← Money Rehab with Nicole Lapin
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If you've listened to this show for any amount of time, you know that my favorite form of cardio is negotiation. Whenever someone gives me a price, my first instinct is to try to talk them into a lower one. And you would be amazed how often it works. But I understand that there are people who would rather run five miles than negotiate a bill. If that's you, then you need to know about today's sponsor, Experian. You could save money by letting Experian negotiate the rates on your bills. They'll keep an eye out for new deals and savings opportunities and will negotiate directly with your provider on your behalf. But that's not the only pain point they've solved. If you hate going through your accounts to see what subscriptions are still active, don't worry. Experian can take the pain out of canceling subscriptions by handling it for you. Just keep the ones you want and put money back in your pocket. Over 200 subscriptions are cancelable. Here's the best part. You keep 100% of your savings. Get started with the Experian app now. Results will vary. Not all bills or subscriptions Eligible savings not guaranteed Paid membership with connected payment account required. See experian.com for details. Support for the show comes from Public, the investing platform for those who take it seriously. On public, you can build a multi asset portfolio of stocks, bonds, options, crypto and now generated assets which allow you to turn any idea into an investable index. With AI. It all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year, you can literally type any prompt and put the AI to work. It screens thousands of stocks, builds a one of a kind index and lets you backtest it against the S&P 500. Then you can invest in a few clicks. Generated assets are like ETFs with infinite possibilities, completely customizable and based on your thesis, not someone else's. Go to public.com moneyrehab and earn an uncapped 1% bonus when you transfer your portfolio. I recently snuck off to Cabo with my husband for a quick beach reset. We sat in the sun, drank margaritas and did absolutely nothing. For the first time in almost a year, my shoulders dropped and my jaw unclenched. I'd love to do it again. Of course, the reasons not to pile up fast My daughter, my jaw. My dog. But you'll notice there's one reason that's not on that list. Money.
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That's because I have a cost cutting secret.
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I know that hosting my home on Airbnb can help offset the cost of travel, making that dream vacation less of a dream and more of a reality. But it's not just me. While you're away, you could host your home on Airbnb. And now hosting is easier than ever. With Airbnb's co host network, you can hire a local co host to take care of the hosting for you. A co host can create your listing, manage reservations, message guests, and provide on site support so the stay runs smoothly. Even when you're away, you get to share your space with someone traveling to your area while you're off making memories somewhere else. If you've considered hosting but need a little help, find a co host@airbnb.com host.
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I'm Nicole Lapvin, the only financial expert you don't need a dictionary to understand it's time for some money rehab. Today, I'm gonna ruin Rich People's Art game for you, but in the best way possible. You've probably seen headlines where some painting that you've never heard of is selling for $30 million at auction. Or maybe you've watched Succession and you've wondered why every single billionaire seems to be obsessed obsessed with contemporary art, but you never actually see any of it hanging in their homes. Some wealthy people love art for the sake of it, sure. But here is the truth. More often than you think. It's not about taste.
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It's not about passion.
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It's not even about art specifically. It's about hiding, moving, and multiplying money in a way that regulators can't easily touch. Today, I'm breaking down exactly how all of this works. I'll walk you through the Five Step Plan playbook that ultra wealthy collectors use to turn art into one of the most powerful financial tools in their portfolios, from tax loopholes to money laundering. And also share real life examples of all of this in action. But I did say we would start at the beginning, which is the purchase. So a wealthy person walks into an auction house, say Sotheby's or Christie's, and drops, let's say, 5 million bucks on a painting. And here's the thing. There is no set market price for art. A painting is worth whatever someone else is willing to pay for it. And that's part of the appeal. And also the loophole. There is no pricing formula. There's no earnings multiple here, just perceived value. And when you're rich enough, you can help create that perception. Take a Jean Michel Basquiat, for example. In 1984, his paintings were selling for $20,000. In 2017, Basquiat sold at Sotheby's Fort for 110 and a half million dollars, a record at the time for an American artist who bought it, a Japanese billionaire. Did he hang this art in his house? He certainly did not. It sat in storage until it was later sent on a museum tour. Because again, it is not about decorating your home with this kind of art. It's about building an asset. After buying the art, the next move is to ship it to a freeport, which is a private tax free storage facility. In places like Geneva, Luxembourg or Singapore. Free ports are legal black boxes for high value assets. You don't pay customs duties or taxes on the items stored there. And because they're not technically in the country from a tax standpoint, government cannot touch them. It's like the art enters this regulatory purgatory. Here's where it gets really interesting. Many of the most expensive works of art ever sold, the never leave these warehouses. They're crated, they're insured, they're stored, and then they're sold all over again, all without ever being hung up or even unwrapped. According to the Geneva Freeport, over 1.2 million artworks are housed there, including works by Picasso, Monet and Van Gogh. Why? Because inside a Freeport, the painting isn't just a painting, it's a liquid asset. And the government doesn't get a cut. Step three, reappraise the art. Let's say our original buyer stored their $5 million painting in Geneva. A few years later they get it appraised again and this time it is worth $20 million. Who decides that? Well, a private appraiser which can be hired by the collector or their family office. In some cases, appreciation of a piece of art is just about the legacy of the artist or the cultural significance of the work. But in some shadier examples, it's just the richest people in pulling strings. And when it comes to art, if you're a billionaire, pulling strings is easy. There is no sec, there is no NASDAQ for art. There's no central regulatory body that says what something is or isn't really worth. Valuation in the art world is largely subjective, based on comparables, artists reputation and you guessed it, how much somebody paid for similar work recently. So if a few insiders coordinate purchases at inflated prices, they can essentially manufacture value. And it is perfectly legal and incredibly lucrative. Take the works of Rudolph Stengel. His pieces were relatively unknown in the early 2000, but by 2017, one of his paintings sold for $7.3 million at Christie's.
