Sotheby’s Stock Prisoner to China Fears

So far this year, Sotheby’s has sold $548m worth of art and other valuable objects in Asia. That’s about 17.5% of the $3.139b total sales at the auction house. True, Sotheby’s made a big deal of Asian sales growth during their recent earnings reports but they also highlighted the 114% growth in private sales to explain the company’s prospects. Nonetheless, a Wall Street analyst took a shot at Sotheby’s, among other firms, by suggesting the firm is overly exposed to a potential slowdown in China’s economy.

That call caps off a 13% slide in Sotheby’s stock this week on the eve of Sunday’s opening of Sotheby’s Fall sale cycle in Hong Kong:

Chinese industrial production has slowed following repeated interest rate hikes and other curbs as the government tries to tame growth and cool inflation that is hovering near a three-year high above 6 percent.

China is important to Sotheby’s because about 15 to 20 percent of its revenue this year came from Hong Kong, according to David Schick of Stifel Nicolaus.

THE ANALYSIS: Schick said in a client note that he has yet to see evidence of a China “hard landing” among the companies he covers with exposure to China, which include Sotheby’s, Coach Inc. and Tiffany & Co.

Sotheby’s Falls Partly on Concerns About China (Forbes.com)

Israel Museum Hopes to Raise $17m Through De-accessioning

 

Carol Vogel reports that the Israel Museum is deaccessioning a few works in the hopes of buying a Picasso from the Neo-Classical or Analytic Cubist period or a Chagall from the 1920s or earlier:

So beginning in November the museum will sell a group of paintings worth more than $17 million at Sotheby’s in New York and London. The proceeds will go toward acquisition of artworks that fill gaps or toward more work by artists the museum already has.

Among the highlights for sale, starting in New York on Nov. 2, is Magritte’s painting“Le Droit Chemin,” a 1966 work showing an apple and a massive stone. (The artist enjoyed depicting two disparate objects.) The painting is expected to sell for $2.5 million to $3.5 million. The museum is also selling “Le Louvre, Matin, Printemps,” an urban landscape from 1902 by Pissarro.

Inside Art: Israel Museum’s Auction (New York Times)

How Do I Avoid Buying a Fake?

Pierre Valentin of Withers answers some questions from the FT for their Ask the Expert column:

This is where the art adviser comes in. Naive buyers often rely solely on the advice of the dealer or auction house. They do not realise that the dealer or auction house generally acts for the seller, or even for themselves if the dealer sells from stock. This results in the interests of the buyer and those of the dealer or auction house being diametrically opposed.

Unfortunately there is a significant risk that collectors will buy a fake. While it is impossible to stop this from happening, the likelihood can be minimised. Even if you buy from a living artist, you cannot be sure you are getting the real deal. Artists such as Giorgio de Chirico, the Italian Surrealist painter, were known for disowning their own work if they no longer liked it. There is a story of Pablo Picasso authenticating a fake by signing it, because he felt sorry for the dealer who had sold it as an original.

Ask the Expert: Be Smart About Art (Financial Times)

‘Wealthy Should Have 50% of Their Assets Outside of the Financial System.”

Josh Brown is a rising star in both the financial blogging and asset management worlds. He published some notes today from a lunch held by Jeffrey Gundlach, a legendary bond fund manager who opened his own firm, Doubleline, two years ago. Gundlach raised an astonishing $16 billion on the strength of his reputation and previous performance. The Los Angeles Times just covered the jury verdict in the trial between him and a former employer. The trial revealed that Gundlach had made $239m in the last 20 years, according to the suit brought by his former bosses at TCW. Though the LA Times rebuts this claim:

During the trial, Gundlach estimated his personal net worth at about $90 million, some of which he has sunk into an extensive collection of modern art.

Either number would make Gundlach a member of the Ultra High club in terms of his net worth. That brings us to the point of this post. During the recent lunch in New York, Gundlach explained that one thing driving the art market—as well as the markets for gold, gems and other hard assets—is the need to store value outside of the financial system itself. Here’s Brown paraphrasing Gundlach:

Jeffrey says his own assets are now 2/3rd’s outside of the “financial system” other than his ownership stake in DoubleLine.  This means fine art, gold, gemstones, rental property etc.  He says the ultra wealthy should have 50% of their assets outside of the financial system.

