Thursday, May 17, 2007

Mr. Buffett, Meet Mr. Rockefeller

$16,200 per square inch

At Sotheby's Tuesday evening, David Rockefeller's prize Rothko, “White Center (Yellow, Pink and Lavender on Rose),” sold for $72,480,000.

That's major money! The previous auction record for a Rothko painting, set a couple of years ago at Christie's, was $22.4 million.

The undisclosed buyer got a lot for his millions. The painting is over seven feet tall and almost five feet wide. Price per square inch: about $16,200.

David Rockefeller made a handsome profit. Reportedly he purchased the Rothko for less than $10,000 back in 1960.

Mr. Rockefeller doesn't get the entire $72,480,000. A bit more than 12% goes to Sotheby's as a buyer's commission. Also, costs of insurance and other art-related incidentals have to be considered when determining his actual profit.

OK, let's round Mr. Rockefeller's cost basis up to $10,000 and suppose he nets, after expenses and before taxes, about $60,000,000.

On those assumptions, Mr. Rockefeller's art investment has produced an annualized compound return of about 20.3%.

That's a long-term record right up there in Warren Buffett territory. (From 1965 through 2006, Warren Buffet's Berkshire-Hathaway has produced an annualized return of 21.4%.)

Now we know why art is called the beautiful asset.

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