Login | October 20, 2018

An artful investment

MALCOLM BERKO
Taking Stock

Published: October 9, 2018

I have an opportunity to buy a $250,000 half-unit in a multiunit art-related limited partnership. A friend will buy the other half. The partnership will buy very expensive old masterpieces, and I've included the partnership papers for your review. Two other people we know are also investing and have checked out the general partners. What can you tell me, good or bad, about this? -- TS, Oklahoma City

Dear TS: It'll be obvious from my answer that I know very little except that this is a leveraged partnership in which the general partners can borrow money using the masterpieces as collateral. Leverage can be dangerous.

The big problem with most new Joe Billionaires, those who hopscotch from St. Moritz to Monaco to London, is they're bored. They have too much money and need to find a place where they can be noticed spending it and earn bragging rights. Any billionaire can buy a Lamborghini, a Park Avenue apartment or a monster 300-foot yacht. That's so plebeian. If your ego really needs stroking and you need to announce your ascendency to the altar of the superrich, your public relations adviser might counsel you to buy a van Gogh or a Warhol for a ghastly sum. Buying something that's as utterly useless as a Pollock or a Rothko is like lighting a Cuban cigar with a $100 bill. Most of the superrich need to light those cigars in public, but there are a few -- such as Joe Jamail, Philippe Kahn, B. Wayne Hughes and James Dyson -- who would light it in private or don't even care for cigars.

During the first half of this year, Sotheby's offloaded $4.5 billion of art belonging to the superrich. During the second half, stuff by Munch, Picasso, Matisse and Kahlo needs to be sold, and Sotheby's is hoping other superrich buyers will be dumb enough to write even bigger checks. In my opinion, there's nothing resembling art in their globs of paint. Real art is Michelangelo's Moses, a painting by Rockwell, Daniel Chester French's Lincoln Memorial and The Kiss, by Rodin, certainly not the nightmarish hallucinations of Picasso, Dali and Munch. David Hockney's "Pacific Coast Highway and Santa Monica," which recently sold for an absurd $28.5 million, could have been painted by my daughter when she was 10. And Modigliani's sterile, reclining nude for which some sucker recently paid $157.2 million is less art than fart. In 49 to 71 minutes, some street artists could reproduce a Modigliani nude, and most superrich buyers couldn't tell the difference. In 43 to 69 minutes, a good street artist could reproduce Munch's "The Scream" in such a way that, after proper baking and caking, an experienced curator would have trouble telling the difference.

Art prices are a scam because there are no parameters for determining value. And two art limited partnerships with which I'm familiar are in trouble. Several years ago, both LPs took in respectable millions in capital. But they leveraged their portfolios using previously purchased pieces as collateral. They borrowed heavily to purchase other pieces considered "investment-quality" (whatever that means). But those pieces, purchased a few years back, haven't risen much in price, and several banks are demanding that their overdue loans be repaid. This has forced the two partnerships to quietly discharge some of their debt in exchange for some pieces in their portfolios. The lawyers are the only folks making money here.

If you can afford the loss and know the risks, I don't mind saying, "Have at it." Your investment would allow you to hobnob with the glitterati, smoke a joint with Andreas Gursky, score some heroin with Sting and do some quaaludes with Madonna. You might even make a profit if, in a few years, the general partners could find other enthusiastic suckers willing to pay more than $4.5 million for McCarthy's "Tomato Head" or $7 million Fischer's lamp and bear. Cheese and crackers got all muddy, what crap.

I've given you the phone number of an attorney who has a magic Rolodex and knows all about this stuff. I don't know the general partners of the LP you're considering. However, this lawyer does. Please ring him. He is expecting your call and won't charge you a centime for your call. He says the general partners are "inexperienced outliers who're unfamiliar with success."

Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.


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