Felix Salmon

A couple of weeks ago, Artnet officially launched Artnet Indices — what it calls “the world’s first comprehensive set of art indices“. According to the press release:

It is now possible to measure price performance and other important market metrics for individual artists and artworks with the same rigorous standards used in financial indices.

Artnet’s Thomas Galbraith is quoted in the release as saying that “the artnet Indices provide quantitative market reports on the performance of artists like Andy Warhol or Damien Hirst, just as you might track a Fortune 500 company”.

I had a long lunch with Galbraith on the day that the indices were launched, and I’ve been going back and forth with him since then, trying to get a feel for how they really work. And as you might imagine, I have quite a few problems with these things.

To put this in perspective, here’s the chart that Artnet loves to send out to reporters, featuring its first index, the C50 index of contemporary art.

The message of this chart is very clear. Contemporary art is an asset class, it’s a strongly performing asset class, and if you go back to 1988, it has significantly outperformed the S&P 500. If you start them both at 100 in 1988, for instance, then by 2009 the S&P would only have reached 354, while the C50 would have reached 578 — even after a big plunge from almost 1,000 in 2008.

In fact, however, an investment in the S&P 500 would have done much better than that: it would be 638 in 2009, thanks to the fact that stocks (unlike art) pay dividends. If you chart the C50 against the S&P 500 with dividends reinvested, the outperformance shrinks markedly:

What’s more, this chart takes the C50 at face value, as a vaguely investable index — when it simply isn’t. Here, for instance, are the top 15 artists in the C50 right now: there are lot of names there (Zao Wou-Ki, Zeng Fanzhi, Chu Teh-Chun, Zhang Xiaogang, Wang Yidong) who simply weren’t investable in 1988, and certainly weren’t in the C50 index back then.

I can’t show you a chart of how the 50 artists in the C50 index would have fared if you just bought those 50 artists and held them, because Artnet’s tools won’t let me combine more than 10 artists in one list. But here’s the next best thing: the middle 10 artists from the C50 list in 1988, charted, again, against the S&P 500. These are pretty big-name artists: Alexander Calder, Jim Dine, Helen Frankenthaler, Franz Kline, Robert Motherwell, Louise Nevelson, Kenneth Noland, Theodoros Stamos, Cy Twombly, and Richard Lindner. If contemporary art in general has done well, you’d expect these names to have done well. And, they have! But they haven’t outperformed the S&P 500.

Now the components of the S&P change over time, too — but the changing components have much less effect on the S&P’s performance than they do on the C50′s. And in fact, if you just buy and hold all the components of the S&P 500, you’re likely to outperform the index as a whole. Hot stocks enter indices, and undervalued ones drop out: I don’t have a chart here for the performance of the 500 components of the S&P 500 in 1988, but it would probably do better, not worse, than the index.

Not that that matters: the S&P 500 is investable. You can buy index funds or ETFs which very closely track the performance of the index, with stocks going in and out: they’ll sell the stocks which drop out, and buy the ones which come in. Since September 1989, there have been a total of 587 additions to the S&P 500: that’s about 25 per year, or 5% of the total.

By contrast, since 1988, there have been 111 additions to the C50: that’s about 5 per year, or 10% of the total. Which means that the C50 churns twice as fast as the S&P 500. And in the S&P 500, that churn can be positive: it can happen when when one constituent gets acquired. By contrast, churn in the C50 only occurs when one artist drops out and is replaced by another.

The result is massive survivorship bias. To demonstrate just how massive the bias is, here are the middle 10 artists of the C50 in 1988, charted against the middle 10 artists of the C50 in 2012: Alexander Calder, Damien Hirst, Roy Lichtenstein, Joan Mitchell, Pierre Soulages, Wang Guangyi, Christopher Wool, Rudolf Stingel, Liu Xiaodong, and Liu Wei. You can see that the current members of the index, had you bought them back in 1988, would have performed spectacularly well. The performance of the C50, then, is largely a function of the fact that hot artists keep on getting added — after they’ve become hot. It’s a classic case of investing with hindsight: if you only bought things which performed extremely well, then you would have made lots of money. Well, thanks for that.

The difference here — the 1988 artists end up at 477 in 2012, while the 2012 artists end up at 2,183 — makes a mockery of the idea that contemporary art is some kind of homogenous and investable asset class, or that someone who simply bought contemporary art in 1988 would have seen their assets perform in line with the C50 index.

What’s more, you’re actually seeing treble survivorship bias here. Artnet’s art indices are created by combining its individual-artist indices, and those individual-artist indices have their own survivorship bias built in. That’s because they break down an artist’s work into groups of “Comparable Sets”, and then combine the Comparable Sets in a price-weighted manner to get the artist index. As a result, if Gerhard Richter abstracts, say, suddenly go on a tear, then those abstracts will start making up an ever-greater part of the overall Gerhard Richter index. Both on an artist level and on the index level, whatever does well becomes highly weighted, and things which don’t do well essentially get ignored. (For instance, you can’t even draw up a chart on Artnet of the bottom 10 artists of 1988, because for some of them, Artnet hasn’t even bothered to put together an index yet.)

Finally, it’s no coincidence that Artnet’s first public index is its contemporary art index — the one part of the art world which has been on fire of late. It’s the third level of survivorship bias: if and when Artnet starts publishing its Old Masters index, say, you can be sure the numbers won’t look nearly as impressive.

But even within the contemporary art world, I would be shocked if one collector in a hundred actually saw the kind of returns that Artnet is implying are typical. The thing about the S&P 500 is that it’s meant to be reflective of the market as a whole: while some stocks will do better and other stocks will do worse, broadly speaking stocks perform pretty much in line with the S&P 500. And that’s simply not true of the C50. The overwhelming majority of contemporary art does not perform nearly as well as the C50. Even if you confine yourself to works bought at auction, if you hypothetically bought every work of contemporary art that was sold at auction in 1988, you wouldn’t come close to matching the performance of the C50 since that date.

In other words, stock indices like the S&P 500 are useful precisely because they act as a benchmark: something an investor can reasonably hope to achieve. No sensible contemporary-art collector, by contrast, could ever reasonably hope to see their collection appreciate in value in line with the C50.

The real point here is that contemporary art is always full of here-today-gone-tomorrow art stars, who create art which goes from being white-hot to being pretty much unsellable. In 1988, for instance, the C50 included where-are-they-now names like Theodoro Stamos, Pierre Alechinsky, James Havard, Jean Fautrier, and even Saul Steinberg, the New Yorker illustrator, who appeared just above Robert Rauschenberg on the list. Last year, the most expensive Steinberg sold at auction reached just $28,750.

And that was a much more staid time, when very few really contemporary artists ever appeared at auction. (There was no Basquiat on the list, for instance; no Schnabel, no Fischl.) Today, the list is not only very China-dominated, but also includes names like Rudolf Stingel, Christopher Wool, Mark Tansey, and Glenn Brown — true heirs to the kind of hype that surrounded the likes of Schnabel in the 80s. You can buy their art at auction, if you really want. But you’d have to be insane if you really thought you were making an investment.

If you’ve ever been to Randall’s Island before this weekend, chances are it was to see Cirque du Soleil — the transnational phenomenon which has taken an venerable yet largely impecunious centuries-old tradition, and turned it into one of the greatest money-spinners imaginable. Cirque du Soleil is, above all else, a branding triumph: it’s transformed circus acts into something which can be proudly sponsored by Infiniti and SunLife Financial.

Go to Randall’s Island right now, however, and while you might describe what you see as a circus, you won’t find any bags of popcorn or Chinese contortionists: instead, there’s 280,000 square feet of astonishingly trendy and expensive contemporary art. This is Frieze New York, and it’s has, in a single outing, managed to change the art world’s conception of what an art fair can and should be.

Jerry Saltz, for one, was impressed:

Making my way into the immense white tent that houses the fair, I was shocked. The spaces are wide-open, well lit, generously proportioned, accommodating, sensual. Ceilings soar; a gentle curve in the tent stops vertigo. “How could an art fair feel good?” I wondered.

