Do the Uber-Rich Care About the Slowing Economy? Check the Art Market

Both Soethby's and Christie's held their spring auctions of Impressionist and Modern Art this week. Last night's results from Sotheby's were modest and uninspiring. The auction house managed to sell $235 million worth of art, versus an expected range between $207 and $284 million. The company shrewdly lowered the supply of works to auction in order to temper supply with the possibility of sagging demand due to the recent worldwide increase in financial market volatility. Many have been predicting a dismal end to the red hot art market which has been exhibiting bubble-like tendencies as multiple records are broken at each successive auction. This week's results point to more of a droop rather than a drop off of a cliff.
The Sotheby's auction produced 41 sales out of a total of 52 lots on the auction block. Many of the works that sold garnered prices well above initial estimates but only four records were broken. As for the guarantees that Sotheby's issued for some works, they managed to sell all but one lot. Christie's auction of similar works Tuesday night brought in $277.2 million, versus expectations of $286 million. 44 out of 58 lots sold. Again, the results were somewhat contradictory. A few works broke records, some sold for higher than estimated, while others failed to sell. Overseas investors comprised 70% of buyers at Christie's, and 30% of buyers at Sotheby's. Apparently, those that attended Christie's auction are familiar with the weak dollar, while those at Sotheby's believe in our government's "strong dollar policy".
Next week's auctions of Contemporary Art will be an even better barometer of whether the incredible momentum in the art market can be sustained. Prices of contemporary works have skyrocketed beyond comprehension in the past few years. Many have hypothesized that this is the result of new investors who are both newbie rich people as well as newbie art buyers, driving up the price of Contemporary Art by bidding for works as an investment despite their lack of understanding of art. Rising art prices have also been attributed to the increase of wealthy buyers from the Middle East and Asia who have recently become wealthy from rising oil prices and stock markets. What do the newly rich know about Contemporary Art? Some would argue that they know nothing. They just raise the paddle and pay more and more because its currently fashionable and because they can. Museums and auction houses have contributed to the frenzy by attempting to "explain" Contemporary Art in what amounts to ridiculously pretentious gibberish. The less the newbies understand about the art, the more the mystique is elevated. In a hilarious editorial in the Wall Street Journal on April 18th, Eric Gibson offered a few priceless snippets from the Whitney Museum's commentary accompanying the Contemporary Art exhibit. My favorite description went something like this:
"...invents puzzles out of nonsequiturs to seek congruence in seemingly incongruous situations, whether visual or spatial...inhabits those interstitial spaces between understanding and confusion."
Color me officially confused. I don't profess to understand art, particularly that of the contemporary variety, but I know that the above description was possibly the result of the curator's monkey randomly picking words out of a dictionary. Needless to say, next week's Contemporary Art auctions will be very interesting. Now that the Chinese and Indian stock markets have corrected, and turmoil in the credit markets has caused many a hedge fund to blow-out, will these investors show up with the same appetites for less traditional works? And will it be a good indicator of prudence returning to even the upper crust? Will Sotheby's and Christie's be left holding the bag due to overoptimistic guarantees offered to sellers? The only guarantee I'm willing to make is the following: Whoever decides to shell out between $6 - $8 million for a large painting of a Campbell's Soup Can should prepare to be mercilessly mocked the following morning.