IC: Welcome to InvestorCanada.com. I'm Donna Guzik.
The 64,000-dollar question in the markets these days is where do I put my money? Well, have you ever thought about investing in artwork? It seems to work for Ken Thompson. He's the multimillionaire and head of Thompson Corporation.
But is it a sound investment for most of us?
Sharla Bailey Kidder has a background as a Wall Street trader and a fine art collector. Since 1997, she's been running a website called Biddingtons.com. She joins me now on the line from New York City.
Sharla, first off, tell me about this website, how it works. You're dealing with artwork and collectibles?
Bailey Kidder: Yes, primarily contemporary art. However, we're set up as an auction marketplace where outside sellers can offer works for sale. We handle all the money. It's not like an EBay in that regard. We're kind of a clearinghouse. But we tend to focus on contemporary art and we run a contemporary art gallery. The situation for contemporary artists is difficult. It's very hard to get gallery representation.
Artists get a gallery show for a couple of weeks every two years and then are on the backburner the rest of the time. There are a lot of fine people out there who deserve to show. So we're both auction marketplace and gallery.
IC: Well, is it tough to deal in contemporary art? There are people, certainly there's a group of people who know about art and then there's the other group of people who say I don't know art but I know what I like.
Bailey Kidder: We very strongly believe that depending on what you like, whatever genre you enjoy, there's a way to find a kind of art that relates to your personal taste. So you don't necessarily have to buy something that's a very shocking, avant-garde kind of piece. Perhaps you like still lives? There are fine people who are doing cutting-edge work in still life painting or representational art.
So we would encourage a client who says gee, I want something with an image I can understand. We say fine, then why don't you look at these artists? They'll be good for investment in that area.
If you know what you like but don't know art, it's a good idea to ask an advisor to help you buy the best things in the area that appeals to you, to introduce you to works by the best artists.
IC: Now, there are people who buy artwork because they like the artwork and there are others who buy the artwork because it's a good investment. Overall, would you say the art that you're dealing in is a good investment? Are these pieces of art going to go up in price as the years go on?
Bailey Kidder: Yes, I think what is key in contemporary art investing, is that you buy something that is art, something that is not merely decorative. It's got to be something that has an edge to it, that's pushing the envelope in that genre. As long as you're doing that, contemporary art represents a good store of value, at a minimum, and tends to increase.
Over time, you can expect roughly a five per cent annual appreciation if you buy contemporary art properly.
IC: So how does an investor who is interested in making that investment in art because it's going to appreciate down the road, what does an investor look for? How does an investor know that a piece of artwork is going to appreciate, that it's worth buying?
Bailey Kidder: In contemporary art, you look for an artist with a good gallery exhibition background or museum placements--which is to say, someone with a solid resumé. You're not going to buy a piece of art from a street artist who has never shown before. You could make money that way, but it's unlikely.
So first of all, you determine that this artist is investment grade. That's one of the key issues in determining if an artwork is going to go up in value.
The other thing to do it to look around and see what's being shown at museums and other art venues. You get a sense where the artist you're considering stands in the context of contemporary art. And you can see if that artist is part of a wave that is ascendant, or part of a wave that's crashing.
It's a lot like buying in the financial markets. You want to buy something that's on its way up and that hasn't peaked.
IC: Right. Is it like in the financial markets where you should do your homework, as much homework as possible before you go out and make a purchase?
Bailey Kidder: Oh yes. People are afraid of art, they think they have to have huge knowledge. What you really need is to have exposure to it. Your eyes are like any other muscle. The more you look at things, the easier it is to understand what's good. You'd be pleasantly surprised. You don't have to have a lot of prior knowledge.
Do the rounds of galleries, do the museum shows, just spend a little bit of time looking. It's amazing how much you learn.
IC: If somebody wants to invest in artwork, how long should they be holding the artwork for? What's a good hold? Is it a five-year hold? Is it a ten-year hold period?
Bailey Kidder: Well, longer is usually better, but it depends. For instance, there's a show here in New York at the Whitney at the moment, Joan Mitchell. People knew that this show was in preparation. Over the past three or four years, you'd see Joan Mitchell works around and they were remarkably cheap versus the other abstract expressionists. So you could have bought the Joan Mitchell works three or four years ago, not even, and flipped them into this market doing very nicely.
Generally a bit longer holding period is better, but there are strategies for shorter term trading, too.
IC: Now, there is lots of discussion in the stock market about fraud and certainly there have been issues of fraud in the art world. How does an investor make sure that what they're buying is authentic?
Bailey Kidder: If it's a work by an artist no longer living, you need appraisal information and what we call provenance-- which is documentation on the artwork's history. The older the artwork, the more important that is. With Old Master paintings, a good provenance and extensive documentation is enormously important. Even scientific tests become important.
One of the reasons we enjoy contemporary art is that it's relatively easy to get things checked out, to have the artist verify that the piece is indeed "right". Authenticity is an issue. People want to make sure they have proper documentation on a work.
IC: Now, we talked a little bit about the upside on the investment. What about the downside? What are the risks?
Bailey Kidder: The risks are that you buy...-- say you're in the big money art world--you buy somebody who's been a publicity darling but is not that fine of an artist. That artwork can go down. It can go down substantially. That's why I urge people to sell into hype and publicity--even on quality art.
There definitely is a downside on big money artworks. On lower priced art, a work under 10,000 dollars, it's much less of an issue.
The other area that's tricky is multiples. I'm always a little concerned about prints. There were some bad experiences in the 80's with people buying graphics that went down sharply. If an artist's primary output is in prints or multiples, fine. Then perhaps a multiple is a good place for investment. But if an artist is primarily a painter, you probably don't want to buy a print.
IC: Not unlike stocks.
Bailey Kidder: Yes, the whole idea of investing in art is to be a little bit sensible. Try not to be a creature of fashion. Try to be someone who anticipates trends. Investing in art uses many of the same skills as stock investing. But, it's a lot more fun to have the art on the wall.
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