Christie’s and Phillips stake out the final week in June in a last stand attempt to save New York’s Gigaweek. Will Sotheby’s follow?

This commentary by Marion Maneker is available to AMMpro subscribers. (The first month of AMMpro is free and subscribers are welcome to sign up for the first month and cancel before they are billed.)

In the best of times, high stakes art auctions are a game of chess between the houses as they try to out-position each other for consignments, sale dates and the interest of the most sought-after buyers. These days, that chess game has an added third dimension, trying to predict the effects of the spread of coronavirus on the three major auction centers in New York, London and Hong Kong.

Through much of the last year, Hong Kong seemed to be the city most at risk from forces beyond the control of the auctioneers. Long-running street battles between protestors, police and gangs of pro-Mainland enforcers threatened to overshadow the city’s art trade which had remained surprisingly healthy even at the height of street conflicts. When Art Basel Hong Kong was finally cancelled under the added pall of the coronavirus, there seemed to be an almost audible gasp of relief among art dealers that they would not have to gamble on attending the fair. Even then, Hong Kong’s volatile mix of street politics was a more present danger than the incipient pandemic.

Today the auction houses don’t have quite the same luxury. Even if art fairs account for a substantial portion of an art gallery’s business, a single fair will not make a break a gallery’s year (exempting Art Basel in Basel, of course, which the fair’s elders seem to be signaling will be moving to September.) The May sales in New York are a different animal. Some wag christened the concentration of buying power that takes place twice a year in New York City as Gigaweek. That’s because the aggregate sales among the three auction houses in those periods is well beyond a billion dollars and account for a portion of their overall revenue too great to simply forego.

With so much sales potential at stake, it wasn’t a surprise that Christie’s organized a conference call with art market reporters on Thursday to announce that it had decided to combine the New York and London sales of Impressionist, Modern and Contemporary art into a single week of sales to be held in New York in late June from the 23rd to the 28th. Phillips quickly latched on to the move to announce their sales would also be combined and moved to June 22nd.

Both houses are holding on to their plans for May sales in Hong Kong grasping on to the hope that the rapidly improving situation in that South Asian city will allow the market to return to some familiar level. Whether Asian buyers will travel to Hong Kong in May remains to be seen; but previous successful sales in Hong Kong held in adverse circumstances lend some credence to the hopes. Seoul Auction is advertising its own sales date on May 31st in Hong Kong. Ravenel, the Taiwanese auction house that usually holds a sale in Hong Kong in early June, has yet to announce its plans for 2020.

Sotheby’s, which had already begun to announce lots for its May sales in New York (something Christie’s has not done), won’t be pushed. Or is that put in check? As New York descends into a mostly voluntary self-quarantine to prevent the spread of Covid-19, the unknown variable is how long the city will be on total lockdown and how quickly it might emerge to functional mobility. Sotheby’s says they’re making decisions on sales on a thirty-day perimeter.

Sotheby’s have already pulled off a double reverse with their Spring Hong Kong sales originally scheduled for April in Asia. By moving them to New York in April, Sotheby’s had made an appointment in Samarra. Now those sales are rescheduled for July 5th in Hong Kong.

Given the odds, betting that Sotheby’s moves from May should be easy money. There’s a reason art sales get crowded together in Gigaweeks, Megaweeks and art fairs. The behavioral economics of the art market are complex. Bidders thrive on the perception of discernment and choice—and, of course, competition … lots of competition. Competition drives prices, it offers social proof of the value of art but it also creates disappointed punters looking for another shot at the action. For Sotheby’s already impressive line-up to do really, really well it will need to move closer to the other sales.

Why isn’t Sotheby’s moving now? Most likely that’s because there’s no good reason to move yet. Hanging in the balance is the fate of the Macklowe collection which is overseen by Michael Findlay, the divorce court’s impartial expert. Findlay may be the art market’s coolest customer. Wry, experienced and unflappable, he has been playing his cards close to his vest. According to the trade, Findlay put pressure on the houses to come up with their best offer by revealing his mandate was not to sell the collection quickly but to maximize the value of the collection.

In that spirit, Findlay let slip that he was under no obligation to sell in May. The court gave him a 3-year window to dispose of the art. The same day Christie’s announced their move, Findlay signaled that he was putting his choice of auction house on pause until the situation in New York solidifies.

Findlay’s slow roll may have already cost the auction business the Marron collection which went to a consortium of dealers willing to give the heirs ready money. Was the move to late June a bid to win Findlay’s favor? Or does adding six weeks just increase the chances that Christie’s can save their season? Is Findlay prepared to take the downside risk that Trump has already bungled coronavirus so badly that a devastating economic nosedive has already begun and no amount of Fed action will be able to keep us from auguring in?

If we take the worst-case economic scenario seriously, might not the next few weeks present the best window over the next three years to get the most dollars for the Macklowe’s art? That would require the situation in New York to improve miraculously in the next two weeks. Could Sotheby’s and Findlay really leap into action and pull off the sale of the century on a month’s notice?

Chess is a cerebral game and following the moves requires knowing a great deal about all of the potential moves that follow. It’s nerve wracking to play but engaging to watch. Among the many moves that the auction houses must think through are the likely motivations of other collectors in the Macklowe’s league.

Whether the sales are in May or June may matter little to consignors who now seem to have little interest in selling art to raise cash. On Christie’s conference call, CEO Guillaume Cerutti, auctioneer Jussi Pylkkanen, US Jen Zatorski, America’s Chairman Marc Porter, Europe’s Dirk Boll and Hong Kong’s Francis Belin all testified to the mood of complacency. “We cannot describe a trend where we have had many of our collectors come to us seeking distressed sales,” Cerutti said in an elegantly deflected phrase. Art may have become an asset in the last decade but it doesn’t seem to be one the rich are eager to trade unless they absolutely have to.

Much is made in the press about the stock market in relation to the art market. But more than 15 years of low interest rates has given rich people a surfeit of liquidity and plenty of real assets. If credit freezes again, these same sellers might rue not consigning in this window of relative calm. Again, Christie’s and Phillips have bought their consignors six weeks to potentially change their minds.

Or they may be betting that the cure for the coming financial crisis is even more liquidity that we already have. In that case, art could still be a hedge against further asset inflation.

What Cerutti did reveal on the call is that while Christie’s consignors were all happy to sell in New York at their own price and according to their own discretion, the private sales queries had started flooding in. Over-leveraged art owners looking to raise cash? No. What’s driving the current interest is the perception that global instability caused by the pandemic might set up what financial types call “special opportunities” and the rest of us refer to as fire sales.

They say the stock market climbs a wall of worry but the art market thrives on the idea that the buyer got a bargain the seller didn’t recognize. People will pay top dollar to feel like they got a good deal. And that seems to be the phase we’re entering in the art market. Cerutti told the gathered journalists that those in-bound queries were all coming from eager buyers with wish lists of long-sought items.

Such is the state of the current art market that we may have to wait until the wish-list buyers disappear before the sellers holding their prizes are willing to consign them for sale.