The Problem With Masterworks
ฝัง
- เผยแพร่เมื่อ 9 ก.พ. 2023
- Masterworks' communication disclaimer (with links to some SEC filings): www.masterworks.com/about/dis...
*Note: I've removed a section of the video that talked about the portfolio return figure PREVIOUSLY being on the company's website when it was higher - this allegedly came at the direction of the SEC, and I don't wish to mischaracterize the action as hiding performance.
You've likely seen ads for Masterworks...are the returns too good to be true? Well, after looking into it, probably.
If you'd like to support the channel, you can do so at / theplainbagel :)
DISCLAIMER:
This channel is for education purposes only and does not constitute financial advice - Richard is not responsible for investment actions taken by viewers. Please seek out a registered advisor if you require assistance (while Richard is a registered portfolio manager at WDS Investment Management, he does not provide advice through The Plain Bagel, which is not affiliated with his employer).
*Note: I've removed a section of the video that talked about the portfolio return figure PREVIOUSLY being on the company's website when it was higher - this allegedly came at the direction of the SEC, and I don't wish to mischaracterize the action.
Just finished watching while that part was there. Even if the SEC asked them to remove, still seems fishy. Advertising 15% return, but when it falls to 10%, removing doesn't seem right. Anyway, I'll stick with my kids' art pieces for my collection.
@theplainbagel the section is still there
I just watched this video now and saw this portion of the video was still there. Maybe TH-cam is taking a while to update it?
@@feedmatt yes sorry, the platform takes a while to update for the cut
@@ThePlainBagel thanks, for a bit there felt I was alone thinking this whole thing was questionable.
Shout out to all the creators out there who have been offered money to promote financial products and say NO to protect their audience. It's NOT easy to do that, and most of those who do rarely get any credit.
Let’s get you to the top of the comments.
This is a great point. The unsung heroes of content creators.
That’s an Excellent point. Thank you Brian Feroldi.
For sure, Brian, but I am curious though. Are all these youtubers that are sponsoring it potentially doing so out of malintent, or simply out of ignorance and not doing enough research perhaps? I'm not sure what the case is, but, I hope it's the latter. Apologies if this sounds weird or odd to anyone.
@@drakehashimoto685 I assume that most of them just think "This is an obviously stupid product, surely my audience isn't dumb enough to fall for it. And if they are - well it's not really my fault that they didn't do their own research". It's just that this is a lot more harmful when it comes to financial products than gamers promoting raid
I've been waiting for a respectable Finance TH-camr to cover this. It seemed a little too good to be true, and the "invitation only" claim inside an advertisement to please invest was also a red flag
I hoped even someone more of a layman like Coffeezilla (nice suspenders by the way) would do this, very positively surprised that Richard got there first. All the more so given some pretty respectable influencers who would never touch, or have even called out, some of the more questionable investments have started promoting them.
I am dissapointed that youtubers i actually respect peddle it. I mean i dont begrudge them their income, but as much as they tell everyone theres no such thing as low risk high return, they heavly imply it every time they banter on Masterworks.
Totally! It always felt so sketch!
Amen
Are there any other respectable finance TH-camrs besides The Plain Bagel and Patrick Boyle?
I'm not saying you and Coffeezilla should do a weekly show...but "Coffee and a Bagel" would make a fine title for one, if you did.
I’m hungry now.
if it ever happens let me know... i wont say anything publically but i have information..
😂😂 this would clap
I would love this! 🎉🎉🎉
@@evilJim555 bruh 💀💀😂
What really boils my blood is the fact that it isn't your average influencer pushing a shiny new investment platform, it's TH-camrs in the finance space encouraging their viewers to invest in it without them looking into the company seemingly at all
I follow many of those finance channels so i guess that it says a lot about them. Being skeptical will be the way to proceed from now on.
Well, as someone who worked on structured products ( and I had to read a lot of clients contracts, and they are as fishy as masterworks ) I can assure you that it takes years to understand all these filings. A TH-cam Finance Guru who never worked in Finance or Legal jobs won't have any competency explaining the risks of these investments. I had colleagues with years of experience and they still found some clauses where we had to check them together to get an idea about the potential risks. SEC should definitely step up and close this company before the problems
finance content creators are even worse than dating-coaches - lowest bottomfeeders, yet new "customers" are always there...
Most finance channels are untrustworthy opportunists. You can see that by then jumping on the newest trend regardless of whether it's a smart investment idea
Finance youtubers have faith that their viewers are smart enough to recognise a scam
By far the weirdest part about their commercials is that they keep mentioning some arbitrary 'waiting list', which can be skipped by entering some youtuber's name in a box. At that point it's just not a waiting list anymore, rather being a mandatory referral box.
The first # people who sign up with this discount code will also receive xyz. Even non scum services will use scum language like "If you sign up now you will get # months free" or "In partnership you also get this other service for free".
Pathetic attempt to generate an air of exclusivity.
Yeah ridiculous in the extreme. It's so scarce everyone can have it!
This. A waiting list that everyone can skip is utter bollocks and a sure sign that something’s fishy.
And in actuality its a setup for a phonecall hard sell. Felt a bit like a boiler room. Was not a fan.
I love the fact you made a 10 million dollar studio for just 1 joke
Most expensive punchline yet
Bagel giving a nod to Coffee!
Such a legend man xD
@@sarthakmunda3914 there's an app for that!.. I'll show myself out
He also put on the million dollar suit
It always astonishes me when people believe in "crazy returns" - if those crazy returns exist, you can bet your ass on it that by the time you hear about them (and everyone else), they're long gone and you're probably the person delivering those "crazy returns" for someone else. There's a reason why some things always just sound "too good to be true".
Exactly: by the time it becomes a TH-cam advert you can be pretty sure it has already lost any possibility of high return.
