"Aside from the relatively small and cost-prohibitive world of masterworks, the value of most art under $1 million is very subjective and market values for most artists can fluctuate wildly from one piece to the next."
Scott Davis is the owner of the Rhode Island Antiques Mall in Pawtucket, one of the largest volume sellers of antiques, art and collectibles in New England. In his more than 30 years in business, Davis has been an entrepreneur, a commercial lighting factory owner, an art and antiques appraiser, a real estate developer and a restaurateur. He also continues to work as a business consultant and consulting industrial designer.
He on the board of the Pawtucket Business Development Corp. and a former chairman of the Pawtucket Arts Festival.
Davis has a bachelor’s degree in industrial design from the Philadelphia College of Art, which is now called The University of the Arts.
PBN: What’s the initial advice you would give someone interested in investing in art or antiques, based on your experience in collecting and selling in this specialty segment and as owner of the Rhode Island Antiques Mall?
DAVIS: Most experts agree that a well-structured investment portfolio should include some hard assets. Art, antiques and certain other collectibles, such as coins, are among the very few investment categories that are tangible while not subject to upkeep costs, excise taxes and other such profit-eroding factors that are inherent to real estate, automobiles or other hard assets. As an added incentive to invest in fine art, the state of Rhode Island now waives sales tax on art purchases.
PBN: Do you think it’s preferable for an investor in art have to have sense of personal interest in pieces they buy, or is it better to be detached and consider each piece as they might consider buying stock in a company and look mainly at return on investment?
DAVIS: Aside from the relatively small and cost-prohibitive world of masterworks, the value of most art under $1 million is very subjective and market values for most artists can fluctuate wildly from one piece to the next. It is much easier for an investor to make a good investment decision if they have a good eye and an appreciation for the pieces they purchase. More than any other factor, beauty sells a work of art, so the successful art investor must personally understand what makes his or her investments beautiful. Auction results published on the Internet have made short-term gains in art investment a rare occurrence, so investors need to plan to live with their art for a number of years before expecting, or more accurately hoping, to make a profit on reselling it.
PBN: What’s the impact on the antique business and other businesses, such as musical instruments, based on new federal regulations, expected to go into effect soon, aimed at blocking the sale of ivory to protect endangered elephants?
DAVIS: New laws and regulations outlawing the sale of items made with any amount of by-products from presently endangered animals, including whale bone, baleen and teeth, elephant ivory, tortoise shell, rhino horn and the like, may now only be sold under such prohibitive restrictions that it’s likely that no retailer is safe selling it at all. Since the use of these products was so commonplace in the luxury market throughout the past two centuries, there are now an enormous number of objects in the market that are caught in eternal limbo. This includes almost all non-brass musical instruments, especially pianos, tea sets, jewelry and a plethora of Asian objects dating back centuries. Private owners may not even transport such items across state lines. While the motivation for the new laws is well-meaning, the laws themselves are irrationally restrictive and place sellers of such objects – most of which were made long ago when the animals were not endangered – at risk of confiscation, heavy fines or worse.
PBN: What are the advantages and pitfalls of investing in silver, coins or gold bullion in the current environment?
DAVIS: Owning precious metals has long been considered a smart way to survive monetary collapse, inflation or other risks associated with paper currency. It has its own stability issues however. Silver and gold coins and bullion are, of course, subject to market fluctuations that, at least over the past few years, have been quite a roller coaster. That said, they have performed reasonably well during certain periods of time, though not nearly as well as the stock market over the long haul. Today’s demand for precious metals is more driven by the electronics manufacturing sector than ever before, so there is reason to believe that demand will continue to increase as this technology becomes increasingly ubiquitous. This should more than outweigh the declining demand for precious jewelry.
Another factor to consider is the impact of new technologies available to locate previously undiscovered deposits of precious metals, so a significant find could affect the value of one’s holdings, since the precious metals market is based on supply and demand.
PBN: For business owners seeking financing, do you think it’s advantageous to offer bullion, coins, art or antiques as collateral?
DAVIS: Most lenders are happy to throw anything onto the collateral list that you’re willing to add to it, but be cautious as they will usually not give you much credit for it. In the event that they actually manage to take it from you some day, they’ll likely give it away for a song. My advice is to not pledge art or antiques at all. If you must, do so only with accompanying “orderly liquidation value” appraisals that both you and the lender agree upon. Bullion is relatively safe to pledge as collateral, since it can always be scrapped for nearly spot value, the price that continually changes based on trading in international stock markets, which is usually all you’d get yourself. Professionally graded coins are reasonably safe to pledge as collateral since they have readily documentable market values, while ungraded coins, no matter how rare or fine, may well find their way to the scrapper.