Art Market Advice from the Daily Beast
Art adviser Barbara Guggenheim takes to The Daily Beast to assure folks that all is well in the land of art:
Some collectors are bottom fishing or making post-sale offers for works that didn’t sell at auction. Some are paying record prices to get the unique gems they want, and some are sitting this season out saving their cash for great things that may soon shake loose. Whatever their strategy, there are smart people who still see the art world as one of endless opportunity. If you haven’t bought art, maybe it’s time to dive in—but be careful.
All of that’s fine and good. Guggenheim is a savvy player. However, she also makes a prediction that strikes us as humpty-dumpty thinking:
The sea change this decade isn’t one of taste, as in the ‘90s when collectors turned away from Impressionism and moved into collecting Contemporary art. This time, it’s the way business will be conducted. No longer will auctions be the center of the universe. If you have significant works to sell, you’ll probably give them to dealers, not auctions. The days of the guarantees from the auction houses are over—at least for now, and if the market remains volatile, you won’t want to risk having your work publicly tainted by not selling at auction.
Why would the pressures upon the auction houses–too much art and not enough buyers–not apply to dealers? Guggenheim is right about the guarantees. In the last round of auctions, Sotheby’s and Christie’s essentially subsidized the purchases of several important lots which were guaranteed for sums much greater than the purchase price. Collectors got to buy good work cheap that the seller sold dear. Everybody won but the auction house that subsidized the difference in the transaction.
Dealers might not give guarantees but they face a similar problem. In the On the secondary market, where the big money lives, a dealer still has to pry the work from an owner with an attractive price. What if another buyer is only interested at a lower price than the seller is willing to part for? Is the dealer going to make up the difference? Market makers–and that’s what dealers are–exploit superior information about transactions to make a profit.
But the sea change in the art world hasn’t been the rise of the auction house as much as the ubiquity of pricing information. Buyers and sellers now know all the numbers. Where’s the dealer’s advantage when demand dries up?
If things get really, really bad out there, dealers will feel the pain of carrying art first. Remember, we’re in a credit crunch. How many dealers these days are able to raise cash against a storage room filled with depreciating art? And will they use that cash to buy more inventory? Probably not.
So the distressed seller is more likely, whatever the shame involved, to use the auction houses where they know they’ll received the entire hammer price instead of searching for a dealer who will have to low-ball them. At least the auction house will only take a commission. And when you’re in debt, maximizing your yield is more important than saving face.
We don’t know that this is how a desperate recession would play out. But we’re sure that Guggenheim’s breezy confidence in dealers benefitting from a sea change doesn’t take all the angles into account.
Where Smart People Are Investing Now (The Daily Beast)