How NOT To Make Money With A Time Machine – Investing in Art

“Success is what sells” – Andy Warhol

(Photo: Wikipedia)

Less than a year ago a family from the Middle East paid a record sum of over 250 million dollars for a painting called “The Card Players” by Paul Cézanne (See above). Many people might say that the seller made a good deal and turned a hefty profit. That may be the case, but how good are returns on the most expensive pieces of art ever sold?

If you had a time machine and could go back in time and purchase the painting for the original price, what kind of return on your money would you see today?

Wikipedia keeps a list of the highest prices ever paid for paintings. I researched the list and included all the record prices paid for paintings for which I was able to find the original sale price. Since we know the sale prices and dates, we can determine how much the painting appreciated each year (geometric mean). Below you can see what kind of return you would get on your money if you purchased the art compared to investing it in the stock market over the same time.

Let’s take a look.

(Photo: Wikipedia)

Painter:

Vincent Van Gogh

Title:

Portrait of Dr. Gachet

Sale Price:

$82,500,000

Year Sold:

1990

Original Sale Price:

$58 (300 francs)

Original Year Sold:

1897

Years From Origin

93

Painting Annual Growth Rate:

16.5%

Annual Stock Market Return During same Time:

9.89%

 


  

 (Photo: Wikipedia)

Painter:

Pablo Picasso

Title:

Garçon à la Pipe

Sale Price:

$104,200,000.00

Year Sold:

2004

Original Sale Price:

$30,000.00

Original Year Sold:

1950

Years From Origin

54

Painting Annual Growth Rate:

16.30%

Annual Stock Market Return During that Same Time:

12.20%

 


 


(Photo: Wikipedia)

Painter:

Vincent Van Gogh

Title:

Irises

Sale Price:

$53,900,000.00

Year Sold:

1987

Original Sale Price:

$58 (300 francs)

Original Year Sold:

1897

Years From Origin

93

Painting Annual Growth Rate:

16.5%

Annual Stock Market Return During that Same Time:

9.76%

 


 


(Photo: Wikipedia)

Painter:

Thomas Eakins

Title:

The Gross Clinic

Sale Price:

$68,000,000.00

Year Sold:

2007

Original Sale Price:

$200.00

Original Year Sold:

1876

Years From Origin

131

Painting Annual Growth Rate:

10.20%

Annual Stock Market Return During that Same Time:

9.30%

 


 


(Photo: Wikipedia)

Painter:

Pablo Picasso

Title:

Le Rêve

Sale Price:

$48,400,000.00

Year Sold:

1997

Original Sale Price:

$7,000.00

Original Year Sold:

1941

Years From Origin

56

Painting Annual Growth Rate:

17.10%

Annual Stock Market Return During that Same Time:

12.92%

 

Looking at the numbers, if you were able to buy the most expensive painting in the history of the world at the original price, your return would be only a few percent higher than that of the overall stock market! After you take into consideration storage, maintenance and insurance on the paintings, a big chunk of that out-performance would most likely evaporate.

Over the long term there are very few things which are more profitable than the return on the broad stock market. Particularly on things which don’t produce anything and derive all their value based on what someone else would pay for it.

But if we focus on art as an investment, it has performed surprisingly well in relation to the stock market over the past 25 years (although with a lot more volatility). But that says nothing about it’s performance moving forward.

It’s hard enough to pick a stock that you think would do well over the next few years, it is even harder to predict which artist and which piece of art would appreciate in the future…if at all.

As the time machine example demonstrated that even with perfect hindsight your performance would only be at best slightly better than the stock market. But since we don’t have perfect hindsight or a time machine it is rather foolish to think that we have the ability to predict which art piece would appreciate the most decades from now.

Buy art because you like it, not to make money.

Michael Page

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