"Art is the ultimate asset.” ?

[Pete Marino]

I am willing to guess there are a lot of people in the comic art world that over spend based on their means, and there are a bunch that have a lot of equity in OA because they bought cheap "back in the day" and can play with house money.

 

I know of more than 1 collector that I consider middle class (less than 250k annual household) that will put up 5 digits on art from time to time.

 

 

Bingo. What the income statistics for the general population doesn't capture is how much of the art out there was distributed to the marketplace at what is now pennies on today's dollar (even less than a single penny on the dollar in some cases). A large portion of the hobby would be largely priced out of today's marketplace if they didn't have such wildly appreciated art and/or cash raised from selling such over the years.

Well to start $250k isn't middle class. That's a number plucked to make most feel they're escaping the Wrath of Obama. It's a pretty big number actually when average is only $26k (1/10th!) These numbers are very relative to where you live too. $250k in NYC sure ain't the same as Little Rock

 

But the numbers I was using were net worth, not income. However as no collector before Gene counted their art as an asset (j/k) it's understandable that OA net worth was vastly understated!

 

Then again, it's not all or even mostly recycling of money from selling to buy. (As suggested by above posters.) Why? Because that money that was gained by selling had to come from somewhere. So.......begs the question. Doesn't it? Either it's new money, even if filtered (layered? AML for insiders!) through numerous transactions or it's (largely) zero sum moving around in a circle. Yes? I would also suggest with more and more upgrading occurring it may be that many small transactions (art going to new money) may result in that same money aggregating into smaller but more expensive purchases pushing the best much much higher. This activity may explain the lack of obvious big new money moving in yet higher and higher prices being paid by the usual suspects? If so, then there may be a ceiling where those with large art-wealth upgrade all they can (are able to trade up into) or run out of ability to up-bid (each other)?

 

Real growth cannot ever occur in zero sum environment, the pie just gets sliced and diced into different shapes.

 

As a quick aside. I used income vs assets, because Income is a better indicator or having disposable income to spend on a luxury like art.

 

If you have tons of assets but low income, you're not going out buying many more luxuries, unless you're selling one off.

 

And the median income vs middle class is a very long discussion, but in this environment I don't think they are very close. The median household does not have the disposable income to spend on original comic art IMO. Maybe $250k was a little high, but I was basically trying to say people that have a good income, but are not exactly "killing it"

 

Also, if someone playing with house money has 10 5k pages he's willing to part with (that he paid $250 each for) to 10 different people and then can consolidate that into 1 50k page. And now we have another player at the big roller table.

 

I just read Gene's reply, I guess my point is a lot like his.

 

I think there are a lot of people coming into the hobby where 5k is an amount they're willing to spend (edited from reasonable)

 

And people slowly move up the scale (usually) of spending as time goes on in the hobby until they find their comfort zone for spending / selling. Not many 1st time buyers dropping 10k on their 1st purchase. But their 75th? 100th? Maybe.

[Bird]

Also, if someone playing with house money has 10 5k pages he's willing to part with (that he paid $250 each for) to 10 different people and then can consolidate that into 1 50k page. And now we have another player at the big roller table.

 

I just read Gene's reply, I guess my point is a lot like his.

 

I think there are a lot of people coming into the hobby where 5k is an amount they're willing to spend (edited from reasonable)

 

And people slowly move up the scale (usually) of spending as time goes on in the hobby until they find their comfort zone for spending / selling. Not many 1st time buyers dropping 10k on their 1st purchase. But their 75th? 100th? Maybe.

 

I think Gene's example is one that happens all the time, but those 10 pages from "back in the day" being upgraded to one $50K page now took 40 years. And that collector is likely done. Now maybe he has 100 pages, okay he can upgrade a few times.

 

I think your last points are dead on. If you stay in the game a few years you get very comfortable going for larger numbers. And the tide rises.

 

 

[Pete Marino]

Sorry, I didn't mean that he had only 10 pages. Just 10 that he'd let go of.

[Bird]

I get that. It just diminishes quickly is all I am saying.

 

But it happens often enough on all levels of the game. These blank comic cover sketch guys that are all the rage now will eventually have their share move on up, and the sketch card guys will take their place. The top seems hard to reach though for anyone entering after 1980. Or not a WD early collector!

[Bird]

ya know, I watched this thread all along thinking "man, this topic goes on forever despite being the perfect example of a moot point" and I am sucked in all the same.

