Pop!
No not the famous fashion magazine. I’m talking about the sound made by the overly pumped-up art market, which finally burst last week and farted around the room like a rapidly deflating balloon.
Art is just another bubble. Prices in the art market have shot up much higher in recent years, in a similar way to yours and my favourite asset class – the housing market. The Financial Times has estimated that the Mei Moses All Art Index has risen 15.5% a year on average for the last ten years. As I reported a few months ago, we have seen some truly spectacular prices achieved for art. This is partially due to the humongous bonuses awarded to rich bankers and hedge-fund managers. Indeed it’s not just foreign billionaires who have viewed art as a valid method of investment. Up until now, it didn’t even matter if you liked the work of art you were purchasing - this was completely irrelevant. As long as it was by somebody famous, or even better, someone who MIGHT be famous one day, then it was snapped up at exorbitant prices by practically anyone. Art collecting has always been a valid investment method, until now.
The rot set in last week, when a highly publicised New York art auction went horribly wrong. The sale earned $270m, far below the pre-sale estimate of $401m. Poor ol’ Vince (van Gogh) failed to sell his wonderful landscape “Wheat Fields” for the required price tag of $35m. In fact the poor (dead) chap couldn’t sell it at all. Even the late Pablo Picasso couldn’t sell four of his paintings. Twenty of the seventy-six lots didn’t sell at all. And as for Sotheby's, well I am wincing in sympathy for them as they had to pay the owners a fixed guarantee on the lots (even if they didn’t sell), which was estimated to cost them around $240m. So their shares promptly fell for two days running, wiping a third off their value. Despite Sotheby's putting a brave face on things, that had to hurt pretty bad. They must be dreading this week, when they host their big New York contemporary sale. Fingers crossed, eh?
So what the hell happened last week? Two words - Credit Crisis.
Art investment is just another example of the boom ‘n’ bust cycle. With sub-prime still wrecking the US economy, and the UK about to follow suit, hedge-fund managers are not in the mood to spend their remaining cash on over-priced art which is costly to look after and insure. When people (even rich people) see prices falling, they suddenly lose interest in that class of asset, even if it is supposedly cool to be seen to own famous works of art. After all, having a famous painting or photograph on your wall when your posh buddies come round for a beer, isn’t going to be much to shout about if all your friends secretly think, “Blimey mate, you paid HOW MUCH?! Are you an idiot or what? Didn’t you know the art market has gone to the dogs?”
So my professional recommendation, as your trusty international nekkid accountant, is:
If you are an artist or photographer who sells his work, buckle up. It’s gonna get hairy after Christmas, so expect your collectors to disappear into the mist and your print prices to tumble forthwith…
If you are an art collector who has invested for the short term (and you are not deeply emotionally attached to the fancy piccies on your wall):
Sell! Sell! Sell! While you still can.
Sorry. Must stop blogging about economics. Force of habit, I’m afraid.
Here’s Clayre McKinnen – I really like this pose.
Art is just another bubble. Prices in the art market have shot up much higher in recent years, in a similar way to yours and my favourite asset class – the housing market. The Financial Times has estimated that the Mei Moses All Art Index has risen 15.5% a year on average for the last ten years. As I reported a few months ago, we have seen some truly spectacular prices achieved for art. This is partially due to the humongous bonuses awarded to rich bankers and hedge-fund managers. Indeed it’s not just foreign billionaires who have viewed art as a valid method of investment. Up until now, it didn’t even matter if you liked the work of art you were purchasing - this was completely irrelevant. As long as it was by somebody famous, or even better, someone who MIGHT be famous one day, then it was snapped up at exorbitant prices by practically anyone. Art collecting has always been a valid investment method, until now.
The rot set in last week, when a highly publicised New York art auction went horribly wrong. The sale earned $270m, far below the pre-sale estimate of $401m. Poor ol’ Vince (van Gogh) failed to sell his wonderful landscape “Wheat Fields” for the required price tag of $35m. In fact the poor (dead) chap couldn’t sell it at all. Even the late Pablo Picasso couldn’t sell four of his paintings. Twenty of the seventy-six lots didn’t sell at all. And as for Sotheby's, well I am wincing in sympathy for them as they had to pay the owners a fixed guarantee on the lots (even if they didn’t sell), which was estimated to cost them around $240m. So their shares promptly fell for two days running, wiping a third off their value. Despite Sotheby's putting a brave face on things, that had to hurt pretty bad. They must be dreading this week, when they host their big New York contemporary sale. Fingers crossed, eh?
So what the hell happened last week? Two words - Credit Crisis.
Art investment is just another example of the boom ‘n’ bust cycle. With sub-prime still wrecking the US economy, and the UK about to follow suit, hedge-fund managers are not in the mood to spend their remaining cash on over-priced art which is costly to look after and insure. When people (even rich people) see prices falling, they suddenly lose interest in that class of asset, even if it is supposedly cool to be seen to own famous works of art. After all, having a famous painting or photograph on your wall when your posh buddies come round for a beer, isn’t going to be much to shout about if all your friends secretly think, “Blimey mate, you paid HOW MUCH?! Are you an idiot or what? Didn’t you know the art market has gone to the dogs?”
So my professional recommendation, as your trusty international nekkid accountant, is:
If you are an artist or photographer who sells his work, buckle up. It’s gonna get hairy after Christmas, so expect your collectors to disappear into the mist and your print prices to tumble forthwith…
If you are an art collector who has invested for the short term (and you are not deeply emotionally attached to the fancy piccies on your wall):
Sell! Sell! Sell! While you still can.
Sorry. Must stop blogging about economics. Force of habit, I’m afraid.
Here’s Clayre McKinnen – I really like this pose.
Labels: Art, Clayre McKinnen, money
posted by Lin at 11:05 AM
1 Comments:
Lin,
I collect. Although, never intended as an investment (I enjoy looking at the pieces), my modest collection has attained a very respectable value. I have dropped out of the big name buying market for some time, and focused on local artists/photographers as opposed to the big names. I want to support those in our region. I have eclectic tastes, and buy what I like.
But even saying that, I have dropped off my art purchasing drastically. Yes..the economy is the reason. Our incomes have not been effected by the economy, but I am holding the checkbook a bit tighter to my chest as of recent.
I have noticed some drop off in the purchase of the photographic art that I am selling for Eric. But in saying that...some things sell for much more than I expect..but overall...there is a drop off. You are correct. Of couse, this is at a much smaller level than a Van Gogh.
cheers
from the other side of the pond
bt
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