And that was before the way that the fair coddles the people who go there: Frieze has persuaded some great restaurants to serve food, it has a beer garden, a high-end coffee bar, and lots of VIP spaces and semi-VIP spaces (hello, Soho House) where the rich and self-important can feel rich and self-important. Plus, when the weather cooperates, as it did this weekend, you can wander along the waterline, check out the public-art projects outdoors, and generally enjoy the kind of pleasant day out which no visitor to the Armory Show has had in years.

All of this does come at a price, however — at least if you’re not a VIP. (Art fairs are the ne plus ultra of “free for those who can afford it, very expensive for those who can’t”.) Frieze is setting a new bar, in terms of admission, of $40 — plus another $20 if you want to drive there and park . (There’s no public transportation, but Frieze does provide shuttles from Manhattan.)

Before the fair opened, a lot of people wondered whether New Yorkers would make the schlep; the answer is that, it turns out, Randall’s Island is actually easier to get to than Venice or Basel or Miami. Today, Frieze announced that all Sunday tickets had been sold: “The number of tickets on sale is not very limited,” spokeswoman Belinda Bowring told me, “but we do cap the number so that the tent does not get too crowded – we have had feedback from galleries and they do not like the fair to be too crowded and therefore we try to find an optimum number.” Clearly the $40 price tag wasn’t enough to put off thousands of visitors. But equally clearly, this is not a fair which makes its money from entrance fees: the tent alone cost $1.5 million.

In many ways the most honest and important part of Saltz’s Frieze review comes in the comments section, where Saltz admits that “IF I DID have to pay $40.00 to go to an art fair I would NEVER EVER EVER go”. Saltz’s job is to look at this kind of art, but even he admits that the value of seeing all this work in the same place at the same time is significantly less than $40 — at least if you’re not going to buy anything.

And while Frieze co-founder Matthew Slotover tells the NYT that he is “very much pro-democratization and a larger engagement” with the general public, the fair’s location on a desolate island, and its sky-high entry fee, and even its galleries all mitigate against that. It’s the galleries who asked for — and received — fewer visitors, remember, and on Friday night I met one gallerist who was complaining that while she met some very high-end collectors on Thursday, the Friday crowd had altogether far too many “lookie-loos”.

In the run-up to the fair, Bowring suggested that I might be interested in talking to the lead sponsor, Deutsche Bank, for Felix TV. I was! The Deutsche Bank sponsorship looks and feels exactly the same as the kind of sponsorship that the bank might provide for, say, a Gerhard Richter retrospective at MoMA. But in this case, it’s not a non-profit museum which is the recipient of Deutsche’s largesse; instead, it’s a for-profit art fair, which is dedicated to making money both for its organizers and for its exhibiting galleries. I wanted to ask Deutsche: does the bank think that it is performing the same kind of public service, in sponsoring Frieze, that it does in sponsoring traditional museums? Or is it just trying to market itself to art-loving New Yorkers as a bank which Gets Art?

Sadly, Deutsche Bank never got back to us, so I haven’t yet managed to ask those questions. But the prominence of a major international bank as the lead sponsor of this fair comes as no surprise. It’s just another part of the branding game which has taken over the entire contemporary art world: banks, galleries, artists, curators, art consultants, even collectors all have their own carefully-tended brands, these days, and their prominence within the art world is indistinguishable from the degree to which those branding campaigns have been successful.

Which is why it’s fascinating to me that the imprimatur of high prices is still conferred almost exclusively on those artists with high-profile gallery representation. You’d think that the internet — a medium made for disintermediation — would by now have done a spectacular job of cutting out the middleman and allowing branded artists to sell directly to awed collectors. But that hasn’t happened, and galleries continue to happily introduce big-name collectors to their top artists, comfortable in the knowledge that neither artist nor collector is likely to try to do a deal behind the gallery’s back.

At Frieze, the Gagosian gallery had a stripped down single-artist exhibit of Rudolf Stingel paintings; I’m sure it did very well. But by the same token, if Stingel himself had booked out the exact same booth and exhibited the exact same paintings at the exact same prices, that would have been genuinely shocking, and the organizers would surely have had to deal with a series of extremely upset galleries, just for starters. There are branded artists out there without gallery representation — the Starn brothers are a good example. Given their fame and the number of art fairs every year, it would make perfect sense for them to just send their work from fair to fair, and live on the proceeds. But they don’t, and I’m sure that a large part of the reason is the institutional opposition that any such attempt would run into. Instead, they confine themselves to studio sales, institutional work, and the occasional online special.

The last visual artist to become enormously successful selling his work directly to the public was Thomas Kinkade, who was actually damaged, rather than helped, by the rise of the internet. In the age of Kickstarter and Etsy, one would imagine that there would be a crowded field of artists exploring the possibilities of this new commercial medium, but, it turns out, not so much. The highbrow version of Etsy, Art.sy, is all galleries: no artists representing themselves. “We do not currently work with artists directly,” says the Art.sy FAQ. “However, should you be represented by a gallery, please have them contact us about partnership opportunities.”

Representing yourself is not a good way to build a strong reputation in the art world: collectors tend to require an institutional imprimatur before they’re willing to believe the evidence of their own eyes. But it does strike me that art fairs like Frieze now have enough institutional imprimatur that if they accept a tightly-curated group of branded artists, people of the stature of Stingel or the Starns, then there probably wouldn’t be any shortage of willing buyers out there. But I’m not holding my breath. Galleries butter Frieze’s bread, and there’s no good reason for Frieze to place that relationship in jeopardy by encouraging artists to disintermediate the galleries.

There’s no shortage of small, artist-run collectives aimed at emerging artists. But just as Kickstarter is emerging as a very powerful platform for established artists, a high-profile art fair could, in theory, allow artists to apply for space just as galleries do. That would be good for artists, and good for collectors. If the fairs don’t let it happen, then they clearly exist to sell collectors to galleries, rather than to sell art to collectors. Remember that, next time you go to one of these things: you might think that the art is the product being sold. But, in fact, it’s you.

As you have no doubt heard by now, The Scream sold at Sotheby’s for $120 million yesterday, prompting Mark Gongloff to wax apocalyptic about “the big squeaky speculative bubble in the art world”. He’s absolutely wrong: whether there’s a bubble or not, this purchase was not speculative. The buyer, I’m quite sure, intends to keep it until he dies; this is not going to get flipped for some great profit. Still, this painting is a great example of exactly what sells for huge amounts of money these days.

Remember the Card Players which sold for $250 million? Or, for that matter, the Jeff Koons Rabbit I wrote about earlier this week, which is probably worth the same amount of money as The Scream, more or less? The three artworks all have something in common: they’re editions, broadly speaking. There are four Screams, five versions of the Card Players, and four Rabbits. And in each case, the value of any given work goes up, not down, as a result of the existence of the others.

That’s because what people are buying, when they buy one of these pieces, is a cultural icon, something instantly recognizable. As Clyde Haberman says of the Scream, “if you’ve never seen a tacky facsimile of it, there’s a chance that you have also never seen a coffee mug, a T-shirt or a Macaulay Culkin poster”. And truth be told, it’s not exactly Good Art. Edvard Munch is a decent Norwegian symbolist, but to give you an example of what we’re talking about here, the painting on the right, Vampire, is the one which held the previous auction record for the artist, at $38 million. It’s really not all that far from what you find in any art class of tortured adolescents.

The real value of the Scream, then, the reason that a pastel on cardboard sold for $82 million more than the price of the oil-on-canvas Vampire, lies precisely in all those mugs and t-shirts and Home Alone one-sheets. Whatever was being bought, here, it wasn’t really art, in any pure sense. It was more the result of a century’s worth of marketing and hype.

And while the Scream is an extreme example of the phenomenon, it can be seen in every major modern and contemporary art auction. It explains pretty much all of Damien Hirst, for instance, not to mention Takashi Murakami, a man whose paintings go up in value proportionally with the number of Murakami Louis Vuitton handbags spotted in the wild.

Meanwhile, if you want to see a pure art market, one based on connoisseurship rather than branding, well, there’s no such thing. But one very interesting place to look is China, of all places — the market which westerners love to dismiss as the place where the only thing that matters is the label on your bottle of Chateau Lafite.