Notes from the DoubleLine Lunch with Jeffrey Gundlach (TheReformedBroker.Com)

Jury Renders Split Decision on Jeffrey Gundlach-TCW Case (Los Angeles Times)

Frieze to Have “Highest Quality Fair Ever”

Matthew Slotover was interviewed by Reuters to preview the coming Frieze Fair in London two weeks from now. Reuters tries to gin up a little worry by connecting today’s crisis in Europe to the fair’s performance in the shell-shocked days after Lehman Brothers collapsed but Slotover wasn’t taking the bait. He says the fair seems stronger  and might be the “highest quality fair ever:”

“The number of solo stands at fairs is often a bellwether because you have to think in advance to do those. Because we’ve got more of those than ever before, it’s a sign that people are taking it more and more seriously.”

In terms of business, Slotover said the art market tended to lag behind stocks and bonds, meaning most of the work on Frieze 2011 was done long before recent market volatility. “It (art) is something tangible and real, and in an age where people are losing faith in paper money, in currencies and in equities, it’s one of those assets that people feel, well, at least I’ve got this actual thing.” He said unlike stocks and property people do not tend to borrow money to buy art. “If you’ve still got cash after everything else, that’s when you buy art. Imagine if no one had borrowed money to buy property — there would have been no crash.”

Founder Eyes Tough Economy as Frieze Fair Nears (Reuters)

Diamonds Are a Lender’s Best Friend

There’s an interesting side note in two recent stories about art loans: diamonds are increasingly being used as substantial collateral against short-term liquidity loans. Here’s the Wall Street Journal on pawn shops doing brisk business in loans to the wealthy against their high value assets:

“There is a certain type of affluent customer that will not go into a pawn shop,” owner Todd Hills told Newsweek in 2010. “And they don’t have a $50 or $100 problem. Maybe they have a $100,000 problem.” The granddaddy of all the plutocrat pawnshops is Beverly Loan Co., in Beverly Hills, which bills itself as “the Pawnshop to the Stars” has been helping the cash-strapped and famous for nearly 75 years.

Owner Jordan Tabach-Bank told CNN in 2009 that he was “giving more loans and they’re bigger than ever.”

“I recently had a hedge-fund manager in here getting a large loan on his collection of diamonds,” he said.

Now listen to Reuters on the rise of loans against luxury assets:

Martin Rapaport, chairman of diamond services company Rapaport Group, says owners of top-quality precious stones have also started to use these as collateral in financial transactions, repeating a trend he saw in the first days of the crisis in 2008.

“We know it happened in 2008 and I expect to see more of (it) this year. The stock market fell so much recently so these people are looking at tangible assets like high end diamonds,” he told Reuters.

At the root of this trend is the fact that such assets are proving better stores of value than investments such as equities. Their value is still appreciating, driven by huge demand from the fast-growing rich of Asia and Russia. David Prager, director of communications at diamond miner De Beers, said the firm’s prices rose by an “unprecedented” 35 percent in the first half of 2011. “That was driven by big increases in consumer demand, particularly in China and India.”

Pawn Shops for the (Formerly) Rich (Wealth Report/Wall Street Journal)

How to Borrow $10 Million (Reuters)

Keno Sells Butterworth, Tiffany and Wegner

Leigh Keno Auctions held their bi-annual sale as part of Americana week and had a few interesting surprises including the presence of a big online bidder who won the top lot. Here are some excerpts from the house’s post-sale release:

  • Among the paintings that garnered significant prices were The Active off Castle Garden and The Active off Sandy Hook, a pair of Maritime oils by the American painter, James Buttersworth that elicited lively competition; the pair sold for a remarkable $158,750 to an internet bidder.

There is always interest in unique pieces of museum quality objects among top collectors and several of the lots from the estate of Hans Christensen, the Danish-American 20th Century master silversmith, attracted attention from numerous bidders in several different countries.

