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The Liquidity Boom: More Money Than People Know What to Do With


It's official: there is so much liquidity out there that people don't seem to know what to do with all their cash.

As Jeff Cooper pointed out recently, the rich are feeling richer, and falling all over each other to get rid of paper and buy tangibles.

He mentioned Mark Rothko's "White Center," which became the most expensive piece of postwar art sold at auction after selling for $72.8 million, crushing a presale estimate of $40 million.

"Money has no meaning," Angela Westwater of New York gallery Sperone Westwater told a Bloomberg reporter after the Rothko sold. "It's a good work, but the whole marketplace is crazy."

The painting had previously been owned by David Rockefeller.

"While it's a spectacular painting, it's clear the allure of having David Rockefeller's painting in your house is going way beyond what you might otherwise consider reasonable," said New York dealer Marc Glimcher of PaceWildenstein gallery. "That kind of thing is becoming irresistible to people."

Rothko's $72.8 million "White Center"

The U.S. Mei Moses art index, which tracks global art auction sales, logged returns of 18.3% last year.

The Mei Moses index shows returns on post-1945 and contemporary art hitting more than 45% last year, while pre-1950 US art returned 34.58%. Over the past 25 years, post-1945 and contemporary art achieved a compound average annual rate of return of 11.87%.

It's official: there is so much liquidity out there that people don't seem to know what to do with all their cash.

Have you heard of the Fine Violins Fund? Its founder, London-based violin dealer and restorer Florian Leonhard, is hoping for returns of between 8% and 12% a year, and claims that rare violins present a "secure long-term investment."

Itzhak Perlman playing a secure long-term investment

China's red-hot these days, and former Sotheby's chairman Julian Thompson is tapping into the hysteria with the China Fund. But, Thompson isn't investing in China. He's investing in china. As in, imperial ceramics. Thompson expects to offer compound returns of 12% to 15%.

There's profit in that teapot

Apparently, there's more than wine in wine bottles. There are big returns, too. The Vintage Wine Fund, out of the Cayman Islands, aims for "high capital appreciation by investing in fine wines from regions including Bordeaux, Burgundy, the Rhone Valley, Tuscany, Piedmont, Champagne and Portugal."

"Let me take your coat. Would you care for a glass of money?"

Perhaps investing in tangible objects isn't quite your cup of Sanka.

Well, you're in luck! Now you can invest in human beings!

Football Players Funds Management Ltd., a unit of Orey Group, a Lisbon-based shipping and industrial conglomerate, has £7.5 million invested in the transfer rights of 15 professional soccer players in Europe. The company puts up 15% of the cost of buying a player's contract, with the professional team putting up the rest. That gives FPFM a 15% stake in the player, while reducing any loss for the team if he doesn't pan out. If the player excels and generates interest from other teams looking to acquire him, the fund and the team sell the player's contract at a higher price.

Forget lean hogs, invest in Ronaldo futures

For the more literary-minded, there are investments that don't come with a measurable return, at least until heightened ego can be quantified. Stephen King's #1 best-seller, "Cell," included a character named Ray Huizenga, whose sister Pam bought the naming rights from King in an eBay auction for $21,000.

Sometimes, naming rights don't go exactly as planned. Retired venture capitalist Jerome L. Stern donated $100,000 to the soon-to-be-opened New Museum of Contemporary Art in New York City.

New Museum of Contemporary Art (artist's rendering)

"I'm 83," he said. "I thought it would be nice to see my name in a place where I'm going to spend a lot of time."

Is Stern incontinent? A fetishist? A garden-variety weirdo? What does this have to do with anything, you ask?

Well, his hundred grand didn't get Stern the pleasure of seeing the Jerome Stern Sculpture Garden or the Jerome Stern Auditorium.

No, Jerome Stern's $100,000 donation to the New Museum of Contemporary Art got him the Jerome and Ellen Stern Restrooms.

Do you think he's pissed?

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