The logic behind "indirectly monetizing art" is that large and carefully managed pools of artworks are more likely to produce a predictable and steady revenue stream that can be sold to investors.

Paris-based sculptor Brian has an impressive art collection. He collected much of it while a student at the Royal College of Art in London; swapping his own sculptures with works of art produced by his fellow students.
Paintings made by his friends not only bring back fond memories from his student days. Given that many of his contemporaries have enjoyed a great deal of success after leaving college, the art also provides him with a comfortable safety net for his retirement.
Such informal trading systems, where young artists swap their own work for art made by others, has always served this dual purpose of combining pleasure with diversified financial security, BBC reported.
The idea is that at least one of the group will become a recognized and valued artist, and as such a broad arts portfolio is likely to contain at least one valuable work of art.
Now, a multilingual globe-trotting financier has formalized the system, making a quantum leap in the process, in the form of the Artist Pension Trust.
“The art market is approaching the money market,“ Bijan Khezri, the Trust’s chief executive said.
The idea is simple; the investment vehicle appoints arts specialists--including curators and art critics--around the world to cherry-pick 50 “young, emerging to mid-career artists“ who are invited to join a trust, which Khezri describes as, essentially, a “closed end fund“.
Over a period of five years, the trust attracts 250 artists who each “invest“ by depositing a series of some 20 works of art over a period of 20 years.
Typically, an “investment“ would be one painting or one sculpture, though given that each “investment“ should be worth some $7,000 to $10,000 some artists would need to submit more than one piece of art per year, whilst others might be allowed to submit fewer than 20 pieces.
Roughly speaking, at the end of the 20-year period, each “fund“ will have an arts portfolio consisting of 250 artists’ collections, each containing 20 works of art collected over a period of years.
The hope is that the artists will prosper, so that their works of art increase in value--though the trust leaves little to chance.
Each collection represents a historical documentation of an artist’s work, thus giving a broad picture of his or her progress. This in itself makes it more interesting to many collectors, or indeed to arts investors, and as such the art portfolio value is enhanced.
“The total becomes more than the sum of the parts,“ says Khezri.
Moreover, having been set up by entrepreneurs, the Artist Pension Trust is also in the business of creating value, essentially by nurturing its members’ fame, or, in the words of Khezri, “fostering the career of your investment“.
The Artist Pension Trust actively promotes their work by arranging exhibits or otherwise raising awareness of their work--for example by lending art to museums or back to the artists for their own exhibits.
Much of the financial security offered by the structure is based on its diversified nature. Currently, there are eight trusts within the overall umbrella structure, each run by a team of experts. Add up the works of art gathered by each trust and a portfolio of 40,000 works of art by 2,000 artists will eventually emerge.
Given that all the artists have been invited to join by experts who have examined their work, the breadth of the arts portfolio should make it fairly likely that the next generation’s Damien Hurst or Jackson Pollock will be amongst the trust’s members, reasons Khezri. “It really comes down to mathematical probabilities,“ he says.
On top of all this, Khezri has injected some financial acrobatics into the equation, essentially by analyzing the art market through the sober glasses of a besuited Wall Street banker, which indeed is what he used to be.
Khezri points out that billions of dollars are invested in art and that a string of investment banks--Citibank, Deutsche Bank and UBS to name but a few--are developing a structured approach to art. Such financial innovation applied to the art market involves the forward selling of revenue streams that are not yet in existence.
What all this means in practice is that investors in art make predictions about future value. They will invest if they think the work of art in question will rise in value, thus eventually create a yield.
The logic behind “indirectly monetizing art“ is that large and carefully managed pools of artworks are more likely to produce a predictable and steady revenue stream that can be sold to investors.

The US consumer has managed to shrug off a high debt burden and a low savings rate, but that may be changing.

The calendar flipped from 2007 to 2008, and just like that, the talk turned from if to when, how long and how deep.
Recession, that is. Will it be short and severe, long and shallow, or some combination of the two ? Will the slump have a V- or a U-shaped bottom? Will the end of the expansion turn out to be December, January or some future month, once the committee entrusted with determining such things assigns a date?
According to Bloomberg.com, while all US business cycles share certain characteristics, they have features unique unto themselves.
For example, every postwar recession experienced an outright decline in real consumer spending in at least one quarter--except 2001’s, where the increase in consumer spending never fell below 1 percent.
Then there’s residential real estate, which, along with manufacturing, is the most interest-rate sensitive sector of the economy.
Housing usually rolls over well before the economy; it leads us into the Promised Land of recovery as well.

Separate But Equal
Most recessions are consumer driven, which makes sense since the consumer accounts for more than 70 percent of total spending.
The 2001 slump, on the other hand, was driven by a sharp cutback in investment in equipment and software following a technology bubble, with too much money allocated to too much fiber-optic cable for which there was no possible use.
So what will the 2008 recession look like? Driven by home-loan defaults, falling home prices and cascading credit problems at financial institutions that have the potential to curtail lending to the rest of the economy, the recession may look something like the one in 1990-1991, which came on the heels of the savings and loan crisis.
It was commercial, not residential, real estate that was the villain back then, with banks and thrifts overextending themselves into areas they knew little about.
New Old Idea
The new banking idea of the current times--investing in structured financial vehicles collateralized with pools of subprime loans--is sending the biggest financial institutions overseas in search of additional capital.
The good news is, the 1990-1991 recession was short (eight months) and shallow, featuring a peak-to-trough decline in real GDP of 1.3 percent.
The bad news is, it took a long time for real estate, both commercial and residential, to recover, damping job growth through 1992. Some regions of the country remained depressed for years.