It reminds me of the Fidelity Magellan fund after Peter Lynch became the manager. It had been a small fund but after delivering a few years of exceptional returns investors jumped in. The 5 year returns still looked excellent however there were few investors that had owned the fund for that long. Magellan became the biggest mutual fund there was at one time but they were not able to sustain the past record. I recall that despite having some stellar returns when the fund was small that during Lynch's tenure (1977 - 1990) the average investor actually lost 29% per year after all the money poured in to the fund.
@@noyopacific This is the norm with large mutual funds. During downturn they have more money to invest than there are opportunities in the market. They also need to trickle down any sell/purchase to avoid price manipulation and this makes them lose opportunity. A small fund is more agile because they have less money to move arround.
Whenever I see a TH-camr claiming a strategy with no losses , I look at the views and know that this strategy won’t work anymore even if it did before. A trading strategy with 500k views will definitely become useless.
@@moxictasculinity why though? the 500K viewers surely don't have much capital to upset the market, isn't it?
When I heard about Masterworks and viewing art as an investment, a quote rang clear in my head. "They know the price of everything, and the value of nothing"
You know the world of retail investing is totally broken when "they don't seem to be doing anything illegal" is basically the one of the biggest stamps of quality any service can get.
This is why I stick with Index/Exchange traded funds and the occasional individual stock. It seems like everything is a scam somehow.
@@Lonovavirthe English language needs more words that can be used for different categories of scams. The word is just too vague.
We have many terms to refer to fried potatoes even though there is little difference between hash browns and french fries.
@@hewhohasnoidentity4377 Well, we do have terms for different types of scams. They're mostly locked up in ivory towers though.
@@poetryflynn3712 Lots of every day choices 🙂 Deception, fraud, hoax, racket, ripoff, sham, con, flimflam, hustle, confidence game, crooked deal, fast one, shady deal, snow job, sucker game, grift, shell game, swindle and so on.
@@cerealspiller Those don't categorize the scams themselves though. They just name them as a scam.
I hate that channels that I follow have started pushing an obvious scam
Ditto. My bs alarm went off the first time I heard about it
It’s not a scam it’s just not a perfect investment but no investment is really
A good deal of financial gurus are just grifters unfortunately
I would not call it a scam, but in my opinion they promote a risky and complicated investment to rather uniformed people.
This is absolutely not a scam. Its a legitimate and established but relatively risky investment platform.
Thank you for your efforts! Masterworks is constantly reaching out to sponsor and I've always wondered more about them. Was suspicious but never dove in. Looks like I'll continue to not work with them.
They are bad, they totally did a no show when I called them the 1st time and got mad when I asked about their company and losses.
how much did they offer?
Yeah. They are far right idiots and left wing numbskull. They will not visit Asia until a decade after Russia Ukraine war
Holy fucking shit, Sentdex. Your k-means Clustering tutorial got me through an internship bro. Keep up the good work.
The fact that you do due diligence to know about the products that you promote. You gained even more respect from me
Oldest adage in the book: If something looks too good to be true, it usually is.
New adage: If something is heavily advertised by social media figures (inc. youtubers), it's either junk or a scam.
I never trusted Masterworks to begin with; it always reeked of a scam to me, just didn't know what the con was. Glad to see someone finally reported on it.
Indeed! The same goes for those "privacy" VPNs if you really look into it. You pay them to give them access to all your devices and data. I haven't seen a product pushed harder.
@@alpenjon VPN are not exactly bad, it's just the way they market their service. If your access to a website or application is already not secure (not being encrypted with TLS or E2EE, then having your traffic tunneled to another place just adds a fail sense of security.
There are good use cases to a VPN, for example:
- Accessing your bank while traveling to a country that is Geo-IP blocked by your bank.
- Accessing your other devices remotely without opening a hole in your home firewall.
- Bypassing basic censorship, in this case you might have better luck with a paid service or setting up a VPN yourself (in your home or paid host provider) because most "free" VPN have their IP address blocked.
Only downside i can think of when doing this is that the IP will not be as anonymised since only a single person would be using the IP (your home) as opposed to thousands of people (VPN provider).
Obviously the VPN provider still knows what IP you access, this anonymised (private) access is only from the point of view of a random website you use. If they are requested access by law enforcement they will definitely provide whatever meta data they have because they are not going to side with their customer.
Of course it's always better to setup one yourself instead of trusting a random company.
Robert koyosaki et al. Promotes Masterworks
@@SilhSe Is that supposed to mean anything?
@@UberPwner09 it means something; artworks, gold and probably digital currency. The opposition to Charlies value. (May he rest is peace)
THIS is why you're my favorite finance TH-camr. I've never seen a better breakdown of MasterWorks. It was just what I imagined from a scummy company that heavily markets towards lay people and hides important figures.
they haven't technically become all the important just yet, just more risk. they're pretty clear it is a risky investment in the call I had
The Coffeezilla cosplay was hilarious. Y'all's video together was also great. He needs to have you back again
My investments in artwork are exclusively reserved for works created by my children, grandchildren and a few close friends. This venue brings me the most joy and the prices are quite reasonable. 😍
Extremely wholesome
Huge value for money 👌
Have fun staying loved
What really pisses me off is the people who got me interested in economics and scams, and told us to watch out for scammy offers that seem "too good to be true" (Coldfusion I'm calling you out) are the ones who advertise this platform.
Wall Street millennial is another one.... A finance channel pushing this stuff
As an investment professional who knows a little bit about art, this seems a very fair appraisal. Good to see someone do the leg work to prove what everyone suspected. Great work!
And as an art professional who knows a little bit about investments I agree :)
Masterwork lol
A rule of thumb I've learned over the years is that if a product/service is being highly marketed towards the general population, that company probably has a pretty hefty profit margin, and you should look elsewhere.
