A Man must acquire Art and Collectibles with Dreams in his Heart, not Money in his Pocket

Monthly Market Commentary: May 1, 2016

Today, we are discussing art and collectibles as an investment class. Daniel Pembrey of the Financial Times explains how over the last twenty years the benchmark FTSE 100 index has more than tripled when measured on a total return basis. The two-bedroom flat, which he sold 20 years ago and which offered south facing views over Clapham Common plus a blue heritage plaque honouring Graham Greene, has risen in value a multiple of five - and this doesn’t take into account the stream of rental income an investor could have received. But even the increase in London property prices pales in comparison to a memorable Aston Martin Zagato, which he could have bought 20 years ago for at £500,000. Another of the 19 made - licence plate 4 RTA, also California sage-coloured - recently sold at a Sotheby’s auction in New York more than £10m at current exchange rates. That’s a twentyfold increase, and while there are auction fees to consider, it also comes with an exemption from UK capital gains tax.

Pembrey also discusses an index of classic cars that might be characterised as the mid-to-top end, which confirms the outperformance of high-quality classic cars over recent years relative to asset classes such as prime London property. But can this strong performance continue - or are classic car and other collectible valuations heading for an expensive crash?

Over the course of my life I collected many things. However, I suppose that the best collections, which we can have, consist of a happy and harmonious family, good health, great moments with friends, and integrity.

I am enclosing three excellent reports.

Paul Brodsky, Founder / Strategist at Macro Allocation Inc. (www.macro-allocation.com) concludes his report, The Fall of All we Know by pointing out that, “There is precedent for deficit fiscal spending and easy credit conditions minimizing economic output volatility in the short term, but subsequently damaging consumption. Inflation then becomes the only politically expedient path to viability because it decreases the burden of debt repayment – not the quantity of debt (and credit) itself, which would ruin lenders and borrowers. Monetary regimes fail every now and then, even those sponsored by the world’s hegemon. The next couple years should be interesting.”

I also urge my subscribers to read the report by Daniel Oliver of Myrmikan Capital, LLC (doliver@remove-this.myrmikan.com). Oliver opines that, “Capitalists suffer most in credit collapses, and it will be no different this time. The only sure safe-haven is gold” and “The price of gold in dollars will be at levels that today are intellectually assured yet emotionally unimaginable. Imagining where the miners will be makes trading them down here a fool’s errand.”

Finally, Gijsbert Groenewegen of Silver Arrow Partners (g.groenewegen@remove-this.silverarrowpartners.com) makes a further case for gold and silver under Deflation is now creating inflation, which will ultimately implode debt and propel gold.

With kind regards
Yours sincerely
Marc Faber 

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