Antique Japanese Edo Era Wooden Netsuke from the 18th or 19th Century

Antique Japanese Edo Era Wooden Netsuke from the 18th or 19th Century
Photo Credit: matsu-kaze.japan

Antique Japanese Edo Era Wooden Netsuke from the 18th or 19th Century

Buy It Now Price: $360 (price as of 2016; item no longer available)

Pros:

-This is an antique Japanese Netsuke carving from the Edo era – the 18th or 19th century period when samurai under the command of the Tokugawa Shogunate still ruled Japan.

-This specimen measures 29 mm (1.14 inches) tall by 51 mm wide (2.01 inches).

-In Edo era Japan, everyone – even samurai – wore kimonos.  Netsuke were functional wardrobe accessories used to secure a traveler’s purse to his kimono sash.

-Although anachronistic for their original use, Netsuke are avidly collected today as some of the finest objets d’art ever created.  They are truly masterpieces of miniature sculpture.

-This particular netsuke exquisitely depicts a small cluster of mushrooms.  Edo era Japanese craftsmen often pursued naturalistic themes when carving netsuke.  This netsuke, with its organic lines and meticulous attention to detail, is a superb example.

-Netsuke were hand carved from a variety of interesting materials such as ivory, wood, boar tusk, horn, bone and metal.  This particular netsuke is crafted from wood – possibly boxwood, one of the finest carving woods known.

-The even, undisturbed dark patina on the wood is completely consistent with an object that is well over a century old.

-The $360 asking price is very reasonable considering that this netsuke is both well executed and obviously original.  It is sold by an experienced Japanese antique dealer and ships straight from Tokyo.

 

Cons:

-Although not visible in the photo, this netsuke has a small age crack on the back, caused by the wood shrinking with extreme age.  This minor defect is not unusual among wooden items more than 100 years old and does not impact pricing significantly.

-While not common, netsuke were sometimes signed by their creators.  This netsuke, although very desirable already, would be even more so if it had been signed.

Art as the Perfect Zero Coupon Bond

Art as the Perfect Zero Coupon Bond

Many of us are looking for the perfect investment – something that produces good, steady returns with modest risk while not being too complicated.  Unfortunately, stocks are not that investment, at least not right now.  The major equity indices currently sport obscenely high valuations while the underlying companies are cesspools of financial engineering and undisclosed risk.  And the dividends you receive from holding shares are paltry – provided you’re lucky enough to own shares in a company that pays any dividend at all.

Bonds, in contrast, are at least a little bit better.  They disburse a (usually modest) cash interest payment semi-annually.  Unlike dividends, bond payments are almost always contractual obligations, a fact that grants the average investor a certain degree of protection as well as peace of mind.  Bonds also reside higher in the capital structure of a company, guaranteeing payment of principal before preferred and common stock shareholders in the event of bankruptcy.

However, bonds aren’t perfect either.  Interest rates on most bonds these days are unimpressively low, to say the least.  And many corporations have over-levered their balance sheets by issuing excessive debt to finance stock buy-backs and dividends in an attempt to “boost shareholder return”.  This leaves them vulnerable to future financial crises where their excessive debt loads may precipitate their insolvency.  This financial fragility is a serious concern for today’s vigilant corporate bond investors.

Art and antiques are a compelling alternative to these traditional financial assets.  In fact, they combine some of the best elements of both stocks and bonds into a single, largely undiscovered assets class.  At its core, investment grade art behaves very similarly to a high quality zero coupon bond.  A zero coupon bond is a financial instrument that pays no interest before maturity, but is sold at a discount to its par (redemption) value.  Later, when the zero coupon bond matures, it is redeemed at its full par value.  The difference between the (discounted) purchase price and the full redemption value is the bond’s return.

Investment grade art and antiques mimic the more desirable attributes of a zero coupon bond.  They are purchased for a certain (discounted) price today, and then are later sold (redeemed) in the future for a (usually) higher price.  The difference between the purchase price and the sale price of a work of art is profit, just like with a zero coupon bond.  However, unlike zero coupon bonds, art has strong future return potential.  For example, right now (August 2016) a zero coupon U.S. Treasury bond with 5 years to maturity yields 1.15%, while a 10 year yields 1.56% and a 25 year zero coupon bond yields 2.31%.  These aren’t the kinds of returns that will allow you to retire one day to a warm beach surrounded by palm trees.  And although I will not (and cannot) make any specific promises in regard to the future performance of art and antiques as an asset class, I will say that it won’t be very difficult for art to beat 2.5% returns over the next couple of decades.

