Last month’s article seemed to hit a chord with many of our readers … here are a couple of their comments:
Bill F. wrote: A great, well written and timely article. Perhaps it will make some art "collectors aka speculators" recall the riches they acquired in WorldCom, Enron, Exodus, JDSU etc. My only return is a few pennies collected by overpaid class action attorneys. But, I still have the joy--each day--of walking through my house and being astounded again by the talent of American artists. Thanks for your continuing insight.
Bill, I personally remember JDSU and I do not think my father will ever forget Global Crossing!
Fran Z. wrote: Right on! It is so discouraging to work with collectors who don't know what they are buying and lack the appreciation that art deserves. It is often more about "look what I can afford to buy". … I enjoy your insights so very much.
And now … on with the show.
The Economics of Art – WHAT!?
This past month we did see another wild ride for the stock market and many people were wondering what impact this would have on the art market … and so did we. Well, I am happy to report that even during the truly wild week of February 4-8, the Impressionist / Modern and Contemporary sales that took place in London did surprisingly well. Well, I will amend that and say that the evening sales did well … you know the expensive works of art … while the day sales, those filled with a group of rather lackluster items, had their share of ups and downs. It is also interesting to note that almost all the PR generated for this series of sales was for the evening parts … there was little to no mention of the day sales. And if any of you happened to see the Sotheby’s press releases you will have to admit that they, in and of themselves, were ‘works of art’. Adjectives like ‘extraordinary’, ‘unprecedented’, ‘highest’, ‘exceptional’, and ‘outstanding’ were in abundant supply, along with numerous statistical breakdowns – how many new buyers there were, where they came from, and most importantly the number of new auction records achieved. I guess they too were worried about the potential fallout from the recent stock market gyrations and wanted everyone to know that there was/is nothing to worry about.
Look, I have been in the art business all my life and since 1981 have been working at it on a full time basis. I have seen, in my short 27 year career, the good, the bad, and the ugly years; the latter of which, when the Japanese economy (real estate) hit the skids in 1990/91, will always stay in the forefront of my mind. During the years leading up to ‘the bust of 1991’, the Japanese were among the biggest buyers of Barbizon, Impressionist and Modern art and with their booming economy of the 1980s, they had the ability to fund their insatiable appetite and paid record prices for the works they wanted … remember the $78 million Renoir and the $82.5 million Van Gogh that Ryoei Saito, a Japanese businessman, bought in May of 1990? Those record breaking prices lasted for a full 14 years (in 2004 a Picasso sold for $104 million). However, once the rug was pulled out from under the Japanese economy, it crumbled and the art market followed quickly behind. Many of the less important works they bought were just never worth the prices paid, and they could not recoup the money spent. I remember, during the early 90s, sellers coming to our gallery with tiny, crappy (for lack of a better word), Renoirs they bought for more than $500,000 - trying to sell them for less than half. There were no takers … hey; those works should have never sold for those crazy prices in the first place!
Today’s global art market is a very different animal. We have buyers from various countries – USA, Europe, Asia, Russia, etc. – not only vying for the international works but paying top dollar (yen, euro, etc.) for their home grown artists. Now, if we are saddled with a global economic meltdown then we are all going to feel the hit regardless of the business we are in, but it is more likely that certain economies will do better than others and as the strength cycles from one nation to another, the buying strength in the art market will move from one country to another. So it is my belief that a total art market meltdown is less likely and we should be prepared to see shifts in strength … at one point the Americans will be the big buyers, then the Europeans, then the Asians, etc. and since many of these wealthy individuals are chasing the same type of works, the general art market should stay somewhat strong. Yes, there will be shifts in interest and certain markets will take a breather (nicer than saying “a much need correction”), but overall, art has become, and I cannot believe I am saying this, an investment. There is a great deal of global money moving in and out of this commodity (saying ‘commodity’ hurt as well) and there will be people to support each of the markets as we move forward. Just wait, one day someone will develop a formula to calculate the exact value of a painting through a mechanical device that will analyze the work based on quality, condition, period, etc. and then you will be able to watch its value fluctuate every minute of every day … oh boy! What fun that will be!! It will be similar to … the stock market. When that day comes, I do hope I am sitting in the shade on a tropical beach.
Anyway, that is enough of my elementary attempt at art market economics … now let’s move on to the results.
