"Gold and Picasso: Going Topless", for the Fall 2011 issue of Marc Faber's Gloom, Boom & Doom Report.

Gold and Picasso: Going Topless.


Sotheby’s (BID), the world’s largest publicly traded auctioneer said second-quarter earnings rose 48 percent for its best quarter ever, though the share price is, at the time of this writing, down over 40% since May 2011. It has been repeatedly pointed out that about every time the shares experience such a decline (and precipitous may be too gentle a description in this instance), a spike in the same direction for the art market in general is all but certain. That would not seem to portend a happy fall season for the upcoming spate of auctions, fairs, private treaty sales, exhibits, etc, etc. More like a happy fall in the loopy prices seen in the market of late, like the purchase for $250,000,000 of a Cezanne painting, the Card Players. Throw in the downgrading of the USA—how they deserve even an AA+ beggars belief, if I performed as badly surely I’d struggle for a B-; the imminent collapse of Europe; and the summer sacking of the UK in riots that witnessed mass pillaging and worse. It was always clear if widespread hardship rendered people unable to buy food, they’d ultimately take it. Rice was among the items depicted in the arms of London looters. Thus, all the ingredients would seem to be in place for the ideal recipe for the death knell of the art market as we know it.


Guess what? Not for the sake of being a gratuitous contrarian, but I am still bullish for the upcoming 2011-12 art market, and foresee records tumbling, not to the downside but rather falling upwards as new highs will be achieved before there is any palpable correction. Talking about fundamentals, the factors fueling the recent frenetic art market activities are only becoming magnified in the face of such worldwide jitters and uncertainly. Shares? If 500-point intraday swings don’t make you queasy, I am sure there are some strategic opportunities on the horizon. Currencies? I don’t think anyone in their right mind would proffer a guess as to the short term gyrations we are about to experience, other than the Swiss Franc seems poised to continue to behave like a balloon freshly filled with helium. Property? Still a mixed bag, with only the best of the best in the top regions performing, and there are less top regions by the day. Commodities? A whipsaw investment not for the unwary as speculation about the sustainability of China’s continued growth, pressure on demand, and spiraling costs. Interest rates seem to reside full time in the doldrums, unless you find zero an exciting number. Cash is going to earn negative returns for the next two years according to Bernanke’s statement last week and bonds can’t go much higher—and there is no sovereign default risk with Picasso. In a macro sense, the USA appears to be morphing into the new Japan, according to Bill Gross (more or less), who runs the world’s biggest bond fund at Pacific Investment Management Co. quoted on Bloomberg.com. Such a grim scenario gives new meaning to the doom and gloom in the GBD Report, which perhaps should consider dropping the boom in favor of a few extra heaping portions of gloom and doom.


But every cloud has a gold lining, if you are an art collector or holder of physical gold, which seems to have been going topless all summer. Where will it stop? I can imagine $2,400 to $2,800 an ounce in the short term, in the same fashion as I can comfortably accept that sooner rather than later the $250m Cezanne record will be eclipsed, pushing further into the clouds the stratospheric value placed on unrepeatable trophy art. Gold equals Picasso, and Picasso = gold. Picasso is the measure of value against which all else in the art market is compared, not to mention Warhol hasn’t been faring too badly either, thank you very much. Let us put to rest the notion that art is an erudite, unknowable, illiquid vehicle seen as a frivolous pursuit of the wealthy to impress upon their friends. Previously I would have said it was a pastime led by the Greenwich, Connecticut hedge fund elite, but markets and investigations have pretty uniformly battered them all of late. Art is a store of value, a systematic, objectively (for the most part) measureable asset class viewed in such a way by more and more collectors, investors and institutions, even. As a whole, art has never been as liquid, global and covetable as it is now, from China to Brazil, New York (still) to Russia, and India and Europe (still). These are good times for art and will continue to be so, for at least the next year or two. Baring some unforeseen, unspeakable tragedy all things art will trend up, but even a cataclysmic event can add to art’s allure. People want art so badly nowadays they are literally prepared to steal it; there's been a spate of art thefts, it's that desirable.