Another potential downside of zero coupon bonds absent from art is that they have specific redemption dates that may not mesh with your evolving financial goals.  This means you may be forced to reinvest proceeds at a lower interest rate from a bond that matured earlier than you wanted, or, conversely, forced to sell into the wildly unpredictable financial markets if you need cash before maturity.  Art, on the other hand, can be “cashed in” by selling it whenever you like, although I don’t advise doing so before you’ve achieved a minimum holding period of 7 to 10 years.  But this longer investment horizon is offset by the fact that the art market isn’t subject to the serial boom-bust cycles that are commonplace in today’s stock and bond markets.  The art market – largely devoid of speculators and hedge funds – tends to appreciate more steadily and predictably than paper assets.

Another great feature of art is that it has no counterparty risk, a major consideration when buying zero coupon bonds.  Because a zero coupon instrument pays no cash flows before maturity, it is very exposed to the prospect of the issuing authority declaring bankruptcy before maturity.  This is why investors usually only purchase zero coupon bonds issued by the most credit-worthy institutions.  Of course, the drawback of buying a bond with a good credit rating is that it will have a very low interest rate.  Art and antiques, however, cannot go bankrupt.  This allows a prudent art investor to wait out the occasional poor market while, in effect, receiving substantial principle protection.  In addition to this enhanced asset security, art and antiques have far higher return prospects than traditional assets classes.  Investing in art and antiques is like having your zero coupon bond cake and eating it too.

Traditional financial assets – stocks and bonds – are an important part of a diversified investment portfolio.  They have their place.  But art and antiques are overlooked investment gems that shouldn’t be excluded from a savvy connoisseur’s asset allocation model.  Art combines some of the best attributes of stocks (high returns) and zero coupon bonds (minimal reinvestment risk) and then surpasses them both by eliminating the possibility of default.  There may not be any such thing as a perfect investment, but art and antiques come as close as anything I’ve ever seen.

Don’t Fear the Beryllium Diffused Sapphire Reaper

Don't Fear the Beryllium Diffused Sapphire Reaper

As 21st century consumers, we want everything we buy to be organic, free range and all natural.  But the bitter truth is that the necessary volume of organic, free range, all natural things simply doesn’t exist in today’s world to satisfying the overwhelming market demand.

Colored gemstones, particularly sapphires, are an excellent case in point.  Everyone wants them, but there aren’t nearly enough good quality stones mined to support this massive demand.  Luckily, through trial and error, the gem industry has discovered how to improve poorly colored or heavily flawed gemstones.  The latest of these industry innovations is known as beryllium diffusion.

A beryllium diffused sapphire is a natural, non-synthetic stone that has been dug out of the earth, but is then subjected to high heat in an oven in the presence of a beryllium-rich material.  This causes beryllium atoms to penetrate or diffuse into the sapphire, altering its color.  Thai gem cookers perform this operation because it can substantially improve the color of an existing sapphire.

Sometimes, it turns unsalable material salable.  In other instances, it merely turns a stone with good color into one with great color.  Beryllium diffused sapphires can come in many different colors, but are most often found in incredibly vivid, eye-catching shades of orange, yellow and pink-peach.

However, there are some people who adamantly refuse to touch beryllium diffused goods.  They believe that beryllium diffusion is a step too far for the gem industry.  They think these stones have been excessively treated and are therefore not comparable to more traditional, heat-treated sapphires.

This attitude is partially the fault of the Thai gem cookers who accidentally discovered the beryllium process around the year 2000.  Instead of giving full disclosure of this new treatment to their clients, they instead sold them – at great profit – as conventionally heat-treated stones.  It was only 12 to 18 months later that Western gem certification labs discovered the deception.  As you can imagine, buyers of these stones were outraged by the Thais’ unethical behavior.

However, beryllium diffused sapphires don’t deserve their poor reputation, assuming their treatment is properly disclosed.  Beryllium diffusion is entirely stable.  It doesn’t fade over time or from exposure to sunlight.  The new, vivid colors are also usually consistently distributed throughout the entire gem.  Due to beryllium’s very low atomic weight, it diffuses very quickly into a sapphire, penetrating right into the middle of the gem.  This means that if you must re-polish or even re-cut a damaged beryllium diffused sapphire, it will still retain its new, improved color.

