During the last few months: consignors and fine art auction houses large and small are feeling the repercussions of the credit collapse. While prices are still good, heady expectations are being met with stronger and growing resistance. Additionally highly valued lots are being removed at the last minute by nervous consignors who cannot cope with the thought of not getting top prices. Consequently these overzealous expectations translate into unmeetable reserves (i.e. minimums below which the item cannot be sold) which are too high and give the impression of a weakening market being worse than it is.
IN a time when investment portfolios are being demolished so the notion adding to the pain by loosing money on the Picasso or other fine objects as well is unthinkable! Guess what? Nothing is immune to the market. Especially something as irrelevant to most of the world as art, yes I said irrelevant and I am in the business and have been for 30 years.
Not to worry though! This is a cyclical situation that all the auction firms go through every ten or fifteen years. Large auctions houses i.e. Sotheby’s and Christies who each sell 6 billion dollars a year each in fine art as well as much smaller regional firms like as Skinners Boston get a reality check from the REAL economy and sets them back on their well polished heels. They get a bit big for their britches, they try to become art bankers, making guarantees, paying huge advances to estates and all this other crazy stuff. They have done it before and it is always their “Waterloo”.
Sotheby’s in particular has a history of nearing the financial abyss, not too many years ago to avoid liquidation they were forced to sell their headquarters in New York City and then to rent it back. This was back in the days when the Chairman Mr. Taubman and the firms President D.D. Brooks were convicted of price fixing and put in jail or house arrest after a Federal probe.
Recently Sotheby’s released less than positive sales results as did Christies.
Not long ago, “too much” was something you never heard in in regards to certain categories of fine art. Recently the silly notion that Art IS a good investment has been back in vogue. Consequently coupling the investment angle with what some think is a way to buy social acceptance, the nouveau riche and others bought in and made an overheated market of it. Well, they had better grab their ankles and shut their eyes..their portfolios are shrinking and their art collection is likely getting a bit soft in value as well. Reality is that ART is a Mediocre Investment..always has been.
I am not saying the sky is falling, but if you’ve bought at the top of the current market, you now own a very long term investment I think. Buying great art has ALWAYS been a game for the wealthy..not merely the rich.
Interestingly these financial woes will have several effects for those of us who works as dealers, many of them positive.
- First dealers who have overpaid by using credit lines to build inventories will be gone in the coming months or year. This is fine with me as these types of dealers are not good for business.
- Consignments to auction houses from estates will have much more realistic expectations and will be reflected in the estimates and reserves resulting in a lot fewer “buy-ins” and more honest expectations.
- The auction houses who paid advances will not take a reality check and mover back from this practice.
- Investors who buy art solely as investments will also be gone.
Art does go up in value in time, however believe it or not, art and antiques in general isn’t a great investment. The lesson is collect what you love, collect what makes that side of your life better and you’ll fined the “dividends” are the pleasure they give you.
In time it will work it’s way out prices will shake themselves out, markets Always find their natural levels. This includes the art market as well.