Value investing in art...

[tede02]

If you're looking for an unbelieveable story, check this program out which I saw on PBS on Sunday evening.  This guy basically buys and sells art for a living.  He very possibly found and bought a Leonardo Da Vinci work for $22k which could be worth over $100 million.  I know nothing about art and don't really care about it but this story was fascinating! 

 

Both links have the video.  I watched it a few times it was so good. 

 

http://www.pbs.org/wgbh/nova/tech/mystery-masterpiece.html

 

https://www.youtube.com/watch?v=Uh350VRTWb8

 

 

[Guest cherzeca]

loved it

[LC]

In a similar vein, here is the application to basketball drafts/trades:

 

http://www.slate.com/articles/arts/books/2016/12/how_daryl_morey_used_behavioral_economics_to_revolutionize_the_art_of_nba.html?wpsrc=sh_all_dt_tw_ru

 

 

We should start a compilation of instances where you have these alternative markets which are priced "differently".

[Jurgis]

In a similar vein, here is the application to basketball drafts/trades:

 

http://www.slate.com/articles/arts/books/2016/12/how_daryl_morey_used_behavioral_economics_to_revolutionize_the_art_of_nba.html?wpsrc=sh_all_dt_tw_ru

 

 

We should start a compilation of instances where you have these alternative markets which are priced "differently".

 

Whatever you say about Lewis, he can collect some nice one liners and zingers.

 

I think I'll have to get the book... when it comes out... and gets down to $1.99  8)

[tede02]

This was an excellent article.  I'll have to read the book.  It absolutely makes me question my own biases in both my personal investments and profession.  What am I not seeing because of my psychological blind spots? 

 

Its also amazing to me how certain people, Buffett for example, just seem to think differently than everyone else.  I sometimes worry that for the vast majority of us mere mortals, our psychological short-falls are insurmountable.  In other words, do we stand any chance at making good judgements (or even just better than average).  The story of the Houston Rockets' management illustrates how difficult it is to look past your biases even when you're aware of them. 

[Icarus]

Great documentary.  I wonder how often these situations happen in the art world.  Maybe a chance for someone to create a hedge fund for undervalued art?

[Guest Schwab711]

Great documentary.  I wonder how often these situations happen in the art world.  Maybe a chance for someone to create a hedge fund for undervalued art?

 

http://www.nytimes.com/2015/03/08/arts/design/with-misattributed-masterpiece-a-rare-look-into-the-imprecise-world-of-art-identification.html

 

It happens a lot more than you'd think. Unless a painting has a well-documented lineage, it becomes a bit of a guessing game with a lot of weight given to "experts" that may or may not be confident or biased. Sotheby's was sued a few years ago for not recognizing a misattributed painting that was worth a lot more.

[oddballstocks]

Here's the funny thing.  To 99% of business people who've never heard of value investing this concept is the foundation of "business."  You buy things cheap and sell them at higher prices.

 

I've heard dozens of stories of people who buy cheap items on Craigslist and then turn around and resell them at higher prices right on Craigslist.  Or garage sales, real estate, or really anything.  Businesses are looking for low cost supply and then aim to profit on the sale.

 

I've found myself that after a few weeks of watching Craigslist and eBay for certain items I can learn the market and find these same arbitrage opportunities.  You need to look at a narrow market then follow for a while.  Eventually you'll *know* what things generally retail for and can spot a deal.  You need to act quickly and move fast with cash to close the deal.

 

Some people are just deal hunters.  They can hunt in stocks, or in guitars, or horse trailers, or really anything.  I enjoy these stories as well.

 

 

[Jurgis]

Here's the funny thing.  To 99% of business people who've never heard of value investing this concept is the foundation of "business."  You buy things cheap and sell them at higher prices.

 

I've heard dozens of stories of people who buy cheap items on Craigslist and then turn around and resell them at higher prices right on Craigslist.  Or garage sales, real estate, or really anything.  Businesses are looking for low cost supply and then aim to profit on the sale.

 

I've found myself that after a few weeks of watching Craigslist and eBay for certain items I can learn the market and find these same arbitrage opportunities.  You need to look at a narrow market then follow for a while.  Eventually you'll *know* what things generally retail for and can spot a deal.  You need to act quickly and move fast with cash to close the deal.

 

Some people are just deal hunters.  They can hunt in stocks, or in guitars, or horse trailers, or really anything.  I enjoy these stories as well.

 

LOL, that's how I make money in online games. The markets there are hugely inefficient. Oh the margins... you can make 2x-5x on things in matter of days if not hours.

 

Of course, there's reason for that: the "money" is really pennies if converted to US$. So part of the reason why markets are inefficient is that there's little point for people to spend time exploiting the inefficiencies. I do it for fun - but it is a waste of time  ;D

 

You learn some of the things you mentioned above: market arbitrage (buy in one place, sell in another), time arbitrage (buy when item is plentiful wait for shortage, sell), quantity arbitrage (buy 1000, sell in 1-10), etc. Most of these don't apply to stock market though or at least are much tougher to find and exploit.

