CNBC says HIGH END art buying boom will continue for 10 years!

[glenbru]

Just thought it was interesting. I'm not sure how it relates to high end OA art buying.

 

Glen

 

 

http://www.cnbc.com/id/100875550?__source=yahoo%7Cfinance%7Cheadline%7Cheadline%7Cstory&par=yahoo&doc=100875550%7CWorld%27s%20Rich%20Pay%20Top%20Doll

[vodou]

Just thought it was interesting. I'm not sure how it relates to high end OA art buying.

 

Glen

 

 

http://www.cnbc.com/id/100875550?__source=yahoo%7Cfinance%7Cheadline%7Cheadline%7Cstory&par=yahoo&doc=100875550%7CWorld%27s%20Rich%20Pay%20Top%20Doll

Time to sell.

Everything.

[delekkerste]

CNBC says HIGH END art buying boom will continue for 10 years!

 

Well, actually it wasn't CNBC that said that, it was one guy that CNBC interviewed. Who happens to run a fine art investment fund and has a vested in interest in hyping up the art market. So take it with a mine full of salt.

 

 

The article does link to an interesting opposing point of view on CNBC.com:

 

Art Is the Next Gold [as in Hard Asset Prices are Plummeting]: Novogratz

By: Robert Frank | CNBC Reporter & Editor

Wednesday, 15 May 2013 | 7:45 AM ET

 

Sales at Sotheby's contemporary art auction totaled $293,587,000, reports CNBC's Robert Frank.The high-priced art market may be poised for a fall, according to a top investor.

 

Appearing on CNBC's "Squawk Box" Wednesday morning, Michael Novogratz of Fortress Investment Group said the art market has all the signs of speculation and that he could see a correction similar to the recent drop in gold.

 

"Art is 100 percent a bubble—I mean it has all the markings for a bubble," Novogratz said. "Prices have gone parabolic. You go to any of the art shows and you know even the cheap stuff that was $10,000 two years ago is now $80,000. The expense of art has gotten crazy."

 

He said the correction, when it comes, will be dramatic. While Novogratz is not short Sotheby's stock, he said the turn in prices could be more than 50 percent. "These $90 million paintings, you know, they might be worth eight one day. They won't go from 90 to 70, it will go from 90 to eight."

 

Last night's sale of contemporary art at Sotheby's saw the sale of a Barnett Newman painting, Onement VI, for $43.8 million. The price was nearly double the previous record for a Newman.

 

The second-highest price was for a Gerhard Richter painting, which sold for $37 million. The same work was purchased at auction in 1998 for $3.6 million.

 

Granted, collectors have been predicting a sharp correction in the art market for years. Many art dealers and collectors called a bubble in the art market in the late 2000s. But after a brief correction, art prices continued to soar throughout the recession partly because of foreign buyers.

 

But Novogratz said this art market feels perilously similar to the dot-com bubble of 1999 and that it is benefiting from easy central bank policy that's largely helping the wealthy.

 

"The Fed has this policy of trickled-down monetary policy ... helping the rich get richer, and the rich are getting tremendously richer because asset prices are going up around the world," he said.

 

Novogratz said the art market is also being propped up by the rich in China and Russia who are looking for a safe store of value for their wealth offshore.

 

"You also have the illegal money, the dirty money, the money laundering that is coming out of ... vast parts of the world where people ... want an easy an easy place to store their money," he said. "That's what's really giving this its turbo-charge to the art market."

 

The auction houses say the prices convey confidence that quality art will stand the test of time and that demand is coming from all over the world.

 

"The global nature of today's art market was yet again underlined with collectors from 35 countries registering to bid in the sale, 20 percent of whom were new to either Sotheby's or the category," the auction house said in a statement.

 

I suspect that the truth lies somewhere in the middle of these two extreme views.

[bocaratondefense]

 

"He said the correction, when it comes, will be dramatic. While Novogratz is not short Sotheby's stock, he said the turn in prices could be more than 50 percent. "These $90 million paintings, you know, they might be worth eight one day. They won't go from 90 to 70, it will go from 90 to eight."

 

 

.....from 90 to eight.

 

 

Time to sell.

Everything.

