Wall Street Week with Louis Rukeyser; 1826; The Collectible Boom

A. Yes. The for Wall Street Week With Louis rule guys are brought to you by a public television station by CSX the company that puts things in motion transportation energy properties and technology. And by Prudential bayed securities the investment firm with rock solid resources and market wise thing.

Being in the business of making money. Produce Friday December 23. Our panelists are Robert Moore Robert Stovall and Julius Westheimer tonight's special guest is Michael Ainslie president then chief executive officer Sotheby's holdings incorporated. Good evening I'm with you guys that this is Wall Street Week. Welcome back. Please forgive me if we don't start with our usual levity tonight. But this program lost a very dear friend this week and I lost a father. Now the death of a parent is easy to take even when the life has been as long as full and as happy as he is. But this seems the right place for me to say a few words about Merrill's down the road guys are with infinite affection but without tears because he so love this program and because so many of its viewers love him. We had already been on the air 14 years before he made his first appearance as

my guest in July of 1984 when he was already 87. By then I figured viewers could trust me not just to be showing you home movies but to be presenting you with a guest of legitimate interest wholly outside the realm of nepotism. As I put it at the time I finally decided that it was unfair to keep a man off just because he happened to be my thought or if his name was anything but Rue Kaiser. It would have been on long ago characteristically though he was from the start perhaps the show's most devoted fan. He had never once asked to be a guest. Equally characteristically when offered the chance he turned it into a heartwarming triumph. He went on to appear a total of three times and each one seemed more memorable than the last. We've had so many outstanding guests over the years that I'm always at a loss when asked to name my favorite but it was clear that the viewers had found theirs and their only complaint was that I had been hiding them for so long. For he was indeed a wonder the authentic

pioneer of financial journalism that was simultaneously understandable and knowledgeable a man who seemed to have total recall of everything that had happened in the American economy since the turn of the century. A guest of strong and independent views would Iraq onto the embodiment of the great American dream success story. He never stepped on anyone else in his climb. Born in the era of gas lanterns in the presidency of Grover Cleveland a man whose advice was sought by Herbert Hoover and Franklin D Roosevelt. He was equally at home in the world of cable television. And George Bush and part of the reason was that he never thought he had learned all there was to learn is still unpublished memoirs are titled Now you tell me. Even late this year after his remarkable body had been slowed by a mild stroke he wrote me a letter proposing a new television series to feature the two of us and to be called he suggested. No generation

gap on the last night of his life this past Wednesday. He was alternately badgering and flirting with the hospital nurses and when a worried cardiologist paid a call. My father was less interested in reciting his symptoms than reporting that he and I had just been chatting about his next appearance on this program. After the first of the year he had a bunch of new thoughts he could hardly wait to share. The loss is ours but so happily with the gift of his life. When I first had the joy of introducing him on this program I noted that my guest who had been financial editor of The New York Tribune when he was 23 was then the boy wonder of financial journalism when he died this week with minimal pain and marvelous ways. Just 13 days short of his 90 second birthday he still was. We'll all miss him. And now let's turn to the markets. And as the Dow Jones Industrial Average indicates the blue chips made it five weeks in a

row the first time they've accomplished that feat in six months as they closed within 15 points of a new recovery high at twenty one sixty eight point nine three a gain of just over 18 points bringing the five week gain past 100 and six points the Dow's advance was joined by all the broader market indexes in a week that saw better news on inflation and a surging bond market. Notably not surging in any direction. Our L whose technical market index is in its neutral zone for the six week in a row. Well I guess we know what all good elves are doing this weekend. Meanwhile in a week in which gold and silver scored minor gains the really precious stuff seem to be on the auction block as Souther bees and Christie's reported record worldwide sales for the fall season that ended Tuesday. And in case you've ever yearned to bid for that big stuff yourself. My guest tonight is the president of the bees and just wait to see some of the eye popping goodies he's brought with him. But first

last ask our very own chief of new rock which likely to pop next in Wall Street. Lou it's interesting the elves have been saying that nothing has been going on in the technical picture of the supply demand factors are unbalanced but I think the significant thing that's been occurring recently is there's been an awful lot of theoretically bad news to which the market should be reacting downward. It has not been doing it particularly the interest rate front and I think the fact the market has held up exceptionally well tells us that there's probably more to go with the upside ahead. You're an authority on market history. Tell me that the secondary stocks normally do well in the air. How good a bet is that. Well I think this year they may not do as well as some people expect primarily because the public has been out of the market since the panic of 87 and the secondary stocks tend to do a little bit better when there's greater public participation. But I think one area still looks good and that would be secondary emerging growth companies tertiary companies with poor earnings prospects probably won't do as well in January some expect with those companies with good earnings prospects will do well.