In fact, the Chinese market is much more sophisticated than that. The record price for a Chinese painting, $65 million, is held by Eagle Standing on Pine Tree with Four-character Couplet in Seal Script, a large piece by Qi Bashi dating back to 1946. Qi was a master, who painted the work at the age of 86, and who worked very much within a long tradition of Chinese art. There’s nothing revolutionary or iconic about this work: it’s just a masterful piece which can be located near the end of a very long tradition.

Or, to take another example, an old porcelain bowl, roughly the size of your hand, and looking like nothing so much as the thing which lives by the door where you keep your keys, sold for $27 million at Sotheby’s in Hong Kong last month. It might be a trophy, but it’s not an obvious, branded trophy in the way that the Scream is.

Now, I don’t think that the Chinese auction market is particularly transparent or reliable: I suspect that it’s used quite a lot as a way of laundering bribes. But it does frequently set records which don’t fall into the branded-object-of-fascination category. And for that alone it makes a refreshing change from what we’re seeing in New York.

Eli Broad’s new book comes out tomorrow, and the cover alone speaks volumes. The title is “The Art of Being Unreasonable: Lessons in Unconventional Thinking”. And the way that Broad has decided to illustrate how unreasonable and unconventional he is? He’s posing next to Jeff Koons’s Rabbit.

Now I happen to be a fan of Rabbit: I think it’s a genuinely excellent and important piece of 20th Century art. I’m also not alone in that view. Ingrid Sischy explained it well, back in 2001, writing of the “Neo-Geo” show where it was first exhibited:

The piece that grabbed the spotlight was Rabbit, his flawless stainless-steel casting of an inflatable bunny. It was a 41-inch-high art-bomb that thumbed its nose at the aesthetics of high art and yet at the same time embraced them, a fusion of Pop and Brancusi. With its wit, its physical simplicity, and its characteristically Koonsian reference to sexual symbols and childhood pleasures, Rabbit has become one of the artist’s most famous and enduring icons…

Kurt Varnedoe, today the chief curator of painting and sculpture at the Museum of Modern Art, is one of many viewers who stayed put when he saw that silver bunny. He recalls, “There are just a few occasions in my art experience in New York where I’ve been sort of knocked dead by an object instantly. This piece was just riveting. You wanted to laugh, you were shocked, you were planted to the floor. I was galvanized by the object. It has such an amazing physical presence… ‘Uncanny’ is the word that comes to mind. There were so many different things going on at once in the piece. It was hilarious, it was smart, and it was chilling… It had that kind of Utopian high-gloss modern clarity to it.”

In 2001, Sischy estimated Rabbit’s value at somewhere in the $2-3 million range; today, it’s probably closer to $100 million. (One Rabbit reportedly sold for $80 million back in 2008.)

Rabbit exists in an edition of three, plus one artist’s proof; Broad owns the artist’s proof, which he bought from Koons in the mid-1990s when the artist needed money to pay the enormous fabrication bills for his Celebration series. Of the other three, two are promised to museums — the Museum of Contemporary Art in Chicago, and MoMA in New York. It’s almost the perfect artwork for a financially-minded collector. Because it’s part of an edition, it’s possible for the piece to be owned by MoMA and by Eli Broad at the same time. Because it’s owned by MoMA, it has the best possible institutional legitimacy. And because there’s a “spare” privately-owned Rabbit out there somewhere, Broad can mark his Rabbit to a private market in the piece.

In the book, Broad says that “people often think it’s strange how briskly I go through museums”: he explains that “I’m there to learn and apply my knowledge to our collections. As much as I would like to stay, I have to move on.” Basically, the job of a museum, in Broad’s view, is to ratify Broad’s own collection. In that sense it’s very different from art fairs, where he can go shopping and build his collection: “While I may dash through a museum,” he writes, “I do give myself time to take in artists’ studios and art fairs in Miami, London, Venice, and Basel.”

All of which is to say that Broad’s Rabbit is an example of unconventional thinking in much the same way as a Saudi oil well is an example of an unconventional energy source. Broad’s famous for buying most of his collection from a single gallerist, Larry Gagosian; the piece he chooses to pose with for the cover of his book is the most valuable and recognizable object he owns. It’s a piece which has been ratified by both museums and the market; a piece which is about as mainstream as contemporary art gets.

The cover of Broad’s book does not depict a man who’s secure in his own taste. Instead, it shows a man who collects trophies and prowls museums looking to make sure that he’s collecting the right ones. Yes, Broad’s collection is extremely valuable. But there’s nothing unreasonable about it.

Both Kelly Crow, at the WSJ, and PDN have interviews with Jonathan Sobel, a photography collector who is now suing the legendary color photographer William Eggleston. Neither of them actually posts the suit itself, however; you can find it here.

At first glance this looks like what it is: one of the silliest lawsuits the art world has seen in a very long time. In order to win, Sobel will need to demonstrate two things, neither of which is true. Firstly, he’ll have to show that the value of his vintage Eggleston prints has been diminished as a result of Eggleston making a new series of much larger digital prints. And secondly, he’ll have to show that Eggleston had no right to make the new prints.

In reality, however, Sobel’s prints have probably gone up in value, not down, as a result of Eggleston’s splashy reintroduction to the contemporary art market, in the form of a Christie’s sale which raised $5.9 million and set a new record price for the artist. And in any case, Eggleston has every right to create new editions of his work. Sobel owns vintage 16″x20″ dye-transfer prints; Eggleston can’t make more of those. But creating a brand-new series of 44″x60″ digital prints is perfectly fine.

As Daniel Grant explains, print disclosure laws make explicit exceptions for prints of different sizes, or even just series which have different numbering. And Josh Holdeman, Christie’s international director of 20th century art, goes so far as to say that “I don’t know of any photographers who haven’t produced multiple editions of the same images”: this is undoubtedly standard practice in the art and photography world.

So what’s really going on here? Sobel is no naif, and it’s hard to imagine he thinks he really has much of a case. This suit is brought not for money, but out of a sense of being angry and aggrieved; of having his ownership violated

I haven’t talked to Sobel myself, but my feeling is that the motivation behind the suit comes from a few different feelings about what’s going on with the Eggleston market.

First of all, as PDN’s Conor Risch explained in a great article last month, the Christie’s auction was more or less an explicit attempt to wrest the Eggleston market away from photography collectors like Sobel, and reorient it towards deeper-pocketed contemporary art collectors. Here’s Holdeman again:

According to Joshua Holdeman, international director of the Christie’s photography department, the point of the sale was to establish a new market for Eggleston’s photography in the contemporary art world. “Eggleston has been kind of stuck in the old school world of the photography collectors for a long time, whose primary concerns are about process, print type, print date, etcetera,” says Holdeman.

Whereas the type of print and the exact date a print was made is “a huge deal” for photography collectors, Holdeman says, “for contemporary art collectors it’s much more about the object itself—they couldn’t care if it’s a dye transfer or a pigment print or whatever, as long as the object itself is totally amazing, that’s what they care about.”

“This is an attempt to start a migration of Eggleston from the quote unquote confines of the photography world into the larger context of the art world,” Holdeman adds.

This kind of talk is basically a slap in the face to collectors like Sobel — people who are used to being a big fish in the small photography pond, and who now find themselves small fish in the much bigger art pond. The writing has been on the wall since November 2011, when Eggleston officially joined Gagosian in Los Angeles, but the Christie’s auction was probably enough to tip Sobel over the edge.

It’s often a sad day, for photography collectors, when photographers join high-end art galleries and thereby become much more expensive. I can add a personal datapoint here: I’ve long loved Todd Eberle’s photographs of Donald Judd’s art in Marfa, Texas, and there’s one photograph in particular which I was interested in buying. But when I got in touch with Eberle, he told me to talk to Gagosian, since they’re in charge of selling his prints. And Gagosian, in turn, was perfectly happy to sell me a whopping great 50″x60″ print (plus frame) for $15,000. Even if I could afford that kind of money, I don’t have anywhere to put a photograph that big. But Gagosian isn’t selling the prints in the smaller sizes that photography collectors generally like.