 

 

[Bronty]

mehhh. Just some guy running an art fund; as biased as humanly possible.

[Bronty]

"He said the correction, when it comes, will be dramatic. While Novogratz is not short Sotheby's stock, he said the turn in prices could be more than 50 percent. "These $90 million paintings, you know, they might be worth eight one day. They won't go from 90 to 70, it will go from 90 to eight."

 

 

.....from 90 to eight.

 

 

Time to sell.

Everything.

 

 

I don't buy that 90 to 8 business. 90m paintings are special pieces, not far off the record. We would call them grails. 90 to 50 maybe if there was a hard correction but 90 to 8? I can't see it.

[delekkerste]

I was watching the Antiques Roadshow on Monday. It was an episode from 1998, but, the interesting part was they gave updated 2013 valuations on all of the items on the original 1998 broadcast. Guess what? The vast majority of items were either flat or down over that 15-year time period. All but probably 2 or 3 items lagged inflation over that period and only one item did really well. And this was during a period of significant devaluation in purchasing power of the U.S. dollar, especially for items of value!

 

No doubt that OA has been in a boom cycle. Perhaps that boom cycle will continue. But, it's difficult for me to see the post-'90s generations gravitating towards this material (or even having the means to do so) like the wealthy Baby Boomers, Gen Xers and early Gen Y collectors have. My guess is that, at some point, prices will finally flatten out like those objects on the Antiques Roadshow and either just chop around and/or slowly erode in value (obviously, we're talking a period of many years). I know, it's difficult to believe, because we've been conditioned to seeing prices only go up for the most part. But, I like to look at how the future dynamics might play out and not rely on old paradigms and rear-view mirror driving. Of course, no one can know exactly what's going to happen, but a smart person can look at the observable facts and weigh the probability of various outcomes differently. Like I said in the "Hard Assets" thread, I think that Gen 1 and Gen 2.0 collectors will probably make out pretty well when selling their art. Gen 2.5 collectors like myself (I started 10 years ago) will probably see mixed results, and Gen 3.0 collectors who have been buying at 2012 and 2013 price levels I suspect will not end up doing very well from a purely financial perspective.

 

I love OA and will continue to buy OA for a while. But, when I spend money on art these days, I do so with the implicit assumption that I will likely eventually lose purchasing power, if not nominal value, by buying the piece. If the joy I get out of ownership and being able to look at a piece whenever I want exceeds the amount of money I figure I'll lose on it, I'll buy it. If not, I won't.

[Bronty]

I was watching the Antiques Roadshow on Monday. It was an episode from 1998, but, the interesting part was they gave updated 2013 valuations on all of the items on the original 1998 broadcast. Guess what? The vast majority of items were either flat or down over that 15-year time period. All but probably 2 or 3 items lagged inflation over that period and only one item did really well. And this was during a period of significant devaluation in purchasing power of the U.S. dollar, especially for items of value!

 

I've seen some of those "vintage" episodes with the updated valuations as well, the returns in general are absolutely abysmal. The "home runs" have doubled in value over a 15 or 20 year period and as you say most are flat or down.

 

However, my sense is that antiques like those shown on AR are generally less collected today and I have no doubt at all that part of the downturn in the prices quoted is due to the internet effect.... "rare" pieces now being shown to be not that rare. After all most comics are flat over that time period due to that effect as well, but the grail pieces are way up. It would be interesting to see what grail antiques have done pre and post internet. I suspect the grails are up, although due to decreased interest in antiques in general (?) not up as much as the comparable comics or comic OA.

 

Its also interesting to note that the artwork shown on these "repriced" AR episodes is generally (but not always) one of the few things that has increased in value, presumably due to originals being actually rare, internet or not.

[delekkerste]

I don't buy that 90 to 8 business. 90m paintings are special pieces, not far off the record. We would call them grails. 90 to 50 maybe if there was a hard correction but 90 to 8? I can't see it.

 

I agree. Art prices are highly correlated with global wealth conditions. It would take an implosion of wealth even greater than 2008 (remember, a lot of these billionaires lost a half to two-thirds of their fortunes in a matter of months during this time) for prices to crash 90%. Though, grails and masterpieces are certainly capable of falling, say, 40-50% - we saw it happen between 1990 and 1996 when "Fine Art Bubble 1.0 - Tokyo Drift" imploded.

