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Buy What You Like – The Art Collector’s First Rule

Buy What You Like - The Art Collector's First Rule

The idea of buying a piece of art for the first time can be very intimidating.  The art world is dominated by technical jargon that can be impenetrable to the layman.  In addition, the field of contemporary art is particularly notorious for its insular attitudes and name-dropping.  But this doesn’t have to be the case.  With just a little bit of knowledge, anyone can be a great art collector.

Now, when I use the term “art” in this context, I imagine that most people think I am talking about paintings, sculpture or maybe photographs.  But I intend the word art here to be understood in a far broader context.  Art, simply put, is anything beautiful that has been crafted or touched in any way by human hands or ingenuity.

The minor arts – coins, jewelry, miniature sculpture, etc. – are all examples of things that most of us don’t consider art and yet are.  They require every bit as much technical skill and raw talent to create as an exquisite painting.  Even a fine mechanical wristwatch or an elegant fountain pen can be art.

In any case, the massive amount of choice available in the art world can be absolutely bewildering.  Where does a novice even start?  I think the answer to this question is self explanatory.  Buy what you like!  There is no point in embarking on the long, but rewarding journey of the art aficionado if you don’t get excited by your chosen specialty.

And there really are an almost infinite variety of styles to choose from.  Do you love graceful shapes and organic naturalism?  Then consider collecting pieces from the early 20th century Art Nouveau movement.  Have you always been attracted by sleek lines, bold colors and abstract forms?  Then contemporary art may be the field for you.  The key is to buy what you like.

This might seem self-explanatory, but there are a surprising number of people who feel compelled to collect hot art market fads.  Respected museums might be filled with 17th century Baroque paintings, but if you find them boring, ostentatious and overwrought, then look elsewhere.  Likewise, every art gallery in New York City might currently be featuring bizarre Massurrealist works, but if they turn your stomach and give you a headache, keep walking.

In addition to a dizzying range of art styles, a large number of disparate mediums have also been used in art throughout history.  A medium is any material an artist uses to create an artwork; almost anything can be a medium.  While traditional paintings are often made from oil or acrylic paints, other artwork, like jewelry or object d’art, are typically crafted from glittering precious metals and gemstones.  Although they couldn’t be more different, both oil paints and gems are considered mediums.  They are vehicles for a gifted artist to display his inherent talents.

Artists have used metals, inks, woods, paints and stone for centuries to create masterpieces of the highest order, often in complementary, mixed media formats.  Artists have not historically  allowed their creativity to be curbed by medium.  As a result, art has been made from every conceivable material known to man.  I believe the aspiring art collector should take advantage of this variety.  Choose a medium that interests you and buy what you like.

However, if you want your art collection to serve an investment function as well as a decorative role, then the dictum to “buy what you like” must follow one other important rule.  The art you buy must have good composition.  Composition is the positioning or use of color, shadow, texture or shapes within a work.  Good composition is innately appealing, although the layman might have difficultly articulating exactly why.  In contrast, bad or mediocre composition leaves a work feeling flat and listless.

For example, diagonal lines are a classic tool used by artists to achieve good composition.  Diagonals are dynamic and give a work a sense of internal energy.  If you examine Old Master paintings, you’ll find that diagonals are often employed to improve composition.

Texture is another element that savvy artists use to create works with excellent composition. Texture is often used to break up large, flat surfaces or add interest to otherwise monotonous features.  Contemporary wall art is a prime example of a category of art that relies heavily on texture to perfect the composition.

Color is one of the oldest, most venerated tools of the artist.  Bold, bright colors can be employed when an artwork is meant to visually “pop”, while pastel colors might be used for more subdued pieces.  Sometimes the complete omission of color, as with black and white monochromatic works, can result in something unexpectedly powerful.

