On this morning’s Q3 earnings call, Tad Smith made Sotheby’s case for a strengthening art market. Here’s the prepared remarks from the call:

Four data points that can give us a potential read on the market:

1. Operational data in the third quarter versus the same period last year and also versus earlier in 2016
2. The Hong Kong sales in October
3. The London Contemporary Frieze Week sales
4. The results of consignment-getting for the upcoming major New York sales as well as the interest level in our material and the anecdotal evidence we are hearing from clients around the world

Number 1

Excluding last year’s summer Contemporary sale in London, which took place in the third quarter of 2015, the operational statistics for this third quarter compared to the prior periods give some cause for optimism. But the quarter itself is so small and the number of sales so few, that one needs to be cautious when using this data.

• Total hammer sales (excluding buyer’s premium), were down only 8% in the third quarter compared to the third quarter of 2015, while the year-to-date total was down 26%. Although the rate of the decline slowed, the third quarter accounts for a small 7% of our overall annual sales;
• The percentage of unsold lots in the third quarter was 19% versus 23% for the same period a year ago, and 21% year-to-date
• Our performance against low estimate was 114% versus 101% a year ago in the third quarter and versus 98% on a year-to-date basis;
• The overall number of bidders and buyers was up 33% and 21% respectively over this same period, and the average number of bidders per sold lot was also up, by 15%.
• The Hong Kong sales in early October were weaker than we would have liked, but the shortfalls were concentrated in two areas – Jewelry and Chinese Works of Art.
• Many other areas did quite well, including Modern and Contemporary Asian Art, where top quality modern works continued to command strong prices, and demand for contemporary Japanese and Chinese works was noteworthy

Number 2

However, the comparison to the same period a year ago, as well as all of 2016 compared to 2015 is what is most revealing about the current state of the Hong Kong and Greater China markets:

• This October, leaving aside the luxury sectors of wine, jewelry and watches, sales of art alone were down only 7%.
• And looking year-over-year, sales of art in Hong Kong in 2016 were actually up 3%.
• Insofar as it reflects strength among Chinese buyers, our recent sales may bode well for our important New York auctions later this month.

Number 3

The London Contemporary Frieze Week sales were encouraging.

• Although the consignment-getting period for the sales was more difficult, that is a bit of a lagging indicator because consignments were mainly secured during the summer months.
• The performance of the sales themselves was positive, with an overall total of $107.8 million, above our $90.9 million high estimate and with 91% of lots sold.
• The top lot of the week across all auction houses was Jean-Michel Basquiat’s Hannibal, when seven bidders drove the canvas to $13.1 million, more than double the high estimate.
• Also noteworthy was our Contemporary Day sale, which achieved $19.2 million and was 86.7% sold by lot – the strongest sell-through rate for an October Contemporary Day sale in seven years.
• For both of these sales, the high sell-through rates may signal that the market is increasingly in a buying mood.

Number 4

Turning to the upcoming major New York sales – we feel good.

• Our Impressionist & Modern Art Evening Sale in New York on the 14th carries a low estimate of $145.8 million, which is similar in size to the other three major sales in the category we have held this year.
• The top lot is Edvard Munch’s seminal Girls on the Bridge from 1902 – one of the most powerful paintings of the artist’s career, which is estimated to achieve in excess of $50 million. This marks the third time we have sold this particular painting since 1996 and each time it has performed well.
• We are also pleased to be offering property from a notable American collection, assembled over multiple generations, and led by Pablo Picasso’s The Painter and His Model from 1963, which is estimated at $12/18 million.
• Our Contemporary Art Evening Sale on the 17th has a low estimate of $208.6 million, which is competitively very strong for the season.
• The sale will open with 25 works assembled by Steven and Ann Ames, noted American collectors and philanthropists, including two monumental abstract masterpieces by Gerhard Richter estimated at $20/30 million each.
• Other highlights include Andy Warhol’s Self Portrait (Fright Wig) from the artist’s seminal 1986 series, which is estimated at $20/30 million, and Jean- Michel Basquiat’s Brother’s Sausage, a monumental frieze of six panels, which carries an estimate of $15/20 million.