The concept of value in modern art becomes more tangible when you consider the current stir about the 32 Jackson Pollock paintings discovered in a storage locker a few years ago. Now, “Jack the Dripper” is famous for creating paint splatters. Every parent with a kid in elementary school knows that, because in first grade, every little tyke has to produce a Jackson Pollock-style painting in art class.

From a fundamental value perspective, there is very little difference between a genuine Pollock and my daughter’s art: fractions of a penny’s worth of paint assembled on paper in random patterns. Yet my daughter’s art will end up in a big cardboard box in the basement, along with her other memorable works. And one of Pollock’s large drip paintings (“Number 12” from 1949) was sold by the Museum of Modern Art last year for US$11.65 million.

But as the recent discoveries show, it is not the absolute value of the paintings that creates perceived value, but the authentication – the art world’s equivalent of analyst coverage. To make sure that the paintings from the storage locker are priceless Pollocks and not the worthless drop cloth of his idiot housepainter, the Pollock-Krasner Foundation has enlisted dozens of experts … and even commissioned a fractal analysis.

As with a stock or commodity, however, the real value of a Dripper painting will not be created until there is a buyer willing to pay more for the canvas and paint drops than a competing bidder.

(Ed. Note: J. Christoph Amberger is the Executive Publisher of the Taipan Group, a financial advisory service. The above is an excerpt from an article that appeared in Taipan’s free daily e-letter, Dynamic Market.)

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