My rule of thumb is: if a product/service is highly advertized by content creators, it's most likely not that good in the best case (compared to other similar products/services), straight up a scam in the worst case. Either way, I'm not buying
When a company spends more on marketing then on their own product.
@@Deathbyreality1 than*
So what do you recommend as an alternative to investing in art? Or sensible investments?
A good rule of thumb is that if something is being advertised by content creators whose content isn't directly connected to the product is a red flag (so a tech creator advertising computer parts is fine, but a tech creator advertising shoes is a red flag).
You're getting much better at this. Humor up 100%, engaging script up 187%. Love to see it. Your content is important to a lot of people. I hope you know some people will have money for retirement because of your work
He's undervalued even with those numbers. I'm hodling BAGL to the moon.
My parents bought a painting for 10k back in the eighties. In the nineties they were offered 100k by three different wealthy buyers. When my parents passed we got 12k at a major art auction, paintings like it had lost most of their popularity.
Sounds like they increased in value. They were bought for 10k, and years later sold for 12k...Doesn't matter what the perceived value at any given point was.
You made an extra 12K from no where. It's a win.
@@theren8311 is this as far as your understanding of economics goes?
@@gaswe9236 Well, explain what I got wrong..
@theren8311 ok for one thing you didn't perform an inflation correction
@@mipmipmipmipmip Yet that doesn't negate the point I was trying to make, which is simply, he made 12k. Doesn't matter what value the paintings have or had at any point in time. The ones that lost were their parents, as it was their money that was spent. He just came about on some paintings in the garage, and made 12k out of thin air. He's only upset because he learnt what he could have gotten off it, if it was another point in time.
I do take the point of inflation however, as my opening statement would be incorrect due to such.
The "waiting list" part of the approach, is basically offering the bait, and then taking it away to make it seem more valuable. It inspires FOMO, fear of missing out, and encourages people to plunk down their money without thinking about it too much.
I told them I make 60k they said it was not enough but that they would call me later. I declined.
You make 60k a month and they declined?
Trust me...I make THEM wait... they keep sending me emails begging me to join. LOL My how the tables have turned. 😂
I was skeptical when there's a waiting list but if you CLICK THIS LINK NOW you can cut in line. 🙄
FOMO indeed.
Reminds me of Cartmanland
I AM SO GLAD YOU ARE COVERING THIS. I have always been skeptical but there was no one talking about this, many of my favorite youtubers such as the JOHN COOGAN & MODERN MBA was promoting this! Also they used to say "ftc certified" now they DON'T.
I concur.
economics explained too! it made me stop watching
It's so frustrating. I don't expect every random TH-camr to be able to do a deep dive into the intricacies of something like Masterworks to determine if it's a scam or very risky, but I DO expect channels that focus on financial topics to do their due diligence.
You'd think they'd be a bit more cautious, especially after other influencers were caught in the FTX debacle...
@@r-pupz7032 If my memory serves me right, they promoted Masterworks (atleast JOHN COOGAN) before the whole FTX debacle. This was during the time everyone was freaking out about inflation.
I stopped watching modern mba because of this. He had it as a sponsor in one video, was criticised in the comments for it. Hard. Ok, happens. Weird that there was no reaction from him, but whatever, I thought.
And then he did the same thing a second time, a transition into a masterworks ad that is hardly recognizable as such when the transition happens. F that.
Another issue is that the value of works of art is also affected by the people who owned them previously. Each piece has a story, and those with more interesting stories attract more attention and higher prices.
A example would be the Mono Lisa. 100ish years ago, no one really cared about it until it was stolen but then returned.
@@1997saltydog I still think no one should care about it. It's boring and not great.
@@algorithmgeneratedanimegir1286 Me too. Its definitely overrated.
Personally, I'm a bigger fan of the Stereo Lisa!
@@Rr0gu3_5uture Dolby Digital Surround Lisa
This would be an interesting business model for museums. They could get some extra value from displaying the paintings while they hold them. They could even possibly 'pay rent' on more popular works- shareholders in that painting could vote to rent it or send it to auction at set intervals based on the museum's rent offer.
Your idea is exactly what NFTs are supposed to be for.
A settlement layer, and a little bit of programmability for those votes and such.
That's kinda how it works already, private collections will regularly lend art works out to museums, partly with the goal of marketing said art work so it can be sold for more. Of course the museums themselves could never function as a broker, do I even need to go into all the potential ethical issues of a public educational institution soliciting donations from the public and trying to make a profit?
This channel should be mandatory for any who watches financial youtubers. Keep up the good (and time-consuming!) work
The problem is that MasterWorks isn't just hilled by financial TH-camrs.
@@Antenox :(
@@Antenox But the financial TH-camrs should know they're questionable or at least try to find out if they are.
@@tomlxyz yeah, a random person shilling for this can come across as just a regular sponsorship. But if a financial channel advertises this, it makes the audience think it's more legit AND the financial channel has absolutely no excuse for not recognizing it as a scam.
Either they knew and willingly scammed people, or they didn't know and thus aren't qualified to run a finance channel.
Everyone who toon this sponsor I unsubscribed to their channel.
@@NihongoWakannai 100% of financial youtuber that ever accept these kinda sponsor are scammer. Example Stephen Graham has been in the scamming business for years
People who actually knows about financing, will never ever recommend you to invest in any products.
I was always skeptical, but when I heard a youtuber actually say "the artworks that Masterworks gives you access to have increased in value by [some crazy percentage] in the last year, and I'm happy to say that [some insanse amount] of my subscribers have signed up in that same time to reap the benefits," I knew we were talking about tulips.
You’d be baffled to experience how few people know about tulip mania.
