Tuesday, December 1, 2015

Culture: Are Art Prices About To Crash?

(Drivebycuriosity) - There seems to be a fashion for crash callers. The hedge fund manager Ken Griffin claims that the art market could crash soon (cnbc). He complains that many buyers are using the art market as an investment. He also criticizes that just some selected art works are gaining value, like Modigliani`s “Nu Couche (Reclining Nude)” from 1917, which was auctioned for $170,4 million this autumn (bloomberg), while the prices of many others are already dropping. "We're seeing the tier one artists with their best works setting all-time record highs, but we're seeing second-tier artists and second-tier works by the best artists starting to slide down in price".

                                                       A Matter Of Taste

Ok. But what are "tier one" and "second-tier works? There are no objective criteria which may exist for the bond markets. Art work is always a matter of taste. I think the popularity of artists and their works depends on fashion and zeitgeist - and the taste of the masses is wobbly. The economist Don Thompson reports in his book "The Super Model and the Brillo Box" - a brilliant explanation of the art market (driveby) - that the stars of certain artists have been rising and falling all the time. In one season a certain painter is the darling of the art world, in the next, he could fall out of grace. Prices of art works are going up and down.

But I believe that the art market as a whole will do well. The global wealth is rising driven by flourishing middle classes in China and other emerging markets. It is no coincidence that the record Modigliani went to China (bloomberg). The rising global wealth is flowing into stock markets, into real estate and into art works. As long the global economy is advancing and can avoid a recession the money flow into art work will climb.

Anyway, I wouldn´t buy art as an investment. I think stocks are the better alternative and their average return beats other asset classes by far  ( nyu.edu  investopedia). But buying art for fun, to demonstrate one´s taste and wealth, to impress friends, neighbors & family, makes sense. The wealthy need to fill the walls of their classy new flats & mansions in Manhattan, London and Miami Beach. And in China, Middle East, Mexico City and many other places new art museums are sprouting like mushrooms (artspace). All these new collections need to be filled.

PS: On top of this post you can see "Shade" by Mark Tansey (2001, oil on canvas). The painting sold for 5,626,000 at Sotheby´s fall auction (sothebys). The estimated price was $2,000,000-3,000,000. Tier-one or second-tier? You decide.

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