Where's KrazyKat When You Really Need Him??

[delekkerste]

Confidence in the fine art market plummets overnight as both of Sotheby's evening and day sales of Impressionist and modern art fall short of expectations, leaving the market reeling ahead of next week's contemporary art sale and saddling the auction house with $14.6 million in losses on auction guarantees. KrazyKat, where are you when the market needs you the most??

 

 

Sotheby's Stock Drops 28% Following N.Y. Evening Sale

2007-11-08 17:42 (New York)

 

By Linda Sandler and Philip Boroff

 

Nov. 8 (Bloomberg) -- Sotheby's shares had their biggest-

ever one-day drop after a Vincent van Gogh and other paintings

failed to sell at an Impressionist art sale, prompting concern

that credit-market losses will batter the art world.

 

Last night's New York auction took in $269.7 million, a

third less than the low presale estimate of $401 million. (Both

figures include commissions.) Sotheby's shares tumbled $14.23, or

28 percent, to $35.84 in New York trading after analysts

downgraded their ratings.

 

Sotheby's had promised sellers fixed prices for works by Van

Gogh, Pablo Picasso and other artists, regardless of whether the

pictures sold, and some didn't. The shortfall may signal that the

market has crested.

 

``If they have huge guarantees, and there are a lot of

unsold lots, it could have a ripple effect on the contemporary

art market,'' said New York dealer Richard Feigen, who has

invested in Sotheby's stock. Christie's International and

Sotheby's have major auctions of contemporary art next week.

 

Sotheby's shares are a wager on an 11-year bull market in

fine art. They rose to an intraday high of $61.40 on Oct. 11. In

August, billionaire Eli Broad predicted art prices would fall

amid credit-market losses by hedge funds and other collectors.

The stock slipped in the past 10 days as U.S. bank losses on

subprime-mortgage investments mounted.

 

Risk Amount

 

The auction house ``is carrying a lot of risk'' going into

next week's contemporary-art auctions, analyst Kristine Koerber

of JMP Securities said in an interview.

 

She downgraded her rating on Sotheby's stock to ``market

perform'' from ``market outperform.''

 

Banc of America's rating went to ``neutral'' from ``buy''

this morning, based on a ``cloudier macro outlook for the art

market.''

 

``The sale's lackluster performance suggests that key fears

related to subprime/credit/housing issues may be playing out in

the U.S,'' Banc of America analyst Dana Cohen wrote to clients.

 

During the art-market boom, values for Andy Warhol, Mark

Rothko and others more than quadrupled. Investors betting on a

decline sold short 8.2 million Sotheby's shares, or about 13.3

percent of the stock available for trading, according to New York

Stock Exchange data on Nov. 6.

 

Short sellers sell borrowed shares, aiming to replace them

with stock bought later at lower prices.

 

``Sotheby's offers investors a great way to place bets on

these big events,'' just as tennis fans might put money on Roger

Federer before the U.S. Open, said George Sutton, an analyst at

Craig-Hallum Capital, whose rating fell today from ``buy'' to

``accumulate.''

 

Unsold Works

 

Sotheby's auction last night, with unsold works by artists

such as Van Gogh and Matisse, showed earlier art is vulnerable

too.

 

In May, Sotheby's $278.5 million total for Impressionist art

was in the middle of the range and almost all the works sold.

Last night, a quarter of the items didn't sell.

 

Christie's fared better at its Nov. 6 Impressionist sale

than Sotheby's. Still, the total take at Christie's just beat its

low estimate before commissions and missed its top estimate by

almost a third. In a May auction, Christie's came near to hitting

its high estimate.

 

`Speed of Sound'

 

``You are looking at an auction market that has come from

the speed of light to the speed of sound,'' said Steven Pincus,

who runs insurer DeWitt Stern Group's fine-art practice.

 

Sotheby's went into last night's Impressionist sale with

significant risks. Guarantees were handed out for art with an

estimated price range of $153 million to $209 million before

commissions, based on data in the sale catalog, Koerber said.

Sotheby's precommission valuation of the sale was about $355

million to $494 million.

 

Of 26 lots guaranteed, five didn't sell and 10 sold below

Sotheby's estimated range, Koerber said today.

 

``While we never comment on individual guarantees or

guarantee profits,'' Sotheby's spokeswoman Diana Phillips said in

an e-mail, ``we have made money on our overall guarantee

portfolio year after year and it is our current expectation that

we will do so this year as well.''

 

Van Gogh's ``The Fields (Wheat Fields)'' received no bids

and didn't sell. The guaranteed painting was valued at $28

million to $35 million. Georges Braque's ``L'Echo,'' expected to

go for as much as $20 million, also failed to sell and carried a

guarantee.

 

Franz Marc's waterfall picture, ``Der Wasserfall (Frauen

Unter Einem Wasserfall),'' another guaranteed work, was estimated

at $20 million to $30 million before commission, and sold for

$20.2 million with commission.