@@anonymous.youtuber Buffett compared the crypto fad to tulip mania and I was surprised how accurate his comparison is. Same with NFT's, now they're just trying to shift the attention from digital artwork to real artworks. And it's always apps on your phone. First Robin Hood, then Bux, now Masterworks.
Maybe they'll make an app where you can buy antique car parts and when everyone bought enough to renovate them and assemble the actual car, they will put it on auction... And no one will buy because they'll be banned from the streets by then lmao
Great video, Richard. When I first started seeing the ads for Masterworks, I was interested. I had never heard of an "art fund." Which is what I figured it was. Then I started reading the fine print like you did. I got as far as the 20% they take when they sell the art (after already having seen the 11% fee at the time the art is purchased) and I knew I was out. I did get as far as the very non-detailed footnote about the owner/customer having to pay the expenses of listing (etc., etc.) and, well, I was already out, now I was out out. Since I had filled out some kind of form in order to see these documents, they had my contact info and kept contacting me repeatedly. Finally I responded and told the employee that I think they take out way too many fees; essentially it's a borderline scam where the people operating the fund get paid, and if there are any crumbs left over for the people who have bought in, lucky them. The idea of an "art mutual fund" has potential, but this is not it.
THANK YOU. I wondered about this as an investment option but got cold feet after I just felt like they were trying to sell me too hard. I never looked into it beyond that but glad I did not blindly take the plunge. The fact that they are targeting less informed people (like me) tells you a lot...
Speculation isn't an investment. There's no cashflows from artworks
As an artist, I am baffled every time I see an ad say “art is the greatest investment”, because I have some awareness of the industry and its really not. Besides how difficult it is to buy and sell and store, it’s a complex guessing game what art will actually be more desirable in the future. Especially with contemporary art it can literally go from barely being seen to worth a million dollars because someone at a museum decided to have it in their show (or, you know, the artist died). There are people who can make a slightly more educated guess or can in some cases brute force value (like sotherby’s), but art is only a good investment if you have the kind of money to lose 99/100. And even then I’ve heard some good reports from dealers and researchers that that might be optimistic
I'd say it is a complex gambling game, because it is literally random.
Also the fine art scene is filled with under the table deals and tax evasion.
@@NihongoWakannai yup!
It is a great investment... if you want to launder your money
It's something only the extremely wealthy can pull off. You need to have the proper conditions to store the artwork and that is NOT cheap, especially something like a Monet or Picasso.
There's also the issue that some outsized values of artwork are allegedly due to an elaborate tax avoidance scheme, where one piece of a certain artist's work is bid up to the stratosphere, which allows legitimate appraisers to put more value on the other works by the artist, which allows the holders of those works to donate them to a museum for a tax write-off that's worth more than what was paid for the artwork before the scheme was set in motion. It's hard to say whether this actually happens at a reasonable scale, but I'm sure it's happened at least a few times in history.
Tax write offs on a donation can only be done on the cost of the object, not on the apprasial amount. If you bought the art piece for $1,000, got it appraised for $1M, and donated it. You'd only be able to write off $1,000.
@@GruMoney Maybe where you live. But that's not the case in the US.
Speaking as an accountant; this is a common misconception. Even if you donate the artwork against the appraised amount, you would still need to pay income tax on the appraised value. So it would really be a zero sum game. Or even negative since most states and countries will have a maximum for how much you are allowed to donate in a given year.
The only tax incentive to invest in art, is that in many countries it's not seen as an investment category and therefore exempted from wealth tax.
@@stephans1990 That's not what a zero-sum game is, but yes, you're generally right - however.
For example in german tax code there is a thing called "private selling transaction" (privates Veräußerungsgeschäft). If you hold to your painting, bitcoins and such longer than a year, you're allowed to sell it tax free - even if you're making bazillions with it (laundermat to the tits). Of course if it might stop applying if you're doing in... non-privately.
But: you won't gain a tax loss from donation or selling it with loss as a person.
As an enterprise it's different ofc.
I mean, I'm not going to say that any of you are wrong about the laws in your jurisdictions, but how I described it is how it works in the US. I could add "trust me bro I'm a Certified Public Accountant" but anyone can say that. If you're curious you can read IRS Publication 526. You'll find plenty of restrictions there, but as a general rule it's true.
What I fear is that more of these firms will pop up and trade these artworks between each other, creating a bubble until the bubble is nicely filled and pops.
You can bet that will happen!
I think that happened last year with luxury watches and grey dealers
Excellent video. The masterworks ads alone stink of bad fish. Investments driven by aggressive, social media-driven urgency and FOMO never end well.
Whenever something is heavily promoted on YT, I tend to be verrrry wary. Thanks for pointing this out ! keep up the good work !
If it sounds too good to be true. It probably is! Thanks Plain Bagel
It usually means more money is going into advertising than product development. a lot more.
True!!! Remember Harry's razors?
You don't see them anymore.
Once it goes full shadow legends you know something is off
The voice of reason strikes again, and brilliantly so. Even TH-cam channels that cover financial topics (Modern MBA, for example) are shilling for Masterworks, so I was getting a bit concerned. We need more like you!
Cough Economics Explained cough
@@johnnytifosi And on the last video they were sponsored by Established Titles. LOL. I unsubscribed after that.
@@vasriccio same here
@Vicente Riccio I didn't. Cause i use vanced. And youtubers think its unethical to use ad blocks.
If they show unethical things, then i counter with my unethical blindfold
Same with Joe Blogs.
What always turned me off were the ad reads themselves as they tend to be very deceiving. YTbers would often literally call such investments as "safe" and "good bets" which you quite thoroughly explained are anything but. And all ad reads should of been approved by the sponsoring company so in effect they put their official seal on it. It's one thing to hear of some scummy clickbait YTber promoting them but they seem to be getting alot of fairly reputable people onboard. It's so sad and honestly frustrating that this is still happening after the whole established titles scam.
