Here is the Atlantic’s Derek Thompson using the book Boombustology by Vikram Mansharamani to make a bubble indicator out of Sotheby’s stock:

In November 2006, David Geffen, the producer of “Cats” and co-founder of DreamWorks Pictures, sold No. 5, 1948 by Jackson Pollack for $140 million, making it the most expensive painting ever sold. Two weeks later, he nearly broke his own record, unloading Woman III by Willem de Kooning for a cool $137 million. These paintings broke a six-month record set by another New Yorker Ronald Lauder, who had bought a Gustav Klimt portrait for $130 million for his Neue Galerie. It was a very good year for auctions, stocks, and CDOs.

It was also the end of an era. It’s no coincidence that these auctions occurred near the frothy tip of a credit bubble, Mansharamani says. In fact, tracking auction records and auction house stock is one of the best ways to smell out a simmering economic crisis.

“As one of the world’s leading art auction houses, Sotheby’s has been a beneficiary of booms in the art market,” he writes. In the last 20 years, Sotheby’s mostly stable stock has experienced four sharp peaks. In the late 1980s, Japan had been “the center of gravity” in the international art market. But its economy imploded, sending Sotheby’s stock reeling. Ten years later, the Internet bubble drove another auction boom among Silicon Valley newbies, and the bubble burst again.

The only problem with this reasoning is that the buyer of one of Geffen’s works wasn’t a fly-by-night bubble-rider but a collector who remains an active participant in the art market. The other buyer was involved in credit markets but not the kind that were at the center of the bubble. Furthermore, the peak in Sotheby’s stock during the late 1990s wasn’t driven by internet millionaires buying art but by speculation that Sotheby’s would be bought by a luxury retailer like Arnault or somehow benefit from the explosion of internet businesses like eBay.

The Art of Bubbles: How Sotheby’s Predicts the World Economy (Atlantic)