 

Market Confidence

 

Sotheby's carries bigger liabilities for its contemporary-

art sale on Nov. 14, with about 78 percent of the low value

guaranteed, according to Koerber.

 

For its contemporary-art sale, Sotheby's has guarantees

against works valued at $174 million to $220 million, including a

Francis Bacon bullfight picture valued at as much as $35 million

and an $18 million Mark Rothko, Koerber said. A year ago,

Sotheby's guaranteed 35 percent of the value of its contemporary-

art sale, she said.

 

Christie's commitments run to 52 percent of its Nov. 13

contemporary sale, Koerber said.

 

Neither auction house would comment on the analyst's data.

 

Sotheby's is scheduled to report results tomorrow that show

its third-quarter net loss narrowed to about 39 cents a share,

from a loss of 50 cents a year earlier. That's according to a

Bloomberg survey of three analysts who provided estimates based

on generally accepted accounting principles.

 

--With reporting by Lindsay Pollock in New York. Editor:

Beech (jmr/jjb)

[shiverbones]

yowtch! It was only a matter of time until the fallout started to hit the art market.

[Sharkey]

This is great! Now I can justifiably lowball the owner of Van Gogh's "The Fields" with a paltry offer of only $15 million! And that financially-challenged loser'll probably have to take it so he can squeak by his tax bill on that villa in Tuscany! .....

[comix4fun]

This entire thread is akin to staring in the mirror and chanting "Candyman, Candyman, Candyman"

[Enforcer]

This entire thread is akin to staring in the mirror and chanting "Candyman, Candyman, Candyman"

 

 

Sad but true.

[Point Five]

Confidence in the fine art market plummets overnight as both of Sotheby's evening and day sales of Impressionist and modern art fall short of expectations, leaving the market reeling ahead of next week's contemporary art sale and saddling the auction house with $14.6 million in losses on auction guarantees.

Must be because everyone is dumping fine art and getting into comic book original art.

[Sharkey]

In all seriousness, though, thanks for posting this article Gene. Since you're in the investment biz, what do you make of it?

 

It seems this is not a new development since at the end of the article it says their net loss this year is actually less than the net loss at this time last year (38 cents per share vs 50 cents last year). That just tells me not to invest in Sotheby's!

 

Works of art not selling at auction is not a new development, it happens. Anybody here who is knowledgeable in the fine art market care to comment on the significance of these particular auctions? Is it simply a matter of earlier impressionist works not being as desirable? Are the prices asked or auction estimates too aggressive? Or is the bigger problem the fact that the auction houses are making guarantees?

 

Or is it just the end of the 11-year bull run? Hey, maybe that means Kirby has another 5, 6 years to be bullish!

 

--Steve

 

[spider9698]

I'll defer to Gene regarding investment analysis. My two cents is that both auction houses have been rather cut-throat to land the big pieces and have overextended guanrantees and estimates to clients to land them. In addition, it seems that it would only be a matter of time before the market cooled and we may be seeing the beginnings of this. I'm afraid that next week may be a bit bloodier for Christie's and Sotheby's with the amount of contemporary art being offered. The only solace they may find is that more people are investing in modern and contemporary art than the old masters or impressionists. Perhaps this is akin to the drive-up in bronze art over golden age OA?

Again, my two cents.

PS: Gene, PM when you can.

 

[batman_fan]

This entire thread is akin to staring in the mirror and chanting "Candyman, Candyman, Candyman"

 

more like beetlejuice, beetlejuice, beetlejuice

[batman_fan]

I personally have seen some board members take a pounding from the sub-prime thing with a notable member selling off some prime stuff and trying to sell others but no offer high enough to cover the investment amount.

[comicartfan]

Gene,

While we are all aware of your postion and that you have in the past posted similiar articles regarding the fine art market, do you think this has an impact on the original comic art marketplace ?

 

I am not looking to get into a flame war, simply wondering if one market can/will have an influence over another ? .....

 

Say baseball collectibles are in a bear market, does this impact say coins ? Or stamps ? Or more directly, other sports ? .....

[Mighty Hal]

I really don't think that the fine art market influences comic art. It's hard to imagine that the collector that has the coin for a Sotheby's Picasso is also the guy cruising through Romita Man's inventory for a really great Jim Aparo splash.

 

I do think that the economy has crunched some of the Sotheby's crowd. It doesn't help that they recently boosted the percentage that bidders have to pay (to Sotheby's) on items that they buy. I think it now starts at 25%.

 

Meanwhile, department stores are reporting that Christmas shoppers are spending less this year. The real estate market is dead. (Foreclosures in my home state, per the local paper, were up 500% last year.) Car dealers are reporting increased inventory. So, while the fine art market may not have a ripple effect on comic OA, the economy sure might.

 

 

 

 

[Artemaria]

While we are all aware of your postion and that you have in the past posted similiar articles regarding the fine art market, do you think this has an impact on the original comic art marketplace ?