Some rather curious art world manifestations (shenanigans?) that have come to light recently are the notion of a Special Purpose Acquisition Company (SPAC) to list on the London Exchange’s AIM, somehow involving art works and SplitArt, an actual art exchange to buy and sells shares in specific works of art. In their own (not entirely convincing) words: “SplitArt will operate the first regulated market for art, indeed the company is in the application process to obtain its license from the CSSF (financial sector supervisor of Luxembourg) and thus establish an electronic trading platform for art securities (MTF Multilateral Trading Facility) that will offer a wide audience access to a new transparent and potentially liquid market with low transaction costs.” I am not so sure how many people would be lining up to have their Picasso’s fractionalized like a time share in Florida, but one you can’t use for holidays. But stranger things have happened. Also, there are more and more funds with tangible collectibles as the core of their holdings like cars and wine, and more banks willing and eager to jump on board, from lending facilities to advisory services. These are all telltale signs of a maturing market with wider breadth and acceptance than at any prior stage in history. In my estimation, the plethora of new art initiatives, even the far-flung and unorthodox, is ineluctable evidence of the concept that art is more, much more, than a pretty picture. In effect, art is flying off the shelves faster than electronics in a London melee. We are in an age of art's rising economy; call me the voice of Boom amidst the chorus of Gloom & Doom. The right art is a safe harbor in today's rocky waters and a great place to dock cash.

Art4August

Today’s art collecting tidbit: Do NOT purchase art at art fairs, any, ever. Demand steeply exceeds supply (or so you are led to believe) and one is bound to get caught up in the irrational exuberance and impulse of unconsidered buying. The same applies for auctions; simply don’t. Ditto buying at commercial galleries during what is considered high season—for me that is eleven months a year. Rather, engage in what I call Art4August, Get the dealers when they are down on their collective knees, or cash flow anyway. Turn the tables on the typical master slave relationship that is the norm when patronizing snooty art galleries. Summer collect! When business crawls to a near halt, vist spaces or reach out to dealers for jpegs. The art supply is more or less consistent whether its Calders or Colens; there’s always death, divorce, taxes and pruning in all seasons, and contemporary continues to be churned out at an alarming pace, I meant carefully and willfully created. Sure the rule still applies to buy what you love, but make sure you love what you buy—do diligence!

Cash is Crap, Sell the Kids, Buy Art

An executive at a top art insurance company told me that a Cezanne painting sold privately for $250m - that stands as the highest price ever paid for a single work of art to date. Not bad for some pigment on a bit of canvas. Many would say that such a lofty number is a ludicrous concept in a time of great political unrest and systemic poverty worldwide. I say why stop there; that the benchmark will steadily rise and in no time at all we will live to see the day of the $1-billion dollar painting. I can hardly wait. I feel entitled to have forged a life in aesthetics, and that you can now attain such high levels of remuneration only makes it that much more pleasant. So, in the age when cash is crap, not to mention the toxic dollar that has become the currency of choice for short sellers, the 1988 Christopher Wool painting Apocalypse Now sums it up perfectly: “SELL THE HOUSE, SELL THE CAR, SELL THE KIDS”. And buy art!

Art and Alcohol from London

I heard on the radio this morning that 200,000 will die in England from cheap alcohol; does that mean freely available or poor quality? Or both. Then I arrived at Heathrow at 7am and they were handing out samples of Baileys and it all became clear.


According to Kelly Crow in today’s Wall Street Journal (the 21st Century art mag), $375m of Richter’s have been sold since 2005 at auction. After recent London results of $11.5m and $5.1m for abstract paintings both small and large that went to China and Russia respectively, at the risk of exposing myself to (further) scrutiny and potential ostracism...I still think they are cheap.

It’s a Mad, Mad Art World: the Market and Machinations from Soup Cans to Nuts

Andy Warhol dreamt about money, made art about money but never made the money he fantasized about till after his death. His auction record during his lifetime was a mere $385,000 in 1986 for a piece fittingly titled “200 One Dollar Bills” purchased by Paulina Karpides and recently sold by the same collector for $43,762,500, also fitting.


The difference between Andy Warhol and Damien Hirst is that with Warhol it was all about fame and money; fame he achieved, wealth only posthumously. Hirst has made his cake (or had it fabricated) and is eating it all the way to Coutts & Co. With Bono in tow, today’s successful artist can become a celeb too, with bona fide rock star status and the cash flow to match. For all his aspirations, Warhol was like George Best or American baseball player Hank Aaron: they expanded the audience to mass while opening future doors for athletes to earn corporate executive salaries, though Warhol was never able to sort it for himself like HIrst managed. One could not exist without the other.


Art used to be more like a religion, with educational, historic, technical, analytic and cultural aspirations; but over time, as most religions came to be replaced by the blind pursuit of material wealth, art followed suit, and swiftly at that. Forget Pop, Minimalism, Conceptualism and any other -isms you can conjure, most art now is all about Economic-ism. Over the years, the balance of power has shifted from critics and dealers who used to be able to make or break a career to artists and collectors (and artists that collect) who are now ruling the roost.


People believe that art is subjective, and lacking inherent value—though I can on one level understand why it entails a certain leap of faith to fathom paying £75,000,000 for what amounts to £6.86 of pigment, canvas and stretcher bars. But what cannot be overestimated is the point that once art came off the cave walls, it’s been covetously and conspicuously collected. The first time contemporary art entered the realm of high-end, expensive evening sales at auction was in 1997 when a children’s heart specialist went to jail for embezzling money from a surgery fund in order to feed his collecting habit. Such is the fervor that grips collectors that one could even steal money from the hands of dying children to fulfill the desire for more acquisitions. That’s what I call a hardcore collector.