The Gagosian announcement and the Christie’s sale, then, were a sign to Sobel that he wasn’t really wanted in the Eggleston world any more. But what’s going on here is not just a question of whether Eggleston is owned by the photography world or by the contemporary-art world. There’s another issue, too: are Eggleston’s images owned by Eggleston, or did he sell them, in some sense, to the people who bought his photographs?

The legal and moral answer to that question is clear: Eggleston’s images are owned by Eggleston. Sobel owns physical photographs, which have some kind of value. But Sobel, unlike Eggleston, has no right to reproduce those images. But after Sobel shelled out $250,000 for “his” photograph, it’s pretty easy to see how he felt some kind of ownership of what he was looking at, and felt that Eggleston had no right to start creating lots more versions of the same image. (In fact, Eggleston didn’t do that: while Sobel’s prints are generally in editions of 20, the new digital prints are in editions of just 2.) Of course, Sobel’s feelings are neither here nor there when it comes to the merits of his lawsuit, but they probably explain why he brought the suit in the first place.

I suspect that what was most galling to Sobel, however, was the fact that Eggleston had simply managed to conjure up $5.9 million for himself (or rather, for his foundation), without going out and shooting a single new photograph. Eggleston is quite explicitly following in the footsteps of Damien Hirst, here: Hirst was the first artist to shamelessly make millions of dollars by consigning new work directly to auction, much to the displeasure of the art world. And as a result, Hirst has gotten to a point where he, Hirst, captures most of the increase in the value of the global Hirst market — and Hirst’s collectors don’t.

What Sobel sees, when he looks at the Christie’s Eggleston auction, is a serious increase in the value of the Eggleston market, with the overwhelming majority of that increase accruing to Eggleston himself, rather than to collectors who were prescient enough to buy early. You can hear the whine quite explicitly in Crow’s article: Sobel used to own the most valuable Egglestons in the world, and he was very proud of that. And now he doesn’t. And he’s upset.

This is all very childish, of course — which is par for the course when it comes to the art world. And somewhere underneath it all, Sobel might even have a legitimate beef. Eggleston is 72 years old, and suddenly, after decades of being a photographic eminence, he’s deserting the photography community and throwing his lot in with Larry Gagosian and the contemporary-art crowd, just because that’s where the money is. Eggleston has had a devoted following in the photography community for a very long time, and his latest move seems designed to annoy his base, which is never a particularly wise thing to do. There might be lots of money in the contemporary world right now, but that world is fickle.

Here’s the thing, though: if the fine-art crowd ever gets sick of Eggleston, the photography crowd will always be there for him. They’re going to keep the Eggleston faith no matter what he does in his old age. Even if they act out sometimes by filing frivolous lawsuits.

Randy Kennedy has a good overview of the litigation going on between Jan Cowles, a prominent art collector, and Larry Gagosian, the world’s most prominent art dealer. He doesn’t provide or link to any of the primary documents, however, which can be found here, and they’re where all the fun is.

In a nutshell, Jan’s no-good son Charles got desperate for cash, and so sold her Lichtenstein through Gagosian without her knowledge or consent. What’s more, his desperation was so obvious to Gagosian that he wound up getting spectacularly ripped off: while Gagosian had initially promised him $2.5 million for the piece, the final payment to Cowles was just $1 million. Meanwhile, another version of the piece, which is an edition of eight, sold at Christie’s in 2010 for $4.9 million.

A lot of attention is focusing on the smoking email from Gagosian director Deborah McLeod, who was based in Gagosian’s Beverly Hills outpost, to the collector who ultimately bought the work, Tom Dean. “Seller now in terrible straits and needs cash,” she wrote. “Are you interested in making a cruel and offensive offer? Come on, want to try?”

Eventually, Dean came back with an offer of $2 million, with generous terms allowing him to avoid paying most of the price for six months. McLeod then talked to Gagosian personally, and told Dean that the deal was on:

Larry says the $2 mm will fly only for immediate payment, so he will buy it. If he succeeds in buying it for 2mm, he will do the 6 month payout for you.

This is quite funny, in hindsight, because of course Larry didn’t buy the piece for $2 million at all. He sold the piece for $2 million; he bought it for just $1 million.

With all of the focus on the emails, however, it’s important not to lose sight of all the revelations in the original complaint, including the extremely serious allegation that Gagosian lied about the condition of the piece in order to justify its very low sale price. The complaint also accuses Gagosian of essentially stealing the work from Jan Cowles:

Although Gagosian knew the Lichtenstein Work belonged to Mrs. Cowles, and not Charles, Gagosian made no effort to contact her, or her attorney-in-fact, Lester Marks, to obtain either any authority to remove the work from the apartment or to offer the work for sale to any third party. Nevertheless, on or about October 10, 2008, Charles purported to consign the Lichtenstein Work to Gagosian. Gagosian took delivery of the work from Mrs. Cowles’s apartment, and listed it as a consignment with the understanding that it would not be sold for less than $3 million, with Charles to receive no less than $2.5 million.

This is all extremely reminiscent of the way in which Anthony Marhsall allegedly sold a Childe Hassam belonging to his mother, Brooke Astor; you’d think that Gagosian would be a bit more cautious about such deals after the Astor case got so much negative publicity.

But what’s absolutely clear here, no matter who wins the legal case, is that the opacity, skullduggery, and information asymmetry in the art world should put off anybody who ever thinks they’re dealing fair and square with a prominent dealer. Charles Cowes was an art dealer in his own right — an art-world insider — and even he ended up getting ripped off by Gagosian.

I’ve heard a few stories, over the years, of what happens when collectors who own art try to sell that art through a gallery. In the first instance, the gallery is always very bullish, and promises to sell it for a high price at a modest commission. But then it somehow never sells, and the consignor becomes increasingly desperate, and eventually accepts a sum of money from the gallery which is a mere fraction of the amount originally mooted. It’s a standard m.o. in the gallery world: never sell anything too quickly, and wait instead for the seller’s need for cash to be as urgent as possible. That minimizes the amount the gallery needs to pay the seller, and therefore maximizes the amount the gallery can keep for itself.

Which is yet another reason why art is not an investment. You might have a good idea what a piece is worth, but you’re unlikely to ever be able to realize that kind of sum. Not unless you don’t need the money — and if you don’t need the money, you won’t want to sell it in the first place.

It should come as no surprise that the Damien Hirst retrospective at Tate Modern has caused editors across the UK to run articles about what it might mean for the Hirst market. After all, Hirst, more than any other artist, is famous in large part just because he’s expensive.

Thus do we get Sarah Thornton, in the Economist, writing that “many collectors of Mr. Hirst’s work hope that this show will reinvigorate his market”. Against that is Julian Spalding, who’s written an entire Kindle Single entitled Con Art – Why you ought to sell your Damien Hirsts while you can. And then there’s Hari Kunzru:

This isn’t just art that exists in the market, or is “about” the market. This is art that is the market – a series of gestures that are made wholly or primarily to capture and embody financial value, and only secondarily have any other function or virtue. Hirst has gone way beyond Warhol’s explorations of repetition and banality. Sooner or later, his advisers will surely find a way for him to dispense with the actual objects altogether and he will package concepts in tranches, like mortgage securities, some good stuff with some trash, to be traded on the bourse in Miami-Basel.

Kunzru starts off near the mark, here, but then veers wildly off course. What I think that all three of these writers are missing is the fact that the Damien Hirst market is largely nonexistent, and has been ever since the “Beautiful Inside My Head Forever” sale at Sotheby’s which was held the day Lehman Brothers filed for bankruptcy in 2008. Here, from Artnet, is Hirst’s annual sales volume at auction (the grey bars are all lots, the orange bars are the top ten lots):

What you’re seeing here is a speculative bubble in Hirst which grew right up until September 2008. After that, Hirsts became a luxury good, in many ways closer to a Prada coat or a bottle of Bordeaux than to artists with healthy secondary markets, like Gerhard Richter. For the past three and a half years, Hirsts have been something to buy, to consume: they’re no longer something that can be easily sold, let alone at a profit.

