THE ERA OF THE EMERGING ARTIST, Part I

"Our chief want is someone who will inspire us to be what we know we could be." Ralph Waldo Emerson

Assume for a moment that emerging artists are akin to value stocks. Like any true value stock, the work of emerging artists is often overlooked, and their worth and prospects underestimated. However, just as Warren Buffet will search out quality companies with distinctive attributes, art lovers can unearth emerging artists whose work is thoughtful, topical and passionately committed to a sense of relevance to modern life. And while the majority of investors fail to perceive value stocks' improving prospects until after the greatest gains have already been made, the opportunity to discover the value of emerging artists exists now.

The art market continues to expand at an unprecedented pace. 2007 marked the first time in history that total worldwide sales for Christie's and Sotheby's hit $10 billion. In November, Christie's posted its second highest total for sales of Post-war and Contemporary art at $325 million, second that is to the $385 million tallied in May. Notably, 93% of the works sold, and a dozen artists set records. Meanwhile, Sotheby's sold $316 million at its November sale of Contemporary Art, the highest auction total ever posted by the firm. Sotheby's sold 91% of its lots.

CREATIVITY ENGENDERS CHANGE
Art is attracting a new breed of buyer. At Sotheby's June sale of Contemporary Art, over 20% of buyers were participating for the first time. Around the world, young, urban and increasingly affluent professionals are choosing art as an accessible means by which to obtain a hallmark of their culture, while demonstrating their individuality and increasing their wealth.

The reasons for art's broadening appeal are varied, but beyond the worldwide expansion of wealth, what's taking place is a fundamental shift in the understanding that creativity engenders change. Whether it be municipal or county governments, educators, or art lovers, there is a new respect for the way that art and music inculcate culture, define generations, and influence the lexicon. When asked to characterize a decade, our responses most often include references to art and music. Art can and often does provide society with forward momentum.

RELEVANCE RULES
Despite their unquestioned quality and finite inventory, sales results of the Old Masters haven't kept pace with those of the Contemporary and Modern art markets. Even Contemporary furniture outsells older fare at sales and auctions. Growth in the value of Modern Art has outstripped every other category of art at auction. According to Art Market Research, prices for Contemporary Art have quadrupled since 1995 while results for Old Masters have significantly underperformed. For the period between June 2006 and June 2007, Old Masters posted gains of 7.6% vs. 44.3% for Modern Art and 55.3% for Contemporary Art, according to the Hiscox Art Market Research Index. And Sotheby's sale of 304 lots during its sale of Old Masters in December, while yielding strong year-over-year results, nontheless pale in comparison to Contemporary Art results.

Two economists at NYU's Stern School of Business, Jiangping Mei and Michael Moses, have developed one of the most respected art indices. Their work centers around an examination of the auction results of over 11,000 sales transactions. Interestingly, in research reported in the magazine Registered Rep, they found that in over 4,500 cases it was not the most expensive paintings which provided the most return for investors, but those at the lower end of the pricing scale.

TO BE CONTINUED...