Bloomberg has an odd take on the use of guarantees in this auction cycle. The talk of the trade right now is that consignors are too smart to take guarantees. If you know you have something really good, the reasoning seems to be, why take the auction house’s insurance policy at the cost of your own profits?

That anecdotal evidence seems to be born out in the numbers. Remove Sotheby’s 200 lots in Taubman property (not the whole estate which was guaranteed for $500m) from the equation and there are 67 guarantees across the three houses.

Christie’s has the largest number of guarantees with 39 lots out of 166 evening lots (23% of the total sales.) The Artist’s Muse sale is the most heavily guaranteed with 18 out of 34 lots (or 53% of the sale.) Next comes PWC with 15 out of 70 lots (roughly 20%) and, finally, Imp-Mod which has a paltry 6 guarantees out of 62 lots (10%.)

Phillips is trying to elbow its way into a credible position. So it isn’t a surprise that they’ve guaranteed 22 of their 52 lots. That’s 42%.

Maybe it isn’t a surprise that Sotheby’s, with so much riding on the Taubman sale, has only 4 guaranteed lots.

Yes. You read that right. There are four lots guaranteed in this cycle outside of the Taubman estate. All four have third-party bids. So Sotheby’s is hardly putting itself at risk (though they could be subsidizing these sales.) There is a fifth lot that Sotheby’s owns which is being included in these stats out of an over abundance of caution.

Bloomberg seems to want to tell a different story. Using the $500m Taubman figure—and remember that auction houses used to only guaranteed estates or other portfolios of auction lots, not massive individual items—and adding the two biggest guarantees at Christie’s easily gets us to a $700m figure. One presumes Bloomberg tallied up the low estimates on all 67 guarantees but they don’t publish an exact figure, just a round $1bn, to compare November’s guarantees to the peak of the last boom.

Popular during the previous art market bubble — Sotheby’s guaranteed $902 million in 2007 and Christie’s guaranteed $800 million in 2008 — the strategy of offering a minimum price to sellers to help land consignments backfired when prices plummeted during the financial crisis. […] As the art market roared back and competition heated up, guarantees again became a major tool to win top lots.

There are 267 guaranteed lots in the November sales. Sotheby’s and Christie’s, which have been locked in a fierce battle over market share, each expects to sell at least $1 billion of art and has about $500 million backed by guarantees. Phillips, the smallest of the three houses, expects to sell at least $75.3 million, of which about $42.9 million has either in-house or third-party guarantees.

Lost in this narrative is the important distinction, especially in a story that compares the guarantees to proprietary trading, that the 2007 guarantees were direct from the house. Today’s guarantees are primarily off-loaded to third parties.

Before Paddles Are Even Raised, $1 Billion of Art Already Has Buyers (Bloomberg Business)