Thursday, December 21, 2017

"The long history of dodgy art 'investing'"

We had two other art posts in the queue but this one is better than those.

Matthew Klein writing at FT Alphaville:
The Crown Prince of Saudi Arabia recently transferred hundreds of millions of dollars of his nation’s wealth to a Russian oligarch via a painting of Jesus. Why he did so is unclear.

Perhaps a man in charge of a country where the dominant religion strongly discourages artistic depictions of living things bought the painting because he liked it and wanted to showcase it in a museum.

Or maybe the money was subsequently relayed into another asset on bin Salman’s behalf. Maybe Rybolovlev and the painting were used as intermediaries so bin Salman could pay someone else for a separate service. Bin Salman spent nearly $1 billion in 2015 just on “the world’s most expensive house” and a yacht.

Whatever bin Salman’s particular motivation, moving money out of Saudi Arabia surreptitiously is a national pastime. From a CreditSights note back in November, when the purges of the Saudi elite began:
Saudi Arabia’s errors and omissions on its balance of payments indicate very high levels of capital flight from the Kingdom. The cumulative errors and ommissions outflows since 2006 amount to $374 bn, $100 bn of which has been accumulated since 4Q2015.
Here is the chart:
The art market is an excellent way to do this. As our arts editor describes:
Throughout the sector there is no transparency, almost no regulation and a culture of almost obsessional secrecy. We don’t usually know the names of either buyer or seller in auction transactions, and in private sales not even the price — or indeed whether a sale has taken place at all.
There is no register of transactions, or of ownership of works…Thomas Christ, a board member of the Basel Institute on Governance, a not-for-profit that pits itself against financial corruption, has described the art market as “an ideal playing ground for money-laundering” on the part of “smugglers, drug traffickers, arms dealers and the like”. While other sectors are increasingly squeezed by regulation, art assets are portable, hard to trace, and have internationally recognised value.
Many aficionados believe the use of the art market to shield assets from the authorities is a modern phenomenon. New research by Kim Oosterlinck suggests otherwise. (It’s not online but has been uploaded to the usual place.)

Art was a popular way to store wealth within Nazi-occupied France because it was relatively easy to transport and would maintain its value better than the normal alternatives. Oosterlinck notes that “the Occupation period provided huge profit opportunities for galleries.”...MORE
Previously from Mr. K.:

Aaarrrggghhh: I Can't Get Matthew Klein's Song Out Of My Head
Leaving the office after posting "Pray For FT Alphaville's Matthew Klein" I found myself humming Jingle Bells à la Klein:
Rolling down the curve
With my Eurodollar strips
Making tons of money
‘til the Fed hikes 50 bps!
And again this morning.

I'm losin' it, man.

The last time this happened to me it was a William Shakespeare pastiche.
Of the Bard doing the Hokey Pokey.

So as one of the greats, "The Bruce Dickinson" says:
"Guess what? I got a fever, and the only prescription is more cowbell!"
Via A Way With Words:....MORE 
Investment Banks As Marxist Paradise
I think I could learn to like this young Matthew Klein fellow....

Ooh, ooh: Matthew Klein on New York Fed Head Calling For More Cashout Refi
Expanding on and contextualizing Monday's "New York Fed Chief Dudley Has An Idea — Homeowners Should Tap Into Equity".
In Which FT Alphaville's Matthew Klein Flexes His Clickbait Muscles

And many more. Use the search blog box if interested.