Speculation in the Art Market? You Bet.

Market Movers blogger Felix Salmon, who has also contributed to this blog, takes issue with Lauren A.E. Schuker's depiction of a speculative bubble in the art world ready to burst in this weekend's edition of the Wall Street Journal:

The recent run-up in art prices might be a bubble, but it's not a speculative bubble. The new wave of art buyers, be they hedge-fund managers or Russian oligarchs, isn't buying art with the intention of flipping it at a profit.

I don't have any statistics to refute your claim, but based on chatter in the art world ether — which is as good as anyone has to go on in a totally unregulated market that operates on rumors — there are, indeed, speculative buyers amongst the new breed of collectors. No doubt there are some buyers who are serious collectors through and through. There are also people buying art because of its social cachet — when you throw down for Dash Snow, you're not just acquiring a piece of art. You're also buying your way into invite-only events revolving around the artist, garbing yourself in the mantle of a "modern-day Medici," and — a bonus of contemporary art — gaining street cred as someone who's on the cutting edge of culture.

And then there are the people who don't fit neatly in to any one of these three categories. They're rich; they want to spend their money; and it might as well be on something that broadens their social horizons and might even make them some money. Potential profitability is one of those niggling factors in the back of this kind of collector's mind. So why shouldn't we assume that if art prices take a swan dive — or threaten to do so — these collectors will be less likely to buy that sculpture?

You've also got to consider that, while they might not survive in the long run (or even get off the ground), the reason why all of these art investment funds keep popping up, even after the last one has failed, is because there's some sort of interest in what they want to do — namely, treat art as a cold, hard cash cow. That they haven't flourished isn't because "no one has ever successfully speculated on art." It's because plenty of people can do it on their own without paying 2 and 20 to a middleman.