How are they gonna afford all these sponsorship deals if it's not a scam? All these big marketing campaigns are not sustainable. At best you'll get a crap product or overpriced service. It's like those old TV infomercials. Reputable companies do not operate like this. You don't have videos sponsored by Kia or Colgate because it doesn't make sense financially for a company that offer honest product/service.
Government going after crypto for being shady but "investing in art" is even more BS. It's speculation!!
That upfront fee, that they really go out of their way to not tell you about, is pretty significant. I would call this malicious advertising - legal or not.
I was always paranoid about masterworks for a single sentence every single one is saying it when they talk about masterworks, which is " use the link to pass the waiting line", which it feels like they're trying to amass as much as possible before the bubble burst
For me if felt like marketing manipulation to try get FOMO from the people. Like what company has a waitlist lmao, Hella sketchy
It's not necessarily about hooking people before the bubble pops, but it's a very obvious appeal to the principle of scarcity. Companies use those kinds of tricks to make people think that they're getting exclusive access when they're actually not. Personally, I find it scummy and off-putting, but it seems to work...
Totally not a rugpull, i swear :)
It very much sounds like scarcity manipulation
Loved the suspenders reference! Bagels and coffee make a fine pairing 👍
A major issue I have with investing in art in general is the circle-jerky market of art appraisal and value effectively set up to benefit wealthy owners of fine art. Not to mention the fact that the whole speculative aspect of the market depends on finding a greater fool to sell your art to.
I've always suspected Masterworks itself as being part of the circlejerk and a mechanism for artificially creating greater fools.
May not necessarily be a greater fool. There are ways that people use art to dodge taxes "legally" using appraisal and donation tricks and oftentimes valuable but not top tier paintings are used to do this. Maybe Masterworks has backend ties to these people?
Thanks for this one! It's really needed, as Masterworks' ads pop up almost everywhere on youtube. The misleading advertising etc. you covered is enough on its own to make me steer clear of such a company. If it sounds too good to be true ....
I bought some art from an auction. But not to turn around and sell. I just get stuff I like to hang up and enjoy. I would never buy shares of a piece I couldn't physically own. I got to meet a couple artists in person which was really cool. Lebo is a really down to earth dude and his works are very colorful. If you ever visit Miami, you might see some of his works around as his studio is there.
I do wonder if there’s some value to buying shares of art if it’s to preserve it for all time. I’d feel good about spending $20 on a “piece of the Mona Lisa” if I knew it went to the guards keeping it safe, the glass it’s behind, and the building it’s in. You’re not owning it but you are contributing real money to its safe existence! Having a financial kickback for that is also good! But this isn’t that lol.
@@iversiafanaticI like the idea. I would probably frame it as "Adopt an Artwork" rather than shares. Make it clear that you are not buying ownership of the artwork you make a donation to the museum. Also clearly communicate what the donation money is going to be used for.
I wouldn't adopt the Mona Lisa. That painting is famous enough to earn its upkeep. I rather donate to smaller museums and less famous artists.
Masterworks as a concept pitched to “art lovers” was misguided. The appreciation selling part of art is just the benefit to a collector. The primary purpose should be the love to have it and look at it everyday.
Very soon we will start seeing people selling fraction shares of luxury watches lol
@@Redolentleeki own part of a rolex, it own it from 1:15 PM to 1:17PM
So appreciate that you made this video. Two things: 1) the lack of SEC oversight opens up a lot of fraud risk, which should be enough to scare retail investors away. 2) Masterworks doest even offer licensing or other revenue generating avenues from their art ownership, so you’re literally letting them take your money for 10 years to do as they please
Your expected return is somewhere between a timeshare and a class action lawsuit
I just buy art at yard sales, ebay, etc, and hope prices go up. Little risk, and there is a large potential for an upside for some of the works. And it's much more enjoyable than sending my money to others.
When you buy a painting you normally just get the painting and not the copyright or licensing rights to it unless the artist or their estate agrees to sell them separately. So if the artist says no or already has other licensing deals that would conflict then there's nothing they can do. If they were able to get rights I guess the LLC could have like a print-on-demand merch shop but I think at a certain point it would become a question of focus, like are you an art investment company or are you a licensing company.
SEC is for weak losers.
It doesn't mean anything and it won't protect you one bit.
Idk, lack of regulation certainly didn't scare people from crypto
This is what sets you apart from the other finance youtube channels. There's other people doing good analysis, like Modern MBA and Economics Explained, but they will never bite the hand that feeds them, even if thats in the best interest of their audience. I am sure you received offers to advertise Masterworks, Established Titles, etc. - the fact that you never do shows how much you value your audience and your credibility on this platform. Please keep up the excellent work - I advise people to check out your channel anytime they want to know more about investing!
I haven't watched Modern MBA, but EE even without the ads is sus af. Their arguments are at best sloppy. Every video will contain at least one massive contradiction that undermine everything they said that wouldn't make the grade in high school. Even in the first video I was like, did you proofread your own script? It isn't even an "Oversimplification" issue, but being straight up wrong and pedalling trickle up/laffer curve/Invisible hand/over-regulation/blah nonsense. I bailed around the minimum wage video, which was one giant holy s*** are you for real??!!.
Macro and Money did a polite take-down on one of their less horrific videos, finding plenty of dirt.
Economics Explained doesn't provide good analysis 🤡
Really disappointed that this episode wasn’t sponsored by Masterworks! 😂
lol
Thank you! It disappoints me that David Stein of the "Money for the Rest of Us" podcast has been recklessly advertising Masterworks, without a word of caution. It's irresponsible and shows he doesn't have the integrity of a fiduciary. What gets me about Masterworks sponsorships is, the TH-camrs and podcasters say something like, "And Masterworks has given me a special code you can use to get to the front of a long waiting list." Yeah, right. If everyone can get to "the front of the line", then there is no line. Red flag!