As an art collector, you should definitely buy what you like.  But at the same time you should also weigh your personal tastes against the composition of a work.  A well made work of art employing good composition will have a balance and harmony that is at once subtle, but alluring.  These high quality artworks will tend to appeal to a wide range of people.  If you ever attempt to sell part or all of your collection, having chosen works with excellent composition will result in higher realized prices.

As you gain more knowledge and experience in art, you will naturally become attuned to good composition.  This is also known as developing or cultivating an eye for good art.  Because judging the merit of composition is such a vital skill to the art collector, it is important to take the time and effort to improve your eye.  Read everything you can on the field that interests you and look at examples in museums, galleries or online.  After a while, you will instantly be able to discern exactly what attracts you to one work or disenchants you from another.  If you buy what you like while using a discerning eye, you won’t go wrong.

Every Woman Should Own a Stash of High Quality Jewelry

Every Woman Should Own a Stash of High Quality Jewelry

I read an interesting comment on the internet the other day that really got me thinking.  An anonymous woman remarked that high quality jewelry is now a luxury that many women can no longer afford.  In addition, she observed that fewer women are wearing fine jewelry on a regular basis.  I’ve reproduced her comment here for reference:

“Jewelry is now the great divide between the have and have-nots of the female variety.  I still own some silver jewelry, because it wasn’t worth selling when we needed the money.  I get noticed when I wear it because most women don’t have real jewelry anymore.  Even women who can afford jewelry are not wearing it out anymore, but they still have their wedding and engagement rings.”

Unfortunately, I must agree with this woman’s assessment.  It seems that fewer and fewer women are buying or wearing high quality jewelry anymore.  I think the persistently weak economy is the obvious culprit here.  Sluggish wage growth, coupled with continuously rising housing, food and insurance costs, has squeezed discretionary spending.  High quality jewelry has been one of the many unfortunate victims of this economic trend.

As a result, a lot of budget constrained women have reallocated their precious jewelry dollars from fine jewelry to costume jewelry.  This has been a reasonable reaction to economic pressure because costume jewelry is so much better looking now than it used to be.  As recently as the 1980s and even the early 1990s, costume jewelry was consistently low quality.  It looked cheap and would quickly tarnish or even turn green when exposed to body oils or perspiration.

However, the advent of inexpensive, but alluring, synthetic stones and simulants, coupled with an industry-wide effort to raise the quality of costume jewelry, has made it a much more palatable choice.  This is especially the case when a “real” piece of high quality jewelry might cost several thousand dollars while a similar piece of “fake”, but still attractive, costume jewelry might be just a couple hundred dollars.

The trend toward buying and wearing less high quality jewelry is most noticeable among younger women in their 20s and 30s.  An insightful Pacific Standard article titled “Has Technology Killed the Jewelry Industry?” provocatively lays the blame squarely at the feet of smartphones and other portable technology.

There is certainly an element of truth to this accusation.  Samsung, LG, Sony and Motorola all produce covetable smartphones, tablets and laptops.  However, it is Apple, with its insanely popular trio of the iPhone, iPad and MacBook series, that has had the most success.  In fact, I am of the opinion that Apple isn’t really a technology company at all, but a luxury technology retailer – a vitally important distinction.  Young Millennial women have, as a group, redirected a significant portion of their discretionary spending into these must-have tech gadgets.  Of course, money spent on smartphones or tablets has to come from somewhere.  And that place is often the high quality jewelry budget.

There has also been a tendency for younger generations to spend money on travel, dining, concerts and other “experiential” activities rather than physical goods.  And once spent on an experience, regardless of how compelling, those limited discretionary dollars cannot be spent on high quality jewelry.

Now that I’ve discussed why women aren’t buying as much high quality jewelry anymore, I’d like to explain why every woman should own a stash of fine jewelry.  The first reason is purely economic.  For centuries, high quality jewelry has been considered a store of value – a savings account specifically for women.  This tradition is still strong in some parts of the world.  For instance, owning a sizable stash of high-karat gold jewelry is considered a necessity for any well-to-do Indian, Southeast Asian or Middle Eastern woman.

