Scott Lynn is a serial tech entrepreneur who has been collecting art for over 20 years. He brings his passion for tech and art together with Masterworks.io.
Masterworks.io – You’re invited to join an exclusive community investing in blue-chip art – just tell them you’re a part of Fire Nation!
3 Value Bombs
1) Alternative assets are a good way to diversify a portfolio and increase overall returns of a portfolio.
2) Achieving financial independence means a well-diversified portfolio with asset classes that have competitive terms to other asset classes.
3) As long as you are able to wait several years to recognize your returns, it can be a great way to diversify your portfolio for financial independence.
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Today’s Audio MASTERCLASS: Why Blue-Chip Art Should Be In Everyone’s Portfolio.
[1:15] – Scott shares something interesting himself that most people don’t know.
- His childhood dream was to be an actor.
[2:36] – Scott shares how he got into art collecting
- His background is in technology entrepreneurship. He bought his first painting at the age of 19.
- Some of the mistakes that early collectors make is they focus on big named artist like Picasso.
- Picasso made around 60,000 works of art during his lifetime. 95% of it is not investible.
[4:36] – Scott talks about some of the bad and good investments he has made
- He bought 200 Picasso ceramics from a neighbor who used to live next to him in the south of France. These objects just don’t appreciate. They’re not the most rare objects, and the scarcity value is low. Things like that are the worst works he has ever purchased.
- On the other hand, Scott has bought paintings for $5 – $10 million, and then sold them 2 years later for twice the amount.
[7:17] – What exactly are investment alternatives, and how will they fill in on current market conditions?
- Alternative assets are a good way to diversify a portfolio and increase overall returns of a portfolio.
- This continues to be an asset class that outperforms its other related asset classes.
[8:50] – Scott talks about the fundamentals in a piece of art.
- When we think about the art market, we think that there are general things that increase the cost of art.
- The top 1% of the world – the wealthier they get, that’s correlated to art prices going up.
- Art is the only asset class that is constantly decreasing in supply.
- When artists die, collectors wind up collecting the paintings, and then end up donating them to museums.
[10:42] – Scott talks about the volatility of blue chip art compared with stocks and bonds.
- When you compare art to other asset classes, the magnitude of loss is lower
- Sharp ratio is the absolute return divided by the volatility of return. It helps to understand the risk adjusted return in any asset class. Sharp ratios above 1 are very good for the asset class.
[12:00] – How does art fit into the context of FIRE (Financial Independence, Retire Early).
- Achieving financial independence means a well-diversified portfolio with asset classes that have competitive terms to other asset classes.
- As long as you are able to wait several years to recognize your returns, it can be a great way to diversify your portfolio for financial independence.
- What makes him excited everyday is that it has a massive asset class, art, that is roughly $1.7 trillion in value.
- They were the first company to securitized a painting.
- They’re a brand new company that’s been around for a couple years, launching roughly 1 painting a week at around $1-$10 million.
- It’s an exciting time to get involved in the art market because there’s not much competition.
[18:10] – What kind of research and data does Scott’s team use to determine the kind of blue chip art they will buy and sell?
- They base it on public auction data in the New York market from the 1950’s.
[19:01] – There are trends in the art market. What happens when things fall in or out of favor?
- There have only been 3 artists in the top 100 list who have produced negative returns.
- There is no options market today in the art world.
[20:34] – What happens when we enter a recession? Do transactions ever dry up or slow down during recessions?
- Correlation identifies if a particular asset class behaves or returns the same way as another asset class over a period of time.
- The prices didn’t decline during the Dot Com bubble burst, they actually increased in value.
- They had the highest correlation during ’08 – ‘09 crisis.
- It is a global asset class that trades between the ultra-wealthy people of the world and behaves differently than public assets.
[22:30] – If somebody buys into a piece of art, are people able to redeem the shares before the piece is sold?
- That’s where the secondary market comes in. They help people get liquidity before the painting is ultimately sold.
[23:38] – Scott’s recommendation to people who are just starting out in the blue chip art market.
- Start slow. Learn about the individual offers. Learn about the artists. Play around with the secondary market.
[24:19] – Scott’s takeaway and call to action for Fire Nation.
- Masterworks is positioned in a really interesting way to help investors gain some exposure to the asset class, and overtime, make it a considerable part of their portfolio.
- Masterworks.io – You’re invited to join an exclusive community investing in blue-chip art – just tell them you’re a part of Fire Nation!
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