 

BTW, some games have market systems that lead to quite narrow margins with barely if any profits. Some have "trader's paradise" markets.

 

I never could do this well in real life, but I knew some people who did.

[Jurgis]

This was an excellent article.  I'll have to read the book.  It absolutely makes me question my own biases in both my personal investments and profession.  What am I not seeing because of my psychological blind spots?

 

Yeah, it does.

 

I should stop reading oil threads and investing in oil cos. (Almost done).

 

I should stop reading macro threads. (But what to do with FFH?  ::) ).

 

Perhaps I should review all my stock holdings and see if I suffer from endowment effect and should rather sell them. But... the trouble here is that I might be also suffering from novelty effect (new girl stock might look better than the old one...). So... tough.  8)

 

And yeah, the job interviews. Most of them are worthless?

[LC]

Someone with more computing skill than I could probably figure out a way to automatically pull all sold listings from ebay...all you would need is the sale price (maybe shipping cost)/date/product ID....chart that stuff, find the items with most variable sale price above a requisite level of volume, regress the price over time, pick a certain RoC you want (i.e. 25%), and go from there.

 

Frankly, ebay should take this idea and sell it to their power sellers, if they don't already.

 

Here's the funny thing.  To 99% of business people who've never heard of value investing this concept is the foundation of "business."  You buy things cheap and sell them at higher prices.

 

I've heard dozens of stories of people who buy cheap items on Craigslist and then turn around and resell them at higher prices right on Craigslist.  Or garage sales, real estate, or really anything.  Businesses are looking for low cost supply and then aim to profit on the sale.

 

I've found myself that after a few weeks of watching Craigslist and eBay for certain items I can learn the market and find these same arbitrage opportunities.  You need to look at a narrow market then follow for a while.  Eventually you'll *know* what things generally retail for and can spot a deal.  You need to act quickly and move fast with cash to close the deal.

 

Some people are just deal hunters.  They can hunt in stocks, or in guitars, or horse trailers, or really anything.  I enjoy these stories as well.

[Jurgis]

Someone with more computing skill than I could probably figure out a way to automatically pull all sold listings from ebay...all you would need is the sale price (maybe shipping cost)/date/product ID....chart that stuff, find the items with most variable sale price above a requisite level of volume, regress the price over time, pick a certain RoC you want (i.e. 25%), and go from there.

 

Yeah, that's why most markets are getting more and more efficient.

 

There are edge cases where people still can make money. And the more it's physical world vs. online computer-processable, the more edges there are. But even physical world edges are getting smoothed out somewhat. Not totally though.

[tede02]

Here's the funny thing.  To 99% of business people who've never heard of value investing this concept is the foundation of "business."  You buy things cheap and sell them at higher prices.

 

I've heard dozens of stories of people who buy cheap items on Craigslist and then turn around and resell them at higher prices right on Craigslist.  Or garage sales, real estate, or really anything.  Businesses are looking for low cost supply and then aim to profit on the sale.

 

I've found myself that after a few weeks of watching Craigslist and eBay for certain items I can learn the market and find these same arbitrage opportunities.  You need to look at a narrow market then follow for a while.  Eventually you'll *know* what things generally retail for and can spot a deal.  You need to act quickly and move fast with cash to close the deal.

 

Some people are just deal hunters.  They can hunt in stocks, or in guitars, or horse trailers, or really anything.  I enjoy these stories as well.

 

This is so spot on.  Everyone is a value investor until it comes to investing in stocks.  It's amazing how the idea of buying things at a discount and flipping for a profit gets all gobbed when an asset starts trading on an exchange. 

[Jurgis]

This is so spot on.  Everyone is a value investor until it comes to investing in stocks.  It's amazing how the idea of buying things at a discount and flipping for a profit gets all gobbed when an asset starts trading on an exchange.

 

I think this is way one sided. A lot of entrepreneurs don't do what oddballstocks described. He described a subset of businesses exploiting arbitrage opportunities. If you create a business (ok, startup  8) ) to create new product, you're not building it as a value investor. Even if you create a business that provides a service, the arbitrage part (buy low, sell high) may become much lesser part of the game. And if you're building out business running at a loss to size it up or capture some market, that's definitely not value investing.

[LC]

This is so spot on.  Everyone is a value investor until it comes to investing in stocks.  It's amazing how the idea of buying things at a discount and flipping for a profit gets all gobbed when an asset starts trading on an exchange.

Not sure I agree...the stock market is more efficient than not. Things are usually cheap for a reason.

 

Nobody goes to the grocery store and buys spoiled food just because it's half price.