Calculable measures exist that can be systematically applied to ascertain the inherent values of art. There is a laundry list of things that contribute to constitute value in the art world: who’s selling (the gallery and it’s reputation, and auction exposure), who's buying (the stature of the collectors), who's writing about it and which museum is exhibiting, or rather, whose private museum is supporting it. Although it used to be that museums were museums: independent, quasi-objective, publically supported institutions with posterity at heart, today they are being replaced by private vanity enterprises resembling ornate bonnet ornaments atop a wealthy patron’s prized automobile. Private museums are becoming arbiters of taste and in the process, market credibility boosters. Or trying to.


Funny enough, the same piece of art can have as many prices as the depth of knowledge of the particular buyer permits. The difference between neophyte art collectors versus a jaded buyer is that a newcomer thinks they are buying something with a designated price requiring payment. A professional collector is like someone negotiating down the price of a container of milk, not paying for it for two years, and then canceling the deal because the milk went sour. Newbies have no idea what they can get away with in the snake pit of art. They are our favorite dupes. Just kidding.


Visiting the Basel Art Fair in Miami last year I eyed a Warhol portrait of Mao on canvas for a client when a friend called spotting serious dialogue going on with another potential buyer in front of the work I admired. I quickly made my way to the booth of the dealer and noticed he was in serious conversation with a doctor and medical entrepreneur I had only just had breakfast with that day. The art community is like picking up a rock and finding 300 intertwined worms, it’s that incestuous.


I parked myself behind my “friend’s” back and began my surreptitious counter-negotiations. Unbeknownst to the good doctor, due to my friendly relationship with the dealer, I was told what was offered on the Mao but that a further day to conduct due diligence was requested, which nowadays entails doing price research for comparable sales in the worldwide auction market on Artnet, a cheap pay-per-search tool that has revolutionized the way art business is conducted. I was offered a price six-figures less if I pulled the trigger then and there, which I did and made my way completely unnoticed during and after the ordeal.


Sadly, there appears a diminished amount of passion in the art world (for the art anyway) as the days of connoisseurship are mostly behind us; old school collectors who never sell and artists with no regard for private planes and Hello Magazine belong more and more in a vitrine in a natural history museum. Mind you, I find nothing wrong trading the multi-billion dollar Hirst market—the fact that you can rather pleases me, but let's not confuse the big money deals with appreciation.


When it comes to certain collectors and supporters though, you can't deny someone like Charles Saatchi his due in his relentless mining of artistic talent; it’s a full time job and a physically strenuous one at that. Constantly chasing young, new art (with my bad sense of direction) is a fulltime job way too exhausting and expensive to think about. But in the process, he rather foolishly dealt away masterpieces that would have permitted him to trade into retirement with impunity. Instead, Saatchi horse-traded his way into a lower tax bracket. The saying rings true that you sell art to make money and keep it to make wealth.


Not only are most curators, advisers, and dealers professionally non-qualified (many unqualified too) but also art is the last bastion of unregulated, multi-billion dollar business activity in existence. There are various ways to legally insider trade in the art world including front running major museum shows prior to public announcements. This entails being privy to information on the programming of a major museum (or gallery) ostensibly through board members or employees, as to who will be featured in upcoming shows and then buying (and selling) on such non-public knowledge for quick profit.


Perhaps curator and adviser are among the most misused descriptive words in the art world after the over-use of the word important in relationship to describing art works. Correct me if I am wrong in assuming art never cured a strain of cancer. Some artists certainly carry themselves in such a self-important manner like peacocks with their feathers in full display. But I admit there has been research to the effect that living with art can contribute to prolonging your life. I must admit I tend to agree—they say having dogs increases life expectancy so why not the same for looking at and appreciating art too? Besides, I’d much rather have a painting, or better yet, a dog hanging from the wall.


When it comes to making, buying, selling and presenting art we are, to a certain extent, all hookers of one stripe or another, which I readily acknowledge. But I know an art dealer of sorts, always surrounded by a bevy of girls, unfailingly gorgeous. When I questioned him about the somewhat seedy appearance of such a mélange, he replied: “How did we meet?” True enough, I did ask him to fix a friend up (yes, a friend), though it never occurred to me he’d be chartering for the occasion. He went on to relate how many billionaire collectors he made business with out of his procurement activities in the escort sector. As Malcolm X put it, by any means necessary.


