Thursday, October 27, 2011

article for an upcoming conde nast car publication

We are facing an unprecedented confluence of international macroeconomic conditions that have collided with the unintended result of pushing prices for rare and desirable collectibles far into the stratosphere. Never before have these forces raged with such ferocity and velocity, bringing into alignment the disparate markets of art, classic cars, wine and property. Crystallizing the general malaise, there is the fear of inflation, uncertainty in valuing currencies, wildly gyrating stock markets (trending lower still), banks teetering, interest rates hovering near zero, sovereign debt bordering on worthless, commodity prices under pressure and dramatic political uncertainly and turmoil. It’s depressing just listing the plethora of negativity preoccupying world markets. So what better time to buy a pretty picture, a good bottle of wine, a nice set of wheels and a big garage to park it in?

Seriously, tangible assets have never before in history been so universally viewed as attractive and safe a harbor to park cash in. Coupled with an offsetting explosion in the generation of wealth in emerging markets over the recent past and you have all the ingredients in place to redefine the criteria for the valuation of collectibles. The beneficiaries are a $250,000,000 Cezanne painting and a $16,400,000 Ferrari. Sadly, with values rising so meteorically there is something tragic about the notion of paintings we don't hang, wine we don't drink, houses we don't occupy and cars we never drive. Other than an art collection of masterpieces, there is nothing to compare to the lineup of the RAC TT Race at the Goodwood Revival with Cobras and GTOs galore. Julian Treger, principal of Audley Capital, a fund the Financial Times called one of the world’s best last year, stated about art and cars: “They are both hard assets in a world of shortages of the best. Though art and cars have different collectors they have the same dynamics. Ferraris are very sculptural, but also incredibly well branded.” Where and when it will all end is anyone’s guess, but neither a $100 million car nor a $1 billion work of art would surprise me.

It may appear somehow wrong and that one should feel a sense of guilt enjoying the pleasures, delights and accompanying rising values of collectibles in the face of such seemingly universal hardship, but business has no moral compass. And although many remain skeptical, I am firmly of the belief that art and cars have inherent, calculable values. The factors driving escalating prices among art and cars coincide: rarity, history, provenance, and condition. The Supreme Court of the United States were asked to decide a case involving pornography and the Chief Justice replied he couldn’t explain it but he knew it when he saw it and the same applies with a great work of art or a sublime piece of automotive design and engineering. Only just recently, seven of auction house Gooding's top 15 Pebble Beach sellers were Ferraris: why does Ferrari above all other marques tend to dominate? Is it down to aesthetics, or provenance? Art and cars have become indisputable asset classes and Ferrari and Picasso are the gold standard against which all else is measured. However, markets are very unforgiving ecosystems so you had better know your stuff cold or stand a good chance of being run over, and separated from your money in the process. A Warhol from the same year and the same size can sell for $60,000 or $60,000,000 and a Ferrari is no different. There are better and worse Hirsts and Astons. Sadie Coles, one of the most significant and influential international gallery owners states that cars are somewhat easier to define value: “The valuation of a contemporary art work can be mysterious, subjective and unquantifiable. Rare cars are functional objects and however beautiful or rare they may be, they also have easier to define provenances - how many were made, during what dates, who owned them and how many miles they have.” I don’t entirely agree with the above reasoning and think there is as much disingenuousness and indeterminism in unraveling the mysterious, subjective and unquantifiable in cars as in art. Art is admittedly the last unregulated, multi-billion dollar business.

Though the high prices for art and cars can be hard for people to swallow, they are here to stay in at least the near term and with good reason. With art, its who’s buying, selling, writing about and exhibiting the work—these are all contributing factors playing into the notion of determining value. And it’s not all that different with cars; though, rather than which museum the car was exhibited in (this adds value too) its more a matter of which historic races the car was driven in and by whom. Whether cars are equal to art, and vice versa, depends on which is fuller, your walls or garage—it is more a condition of taste and opinion. Hardcore car lovers will say you can’t drive a painting, but art throws off a visual dividend and ease of coexisting beyond what cars can offer. True, you can't jump in your Van Gogh and race a Monet or head off to the country, but by the same token you can't climb into bed and drool over your Testarossa. Cars are the most ubiquitous form of industrial design and we see thousands per day, but we don’t see them when we are behind the wheel or when we park them up for the night. That really is unfortunate, as I have my cars in my office and under my desk, and if I could, I would have one under the duvet too.

