POP! What Art Bubble?

Thursday, December 1, 2016

By Alexandra Peers

Early this fall, in a classroom in an East 50s skyscraper, a handful of the most powerful women in the art world gathered to dish. Sotheby’s Institute, the auction house’s master’s degree program, had invited them to address guests and students (a sensible choice, since the school is so predominantly female they recently had to renovate the main floor to add more women’s restrooms).

The topic turned, as it almost always does these days in the art world, to the trillion-dollar market and to the one-percenters playing in it—and the rabid attention paid to it. Marianne Boesky, daughter of the insider trader Ivan Boesky, herself an art dealer, envied for both her eye for talent and her client list, said “There are cartels of people getting behind artists—pumping and dumping!” Elizabeth Dee, who just pioneered the art neighborhood of Harlem with a huge new gallery and has launched Independent. a hugely successful “alternative” art fair, concurred. And Amy Cappellazzo, who has just moved to Sotheby’s after two decades as contemporary art czar at archrival Christie’s, bragged she “could always sniff out the imposters” —as if art collectors were reality TV contestants who aren’t there for the right reasons. She searched the air to find a distasteful word for the fascination people have today with talking about the art market, its trends and records, as if it were a sport.

“It’s porn,” she said.

Ironic, of course, as this was a bit like a critique of nudity from Larry Flynt.

The auction houses and art fairs have been complicit, if not brilliant, at expanding, reinventing and fueling the art market in the last generation. With stops and starts, prices for a handful of artists, most notably Pablo Picasso and Andy Warhol, but many more have been on an almost uninterrupted tear for a generation, while other artists have risen, fallen, disappeared, been discovered and ruthlessly discarded again. As prices have climbed, so have lawsuits, tales of fakes, of huge markups and of friendships betrayed. “Art has gotten a bad name,” notes veteran dealer Jane Kallir, of Galerie St. Etienne, writing in the annual “Art Market Report” she’s been doing for decades. “The private nature of most art transfers, coupled with the large sums of money that can be involved, create an aura of malfeasance,” she notes, “even where none exists.”

Enter Schadenfreude. People on the sidelines, kept out of the game by income, disinclination or simply bad market timing, have rooted for the end of the art boom, its crazy prices, global Grand Tour of parties and gargantuan, almost unbelievable transactions (Pablo Picasso’s Bust of a Woman was priced at $47.4 million when a Qatari royal contracted to buy it in 2014, but Larry Gagosian sold it to Leon Black the next year for $106 million.) At first glance, they seem to be getting their way. In the nine months ended September 30, 2016, Sotheby’s reported net income of $8.6 million, compared to $54.9 million in the prior year period. The auctioneer disclosed: “The lower level of net income is principally due to a decrease of $764.5 million, or 26 percent, in net auction sales associated with the recent decline in the global art market.”

Art speculators have been bitten in the butt in recent weeks, too, as some “flavor of the month” artists sold at the November auctions in New York for a fraction of earlier prices. At the big fall auctions, you could almost hear the sound of air hissing out of the art market bubble. In the Contemporary sales, works by both legends like Roy Lichtenstein and up-and-comers like Dan Colen sold at mark-down prices. Tommy Hilfiger parted with his Damien Hirst, “The Crown of Life,” 2006, for $1.15 million, which looked good until you realized he bought it five years ago for $1.4 million. How much is the market down?: Christie’s bellwether sale of Post-War and Contemporary art, which brought $276.9 million on November 16, plummeted from the $658 million total of the same sale 18 months ago, in May 2015. We-told-you-so-ers might want to take pleasure in this, but it would be a waste. For a look at why it doesn’t matter, take a look back. (Sorry, but the boom, by and large, is not going anywhere.)

The great art boom, with its fits and starts, is generally traced back to 1987, when Vincent van Gogh’s Sunflowers sold for $33 million. All around the world, people who never talked about art were talking about the eye-popping price (which would be laughably low now: it’s not even in the top 50). After that, records fell like dominos. The stock market “crashed” in October 1987, falling 500 points in a day, but that only fueled the fury, as confidence in stocks got shaky. By 1989, Van Gogh’s glorious Portrait of Dr. Gachet made $82 million, selling to a Japanese buyer who at one point joked he wanted it buried with him. About 18 months later, the fever had passed, Japanese estate tax and financing rules that had favored art acquisitions changed, and auctions returned to the somewhat sleepy slog they had been for centuries. Prices for works by such artists as Jean Dubuffet or Alfred Sisley fell by half overnight. Arguably, that should have been the end of the story.

