Investing Carat by Carat
12/06/2012 10:00 am EST
Art and diamonds are rarely mentioned when discussing hot investment commodities, but the wealthy are investing there and prices are skyrocketing, says Eric Bradley.
With major art and auction houses notching some record sales, what are some of the items that investors are buying these days? We're asking Eric Bradley that question. So Eric, what are you seeing that people are interested in?
We're seeing the ultra-wealthy start to put their money into fixed objects that have a sense of scarcity and also have a sense of a growing demand in the future. So the wealthy have known for a long time that when there's a lot of uncertainty in the market, a lot of fixed objects are a good source just to ride out market fluctuations, just to preserve their capital.
So we're seeing art auction houses record some of the highest sales they've ever had. We're seeing antique auction houses expand nationwide. They're starting to buy real estate in big cities, closer to populations. We're seeing stock prices of the publicly traded auction houses do very, very well considering the uncertainty in the market compared to other equities.
Along the areas of what people are buying, we're looking at American art doing very well. Contemporary art is doing very well. We're seeing an influx in investment into gems and diamonds, which we had not normally seen-although in a lot of ways colored stones have not lost their value in 37 years-but over the last decade we're seeing the price of one-carat clear diamonds rise in value at a rate that outperforms gold bullion.
Those are headlines you don't read very often, because it's kind of hard to quantify that-there are not very many funds that track diamond and jewelry sales-but the wealthy, the $5 to $10 million set, are putting a lot of their capital into these objects.
It's interesting. So Eric, when you're talking about what's being purchased in the US, are these domestic buyers or are they from overseas, or both?
Well it's a very good question. What we're seeing now is that there's a shift in the wealth that's being created, and a lot of it is being shifted to the BRIC economies. So you have Brazil and Russia and India and China.
We're seeing a rise of wealth-of the super-wealthy really is a good way to put it-in places like China and India. One statistic put the rise of the increase in non-financial wealth in China and India has grown 173% in the last decade from about $5,000 per head to almost $14,000. That's a lot of money very quickly.
These people are also getting their wealth at a time when conventional investing advice really doesn't prove accurate anymore. So we're seeing buyers look at the United States as a source for new items.