Online Extra: Invest for "Psychic Income"

That's the approach to buying art that big collector Eli Broad, chairman of AIG SunAmerica, takes

Having made his fortune in real estate and financial services, AIG SunAmerica Chairman Eli Broad is among the top 10 art collectors in the world, according to ARTnews magazine. He and his wife, Edythe, have chosen to focus on contemporary artists and paid top dollar for works by Andy Warhol and Alexander Calder in 2002. Still, Broad believes that in some areas of the art market, prices may have peaked. Here are excerpts from a recent conversation with BusinessWeek Online's Thane Peterson:

Q: After attending the big New York auctions in November, what's your take on the art market?

A:

Frankly, I was surprised at the strength of the contemporary-art sales. I think people are down on the stock market. They're buying art and, in some cases, real estate.

Q: Were you buying?

A:

We don't sell. We're always buying art, regardless of economic conditions.

Q: Did you see any signs that the market is peaking?

A:

Not in contemporary art. There were signs in areas we don't follow closely, such as Asian and pre-World War II American art.

Q: What's your thinking on the prospects for the art market next year?

A:

I cannot imagine the market going higher. If anything, I still believe there should be an adjustment. Nothing can go up in a straight line, as [the contemporary-art market] has for three or four years.

Q: What's your advice for collectors?

A:

People should be cautious and look for the best quality work. I don't think there's any need to be hasty. If people are passionate collectors and real connoisseurs, they ought to collect and not do so for economic purposes.

Q: Yet there seems to be a renewed trend toward investing in art rather than just collecting.

A:

Historically, people who have invested in art have not done as well [as they would have with] other investments. What you really get from art is psychic income. You've gotta have a love for the art. I would not advise anyone to invest in art from an investment point of view alone.

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