Antiques Can Mean New Life For Your Portfolio
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CNBC, Monday, October 18, 2010--
Though things may be looking up for the stock market, the next time the Dow Industrials drops hundreds of points in a few minutes, you may want to consider pulling funds out of the market and putting them in your bed.
It may not be a bad idea if your resting place is part of an exceptional Louis XV-style bedroom suite by François Linke, one of the great French furniture makers of the late 19th century.
Bill Rau, owner of M.S. Rau Antiques in New Orleans, says that with the financial crisis a recent, vivid memory, "people are interested in hard assets that have a historical track record."
"They told us ‘I'd rather have my money in this than in the market'," says Rau.
Though the recession took a toll on antique prices and trading volume is down, rare, high-quality items have held their own.
More than a few world auction record prices were recorded in 2010:
* In May, a bronze statue of the Buddha Amitayus-a deity associated with long life-from the Xuande period realized $9 million at Christie's in Hong Kong.
* In July, Sotheby's sold an 18th-century, English-silver wine cooler with an estimated worth of $2.5 million, for $3.8 million in London.
* In October, a Qianlong porcelain vase sold for $32.3 million at Sotheby's Hong Kong.
Another good indicator of market strength is the Antique Collector's Club (ACC) Antique Furniture Price Index. The index is based on the retail prices of seven different furniture categories in the ACC's book, "British Antique Furniture."
In 1968, the first year the index was recorded, it was 100. Though there have been fluctuations over the past 40 years, that number has generally increased.
In 2009, however, the ACC Index fell 7 percent, from 2942 to 2736, after a flat performance in 2008.
But Lewis Baer, owner of Newel Antiques in New York, notes, "We haven't continued to slide."
Baer says he's noticed two recent trends: A renewed interest in the Neo-Classical period, a departure from the recent narrow focus on mid-century modern pieces; and an increase in Chinese demand for Chinese antiques.
"While you still may be able to get a few deals on some good pieces, the period of time where you can get cheap antiques is coming to a close," says Baer.
Pros And The Market
To illustrate the point, consider this. In 2003, Fibrebond, a family-owned concrete manufacturer in Louisiana with about 450 employees, hit a rough patch. To stay afloat, the family sold its collection of antique European paintings for an undisclosed amount.
"Even though the economy was a little rocky after September 11, we were able to liquidate those paintings at pretty good gains," says Fibrebond President and CEO Todd Walker.
"If you invest in quality, the theory is it's exactly like a good investment, it's going to provide a return," says Walker. "We were certainly able to do that and it came at a very opportune time."
Legendary financier Red McCombs agrees that diversifying into antiques is a wise idea. McCombs, who is the founder of the Red McCombs Automotive Group, co-founder of Clear Channel Communications, and the former owner of the San Antonio Spurs, Denver Nuggets and Minnesota Vikings, is also an avid antiques collector.
"I collect just about anything that is old and has a story to it, or, if it doesn't have a story, if I find it particularly attractive," says McCombs
"I don't buy to resell, but on the other hand, I have never bought anything that I thought wouldn't increase in value on a relative basis," McCombs says. "The market for really fine, old things may stay level for a while, but I don't believe that losses (on a relative basis) are going to take place."
Of the 2008 stock market decline, McCombs says, "I'm not saying that the same thing couldn't happen to antiques, but you also have the joy of looking at them."
Rau, the dealer, says that fall 2008 notwithstanding, the great majority of the people he sees do just that-buy things they love with the understanding that, more than likely, they will be a good long-term investment.
"But," says Rau, "if it turns out only to be an OK investment, it still paid a dividend everyday because they got to enjoy it."
"I actually discourage people from buying things strictly as an investment," says Baer, "There has to be an emotional relationship. You have to love to live with it," Baer says.
If you want to add antiques to your portfolio, where should you start? Spend some time at the museum. Visit a gallery, an auction or both.
"Find the stuff that speaks to you," says Rau.
"The type of person who wants to live with French Louis XVI formal furniture is different than someone who might be interested in 20th century modern furniture," says Baer.
He says some of the most popular antique furniture styles today are mid-century modern, Art Deco, English and American traditional like Chippendale and Georgian, Neo-Classic and Biedermeier, which is a combination of Neo Classic and Art Deco.
Rau says that Georgian silver, 18th and 19th century glass, and jewelry are also popular items to collect.
He suggests using a checklist with these five criteria - condition, beauty, rarity, maker and provenance. A piece doesn't have to register a check for every criteria, but the stronger the checks are, the better the long-term investment it is likely to be.
Once you have a sense of your style, there are many places you can buy antiques, including auctions, dealers, fairs, flea markets, estate sales, eBay [EBAY 25.475 -0.205 (-0.8%) ] and other websites. You can also hire a designer or a consultant to help with the entire process.
What you spend depends on your budget, but you should buy the best example of the style that you can afford. McCombs, for example, buys items ranging from several hundred dollars to seven figures.
"The minimum somebody would have to spend would be $1,000," adds Rau. "However, that is only for certain antique glass, porcelain, or silver. One would need to ratchet that up for furniture."
But, Baer says, because prices are off a bit, there are great opportunities to buy now.
Consider your collection an evolution. Where you are today is not where you will be five, ten, twenty years from now. Some consider their collections revolving inventory; they are always looking for better examples of period and style.
So, no matter what your taste and price point are, be sure to enjoy your portfolio from the past.
(Editor's note: This article has been updated since it was originally published in September 2009.)
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