9/15

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The topography of Wall Street and the financial system was redrawn over the past weekend. So what’s next? And specifically, what’s next for the art market? In recent months, heightened anxiety about the credit crisis and the meltdown in global finance did not translate into a flight from art purchases. Quite the opposite. Will the current jitters cause collectors and investors to look to art as a safe haven, or will they put the breaks on a long boom that has persisted, with a brief interruption in the early 1990s, for almost a quarter century? What does it mean for nonprofit institutions which rely on donations, and for art sales that depend on loans, guarantees, and credit? Who stands to lose or gain from the next round of transformations? And on the eve of a historic single-artist sale, are we going to witness a turning point in the psychology of the art world and the art business? I invite our panel to submit educated guesses.

11 thoughts on “9/15

  1. The art market will follow the money market, there’s no denying that. Whether there’s a six-month or two-year time lag, there will be a correction, if not an outright bursting. There is no mythical superhighway on which hyper-inflated art can go on floating above the clouds, regardless of gravitational forces.

    There will be no safe havens anymore, just as there are no comforting ‘isms’ or safe bets to fall back on. In times of art market woe, everyone trots out the old adage about quality finding its way to the top, with the detritus that didn’t make it into art history sinking like a stone. The problem now is that even much of this top quality band, like the crust on the milk bottle, has gone sour.

    There’s just too much contemporary art sloshing around at the moment and sooner or later this will knock confidence even in the so-called top lots, which are often themselves built on house-of-cards reputations. To use another housing analogy, the false promise of rising equity will put the brakes on fevered trading and rapid flipping – hitting the collecting-as-investing sector hardest of all.

    No matter how hard Hirst or anyone else tries to circumnavigate the top-down system with new means of distribution, people will always want to see art, even if they can’t always buy it, so the museums should still be able to attract sponsors and the fairs should just about keep their roofs (Deutsche Bank just announced its commitment to Frieze Art Fair until 2011). There’ll still be room for one or two mavericks, but for the rest of us, it will be back to basic rations.

  2. Don’t grab that toga and fiddle just yet.

    There is a turning point in psychology afoot alright, but I don’t feel it’s limited to the art market. (Forget Soylent Green, denial is the new food source of this brave new world.) Even those obviously hurting from the latest turmoil seem oddly stoic when interviewed on TV, as if it’s more important to remember which is your best camera side than to slip and let how you really feel about watching your house wash away or your job evaporate overnight be the story.

    Having said that, anyone who wallows in the bad news of the day is no serious student of history. It’s not only that everything cycles, but that those who thrive during any up swing can often be seen to have kept their heads about them and spotted the opportunities during the previous downturn. Tortoise trumps hare here. Gagosian in Moscow. Gagosian in Rome. Younger galleries holding their breath, cashing in their favors, and expanding to larger spaces. There is genius in boldness.

  3. 9/15. Dow down 504.48 (4.42%). Hirst up $127.2 million.
    9/16. Dow tossing around break even all day, but now (3:05 pm) up 89. Hirst up $73.4 million in today’s sessions, for total proceeds of $200.9 m, 13.8% above Sotheby’s high estimate.

    Hirst-onomics has just prevailed over the larger economy. Is it his great market timing (as per Ian)? Taking advantage of the lag and climbing a house of cards just before it implodes (Ossian)? Genius in boldness (Ed)? Or the street smarts and dumb luck of the parvenu, as enunciated by The Clash in “Rudie Can’t Fail”?

    I know that my life make you nervous
    But I tell you that I can’t live in service.
    Like the doctor who was born for a purpose
    Rudie can’t fail

    Okay, I went to the market to realize my soul
    ‘Cos what I need I just don’t have, oh no
    First they cursed then they pressed me ‘till I hurt
    They say Rudie can’t fail

    As for corporate funding of non-profit institutions, museums and their sponsors, the Jewish Museum is opening a long awaited Dead Sea Scrolls exhibition tomorrow, with support from various family and private foundations, but with insurance giant AIG as principal sponsor. This was obviously arranged long ago, in a different financial climate, but AIG is now very much in the news, its shares plummeting, credit rating downgraded, searching for solvency, with bankruptcy a distinct possibility. If AIG does have to file Chapter 11, might they ironically be outlived by the very exhibition they have funded? And will this lesson be lost on other corporate sponsors, for example Bank of New York Mellon and its pledge of support for MoMA?

