You have to put valuation ceiling on all assets including those in art.
Mohit Satyanand
http://www.outlookmoney.com/scripts/IIH021C1.ASP?SectionID=10&CategoryID=75&ArticleID=6059&search=Y&SecID=0&SearchFor=2&txtSearch=indian+art
When I moved into my own flat in 1984, it was bare except for a painting by a little known artist of the Bengal school, Sudhir Khastgir. Part of my parents’ tiny collection of art, it features a bare-bodied drummer, his hair flying with the energy of his own music. The other painting that has always belonged to the family’s walls shows Yashodha protecting a young Krishna, as the women of the village complain about their broken matkas. It is an early work by B. Prabha, who later became well-known for her stylised depictions of the female form.
When, sometime last year, art and art prices started making the front pages of newspapers, I found myself drawn into the dynamics of the art market. Prices of Raza and Souza surged into the million dollar price bracket. “What’s happening?” I asked Anjolie Ela Menon. “The whole thing sickens me,” she said. “Nobody’s talking about the artists or what they have to say; it’s just about price.” I asked my friend Meera Menezes, art lover, critic and collector of avant garde works. “Collector A is buying up everything in sight. Gallery B is systematically buying one painter at a time, and creating a shortage of his works, then putting them into its catalogues,” she said. Sounded like the tales my stock-broker told me about large brokerages front-running a particular share—buying a significant portion of the floating stock, then recommending it to their clients.
“But where’s the money coming from?” I asked Meera. “Much of it is coming from abroad—that’s why prices are quoted in US dollars—though a lot of it is probably money of Indian origin coming back,” she replied. This sounded just like FII money coming into India, a lot of which has come in via the much-discussed participatory notes, which mask the real origin of the funds.
One of the biggest sellers of Indian art is an on-line site, Saffronart.com. Two of Khastgir’s paintings had been put on the block in 2001 and 2002, with reserve prices in the sub-Rs 1 lakh range. Neither had sold. In the December auction, a Prabha was on offer, with an expected price of Rs 5-6 lakh. “You can buy yourself a new car for the price of that Prabha,” I teased my mother the next time we sat under it. Virtually every painting on offer sold for twice the expected price. The Prabha went for Rs 51 lakh! “That’s serious money,” I told my mother. “You really should consider whether you want to keep it at that price.” Once again, she refused to talk to me. I had better luck with my father—“I’m going to start selling your core stock-holdings when they get over-priced.” “Makes sense,” he said.
In Saffronart’s spring auction too, everything fetched a multiple of the expected price. When I advised Meera to sell some of her paintings, she said she had never looked at her collection like that. I argued that she should sell paintings that she didn’t care that much for, or those that were over-priced and buy emerging artists with the money when the froth subsided. I don’t know what she did, and the Prabha still adorns my mother’s walls.
But my father’s shares—Bajaj Auto, Nestle, Hindustan Lever, Siemens, even HDFC and Trent—were all flogged. Great companies, but you have to put a valuation ceiling on all assets. Above that, you have to sell, knowing there will be an opportunity to buy back at a lower price.
The world of art is more nuanced—my mother may not be willing to put a price on a work that can never be replaced. But when too much money chases too few assets, both liquidity and rocketing prices will reverse—sooner rather than later. And if you’re then sitting on cash, as my father is, you can get back in and buy. Whether the old masters, or the artists (or companies) of tomorrow.;
The author is an investment advisor to a select group of clients. He can be reached at msatyanand@yahoo.com
When, sometime last year, art and art prices started making the front pages of newspapers, I found myself drawn into the dynamics of the art market. Prices of Raza and Souza surged into the million dollar price bracket. “What’s happening?” I asked Anjolie Ela Menon. “The whole thing sickens me,” she said. “Nobody’s talking about the artists or what they have to say; it’s just about price.” I asked my friend Meera Menezes, art lover, critic and collector of avant garde works. “Collector A is buying up everything in sight. Gallery B is systematically buying one painter at a time, and creating a shortage of his works, then putting them into its catalogues,” she said. Sounded like the tales my stock-broker told me about large brokerages front-running a particular share—buying a significant portion of the floating stock, then recommending it to their clients.
“But where’s the money coming from?” I asked Meera. “Much of it is coming from abroad—that’s why prices are quoted in US dollars—though a lot of it is probably money of Indian origin coming back,” she replied. This sounded just like FII money coming into India, a lot of which has come in via the much-discussed participatory notes, which mask the real origin of the funds.
One of the biggest sellers of Indian art is an on-line site, Saffronart.com. Two of Khastgir’s paintings had been put on the block in 2001 and 2002, with reserve prices in the sub-Rs 1 lakh range. Neither had sold. In the December auction, a Prabha was on offer, with an expected price of Rs 5-6 lakh. “You can buy yourself a new car for the price of that Prabha,” I teased my mother the next time we sat under it. Virtually every painting on offer sold for twice the expected price. The Prabha went for Rs 51 lakh! “That’s serious money,” I told my mother. “You really should consider whether you want to keep it at that price.” Once again, she refused to talk to me. I had better luck with my father—“I’m going to start selling your core stock-holdings when they get over-priced.” “Makes sense,” he said.
In Saffronart’s spring auction too, everything fetched a multiple of the expected price. When I advised Meera to sell some of her paintings, she said she had never looked at her collection like that. I argued that she should sell paintings that she didn’t care that much for, or those that were over-priced and buy emerging artists with the money when the froth subsided. I don’t know what she did, and the Prabha still adorns my mother’s walls.
But my father’s shares—Bajaj Auto, Nestle, Hindustan Lever, Siemens, even HDFC and Trent—were all flogged. Great companies, but you have to put a valuation ceiling on all assets. Above that, you have to sell, knowing there will be an opportunity to buy back at a lower price.
The world of art is more nuanced—my mother may not be willing to put a price on a work that can never be replaced. But when too much money chases too few assets, both liquidity and rocketing prices will reverse—sooner rather than later. And if you’re then sitting on cash, as my father is, you can get back in and buy. Whether the old masters, or the artists (or companies) of tomorrow.;
The author is an investment advisor to a select group of clients. He can be reached at msatyanand@yahoo.com
No comments:
Post a Comment