But your feeling is of the institutions themselves again a little more courageous. I think the institutions have a lot of cash they're very nervous that the market could go up they're not persuaded yet to put their money to work because they have high yields in the short term cash equivalent. But I think as soon as there is some sign that interest rates are going to turn down they don't even have to adjust so there's some sign you could wind up with a buying panic. How quickly you estimate that's going to go. Well the surprise may come sometime in January it's hard to look at this point it looks like rates are not coming down but since everybody is so convinced of that maybe January will become a turning point. There's Westheimer unlike these other fellows who have to deal with the public as a retail broker do you see any more public interest in this market. Yes I do because I tell you what's been happening Lou. The memory of Black Monday is beginning to fade. We're about a year and three months past it now. And as all of these traumatic events do this will soon fade into history. And I also don't hear as much as I did maybe six months ago of don't talk to me about common stocks or should I sell out my entire portfolio. We heard a lot of that about four or

five months ago and that is usually a signal that we're near the bottom when everybody wants to dump his or her portfolios completely. So what does it mean if I get more confidence that we're not at the bottom. I hope not. I have the feeling Lou that with price earnings ratios down now and earnings continue to go up and as Bob said interest rates not showing any upward movement I think we're going to have a strong beginning of 1909 and Wall Street. Bob Stovall I want to get your view on this and also your view on the interest rate picture of the bonds jumped nearly two points this week that's a pretty good move for them. Is this the start of something important in interest rates. It might be of course it all depends on the Fed Reserve Board if they feel they have to raise the discount rate. I'm not the one to fight that and say the market can move up through higher rates but I'm inclined to think that the market has the feeling that this economy is going to go through a period of rolling readjustment to use the term of a generation ago with parts of the economy going down other parts going up and the Fed won't have to raise rates if that's the case then with the dollar stable and oil

prices stable we could see a strong bond market leading eventually get to a stronger stock market. Another the big news items on Wall Street this week and indeed of course the nation was Drexel Burnham pleading guilty to six felony counts paying a six hundred fifty billion dollar fine. Million dollar fine. That's a lot of money. It is the six hundred fifty million dollars is more than the total capital of I'd say 95 percent of all the member firms probably is going to mean some more people put out on the Street and Wall Street's own recession but the main focus is that this thing happened the uncertainty of the Drexel case was largely put behind us. The market didn't react too much one way or the other. But I think looking at it from a detached position and getting this far in the case is probably a positive thing for investor attitudes. It doesn't seem to be much selling as a result of the scandal but people don't seem to be turning their backs on Wall Street more because of this news now it's a matter of lack of buying for the last year or

more of the average investor that feels that they really can't get a even chance on Wall Street with the big guys having the edge on them. This will go another step toward to I think bringing them back eventually become really all the small investors interested. Is it of the next five takeover stories or very high yields with government guarantees they're just not involved in much other ways bring them back because they will now have more reason to believe that possibly Violators will be caught. That's what I think. All right now before we made tonight's special guest let's take a look at that high priced world that always tries to stay cool and collectible as we learn to appreciate the art of money. To get an idea of how much money there is in art these days let's go to an auction in New York City held just over a year ago. Of the 25 now. The iris. Is 5 and God. What you said his daughter will say 15 million dollars to start a. Bit of 15 million dollars to start it. I have a bit of 15 million dollars for it.

By the time the auction was over the 15 million dollar better look like a piker as the painting sold for fifty three point nine million dollars not till yesterday did Australian billionaire Alan Bond reveal that he was the mystery buyer proving again that money makes the band go. But for those of us with somewhat smaller pocket books so the BS has a bunch of other think it's coming up for auction. One is Abraham Lincoln's pocket knife commemorating his visit to the great central fair in Philadelphia. Accompanying it is a simple handwritten letter from Lincoln graciously acknowledging the 1864 gift. Together these Lincoln the Mentos are expected to bring between 70 and ninety thousand dollars. If that's still too high for your uncle's birthday present how about this painted ceremonial fire had. Something every good fireman in the mid eighteen hundred would wear while marching in civic parades. Now it's probably worth between ten and fifteen thousand dollars. What's the matter don't you think your uncle

