The New York Observer, June 18, 2001
By James Verini
If you’ve ever wondered which French painter’s work is the equivalent of General Electric stock, Michael Moses, who teaches courses in something called “operations management” at the New York University’s Stern School of Business, can tell you. It’s Claude Monet, without a doubt. His Impressionist works are the best investments on the art market, says Professor Moses. Just ask the guy who paid $13.25 million at Sotheby’s in early May for Le Parlement, Soleil Couchant, a painting that sold for $9 million in 1989.
The worst investment right now? Probably Marc Chagall. In 1989, the Russian-born Surrealist’s Le Violoniste au Monde Renverse went for $4.2 million. Some bottom-feeder picked it up at the May Sotheby’s auction for $2.1 million.
But actually, said Professor Moses, neither the Monet nor the Chagall are worth G.E. stock exactly; at best, they’re worth G.E. bonds. In Art as an Investment and the Underperformance of Masterpieces: Evidence from 1875-2000, a paper he wrote in May with Stern professor Jiangping Mei, the two academics track the sales of Old Master, 19th-century, Impressionist, Modern and American paintings at Christie’s and Sotheby’s since 1950 as an analyst would securities. Their findings: The most valuable paintings of the last several centuries are only barely outperforming the bond market at the moment, returning 5.5 to 8 percent.
This has not always been the case, though. During the last great art bubble, which peaked around 1990 and favored garishly bright Impressionist and early Modern works, stockesque profits of 13 to 14 percent were normal, said Professor Moses — especially if one had bought at the right time.
What would have been the best time of all to invest? “The 1890’s,” he said. “A century ago, one could get a Monet for $1,000 or $1,500.”
But, said Professor Moses, contrary to popular belief, more expensive paintings tend to offer worse returns over time. One is better off investing, say, a few hundred thousand dollars in a good, crisp Sargent or Homer, which have recovered admirably from the early-90’s crash, rather than a few million in one of those blurry Frenchmen.
If that still sounds pricey, remember that art is a long-term investment (“long” as in decades). “The front-end commission that auction houses charge on art — at least 10 percent — makes short holdings disastrous,” lamented Professor Moses. If he had the money, he says, he’d most like to buy a Caravaggio, although they don’t come on the market very often.
So how much does the novice investor need to get started in art? It’s more than a government bond — but not as much as you would expect. With the $5,000 you saved up in bar-mitzvah and graduation cash, you can get a competent Stuart Davis print, say, that will begin appreciating as soon as you hang it on the wall. And that’s the type of modest investing that the business professor in Professor Moses, not the art connoisseur, really advises.
“I advocate the couch-potato school of art investing,” he asserted. He means that literally: “If you buy your couch, and 10 years later you want to change colors or it’s not comfortable anymore, you throw it out — and you don’t beat yourself over the head because it wasn’t a great investment. Well, you can do the same thing with the painting you put over the couch.”
How much did Professor Moses pay for his couch?
“That’s for me and my interior decorator to know,” he said.