Economic Hardship in a Deflation and OA

[malvin]

Hey Chris,

 

Well said! And Gene's been pretty good too

 

I agree, I use discretionary money when I buy art, I'm not forgoing food on the table. There is no doubt that there is a portion out there who are in over their heads, I'm hoping it's a minority.

 

If I see art I like at a good price, I'm still buying, and I'm still selling stuff that I had planned to sell, even bigger pieces (e.g. the Silvestri Cyberforce DPS), so I'm hoping the downturn won't affect things that much! =)

 

Malvin

[Sharkey]

What Chris said. And he's right, he's no genius. Actually Chris, your post defines exactly what smart, disciplined, rational people SHOULD do. It's really about discipline in spending and saving and being smart enough to only buy luxuries (such as collectibles) when you're in a position to spend money you can afford to live without on something that you don't need. Most people do the former (spend) way more than the latter (save), and they're the ones who will be hurting over the next several years. It's hard to trade comic books and DVD collections and multiple flat screen TVs for food, car payments, and mortgage payments. Our society as a whole has been obsessed with material possessions and I've never seen people spend spend spend for so long with so little regard to long term investment strategies or accumulation of rainy day funds. I know people who were offered massive home equity lines of credit, multiple credit cards, etc who maxed them all out to buy X-Boxes, ATVs, boats, and all sorts of stuff for themselves and their kids. Now they're sweating bullets. We'll soon know the ants from the grasshoppers.

 

I fully expect to see some choice pieces come to market when some collectors who bought things they couldn't really afford are forced to sell them to pay off other debts, like their way overinflated mortgage payments on a house that will soon be worth 35% less than they paid for it. And when that happens, I expect to see the collectors who follow Chris' model of financial discipline and sanity be prepared to buy them. But they won't pay record prices, nor should they. It's much more likely that the market will shake out the true blue chip items from the chaff. We'll soon know if Jim Lee prices are sustainable.

 

Gene, there's no doubt we are seeing a deflationary spiral that will bring our "spend first, think later" economy to its knees. Anybody who didn't see this coming has had their head in the sand for the past 5 years. Admittedly, I didn't think it would hit with this much fury and expected a bit more of a prolonged downward trending rather than the lead-boulder plummet we've seen in the past 2 weeks. Ouch, hey it hurts to see it no matter where you sit. But it was going to happen. The inflated valuations in the market and housing sectors had to make a correction. Had to. BOOM. Welcome to reality, world.

 

Our society's mindset of spend, spend, spend is going to bite a lot of people; it'll be rough going for the next few years, maybe the next decade. But, for those bear-minded individuals who anticipated the inevitable downturn and are appropriately positioned when things hit bottom, there will be plenty of opportunities.

 

[Nexus]

Just some observations and notes from another collector...

 

I've also had completely out-of-the-blue, unsolicited offers for some of my art in recent weeks. Really stupid five-figure offers for art that even I don't think is worth that much. I've held onto all of it, though.

 

I've also been OFFERED more good art in recent weeks than in the past.

 

Anyone who panic-sells now is a. not really a collector in my book and/or b. hasn't managed their money well.

 

I don't expect to see a lot of panic-selling, so I don't think there will be some massive influx of top-notch art hitting the marketplace. Most collectors buy for the love of the art and will hang onto it, regardless of its perceived value. At the same time, for the pieces that do come onto market, I don't foresee the same escalation in prices that we've seen the last couple of years. Anyone here really still think they'll see McFarlane Spidey covers get $80K, KILLING JOKE pages get $30K, or even Ditko ASM pages at their current $40K levels?

 

If the worst were to pass, and the OA market collapsed completely, of course, I would be bummed. But in that scenario, a valueless OA collection would be the least of my worries. And I never expected to see a return on my art purchases...I bought it all simply because I enjoyed having it.

 

Right now, I'm sitting back and waiting to see how many collectors succumb to all this doomsday talk, both in terms of buying and selling. The November Heritage auction should be interesting.

 

 

[NelsonAI]

A lot of valid points being made on this thread.

 

Over the years, certain collectors have inquired about time payments for artwork I had for sale. I usually evaluate the situation on a case by case basis. In every instance, I warn the prospective buyer not to overextend themselves. I would much rather lose a sale than see someone dig themselves a hole they can't get out of. Some have taken my advice, others have not.