 

I agree - this is the germane question. Sure one has nothing to do with another, but is it foreseeable or even reasonable to expect some kind of trickle down effect?

 

If so, then what?

 

- A

[chromium]

While we are all aware of your postion and that you have in the past posted similiar articles regarding the fine art market, do you think this has an impact on the original comic art marketplace ?

 

I agree - this is the germane question. Sure one has nothing to do with another, but is it foreseeable or even reasonable to expect some kind of trickle down effect?

 

If so, then what?

 

Buy, buy, buy

[delekkerste]

Gene,

While we are all aware of your postion and that you have in the past posted similiar articles regarding the fine art market, do you think this has an impact on the original comic art marketplace ?

 

I am not looking to get into a flame war, simply wondering if one market can/will have an influence over another ? .....

 

Say baseball collectibles are in a bear market, does this impact say coins ? Or stamps ? Or more directly, other sports ? .....

 

Here's my take on things (see below; this was excerpted from another post in Comics General). Granted, comic OA is a niche hobby with its own quirks and prices may be "stickier" than in more liquid, transparent markets, but I do not subscribe to the theory that it will prove to be immune to the factors affecting almost all other markets out there. I also concede that there is still plenty of money out there, but maintain that this is nearly always the case, and that one will find that the willingness to spend curiously diminishes in a downturn.

 

I'm not looking to waste my time with a flame war, so if anyone feels like they might be offended by a less than utopian forecast for the comic OA market, please stop reading now.

 

Here's the reprinted post:

 

 

"While they are not 100% correlated or comparable, I do think you can compare the markets for comic books and comic art with fine art. Let's face it - the price of art, collectibles, stocks, bonds, real estate, commodities, etc. have all had a huge run-up the last 6 years, due largely to the ocean of liquidity and availability of cheap credit. It's no coincidence that collectibles prices have been going up at the same time EVERYTHING ELSE has been going up. Negative real interest rates prevailed for years, people had criminally easy access to cheap credit and home equity loans, bubbles in other markets and certain industries plumped up many peoples' wealth and income, etc. - these factors and more all conspired to inflate prices of everything from comic books to condos (until the past year) to stocks to metals to fine artwork.

 

Clearly, some trends have now reversed. The credit bubble is now a credit crunch. The housing bubble is now a housing recession. The 5-year bull market in stocks has been showing cracks in the firmament (if the bull isn't dead already, I think it will be before our next president takes office, IMHO). The psychology of the fine art market has gone from greed to fear almost overnight. There is still a lot of money out there and some markets remain unscathed or even healthy, but mass psychology is beginning to turn and air is steadily leaking out from the greater credit/liquidity bubble that has fueled all the bull markets in the past 6 years.

 

Just as a rising tide has lifted all boats, we'll see who has been swimming naked (figuratively speaking) when the tide goes out."

[spider9698]

Well put. While I am not screaming that the sky is falling, I think we can all agree that the rate at which our collections have appreciated over the past few years is a bit extreme (and unhealthy)

 

[comicartfan]

I agree with Gene and Steve......Nothing can sustain the type of growth that we've seen in the past 2 years and while there won't be a crash, ala Black Monday, there will be correction.

 

We keep hearing how prices can't keep rising and they will fall, but I have yet to see it....At least with the better quality pieces.

 

 

[dem1138]

I think a good current take on the temperature of the OA market will be where the FF #57 page ends on Heritage this coming weekend. Pages from this title/era sold in the 22K range iat SD and this current page, I feel, is superior to the ones that sold (though one of the ones that sold was darn near close to as good!). The page on Heritage is already at around 18K with the next bid being 20K+. In a "crazy" market, this would be a 25K+ page. I'm curious to see where it falls. If the bid in now is the final bid, that's not a good sign to me. However, if it ends around 22K, I'd say the market is stabilizing - but if the page ends over 25K -- then I really don't know what to think...

[westform]

David; I had this page pegged at 28k with the juice as a pre-auction estimate. I think that would be a sign of a VERY healthy Kirby market. I could be wrong, but I guess we will see... Any other guesses? Dan

 

I think a good current take on the temperature of the OA market will be where the FF #57 page ends on Heritage this coming weekend. Pages from this title/era sold in the 22K range iat SD and this current page, I feel, is superior to the ones that sold (though one of the ones that sold was darn near close to as good!). The page on Heritage is already at around 18K with the next bid being 20K+. In a "crazy" market, this would be a 25K+ page. I'm curious to see where it falls. If the bid in now is the final bid, that's not a good sign to me. However, if it ends around 22K, I'd say the market is stabilizing - but if the page ends over 25K -- then I really don't know what to think...

[spider9698]

While I agree a price of 28K for the Kirby piece would be strong, I think we are looking at a small piece of the overall market. There will always be buyers for "A" list material (Kirby FF, Ditko ASM, Bolland KJ, Miller DKR). The real question is the sustainability of prices for the B through D list material. I think we may start to see the house of cards fall apart for those pieces long before it touches any of the above material.