Bad to Worse
The even worse news is that commercial real estate, where strong growth has been offsetting the collapse in the housing market, may be the next shoe to drop. The old maxim that retail development follows new housing is about to be tested in a case of new supply meets slack demand.
If lending standards to business were anything like those used to evaluate potential homeowners, there’s going to be a lot of empty mall space across the US.
And what if retail demand underperforms expectations? The US consumer has managed to shrug off a high debt burden and a low savings rate, but that may be changing. Retail sales fell 0.4 percent in December, and January chain store sales are off to an inauspicious start.

In Guangzhou recently, 286 graduates and postgraduates competed for 11 positions as street cleaners, and the city hired one candidate with a PhD, four with master's degrees and six with bachelor's degrees.

Figures vary, but the size of China’s higher education system appears to have at least quadrupled in the last decade as the nation has pushed relentlessly toward building a modern economy.
Next spring, Chinese colleges and universities expect a record 4.95 million graduates, up 820,000 from this year, reported Chinaview.cn.
More than a million of them will wind up jobless, according to estimates. The glut is leading students and colleges to what might be considered acts of desperation.
In Guangzhou recently, 286 graduates and post-graduates competed for 11 positions as street cleaners, according to the official New China News Agency. The city hired one candidate with a PhD, four with master’s degrees and six with bachelor’s degrees.
“Given the already grave employment situation in the country, the employment pressure on university graduates will be obvious,“ Wang Xuming, a spokesman for the Ministry of Education, said at a recent news conference.
All of which is causing an air of concern among students.
The dilemma facing Chinese students is hardly unique. Through the ebb and flow of the business cycle, American college students have long been accustomed to the idea that a degree doesn’t necessarily guarantee them a job--at least not right away. But in a country where, not so long ago, theÊstate guaranteed everyone employment, however lousy, it is a new and unsettling reality.
Some employers and economists say the problem is one of rising expectations. It’s not that there are no jobs available, it’s that students are holding out for the good ones. They should be more patient, this line of thinking goes, and willing to settle for something less than their dream job at first.
“A college education is a long-term investment,“ said Tang Min, the chief China economist for the Asian Development Bank. “You have to think about your lifetime.“
Tang, who wrote a report in 1998 calling for a major expansion of the Chinese higher educational system, has been criticized as the architect of the current glut. He says he has no regrets, even when faced with a recent report saying that two-thirds of last year’s college graduates are earning less than $250 a month. That, he said, is double what a high school graduate can expect to earn in China, and the gap is almost certain to grow as graduates climb the career ladder.
Some say what is needed are more students with skills that match the job market. Employers say students are often not qualified for the available job openings and blame the university system for failing to adapt to the nation’s new economy.
Partly in response to those critics, the government recently announced a major initiative to increase vocational education over the next five years.

On January 15th the governments of Singapore, Kuwait and South Korea provided much of a $21 billion lifeline to Citigroup and Merrill Lynch, two banks that have lost fortunes in America’s credit crisis.
It was not the first time both had tapped the surplus savings of developing countries, known as sovereign-wealth funds, that have proliferated in recent years thanks to bumper oil prices and surging Asian exports.
As reported by Economist.com, since the subprime-mortgage fiasco unfolded last year, such funds have gambled almost $69 billion on recapitalizing the rich world’s biggest investment banks.
With as much as $2.9 trillion to invest, the funds’ horizons go beyond finance to telecoms and technology companies, even aerospace. But it is in banking where they have arrived most spectacularly. They have deftly played the role of savior just when western banks have been exposed as the Achilles’ heel of the global financial system.
At first sight this is proof that capitalism works. Money is flowing from countries with excess savings to those that need it. Rather than blowing their reserves on gargantuan schemes, Arab and Asian governments are investing it, relatively professionally.
But there are still two sets of concerns. The first has to do with the shortcomings of sovereign-wealth funds. The second, bigger, problem is the backlash they will surely provoke from protectionists and nationalists. Although sovereign-wealth funds hold a bare 2 percent of the assets traded throughout the world, they are growing fast, and are at least as big as the global hedge-fund industry.
But, unlike hedge funds, sovereign-wealth funds are not necessarily driven by the pressures of profit and loss. With a few exceptions, most do not even bother to reveal what their goals are. The relatively friendly welcome sovereign funds have found in America may be temporary. Before the credit crunch, American politicians objected to Arabs owning ports and Chinese owning oil firms.
In politics, appeals to fear usually sell better than those to reason. But the hypocrisy of erecting barriers to foreign investment while demanding open access to developing markets is self-evident.
Host countries should not set up special regimes for sovereign wealth. Although every country has concerns about national security and financial stability, most already have safeguards for bank ownership and defence.
Until East and West even out the surpluses and deficits in their economies, sovereign-wealth funds will not go away. Ideally, the high-savings countries of the Middle East and Asia would liberalize their economies, allowing their own citizens to invest for themselves, rather than paying bureaucrats to do it for them. But do not expect miracles.
More transparency would go a long way towards easing concerns: an annual report that discloses the fund’s motives and main holdings would be a start. Investments through third parties, such as hedge funds, help too, providing an additional layer of protection against the misdeeds of rogues.