The Story So Far

Maket Insight

by  AAMRA

August 8 sent shivers down the stock markets around the world. The new, downgraded, credit rating of America, affected business round the globe. The art market, which depends heavily on the way the stock market functions, mainly the top-end, where investors form the same strata as those connected with the stock market, naturally could not escape unscathed. Sotheby's shares alone dived 20 per cent during the day, closing at 13 per cent below the previous day's.

One was surprised therefore, when, as reported by Mutual Art on August 13, Sotheby's CEO William Rupert announced “the best quarter in Sotheby's history” and said he believes “market volatility” around the world “in other arenas” has further encouraged art market investment. Last week Sotheby's reported consolidated sales of a record $3.4 billion in the first half of 2011, up 54% from last year in the 2nd quarter. Christie's previously released its six-month total of $3.2 billion, up 15% from last year.”

The reason however, will be apparent on a little probing. Actually, America's new downgraded status in credit rating effect on the global stock markets was more smoke than fire. This was evinced by the fact that the stock markets, especially the Asian stock markets, recovered to a satisfactory extent within the week. It was more of a one-day shiver and definitely not the long winter phenomenon following the global meltdown of 2008; at least until the time of going to press. Actually, the first half of 2011, according to art market experts, “has continued to bolster art market confidence and the auction floors have been able to manage to recover following the global financial meltdown of 2008.”

However, despite the apparent recovery, art-investors are cautious. And market watchers and speculators think that this cautiousness will have a roll-on effect on the art market too. It will therefore be interesting to watch how the auction floors perform during the second quarter. Actually, buyers are now enormously cautious. So much so that only blue-chip names are no more enough to guarantee record prices. In fact big names have even remained unsold in 2011.

Mutual Art lists a few of these.

“Monet was noticeably absent from the best-selling list, and unfortunately appears here twice for unsold lots. Other lots by blue-chip artists failed to sell or sold below their low estimates as buyers remained cautious, ignoring often over-enthusiastic auction house catalogues and paying close attention to the artworks' condition.

1. Andy Warhol's Self-Portrait, sold below the $30,000,000-40,000,000 estimate for $27,522,500 (Christie's New York, 5/11/2011)
2. Claude Monet's Nymphéas, Not sold against an estimate of £17,000,000-24,000,000 (Christie's King Street, 6/21/2011)
3. Pablo Picasso's Femmes Lisant (Deux Personnages), sold below the $25,000,000-35,000,000 estimate for $21,362,500 (Sotheby's New York, 5/3/2011)
4. Jeff Koon's Pink Panther, sold below the $20,000,000-30,000,000 estimate for $16,882,500 (Sotheby's New York, 5/10/2011)
5. Claude Monet's Iris Mauves, Not sold against an estimate of $15,000,000-20,000,000 (Christie's New York, 5/4/2011)
6. Robert Rauschenberg's The Tower, Not sold against an estimate of $12,000,000-18,000,000 (Christie's New York, 5/11/2011)
7. Pablo Picasso's Couple à la Guitare, sold below the $10,000,000-15,000,000 estimate for $9,602,500 (Sotheby's New York, 5/3/2011)
8. Francis Bacon's Untitled (Crouching Nude on Rail), sold below the $10,000,000-15,000,000 estimate for $ 9,602,500 (Christie's New York, 5/11/2011)
9. Paul Gauguin's Nature morte à L'Espérance, Not sold against an estimate of £7,000,000-10,000,000 (Christie's King Street, 2/9/2011)
10. Thomas Gainsborough's Portrait of Colonel John Bullock, Not sold against an estimate of £3,500,000-5,000,000 (Christie's King Street, 7/5/2011).

A look at the names featuring in this list will make it clear how even blue-chip artists are getting ignored or are selling much below their lower estimates. Right from Picasso to Monet to Bacon to Gauguin, this list spares nobody. But why?

Experts are divided in their opinions. One section is casting a cautious glance at the auction houses themselves. This section thinks that the duopoly is back to their pre-meltdown game namely that of overestimation. Clearly, the works remaining unsold or those selling below their lower estimates were overprized by the respective auctioneers. The post-meltdown buyer is not just intelligent but cautious too. She/he has realized that simply blue-chip names do not guarantee a sizable return on investment. She/he may be flushed with money, but the memories of the meltdown are so deeply haunting that s/he will not invest before cautiously judging the shelf-life of the piece being bought.

There is another group who thinks that the focus has shifted. Europe and America may have traditional investors, but those with newly acquired cash and that essential aspirational zeal, which is so necessary for the art investor is actually to be found in the east. The new investor does not so much care about blue-chip as they care about their 'wish'. One of the guiding factors of this 'wish' is a way to patronize their 'own'. In support of this, the experts quote the figures of the Asian markets, which the conservative art market watchdogs term as surprises, and which in turn has helped the duopoly post an enthusiastic first quarter result. To quote the Mutual Art list again,

“Old Master and Asian artists enjoyed relative success these six months, fetching enthusiastic bidding in their categories. At Christie's alone, sales in Asia totalled £296 million ($482.5 million), up 48% while sales in America remained down. The trend towards Asian art and increasing buying power from Asian collectors is clearly evident from this list.

1. Rome, the Castel Sant'Angelo and the River Tiber from the South by Gaspar van Wittel. Sold for £718,850 - 3,494% above estimate (Sotheby's London, 7/7/2011)
2. 1985-4 by Yu Youhan. Sold for HK $14,100,000 - 2,720% above estimate (Sotheby's Hong Kong, 4/3/2011)
3. Appearance of Crosses 90-6 by Ding Yi. Sold for HK $17,460,000 - 2,394% above estimate (Sotheby's Hong Kong, 4/3/2011)
4. Grayground by Ronald Ventura. Sold for HK $8,420,000 - 2,306% above estimate (Sotheby's Hong Kong, 4/4/2011)
5. Spring Calling by Wu Guanzhong. Sold for HK $17,460,000 - 1,646% above estimate (Christie's Hong Kong, 5/31/2011)
6. Sans Titre by Wolf. Sold for £2,617,250 - 1,645% above estimate (Sotheby's London, 2/10/2011)
7. Autumn in the Village by Lin Fengmian. Sold for HK $23,060,000 - 1,318% above estimate (Christie's Hong Kong, 5/31/2011)
8. Series "X"? No. 3 by Zhang Peili. Sold for HK $23,060,000 - 1,153% above estimate (Sotheby's Hong Kong, 4/3/2011)
9. Lotus and Landscape along Highway Hengguan by Zhang Daqian. Sold for HK $56,660,000 and HK $52,180,000, respectively - 809% and 745% above estimate (Christie's Hong Kong, 5/31/2011)
10. The Meeting of Antony and Cleopatra: 41 BC by Sir Lawrence Alma-Tadema. Sold for $29,202,500 - 484% above estimate (Sotheby's New York, 5/5/2011)

Out of the 10, five of the artists are not blue-chip and Asian. That defines the 'wish' of the new-age collector, mentioned earlier.

This has been the story so far. Now, let's wait and watch.