deserves a nice new hat. Even a lady without a strong sense of history might like this emerald and diamond bracelet from Cartier. The three emeralds way ended a trifle in 14 carrots and a shrewd bidder might take the bracelet home for less than $150000. If that still seems strictly for the birds how about this. Four hundred thirty eight page 1826 Journal of John James Audubon accompanied by some of his famous ornithological drawings. So the bees guesses that someone will have it all. Even this dusky petrol but scarcely more than a quarter million dollars. And to think it would have brought only about $70000 a decade ago from the same Bradley Martin collection is a document dear to all of us. The Declaration of Independence this copy which once belonged to George Washington Secretary Tobias Leir was printed on the evening of July 4th 1776 to carry the news of America's independence to the thirteen colonies. Only 23 companies have

survived and only two of them are in private collections. This may be the only chance you'll have to own one but be prepared to declare plenty of money. The company is estimated to be worth between four hundred and six hundred thousand dollars. If you haven't used up your credit cards yet this holiday season you could probably take all these objects home for no more than about one point two million dollars or roughly three times what they would have fetched 10 years ago. Is this then an investment that even a small potatoes buyers should know more about. With some thoughts on that let's go over now and meet tonight's special guest Michael Ainslie. Welcome Michael. Delighted you could come please. Michael Ainslie likes to preserve things including capital arm within economics degree from Vanderbilt in his native Tennessee and an MBA from Harvard. You

know how to count. But he also knows what counts he was a deputy director of housing in New York City and served for four years as president of the National Trust of historic preservation. Before becoming chief executive officer and president of Southern bees the world's biggest auction and real estate operation in July 1904. Michael is your business booming because Wall Street is not. No I don't think it's related to Wall Street. What what we're seeing happen in the art market is that there is an increasing interest from all over the world our market has become a global market in the last few years and we see buyers from Korea from Japan from Scandinavia and the second factor is that we've seen such incredible quality objects coming on the market in in in the auction market. Historically many of those objects would been sold privately through art dealers. If you go back in the 50s. Edward G Robinson sold his entire collection of impressionist paintings man demand to stock the arcos for three million dollars. He

didn't even go to a lecture room or a dealer today that wouldn't happen. Michael this may be upsetting to you but some of us don't even have 3 million dollars. How little could they have and still think of investing in this sort of. Well that's that's the misconception about our business. We sold a few objects this past year for over a million dollars but most of what we sell is in the few thousand dollar range in fact we sold 200000 objects under a million dollars and they averaged $6000 a couple of examples. Silver candlesticks today from the mid 18th century are English silver of all kinds. I think a great buy $3000 and take whities are a very good area for buying today. Greek statue of Venus from 2000 B.C. for for $5000. Those kinds of prices are quite common even prints a Picasso etching today can be bought for seven or eight thousand dollars.

Suppose someone wanted to go to one of these auctions and not just be snookered by it. Those with more experience and more money how could you prepare to get into this. Well learning about collecting is I think one of the most exciting parts of our business it's very much a self-taught skill. People basically begin by going to museum exhibitions. They go to come to public auction exhibitions they learn through reading about the sales. And over time build up a knowledge that enables them to begin collecting another very important ways to talk to our own expert staff we have about 300 experts worldwide and we encourage people to come in and get to know when people hear of these huge prizes in the millions. They assume that somebody's just showing off a few of my Banquo and I guess if you're Alan Bond you can do that. But in fact don't many people mortgage these paintings and other works of art borrowing the money with which to buy them the same way they buy to buy real estate. Well I wouldn't call it mortgaging. We do provide some short term financing that is very low in terms of its loan to value

ratio we will we will lend to both sellers and occasionally to buyers up to 50 percent of the low value what we call the estimate low low estimate at auction. But you're not alone in this market bank well known as well the banks will lend occasionally but in general banks have been very cautious and very really I think appropriately they don't know the value of works of art they frequently turn to us when they do want to lend and we work with banks in that way. Have you had many defaults on your own loans with several hundred million of loans behind us we've had virtually no losses we've I think in 10 years had about $100000 of loan losses largely due to the conservatism of our lending. Those of us who are ignorant amateurs often think of collectibles as anything that's a hard object but in fact in your business it has a very specific meaning does it not with you playing with it as well collectibles of what that term is is a generic term for new areas coming onto the market things like animation art Walt Disney's sell you a low odds one of them with their worth 10 to 20000

today some of them less. We just sold Clark Gable script from Gone With The Wind for seventy seven thousand last week or Humphrey Bogart's P.A. also went in that sale. Who buys that stuff. Amazingly wide range of collectors many of them young but a very international group of people from all over the world. New collectors coming into that market. We have quite a collection of powerless before I turn you over to them I want to ask you one question about the other area which is mainly engaged namely real estate. What's your feeling about the U.S. real estate market today. Well we have a real estate brokerage company so that is International Realty real estate's very different from art it's a very localized market and there's been some very strong markets lately and some of that have been flat over the last year I think Manhattan and some areas around New York have been very strong but in general it's very hard to generalize about it in a localized market in general quite strong compared with real estate compared with