There is absolutely such a thing as the art market: a place where artworks are bought and sold, and where dealers and auction houses make money as the intermediaries finding the prices at which buyers and sellers can agree to transact. There isn’t, by contrast, such a thing as the Prada market: that’s a consumption market, where Prada makes goods, sets the prices unilaterally, and then sells them to as many people are willing to pay their price. (And given that Prada is in the Giffen Veblen goods market, often raising the price has the effect of raising the demand.)

Hirst, for better or worse, has moved himself out of the art market and into the consumption-goods market: he manufactures art works, sets the prices for them, and sells them to anybody willing to buy them. Once you have bought a Hirst, you then exhibit it as a way of displaying your wealth and, um, taste. Hirsts have not been a speculative investment since 2008, and I very much doubt the Tate retrospective is going to change that.

I don’t think this is a bad thing. Hirst, more than any other artist, has managed to capture the value of his works for himself. The global stock of Gerhard Richters is hugely valuable, and that value is at least one and possibly two orders of magnitude greater than the total amount of money that Gerhard Richter himself has made over his lifetime. The value of the art, in other words, has accrued to collectors rather than to the artist.

That’s not the case with Hirst: I suspect that of all high-profile artists, he has personally pocketed the greatest percentage of what you might call his global market capitalization. All too often, discussions of artists’ prices work on the assumption that higher prices, and higher dollar volumes, are always good for that artist. But I think Hirst has managed to disprove that rule. Collectors are not getting rich off his work. But he is.

Greg Allen has a fascinating report on a monochrome painting which went unsold at Christie’s last week. It had originally appeared in Christie’s auction catalogue under the authorship of “Henry Codax”, with this explanation:

Henry Codax, a pseudonym created by New York-based artist Jacob Kassay and the Swiss conceptual artist Olivier Mosset, is referenced from a fictional character in the contemporary novel Reena Spaulings published in 2005… In the present example, Kassay’s iconic silvery paintings have been replaced by a sleek, anonymous grey surface. Stripping away any obvious authorship, Kassay and Mosset’s Henry Codax joins the company of fictional and pseudonymous artists including Marcel Duchamp’s Rrose Selavy and Richard Prince’s John Dogg.

That’s an unambiguous statement of fact: “Henry Codax” is a pseudonym created by Kassay and Mosset. But Christie’s provides no sourcing for that fact, and Kassay’s gallery is on the record as saying that they know nothing of Henry Codax.

Kassay has, as Allen puts it, a “hyper-speculative Kassay auction market”: that is, if a Kassay comes up for auction, many people will be bidding on it just because they think that Kassay is a star whose works are going to rise sharply in value. So if Codax is Kassay, the Codax painting, estimated at a modest $10,000 to $15,000, could be a highly lucrative investment. (Kassay is shooting up the hot-young-artists league table, with $1.8 million of auction sales to date, at the age of 28.)

So I was a little surprised to see that the Codax had been bought in at auction: that no one was willing to spend even $10,000 for a huge, 7-foot-square piece described by Allen as “the awesomest” painting that Codax ever made. (Admittedly, there aren’t all that many of these things.) What happened? Allen got on the case:

Someone who attended the sale told me that Christie’s had read a statement, known as a saleroom note, before the sale, in which Kassay said he’d “had nothing to do with” the painting, and that his “name should not be associated with it.” [In trying to confirm the text of the actual statement, I contacted Christie's, first as press, and then finally as client. The specialist who worked on the lot was helpful, if circumspect. But she also referred me to the sale results page, which, I was told, would have the saleroom notice appended. Except, of course, it didn't, because Christie's deletes online references to unsold lots completely, in order to not taint their saleability in the future.]

An auction-house saleroom is an interesting quasi-public space: what goes on there is generally considered public knowledge, but at the same time information about auction-house results can be quite expensive to retrieve. And even the best results databases don’t make an attempt to document the statements read out at the beginning of the sale.

What’s interesting here is that Christie’s seems to be doing everything it can to bury Kassay’s statement. In the sale, Kassay said that his name should not be associated with the painting, but on Christie’s website, the only mention of the painting still says that it’s a Kassay. And Kassay’s statement itself is nowhere to be found; it’s certainly not being released by Christie’s to Allen, either as a member of the press or as a buyer.

This is just another example of the way in which the entire art market is built on information asymmetries. Christie’s knows something; that information has value, and it rises in value the fewer the number of other people who know that thing. So while Christie’s claims to be in the business of providing public and transparent pricing for art, in fact it’s in the opacity business as much as it’s in the transparency business.

What’s more, the Christie’s press release for this sale trumpeted its online aspect:

Upon the heels of the incredibly successful Elizabeth Taylor online only auction, the First Open sale featured the most LIVE registrants ever for a Christie’s contemporary sale signifying a new era in bidding and buying for this department.

If you look at the LIVE website, it explains that bidders “may enter the online saleroom up to 15 minutes before the start of the sale, or at any point during the sale.” If someone wanted to bid on the Codax using the LIVE system, it’s entirely possible that they could have missed the reading of the Kassay statement. But Christie’s, a bit like Goldman Sachs, is an intermediary always out for itself. Just like everything else in the art world, the rule at auction is always caveat emptor.

One of the odder reactions to my post about the commodification of Gerhard Richter came from Marion Maneker, who accused me of “serious lapses in logic and intellectual judgment”, not to mention “sloppy thinking and a poor grasp of the art market”, without ever really coming out and saying what I was meant to have got wrong. Instead, he confined himself to dropping this cryptic comment:

Valuable art is valuable because it has become a currency, not a commodity. No one suggests that gold is a “better” metal because it is accepted as currency. It simply fills that role.

This, of course, makes no sense at all. Currencies are things that you use to pay for other things; commodities are things that you buy. If art is going to be one or the other, it’s going to be a commodity, not a currency. But on Twitter, Maneker doubled down.

Being unfamiliar with the use of art “as a medium of exchange”, I asked for an example. And Maneker responded with an extremely bizarre blog post entitled “Art as a Currency“.

In his new post, Maneker makes the rather banal point that if you buy a painting (for old-fashioned cash), then you don’t just get an object to put above the fireplace, you also get cultural cachet. Or, as he puts it, “access to an emerging social class of global capital”. So far, so good. But then we get this:

Richter has emerged as an artist whose work can be used as social currency to join that class. Because it is a widely used currency, Citibank is providing a legitimate service to its clients when it advises them on the value of that currency. In that sense, commenting on Richter’s Abstrakt paintings is no different to giving guidance on the Swiss Franc. I may buy Swiss Francs as an investment or I might be moving to Switzerland for a few years or just a few months. Each of those scenarios will require different decisions on my part but I am still informed by an report on the Swiss Franc.

But here’s the thing: as Maneker himself says, a currency is a medium of exchange. And in trade, or exchange, you have to give something up in order to get something else. If I want a ham sandwich, I have to pay $4. If I want a mid-market Richter, I have to pay $4 million. The Richter, or the sandwich, goes one way; the currency goes the other.

When Maneker is talking about “social currency”, however, there’s no exchange at all. If I use my Richter to join a class of Richter collectors, that costs me nothing. I pay for my Richter with dollars, and my new-found social fabulousness comes for free. Or, if you’d rather, I pay a couple of million dollars for the prestige associated with owning a Richter, and the painting on the wall comes free. Either way, the painting itself is not the currency — it’s not something I need to give up in order to buy something else. Quit the opposite.

Maneker does concede that commodities (like cigarettes) can be “used as currencies” (in, say, prison). But even then, you have to give up your holding of your commodity — your cigarettes — if you want to get something else in exchange. If I just want to impress my friends with the size of my Richter, however, I don’t need to give it to anybody.

The Swiss franc has intrinsic value: it is used, in Switzerland, to buy stuff. More to the point, there is a vibrant foreign-exchange market where billions of Swiss francs are traded for dollars, and vice versa, every day. The value of a Swiss franc can be pinpointed with extreme accuracy: right now, for instance, it’s $1.0911. And every Swiss franc in the world is worth exactly that much. The jargon term is that the Swiss franc is fungible. So when Maneker says that “Richter’s paintings are not fungible”, he’s actually giving a reason why they’re not a currency.