The reason for jewelry’s persistence over the centuries as a savings vehicle is multi-fold.  Historically, patriarchal laws in many countries prohibited women from officially inheriting property.  High quality jewelry, often received as gifts from family members or spouses, was usually considered to be a woman’s property from a legal standpoint.  If her marriage ended in divorce, a woman could confidently walk away from her former husband knowing her valuable hoard of high quality jewelry was all hers.

While the modern world is much more amenable to female inheritance and ownership of property, there is still a vital investment argument for every woman to own a collection of gemstone-studded, high quality jewelry.  Antique, estate, designer or hand-crafted jewelry, made from karat gold, platinum or sterling silver and set with sparkling precious stones, is the glittering epitome of wealth.  Fine jewelry often has a significant intrinsic value that can range from hundreds of dollars for more modest pieces to millions of dollars for legendary jewels.

But the real value of high quality jewelry is the fact that they are miniature works of art.  As a result, well designed and executed fine jewelry is always worth more than the sum of its parts.  And the stylistic choices available are nearly endless.  The flowing, naturalistic forms of Art Nouveau jewelry are nothing like the jagged shapes and sharp angles of Brutalist jewelry.  There is a style of high quality jewelry that will appeal to every woman.

Perhaps most importantly, nothing highlights the beauty of a woman like fine jewelry.  Whether it is a luscious strand of Tahitian black pearls, a gold cocktail ring set with a glistening blue tourmaline or a pair of simple platinum and diamond stud earrings, high quality jewelry accentuates the best features of a woman in a way no other accessory can.  A woman who wears fine jewelry knows she looks beautiful and, therefore, naturally exudes confidence.  And confidence is priceless.

I understand that many women may not feel comfortable wearing incredibly expensive, high quality jewelry every day.  Less expensive costume or mass-produced silver jewelry works well in these situations.  However, there are certain times in life – weddings, holidays or the occasional night on the town – when a woman just wants to look and feel her best.  For those times, there is no substitute for high quality jewelry.

The Precious Metal IRA Loophole

The Precious Metal IRA Loophole

The precious metal IRA (Individual Retirement Account), also known as a gold IRA, was a great leap forward for U.S. retirement savers.  Since its inception in 1998, the precious metal IRA has allowed U.S. citizens to invest funds either tax free (Roth IRA accounts) or tax deferred (traditional IRA accounts) in gold, silver, platinum and palladium bullion.  This has been a boon for U.S. investors interested in tangible assets but, unfortunately, it did come with one big drawback.

The U.S. government currently prohibits the purchase of art or antiques in IRA accounts – basically any asset that can be considered “collectible”.  This depressingly complete ban includes, but is not limited to, artwork, rugs, antiques, gemstones, stamps, coins and alcoholic beverages (like fine wines).  This is a pity, as this misguided policy bars U.S. retirement savers from an entire investment asset class that is tremendously undervalued right now.

However, there is one small exception to this ironclad no art, antiques or collectibles policy.  And it is found exclusively in the small print of the precious metal IRA.  It is a loophole so small that I’m certain the faceless IRS bureaucrats and uncaring D.C. politicians never though anybody could squeeze through it.  They were wrong.

First we need to have a primer about the complex rules surrounding a precious metal IRA.  An account may only purchase certain gold, silver, platinum and palladium coins and bars.  These coins and bars must all have a minimum fineness of at least 99.5% or 995 fine.  In addition, the prohibition on “collectibles” disqualifies any proof coins, which are specially struck under ideal conditions to appeal specifically to coin collectors.

As a logical extension of this rule, any coin that has been third party certified or slabbed, even a bullion issue that meets all the other qualifications, is not allowed.  This is because third-party grading indicates a coin is meant for the collector community and is thus a “collectible”.  Although it isn’t specifically written into the tax code, it is also a fair bet that any coin issued with a predetermined mintage limit would also be forbidden, as this would imply the coin was intended for collectors.

