Waiting for the Fall

Eli Broad says that art prices are going to fall. This might be true, but Eli Broad has no more idea than anyone else where art prices are going, and he's clearly talking his book: he's a buyer, not a seller, of art right now, so it's in his interest for the art market to come down a little.

Todd Gibson says much the same thing as Eli Broad, and for much the same purported reason:

With the rising cost of capital having passed some sort of tipping point this year, and with the recent meltdown in the subprime mortgage market beginning to poison all debt markets, the richest of the rich--the biggest of the big collectors--have been hit incredibly hard...
As this credit and liquidity crisis continues to develop into the fall, we'll see more reports of the loss of staggering amounts of wealth among the super rich. Clustered within this group of individuals, of course, is the small subset of the NetJets-set who do the art fair and contemporary auction circuit with checkbooks in hand.

I don't buy it. If somebody makes a fabulously ~~lucky~~ successful hedge-fund investment there might be a wealth-effect consequence, and that person might be more willing to drop a seven-figure sum on a painting by Julie Mehretu. On the other hand, there's no shortage of buyers for Julie Mehretu right now, and if one or five or ten drop out of the market, the rest will still be there. And remember that in a gallery situation, unlike an auction situation, you only need one buyer to reach a stratospheric price; remember too that auction prices have often simply been a reflection of the astonishing sums changing hands in the opaque world of art dealers.

What's more, I don't, actually, see the richest of the rich being "hit incredibly hard" – not as a group. Some small subset of them will have a large percentage of their net wealth in hedge funds, and some small subset of that small subset will have been overweight quant funds and therefore might have suffered some capital losses. But hedge funds as a whole have not done so badly in the past couple of months that their investors have less money now than they did a year ago. And the rich, as a group, have money everywhere – stocks, bonds, real estate, art, you name it. Yes, they're exposed to hedge funds, but a hedge fund collapse or two will hardly inflict a mortal wound.

And, of course, there's no indication that your average Russian oligarch is scaling back his spending one iota. If Hugh Grant's Andy Warhol does sell for over $30 million, it will be thanks to trophy-collectors like the Russians, rather than the serious art collectors who are much more likely to want a race riot, or an electric chair, or a car crash. The turquoise Liz is very much a second-tier work: the red Liz is better, and the Marilyns are better than the Liz's in any case, and in general the celebrity works get bought by celebrities, who have much less money than the collectors-with-a-capital-C who are more interested in the later, darker works (or the ground-breaking early paintings).

That said, George Michael did just drop $7 million on a Hirst – and it was a very good Hirst, too. I do wonder who the people are spending multi-million-dollar sums on bad paintings by Hirst's assistants – it's those paintings, not the sculptures, which will really plummet in value when the Art Crash finally happens. You thought it was hard selling your Eric Fischl in 1992? Just wait and try to sell your enormous ugly painting of the caesarean birth of Hirst's son in a few years' time.

–Felix Salmon

Add Your Comment

Report Abuse

Archive

Categories

Links