  • Among the items that exceeded their estimates were his iconic sterling silver with rosewood handle and base Teapot and Warmer, his journeyman’s piece executed in 1944 that fetched a remarkable $33,480; which was a world record for a Christensen piece.
  • There was a stunning sterling silver with rosewood handle Water Pitcher that realized $17,360; and a sterling silver Jewish Spice Box that sold for $23,560.

“We are delighted with the new world auction record achieved for Hans Christensen’s Water Pitcher and Teapot and Warmer.  This was one of the most exciting collections we have had the honor of offering to our clients and we along with the consignor are thrilled with the results,” said Keno.

  • Also part of the Christensen estate was a 20th Century swivel chair Model 30 (circa 1955), by the Danish designer Hans Wegner which was found by the consignor in a garage.  The chair was purchased by a bidder in the room for $32,240.
  • Another star of the auction was a ‘Dragonfly’ leaded-glass fluid lamp from Tiffany Studios that sold to a telephone bidder at $142,600.

 

Leonardo By the Book

It’s been very quiet in the world of the lost Leonardo that scholar Martin Kemp believes is a genuine Leonardo. It has sold in recent years for five figures but would be worth nine if the attribution sticks. For a while, authenticators claimed to have found Leonardo’s fingerprint on the work until David Grann demolished that expert’s reputation in the New Yorker. Now Kemp is back with further proof that he says nails the authenticity, according to the Guardian:

“Assertions that it is a forgery, a pastiche, or a copy of a lost Leonardo are all effectively eliminated,” Kemp told the Guardian. Earlier this year, he embarked on what he describes as a “needle-in-a-haystack” search for a 15th-century volume with a missing sheet. A clue lay in the stitch-holes along the portrait’s left-hand margin, suggesting it had been torn from a luxury-bound volume. But the chances of this volume surviving 500 years were remote, and the chances of it being found even remoter.

Against the odds, Kemp tracked the volume down, to Poland’s national library in Warsaw; the stitch-holes are a perfect match for those on La Bella Principessa, a portrait in ink and coloured chalks on vellum. It is overwhelming evidence, Kemp says, that the portrait dates from the 15th century – and not the 19th century, as Christie’s thought when it sold it in 1998 for £11,400 (it could fetch £100m as a Leonardo).

Kemp travelled to Warsaw with a specialist who has undertaken scientific analysis of the Mona Lisa, scanning beneath paint layers. Recalling the moment they opened the volume, Kemp says: “Yes, lo and behold, we could identify that there was a page clearly removed. The stitch-holes matched, the vellum matched. It is indeed 1496, it is indeed Bianca and indeed for her marriage. It’s uncanny. You could say: ‘Stitch holes are always the same distance apart.’ But the irregular stitching was spaced by eye, not precisely measured.”

Is This Portrait a Lost Leonardo? (Guardian)

Legitimizing Late de Kooning

Adam Lindemann wasn’t that impressed with MoMA’s de Kooning show. He explains in his Observer column that the moment seems to have passed and de Kooning is curiously not relevant to the rest of the world. However, Lindemann does think the MoMA show has achieved at least one important milestone:

De Kooning had gone senile by the end of his life, suffering from what we now call Alzheimer’s, but he continued to paint, almost until his death in 1997. Though some say the reduction of his painting style to only a brushstroke or two shows that his assistants did the work, or that he was no longer compus mentis, what do I care? I don’t believe in artist’s personal histories or care how many wives they had or cigarettes they smoked. I look at the work, not the person. To end his life by reducing his painting to only a few sparse brushstrokes was pure poetry, whether he knew it or not. I applaud Mr. Elderfield, who spent six years putting this exhibition together, for dedicating two large viewing rooms to the late work, because though the market for the late paintings has been strong, their credibility was always suspect because of the circumstances of their creation. MoMA’s decision to showcase them is meaningful, and frankly a show of only the late work would have been stronger and fresher than this voluminous “blockbuster.” Years from now that’s all we’ll remember from it: how this was the show that finally gave the late de Koonings permanent credibility.

Did I Need to See a $4 Billion de Kooning Show? (Observer)

de Kooning: A Retrospective (MoMA)