The clear intention of all these rules is to strictly limit your precious metal IRA to bullion coins and bars only.  The minimum fineness requirement alone automatically disqualifies all old gold or silver coins.  All older precious metal coins were originally intended for general circulation.  Because of this they had to be alloyed to increase their hardness and wear resistance.

For example, old, pre-1933 U.S. gold coinage is only 90% fine.  British sovereigns, which have been struck continuously from the early 19th century right up until the present day are 91.67% gold.  Most other old gold coins from the early 20th century or earlier are 90% fine.  Because of the precious metal IRA fineness requirement, all of these gold coins are disallowed.

That removes most gold coins – especially any antique coins with collector’s value – from contention for your precious metal IRA funds.  Effectively, only modern, 24 karat, pure gold bullion coins (and bars) are allowable.  There is, however, one small exception to this rule: American gold eagle bullion coins, with a fineness of 91.67% or 22 karat gold, are exempted.

Interestingly, American gold eagle coins (along with their American silver eagle brethren) possess another important exemption as well.  Proof specimens of these coins are allowable in precious metal IRA accounts.  This is important because these are the only proof coins of any type that can legally be owned in a precious metal IRA.  Apparently, congress carved out a legal niche for these proof coins in a bid to increase the popularity of the U.S. mint’s gold and silver eagle program.  It worked, as these two coins dominate the global gold and silver bullion coin market.

So with all this information about precious metal IRA requirements we can build a list of permissible gold and silver coins:

 

Precious Metal IRA Approved Gold Coins:

  • American Gold Eagles (uncirculated and proof)
  • American Gold Buffaloes
  • Australian Gold Kangaroos
  • British Gold Britannias (2013 to present only)
  • Canadian Gold Maple Leafs
  • Austrian Gold Philharmonics
  • Mexican Gold Libertads (1991 to present only)
  • Chinese Gold Pandas

 

Precious Metal IRA Approved Silver Coins:

  • American Silver Eagles (uncirculated and proof)
  • America the Beautiful Silver Coins
  • Australian Silver Kookaburras
  • Australian Silver Koalas
  • British Silver Britannias (2013 to present only)
  • Canadian Silver Maple Leafs
  • Austrian Silver Philharmonics
  • Mexican Silver Libertads
  • Chinese Silver Pandas

 

Now, this list of gold and silver coins that are allowable in a precious metal IRA might be academically interesting, but I promised you a loophole.  Well, here it is.  When the U.S. Congress created the precious metal IRA, they intended to completely exclude art, antiques and anything that could remotely be considered a “collectible”.  But some of the gold and silver bullion coins listed above are actually stealth collector pieces that have strong numismatic potential!

The implications of this revelation are staggering.  It means that you can legally purchase and own some numismatically-oriented, collector’s coins in your precious metal IRA.  Suddenly, the full promise of tangibles investing in a precious metal IRA is within your grasp.

Now, if you’re the canny type, you might well ask how modern bullion coins can be desirable to coin collectors.  They are supposed to be lumps of gold or silver with their weight and fineness guaranteed by a government.  They are supposed to trade as nothing more than bullion.  But reality has a funny way of interfering with the best laid plans of national governments.

In short, some modern bullion coin issues are far rarer and more desirable than you might think at first.  In addition, coins, like any art form, heavily rely on aesthetics to appeal to potential collectors.  And modern bullion coins, which often adapt renowned historical designs, are undoubtedly the most beautiful coins of the current age.

I won’t go into all the details surrounding why some modern bullion issues have great numismatic potential here.  Instead, I’ll encourage you to read another article I wrote titled: Chasing Perfection – Collecting Gold Bullion Coins.  But this premise isn’t just my opinion; there are a significant number of modern bullion coins that already trade for hefty premiums over spot prices on the open market.