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Why?
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Strategic placements in museums, carefully managed auctions and collectors who had financial reasons to see his work appreciate. Step 4 Use the art as a financial tool. Now that the painting is worth $20 million, the owner has three options, none of which involves selling the work. There's option A, borrow against it. Banks and private lenders now offer art backed loans. You can borrow up to 50% of the appraised value of your painting tax free. Because remember, loans are not income, so they're not subject to income tax. So if your art is worth 20 million dollars, you might take out a 10 million dollar loan against it and use that money however you want. You could buy real estate, you could fund a startup, you could fly to space, whatever. Option B, donate it for a tax write off. If the owner wants to look charitable and reduce their taxable income, they can donate the painting to a museum. Since the artwork was appraised at $20 million, they can claim that full value as a charitable deduction, even if they only paid $5 million for it. This tactic has been used by countless collectors. The IRS has challenged some of these appraisals in court. But most donations go through without a hit. Option C, Let it sit and appreciate. Some countries don't charge capital gains taxes on artwork, Switzerland for example. So if the painting appreciates from 5 million to 50 million bucks while sitting in Geneva, the owner can eventually sell it without paying taxes on the appreciated value. So let's do say that you let it sit and appreciate and now the piece is worth $50 million. Here's where step five might come in. Clean, dirty money. Let's say someone has $50 million in illicit cash. Instead of trying to funnel it through a bank, they go through an auction house. They bid on a painting either through a shell company or an associate, and they buy it from themselves. Now that $50 million is part of a public documented transaction, it is no longer dirty cash. It's art sale proceeds. This has happened before. In 2020, the US Senate released a report showing how Russian oligarchs used evade US Sanctions. One oligarch bought and sold art through shell companies with zero transparency, effectively moving money around the globe under the radar. Auction houses that facilitate these deals, like Christie's and Sotheby's, don't violate any laws.
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Why?
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Because in many countries, there's no requirement to verify the identity of art buyers the way banks must. It's a regulatory gray zone and rich people take full advantage of it. Now I know what you're thinking. I'm not buying $1 million painting.
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Nicole.
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What does this have to do with. Here's the thing. Understanding how the rich move money teaches us how the system actually works. Not the version that we're sold, but the version used behind closed doors. And whether or not you ever buy fine art, there are still some lessons here. Like sometimes valuation is narrative driven. Just like art crypto, even stock in your portfolio can appreciate based on vibes on what others are willing to pay for it, not the tangible value of the asset itself. Also, tax planning is everything. It is not sexy, but it is true. The rich don't pay fewer taxes by accident. They use legal tools available for them. From donations to loans to jurisdictional arbitrage. You don't need a Picasso to think like the 1%. You just need to remember the long term time horizon, get a little nerdy about tax strategy, and of course, listen to money rehab. For today's tip, you can take straight to the bank. You don't need millions to start investing in art. There are platforms that will let you buy fractional shares of high end artwork. Think Basquiat, Banksy, and even a Picasso for as little as 250 bucks. That means you can ride the same wave of appreciation as the ultra wealthy collectors without having to store a painting in Geneva. And if the art world still feels a little too abstract for your portfolio, you can also consider investing in companies that support the ecosystem. Like publicly traded firms specializing in art storage, logistics or insurance. You don't need a freeport, you just need a brokerage account.