If you've ever thought about investing in the art market, you're not alone. But, how viable is the art world for long-term investors? In this segment of Backstage Pass, recorded on Dec. 20, 2021, Fool contributors Jason Hall, Toby Bordelon, and Rachel Warren discuss art investing and Masterworks, a start-up that allows retail investors to own a slice of a famous piece of art with starting capital as low as $500.
Jason Hall: Toby, you're an art guy.
Toby Bordelon: I am. I'm actually very interested in art, in fact, I just bought a few new things yesterday from a gallery in Alexandria, Virginia, where we used to live that we love. But you know, I'm actually not interested as an asset class.
Personally, I think that's the wrong way to approach it. My wife and I, we buy art to enjoy it, we buy stuff we want to look at, and I have absolutely no expectation that anything I'm buying is ever going to be sold for profit.
I just assume, hey it's stuff I enjoy, stuff I want to have, but it's consumption, it's not investment, right? That's my issue with Masterworks, which is a cool idea. I love the idea, but it's along those lines.
If I put my money into a piece of art, I want to be able to look at it and have it on my wall, or at least have somehow some way to enjoy it. Now, maybe if they could combine this with NFTs somehow, like everyone who invests in a painting, get an NFT, I don't know, I can always hang a picture on the wall, so--
Rachel Warren: An NFT.
Hall: They've actually I've listened to a couple of interviews from some of their executives. They've been on a couple of podcasts that I listen to. They are like, we're not touching digital art. We don't understand it, we're not.
Bordelon: Yeah. I wonder what do I get, it's an investment. I'm putting money into a painting that I hope they sell for a profit, but that's not my approach of art.
Hall: That's exactly the approach they're taking. I think it's something interesting the way they're doing it. Because they are focusing on the areas of art where they see, where there have been the best recent returns, but also where they see clear demand for that kind of art, and they're trying to buy good art, I guess is the right--
Bordelon: I can see myself being an investor in the company and it's interesting, I want to look at it more, but I don't necessarily see myself as a customer.
Hall: I love that Toby. I think maybe that would be more fun.
Warren: Oh like if they went public, yeah that would be cool.
Bordelon: Yeah, right?
Hall: You know, what I think, I've been convinced this for a while, but I'm pretty sure like the is like, I love art, I want all the art. I got to figure out a business where other people will buy art for me [laughs] Basically yeah--
Warren: I mean, if that were the case.
Bordelon: Do you think he's just sitting his office surrounded by all these Picassos and Monets and whatever. Like this is pretty sweet.
Hall: Why wouldn't he be? [laughs]
Bordelon: It's fair. That's fair.
Warren: Who wouldn't want that? I don't know, I feel like this just very much depends on what your goal of investing with this platform is. If you're like me, I'm focusing in terms of building my long-term portfolio, I'm focusing on equities.
But I also happen to be really interested in art. I love the idea of owning a piece of history or little bit of it. For me, that would be more of like this is a fun thing, not so much something that I would at least initially expect to profit off of, but a fascinating business model.
Hall: I think it's a great way to scratch that itch to your point. Investing to me shouldn't just be about making money. That needs to be an important part of it, but are you learning? If there's an area that you are really interested in, it's worth checking it out, I think so.
Bordelon: Now, the other thing, too, that I think we should point out, we started this topic with a comment on Christie's Auction House and their record year.
I think it has a reputation of being a place where they sell these million-dollar pieces which is out of reach for normal people, but they do auctions where they're selling pieces that are a couple of thousand dollars. If you are a normal person, you can go to their website, you can look at the upcoming auction, and you can look at something that might be interesting to you.
You can have some of these old paintings. I think they're doing a 19th century art auction in a couple of weeks. Some of the estimates there are anywhere from $5,000 to $10,000 to $20,000.
But still expensive, but not like beyond the level of modern art by current living artists that you might buy, depending on who they are. It's not just these headline looking at what's sold for $15, $20, $30, $50 million.
It's like just stuff that a normal person who likes art could be interested in. It's something to check out, I think.
Hall: That's cool. I think to me, this asset class doesn't fill a bucket that I feel like I needed to fill in terms thinking about uncorrelated assets. We're talking about Bitcoin with inflation.
Bitcoin to me is the hedge against inflation, that's how I think about it for my portfolio. I don't know, I just think more like real estate is an asset that I'm more interested in because it's one that I can see generating an income, that kind of thing.
Very interesting, there's no doubt about that. Unless my son becomes very interested in art, which he may. I have the feeling that the art that myself and my wife acquire is just a bunch of stuff that he's going to have to get rid of it at a yard sale when we eventually die. [laughs]
I think that's what's going to probably happen. We buy stuff like art, I love to buy things from local artists that I can talk to and hear their story about the art that I think is cool, and that's good enough for me. Maybe I'll be Toby, rich one day and I could buy expensive art, so. Toby is not responding. [laughs]
Bordelon: I'm responding, Jason. [laughs] My art is not expensive. Hey, you know what? What if you save your money, if one of these many companies you've invested in gets memed, you want to exit at the high point and you go buy yourself a $5 million dollar piece from Christie's or something.
Hall: There you go.