Escapees from the stock market shouldn't seek refuge in collectibles
The decline in stock prices has made many investors think about other places to put their money, including tangible commodities such as gold, art, and other collectibles. Economists and those in the collectibles trade, however, do not expect a major surge in buying of art, antiques, decorative objects, and other appreciating capital items. Nor do they expect a major increase in the value of these collectibles in the near term. ``The rising prices for collectibles over the past few years has been tied to the equity markets,'' said Robert Salomon, managing director of the New York-based Salomon Brothers. The investment firm maintains a comparative listing of the rising values of certain commodities, such as art, jade, and precious metals.
``As stocks went up, people felt wealthier and more in a position to buy expensive works of art,'' Mr. Salomon says. ``People are now feeling poorer, and it is unlikely that they will see high-priced art as a safe haven for their money.''
He and others note that the recent collapse of stock prices suggests there are deflationary influences throughout the economy which would not make tangible, nondividend-producing commodities appear particularly attractive to investors. In periods of higher inflation, on the other hand, rare items of good quality increase more in value in proportion to other items and the rate of inflation.
James Ramsey, chairman of the economics department at New York University, says rising prices of collectibles are often associated with increasing prices for gold and silver, but so far the stock market jitters have not produced a flood of buyers of precious metals. Gold has stayed at the mid-$400 range both during the stock market's five-year rise and recent decline.
``There is also a liquidity problem for investors right now who might want to switch from stocks to collectibles or precious metals,'' he said. ``If you just want to get out of the stock market, you'll face a sizable capital loss, and you may not choose to rush into something else right away. Those who are in the stock market for the long term - understanding that there are always ups and downs, which is how you have to look at the stock market - probably feel a little poorer now. In both cases, you may have less money to exercise personal preferences, and that may lead to an overall decrease in the demand for art and other collectibles.''
The major auction houses are already predicting declines in sales of less expensive objects - those under $2,000. Barbara Bloemink, acting director of New York's Phillips Auction Galleries, who noted that her husband is ``a broker in the stock market,'' stated that ``the low end of the market is just dropping out. The higher end of the market will hold its own. People who buy those things usually don't have all their money in the stock market'' and will not feel all that much poorer because of the stock price collapse.
Other auction houses predict a ``less aggressive'' market for collectibles until stock prices firm and begin to rise again. Fewer record prices may be set for objects as concern over the stock market's collapse affects other markets.
``I would be very nervous about depositing large amounts of money in any one place,'' one economist said. ``Maybe art is going to fall 40 percent, too.''