At a panel discussion led by Lindsay Pollock a few months ago, Roland Augustine, the president of the ADAA, casually described the majority of contemporary art buyers as “speculators.” Put aside the strangeness of a trade association head branding the bulk of his industry’s customers with a perjorative.
Focus on the issue of speculation. Can the majority of art buyers in 2007 and 2008 really have been speculators? Who are these people and can no one identify a single one of these speculators?
The subject comes to mind again after last week’s report on the Phillips de Pury sale contained this quote from an art advisor [emphasis ours]:
Grotjahn’s colorful early painting, with a low estimate of $400,000, didn’t find a buyer. Another work — a fiery orange butterfly painting — fetched $458,500 against the estimate range of $450,000 to $650,000.
In 2003, paintings by the Los Angeles-based artist cost around $20,000, said his New York dealer Anton Kern. In May, one of his canvases fetched $1.2 million at Phillips in New York, setting an auction record for the artist.
“You can’t have increases like that unless people are buying for investment purposes or everyone is leveraged,’‘ said Cristina Delgado, a New York art adviser, before the auction. “We need to come down to prices in the art market before everyone began leveraging, probably another 30 to 40 percent.”
Delgado’s sweeping statement–like Augustine’s–is compelling mostly for its combination of certitude and its blithe lack of evidence. We’ve addressed this question of leverage before. There’s every possibility that art is being bought using money that comes from other leveraged assets. And if there is significant leverage in the art world, there has yet to be convincing evidence of it. (And most figures in the art world describe art funds as minimal players in the market.)
As for the speculators, it reminds us of the hoopla surrounding hedge fund buyers in 2005 and 2006. Hedgies were said to be a threat to the art market because they would bring their hot money habits to the art market causing volatility they bought and sold with abandon. But so far, hedge funders are still long their art (though we’ll see what happens in 2009 and 2010.)
Watching certain works come to market multiple times in the last five years, one would have to conclude that there is buying and selling to take advantage of rising market. Richard Prince’s Dude Ranch Nurse #2 doubled in value between to auction house sales that were held 18 months apart. The second was this October as the market for Prince nurse paintings was beginning to shatter. Had the picture been sold five months earlier, it would have tripled in value.
That looks like speculation. Was it? And do a handful of those kind of stories justify calling the entire art market a product of speculation?
What about the speculators? When the stories are unwound, the buyer and seller at the center of some of the most visible art gains have been long-time art hounds like Peter Brandt. The Estella Collection was a very well-timed and executed speculation in Chinese contemporary art. That was the Acquavellas. The Nahmad family and the Mugrabi family buy and sell a lot of art. So do a large number of dealers. They buy what they see as a good value and hold it until they see a solid gain. Sometimes that takes a while. Other times, it happens quickly. Either way, it’s speculation.
Finally, speculation is its own punishment. All asset prices are in retreat right now. How long they will pull back is anyone’s guess. In financial terms, anyone holding a substantial quantity of art is at risk. In the end, they may suffer the most for their art.
Hirst Painting Flops at `Brutal’ New York Art Auction (Bloomberg)