  4. Prices NEED to fall in the contemporary space. Both here in Beijing and around the world. They have reached silly heights across too many categories, affecting even works with little history and less future. So I welcome a shakedown. In such circumstances the bad is usually hit worst, and the good bounces back better. So when the market finally gets hit, it will be very interesting to see what sinks and what bounces.

  5. I am not so sure that the good will rise, perhaps different good… I would like to think so.

    I do imagine that on another day the Damien Hirst sale could have brought in more than it did, i try to think that way to remember that there is just no benchmark for the way things are today. When you set something like this sale as a benchmark, then you lose perspective on so many other possibilities.

    The real problem that would keep the “good” from bouncing back as I see it is that plenty of really great artists are getting priced out of alternate and traditional means of building reputation and long term support. How many museum shows of relatively young, interesting artists have been cancelled due to high insurance costs alone? it is kind of a new mid-career step that both artists and galleries have to learn.

    The “market” may correct and the other validation systems adjust and adapt, it is the normal way of things. An artist will always be faced with a similar array of career decisions they must navigate, the primary one being whether to sift through all this yourself or hand that over to another party. There is always more than one way to get the job done.

    The problem with this kind of speculation is that the market is not definable anymore, it has been not one, but many. The scary thing to me about this sale is that it does appear to turn the many into one. Boundary blurring issues are sure to cause problems that we can’t possibly begin to imagine.

  6. To Lisa’s question, I was less concerned about the financial market crash negatively effecting the Hirst sale than about an utterly failed Hirst sale signaling to the art world chattering class and collectorate that THE art market was taking a nose dive right alongside the investment banks and insurance giants. It would have been pure coincidence, but it would not have been perceived that way. The point being, as Lisa is right to note, that we are dealing with art marketS in the contemporary space. And, thanks to the Hirst sale, we can talk about “Hirst’s market” in totally autonomous terms.

    But I question this notion that prices “NEED to fall in the contemporary space” because that assumes that we understand them to be overvalued and that we have some measure of exactly WHY those prices are overvalued. Dot com companies in the late-90s with share prices in the $50 range but with no product, no revenue and no capital reserve, just a bunch of starry eyed investors, were overvalued. CDOs based upon myriad ARMs for $1mm homes handed out to security guards making $32K a year (who actually thought THEY were the one’s that owned the real estate, when, in fact, they were simply renting from the bank), were overvalued. We know this not only from retrospect but also because there are investors who saw these asymmetries and PROFITED from them (there is no doubt that some enterprising fellow made a KILLING betting against Lehman over the last month).

    Perhaps the problem is, then, that there is no such possibility in the art market, because the asymmetry we see, the “silliness” of the prices, is simply a perceptual one. We just can’t believe that anyone would walk out and drop $1.5mm on a Hirst. But we have no means to bet against Hirst’s market. So there’s a question: In strictly financial terms, how would one bet against the art market? And shorting Sotheby’s stock is a pretty anemic answer.

    Now, I’m not saying that overvaluation in the contemporary space may not be a reality, but we’d need a concrete measure, and our better judgment, based as it is in large part on institutional ratification of art and artists (or, less savory, our own overinflated sense of artistic merit), is not a measure at all.

  7. Now you are being disingenuous Jonathan. Evidence of over-pricing has been around for over two years; maybe five. It is evident in galleries asking $50,000 for unknown artists with minor or no gallery shows behind them and no genuine collectors. It is visible in the volume of work hitting the auction houses that have spent less than two years in collectors hands and only a single gallery show before that. It is visible in Art school graduation shows, in Europe, the US and Asia being trawled by gallerists and collectors alike, paying ten times the going rate for student work of only five years ago.

