If you've spent any time reading AntiqueSage.com, you know that I have a strong preference towards antiques as investments. Antiques are works of art that have stood the test of time, having been seasoned over decades, if not centuries.
This process tends to weed out specimens constructed of inferior materials as well as fad-based items, leaving a higher percentage of investment-grade examples. So when I've occasionally wondered to myself if successfully investing in contemporary art or new luxury goods by buying them directly from the artist or craftsman is possible, the answer has always been "No".
But then I had an experience on Etsy that changed my mind. I was perusing the online, peer-to-peer, handmade/vintage centric website for antique jewelry when I stumbled across something rather astonishing: a new piece of jewelry that was investment grade and sensibly priced!
This was something I didn't expect. Normally, luxury goods are far too expensive when new to make reasonable, much less good, investments. The average markup over cost normally runs 100% or even higher. It is easy to see under these circumstances why buying new luxury goods for investment purposes is a fool's errand. It is far better to buy them in the secondary market for discounts of 50% or greater.
And yet here I was, staring at a beautiful investment grade, abstract modernist pendant that was selling for only $365. In cases like this, calculating an estimate of the item's intrinsic value can be a useful starting point. I immediately began to crunch the numbers.
The jewelry had modest intrinsic value from its precious metal content - about $30 or so. It was also set with two natural sapphires: a small, round-cut, beryllium-diffused orange sapphire and another, much larger natural, purple-pink, marquise-cut sapphire. The beryllium diffused stone was only worth $8 or $10.
The 1.27 carat purple-pink sapphire was the real treasure here. Even at a lowball price of $200 a carat, the stone was still worth over $250 by itself. Altogether, the intrinsic value of the piece was around $300 using fairly conservative assumptions. As an added bonus, the jewelry had been cast in a cuttlebone mold, an ancient technique that destroys the mold in the casting process. As a consequence, this pendant was one-of-a-kind, a factor that significantly enhanced its desirability.
The aggregate material value of $300 meant that the piece was only selling for about $65 in excess of its intrinsic value. This modest $65 premium reflected both the item's considerable artistic merit as well as its undeniable usefulness as a piece of jewelry. I was very interested.
But another question quickly popped into my head. How could the selling artist afford to let the piece go for so little money, especially after Etsy takes its cut? He must have spent a minimum of several hours designing and crafting this pendant, and a wage of no more than $15 or $20 an hour at best for his considerable skills seemed unrealistically low.
So I read up on his background, discovering that he was more or less an old hippy from Southern California. He had started out in the mid 1970s cutting gemstones, eventually stumbling into gold working and then full-fledged jewelry making. I surmised that he probably had low expenses - no million dollar mortgage or $1,000 a month student loan payments here. It is also possible that he scored a deal on the sapphires used in the pendant, given his extensive background with gemstones.
In any case, I was satisfied that the jewelry was as represented and a bargain at $365. I wasn't disappointed either. After purchasing it, the pendant I received was a wonder of modernist design - at once sleek, organic and, above all, stunningly beautiful. It was a remarkable find.
This pendant changed my thinking about the viability of investing in contemporary art direct from the artist. I now think it is possible, although still very difficult.
New art is disadvantaged versus antiques in several ways. First, it lacks seasoning, which helps reduce undesirable specimens. Second, it is often overpriced, rendering future investment returns poor, or even negative. Finally, when scrutinizing contemporary art I believe it is imperative to de-emphasize the artist and focus very intently on the quality and materials of the work itself.
Ultimately artists - especially new, unproven artists - don't sell art. Beauty and fine workmanship do. In spite of these drawbacks, buying contemporary works direct from the artist may be one of the most overlooked ways to invest in art today.