Maybe the best examples are proof and burnished (a special type of uncirculated strike) American silver eagles.  Even common date issues for these one troy ounce silver coins currently sell for well over double their bullion value.  That is a far cry from the average silver bullion coin, bar or round which might sport a modest premium of only 5% to 20% over spot.

However, I believe the best appreciation potential resides in gold bullion coins, which generally have much smaller mintages than their silver counterparts.  The stunningly beautiful Mexican Gold Libertad series, for example, has never had an annual mintage that exceeded 15,000 over the last 20 years.  They are ridiculously rare and undervalued, yet you can still add one ounce “bullion” Libertads to your precious metal IRA for 15% to 20% over spot!

The only better buys are proof Mexican Gold Libertad coins, which often have mintages in the hundreds.  Their mintages are insanely low, especially considering that many circulating issues of coins are struck by the millions or even billions these days.  Unfortunately, the proof Mexican Gold Libertad is considered a “collectible” coin and is not eligible for inclusion in precious metal IRAs.  Only the uncirculated version can be safely purchased in a precious metal IRA.

If Mexican Gold Libertads don’t excite you, there are many other modern gold bullion coins with excellent return potential for your precious metal IRA.  American Gold Buffaloes, Australian Gold Nuggets/Kangaroos and Chinese Gold Pandas all have that winning combination of great design and relatively low mintage.  And their prices are often only modestly above their bullion melt values.

But a special mention should be made for American Gold Eagle coins.  While I don’t believe the normal American Gold Eagle bullion issues have much numismatic potential due to their excessively high mintages, the special uncirculated “burnished” strike and proof examples offer tremendous value.  Proof American Gold Eagle mintages are usually fewer than 50,000 specimens per annum, sometimes dramatically so.  But, in spite of their rarity, premiums are normally quite reasonable at only 15% to 30% over spot, provided you aren’t chasing rare dates.

There is, however, one important detail to note if you decide to add numismatically-oriented gold bullion coins to your precious metal IRA.  It is critical that you choose a custodian that offers segregated storage.  Segregated storage, also known as allocated storage, means your gold is physically separated from the holdings of other precious metal IRA customers kept in the same vault.  This means that if you deposit a certain type and date of gold bullion coin into your IRA, you can pull the exact same coin out at a later date.

In comparison, the more common method of gold storage is referred to as commingled or unallocated storage.  This means the custodian dumps all its customers’ precious metal holdings into a single pile.  If you request to withdraw or sell a coin, they will reach into the pile and randomly pull out whatever date of that type of coin they find.  Commingled, or unallocated, storage is cheaper than segregated storage, but it invalidates any attempts to buy numismatically-oriented coins and must, therefore, be avoided.

Although I haven’t had the chance to use their services yet, Noble Gold is a precious metal IRA trustee that emphasizes their high-security, segregated storage facilities.

In spite of its strict requirements, a precious metal IRA is one of the few ways to invest in tangible assets (other than real estate) in a U.S. retirement account.  And while your local congressman has done his best to shut you out of the lucrative art and antiques market in these accounts, he and his political friends overlooked one small detail.  Take advantage of this little-known opportunity to invest in numismatically-oriented bullion coins in your precious metal IRA while you can.

The Minor Arts – Beyond Painting & Sculpture

The Minor Arts - Beyond Painting & Sculpture

When I talk about investing in art, most people assume I’m talking about paintings and sculpture.  And while these categories of art have been the traditional focus for artists, art critics and wealthy art collectors for centuries, I generally find them to be the least interesting type of art from an investment standpoint.  For one thing, they tend to be relatively large, requiring a great deal of space to properly display.  In addition, because paintings and sculptures are intimately associated with the idea of art in the public mind, the field has largely been scoured clean of investment bargains.

