of oil is up seven-fold. The Chinese Yuan is up 7% year-to-date versus the dollar after having gained 7% in all of 2007.The U.S. money supply is growing at the rate of 16% per year, the highest rate of growth since 1971 and, correspondingly, Gold is up 283% against the dollar since June 2001. The real source of many consumers' wealth, their homes, have already lost 16% of their value since the peak in 2006.

Writeoffs related to the credit crisis have already passed the $450 billion mark. Keep in mind that this still only reflects sub-prime losses, as no commercial or Alt-A losses have been taken as of yet. After assuring in June that economic risks had diminished, Fed Chair Ben Bernanke testified in mid-July that "there's no doubt there's further deterioration in the cards for bank earnings and we'll continue to see financial sector woes play themselves out." Despite inflation in the form of rising consumer prices, currently at an annual 5.6% rate, the highest since 1991, the stresses in the financial system negate almost any efforts by the Fed to tackle inflation. That does not bode well for the dollar.Fannie Mae and Freddie Mac:The liquidity and capital crisis at these two mortgage behemoths is set against their guarantee of a whopping $5.3 trillion in mortgage credit, or half the total of all U.S. mortgages. The main issue however, revolves around their relative under-capitalization; the two have only a combined $81 billion in capital and that inadequacy means that raising capital has become a priority in this era of mortgage crisis. That roughly 2% of liabilities in the form of capital means that the danger exists that if the value of the mortgages that they guarantee declines by a small percentage......From where that capital will come is the big question, and it is increasingly likely that it will be the U.S. taxpayer who will have to shoulder the burden once again. Why? Absent their ability to raise additional capital in the public market they will almost certainly be rescued by the federal government because they are at least implicitly, if not so stated in their prospecti, guaranteed by the federal government, meaning that their failure would send a pronounced negative signal to the nations' creditors were they allowed to fail. Hence, their bailout could cost as much as 10% of GDP, the rating agency S&P has said and "could create a material fiscal burden to the government that would lead to downward pressure on its rating."

International Art Day

Did you know that official international Art Day is celebrated every year on the 2nd Friday in August and that this year it is actually TOMORROW, 8/8/8? I learnt about this special day just today (do you believe in luck? :-) on Artists for A Better World website http://www.artistsforabetterworld.org/ :

It started out as a simple idea for people the world over to set aside a day for appreciating artists and for enjoying the kind of art they like. And it has now turned into a debate, not dissimilar to the conflicted international views about whether the arts deserve funding and where the arts fit into a technologically advancing culture.

Artists for A Better World member Becky Mate is the founder of an international holiday for artists of all disciplines called Art Day. For the past 10 years, she has let people around the world know that such a holiday exists. The idea has been met with both favor and controversy.

Art Day is the perfect time to celebrate creativity and bring joy to others. Draw a picture. Compose a song. Write a poem or story. Paint. Have a party! Additionally, give a card, photo, music CD, poem, story or anything creative to someone else (you can find a lot of wonderful art gifts in our gallery http://www.capucinesboulevard.com and in our gift shop http://www.cafepress.com/capucinesblvd)

In short, Art Day is about bringing a smile to others and forwarding the concept of creating a better world though aesthetics. Although Art Day was formulated around a particular date to celebrate creativity, ideally, one would forward creativity all year round. Art Day helps to call attention to its importance.

We are on Twitter

We want to inform our readers and friends that you can now follow Capucines Boulevard art gallery activities on Twitter: http://twitter.com/capucinesblvd Twitter allows us to post brief up-dates about new articles and videos we create, about our artists and events and many other exciting things.

Twitter is a microblogging site which "really shines when you’re away from your computer. By hooking up your mobile phone, you can receive updates from those you’re following … when you’re waiting in boring lines." You can get a quote of the day or an invite to an event - it takes communication to a totally new level, convenient for YOU.