Is a bleak one (at least for the short term).
As the maelstrom of turmoil affecting the international economy continues indefinitely, OMNP searches to find some answers as to how this will affect the art market’s winning streak over the larger part of the past decade.
First, a rundown of the recent crisis. Since the sales of the Modern and Contemporary market have driven the astronomical prices of recent years, conventional knowledge assumes that their performance acts as a solid barometer of where the market is headed. In turn, recent auction failures have led to pessimistic prognostications. As Bloomberg News reported, totals from last week’s sales from the triumverate of Christie’s, Sotheby’s, and Phillips de Pury ended up achieving about half of their pre-sale estimates.
As Scott Reyburn from Bloomberg News reported (October 20th):
“Sales by Sotheby’s, Christie’s International, and Phillips de Pury & Co made a combined 59 million pounds ($102 million), against minimum estimates of 106.2 million pounds, according to Bloomberg calculations. They follow a five-day auction by Sotheby’s in Hong Kong this month that raised HK$1.1 billion ($141.7 million), also about half the presale estimate, as buyers shunned some top lots for being too expensive.”
One knows that things are getting bad when works by Gerhard Richter fail to sell at auction. Two gorgeous works by the man that many people consider to be the world’s greatest living artist, failed to sell at Christie’s London Post-War and Contemporary sale on October 19th.
More linkage covering the recent failures:
Grim financial news has emerged accordingly. Sotheby’s for one, seems to have been hit hard. On Monday October 6th, Yahoo News reported that its stock had fallen nearly 75% from its October 2007 high of $57.12, to a close of $13.86, following the subpar performance of its Asian Contemporary sales. As of October 20th, Sotheby’s stock has declined further to $10.06 a share. In face of the storm, Sotheby’s has taken out a $250 million loan from Bank of America, perhaps banking on the success of its upcoming Modern and Contemporary sale which includes probably the closest thing to a sure thing: a seminal work by Suprematist pioneer Kasimir Malevich that is estimated at $60m, and is sure to appeal to the fledgling Russian wealth that has buoyed the art market in recent months.
Hard times certainly seem to be ahead. Even the seemingly indomitable force behind the market powerhouse of Damien Hirst finds itself tempered, if only temporarily. Despite the phenomenal success of his auction last month during the onset of financial panic, Hirst revealed that delays in securing a buyer for “For the Love of God,” for the purchase price of £100m GBP would lead to the work being put up for auction .
It’s a nod to Hirst’s bulletproof reputation that such an announcement is not being balked at in the midst of such economic struggle. “For the Love of God,” of course has gained its fair share of controversy since its inception; controlling interest in the diamond covered skull was purchased for $100m USD by a group of investors that included the artist and his manager, (a conflict of interest covered by OMNP here)
But how does all of this affect the Old Master’s market?
Despite the deflation of the Modern and Contemporary markets, it remains to be seen how the financial downturn will affect the Old Masters market. So far, news has been inconclusive. Reports from the most recent major commercial event in the trade, the XXIV Paris Biennale des Antiquaries, described the overall fair as being slow for business, although certain dealers such as De Jonckheere, Sam Fogg, and Richard Green managed to do brisk business, mainly before the financial crash began with the collapse of Lehman Brothers on September 15th.
Business at other major fairs such as the Biennale Internazionale des Antiquariato in Rome, and the International Fine Art and Antiques show at the Park Avenue Armory in New York may give a better glimpse into the strength of the market, but the best indicator will probably come with the January Old Masters auctions in New York.
Judging by the past, the outlook for the OM market should remain an optimistic one, its exemption from overinflation gave it a stability that made it the least affected by the last art market crash during the early 1990′s. See “Investment Advantages” (page 30) in OMNP’s profile of the OM market (click here for .pdf download) for further information on this topic.
More analysis/predictions on the market’s maladies:
And perhaps the most solid advice in the midst of such peril: