Art as an Asset Class - Or, How Many Consecutive Down Days is it Going to Take to Get Your Attention? The Need for Alternatives III:

Posted by Original Fine Art Gallery at 8/19/2009 12:21 PM
Categories: Art Investment,Art In the News,Asset Allocation,Put Your Assets on the Wall
Tags: Art Investment Alternative Investment Asset Allocation Put Your Assets on the Wall

Art as an Asset Class - Or, How Many Consecutive Down Days is it Going to Take to Get Your Attention? - The Need for Alternatives IIIExcerpt from Put Your Assets on The Wall™
Website: http://www.bestartinvestments.com/

“Growth in the economy in this decade will be the slowest of any decade since the Great Depression.”

Paul Volcker, former Chairman, Federal Reserve,  August, 2008   


David Dreman and Eric Lufkin produced a study in 2000 titled "Investor Overreaction: Evidence That Its Basis is Psychological" which examined just why it takes so long for a stock to make a new low once negative information is out. Less favored, or known, stocks often get penalized despite favorable fundamentals. What Dreman and Lufkin concluded is that the facts are far less important than peoples' perception of a company  or group of companies when it comes to stock performance.  

 In this same way many investors will remain locked into an asset class such as equities out of habit, despite all fundamental evidence to the contrary, artificially upholding the asset classes’ value 'til the very end, and ignoring the existence of viable and well-performing alternatives, often to their detriment.

 Even investment professionals are vulnerable. Writer Mark Hulbert in a January, 2009 New York Times article reported that at the end of third quarter of 2008, the forecasts for the fourth quarter made by the 10 best and worst performing market timing newsletters produced dramatically more bullish forecasts from the timers with the better historical track records.  





 In a study done by former Federal Reserve Chairman Alan Greenspan and James Kennedy, in March of 2007 titled, “Sources and Uses of Equity Extracted From Homes,” the authors determined that the greatest driver of the nation’s growth in GDP, by far, was the equity extracted by U.S. consumers from their homes via mortgage equity withdrawals. Obviously, that activity has ground to a halt, consumer spending is falling sharply, causing earnings estimates for S&P 500 companies to continue on their downward trajectories. Prospects for the resumption of former levels of economic growth and productivity are anything but bright. After all, a market is only undervalued on a price to earnings basis when those earnings being forecast hold some validity. 


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