Pete Wargent blogspot

Co-founder & CEO of AllenWargent property advisory, offices in Brisbane (Riverside) & Sydney (Martin Place) - clients include hedge funds, resi funds, & private investors.

4 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the better property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete Wargent is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.

"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.

"Pete's daily analysis is unputdownable" - Dr. Chris Caton, Chief Economist, BT Financial.

Invest in Sydney/Brisbane property markets, or for media/public speaking requests, email pete@allenwargent.com

Tuesday, 6 March 2012

Investing in ART?


Art can be a profitable asset class in which to invest, provided you know what you are doing.

Of course, the most difficult thing when it comes to investing in art is knowing what value to place on a piece.

Company share prices can be valued with reference to current and expected future dividends.  Works of art don’t pay dividends. 

Institutions typically steer well clear of investing art so there is not an equivalent reliable quoted market to reference.

That said, institutions could invest in art.  In the years following 1974, the British Rail Pension Fund, exasperated with repeated UK financial crises and diabolical market returns (the fund clearly wasn’t “getting there”) poured more £41 million into more than 2,500 works of art, redeeming them for more than £170m over the next 14 years. 

This resulted in an annualised return of 11.3% (and outperforming inflation by 3.7% per annum) – a genuine success.  Sadly, British Rail had less success with its core competency: getting trains to their destination on time.

John Maynard Keynes* observed that a successful investor is something like a beauty pageant judge – they are not necessarily looking for the prettiest competitor, rather the competitor that the average opinion expects to be the prettiest.  This observation is particularly pertinent when it comes to investing in works of art.

An artist’s brand is important.  Having a piece sold by Sotheby’s or Christie’s is an important validation and can result in increased values of existing and future works.  Likewise, should a celebrated collector purchase an artist’s work, this represents a key seal of approval and outperformance may ensue.

Two clever dudes with Japanese sounding names (i.e. I can’t remember them…OK, I’ve just looked it up: Moses and Jiangping Mei) attempted through many hours of painstaking research to show a link between statistical indicators (for example, the number of scholarly references made to an artist) and sustained outperformance of art work values.  A thorough and detailed thesis concluded that…umm…uhh…there is no such link.

Summary: if you enjoy art and know something about it, go for it and invest.  Otherwise, use common sense and buy shares in outstanding companies that pay you dividends.

***

*John Maynard Keynes was a truly great man, one of Britain’s most intelligent ever economists and the predecessor of Warren Buffett in more ways than one. 

At the helm of the Cambridge University Chest Fund, Keynes was a focus investor many decades before anyone knew what a focus investor was.  

Keynes noted that it was better to invest in a few outstanding ventures rather than diversifying into a swathe of 15-20 investments in which one has no particular confidence.  Like Buffett, Keynes was also a genius of the pithy quote. 

When asked whether distressed investors suffering from loss aversion should take comfort in ‘reversion to the mean’ and the long term trends and results of the markets he duly noted that: 

“The long run is a misleading guide to current affairs.  In the long term we are all dead.”

References: Peter Stanyer, Guide to Investment Strategy (Profile Books, London, 2006)