January 06, 2009

Are There Any Good Investments Left?

After the American Century

In 2008 no matter where you lived, chances are you lost money. Houses lost value, stock markets fell most places by a third or more, and if you were unlucky enough to hold many British pounds or Swedish kroner then you lost an extra 20% compared to everyone else.

Perhaps the natural thing to do in 2009 is to put any of the money that is left in a savings bank and wait for the economy to stabilize. But most assets are not liquid. For example, few are eager to covert their homes into cash, as they are worth less now than a year ago, and they have to live somewhere. Likewise, people who have money tied up in pensions typically have to keep putting money in and they cannot take it out until they retire. In other words, most feel they have few options, other than holding on to their shrinking pension and their deflating house and hope for better economic weather. Many people I know are playing the lottery, just a couple of tickets, here and there. hoping to hit it big. They lose maybe $20 or $30 a month that way.

But the options are not all bad. For years I had trouble getting skilled workers to the house to put new tiles in the bathroom or make repairs, because there was so much other work to be had. When the economy cools off, these guys may actually show up, as they have promised to do several times over the last two years. This is a good investment, because I get to enjoy it, and the house keeps its value.

By a similar logic, people should buy art in troubled times. In part this is to help artists, but also I realized some years ago that by the time you purchase a good reproduction of a famous work of art and have it suitably framed, the cost is almost always more than $100. Yet after a year or two, I find myself tired of most such prints, and so replace it and find myself out another $100. Eventually, you have a closet full of nicely framed, somewhat faded copies of famous paintings. Worthless clutter that may easily have cost $500.

Instead, spend a bit more for a lithograph or painting that is authentic. I bought a lithograph on an impulse last week, for less than $200 (framed, too). It's better than lottery tickets, that usually lose all their allure in a couple of days. OK, the litthograph is not that large, but I once met the artist, so it feels a bit personal, and he has regular exhibitions. It is interesting to look at, and I am not likely to get tired of it, at least not soon. Also, there is a chance that it will still be worth something years from now. I am not saying go and buy art as an investment, because that is hardly a sure thing. But buy art rather than posters, and you get to enjoy it., and you will have more closet space. After a couple years, an art dealer may trade you for somethingh you are tired of, for something else.

There is a small hidden agenda in these two suggestions. If we all used a bit of money on home repairs and on art, it would help the local economy,. Why give the money to some charlatans who claim they know which stocks are going to rise in Asia or Eastern Europe or New York? Maybe you can frame stock certificates and put them on the wall, but will you really enjoy that?

For us small fry without fortunes, there are still good investments, things right in front of us, things we can enjoy for years. And I don't mean lottery tickets.