stocks. How is art as an investment. Well we always say we don't recommend people that people buy for investment in art. You should love what you're collecting You should be interested in the objects and the history. But on the other hand art has done very well at maintaining its value. We publish an Art Index in Forbes every month and that index if one tracked it over the last 13 years has grown at a compound rate of about 15 percent a year. What's in the index. The index covers 12 collecting categories from impressionist paintings English silver Old Master paintings contemporary paintings and so on across the 12 major collecting areas. We turned over the three works of art starting with Bob Novak. Michael in recent years there's been increasing recognition that antique little appeals have been going up in value. It's an area which seems to be dominated by several auctioneers that are domestically based. What do you think of the prospects for an sequel to movie deals and is there any prospect that the major international auction houses will become more active in this market.

We've been very active in England in Monaco and selling vintage automobiles and we expect to be in the next year in the United States. It's a very broad market as you say there are a lot of collectors way beyond painting collectors that enjoy and buy vintage of bills and it's one of the few areas where they're more being produced every year. So it's a it's a good area for our future. We expect to be in Michael about six months ago my wife and I bought a Currier and Ives print at a very reputable gallery not yours. I took it to a picture frame or they looked in the back of it and they said my gosh this is mounted on cardboard. The acid is going to eat through soon. And in five years you won't have a print. Well to make a long story short the gallery really backed it or whatever you called it and everything worked out fine. How does a naive guy like me or anybody else protect themselves against something like this. Well that's one of the reasons that we have a world class staff of experts who really act as personal consultants to collectors. We encourage you to come in just as you would with an art dealer and get to know experts and work with them.

They would immediately have recognized this if it had come in for consignment and would have changed that backing so they wouldn't would be acid free paper. Michael it's been said that the art auction business is a pawn shop for the very rich where they come with their first class collectibles and paintings and masters sell them and then buy something else when they have more money. What's the commission when you buy and sell and in fact do the rich use it as a first class hock shop. Well that we that we like to think not but the commission structure is that we we typically charge 10 percent of from the seller and we have a buyer's premium of 10 percent from the buyer. The selling commission is sometimes negotiable on major sales. But so the combined commission can be as high as 20 percent. The with regard to the the other question I think what we found is that in

recent years the market has broadened way beyond just the rich we now have young collectors young professionals young people that are just getting started in life who buy their jewelry buy their furniture it's other BS and do that all over the world so I think it's it's one of the things that's been happening is that our market is becoming very global. We have a truly international marketplace. It's not unusual now to see 25 or 30 telephones going at one of our major sales with bidders from all over the world bidding on objects. And secondly that it's a very young market. Michael you've been gracious in telling us some of the areas you think look attractive. What are some of the areas you think are a little overpriced. Well I don't think any areas are overpriced I think the less of the auctioneer talking. There's there's been press writing about mania in our in our buying. We really don't think that's that's the case. What Who's to say something's overpriced when you have international competition for it. For example you've shown tonight some objects coming up in the Bradley Martin sale the

most remarkable collection of all of manuscripts in American books and manuscripts in perhaps ever. Who's better. Bradley Martin was the grandson of Mr. Phipps who was Andrew Carnegie's partner and Bradley Martin who died this past year in 82 and who then had the Bessemer Trust Company as whose executor who've asked us to sell this collection had collected ten thousand major books and manuscripts. The sale will take place over 18 months we'll have to have many sessions but we will be exhibiting in June of this year all 10000 objects its other bees in New York on one weekend so I hope you'll take note of it. I want them all. Here's the trend business what do you see as the new Leave valving trends in the next couple of years. Well I think there are a number of areas that are that are emerging if you will. I know you had a time to up here just wanted to something called regional art. A Canadian Scandinavian or Australian art is really

becoming global in its interest in one of the most exciting is jewelry jewelry is just becoming a big part of the auction scene and people are discovering it's the most efficient marketplace to both buy and sell jewelry. Husbands of America turn off the TV set now. I want to thank Michael Angele for being with us tonight been such a nice guest and I thank our panelists. And I hope you'll be back with us again next week and we'll have one of our perennial favorites the New Year's party. When we look back on the year that was. And ahead to the year that will be it's our panelist traditional night of black ties and red faces. And we're saving a special place for you. Meanwhile this has been Wall Street Week. I'm Louis Rukeyser. I'm from all of us the night that Wall Street has been brought to you by a public television station by CSX a company that puts things in motion transportation energy properties

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