Commodities, by contrast, are different. They’re fungible — but only up to a point. Different weights of oil, different types of wheat, different grades of beef, sell for different amounts of money. And in the art world, you’ll notice that nearly all the most successful artists (financially speaking) now make art in series. Richter’s a prime example: his website even goes so far as to list them all in alphabetical order. (The “Photo Paintings” are subdivided into “Apples, Astronomy, Baader-Meinhof, Buildings, Candles, Cars, Children”, and so on, while the “Abstracts” are broken down by date, with a separate category for the Colour Charts. The Mirror paintings come under “Other”.)

Looking at art through an economic lens, where people rationally respond to incentives, this makes perfect sense: if you have works in series, they become increasingly fungible and interchangeable. That’s one reason why editioned works can be worth so much: there’s more of a market to mark them to. And it’s worth noting that Richter’s biggest series, the Abstrakt paintings, has also provided the majority of his most expensive works.

Maneker asks “whether the Abstrakt paintings are a commodity” — to answer it in the negative — shortly after starting a sentence with the phrase “If I buy an Abstrakt”. But the phrase answers the question: a world where you can talk about “buying an Abstrakt” is a world where “an Abstrakt” is something which has become commoditized. (Incidentally, I think the Abstrakt paintings are gorgeous; Maneker’s entirely wrong when he says I don’t like them. I love comfy armchairs as much as the next guy, and there’s nothing wrong with them at all.)

When I say that Richter has become a commodity, I’m not expressing “bigotry toward the very rich”, or “passing judgment” on them, as Maneker thinks — I’m just describing the way that the upper echelons of the art market work. It’s a place where artist-brands are instantly recognizable, and where the cognoscenti are largely incapable of looking at a work without mentally attaching a price tag to it. There are so many Warhols and Richters floating around the market that any Warhol or Richter can be valued pretty accurately at this point.

If a certain class of person walks into an apartment and sees a huge Richter, they’re going to know pretty much immediately how much that Richter is worth. If they see a medium-sized Old Master, by contrast, the financial value of the piece — not to mention its authorship — is much less obvious. As such, Old Masters are much less good at displaying the wealth of their owner than Warhols and Richters are. Which has to explain at least some of the reason why Warhols and Richters are so incredibly expensive.

Jonathan Binstock is the head of Citibank’s art advisory and finance operation — the shop which was famously founded by Jeffrey Deitch. Recently, he put out a four-page research report on Gerhard Richter. According to Binstock’s report, Richter “has recently emerged powerfully as the next great market force among the tradition of 20th century painters including Pablo Picasso, Willem de Kooning and Andy Warhol”. What’s more, “it is clear that he is in the process of being catapulted to a rare and illustrious realm of authority”. And he turns out to have been a great investment, as this chart from the report purports to demonstrate:

Binstock was kind enough to agree to come in to Reuters to talk about this report, which I’m not really a fan of. For one thing, I don’t think there’s much in the way of meaningful information in Binstock’s chart, and I think it’s incredibly dangerous to make it seem as though artists are investable assets which can be compared in some way to the S&P 500. Binstock says that he’s “trying to bring a level of financial professionalism to the project”, but I’m pretty sure that most of my readers would be able to come up with two or three ways off the top of their heads in which the above chart is unprofessional.

In any case, Binstock is very much part of the way in which the art world is turning individual artists, like Gerhard Richter, into asset classes. When I asked if his phrase about Richter “being catapulted” was a classic momentum-trade analysis, Binstock replied that “yes, he’s being catapulted, and I think that’s an imprimatur that comes now from the market”. In other words, Binstock is now lumping Richter in with Picasso, de Kooning, and Warhol just because Richter paintings are selling for large and ever-increasing sums at auction.

But here’s the thing: Picasso, de Kooning, and Warhol aren’t just good artists, they’re important artists — among the most important of the 20th Century. They permanently changed the way we look at and think about art: what it is, what it can do, what it should look like. Richter’s no slouch on that front, but he’s not in their league, and never will be. What’s more, there’s a very clear distinction between Richter’s important art, on the one hand — think fuzzy black-and-white paintings interrogating Germany’s attitudes to its own history — and his expensive art, on the other. Here’s how Binstock describes the expensive art:

A particularly desirable series of abstract paintings from the late 1980s and early 1990s provides an excellent case in point. The artist made a stunning array of these in a convenient easel size of roughly 48 x 40 in (122 x 102 cm) — domestically scaled objects with overwhelming wall power. Their beautiful rubbed surfaces are among the most delectable of all Richter’s abstract conceits. A red and blue example, sold at the same Sotheby’s sale mentioned earlier, brought $6.3 million, an extraordinary price for a painting that might have been $2 million in late 2007. Indeed, another painting from the series, primarily white and especially creamy, made $1.8 million in October of that year.

Check out the adjectives: “convenient”. “Domestically scaled”. “Wall power”. “Delectable”. “Especially creamy”. This isn’t art, it’s interior design for the private-jet crowd. Binstock is talking here about what he calls “the mid-market”, which he defines as paintings in the $1 million to $5 million range. (Yes, $5 million is now officially the new middle market.) The middle market is where you find apartment-sized, instantly-recognizable paintings which look nice above the fireplace.

Picasso, de Kooning, and Warhol all faced art-world opposition to what they were doing: they were breaking rules, creating something challenging and new. It took a long time for the art world to embrace them, and to this day their work still carries a frisson of transgression. Richter’s expensive art, by contrast — the colorful squeegee paintings, or the beautiful candles — is perfectly calibrated to middlebrow taste, and has never been remotely controversial.

Remember that when we’re looking at extremely expensive art, we’re looking, pretty much by definition, at the art which is most coveted by incredibly rich men. (That’s why paintings of women have always sold for much higher sums than paintings of men.) And while your typical incredibly rich man might well have a lot of sophistication when it comes to arbitraging the capital structure of potential takeover targets, his taste in art is most likely to run very much in line with Matisse’s famous quote about how a painting should be like a comfortable armchair. Richter’s “beautiful rubbed surfaces” sell at a premium for exactly the same reason that the apartments at 15 Central Park West sell at a premium: they’re modern yet timeless, incredibly easy to live in, and utterly inoffensive.

This didn’t make it into the video, but Binstock and I talked a bit about Richter’s mirror paintings, and he told me about a blood-red piece which sold at Sotheby’s in London a couple of weeks ago for about $750,000. He loves that work; I, too, am very partial to the Richter mirror paintings, especially the room devoted to them at Dia: Beacon. But the mirror paintings are very much at the highbrow end of the Richter spectrum, which means that they barely even count as “middle market” as far as the Richter money-scale is concerned.

I therefore had to ask Binstock about the famous declaration by Tobias Meyer of Sotheby’s that “the best art is the most expensive art because the market is so smart”. Binstock said that “in some cases”, Meyer is correct, but he then reversed himself, noting that “you can buy a Velásquez for a lot less than a Richter”. How does that make any sense? “It’s a question of supply and demand,” said Binstock. There might be a much greater supply of Richters than of Velásquezes, but, he said, “there’s much more demand”.

It’s worth quantifying this for a minute. I went on to Artnet to see how many works by Velásquez had sold for more than $100,000 in the history of its database: the answer is three. There’s the portrait which sold at Bonham’s in December for $4.6 million, and then there’s one other portrait, of Saint Rufina, which has sold twice: at Christie’s in New York in 1999 for $8.9 million, and then again at Sotheby’s in London in 2007 for $17 million.

Richter, by contrast, has no fewer than 545 works in the Artnet database which have sold at auction for more than $100,000. If you want a Richter, and you have the money, it’s trivially easy to buy one: you can get one directly from any number of art dealers, or you can just wait until the next round of art auctions, where I’m sure a lot will be available for sale. Even so, there have been 15 different Richters which have sold for more than $10 million since 2007; two of them beat the $17 million Velásquez figure in 2011 alone. There are so many Richters for sale these days that the tenth-most-expensive Richter to sell at auction in 2011 still managed to bring in $5.7 million; in total 108 Richters sold at auction in 2011, at an average sale price of $1.85 million apiece.

