A Proposal for an Investment Strategy

By Ctein

I would like to make a suggestion, with all appropriate modesty, that would alleviate a considerable amount of current financial woe. First, some background.

Most stuff isn't really worth anything! Beyond the basics of food, clothing, and shelter that one needs to survive, the rest is pretty much discretionary. It's all about how badly you want it. Soft currency, hard currency, promissory notes—none of it has much intrinsic value. Gold bugs treasure their hoards, but gold's nutritional value is insignificant, it makes very uncomfortable clothing, and it's not a good structural material. A bar of gold bullion is attractive, true, but 12 bars are not 12 times as attractive.

Gold is worth something because a large number of people have decided that they will give you stuff you want in exchange for gold. But it's not like one ounce of gold gets you one loaf of bread, now and forever. (Yes, it's really good bread!) It's whatever people decide it's worth today. Ditto, oil wells. Even real estate. That was a "hard" investment. I mean, everyone needs land and there's only so much of it, right? You can't go wrong with real property.

And I have this lovely bridge to sell you...

So, gold bugs have been routinely disappointed, the dot-com became the dot-bomb,the real estate boom burped.

It has to be this way! If one ounce of gold really was worth one loaf of bread now and forever, it might be worth hoarding because it wouldn't go moldy on you, but that would be it. The value has to change relative to what you really want or else there'd be no way to profit. The trick is to buy and when it's low and sell when it's hot. What goes up will eventually come right back down, because ultimately it's human whim.

Hence, investors always need the Next Big Thing. They moved on to commodities. Prices skyrocketed. Now they're coming down again, big surprise. Investors are on the prowl for a New Thing.

...And what would you pay for pie-in-the-sky!?

I suggest photographs. They have just as much intrinsic worth, relative to market prices, as most of this other stuff. In many cases are a lot more portable, and they're certainly more attractive. They even do have some modest utility value, for covering up the stain on your wall.

It makes just as much sense as investing in tech stocks, mortgages, or rice. And like those you can generate more, lots more! Let's not forget the potential of futures ("I will gladly pay you today for a hamburger next Tuesday.") This could be a really big bubble, just the shot in the arm the economy needs! Think of what a gilt-edge Tanaka, or a blue-chip Pierce, or an AA-rated Ctein could be worth! And this rising tide floats all boats, because as the easy pickings get grabbed up by the early investors the later ones look for the less likely commodities. Even Johnstons would grow vastly in price. [Hey! —Ed.]

Like all bubbles, eventually it would burst, and the early investors (and, I emphasize, divesters) would make out like bandits and the later ones would get screwed. Meanwhile the suppliers, like us and our agents and galleries, would get to be part of that banditry, salting away our not-so-hard-earned rewards in non-photographic assets. (Big mistake, plowing your returns back into the same thing the bubble's built on. Not a good long-term strategy!)

I think this has huge possibilities. Any investment firms or brokerages out there, drop me an e-mail as soon as you read this. Get in on the ground floor. You can guarantee I won't be disappointed!

_______________________

Ctein

Featured Comment by Christopher Lane: "Ctein, My day job is in the financial industry (lucky me) and you are absolutely dead on with your analysis which is the most cogent I have seen anywhere. The money is always looking for a place to flow and right now those routes are getting fewer and fewer. I totally agree with you; however, I would broaden your proposal a bit. I suspect that the entire art market is going to get a shot in the arm from this meltdown. That includes photographs and photobooks. As you point out, the intrinsic value of art is to cover up bad patches in your wall and look at while you eat your grill cheese sandwich. ;~)"

Featured Comment by Ken Tanaka: "Ctein: '...gilt-edge Tanaka.' I like your thinking.

"I realize that you present this with tongue firmly in cheek. But, in fact, photography is a (slowly) rising star in the art market. Within the past 15–20 years a completely new crop of centimillionaires and billionaires have driven the prices of other art works into space. Witness just this week the 2-day Sotheby's London auction of works by 'artist' Damien Hirst that produced £111.4 million. (Hey, where else can you find a dead adult shark preserved in an acrylic tank of formaldehyde? It's either art or an appetizer.)

"So while newly-minted Russian and Chinese billionaires have their private bankers waving paddles at this stuff other more mortal art investors are looking for better, more accessible values. Photography has become one of those 'bargain' opportunities. Sotheby's auction of Andreas Gursky's '99 Cent II' for $3.34 million in 2007 set the new high-water mark for photographic art work sales. But it looked like an eBay deal to many art investors looking for bargains in new art spheres.

"(A neighbor and good friend, now an octogenarian, has been collecting photographs for 40+ years. A tour though is collection is like a walk through the George Eastman house. Although he calls it a 'modest' collection, another mutual friend, a museum curator, estimates it's worth between three and six million dollars.)

"So dust-off those old dye-transfer Apollo launch prints and head to Sotheby's, Christy's, or Philips de Pury, Ctein. BTW, do you happen to know a lab that can produce gilt-edged prints? I can't find one locally."

Mike adds: For a recent dissenting viewpoint on that, Ken, check out this article from the Financial Times about contemporary art. To quote, "...my suspicion is that it [contemporary art] will fall further and harder than perhaps any other asset class, save perhaps subprime mortgages." (Thanks to David Emerick for the tip.)