There appear more and more crossovers between the bedfellows of cars and art, including the phenomenal Renzo Piano designed museum atop the Lingotto building and examples like BMW art cars and the recent sponsorship deal between Volkswagen and the Museum of Modern Art in New York. Art and cars also share some not too positive attributes like the problem of liquidity: try and call your broker in the middle of the night to swiftly dispose of your car and/or art collections! Though art and cars are proven stores of value, nothing goes up forever, despite our strongest wishes. And there are those who climb into either category of collecting to ascend a social ladder, like nailing bags of money to the walls or stuffing notes into the garage and parading around like a peacock with fully exposed feathers.

With art and cars strictly as investment, divorced of aesthetics and functionality it all seems rather perverse. There have cropped up a number of classic car and art funds that look at both as nothing other than asset classes with untapped upside, stripped of use and enjoyment, but they are missing the point—art and cars are so great as investments because of the usability and joy, not just the reductive quality solely as appreciating assets. Shares, bonds and gold go into safes or drawers and draw no satisfaction other than the potential to increase in value. There is more to life— studies exist that say living with art (then why not cars?) can increase your life expectancy like having a loyal golden retriever. I can fully understand and appreciate the notion! Personally, I don't differentiate between a fork, chair, car or painting. Anything done exceptionally well shares qualities with art, and in the end its simply a matter of nomenclature, of naming and categorizing things that serve no purpose other than creating false hierarchies.

Richard Bremner, one of the UK’s foremost car writers weighs in on the art vs. car debate as follows: “For some, a car can be a thing of beauty, exquisite beauty even, and even the lowliest motor is the result of a creative process that has involved some artistry, no matter how modest. The vast majority of post-war cars, and some pre-wars too, were designed using not only the artistic skills of sketching and rendering designers but those of sculptors too. The result is an object that's quite capable of pleasing the eye that carries its own story, reflects the era in which it was conceived and the culture of the manufacturer that built it. As with art collecting, classic car acquisition can be about money of course, besides the displaying, coveting and hoarding of these things.”

An exceptional car is nothing to turn your nose up at, but there are many that would do the same with a work of contemporary art. Unfortunately regarding contemporary cars, over regulation and mass production sometimes aid in homogenizing design, which only adds to the values of classics. And in contemporary art, oversupply to feed demand can also lessen the values. There is nothing that can replace passion and connoisseurship in either endeavor including all the endless analysis a private bank could muster. Where will it end? Will it implode, like it did in the late 1980s, or are certain top vehicles now immune to the vicissitudes of the market? Though nothing is endless, art and high-end collector cars are not over leveraged like what might have been the case in decades past. For the most part, we are faced today with end users who have the wherewithal to stay in the game and not have to go prematurely running off the track.

Adam Lindemann, a highly noted collector and writer on art and design, who famously flipped a Jeff Koons sculpture for many millions in profit before it was packed off for shipping, told me that: “Cars are not at all like art, they are like ‘Design’. Buying a great car is like buying a great piece of Art Deco furniture. What matters is provenance and originality. There is no such thing as rolling art, there is however rolling design. The fact that we live in an age of computer chips, and technology molded into carbon fiber, means that the hand made machines of the last century will be valued objects of the future without a doubt. Over time the great cars can only go up in value, the question is deciding and sourcing the ‘great’ ones from all the other ones.” I find as plausible the thoughts of Kai Schachter (my 14 year old son and no car fanatic like his father) who said, “A car is a piece of art and even though you drive it around, it’s as fragile and delicate and needs to be cared for as much as any painting or sculpture.”

The downside in the public consciousness is that there is a bifurcation in the economy, a wider and wider chasm separating those that have from those that don't and many are dialing down their standards and style of living. The baby boomers are coming to the end of a party (and a good run It was) and facing the realization that someone is going to have to pay. Countries face the same harsh dilemma: debts are swallowing us all and it can’t go on and on and... It wouldn’t be the best of looks to roll into an Occupy Wall Street protest in your Ferrari with a Picasso in your tent. But let’s face it: since art came off the walls of a cave, it has been coveted and the same goes for life after the combustion engine—once it was invented and inserted into the bay of a car, we’ve had to have them. There is unparalleled seduction in a great car and artwork; the smells (even paint smells enticing), the feel, textures, and sight—a feast for all the senses. Unfathomably in a world wreaked by social, economic and political instability, it has been a record year for auction houses in cars and art, part of the ever-increasing acceptance of the rarity, preciousness and transcendent qualities of both: more so than anyone might have imagined in such recessionary times. We are only but custodians of things, charged with maintenance, preservation and appreciation of unrepeatable, glorious objects. And as we get progressively priced out of markets in cars, art, wine and property, the definition of what is desirable and covetable will only expand.

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