 

As a long time collector, I want to see this hobby thrive.

 

Cheers!

N

 

[heartened]

Still interested in KJ pages at those prices, personally. I too think there is still a lot of money out there, and have fielded increasingly crazy offers on art from my collection over the past one to two months. The economy of course will eventually affect everything, as it is likely to decrease each person's spending limit. But the nostalgia factor often allows collectors to weather the storm and not dump their art. And this waiting game often lasts longer than any downturn in the economy. If the economy stays down for years (i.e., a true recession/depression), then art prices will come down as people are eventually forced to sell. But, I think the economy has to really "hurt" a collector to get them to let loose on the good stuff.

 

Additionally, some careers are less affected by the global economy. Not immune, but less affected. We docs don't make millions, but we make the same in a down economy as we do in an up economy. If the economy stays down for too long, though, eventually we suffer too. But, for now, I'm still buying! My biggest impediment to buying more these days is actually that I work too hard and have no time for this hobby for weeks at a time. Then I quickly try to figure out where the hobby is, what's available, and maybe grab something.

 

I've decreased my "art day" announcements, but have still been buying. I bought a big piece about two months ago, but haven't had time to even put in on CAF. So, just because teh "art days" are fewer, just might mean that people don't have as much time as they used to.

 

[dem1138]

Looking through the upcoming Heritage and Comiclink Auctions though, it doesn't look like anyone is letting go of much yet.

 

 

I stand corrected! There is some great Kirby and Ditko art in the upcoming Heritage Auction. Should be interesting...!

[westform]

Chris pretty much sums up my experience in the hobby. I guess the question will be, how many 'collectors' are subprime borrowers of comic art and how many have viewed it as a luxury good and bought only what they could afford and/or lose? Time will tell I suppose.

 

 

[*paull*]

Twice in the past few months I've held back on bidding on items I know I would have bid more on if it were 2006 or 2007. I've also cut back on my GA comic buying.

[NelsonAI]

 

At least one major dealer is touting (himself and) comic art as a great, safe investment on a major "classifieds" website.

[tth2]

Looks like KK was banned again

I like how the moderators know just quietly remove all his posts completely now. And they react to his posts much more quickly now. They should`ve been doing this years ago. For an attention-wh*re like KK, that`s got to be the worst thing in the world.

[r1982rhoads]

Personally, I would love to see a decline in prices. I love the stuff, and if the market causes a $1000 page to go to $60, I would still get the same feeling buying the page. Bottom line, declines come, but they always do go, as per history. A lot of the high priced stuff most likely won't hold their top, but I do believe a lot of the mid range to lower priced stuff will come back nicely once all the problems work their way through the system.

[dem1138]

The November Heritage Auction will tell us a lot. That FF 5 page is awesome...

[KreeSkrull99]

The November Heritage Auction will tell us a lot. That FF 5 page is awesome...

 

I couldn't find the page but perhaps you can send a link ?

 

I am desparately looking for a safe place to park some Benjamins in this chaotic and scary environment

[innocuous]

I'm new to OA, so thanks for all the comments here. I've learned a lot.

 

To some degree, I do hope the market comes down. Although my buying of everything with my discretionary income is pretty much on hold right now, if something comes along that I really want . . .

[mtlevy]

Just one example of art not crashing...

 

I wanted to add a second V page to my collection.

 

A decent but not great page was on eBay this week sold for $3K+...the same page sold in July on ComicLink for $2.7K

 

 

[J.Sid]

The people who own the artwork I want will not be dropping their prices anytime soon. They are pretty far from being in a mad rush to pay their mortgages.

 

Jeff

[clemso]

The November Heritage Auction will tell us a lot. That FF 5 page is awesome...

 

That is a great page, I remember that page when it came up for auction first time round way back in Christies 94/95?

 

There is a lot of Kirby up for sale, pages such as the last page to Avengers1 page, FF 5 page and X-Men 1, first Jean Grey in costume will probably do well despite credit crunch. As for the average Kirby pieces, well will see.

 

Clem

[delekkerste]

Another day, the sound of another bubble popping...

 

Fortune just reported that the average net worth of China's wealthiest fell by a third from a year ago - and that's probably outdated and understated already. Anyone who believes that the only people taking things cautiously are the ones who overextended themselves is seriously deluding themselves. Even those who have ample money to spend simply aren't in this environment. Bear markets and deflation are as much about psychology as they are about money and the economy.