Beryllium diffused specimens aren’t all-natural, untreated stones and they will never sell for comparable prices to completely untreated sapphires.  It is clear that sapphires that come out of the ground already looking beautiful will always sell for a healthy premium over any treated stone.  However, I find it equally unlikely that the price differentials between traditionally heat-treated sapphires and beryllium diffused sapphires will end up being significant.  Instead, it is clear that the prices for traditionally heat-treated sapphires and beryllium diffused sapphires will converge over time.

Interestingly, the sapphire industry went through a very similar scandal several decades ago.  In the late 1970s, some enterprising Thai gem cookers discovered that heating colorless (or geuda) sapphire at extremely high heat (greater than 1,500 degrees centigrade) resulted in some stones acquiring a fine blue color.  In addition to this, the heated geuda also showed markedly improved clarity as the high heat – near the melting point for sapphire – healed many internal fractures within the crystals.

This resulted in a flood of good quality blue sapphire hitting the market in the early 1980s as every gem dealer in Southeast Asia rushed to treat his previously useless stockpile of colorless sapphire.  Predictably, prices for blue sapphires collapsed.  These depressed prices for good quality blue sapphire persisted for over 25 years.

But then a funny thing happened around the year 2010.  The price of blue sapphire skyrocketed, increasing by anywhere from 40% to 100% almost overnight.  This permanent, stair-step price increase occurred because the temporary abundance of blue sapphire in the international gem market was just that – temporary.  The massive stockpiles of colorless geuda accumulated over decades of painstaking, artisanal hand-mining had been completely exhausted.  Now colorless sapphire that responds well to heat treatment is almost as rare as blue sapphire straight out of the mine.

I suspect there will be a very similar outcome for beryllium diffused sapphires today.  At first they are poorly understood and hated.  Prices soon collapse due to a glut of supply.  Then, very slowly over time, the overhang of treatable material is consumed.  Eventually, everyone will realize that beryllium diffused material is durable, stable and stunningly gorgeous.  It is also mined from the earth by hand, just like every other natural sapphire.  Once the markets fully digest these concepts, beryllium treated sapphires will trade at similar price points to other, traditionally heat-treated sapphires.

Time is running short.  It has been over 15 years since the beryllium diffusion process was introduced.  If the current situation unfolds anything like when the heat treatment of geuda was developed in the late 1970s, there won’t be many more years until the price of beryllium diffused material increases permanently.  Organic, free-range and all natural may always be our first choice, but raw, breathtaking beauty – even when helped a little by science – also has its own visceral allure.

Medieval Ceylon Kahavanu Gold Coin

Medieval Ceylon Kahavanu Gold Coin
Photo Credit: Julian-Coin

Medieval Ceylon Kahavanu Gold Coin

Buy It Now Price: $495 (price as of 2016; item no longer available)

Pros:

-This is a medieval Kahavanu gold coin from Ceylon (present day Sri Lanka), a large island off the southern tip of India.

-The coin weighs 4.32 grams and is third party certified as EF-45 (Extra Fine) condition by ANACS (American Numismatic Association Certification Service).  The ANACS certification is an important guarantee of authenticity.

-This coin type was first struck by the South Indian Chola Empire during the 11th century AD to fund the invasion and occupation of Ceylon by the great king Raja Raja Chola I.

-The Kahavanu gold coin shows the king standing on the obverse while the reverse portrays the king sitting on a low throne holding various ceremonial objects.

-Kahavanu gold coins are sometimes called “Octopus Man” coins because the figure on the coins vaguely resembles the many tentacled sea creature.  However, the king is actually just wearing loose-fitting, MC Hammer-style parachute pants, giving the illusion that he has many “tentacles”.

-These gold coins are often crudely struck, but this example is well executed and very attractive.  It is certainly among the finest examples of this coin type I have ever seen.

-This exotic, 1000 year old Kahavanu gold coin is a superb specimen of naïve or ethnographic art from a native South Indian Hindu dynasty.

–Medieval Indian gold coins have become much scarcer over the last 10 years and prices have risen accordingly.  I feel $495 is a fair price for this piece.

 

Cons:

-This gold Kahavanu is one of the most expensive examples I have seen on the market.  That is because the seller knows it is an outstanding specimen.  In the art world, it is often necessary to pay premium prices to secure premium pieces.

-Medieval gold coins from another South Indian dynasty, the Vijayanagara Empire, are not only available at somewhat lower prices but also tend to be struck in finer styles.

-Although it was one of the great kingdoms of medieval India, the Chola Empire is relatively unknown today, especially in the West.