Beauty, desirability and fine art reside in the eye and the mind of the beholder.
da Vinci’s Salvator Mundi, Savior of The World, just brought slightly more than $450 million at auction. Let that sink in for a minute or two…. As with U.S. Equities, this too is a new record high.
Have you asked yourself why it would bring that much and who bought it? The who, remains a mystery, no one is saying, and speculation is rampant. It appears to be an individual.
If you like art and try to understand the craft of painting as a proxy for value, understanding what DaVinci strove to accomplish is both exciting and, in my opinion, unprecedented; that is, da Vinci’s works were paradigms, he changed the process of seeing and expressing an image – forever. Walter Isaacson, Author of “Leonardo da Vinci,”* does the artist justice in his description of da Vinci’s craft; see the Washington Post’s article referenced below. It is a worthwhile read.
Understanding the selling price of Salvator Mundi gets a little harder. Like market traded securities, or just about anything else, demand, supply and emotions affect price. In the case of the da Vinci work, it is fairly easy to understand the logic by which the bidder got there, and the auctioneer profited. There’s a lot of money chasing one rare piece of very desirable, one-of-a-kind, painting.
If money were no object would you have bought it? Why own it? Investment, bragging-rights, pride, pleasure, hubris, or absolute joy and respect for the craft?
So, Is art a good investment? What is the estimated return of Salvator Mundi since it was first, presumably, purchased by King Louis XII and Queen Anne of France? Using a surrogate, the price of the Mona Lisa as sold to King Francis of France was an estimated $575,000 circa 1519: That’s an approximate 1.35% rate of return to this week’s sale price of $450,312,500.**
According to Elroy Dimson and Christophe Spaenjers research shows Art beats cash, gold and bonds but not equities.***
Enjoy art. Buy Stocks….
What percentage of your net worth would you spend on a piece of art? We may be able to help you determine that. Our Family Wealth Planning Process is the first step in attaining the well-being you desire in structuring your life finances.
Take a look: https://www.dominguezandjones.com/wealth-management/
*Walter Isaacson is professor of history at Tulane University and CEO of the Aspen Institute https://wapo.st/2iqnChr
** Jason Sweig for The Wall Street Journal https://on.wsj.com/2yQZlal
*** Elroy Dimson ([email protected]) is at London Business School, Regent’s Park, London NW1 4SA, United Kingdom, and at Cambridge Judge Business School. Christophe Spaenjers ([email protected]) is at HEC Paris, 1 rue de la Libération, 78351 Jouy en Josas, France.The investment performance of art and other collectibles Elroy Dimson and Christophe Spaenjers.
Figure 4 shows the deflated index values for different emotional and financial asset classes over the time frame 1900–2012. Each index is set equal to 1 at the beginning of 1900. The real price index data for stamps, art, and violins are shown in Figures 1–3. The data for equities, bonds, and bills come from Dimson, Marsh, and Staunton (2013). Gold prices come from Global Financial Data and the World Gold Council (2013). https://bit.ly/2zL86X9
Currently, our portfolios overweighted domestic and foreign equities.
Carlos Dominguez – Portfolio Manager, RJ
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