 

BusinessWeek is reporting on some of the early casualties of the ongoing crash:

 

China October 6, 2008, 9:50AM EST

 

Pop Goes the Bubble in Chinese & Indian Art

 

Fallout from the global economic crisis hits the opening sale of modern and contemporary Asian art at Sotheby's in Hong Kong

 

by Frederik Balfour and Nandini Lakshman

 

While much of Hong Kong hunkered down just hours before the arrival of a typhoon on Oct. 4, the start of Sotheby's three-day auction of modern and contemporary Asian art was buffeted by the financial storm on Wall Street. Of the 47 works that went under the hammer, more than 40% were unsold. What's more, earnings for Sotheby's (BID), including the auctioneer's commission known as the "buyer's premium," were a paltry $15 million, accounting for just 41% of the auction house's estimated takings for the night. Among the biggest upsets was the unsold work by India's hot-selling artist Subodh Gupta, Untitled, which had an estimated price of $1.55 million to $2.05 million. Another big surprise: Chinese cynical realist painter Liu Wei's triptych, The Revolutionary Family Series, failed to find a bidder willing to meet the $1.55 million suggested minimum.

 

As the weather deteriorated on Sunday morning, so did events in the auction hall. Only 39 out of 110 paintings from the 20th Century Chinese Art Sale found buyers, while 71 had to be packed up and shipped back to their sellers. By the afternoon session, the usual buzz at Hong Kong's contemporary Chinese art auctions was sorely absent. At one point during the sale, the auctioneer mistook a woman covering her mouth to stifle a yawn for her wishing to bid, prompting a valiant attempt to inject some levity into the proceedings as he asked if "anyone else is yawning in the room."

 

Yawns gave way to disbelief a little later when two works by white-hot Chinese artist Zhang Xiaogang went unsold. That's a huge reversal for the Beijing-based artist, whose paintings have routinely fetched millions of dollars, well in excess of auction estimates. (His painting Bloodline: Big Family No. 1 was one of the few top lots that sold on Saturday, though the $2.97 million price was below the expected maximum.) Yue Minjun and Zeng Fanzhi, two others among the hottest-selling Chinese contemporary artists, did manage to sell, although well within the estimates.

 

Wall Street Fallout

 

You connect the dots: Wall Street goes into meltdown, and Sotheby's auction bombs in Hong Kong. Kevin Ching, Sotheby's CEO for Asia, tries to be optimistic about whether the two are connected. "I hope there is no immediate direct correlation between the financial market and the art market," he says, pointing to the widely successful auction of enfant terrible Damien Hirst's works in London within days of the collapse of Lehman Brothers. The problem with some of the Hong Kong auction, he adds, stems from overly ambitious owners trying for unreasonably high prices. "When we have [sellers] who want aggressive estimates over and above what [the] market can accept, they would have to occasionally accept the consequences, and I think that's what happened here [saturday] night," Ching explains.

 

Still, others in Asia's art business are certain the fallout from Wall Street is already hurting Chinese and Indian markets. In both countries, newly wealthy investment bankers and hedge fund managers helped inflate bubbles (BusinessWeek, 6/5/06) in works by local artists. For instance, in the last four years a booming Indian economy (BusinessWeek, 6/5/06) and buoyant stock market encouraged many private banks to offer fee-based services to assist clients in building portfolios of artworks sourced from galleries, auctions, and even direct sales. Fund managers say that investment bankers with their hefty bonuses helped inflate art prices by 30% to 60% above their real value, according to a gallery owner in Mumbai.

 

Bright Spots

 

Now with Wall Street in turmoil, most of the bankers who were regulars at art shows and auctions have moved out, says avid art collector Harsh Goenka, chairman of India's diversified RPG Enterprises, which has interests in tires, power, and retail. He claims that in the last few years, around 60% to 70% of art sold in auctions and shows in India went to the new breed of investor rather than art connoisseurs. "They looked at art as a brand and made money by trading in it," says Goenka. In the past few months, he says, painters and art dealers have been calling him up to offer their unsold works at a 30% to 40% discount.

