Hard Assets May be a Better Investment

From Their Television Broadcasts April 17, 2002

There is a reaction in the markets to what is happening in the Middle East: money is moving out of the stock market and out of paper assets and it is moving into the hard assets including gold and silver and even fine art.

We haven't seen a significant move into hard assets since the middle 1970's when inflation was spiraling higher; but we are starting to see a similar move now.

Look at the evidence: the stock market has again failed to pierce the 11,000 level on the Dow and the NASDAQ has dropped dramatically from the 2,500 level. Meanwhile, the price of gold has moved above $300 an ounce, and Michael Schwartz the owner of Galerie Michael on Rodeo Drive in Beverly Hills says that prices for quality fine art have rallied about 15-percent to 18-percent in the past year.

Michael Schwartz is reporting that high quality, rare fine art is a proven safe haven in times of trouble and world chaos. Art is not only portable and tends to hold its value because of its rarity, but Art also adds some comfort in a trouble world. Stock certificates in a portfolio lack that "fuzzy feeling" that a fine painting or limited edition print can offer.

World oil prices have run up to the near-$30 a barrel level on fears that some OPEC exporters will seek an embargo against shipments to the United States, and that is triggering fears of spiraling inflation.

Higher inflation is a friend of hard assets including art and the metals.

At Goldline International, a precious metals trading firm in Santa Monica (800-827-4653), call volume from investors and consumers has increased thirty to forty percent in recent weeks. Meanwhile, the price of the one ounce Gold American Eagle, a bullion coin similar to a Kruggerand or Maple Leaf coin, has jumped in value from $285 to about $310 in the past four weeks.

The rise in metals prices is also spilling over into prices for numismatic items including rare gold and rare silver coins.

When you buy the metals, be sure you know the difference between "bullion items" which are items priced for their gold or silver or platinum content, and "numismatic items" which may contain precious metals but are also valued for their collector interest or rarity.

A good example to show this difference is with an 1884 U. S. silver dollar issued at the Carson City mint. While this coin in new or uncirculated condition has about $6 worth of silver in it, as a numismatic item it is worth about $100 or even more if its condition is pristine.

Michael Schwartz of Galerie Michael at 430 North Rodeo Drive, Beverly Hills reports there is a long history linking the success of art investing in times or world trouble. He points to studies that show that while stock valuations sank by $3-trillion in 2000, the art market continued to gain 16-percent in value.

A study also showed that during the Vietnam War, from 1966 to 1975, the stock market as measured by the S&P 500 index sank by 27-percent, but art during this same time climbed by 256-percent.

Alan Mendelson, KCAL 9 News