When I write about art on the Antique Sage website, what I’m usually referring to is a relatively obscure category of art known as the “minor arts”.  The minor arts include jewelry, silverware, objets d’art, coins, miniature sculptures and carvings – in short, anything excluded by the “major arts” such as paintings, prints and monumental sculptures.  Throughout history, academia has had the tendency to diminish the importance of the minor arts while endlessly analyzing and discussing the major arts.  I think this dogma has been a great disservice to the fields of both art history and art connoisseurship.

For example, everyone has heard of Leonardo da Vinci’s masterpiece painting, the Mona Lisa.  It has been endlessly mythologized in popular culture, such as Dan Brown’s bestselling book “The Da Vinci Code”.  It has also been over-analyzed by smitten art historians for centuries.  In fact, the very first art historian, Giorgio Vasari, breathlessly wrote about the Mona Lisa in his groundbreaking 16th century book “The Lives of the Most Excellent Painters, Sculptors and Architects”.

Now there is nothing wrong with paintings in general or the Mona Lisa in particular.  It is a very fine late Italian Renaissance painting created by a renowned artist.  But does it really deserve its reputation as the single greatest painting ever created in human history?  And, by the same token, is the Mona Lisa really better than every single one of the minor arts ever created?

Let’s examine one specific example of the minor arts as a point of comparison.  The photo accompanying this article shows the Crown of the King of Bavaria – one of the Bavarian Crown Jewels.  It was commissioned for king Maximilian I Joseph of Bavaria in 1806.  This magnificent work of minor art was designed and crafted in Paris in 1806-1807 by the very best jewelers of the Napoleonic court, including the most renowned goldsmith of the time, Martin-Guillaume Biennais.  The result was a magnificent gold and silver crown encrusted with countless diamonds, rubies, pearls and emeralds.  And until it was removed in 1931, this royal regalia also held the stunning and historically important Wittelsbach Diamond, a 35.56 carat, deep gray-blue diamond.

And yet, few people have ever heard of the Crown of the King of Bavaria.  It simply doesn’t show up on society’s cultural radar.  Yes, the Crown of the King of Bavaria is one of the minor arts, but is it really any less impressive than the Mona Lisa?  I think the answer is no.  They are both phenomenal pieces of art, even though one is a painting and the other is a piece of jewelry.

But they are also very different works.  So in a very real sense I don’t think it is even possible to directly compare the two works.  It is like comparing apples and oranges.  In the final analysis, I believe the Crown of the King of Bavaria is every bit a masterpiece for the ages as the Mona Lisa, albeit crafted from gems and precious metals instead of paints.

Now, none of us are likely to acquire ownership of either a Leonardo da Vinci painting or the Bavarian Crown Jewels anytime soon.  Instead, most people looking to diversify into art or other tangible assets are probably interested in spending more modest sums of money – usually less than $10,000 per item.  Luckily, this is the value region where the minor arts absolutely shine.  In contrast, choices in the major arts – paintings and large sculpture – are somewhat constrained in these lower price ranges.

The minor arts – coins, miniature sculpture, jewelry, silverware, objet d’art and the like – have, in my opinion, been perennially overlooked in not only academic settings, but also the art marketplace.  Normally this oversight would be a mildly thought-provoking, but ultimately unimportant historical footnote.  However in this case, I think whoever buys the right minor arts today – for ridiculously cheap prices, I might add – will make a lot of money tomorrow.

Art in general is an intimidating field, requiring a certain amount of technical knowledge to properly navigate.  And most people don’t have a great understanding of the traditional art market, much less the minor arts market.  There is a persistent myth that you need to be a millionaire in order to invest in art.  But, the reality is that the minor arts are far more budget-friendly than most people realize.  As little as $100 is enough to start investing in art.

And this is the real reason I started the Antique Sage website.  I firmly believe that the minor arts have a greater potential for future price appreciation than any traditional asset class at this juncture in history.  The minor arts may be small, but, as the saying goes, good things come in small packages.