Monet and the bank manager

What has a water lily in common with your bank manager? More than at first might appear.
Last week, Le Bassin aux Nymphéas, a canvas from Monet’s water lilies series sold in London at auction for almost £41m (including taxes and commission). This was twice the previous record at auction for Monet, itself set only in May.
While the rest of the economy struggles under the weight of the credit crunch, the fine art market is powering away.The prices reached at auction for the key names are surprising everyone in the industry. Alongside the Monet last week, a bronze by Henry Moore sold for £4.3m and an early Degas pastel made £13.5m.

The Monet in question was a particularly fine example, showing sky and trees reflected in the water amongst the lilies that Monet famously invested so much in when creating his water garden at Giverny.
However, in terms of sheer acreage, it is dwarfed by the series of eight Nymphéas installed at Paris’ Orangerie museum, the scale of which impressed a friend of mine recently, notwithstanding his stance as a confirmed cynic on all matters artistic.
So is this trend powered by investment theories or are we seeing here no more than the super rich spending their money on artwork to hang in their Manhattan apartments or Holland Park mansions?
The fact of the matter is that the boom is powered by what used to be described disparagingly as “new money”. Assets that have been accrued by those who happened to be in the right place and the right time with the right attitude in the decade before August 2007 have made a lot of “new money”. This money might have been previously reinvested in business, but in the current climate, putting your millions in Renoir or Matisse can hardly be regarded as much more risky.
The same applies to the banks and financial institutions previously so willing to put money into new businesses and projects. The fact of the matter is that whilst they are understandably interested in finding opportunities hedged with greater security, they must still find ways of investing their assets in as diverse a portfolio as possible or risk endangering their own market positions in the medium term.
So a high street bank that might possibly have offered a Small Firms Loan Guarantee arrangement without security for the remaining 25 per cent might now be looking to secure that last quarter of the capital. But they remain open for business.
If you have your ducks in a row, you can find the funding you need.
The same applies in the field of equity investment. In the North East we are in the fortunate situation of benefiting from substantial public sector investments in enterprise, fronted by the likes of Entrust, Nstar and others, but private individuals, whether acting in syndicate or individually, must still find attractive opportunities or face watching their capital stagnate as inflation rises.
And when shares in a financial institution can become valueless almost overnight, the disparity in risk between those investments previously regarded as safe and those that are (and will always be) high risk is shrinking.
A cool head is required always in times like this. Even a bear market presents opportunities for those in a position to invest.
Art may be a safe haven now but it is by no means idiot-proof.In November, an unsuccessful New York sale of impressionist and modern works described variously as “tired” and “ugly” caused a 28 per cent fall in Sotheby’s share price.
Even at the Christies auction last week, 15 of the 81 pieces were unsold. And if you happen to be in a position to invest in Damien Hirst’s “The Golden Calf”, which he will sell direct to the public at auction later this year, beware that sooner or later the calf will have to be replaced. Nothing lasts forever.

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