Comments

[David]

Great idea!

I have a collection of photos that many would rate as "junk", but even so, a swap of them for such more or less useless stuff like gold or cash would still be a good investment.

I can also offer some futures on my photos where I can sell them for a few hundred in worthless pieces of green paper in exchange for the chance that I may become a famous artist someday. You will then have a bargain that you could resell at a huge gain.

[John Camp]

But think of all the bad photographers out there who couldn't participate. To even out that problem -- really, to be fair -- I think the successful, like those mentioned, should chip in a certain percentage for those who are digitally impaired. What would be fair? Well, I think perhaps 39% of retail for national redistribution, plus an additional ten percent to support the disfunctional shooters on a state-to-state basis. That'd only be fair.

JC

[scott kirkpatrick]

Futures sounds like the perfect thing to package for those days when the shot I am going to make is growing clearer in my head, but the fire is warm and the wine glass is still full...

scott

[Scott]

But isn't the high quality photography bubble about to break now? Wouldn't it be prudent to have invested heavily just after the dot-com bubble burst, before all these wondrous new technologies came online?

Before people completely lose their ability to distinguish a good photo from a bad one, and the value of everything plummets I mean...

[Mike C.]

Too late... It's already happened in the real world. Some people may have heard of the Zelda Cheatle Gallery in London, where Zelda encouraged and showed some of the best of British and world photography (and her Z Press imprint published terrific books by Mark Powers and John Blakemore). Well, that's not what she mainly does now: see this article:

http://www.nytimes.com/2007/07/13/business/worldbusiness/13exotic.html?fta=y

Now you know why auction prices have been going through the roof. Photographs are the new gold (or, at least, *some* photographs...)

[Click]

Don't joke this could actually happen.

Remember the Dutch and their Daffodils? Wasn't pretty :~(

[Yanchik]

That's not a strategy, Ctein, that's a tactic....

Oh, hang on, haven't I just inadvertantly revealed the root of the problem ?

Y

[robert]

tulips.

[john robison]

There is another point to remember about land. No one "owns" land. All you own is the right to pay taxes on it. Don't believe me? Then stop paying taxes and see how long you own it.

[Robert Roaldi]

Now hang on a minute there, Ctein. Are you saying that financial markets are an illusion, maybe a scam? That those silver-tongue guys in serious blue suits are con men, or worse, stupid? You mean, you think it's possible that tens of thousands of stand-up hard-nosed free-market-loving MBAs blindly fell for this "deregulation" idea and thought that we could grow money on trees without doing anything useful to earn it?

It's a sobering thought that maybe people like us, in the previously wealthy west, had only one useful thing to give to the rest of the world, our savings. We have been using it to buy stuff cheap. Well, now we have all this stuff and not much money left. Who needs us now?

The best post-graduate schools in the world are in the US and 60% of graduate students in the US are foreigners. When they go back home and set up their own universities and research centres, who is going to need us then?

Why did we let the lawyers, accountants, and financiers run things? Why did we think they knew better? What evidence was there of that?

[Ctein]

Dear JC (and Scott),

I'd be happy to share 50% of my windfall profits with the less fortunate, but it won't be necessary. Why do you think "junk photographers" will be less packageable than junk bonds or junk mortgages were, eh?

Don't confuse sound monetary planning with real-world investment. We're after the latter, not the former.

It's tulip bulbs, all the way down!

Dear John,

That can be said of any assets you have that aren't protected against judgment for nonpayment of any debts. Owning something doesn't mean someone else can't lay claim to it. Irrelevant to investment strategies.

pax / plutocratic Ctein

[John Camp]

Jeez, I hate to take a serious tone, but it occurs to me that you may actually be on to something here. Suppose you took fifteen really good photographers who print in a variety of sizes from 8x10 up, and then "bundled" them. This would have to include a few really famous guys, but who still don't charge too much (I'm thinking of people like Paul Caponigro, who just a couple of years ago sold me an exquisite oversized signed copy of "Running White Deer" for $6,000.) In any case, you bundle these folks and sell the bundle for $25,000 as a "modern portfolio, good for investments, or to hang on your wall. We will frame them for you in traditional black frames, matted, if you wish, etc. All prints limited edition, unless otherwise stated. Furnish your entire apartment with cutting edge modern photographic art by both traditional and current masters..." The famous guys would attract buyers for the less famous guys who are nevertheless very good and possibly going to be famous in the future. Hmmm. (Scratches chin.) You could of course buy the same group from a gallery, but then you'd have to pay for gallery overhead and profit, whereas, if they were sold directly over the net as a bundle...

JC

[EmmJay]

Now we must decide what constitutes a photograph. Are we talking silly inkjets or darkroom prints? (I make both.) I gonna poke a stick in the hornets nest and make the following statement. I can't believe anyone would pay more than say $40 for an inkjet. Computerized ink on paper. Please. A handcrafted silver print that appealed to my taste (or lack of)? Well I would pay more.

[Andreas]

You want a cogent financial analysis? Read Marx.