Bloomberg tries to amp up the London auctions by suggesting the Contemporary sales will present a significant buying opportunity if the British pound crashes in the wake of a ‘Leave’ vote on June 23. Sotheby’s and Christie’s will have held their Impressionist and Modern sales before the vote. Recent trading in sterling does offer a single-digit discount currently but remember that the sales prices will be denominated according to the exchange rate on the day of the sale but no one who buys a work at auction does the actual transaction on that day.

Conceivably, one could buy this week and witness a crash in the pound after the unlikelihood of a Brexit. Then, make the actual transaction later with a much cheaper pound. But that seems too clever by half and still doesn’t change the fact that there is a consignment drought.

Bloomberg quotes a smattering of participants and observers who seem happy to go with the Brexit story line even though it has been apparent for some time that there are few motivated sellers:

• “We note very limited big consignment wins in the contemporary evening sale which could be pressured by concerns around the upcoming referendum,” David Schick, an analyst for Consumer Edge Research, said in a report on June 8.
• “There is a definite sense of caution until we know what happens with Brexit,” said London-based art dealer Pilar Ordovas. “Unless you really have to, why would you sell right now?” […] “There will be people who will see this as an opportunity because you could get a lot more for your money,” Ordovas said.
• “It’s already a fragile situation and any new uncertainty doesn’t help,” said Olav Velthuis, an associate professor at the University of Amsterdam who specializes in the art market. “The auction market has been slowing down since late 2015.”

This last statement doesn’t really go far enough. Yes, the headline sales stopped at the end of 2015 but there was already substantial underlying weakness in the art market since 2014. Although Christie’s was able to generate some massive sales for a few particular lots, the breadth of the market had already deteriorated.

That suggests uncertainty is less relevant than an internal dynamic to the art market where owners of very valuable works of art have little need nor incentive to sell because the weakest asset in today’s global economic environment is cash of any kind.

That brings up a final note about who the real speculators might be. Although the London sales are diminished in their offerings, there are a few high quality, out-of-favor works on offer. A speculator is someone who buys when others don’t see value and sells when others finally do.

So it is telling that a savvy currency trader like David Nahmad is eager to be quoted in the Bloomberg piece as a buyer.

Brexit Looms Over Art Market With London Auctions Set to Decline  (Bloomberg)