 

That's why I say that anyone who says the best of the best of anything is bulletproof is - we saw the greatest masterpieces of Western painting plummet in value during this time (and, just because someone decided not to sell the overpriced painting they bought in 1988 or 1989 doesn't mean the value didn't collapse along with everything else), so if that stuff didn't hold up, I refuse to believe that anything lesser is bulletproof either.

[Bronty]

Makes sense. I think the "buy the best" motto has worked very well with respect to the internet effect that made "commons" less valuable and "grails" more valuable... but its not like the internet effect is the only factor on prices!

[Bronty]

we've been conditioned to seeing prices only go up for the most part. But, I like to look at how the future dynamics might play out and not rely on old paradigms and rear-view mirror driving.

 

yeah. It just seems like common sense as the readership base has been in decline for decades. Fundamentally nothing changes that although the films may extend this for a while or even permanently, but only for the properties for which successful films are made.

[lb jefferies]

I love OA and will continue to buy OA for a while. But, when I spend money on art these days, I do so with the implicit assumption that I will likely eventually lose purchasing power, if not nominal value, by buying the piece. If the joy I get out of ownership and being able to look at a piece whenever I want exceeds the amount of money I figure I'll lose on it, I'll buy it. If not, I won't.

 

+1. Best paragraph in this whole thread.

[suspense39]

High end contemporary art is also viewed as a luxury good (not that it always IS), like designer handbags, high end wine and champagne.....Francois Pinaut probably the worlds largest owner of luxury good producers (Louis Vuiton for example) is also one of the largest and most important collectors of contemporary art. Original comic art just doesn't have the same cache', or billionaire mogul selling and promoting it as such.....and I'm quite happy with that.But I think we will also have a lasting run

[delekkerste]

High end contemporary art is also viewed as a luxury good (not that it always IS), like designer handbags, high end wine and champagne.....Francois Pinaut probably the worlds largest owner of luxury good producers (Louis Vuiton for example) is also one of the largest and most important collectors of contemporary art.

 

You are thinking of LVMH head Bernard Arnault, not Francois Pinault. Or perhaps an amalgamation of the two.

[Mio]

Speaking of art prices... does anyone know a good place to find historical prices for art? Aside from the narrow ha.com archive, I haven't found a good place.

[suspense39]

High end contemporary art is also viewed as a luxury good (not that it always IS), like designer handbags, high end wine and champagne.....Francois Pinaut probably the worlds largest owner of luxury good producers (Louis Vuiton for example) is also one of the largest and most important collectors of contemporary art.

 

You are thinking of LVMH head Bernard Arnault, not Francois Pinault. Or perhaps an amalgamation of the two.

 

yes, i stand corrected

[jbud73]

I love OA and will continue to buy OA for a while. But, when I spend money on art these days, I do so with the implicit assumption that I will likely eventually lose purchasing power, if not nominal value, by buying the piece. If the joy I get out of ownership and being able to look at a piece whenever I want exceeds the amount of money I figure I'll lose on it, I'll buy it. If not, I won't.

 

+1. Best paragraph in this whole thread.

 

Yes Gene is articulating the concept of Utility of which I am proponent. Most people only consider the direct cost of items they purchase and do not attribute the associated reduction in their buying power and overall satisfaction with the item they purchased in relation to all other things they could have used those funds for.

[vodou]

Opportunity Cost.

[NelsonAI]

CNBC says HIGH END art buying boom will continue for 10 years!

 

Well, actually it wasn't CNBC that said that, it was one guy that CNBC interviewed. Who happens to run a fine art investment fund and has a vested in interest in hyping up the art market. So take it with a mine full of salt.

 

A very important correction and distinction.

The thread title at face value sounds more like typical pump and dump rhetoric.

 

Buy what you love AND what you can afford. I collect for personal enjoyment and do take into account opportunity cost. The fact that some of my OA has appreciated over the years is just a bonus for me.

 

Cheers!

N.

 

 

[Silver Surfer]

The guy buying the $90M painting won't even blink and could careless what the market is doing. If its cheaper then they will just buy more and the prices will start to rise again.