Art market datapoint of the day

By Felix Salmon
October 21, 2009
auctioned off:

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Law firm Heller Ehrman spent millions of dollars putting together a corporate art collection during the biggest bull market the art world has ever seen, before going bankrupt at the end of last year. Now that art collection is being auctioned off:

The largely contemporary collection is expected to fetch between $610,000 and $1 million in a slow art market, according to bankruptcy papers and the auctioneer hired to conduct the sale…

Martin Gammon, director of business development for Bonhams, acknowledged the art will be going on the block at a time when “the art market is somewhat down from its highs of 2007.” But he said he expected the Heller auctions to be successful.

“In this particular instance, the pieces are post-war and contemporary, which has seen some deflation, but most of that speculation took place at the very high-end of the marketplace, pieces that were selling for hundreds of millions of dollars,” Gammon said. “This is all, I would say, very well selected and well curated material.”

Peter Benvenutti, the chair of Heller Ehrman’s dissolution committee who is now at Jones Day in San Francisco, said he expected the auction to generate “a small fraction of the original cost” of the art, which he said was substantially more than $1 million.

Anybody who claims that art can ever be a good investment should bear this in mind. If anything could have turned a profit, it would be contemporary art which was bought a decade ago and which is being sold now. But no: this collection is worth much less, at auction, than the amount that was paid for it.

If you buy art — especially works on paper — from an art gallery at full retail price, then your chances of being able to ever sell that art at auction for more than you paid are slim indeed. When people talk about art as an asset class, they’re not talking about the kind of art which you see hanging on law-firm walls, or even in suburban homes. They’re talking about a tiny subset of the art world, which you’re not invited to except as a sucker. Caveat emptor.



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What is the commission that a broker or auction house makes on the sale of a painting? Do appraisers figure in the sales at all? I’m reminded of when, not so long ago, Candy and Candy bought a $10-$20M building in Los Angeles for $500M using the poor icelanders for financing. It’s all the artificial manipulation of value, and skimming. It depends on the “ratings agencies” in their various forms, and effective BS.

(The answer to yesterday’s question: “What does the “RT” mean in tweets?” Is, “re-tweet.”)

Which is why I have never bought art as an investment; I’ve bought it because I like looking at what I own. I get joy and contentment and inspiration from it. And I don’t worry about what it’s “worth.”

Posted by Donald A. Coffin | Report as abusive

I’ve bought a number of prints over the last few years, mostly old masters and Americans from the first half of the 20th century. I always bid low, and only for things I really want. I got a couple real buys at auctions last November and March, when a lot of people were pretty scared.

I figure they will probably always be worth close to what I pay for them, and if really bad inflation ensues, they will be something of a hedge. But mostly, I buy these to hang on walls and look at them every day.

Buying contemporary artists as an investment is probably pretty dicey. Tastes can be pretty capricious. Rembrandt was broke for half his life and at times bought his own prints just to keep prices from falling to nothing. Yet now his prints are some of the most valuable. Who knows what the trendy were buying in 1640?

Posted by Bob_in_MA | Report as abusive

I would only buy art on my own taste, and its value would be pegged on my appreciation. I don’t expect that I will ever be purchasing art at those prices and just as well — there are so many great artists producing great work — it’s where I’d rather spend my money.

I think you’re missing a few fundamental points. What if at the same time, and investor had chosen equities or property? Say, the bought shares in Heller Ehrman…they certainly wouldn’t be getting $1m back from that investment. I have worked as an economist in the art market for 15 years and in fact most art does appreciate in financial value. The problem with investment in the market is LIQUIDITY. This is a forced sale at a bad time for that sector of the art market.

Posted by An economist | Report as abusive