Is it really possible that demand for Richters is so much greater than demand for Velásquezes that Richters can flood the market and still sell for more than $20 million, while Velásquezes, which come along once a decade or so, fetch only $4.6 million? That’s what the market is telling us. But I don’t think that the laws of supply and demand are particularly useful here. In many ways, the high prices we’re seeing for Richter represent a liquidity premium, and also the way in which rich people are happier dropping enormous sums of money on art if those sums have already been ratified by dozens of other transactions at similar valuations.

If you look down Wikipedia’s list of the world’s most expensive paintings, there’s certainly a fair few pieces by artists who come up for sale only rarely — Klimt, van Gogh, Titian, Pontormo. But they’re very much outnumbered by Picassos and Warhols with quasi-commodity status. And if you want to be charitable to Binstock, that’s really all he’s saying in his research note: that Richter is becoming a commodity just like Picasso and Warhol, and that the commodification of an artist is generally accompanied by a significant increase in that artist’s valuations.

I would never encourage speculating on the art market: it’s a rigged game, which you’re almost certain to lose. But if you really want to do it, here’s a tip: buy work which (a) is instantly recognizable as coming from the artist in question; (b) looks great when hung on the wall of an expensive apartment, and (c) comes from a fecund artist with a massive output. Oh, and if you can, get a painting with lots of red in it. And remember, you’re not buying great art, or art you particularly love. You’re second-guessing, buying the kind of art you hope that billionaires are going to covet in the future. It’s a pretty soul-destroying exercise, with a low probability of success. But if you’re the kind of person who marks your art collection to market, you probably don’t have much of a soul to begin with.

Dan Duray had the news on Friday of the latest big-money lawsuit in the New York art world: dealer Marc Jancou is suing Sotheby’s and artist Cady Noland for $26 million.

The lawsuit is here, and there’s absolutely no indication whatsoever of where the $26 million number comes from; I suspect it’s just an attempt to make a splash in the press. Jancou had consigned a Noland work to Sotheby’s, which slapped an estimate of $250,000 to $350,000 on it. But then Noland “apparently disavowed the work,” according to Baer Faxt — and as a result, Sotheby’s pulled it from their auction. Jancou’s upset, and is on the legal warpath.

I see no fault of Sotheby’s here — if I were in their shoes, I’d do the exact same thing. Sotheby’s clearly has — or had — a good relationship with Jancou: according to the consignment agreement attached to the complaint, they were charging him zero seller’s commission, and neither were they charging him for things like insurance, catalogue illustration, packing, and shipping, which they normally charge sellers.

But in terms of art-world importance, Cady Noland trumps Marc Jancou — and it’s easy to see why, when her piece Oozewald just sold for $6.6 million. As Daniel Grant explains at some length, so long as an artist is alive, and especially if that artist is producing expensive work, the art world tends to bend over backwards to honor that artist’s wishes.

As a general rule, it’s pretty important, when buying or selling work by a living artist, that the artist be reasonably happy about the deal. If the artist is dead, then you need to be on good terms with the estate. It’s a significant risk, in contemporary art, especially given the fact that artists, by their nature, can be mercurial and temperamental.

All of which is yet another reason why art isn’t a commodity which can simply be bought and sold at a market price. It’s always encrusted in various egos, none more than that of the artist. They might have sold the work, but it’s still theirs, on some level, and that does give them certain rights of authorship. The artist nearly always retains copyright in the work, for instance (which is why you’ll never see images of Richard Prince works from the mid-70s), and increasingly the institution of resale royalties is being enforced, at least in California and the UK.

Marc Jancou has no real excuse: he should have known, before consigning Noland’s work to a very public auction, if she was OK with that. It’s not like he’s some kind of art-world naïf. It’s very unclear what Noland did; Jancou’s suit says only that she “tortiously interfered with the consignment agreement by persuading Sotheby’s to breach the agreement by refusing to put the work up for auction”. Jancou does say — or at least imply — that even after Noland’s complaint there was no doubt as to the authenticity of the work; she doesn’t seem to have denied making it.

But the art world is a fuzzy place, and there can be a big difference between a work made by Cady Noland, on the one hand, and a Cady Noland work, on the other. And Jancou’s being incredibly disingenuous if he’s pretending he didn’t know that.

Sarah Thornton has an interesting theory on why art prices keep on spiraling upwards:

The burden for the stinking rich is what to do with their money. There is currently no interest to be earned on cash, so they can’t leave it in the bank. The property market is nearly paralyzed and, for these globetrotters, the drawback of real estate is that it is tied to specific currencies. A Mayfair flat sells in pounds, but the Francis Bacon painting that hangs on its wall could sell in Hong Kong dollars and take up residence on a yacht in the South Pacific. Like historic or extra-large diamonds, works by artists with international recognition are a hedge against volatile currency fluctuations.

Fifteen years ago financial advisers were not in the practice of recommending that rich people diversify their portfolios by buying art. Now it is the norm. While buying emergent art is high-risk, speculative investment, acquiring established masterpieces is perceived as the opposite – a back-up in hard times. If all goes wrong in the world, if the eurozone cracks, the Middle East erupts in war, and a tsunami hits Manhattan, that rare, portable 1964 Marilyn by Andy Warhol will still be worth something.

This would be a lot more convincing if Thornton actually named or quoted any of the financial advisers who are reportedly “recommending” buying art as an investment. Because I’d love to talk to one. Art’s a dreadful investment: it’s got a negative carry, it’s highly unpredictable in terms of value, there’s no reason whatsoever why prices should go up rather than down, and, of course, you can put your elbow through it at any time.

In my experience, the only people who ever recommend that rich people diversify their portfolios by buying art are people who are going to make money, somehow, from the deal: people selling art investment or advisory services. Everybody else is generally pretty sensible, and sticks to saying the simple truth: Buy art because you love it, not because you think it’s going to rise in value.

More generally, the stinking rich are, as a rule, swamped with bright ideas from people guiding them on what to do with their money. They all have family offices, replete with highly-paid investment managers: The alternative here is not to simply leave the money in the bank, earning no interest. (More likely, they own the bank, take other people’s deposits, and lend them out at a healthy profit.)

And the idea of art as “a hedge against volatile currency fluctuations” is just bonkers; I’m not at all surprised that the line appears in a column for the Guardian, rather than in Thornton’s normal home of the Economist. If you have billions of dollars and you want to hedge against currency fluctuations, then — and I hope you’re sitting down for this — you hedge against currency fluctuations. Options and swaps and futures and forwards and the like are as commoditized as they come in the foreign-exchange markets, and much easier and cheaper to buy and sell than any major artwork.

Thornton’s wrong, too, about the intrinsic value of a 1964 Marilyn by Andy Warhol. If it was worth 10% of its current value a few years ago, it can be worth 10% of its current value in a few years’ time, too. Admittedly, 10% of its current value is still “something”. But that hardly makes the Warhol a remotely sensible investment. The whole point of art is that it has no intrinsic value: that its financial value is a magical number which is some highly variable function of how much various incredibly rich people love and covet the work.

But she’s right about this aspect of why the two big auction houses are doing so well these days:

Christie’s and Sotheby’s are superlative marketers who are getting better at funnelling demand for objects by a small group of well-tested artist brands.

The key word here is “brands”. CNBC’s Zac Bissonnette recently wrote to me saying that what he hates about contemporary art is the way in which “you can just put it there and all your friends will know what it is. People might as well hang a Nike swoosh over their couches.”

Zac’s exactly right about this: the one thing that pretty much all ultra-expensive art has in common is that it’s instantly recognizable as the work of a given artist. (And that goes for Cézanne as much as it does for Jeff Koons.) Fine art has become the billionaire’s-club equivalent of a Louis Vuitton bag, slathered in logos. It’s not connoisseurship which drives values, so much as recognizability. Which in turn helps to explain why the most prolific artists (Picasso, Warhol, Hirst) are also the most expensive: the more of their work there is, the more exposed to it people become, the more they’ll recognize it, and therefore the more desirable it is.