The Impressionist and Modern
I will start my roundup with the February 4th, 5th & 6th Impressionist and Modern sales in London …and as we have seen in the past, these had their share of The Good, The Bad, and The Ugly.
Top honors for the week went to Franz Marc whose Weidende Pferde III (Grazing Horses III), from 1910, brought an impressive £12.34 million ($24.5 million); while Alexej von Jawlensky’s Schokko mit Tellerhut came in second with £9.43 million ($18.6 million) – this work last sold in 2003 for $8.3 million; and Renoir’s tiny (10 ½ x 8 inch) La Loge and Picasso’s Tete de Femme (26 x 20 inches) tied for third ... each making £7.41 million ($14.6 million). In fourth position was another Picasso, Femme au chapeau, making £5.73 million ($11.3 million); and tied for fifth place were works by Giacometti, Van Dongen and, once again, Picasso – each making £5.62 million ($11.06 million). I could go on spouting names and prices, but the real test is the overall results … and here they are. The evening sales … which included a number of very nice paintings and some, over estimated works … brought in an impressive £222 million ($438 million) with 167 of the 207 works offered selling -- that is about 80%. The day sales were a different story. Here there were many, less than nice, works being offered and of the 753 pieces, only 501 found new owners -- a sell through rate of about 66% for a total of £48.9 million (about $96 million). This brought the 3 day total to £271 million ($531 million) ... not too shabby.
Now, to compound the fracture, Christie’s decided to hold its major London Contemporary sale on February 7th (Sotheby’s decided to give everyone a break and waited until the end of the month) and with 338 works on offer, that brought the week’s total for just the two auction rooms to almost 1300 works … far too much product!
Top honors for this set of sales went to Francis Bacon when his Triptych 1974-1977 sold for £26.3 million ($51.68 million) … the buzz before the sale was that the work would sell for more, but $51 million is a pretty good result in my humble opinion. Second place was snatched by Gerhard Richter when his 1966 Zwei Liebespaare made £7.3 million ($14.32 million), a record for the artist at auction; and bringing up the top three was Lucio Fontana’s Concetto spaziale, Attesa (a red canvas with one vertical slit) at £6.74 million ($13.2 million), also an auction record … hum, I wonder if the Nahmad family were the buyers – in a recent Forbes article they claimed to have 100 works by the artist in their warehouse; you know, one needs to protect their investments.
In the end, of the 338 works offered, only 235 found new owners, resulting in a buy-in rate to 31%. Still, £91 million ($179 million) was spent between the evening and day sales, and this, added to the Impressionist and Modern sales results, brought the week’s total to £362 million ($710 million) … so much for worrying about the art market!
Nevertheless, these results do support my theory that the market cannot absorb almost 1300 works in a 4 day period … something the auction rooms just do not want to deal with. Buyers and sellers would be much better served if they spread out the offerings … dumping too much product on the market will have the same result as trying to sell too much stock at one time … there are going to be a number of unhappy sellers, not to mention some unhappy buyers (but many of them will not realize that for years to come).
I do not want you to feel bad for Sotheby’s (not having their sale that week) because during the week of February 14 they had the RED sale in New York. This benefit sale of Contemporary art, sponsored by Bono & Damien Hurst, brought in a whopping $42 million … the presale estimate was $21-$29 million. All the art was donated and the proceeds went to the United Nations Foundation to support HIV/AIDS relief in Africa. New auction records were established for 17 artists and the top honors for the evening went to Damien Hurst when his Where There’s a Will, There’s a Way sold to White Cube (the London gallery that represents the artist) for $7.15 million …nothing like market support!
I am out of space and will pick up next month with the last Contemporary sale in London.
Howard L. Rehs
© Rehs Galleries, Inc., New York –March 2008
Gallery Updates: This month works by the following artists have made their way through the gallery: Julien Dupré, Ridgway Knight, Diaz de la Peña, Henry V. Lesur, Colin C. Cooper, Van den Eycken, Kuhn and 5 works by Swatland.
Web Site Updates: We have added, or will be adding, works by the following artists to our site this month: Ridgway Knight, Jules Worms, Boudin, Corot, Cortes, Bonheur, Blanchard, Swatland, Harris and Kuhn.
Next Month: Continuing sales coverage.