[vox]

Nobody goes to the grocery store and buys spoiled food just because it's half price.

 

Spoiled food has no value, other than as fertilizer. There are stores that will sell 'misfit' food that have cosmetic defects for a discount.

 

Regarding Daryl Morey and the Houston Rockets, is there any evidence that they have drafted more efficiently than other NBA teams given their draft slots? Or that NBA teams are overall better at drafting players than they were a decade ago? The Morey era Rockets don't immediately come to mind among teams that have the best recent draft records (Jazz, Warriors, Thunder, Spurs, Bucks), they are more known for their statistically optimal offensive game plan.

[dyow]

I look at value investing as an art.  Looking at the market is like looking at messed up art.  It is confusing if you look at it superficially.  But instead of looking at the picture right side up, you need to turn the picture upside down, then you understand it for what it is and see it in its true form.  and you see its real beauty. 

 

As far as what other people consider art...honestly i look at that stuff and think wtf is this.  Most artists were hermits/lonely/disturbed people who nobody paid attention to when they were alive. Then after they die young from depression or drug abuse, they become special and people attach all these meanings to the work they did and their paintings sell for millions.  Ask someone who likes art about a specific art piece and why they like it...their response will be borderline bi-polar and something like "oh when i look at this i see this this but i also see that and it makes me feel like this but it also makes me feel like that". C'mon now, you don't need art you need medication.  The worst part is these same people who worship these artists would never have paid attention to these people when they were alive. 

 

Value investing is true art (or inventions like cars, planes etc the people who invented these things were bad ass artists).......and if you get the art right you get paid....real artists get paid when they are alive.       

 

I would short the whole art market if i could. 

[whiterose]

You shouldn't confuse art as such with the art-market, these are two different things. Art works which are culturally significant and have a place in art history are not necessarily high priced. There is over time a correlation between the two, but it's not that strong I guess maybe 0.4?

Also there are trends/fads like in fashion, which can last for 1-50 years, or even will get rebooted after 100 years. There are some interesting studies regarding investing in art, but to not get into detail; it's per se a not very rational option if you look at it just for investing purposes.

You are able to make money though via buying low and selling high in a shorter time frame ("flipping"), if you guess the current value right and have on the other side of the deal as best case scenario a willing buyer. But that's already a business called being an art-dealer.

[oddballstocks]

I look at value investing as an art.  Looking at the market is like looking at messed up art.  It is confusing if you look at it superficially.  But instead of looking at the picture right side up, you need to turn the picture upside down, then you understand it for what it is and see it in its true form.  and you see its real beauty. 

 

As far as what other people consider art...honestly i look at that stuff and think wtf is this.  Most artists were hermits/lonely/disturbed people who nobody paid attention to when they were alive. Then after they die young from depression or drug abuse, they become special and people attach all these meanings to the work they did and their paintings sell for millions.  Ask someone who likes art about a specific art piece and why they like it...their response will be borderline bi-polar and something like "oh when i look at this i see this this but i also see that and it makes me feel like this but it also makes me feel like that". C'mon now, you don't need art you need medication.  The worst part is these same people who worship these artists would never have paid attention to these people when they were alive. 

 

Value investing is true art (or inventions like cars, planes etc the people who invented these things were bad ass artists).......and if you get the art right you get paid....real artists get paid when they are alive.       

 

I would short the whole art market if i could.

 

This reads like some punk rocker writing about classic music.  "pianos, who needs that crap? Melodies? They're worthless!"

 

I appreciate art.  Like anything there are a lot of different styles.  I acknowledge and appreciate the talent that went into sculpting, or creating lifelike statues out of marble.  Think of the challenge in taking a piece of rock and making it look like a person.  I also like landscapes and paintings about specific things.  My guess is you're ranting about modern art.  Most seems strange, but some is fascinating.

 

Art is a medium for an artist to tell a story.  I personally enjoy writing, that's the medium I use.  Others use a paint brush, or chisel, or musical instrument.  If you view art in this context I think it's easier to appreciate.

 

Most on here probably agree with you.  I enjoy lingering at art museums, looking at the paintings and imagining the emotion that created the picture.  My wife will breeze through "looks good, where's the exit?"

 

Art is a medium to be respected.  It's one of the only timeless artifacts.  Reading 10-K's and investing? No one will care in 500 years.  Statues and monuments created today might persist for a thousand years or more.  We are still analyzing cave paintings from 10s of thousands of years ago.  Ponder that for a few minutes.  For most of us 100% of what we create will fade into the wind.  But paintings in a cave still have meaning.

[Jurgis]

http://jasonzweig.com/a-portrait-of-the-investing-columnist-as-a-very-young-man/

 

(Reposting from SI).

 

This covers what oddballstocks and some other people on this thread talked about. Pretty interesting article.

 

I don't necessarily agree with all sentiments expressed in the article about stocks.