Ground Floor:Normally by December 22nd, I'm sitting on the ground floor surrounded by wrapping paper and panicking that I've either bought people the wrong sort of present or that I've left someone out altogether. But this year I made the list, checked it twice and am quietly confident. I haven't splurged in the way predicted by Deloitte's (as I spoke about last week). I'm hoping that people won't be disappointed when they unwrap their gifts, writes Sheila O'Flanagan
I am slightly concerned about the unwrapping process for one of my friends who has been dropping massive hints to the man in her life about the desirability of a frivolous gift this year. Both of them are generally practical people and their gifts normally reflect this (Black & Decker for him, frothy coffee maker for her - even though he prefers the frothy coffee) but this year she has her heart set on something small and sparkly. The hints she dropped were of the "it's also an investment" type.
Unfortunately, I think that they might have been too subtle as he is considering (following last week's Weekend article in The Irish Times) buying her a "piece of art".
In a brief conversation in which he picked my brains about art investment (sadly, many people think that a financial background also means that you know the best commodities to buy too), he revealed that a painting would also serve the purpose of filling the gap on the landing wall.
I muttered something about the gap between his ears needing filling if he really thought that something to hang on the wall was what my friend wanted and suggested that something to hang around her neck would be far more welcome. He was (genuinely) surprised by this but I'm hoping that he's heading for Weir's this weekend and making an investment in his relationship rather than in anything else!
The booming market in art is, however, a bit of a worry signal for the economy. When people don't know what to do with their money, they seem to turn to "art", even when they haven't a clue what they're buying.
For almost every other investment we have reference points - location in terms of housing, a well-regarded make of car or Tiffany jewellery (I'm trying to help out my friend here), but when it comes to art there's a whole world out there ready to snare the uninitiated.
During the 1980s, the Japanese were the world's biggest buyers of art for investment purposes. It was estimated that during a four-year period, the Japanese spent an incredible €18 billion on art. Names such as Picasso, Rembrandt and Renoir were snapped up and, of course, the entire world (not just the art world) was stunned when Yasuo Goto, chairman of the Yasuda Fire and Marine Insurance Company, bought Van Gogh's still life Vase with Fifteen Sunflowers for the incredible price of $39,921,750 (€30,311,120).
By 2002, however, the Japanese corporates that had accumulated the paintings were under huge financial pressures due to the almost inevitable bust and as they tried desperately to restructure their debt-ridden balance sheets more and more of the art - which had been bought at wildly inflated prices - began to appear on the market in a virtual fire sale.
As far as the money men were concerned, Old Masters might have a certain cachet about them but they were a non-performing asset and companies couldn't afford to saddle themselves with non-performing assets. The art had to go, even at a significant loss.
The recent explosion in Irish art prices is modest by comparison. Nevertheless a return of 250 per cent over six years for a Paul Henry certainly looks good relative to equity markets, not to mention a 500 per cent return on a Donald Teskey. As for Louis le Brocquy - if you are lucky, you could be sitting on potential returns of around 2,000 per cent. What wouldn't a hedge fund manager give for that?
Whenever people ask me about investing in equities, I usually suggest to them that, if they are not simply buying into a managed fund, they should find out about the company they're thinking of investing in. Most people can't actually be bothered to do that - they want the quick return without any of the associated work. Buying art, for those with money to spend but no real idea of what they want to spend it on, is somewhat similar. They want someone they've vaguely heard of (which gives a certain comfort factor) but they also want someone whose work is going to triple in value very quickly. An investment needs to make a return, after all.
I've bought a few paintings myself over the past few years but unfortunately I didn't follow any of the rules of investment. I bought them because I liked the look of them.
I do have one important piece of art in my house. It is a mosaic of my cat, made by my nephew, James, when he was 10, and it has pride of place on my living room wall. It's one asset that will always mean more to me than jewellery or a Louis le Brocquy. As far as I'm concerned, it's priceless.
www.sheilaoflanagan.net