    The only reason no-one else says this is because most commentators have a vested interest in maintaining sales. There is nothing to worry about, though. Prices falling may be hard for some artists and agents to stomach, but it will make life easier for good gallerists and genuine collectors and, probably, start the whole cycle all over again. (That is, unless the failure of the fad side of contemporary art collecting leaves a permanent scar on the face of the market as a whole. But that is fodder for another thread.)

  8. Lisa opines that Hirst’s eventual prices, as well as Sotheby’s estimates, might have both been significantly higher were they not weighed down by the larger tortured economy. Perhaps. But I am more engaged by her idea that a “benchmark” does not apply here. A benchmark needs to be keyed to something statistical and quantifiable, and only works with data from a standardized index or market. There is nothing standard about the art world, a decidedly elite and unregulated activity within our brave new globalized world. And Hirst, as well as Koons, Murakami or any other artist who has achieved sufficient “branding” to consider bypassing the gallery system and selling directly at auction, are all further exceptions, even within this elevated arena.

    So we should be careful not to blur the boundaries, not to turn “the many into one”, or for that matter the one into many. The “lessons” of Hirst’s recent success at auction are, quite possibly, not applicable to other situations. They are singular to this artist and this moment. There is certainly a great metaphorical trope in the accidental coincidence of the implosion of equity markets and various investment bank failures with recent auction antics. It highlights the gulf between the very very rich and the rest of us. They are able, as Ed implies, to fiddle while Rome burns. Obviously they are not cashing in their (recently decimated) 401Ks to buy a butterfly painting or a golden calf in formaldehyde.

    But we knew this already. What we seem to be attempting in the last two AWS threads – beyond the truism that the collecting elite, buoyed by large amounts of cash, property and influence, are cushioned from immediate blows, and generally enjoy a comfortable lag from the day-to-day movements of the equity market – is some sort of systemic analysis of why Hirst was able to succeed in the face of general market failure. I think conflating the two is both unwise and doomed to failure. Which is probably why, in earlier postings, I referred to “Damien 90210″ and also provided him with an early Clash reggae-jig for his victory lap: to emphasize the anecdotal, the singularity of his gesture, his art and his market sense. Which singularity, I hasten to add, should also be recognized as unique and applicable to each and every artist. We need to acknowledge that we are awash in exceptionality, and that exceptions do not prove the rule.

    As far as shorting BID, Jonathan, I agree it’s a pretty lame equity strategy. But I also think the most significant shadow thrown by Sotheby’s is not in the NYSE but in more art-specific precincts.

  9. How to measure overpricing? In earlier worries over the economy there was another Sotheby’s auction under Hirst’s direction – the 2/14 (red) sale. The auction house cut their pre-sale estimate to 21-29m, from their earlier estimate of 40m. Nobody raises an eyebrow. With the official estimate at 21-29m, 42.58m was raised. This sale was uniquely driven by sentiment – given that there is psychology and theater to the auction house as a form, how do you measure what these numbers are saying?

  10. I think the Hirst sale is such a unique occurrence that it would be hard to infer from it anything but the most general conclusions. There will be plenty of sales in the coming weeks to deliver more informed judgments about the overall health of the market and its various segments and regions.

    On the whole I would agree with Ian that there has been a lot of price inflation in a very short time, underscored by very little of what historian Irving Sandler had called, in reference to an earlier moment in art, the “art world consensus.” History tells us that after phases of rapid growth and exuberance periods of culling and filtering inevitably do follow.

    The earlier comment on the exceptionality of branded artists is well taken. It suggests that other mechanisms may now help prop up art values, beyond the core validating institutions of the art world. It begs the question of what the core brand message is. If the brand stands for timeless quality, then the prospects for the artists would be good in a jittery market where there is a flight to “blue chip” material. If the brand is very closely associated with the recent Zeitgeist, however, there could be trouble. As we know, some of the major branded names of the 80s were severely punished for their earlier success.

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