Hoffman, 44, is a new breed of investor in the $5 trillion art market. From a townhouse near Hyde Park in London, he manages an investment fund that buys and sells paintings rather than stocks or bonds. Since 2004, a dozen or so similar funds have tried to lure investors as the price of art has soared. So far, Hoffman's is the only one that's raised enough money to start investing.From Buffett's Early Letters to Partners:
"Since the whole subject of compounding has such a crass ring to it, I will attempt to introduce a little class into this discussion by turning to the art world. Francis I of France paid 4,000 ecus in 1540 for Leonardo de Vinci's Mona Lisa. On the off chance that a few of you have not kept track of the fluctuations of the ecu, 4,000 converted out to about $20,000.
If Francis had kept his feet on the ground and he (and his trustees) had been able to find a 6% after-tax investment, the estate now would be worth something over $1,000,000,000,000,000.00. That's $1 quadrillion or over 3,000 times the present national debt, all from 6% I trust this will end all discussion in our household about any purchase of paintings qualifying as an investment.
However, as I pointed out last year, there are other morals to be drawn here. One is the wisdom of living a long time. The other impressive factor is the swing produced by relatively small changes in the rate of compound."
As mentioned earlier in the previous post, Business Week announced “The Death Of Equities” in its August 1979 publication. At that time, people would rather invest their money in money markets, fast-food franchises or rare stamps and paintings. Stocks, apparently, were history.
Although a rare painting such as Mona Lisa by Leonardo de Vinci undeniable is a wonderful painting that ever created and should become a world heritage, it still is not a good investment if you look at the businessman point of view. This kind of rare painting does not create positive cash flow to the businessman. People might argue that this painting is found only one in the world and its price will eventually go up. This mentality is no less differ from the one who promotes real estate investment where they always proclaim “Location is the rarity and no substitute for it.” True, New York exists only one place in the world and its location could not be replaced by any other cities. But people tend to forget maintenance works and its related expenses such as insurance, maintenance charges and storage fee. To keep the painting in well manner, lots of effort need to place on it. The painting might priced at $ 100 millions during SOTHEBYS bidding session and the price seems enormous. But, as mentioned by Warren Buffett, if you invest 4,000 ecus ($ 20,000) as what Francis I of France did in 1540 and the investment brought you 6% after-tax annual return, the investment you made would worth $ 1 quadrillion ( $ 1,000,000,000,000,000). How many times 1 quadrillion is for 100 million? That is 10 million times!! (With $ 1 quadrillion, you can distribute evenly to every residents of the United States of America roughly $ 3.3 million!! That’s the state where everyone in USA becomes millionaire!!).
By knowing this fact, will you still consider a rare painting, stamp is a good investment?
