Why Art Is Now for All the Super-Rich Only
Why Art Is Now for All the Super-Rich Only
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After a reportedly lively and lucrative Art Basel last month, London's auction sales showed that the secondary market for twentieth century art is firing on most, but not all, cylinders: while Sotheby's Impressionist and Modern art sale netted £178.6 million or $282 million—the second highest total for any auction held in London—Christie's less inspiring sale still managed to pull in £71.5 million, or $112.9 million. And yet these were modest by comparison with the staggering Christie's sale in New York in May where record prices were paid—$179.4m or £114.23m for Pablo Picasso's Les Femmes d'Alger and $141.3 million or £89.97 million for Alberto Giacometti's l'Homme au Doigt.
The art market's apparently unstoppable upward spiral has become an almost normal phenomenon, and many commentators have all but given up speculating on whether or when it might come crashing down. It's easy to get tangled in the impenetrable intrigue of the secondary market—with its buy-ins, third party guarantees, buyers premiums, and the rest of the bizarre lore and shadiness of the business—while the old notion of the art market "bubble" seems no longer to offer a reliable dose of periodic schadenfreude for those who like to see the very rich loose their shirts.
But in reality there's little reason to believe that the art market will see the same crashes it has experienced over the last thirty years, and last week's London auctions hold some of the clues to why.
Sotheby's headquarters in New York.
Photo: Sotheby's.
First off, we're seeing the steady establishment of high modernist art into the accepted canon of what's desirable at auction, particularly with previously "difficult" abstract art such as Kazimir Malevich's Suprematism, 18th Construction at Sotheby's London. Those kinds of sales show that the first half of the 20th century is now increasingly seen as culturally and intellectually serious and lasting in its reputation as important art—the big touring Malevich retrospective at the Tate, Stedelijk, and Bonn's Bundeskunsthalle last year didn't hurt in cementing Malevich's reputation, after all. Modernism is now completely uncontroversial, and collectors are keen on the strength of its brand.
But as illustrated by the contrast between the mega-sale of Picasso's Les Femmes d'Alger in New York and the stuttering sale of a late Picasso portrait in London, even in an established name in an established field, buyers discriminate between the merely rare and the truly, seriously, excruciatingly rare. Of course, when you're billionaire hedge fund manager Steve Cohen, having the most sought-after Alberto Giacometti for your collection is worth the $141.3 million. But while such prices are all about an artist's reputation, about the quality of the work and so on, in reality reputation means nothing without scarcity, and scarcity does one important thing in the art market, against which everything else is incidental. Scarcity guarantees the "store of value" effect, and "store of value," in a world of increasing global prosperity is what the increasingly global super-rich are really after. You might be about to download some of the greatest movies in the history of the world for the price of a beer, but great art is different. Scarcity counts.
Kenny Schachter On What's Really Going on at the Top End of the Art Market
Photo: Kenny Schachter.
The school year for the international art world stretches from Frieze London in early October to the London contemporary auctions, which this year, due to the crowded-out calendar that included the Venice Biennial in addition to Art Basel, pushed the calendar uncomfortably into July.
It's a long year for the art world.
The British summer heat wave, still underway, was not the only drain affecting the mood in the London salesrooms over the past week or two. There were numbers missed, excessive estimates that choked off bids, and a dearth of energy that gave the whole undertaking an underwhelming feel. All in the face of the greatest year in the greatest world art market that ever was. Mmmmmm…
The boom will continue, in the short term at least. But the market has its limits and they were reached in terms of malaise, if not in strictly financial terms.
If art fairs are the equivalent of the market's stock exchange, auctions are the commodity pits. London evening sales, though, will never match the scale of the New York events that scratch up against a billion a shot these days (at Christie's at least), and will always be relegated to the little league, where the record for a single sale sits at just over $200 million. That was from 2012, also at Christie's.
"To the Bearer on Demand" at Sotheby's Contemporary Evening sale on July 1.
Photo: Kenny Schachter.
There were some interesting stories, including a change in the dynamic of Christie's usual dominance over the last 3-5 years in the contemporary sector, in turn getting their butt roundly kicked by Sotheby's by a significant margin. The pendulum swings back and forth, depending on who's got the latest version of Christie's outstanding Bret Gorvy or Tobias Meyer—the recently departed Sotheby's rainmaker.
A few trends spotted at the previews included piped-in music at Phillips that only served to distract visitors (perhaps that was point) and significantly dimmed lighting conditions at Sotheby's and Christie's augmented by super bright spotlights on individual works. Which suited me just fine. What hasn't changed is the kamikaze auction house specialists at all the houses that zoom in on potential clients like ravens diving for vermin.
A more disturbing development was the money-themed viewing room at Sotheby's for a dollar-based art collection being sold in its entirety replete with the cheesiest theatrical props I've yet to see employed outside of a themed restaurant for spoiled brats. More on that upcoming.
Christie's launched the cycle of shaky sales, led by a group of five dreary Richters, only one of which managed to sell and for an anemic number below the low estimate. Even the Richter cover lot, owned by Christie's (still) failed to elicit a bid. Regarding the Richter landscape that graced the catalogue—a yellowish, blurry painting—a noted dealer from New York told me he could be convinced it was by half a dozen artists other than Richter.
For better or worse, the market wants its art to look (very much) like the rest of the works by the artist who made it.
Gerhard Richter has famously gone on record stating that crazy high prices for his art are “daft" and unsupportable by any form of reasoning. He even threw Pablo Picasso under the bus disputing the notion that any painting, including by the master himself, could conceivably be worth $20 million or more—by the way, a friend just mentioned he is about to close on a $300-400 million canvas.
After Christie's relatively dismal sale, Richter had a lot to celebrate.