Basically Masterworks functions as a filter to remove channels with bad due diligence from your subscription list
My rule of thumb is always "If it were really that good I wouldn't need to hear about it through marketing and ads."
That's solid advice, anything in social media is dubious.
Nah man, coca cola disproves this. Unfortunately. My teeth display acid erosion from years of regular soda drinking 😳
Unless it's flex tape.
@@cleigh3796 yeah but coca-cola does this not because someone might not have heard of it, but for the people who sometimes get an itch to drink a soda, and by having their brain filled with milions of cola ads, they instinctively reach for a coca cola.
It's always pretty suspicious when someone is trying to sell you a get rich quick scheme instead of just using it themselves...
One must remember to ask not only "Is this a scam?", but "What's the catch?" There's *always* a catch. Sometimes it's worth it, and sometimes you need to walk away. :-/
The catch is right in your face. Would you invest your money with a company that spends so much on marketing?
they're talking generally...@@DJ_POOP_IT_OUT_FEAT_LIL_WiiWii
Masterworks has been pushed as hard as Established Titles for a while now. It's always been very suspicious.
My default position for any sponsorship that you find on a TH-cam channel or Podcast has become one you take with a pinch of of salt.
As an artist I’ve heard stories about how terribly run this company is. According to rumors the people on they have hired on the sales side come from the financial industry and know very little about the art and have made wildly inaccurate claims when they approach larger investors.
Also fakes are a huge problem. I heard it estimated that up to 50% of Art in museums are faked or mis attributed. While that may be high there are plenty of stories of people buying an artwork for hundreds of thousands of dollars only to find out it was a fake or stolen and losing the entire value of the artwork.
It’s a super risky investment. There are a reason collecting is only for the wealthy. They are the only people who can afford to take such risks.
I looked into Masterworks a year or two ago. My BS meter quickly hit the red zone. I think your analysis is spot on.
That 11% up front and then the 1.5% management fee was the largest red flag to me in this video. My money is safer in an index fund and there's no amount of time I have to 'wait' for me to earn back those percentage differences cutting into it
@@errhka”My money is safer in an index fund”-this is almost a universal truth, lol. 100% of my portfolio is in index funds. Nothing actively managed, no crypto, no scams
Great video! Also worth pointing out that, of the majority of art owners who buy for the 'joy of ownership', many do in fact sell when they need to - just that it's usually under the table. Sometimes, even in legitimate sales, a big chunk of the price is actually paid in black to the dealer, and none of this is going to be able to find its way to an investor on Masterworks who can only receive a portion of the sale when it's legitimate, but not from the rest of the iceberg.
Also reminds me of those fractional collectibles. Be it video games, sports cards or other cards... Somehow feels insane to invest in fractional increase of value. Specially in this market.
The Coffeezilla joke was 100% comedy GOLD! And also enormously respectful to Coffeezilla.
If there weren’t enough good reasons to watch your channel already!
Great video! So I actually joined Masterworks, and invested $10,000 with them, across two pieces of art back in November 2021. You're right, after multiple conversations with their representatives, the "True-up" cost was never mentioned, and it was only after my investment did I find the language within their filings.
The point in the video where you touched on the "survivorship bias" that can make the index returns seem better than they are is a great point, one that I didn't think about it. Since I bought shares in those art pieces, they haven't been sold, but they have been apprised, and apparently, their value hasn't gone up. Granted, the stock market indices are in the red since that date, so technically my art pieces are "out-performing" for the time being. Granted, it's all illiquid and based on an appraisal, so who knows?
At the end of the day, I decided to throw some money into it out of interest, it represents
Seems scammy and very risky
Honestly, a quick google search will find pretty much exactly the same thing everyone else has said. Masterworks is a realistically safe, although, not perfect, investment. They openly do tell you that investing is for those who are more wealthy, will be locked up for years, and will take years before you get your investment back. They are clearly not trying to scam anyone, and it's honestly a really good idea.
You're better off putting 5-10k in 2018 Topps Chrome Shohei Ohtani cards (parallels /50 or rarer)
Wow my advice aged well didn't it 😎
@@sp123elaborate
This video is pretty much what one could call public service. Thank you!
Huge respect for Richard’s candour ! ✊🏻
Lots of YT gurus are advertising masterworks as if it’s something worth investing with their own bs inputs to their audiences, shame on them!
Thank you for covering masterworks. I've been seeing a lot of good youtubers being sponsered by them and it really rubs me the wrong way. Their platform seems really sketchy and misleading trying to promote a non-market illiquid asset as a great investment opportunity, oversimplifying the caveats and advertising to the common masses who wont know any better. You deserve some donations
Thanks for covering this! The advertised returns seemed too good to be true and the obviously fake waitlist was a red flag. Yet I hear creators I enjoy advertising for them.
Subscribed based on “exploring the SEC filings and talking to the company’s representatives”. Not the highest bar but it’s more than most people I’ve seen these days commit to.
If you don't hold it, you don't own it. I don't trust any of these companies that sell "stock" in things like art and sports memorabilia. There's too much that can go wrong, and when it does, you better believe that you'll be the one holding the bag.
I started writing a comment on Kings and Generals channel about their endorsement of Masterworks, but gave up because I couldn‘t articulate my concerns properly.
You‘ve presented it perfectly. When financial products get so much marketing even on non-finance channels, it‘s a clear red flag.
With how eloquent this guy is, he could easily be swimming in money if he really tried to grift people, but he instead tries to educate people on financial realities, being down to Earth and clearly explaining the inherent shortcomings of risky investments in a way laypeople can understand. Class.