[vodou]

I think it would be very interesting to see what sort of chill a credit contraction would put on our little hobby (among other things)? As an example, I'm nothing special but I've got $170k in credit card lines, all at promo ZIRP, for a range of 12 to as far out as 24 months. Now I don't use credit to play art games but I bet a fair number do. My lines before 2010? Less than 1/3 that. And higher rates (IIRC, maybe 2009?)

 

The point is $170k (or any number that applies to you) at ZIRP is a lot of purchasing power with no pain for a year or more, aside from 1% service monthly. What would happen to your psychology of buying if your line was cut by 2/3 and/or rates went from ZIRP promo (and under 8% normal) to 3% and 11% (or whatever, but markedly higher)?

 

What I described above are the same conditions that have fueled a lot of speculative buying across all "asset" classes. It's hard to see rates rising, our own national debt would be unserviceable in short order (without significant tax increases or spending decreases), but credit line decreases...that's very much a possibility. As I started, what chill would that put on everything, and comic OA in particular?

 

I don't know. But purchasing "power" probably part of the $50k question, along with income and net worth.

[cirnick-migration]

Another factor which comes to mind is trading. I think a lot of the high end art ends up as trades (especially with folks who purchased cheap long ago and have the high trading value).

 

We should all start trading and stop paying ebay and heritage fees

[tth2]

Jim Chanos says that the art market is frothy and he's therefore shorting Sotheby's.

[AKA Rick]

Another factor which comes to mind is trading. I think a lot of the high end art ends up as trades (especially with folks who purchased cheap long ago and have the high trading value).

 

We should all start trading and stop paying ebay and heritage fees

 

...and start using BITCOIN or other crypto currencies to keep the payments discreet and with minimal fees too.

[vodou]

Another factor which comes to mind is trading. I think a lot of the high end art ends up as trades (especially with folks who purchased cheap long ago and have the high trading value).

 

We should all start trading and stop paying ebay and heritage fees

 

...and start using BITCOIN or other crypto currencies to keep the payments discreet and with minimal fees too.

Trades don't grow the circumference of pie, just re-slice it. And arguably are even more open to insider manipulation. Gold, silver, cryptos, anything else would be great to do deals in if they weren't so volatile against the national currencies. That volatility either creates wider 'spreads' or somebody gets left holding the bag (at least in the short run). Silk Road I and II messes should also warn that discreet and anonymous...are only that until credentials come knocking. Which really isn't much different than writing a check, paying by card, or pulling bulk cash out and doing a suitcase deal in a hotel room. The info is all there to be tapped on demand. Right?

 

Things were a lot easier (less stupid) when governments (not just USA) weren't starving for tax collections, civil asset forfeitures weren't so common and there weren't supposed boogeymen (financial "terrorists") around every corner. Oh well...the fear mrket has never been so bullish

[Peter G]

http://news.yahoo.com/georgia-okeeffe-painting-fetches-record-breaking-44-4-212427464.html

[suspense39]

I know these prices are insane!

[Peter G]

I know these prices are insane!

 

I am afraid that this all will end very badly ! ! ! But not yet . . . expect future price appreciation because as Chuck Prince says, "As long as the music is playing, you've got to get up and dance."

[Peter G]

"... A broad-based tax cut, for example, accommodated by a program of open-market purchases to alleviate any tendency for interest rates to increase, would almost certainly be an effective stimulant to consumption and hence to prices. Even if households decided not to increase consumption but instead re-balanced their portfolios by using their extra cash to acquire real and financial assets, the resulting increase in asset values would lower the cost of capital and improve the balance sheet positions of potential borrowers. A money-financed tax cut is essentially equivalent to Milton Friedman's famous "helicopter drop" of money" - Benjamin Bernanke

[Peter G]

"Cantillon in the 1730s suggested an even more insidious flaw in the central bank’s reasoning. He said that inflation does not move uniformly through an economy. It moves with lags, something Milton Friedman also said in the 1970s. Inflation, according to Cantillon, moves in concentric circles from a small core of people to an ever widening group of affected individuals.

 

Think of the way ripples spread out when you drop a pebble in a pond. Cantillon said that the rich and powerful are in the inner circle and see the inflation first. This gives them time to prepare. The middle class are in the outer circles and see the inflation last. They are the victims of lost purchasing power.

 

This Cantillon Effect may explain why wealthy investors such as Warren Buffett are buying hard assets like railroads, oil and natural gas that will retain value when inflation hits. Official measures of inflation are low today but those in the inner circle already see it coming first, just as Cantillon suggested.

 

- Jim Rickards