The Best Investments of 2018? Art, Wine and Cars

Luxury assets have outperformed stocks and bonds this year

By Avantika Chilkoti

Reprinted from the WALL STREET JOURNAL

Updated Dec. 31, 2018 11:29 a.m. ET

Who beat the market this year? Investors who like the finer things in life.

Luxury assets, including wine, art, classic cars and fancy colored diamonds, have outperformed stocks and bonds this year.

“People are looking for a place for their cash, and the security of holding something physical is appealing,” said Anthony Maxwell, director at Liv-ex, the London-based wine exchange. “They are looking outside securities, and gold is not what it used to be.”

Investors who put money into art at the beginning of the year saw an average gain of 10.6% by the end of November, according to Art Market Research’s Art 100 Index, the closest thing the industry has to a benchmark.

In November, David Hockney’s painting of a man in a pink jacket by a swimming pool set a record for a living artist at auction, selling for $90.3 million at Christie’s New York.

Those investing in wine have seen a 10.2% gain this year, according to the Liv-ex 1000 index, a broad measure that covers wines across regions.

Meanwhile, global stocks have tanked in the past quarter, reversing gains earlier in the year, as analysts fret over slowing global growth and trade tensions between the U.S. and China.

Investors who put money in the S&P 500 at the beginning of the year have lost 5.1%, based on estimates of total return. Those seeking refuge in cash equivalents have gained 1.9% this year, while those holding gold have lost 2.2%.

Yet, the fall in stocks is a recent trend. Analysts say equity markets may well strengthen in the coming months, while the trend for luxury investments could reverse.

“Wine is something to drink and enjoy, and art is something to appreciate,” said Robin Creswell, managing principal at Payden & Rygel, a Los Angeles-based asset manager. “You might enjoy the updraft of higher prices in beneficial markets but you shouldn’t be surprised if there is a downdraft.”

Meanwhile, those who own luxury investments can revel in their relative staying power.

“They will always have some sort of market because somebody loves them,” said Andrew Shirley, a partner at global real-estate consulting firm Knight Frank and editor of the group’s Wealth Report. “With a share, there is no sense in owning it for the sake of owning it.”

The market for high-end diamonds has been steady, gaining 0.4% in value in the first three quarters of 2018, according to the Fancy Color Research Foundation in Tel Aviv.

Eden Rachminov, chairman of the FCRF, a diamond-industry body, says the gemstones can help diversify an investment portfolio and there is almost no volatility in prices.

There are risks involved in holding alternative assets, from regulatory reform to changing tastes, such as a recent shift in demand beyond traditional Bordeaux wines to top-end Burgundy and other varieties.

And the wealth effect that people feel from higher stock markets can reverse itself quickly.

“If people make money on the stock market, they have more money to spend on their hobby,” said Dietrich Hatlapa, director of Historic Automobile Group International.

Luxury-car prices were down slightly this year, according to HAGI’s Top Index, which covers rare collectors’ automobiles—a correction, Mr. Hatlapa says, that was expected given the rate at which investors poured money into the vintage-car market following the 2008 financial crisis.

“They decided to allocate more to classic cars as part of their portfolio because they couldn’t find returns elsewhere, but there are more alternatives as interest rates normalize,” he added.

Cars have been the best-performing luxury investment over the past 10 years, gaining 289%, according to a report published by Knight Frank earlier this year. Coins gained around 182%, wine 147% and jewelry 125% over the same period, while antique furniture and Chinese ceramics lost value.

Emerging markets represent a large part of demand growth for luxury assets, leaving prices vulnerable to moves in currency markets too, analysts say.

Wine analysts point to the boom that followed the United Kingdom’s decision in 2016 to leave the European Union. Political uncertainty over Brexit dragged on sterling, the main currency for trade in wine, creating a buying opportunity for international investors.

Sources: Historic Automobile Group International (cars); Liv-ex (wine); Art Market Research (art); FactSet (stock indexes, bond ETFs); Dow Jones MarketData (gold)*As of November


LeSoleil Fine Art
Art as an Investment

CCTV finally broadcast: save wealth,
from the art collection

As we all know, the present real economy in our country has been in a downturn, and economists predict that this downturn in the real economy will last a long time, two years, three years and even longer. As you can see, even a technology-innovation city such as Shenzhen has gradually transformed itself into a financial city.