Love your videos! I wish more youtubers were as honest and transparent as you !!
Finally someone putting in the work to bring some clarity on this questionable investment opportunity.
Thank you!
Respectable TH-camrs who took the money - please take notice.
Thank you. I was tempted over a year ago to allocate into masterworks and after the phone interview and further digging I was concerned about their fees and the veracity of their claims. It just bugged me immensely that many financial TH-camrs are dishing this out to their subscribers as a great opportunity. Thank you for you honest review.
Finally someone respectable doing a breakdown of this platform. I was getting worried how many financial and business TH-camrs are pushing this platform to their audience and often in sneaky ways promoting it in the same breath when talking about inflation and upcoming bad times. I understand why otherwise rational and respectable finance youtubers accept the sponsorship (and probably they cannot do a thorough breakdown due to their contracts), but I honestly respected you much more now that you almost certainly refused a sponsorship deal with them and instead decided to warn your audience.
Keep up the good work Richard ❤
totally, yesterday i was watching a video in one of thses channels and masterworks promotion got in. A lot of comments were critisizing their advertisement and the intentions of the channel for continuing advertising them
Thank you for bringing the other side of the investing scene to those that may not be savy in such fields. Appreciate the effort to be fair and transparent. TH-cam ads by influencers seems to be stretching things a bit and too good to be true most times as it is.
I like your work sir. Your honesty and appreciation for financial consumers deserves a subscription
Thank you for this! I cringe every time I hear a TH-cam influencer promote this "investment" without talking about any of the MANY risks involved!
Another great reason for wealthy individuals to own art: avoid paying taxes and money laundering.
Exactly! I doubt MW will own any of the “valuable” art. Those pieces are owned by rich people and sold to other rich people at inflated prices with each sale for unspecified reasons that have nothing to do with the value of the art.
I’m glad someone else said it!
@@nameunknown1519 this is exactly the point of masterworks. There is no true value to these things, it’s all made up. They can drive up the price of a work of art in the dark (easy to do when you’re whole industry operates in extreme privacy) and then sell this inflated finger painting to the common idiot through masterworks because looks how much it has increased in value recently! What a great investment! Now instead of merely getting a tax write off the rich guy can offload his inflated garbage to the Everyman and get paid cash, the auction house gets paid cash, and masterworks collects their cut too. Now you the investor are saddled with a manipulated asset that will never sell for as much as it was bought for, And you even have to keep paying their annual fees forever!
Money laundering for sure.
@@nameunknown1519 indeed ;) a not so hidden loophole for the wealthy that's for sure.
When my mom died we tried to sell some pictures by a local artist that were once very valuable. Taste changed completely and we didn't find any buyers. In the end we donated these pictures to the city archive and were lucky they took them. They only took them because they depicted well known landmarks and buildings.
Artwork is fickle and even experts can only guess.
Sorry for your loss
Your honesty is so refreshing! With most financial content, it's exhausting to constantly parse the truth from the agenda.
Thanks Richard! Masterwork and people promoting it immediately gave me super fishy vibes.. hearing you articulate this with some great research was amazing …
I always was super worried by the claims of 20/25% per year returns, and having outperformed the stock market.. which is such a red flag
I’ve been really bothered by this sponsor, thanks for covering it. Respectable channels have been pushing this “better than stock” investment
One of the big things that has struck me about masterworks is that it has a similar structure to a ton of private equity. They have the ability to hold indefinitely, only mark to market at sale, etc.
Thank you for this video. I spoke to them 2 years ago and asked very basic questions. The response was, "Are you a lawyer or something?" I am not, and as I mentioned, the questions were basic. My conclusion was that I didn't want my money tied up for an unspecified amount of time with less control of said money as compared to a brokerage.
This is why you're one of the very few finance youtubers that I am subscribed to!
Also, my mum works in insurance and she says that keeping fine art is expensive, because of how easy it is to damage it, so I am not even surprised by the extra fee 11%.
Basically the lesson of this is yet again: read the terms and conditions 😅
These objective reviews and deeps dives into the small letters at the bottom is why I follow this channel. No hype, no moon, real numbers with feet kept on the ground
Every generation needs to be taught the lesson that things which sound too good to be true usually are.
We need to teach it multiple times a generation, daily affirmations
The first time I saw an ad for this, I realized that they knew nothing about the art market, collectors, or connoisseurs. The art market is so random and depends on trendiness and zeitgeist. It will never dependably make anyone money. Every once in a while, there'll be a crazy sale of something, but that's the exception, not the rule. Most art sales are small. And collectors don't collect for the investment. They want to see and live with the art. The ownership, not the sale, is the important thing.
Thank you. I think MasterWorks is worse than Established Titles. There are just some basic problems like the art market being notoriously opaque, auction houses getting 10%-15% of each sale, and upkeep costing 1%-2% every year. Plus you need a lot of education or 10 years experience to really reliability judge art prices.
Masterworks is much more harmful than Established Titles. Anyone with an ounce of common sense probably suspects that you can't *really* become a Scottish lord by forking over $40. By contrast, Masterworks on the surface seems like it could actually be legit. I can easily see people pouring thousands of dollars into it.
I have always found them at best extremely highly questionable.
I am a collector of very specific items and I know in fact that what I collect has vertically no resale value. Upon my death my collection that I have spent tens of thousands of dollars on in all likelihood will be thrown into a dumpster to be hauled away to a land fill but I really could not care less. I collect what I collect because I like owning them and I enjoy having my collection. My greatest fear is that my house will burn down as my home insurance provider out right told me that my collection will not be covered at all and they wont cover it with any amount of extra premium.
What items do you collect?
Tell us what you collect!!
