YOUR MIND ON MONEY: What does current trend is asset values mean?

2014-05-15T12:00:00Z 2014-05-15T17:53:24Z YOUR MIND ON MONEY: What does current trend is asset values mean?F. Marc Ruiz Times Business Columnist nwitimes.com
May 15, 2014 12:00 pm  • 

So what does a black and white painting, a country estate in Connecticut and a Chinese Internet company all have in common?

The answer to this strange little riddle is that each of these items have been recently sold or priced at the highest value ever for an item of its kind in the entire history of humanity.

This week Christie’s auction house in New York sold a contemporary piece of art produced by Barnett Newman for an incredible $84.2 million. Not only does this mark the most expensive piece of artwork ever sold, the painting was sold during a record setting auction in which $745 million of art was sold in one night.

Last month, a new record was also set in U.S. residential real estate prices when Copper Beach Farm, a lovely 50 acre estate on Long Island Sound was sold for $120 million. At least the offering included two small islands in the Sound, which as the credit card commercial says is “priceless.”

And soon, the Chinese version of a combined Amazon.com, Ebay and PayPal, called Alibaba will offer stock in an initial public offering (IPO). The offering is expected to raise about $15 billion for the company and will value Alibaba at around $140 billion, which will, in keeping with trend here, be the highest value IPO ever.

I guess if for good measure we throw in the record high levels set in the Dow Jones Industrial Average over the past week we have a kind of financial “planetary alignment” occurring with asset price values at all-time highs across the spectrum.

Now I’ve seen enough sci-fi movies, and read enough sci-fi books to know planetary alignments usually don’t end well for the masses and this financial alignment is worth watching.

It’s hard to look at these various data points and not wonder what the heck is going on. Are we on the front end of the next global economic expansion? Has all the monetary expansion perpetrated by the Fed and other central banks created a new financial bubble? Has inflation finally returned? Are we late or early for this party?

The truth is I don’t know. What I do know is following the 2008 financial collapse I took a vow to be less myopic in my vision of the world.

The scope of the problem in 2008 was difficult to anticipate on Main Street in part because the nature of the problem on Wall Street was not concentrated in the stock market or even the mainstream bond market.

The problems first emerged with a price bubble in commercial real estate and warm weather state housing prices and cascaded from there. The trend was hard to spot and even now remains difficult to fully comprehend.

New trends emerge all the time, the current trend in asset values is pretty clear. Now we have to figure out what it could mean. And if everything is worth more right now, then I need to go find something to sell.

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