 

The picture isn't all grim, though. The mood was positively ebullient at Sotheby's Hong Kong on Oct. 6 as buyers crammed the room for the auction of Southeast Asian contemporary paintings. Sotheby's employees manned the phones to handle enthusiastic overseas bidding. For instance, Indonesian painter I Nyoman Masriadi had already set a personal record on the first day of the Sotheby's auction when his huge canvas featuring Batman and Superman sitting on adjacent toilets sold for $620,000. He then surpassed that with a painting of boxers that seems part Botero, part Léger; it fetched a high $833,000. A bit later, during furious bidding for yet another Masriadi, the auctioneer exclaimed "This is really, really fun." The room broke into applause when the work finally sold for a very respectable $307,000.

 

The reason for this sea change in sentiment? The prices were far more affordable than the works from China and India on sale during the weekend, and collectors seem to have finally cottoned onto the notion that Indonesian, Vietnamese, and Filipino artists represent opportunities for collectors to own great art. One work by up-and-coming Filipino painter Geraldine Javier sold for $32,000, more than three times the high estimate. An intimate portrait of a woman and child by Vietnamese painter Mai Trung Thu also sold for triple the estimate, fetching $23,000.

 

Balfour is Asia Correspondent for BusinessWeek based in Hong Kong. Lakshman covers India business for BusinessWeek.

 

[dem1138]

Gene, clearly you missed the "superhero exception":

 

Bright Spots

 

For instance, Indonesian painter I Nyoman Masriadi had already set a personal record on the first day of the Sotheby's auction when his huge canvas featuring Batman and Superman sitting on adjacent toilets sold for $620,000.

 

Balfour is Asia Correspondent for BusinessWeek based in Hong Kong. Lakshman covers India business for BusinessWeek.

[delekkerste]

 

They're dropping like flies now...all over the world, all kinds of art...

 

Bloomberg News

Hirst Sale Marks U.K. Art Market Peak; Prices Fall, Survey Says

2008-10-06 23:01:00.30 GMT

 

By Scott Reyburn

 

Oct. 7 (Bloomberg) -- Damien Hirst's 111.5 million-pound ($199 million) record auction in London last month marks the top of the art market in the U.K., for now at least, according to a survey by valuers.

 

At the time that Hirst was grabbing headlines, the collapse in real-estate sales in the U.K. was taking its toll on prices of lower-value art and antiques, said the Royal Institution of Chartered Surveyors.

 

``The credit crunch and bank collapses are slowing down the markets, as is the falling house market,'' said Simon Jones of Oxfordshire auctioneers Jones & Jacob, who was quoted in the survey. ``It will get worse as the recession continues. That said, best quality lots are finding buyers at good prices.''

 

Auction houses are watching for signs of how their sales will perform in London and New York in the next two months. Even wealthy art buyers may be deterred by the Sept. 15 bankruptcy of Lehman Brothers Holdings Inc., tumbling stock markets and slowing economic growth, said dealers.

 

A net balance of 34 percent more auctioneers and valuers reported prices falling for items estimated at 1,000 pounds and below in the quarterly survey completed last month. By contrast, a balance of 39 percent reported that prices rose for more expensive works of 50,000 pounds and higher as wealthy people snapped up trophy art. Contemporary art registered the strongest growth, with 41 percent more surveyors reporting increased prices.

 

Antique Furniture

 

Twenty-two percent more of those surveyed by RICS said prices were dropping for items valued up to 5,000 pounds. Prices fell most sharply for antique furniture and traditional paintings, said RICS.

 

``It seems average buyers are reassessing their spending in the current financial crisis,'' said the survey, based on responses from 63 RICS members. ``With less people moving home, there is a diminished supply and demand for art and antiques.''

 

In August, the RICS's U.K. housing survey reported that the average number of transactions for each surveyor in the previous three months had dropped to 12.7, the lowest figure since the survey began. During that period, some estate agents in a number of regions reported making less than one sale per week, said RICS.

 

Silver and jewelry also continued to increase in price at auction, helped by strong commodities and precious metal markets, according to RICS members.

 

Sotheby's ``Beautiful Inside My Head Forever'' auction of new work by Hirst on Sept. 15 and 16 ended with 98 percent of lots finding buyers.

 

On Sept. 27, the Edinburgh auctioneers Lyon & Turnbull sold only 27 percent of the lots at a 300,000-pound sale of modern and contemporary art and design in London. Most of the works in the auction were valued at less than 5,000 pounds.

 

(Scott Reyburn writes about the art market for Bloomberg News. Opinions expressed are his own.)