“Recovery” of the Art Market?

May 22nd, 2010

“Signs Emerge of Recovery for Art Sales” shouted a headline in the April 20, 2010 issue of the International Herald Tribune. By way of contrast, pages 70-72 of Mood Matters argue that art sales will be a big-time loser as the overall global social mood deepens. Since this story seems to undermine that claim, it’s worth digging into it a bit deeper to see what is really going on.

After quoting sources like Philip Hoffman, head of the Fine Art Group Fund, and the head of Castlestone Management, a fund that specializes in art investment for well-heeled clients about the prospects for the art market (which is tantamount to asking the foxes if they thought chickens were a good investment), the article slips-in the very revealing quote from Castlestone that “equities is considered to be a key indicator when analyzing trends in the art market.” A socionomist would read this as: The art market can be expected to rise as the social mood increases, and then decline as people start fearing the future again.

After recounting the downturn in the art market in 2009 (which is the basis for the story told in MM), the article notes that Sotheby’s, the poster-child for the story in the book, reported a 31 percent increase in sales in the last quarter of 2009. As Mr. Hoffman argued in another quote from the article, “You’re going to see some great prices in New York. The rare pieces are going to go through the roof and make prices that you wouldn’t expect to see in the economic climate we’re in.”

From this kind of unbridled optimism, you’d expect to see clear sailing and cloudless skies on the horizon. But a little farther on in the piece turns up a little different scene.

Michael Moses, co-developer of the Mei-Moses Art Index (discussed on p. 191 of MM), says that in the first quarter of 2010 the Index declined by nearly 5 percent, a loss that he attributes to a single category: pre-1950 American art. So maybe it’s not so negative, after all. But then Mr. Hoffman states at the end of the article that works at the very top end of the price list are set to get bids as much as 50 percent over their pre-sale estimates, but that works at the lower end of the market will probably hold their ground, with those in the midrange or by second-rate artists could slide by about 20 percent.

The overall message from this piece is that the so-called “recovery” of the art market will be driven by the big-name sales of collections from author Michael Crichton and Brody, thereby pushing up the picture for the overall market. But the vast majority of the market will do nothing better than hold its ground, which is already shaky, and that even this bright picture is predicated on a continuing escalation of prices in the equity markets.

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