Professor Elam

Now art owners are 'pawning' their collections.

My presentation on derivatives asks early on, what is Facebook worth? Barrons has long kept track of an annual art index of Chinese jade and such. Sootheby's Christie's and Barret Jackson are all auction houses that have posh sales. Now even Annie Leibovitz has pawned her entire photography collection for a mere $15 M.  Annie is one of the most famous names in photography, go to the photo book section of any major book store and you will see her work. There has always been a spirited debate as to whether photos are art, but I suspect Annie cashed in before the value went to say $10 M. IF she cannot make the pawn payments, excuse me loan requirements, would the bank repo the photos, and then what?

Markets are deleveraging as the term goes and re pricing assets. Ever lower price earnings ratios mean that streams of income are worth less and less, and so real estate investment trusts are worth less from the p/e standpoint as well as the uncertainty of rents. Notice the For Lease signs on more and more commercial properties?

But what is the value of a painting or sculpture?  Such things get bid to huge levels in bull markets. A short wheelbase Ferrari once owned by James Coburn recently fetched a record near $10 Million, and that is a car not a downtown lot in Fort Worth….. 

We study derivatives in Intermediate II Accounting, as you can see there are lots and lots of derivatives, art is a derivative of the perception of where we are in a world of ever increasing or now decreasing values. True Picasso is not around to produce another painting, so what is his original effort really worth?  We are going to find out…