The front page of the NYT’s arts section today is dominated by a 2,000-word auction preview by Carol Vogel. The headline is "Tapped Out?" and the article continues on all of page 16, under the hed "Auction Houses Brace for Fall". Vogel’s tone is highly pessimistic: "anxiety is the dominant mood," she writes, adding that Sotheby’s and Christie’s are "whistling in the dark" in their search for buyers.
Directly opposite Vogel’s article, on page 17, is a full-page ad from Sanford Smith, who runs the ART20 fair which is at the Park Avenue Armory this weekend. He writes:
In the 40 years I have been in the art business as a collector, dealer and show producer I have never seen the value of quality merchandise do anything but increase…
Now is the time to buy… Your purchase of art will not only increase in value but will also bring beauty and pleasure into your life — unlike your portfolio.
Smith is not alone in pushing this line. In recent weeks I’ve received a steady stream of emails from dealers and art consultants, all of them variations on the theme that art is a good investment at a time when more mainstream asset classes are plunging in value. Funnily enough, I never got these emails during the boom years, when art really was getting more and more expensive.
There’s a definite whiff of desperation in the air, and I can advise anybody that if they’re talking to a dealer who’s saying that his wares are a good investment, they should run very fast in the opposite direction. Here’s an exercise for anybody who’s not convinced: have a look at the art which has increased the most in value over the past decade, and ask yourself if any of it was sold as a good investment.
Incidentally, this downturn is already presenting nice opportunities to anybody still in the market for major works. Sotheby’s, for instance, has a very important 1916 Malevich, onto which it has slapped an eye-popping $60 million estimate. But it knows for a fact there’s at least one buyer out there:
Determined to offset some of the risk, Sotheby’s has lined up what it calls an irrevocable bid on the painting. That means the auction house has a buyer who has contractually agreed to purchase the painting for an undisclosed sum.
If someone else is willing to pay more, the original bidder will get a share of what is called the upside: the difference between what he was willing to pay and the higher price.
This is a no-lose proposition for the buyer. If there aren’t any other bids, he gets the Malevich at what he clearly considers a good price. If there are other bids, he gets paid in cash for losing the auction.
The lesson here is that if you definitely want any major painting that is coming up for auction, talk to the auction house in advance. You might well be able to work out a deal, and there’s a very good chance you’ll be able to persuade them to waive a large chunk of their commission if you submit an "irrevocable bid".