Christie's wasn't all bad as some things sold well, like a Morris Louis for £1.5 million against a £500-700,000 estimate, and looking radically cheap compared to his peers; a Chris Ofili record of £2.8 million (a million above the high estimate) and a continuation of strong Sigmar Polke performances, turning the tide towards pricing parity between the two post war German giants of painting.
When a Christopher Wool made a well below estimate £3.4 million against expectations of £4-6 million, Jose Mugrabi exclaimed “Wow!' aloud. I guess he didn't just see it at Basel Miami.
Back to the dollar room, which made Sotheby's resemble a giant automated cash machine. When Larry Gagosian entered the four-meter high faux bank vault, he beheld the room and blurted out: “The buck stops here." Rather the buck rests here, gains traction, change hands and lurches to the next group of owners. To spend a life making money to pursue an art collection that depicts it is a little sad, not to mention boring. The safe door more than anything attested to what a silly enterprise the whole idea was to start. Does art require such props to prop up the market?
Except for some wonderful Warhols, including a handmade painting of a dollar bill that made $32 million, it was mostly a load of crap for sale. Two significant early dollar silkscreens, said to be Warhol's first, found no takers; green historically sells for less even when the subject is money itself. Dollar bill y'all. Yawn. Or better yet, no thanks.
In the end, Sotheby's reached their highest contemporary result, which was positive and excellent for them, and just a few million less than the record for a contemporary evening sale in London. But in truth it all felt rather forced, gimmicky and lackluster.
Phillips posted their numbers, making £18 million overall, but one wonders what their role is now that all the houses cater to the younger, emerging sector of the market which was Phillips' historic strong point, and even Bonham's has effectively jumped into the fray. Though an Ai Weiwei record was achieved at £3.4 million against an estimate of £3-5 million, Phillips sales are rarely if ever joyful, and the song remained the same.
Two other exceptional highlights and buys were a 1979 Sigmar Polke canvas at £1.1 million against expectations of £1-1.5 million and a pair of Bruce Nauman hanging heads of wax which fetched £1.7 million vs. £1.5 to £2.5 million that the house had hoped for. It was the only Nauman on offer for the week, a coup, and it doesn't get better than that (for Phillips, anyway).
Photo: Kenny Schachter.
On to the day sales, where works are offered at lower price points by less established artists. The constant art world chatter surrounding the selling and reselling at ever-higher numbers for work by young artists is officially dead, you will be happy to hear, for no other reason than there is no longer a market to support unsupportable inflated prices for the unproven. Like pop music, if you listen to a song too relentlessly you can lose a taste for it.
What would the moniker be in the case of art? Like music, if you listen to a song too relentlessly you can lose a taste for it, similar to a spate of
overexposed young artists as apparent from this anonymous letter of capitulation to a well known collector from a Phillips employee: "Just been talking to the team about this. As you know the market for younger artists is VERY tough (and probably going to get tougher). We have been offered a dozen xxxx in the past month, so people are selling (or at least trying to!) and get out of this market in a big way – thus we have be super conservative. We are already have a very nice similar xxxx work confirmed for the June day sale. Given that the market is so soft this is could be a tough sell even at this level. Sound like a plan? Anything else that we can do for you?"
A day before the Christie's day sale, I had a call from a fabricator that was repairing an artwork of mine that the artist who had “made" it had refused to put back together again, after initially agreeing to do so. No doubt, it was owing to the fact I put another work by the artist into the Christie's auction, thus his refusal to repair was recrimination for my deaccessioning. Just prior to the sale I had an urgent email from Christie's apologizing because “an external contractor knocked against the work and scratched through the anodizing."
The house still wanted to keep the work in the sale but as a result they agreed to purchase the piece outright at the mid estimate should it not sell or make less than that figure.
As there turned out to be little or no interest in the work, the act of creative destruction proved a gift. Lesson learned: If you auction anything you are unsure of, ask for it to be installed in the no man's land by the elevators.
I had better results with another painting. Though this work also proved to have little or no interest prior to the onset of the sale (none of the day sales had much action to speak of) the painting was used as an invite for a high-end fashion event held at Christie's and because of it the work soared past its high estimate by a factor of three.
Call it a rare instance of a happy marriage between fashion and art. Though this practice of auctioning fairly recently bought art understandably doesn't sit well with dealers and artists, people move on from people and things. And so it goes.
Bruce Nauman, detail from Hanging Head #1 (1989).
Photo: Kenny Schachter.
Few final asides before the season shuts down. The pressures on art galleries that aren't called Zwirner and Gagosian (and a smattering of others) are enormous and many are getting hammered in a world that increasingly buys obvious things from obvious people. I know a dealer with multiple venues so overstressed he's never without his gallery bag filled with a potpourri of illicit drugs.
It isn't going to get any easier for dealers (for art dealers that is) who must lead incessant nomadic lives from fair to fair, sale to sale, sometimes at the expense of health and/or family life.
And who said there is no regulation in the art market? Art related lawsuits are probably at an all time high and banks scrutinize each and every transaction like junior private detectives. Here is a doozy: a payment from the sale of a painting is still being withheld by a bank that required the following information before funds could be cleared, “Information of Ostrowski: What is the meaning, if this is a person?" What an existential line of questioning from a bank no less. Maybe they observed his market downturn and were expressing concern. Are there resident art critics now on the HSBC payroll?
High estimates wrought by greed reflect false expectations and yield false hopes. Whether it's wads of Warhols or redundant Richters, you'd better get it right or it can prove a costly gamble.
We've experienced the most prosperous year in art ever. Art is a market like any other that just as swiftly falls as it rises.
Sure, art could be cracked for long-term capital gain with knowledge, passion, intuition and luck, but you'd better put on your seatbelt (especially in the back of cabs) and tread with caution.