I do hold out some small hope that the Chinese art market will provide a correction to this syndrome — there, I’m told, the value of an art work is (at least sometimes) much less a function of its recognizability as the work of a certain artist, and much more a function of the way that it can fit itself into a long artistic tradition.

Once upon a time, the western art market worked that way too: there were genres, and artists worked within them, and then would be judged on how well they painted within the constraints of that genre. Those days, of course, are over now. But that doesn’t mean for a minute that the value of a Warhol is somehow forever. As with any other investment, what goes up can always go down.

Many thanks to Zac Bissonnette for fisking the latest Bloomberg gushery on art funds for me, so I don’t have to. This fund isn’t going to produce disappointing returns: it’s probably not even going to get off the ground to begin with. Does Bloomberg’s Scott Reyburn have a clue what “unconfirmed commitments” are? I suspect they’re the fund-world equivalent of vaporware.

But the fact is that the intersection of money and art is a busy place these days. You have what John Powers cleverly calls Spot Markets, for starters — the global Hirst-spot bazaar is in full flower right now. And then there’s that $250 million Cézanne — a figure confirmed by “multiple sources” of Alexandra Peers, and which, as Marion Maneker says, serves to validate other nine-figure prices paid for important works.

Interestingly, the Cézanne is particularly special in that it’s a 19th-Century work: everything else north of $100 million has been 20th Century. This could be the beginning of a relative-value trade, where older masterpieces finally converge in value on the silly prices being paid for modern and contemporary works. Or it could just be an outlier: there are precious few undisputed masterpieces of this sheer size in private hands. The Cézanne is 130 centimeters wide — that’s over 51 inches, which is huge by the artist’s standards. (Some of The Bathers are significantly bigger, but all of those are in museums.) If you want a trophy painting, it’s still the case that you’re going to want something big.

So when Peers quotes the venerable Gary Tinterow describing the Cézanne as “the darkest, the most stripped down and essential” of its series, that’s all well and good — but the real driver of the $250 million price was, I suspect, its square footage.

Alice Gregory has a great piece in the latest n+1 magazine about working at Sotheby’s during the run-up in prices following the 2009 crash. Here’s a taster:

After a few months on the job, I was assigned a new duty—writing the essays that are printed beneath and between the reproduced images in the sale catalogue…

I sprinkled about twenty adjectives (“fey,” “gestural,” “restrained”) amid a small repertory of active verbs (“explore,” “trace,” “question” ). I inserted the phrases “negative space,” “balanced composition,” and “challenges the viewer” every so often. X’s lyrical abstraction and visual vocabulary—which is marked by dogged muscularity and a singular preoccupation with the formal qualities of light—ushered in some of the most important art to hit the postwar market in decades… It was embarrassingly easy, and might have been the only truly dishonest part of the Sotheby’s enterprise. In most ways, the auction house is unshackled from intellectual pretense by its pure attention to the marketplace…

Sotheby’s felt detached from the posturing that happens in Chelsea galleries and the gnomic garbage that counts for art-world conversation. Auction house employees don’t invoke half-remembered poststructuralism or make inapt analogies. They don’t have to. The prices speak for themselves.

We’re in a world right now where distinctions between art and money and value are becoming increasingly blurred, in a way which plays straight into the hands of the nouveau riche and the hedge-fund managers who love to splash millions on big and shiny work. This is a fad, and it will pass, along with former M&A dealmakers who think that owning an expensive art collection gives them the ability to make money flipping paintings on a six-year time horizon. Sociologically, it’s fascinating. But when the crash comes, it’s going to be very, very painful for anybody in the art world who’s gotten used to today’s excesses.

Many thanks to Amy King at Artnet, who put this league table together for me, showing the artists who have grossed the most money at auction before their 30th birthday. (Technically, it’s total auction revenue up to and including the full year in which they turn 30.)

In first place, and vastly ahead of anybody else, is Jean-Michel Basquiat, who of course died in 1988 at the age of 27. The overwhelming majority of his $16.6 million was posthumous: $15.3 million came in 1989 and 1990. And dying young is not a career strategy I’d necessarily recommend to any artist.

Basquiat aside, there’s an impressively Asian tinge to this list, with 5 of the other 9 artists coming from China, Korea, or Japan. Notably, the appositely-named Choi So Young saw more than $2 million of her work sold at auction before she was 30 — an achievement which, historically, neither female artists nor Korean artists would ever dream of.

This does not mean that Asian artists have more success at a younger age than their US and European counterparts; it probably just means that hot young US and European artists have galleries which are better at keeping close tabs on their work and preventing it from coming up for auction. But still, it’s a glimpse at just how incredibly successful young artists can be, these days.

I suspect we’re still only in its early days, but there’s no doubt that we’re in a massive Chinese-art bubble right now. And for proof, all you need to do is look at the league table of the highest-grossing artists of 2011.

If you look at the artists who made the most money at auction in any given year, it’s normally pretty predictable, with Picasso at the top of the list and Warhol increasingly dominating. But here, courtesy of ArtPrice and Bloomberg’s write-up of ArtPrice’s results, is the top of the 2011 league table:

1. Zhang Daqian, $506.7 million

2. Qi Bashi, $445.1 million

3. Andy Warhol, $324.8 million

4. Pablo Picasso, $311.6 million

5. Xu Beihong, $212.9 million

This is in many ways the tip of the art-market iceberg, where most deals — especially in the white-hot contemporary-art scene — are still done privately, rather than at auction. The reason no living artist is on this list is mainly that living artists have gallery representation, and galleries don’t like buying and selling at auction.

But still, the rise of Chinese artists on this league table is nothing short of astonishing. The most expensive artwork sold at auction in 2011 was Qi’s Eagle Standing on Pine Tree; Four-Character Couplet in Seal Script, which sold for $65.5 million in Beijing in May; it beat a major Clyfford Still into second place. (And remember too that this is using a value for the yuan which in many ways is artificially low.)

And the sheer levels here! Picasso has never grossed more than $362.7 million in one year; both Zhang and Qi handily beat that figure in 2011, without anything approaching Picasso’s place in the canon. And the way that these artists came out of nowhere makes Groupon’s growth seem positively sluggish. Here are the Artnet reports for Zhang and Qi:

And lest you think that the growth from 2010 to 2011 isn’t all that impressive, note the little footnote. The 2011 numbers are for the first half of the year only.

Precisely because these artists have almost nothing in the way of a long-term auction history, they’re not going to be showing up in the Mei-Moses art index for a while. That requires paintings to have been sold twice. But when that happens, we’re going to have some very crazy results. Either the index will soar, due to the bubble, or else the first datapoints will come when the paintings being bought today are eventually sold. And that might well be for prices much lower than we’re seeing right now.

Update: Marion Maneker doesn’t believe these numbers. “The tables mysteriously omit Gerhard Richter—a very important living artist—whose auction sales in 2011 were massive,” he writes. “So Artprice may have excluded living artists or have a faulty method for assembling the rankings.”

But the fact is that the tables don’t mysteriously omit Gerhard Richter. According to Artnet — which agrees with Artprice here — Richter sales at auction in 2011 came to a total of $199,897,823 — not enough to crack the top five. that’s a record for the artist, but you can see how it’s much more in line with previous totals than we’re seeing with the Chinese artists. This graph, of Richter’s auction sales, includes all of 2011:

Update 2: Thanks to commenter TWAndrews/Alex Tabarrok/Daniel Lippman for pointing to another possibility here:

There are rigged auction houses all over China and they become the most suitable places for elegant corruption. The briber, first of all, gets a fake painting either from a gallery or a fake painting factory. Then, s/he provides relevant document proof of scholars and experts to take care of the problem of authenticity. These scholars and experts are paid to confirm the authenticity of this fake painting. They falsify every historical detail, evidence of painting style and scientific verification of the materials used. The forged painting is then given to the official as a gift and is auctioned at a very high price. Eventually, there is always someone coming from nowhere who wins the bid. Again, the bidder is a trusted person of the briber. These auction houses get hush money before the whole corruption process is completed.