Masterworks Sells First Painting, Investors Make 32% in One Year

Masterworks sold a Banksy Mona Lisa for $1.5 million after holding it for one year. Investors gain 32% after all fees and costs. I don't think this would be typical but nice to see that this first deal worked out.

I've now invested in four paintings through Masterworks.

Adjusting Home Price Down

 

In the last couple of years I have used the Corelogic house price indices to update the value of our house. But this price has gotten more and more out of touch with sales prices in our development. Well, there was only one this year and it was a lot lot lower. So, I have now redone a regression analysis of all the comparable sales since we bought here. The dependent variable is the percent premium over the original sale price when the development was new and the explanatory variables are dummy variables for each year (0,1 variables that take the value one in the relevant year). This re-values our house at AUD 810k down from 852k last year. We paid 740k at the beginning of 2015 and so this hasn't been great investment-wise as it has appreciated a lot less than the average home in this city supposedly has.

This graph shows how the premium over the original price has changed over time:

In the last year prices have fallen quite a bit. I am not sure why there has been this trend, which is out of step with the rest of the city. One possibility is that the ongoing construction of a new large denser neighboring housing development in place of low rise offices has reduced the value of our development.

September 2020 Report

Stock markets fell and the US Dollar rose this month. The Australian Dollar fell from USD 0.7380 to 0.7156. The MSCI World Index fell 3.19%, the S&P 500 3.80%, and the ASX 200 3.51%. All these are total returns including dividends. We gained 1.09% in Australian Dollar terms and lost 2.07% in US Dollar terms. The target portfolio is expected to lose 0.70% in Australian Dollar terms and the HFRI hedge fund index 0.17% in US Dollar terms. So, we outperformed the stock market indices and the target portfolio but not the hedge fund index. Here is a report on the performance of investments by asset class (currency neutral terms):

 

Hedge funds added the most to performance and gold detracted the most.

 

Things that worked well this month:

• Bluesky Alternatives (soon to be Wilson Alternative Assets) gained AUD 13.5k followed by Regal Funds (AUD 10.4k) and Cadence Capital (AUD 7.4k).
  

What really didn't work:

• Gold fell the most (- AUD 16.6k).

The investment performance statistics for the last five years are:

 

The first two rows are unadjusted numbers in US and Australian Dollar terms. The following four lines compare performance against each of the three indices. We have the desired asymmetric capture for all three indices now and positive alpha compared to two of them.

 

We moved further towards our long-run asset allocation. Bonds are still the asset class that is furthest from their target allocation:

 

 

On a regular basis, we invest AUD 2k monthly in a set of managed funds, and there are also retirement contributions. Other moves this month:

• I bought 100k of Australian Dollars by selling US Dollars.
• Woolworths (USD 25k) and Nustar (16k) bonds matured.
• I invested USD 10k in a painting at Masterworks.
  
• I bought 22,136 Domacom shares (DCL.AX) at 6.6 cents each. The company announced a deal that might get them about halfway from here to profitability.
  
• I bought 25,000 Bluesky Alternatives shares (BAF.AX). 
• I bought another 1,000 shares of the IAU gold ETF.
  
• I was stopped out of the short 10 year treasuries futures position.
• We reduced our Commonwealth Securities margin loan by another AUD 90k to AUD 92k. Ultimately, I plan to borrow mainly from Interactive Brokers who have a much lower interest rate and only use the Commsec margin loan or our home mortgage facility when there are particularly good opportunities.