What Do Mnuchin and Edelman Know About Markets That You Don’t?

Art + Auction ran two interviews with art dealers–Bob Mnuchin and Asher Adelman–who are better known for their financial skills. That is, their reputations were built on significant careers in finance. We suppose the interviewer hoped to find some wisdom about markets and art as an asset–the interviews were published under the headline, The Wise Men. But the most interesting part of both interviews is the seamless way both men incorporate their financial views into the art market without trying to turn the art market into a financial market. As Edelman points out in discussing art funds–and we would expand to cover the art market as a whole–the art market lacks the structure to be a financial market.

The purpose of the art market is to transfer art between artists and collectors, collectors and other collectors and from both groups to institutions. That’s one of the reasons Edelman can make this comparison:

In 1987 you compared the atmosphere at Christie’s and Sotheby’s to that in the Chicago hog pits.

I owned the biggest stockyard company in America then, so I was qualified to make that comparison.

By which you meant that art was being treated as a raw commodity.

But it is for them! That’s the business they’re in.

Like the commodity markets, there’s nothing wrong with speculators making money along the way. But Edelman seems conflicted about his role in the process. On the one hand, he points to himself as Mnuchin as the only persons running competent art funds:

I don’t think there are any funds—with the exception of Bob Mnuchin’s, which he runs with his own hand, or maybe I have something quiet too—that don’t put on layers and layers of conflict and advisers and relationships with auction houses.

On the other, he frets that he isn’t taken seriously as an aesthete:

I know about the paintings I’m selling. So I resent people who say, “He has to be shallow.” I’m not.

These two ideas are not necessarily in conflict. The art market is filled with financial speculators. They’re called dealers. To the extent that an investor wants to get a return on art, they can back a dealer and take part of the profits. A dealer creates value through perceptive trading–often over a longer time horizon. The allure of art funds have been the idea that one might diversify assets without having a deep knowledge of art or the art market.

On another note, Edeleman offeres this bit of caution:

We are in exactly the situation we were in in the 1970s—which was totally predictable two years in advance, economically. The dollar is going to strengthen. It will go up 20 percent in the next 18 months, in my opinion. And if there’s been one support for the art market, it’s the reluctance of non-Americans to sell and the willingness of Europeans and others to buy, because in their currencies the prices don’t look as inflated.

Asher Edelman (ArtInfo)

Robert Mnuchin (ArtInfo)