@@realleon2328Funko pops obviously
Hey Bagel, great video! When speaking about diversification benefits of art I believe the papers you referenced by Deloitte and Korteweg et al. may not sufficiently account for the impact of resale factors on correlation/covariance. Like you mentioned many alternative assets have a survivorship bias such that resale is delayed in cases of price decline. This is apparent in the VC tech space, private real estate trusts/lps, and in other collectible markets with granular assets. Because of the behavior to never sell down and have a drop-off in asset marketability, you typically see a flat performance during downturns due to hold-outs, paired with extreme illiquidity. While there are various techniques which can be applied to infer the true asset volatility of illiquid assets, the Korteweg paper's methodology seems to provide a relatively unaggressive take, while still suffering from an understandably poor dataset.
As an amateur artist myself i would never invest in something like this because i feel like other artists, especially someone like Banksy would totally hate the idea of the art being "sold" like this.
Banksy? Pathetic crap.
Yes, I am soooo glad you did this!! I have always questioned MW as a successful investment strategy v. some highly speculative investment promoted by influencers. Everyone needs to focus on due diligence before they give up their money.
I go to a lot of estate auctions, and the market is flooded with nice looking artworks that just don't sell for more than the raw materials used to make the painting. It's not a joke that in almost all cases, you have to be dead to start making good money as an artist.
How can you tell which artwork will skyrocket in value? You can't, unless you're buddies with a major gallery and know which works they're about to promote.
RN.. One of masterworks featured artist Wong is a guy who recently offed himself and now they bought it from his family for 5mil
When I first heard about Established Titles, I thought that idea was so ridiculous, it would've been easy to call it a scam, when I heard about Masterworks, I thought the idea was very promising, so promising because I thought fine art actually had a lot of value, although I haven't tried it out yet, I came here to watch this video to learn whether it is a good idea or not.
We seriously need a Coffeezilla video about this topic, having a Coffeezilla video on Masterworks will help a lot of people get better understand of what is really going on with TH-cam sponsorships these days.
My understanding was that the fine art market was mostly about tax evasion. Since individual pieces can can vary wildly in value from year to year, and are easily donated and shuffled around to, for example, one's personal charitable foundation as a stonking huge 'donation' that costs nothing as said personal nonprofit can 'choose' to store the thing on your own sodding wall.
Finally someone is talking about Masterworks. From the beginning I sensed something was off with that business model, and after the FTX collapse I got extra suspicious. Thank youfor covering this topic Mr. Richard Bagel.
This level of research for a TH-cam video is insane and appreciated. Thank you :)
When I saw the YT sponsored advertisements, it was a sequence of red flags in how the product was being presented, to which I would also add a waiting list to buy the artworks' shares.
Looking more into details, and thank for guiding us through the SEC files that are not the most "user-friendly" documents, it would look like it is not an actual scam but the offer is rather misrepresented in a very biased manner, with probably the true-up costs being the dodgiest part that are barely even mentioned en passant.
As someone who has some collectibles as part of his investment portfolio, I must say I am not very convinced by the idea of buying shares of a piece I will never really own, as collectibles are both an highly illiquid and highly volatile asset, the main benefit of which is that in worst case scenario owners are left with a phyiscal object they probably liked in the first place. With the Masterworks concept (which I saw it also applied to trading cards once), one doesn't even have the benefit of this fail-case.
Which would seem to confirm the general rule of thumb that if something is sponsered on TH-cam, rather avoid it.
I was never interested in putting any money in Masterworks, but I really appreciated your explanation of how it works.
Thank you.
Subscribed.
Yeah, I used to work for a Chinese billionaire that collected art, the art prices that are reported are overinflated. So, if Masterworks has a really crafty group, maybe it can make you some money, but also maybe not. Additionally, that liquidation issue seems super scary to me, especially when low-risk interest rates like CDs are already so high...
The value of an artwork or similar trophy asset depends on what the second highest bidder is prepared to pay for it, it is very subjective because it is about how much they value the ability to sit and look at it, and how much spare cash they have for such luxuries.
Due to various sanctions, the Russian oligarchs are out of the market, and that must have some impact on valuations. Of course that could be considered a buying opportunity, but either way, that is a very big risk.
You should do videos like this more often. Love the fact that you are putting out a proper analysis of a fin tech company for viewers to understand what they're getting into using your experience and knowledge.
Very good report Richard. Evenhanded, thorough, and entertaining as always!
Love that you were able to go through all this info. because it would have taken me a long time. Masterworks seemed enticing to promote, but I will be passing on promoting them. Thank you!
After watching your video, my trust and respect for masterworks has increased A LOT. It went from zero to barely any.
The other problem with the artwork price index; money laundering is huge in the fine art industry and may skew the index.
That was always my red flag - from my understanding, a lot of the huge increases in price for art are for tax donations purposes for the rich & money laundering.
It wouldn’t make any sense for retail investors to get the same returns for an ordinary sale.
This sketchy aspect of the bizness is rarely even considered. Buffett and Munger do none of this. So I'm out
The fraud and collusion potential for MW procurers is also a massive hidden risk. If I were a MW exec, the temptation to enter into a secret deal with a private collector to buy an art piece for a highly inflated price for a life changing kickback would be preeeetty high. At the end of the day, all I would be doing on the surface is adding a lucrative investment onto the books and maybe even getting a bonus for job well done from the company.
And even then, who knows, maybe that artwork generates actual interest by selling so high and will end up being sold for a profit 5 years down the road? Earning me another bonus...
Having gotten a taste, I probably would never stop. Until the entire house of cards collapsed...
If there is no regulation, this kind of thing is bound to happen sooner or later (probably already happening).
It's just as scammy as any crypto sh!t coin, just more socially acceptable
As a matter of common sense I wouldn't be putting my money into esoteric investments being hawked in TH-cam videos. Thanks for breaking down this particular one.