A group of collectors—think of them as Shakespeare’s Henry V might say, “we few, we happy few”— kept buying contemporary art into the freefall, getting a Cindy Sherman there or a Jeff Koons here for a few thousand dollars. These included Mera and Don Rubell (he’s the brother of the late cofounder of Studio 54, Steve Rubell); Larry Warsh, who was to turn profits made on early bets in Jean-Michel Basquiat and Keith Haring into funding for Chinese dissident art superstar Ai Weiwei two decades later; and Eli Broad, the financial services giant who in 2015 opened his own museum in Los Angeles. Their purchases began to look ridiculously smart when art bounced back around 1994. As prices climbed again, records set for masterpieces were increasingly covered by the mainstream press, and cottage industries of art-market analysis, and of making loans against art, arose and flourished.

A global roundelay of wealthy art buying began, and you could chart who was bidding by the nations listed on the auction house’s currency boards. The Japanese first (favoring pretty, sun-dappled Impressionists), the Chinese in the 1990s (buying the classic blue-chips, plus their own nation’s art, new and ancient), the Russians (favoring the tougher modernists, trophy pieces, and works by Peter Doig and Mark Rothko, moving millions out of Russian to London and back through art), and the Arabs (buying all of it). There were more market downturns, some severe—the first Gulf War and the Justice Department investigation of price fixing between the top auctioneers in 2001–03 being two of the most notable.

And then in 2002, the art fair Art Basel Miami Beach debuted, not coincidentally sponsored by Swiss bank UBS, and it changed everything. A cross between the day after Thanksgiving at Wal-Mart and Woodstock, it and the two dozen or so other fairs that followed became the gateway drug for millions to get hooked on the feverish, delightful, luxurious art world—and for the slice of those who could afford it, to get hooked on art collecting itself.

Art became a recognized asset class, globally traded, internationally scrutinized, codified and endorsed. which is the reason some art dealers give today for why the art market can never crash again: it’s too big now, too “serious,” too watched.

But those who think it’s all about art as an asset class miss the point, and miss the art market’s true bubble, the one that its players live in.

For many art collectors, the promise of appreciation is the excuse for the splurge, not the fuel for it. It’s like saying you went to Shea Stadium to see the Beatles in the summer of 1965 because you knew the “Butcher” album would be worth a lot someday. It is, but saying you were there, and there before so many others, is worth more. For many, the profit of art has always been the excuse for the party—and what a grand party it’s been.

So, what’s the takeaway? On the one hand, you have the art market’s likely continued strength at the top end, fueled by a global addiction—and that is the right word for it—that shows no sign of abating. Which means that some mostly rich people buying art today are going to get much, much richer. And it’s probably not you, unless you already are on the waiting lists for the artists handled by that small handful of dealers whose “stables” tend to go up reliably. But the rising tide is no longer lifting all boats. Art as investment? Not even the best salesmen are claiming it’s that anymore.

Marc Spiegler, director of Art Basel Miami Beach, which is held every December and is probably the busiest and most lucrative retail space for art in America, recently shocked some readers of the respected British trade journal The Art Newspaper when he wrote in an article, “Emerging art is not a great investment from a financial standpoint—because when it goes illiquid, it goes totally illiquid. There are artists whose works you simply cannot sell now….Of the artists selling well today, roughly 80 percent will be basically unsellable in 20 years,” he adds. “Which is perfectly fine. Because collecting contemporary art is about engaging with the Zeitgeist.”

The Zeitgeist can be a capricious bitch. Don’t say you weren’t warned.

Alexandra Peers, Executive Editor of Galerie magazine, covered the art world for decades for The Wall Street Journal.


A Salon Dinner to Remember

AVENUE hosts quarterly salon dinner

On The Avenue

Every Day We’re Trufflin’

Belmond Castello di Casole launches truffle-hunting experience


Stars Rise, Stars Set

Tallying the winners and losers at London's fall auctions