In China, science and technology can no longer promote the development of the national economy. Science and technology have failed to give the economy too much innovative ability. Almost 70% of the physical shops have been killed and Baidu take-out has taken place so that all citizens live in their homes. High taxes, the real estate industry is facing collapse. The recent nationwide environmental pollution control has made the bleak operation of individual industries worse, shut down and shut down, and the collapse of bankruptcy.

Afraid…

There are five fears in China's middle class:

■ afraid of house prices, because the wealth of the middle class configuration of almost all real estate investment, house prices once, so hard to accumulate your wealth naught.

■ afraid of the house can not sell, even if you fate, the price drop down, but who will be your Panxian? People buy or not buy up, rigid demand is not obvious, investment real estate are aware of the risk, in this case how do you cash?

Fear of income tax increase, this is a matter sooner or later, the property tax will come, you are waiting to be fooled, northeast there is a saying is a small piece of thin slices.

■ afraid of exchange difficulties. This is an indisputable fact. Since the beginning of last year, the state has implemented foreign exchange control measures to restrict the exchange of foreign exchange, prohibit foreign investment in home ownership, prevent the outflow of funds and prevent the transfer of assets. First, the country's foreign exchange reserves have fallen below the warning line, but they are serious. Second, the rich are selling domestic assets to escape, tens of millions of middle-class people are also moving on the road to immigration.

■ afraid of devaluation of the renminbi. Regal and middle class immigrants are the main reason for the transfer of RMB assets, diversification of asset allocation, seeking financial security, to avoid the risk of devaluation of the renminbi, about 70% of such people now. The second reason is that children's education, away from environmental pollution and the pursuit of food safety.

Economic stability is the top priority of the future national policy, the stability of the RMB related to the overall national situation. Faced with the constant pressure of capital outflows and devaluation of the renminbi, the state will surely use all possible means to cope with the middle class that blocks the transfer of assets. The introduction of CRS, but also to turn the middle-class monetary assets turned upside down, so that your cash can not be hidden. From last year, it is no longer possible for immigrants to transfer their assets. So at this moment, art is the safest and most secure asset allocation.

Wanda Wang Jianlin bid farewell to the real estate market, officially entered the art industry. Because Mr. Wang has long understood, but also saw through, since the hit economy, any commodity does not have the value of the preservation and value of art, any product does not have the resilience of art and high returns, art Investment income is far higher than any financial products. Not only Wang Jianlin, you look at home and abroad, almost all the business tycoons, financial predators, are art lovers, collectors and successors.This is the best proof.

Now that you want to keep the wealth accumulated in the first half of the year and prevent it from disappearing with the disappearance of the Chinese economic bubble, art is your best option among the few choices you have made.

Let us give two examples. The British Railroad Pension Fund purchased 2,500 pieces of art with a total amount of 100 million U.S. dollars in the event of serious inflation. After 25 years, these works of art have brought about 300 million U.S. dollars to the railway pension fund. The art foundation in the United Kingdom relies on its forward-looking vision and excellent financial skills to make the return on investment in works of art reach 59%.

In China, 6 blocks of the year 4 bought a full version of the monkey tickets, and nowadays 1,300,000 are not taken away. RMB will devalue, works of art will not.Throughout the ages, can be called national assets, not gold and silver jewelry, not money, but the legacy of the past dynasties artwork.

Wanda's move is a benchmark. He indicates that the investment industry is quietly undergoing changes. This indicates that the investment direction of China in the next decade will herald an unprecedented increase in the proportion of investment in art in China. Whoever occupies the heights in the first place, Who will be the next legend.

There is a saying that the leadership of the child where to go, we go there, what the rich investment, we do. Well, Wang Jianlin, Ma Yun, Xu Jiayin, Liu Yiqian, Sun Guangxin, Dai Zhikang and Huayi Brothers all turned themselves into investors and collectors of works of art. It is not hard to see the economic trends in the coming decade.

Thank you for supporting our artists,