As far as buying and selling at auction, you had better know what you’re doing as you are invariably up against the savviest purchasers in the world. And these days that really does mean the world over, as we are truly in an interdependent, global environment after years of lip service to that effect. In the past, dealers banded together at public sales to keep prices artificially low, and then bid amongst themselves after a given sale. Today it’s the reverse, or so they say. But even if you own buckets of Basquiats and you obscenely bid one up auction to bolster the market, nevertheless he who he who plays with a paddle pays.


In New York in the 1940’s, the amount of what we know as contemporary galleries could be counted on the fingers of one hand. What is merely a short time later there are a plethora of commercial venues worldwide. Also, for the first time in history, we are in an age of so many billionaire dealers and collectors, and what is more, dealers and collectors who are billionaires from art, including such legendary hoarders as the Nahmad’s, Berggruen’s, Mugrabi’s, Ernst Beyeler (recently deceased) and Bruno Bischofsberger, amongst others.


Safe to say most artists and galleries are like cottage industry entrepreneurs except for a gallery business model like that of Larry Gagosian who appears intent on nothing less than world domination, establishing beachheads far and wide, from New York to Athens via Paris, London and Rome. There is no one in gallery land in his rearview mirror.


A hedge fund friend at the onset of the recession said he’d hoped I realized the works I yearned for and dealt in would be rendered valueless. He obviously wasn’t the type to beg, borrow or steal for art. Having no means has never been an impediment to a true collector. In the past ten years there has been more growth in the worldwide art market than in the previous 100 years. Though the recession has clearly and concretely caused a shift in what is sought after and effected values, we are today at historic high levels for art. For every bust in the art market lurks a bigger boom down the horizon and vice versa. The art market is a lovely, endless cycle, but one that seems to grow and grow over time with no bounds in sight.


No one could ever have imagined how art fared so well in light of the crushing recession that brought the world’s economy to its collective knees. But clearly trends have shifted today—in the recent past, $25m Jeff Koons sculptures were being flipped like burgers on the resale market before the crates were even unpacked, and at the same time, you couldn’t give a Monet away. Today, contemporary art is a long way from selling for the prices of office buildings but Picasso’s, Monet’s and Van Gogh’s are reaching dizzying heights as we are in the midst of a flight to quality, with art viewed as a safe harbor in uncertain economic times.


Sure there continue to be plenty of naysayers and party poopers that moan that it’s an artificial bubble bound to burst. And true enough, there are many people in it for the wrong reasons, but this is also a good thing, as it only contributes to broaden the markets and create spillover opportunities for the various segments of art. With 1000-point intraday swings in stocks, interest rates at historic lows, banks teetering and companies uneven at best, art has never looked like a better place to be. And the dividend it throws off in good times and bad is the visual pleasure gained by looking. The continuing international economic instability is a major factor driving today’s market for art. And the ever increasing worldwide attention—there are more people today making, looking at, writing about, showing and buying art then at any previous time in history.


People are still endlessly speculating that this artist is overvalued and what that artist is making is not even art. When you go to an emerging art fair like Frieze, I would guess fully 85% on what is on view will become relatively worthless over time. Perhaps even more. But then again, there are also awful Picasso paintings. In the breadth of an artist’s career you encounter a bell's curve; but that is a good thing as it creates access points for people to enter the market at differing price levels. For instance not everyone could afford a Giacometti sculpture (the last public record of $104m didn’t help) but you can find what is considered a less prized etching, almost as gripping.


Most people in art only look at the pictures and adverts in art magazines unless they or their artists are themselves written about. To read, learn and discover more about today’s art forget Frieze and other specialist magazines, try bloomberg.com, the FT, Wall Street Journal—the financial press and fashion mags (and GQ!) do a much better job without trying to impress with unknowable art speak so often encountered in the art journals.


There was even recent coverage in the Economist solely on the past, present and future financial outlook of the oeuvre of Damien Hirst. Though this analysis was flawed (you need specialists entrenched in the field of practice for meaningful insight) it reflects that the times they are not a changing, but they have changed and forever. Too bad Warhol didn’t live to experience a time where there are charts and graphs depicting an artist’s price performance and aesthetic economic indicators and buy/sell signals; chances are it all would have ended up as grist for his canvases. And as for the wrongly long- term bearish sentiment on Hirst in the Economist, I forecast in 10 to 15 years time, the market for Hirst fakes alone will amount to billions.


Art fairs, most of which I have actively participated in at one time or another (and been thrown out of, hard to imagine), are the most effective and convenient way to do reconnaissance about what is afoot at any given time. They are wonderful information gathering affairs as well as the closest the art world gets to fostering a sense of community; we all travel to the same destinations and socialize with many of the same people across multiple time zones. But the fairs are also deeply hierarchical enterprises. The decision making process as to who gets to have a booth, and in which section that booth is located in are based largely on capricious, political factors. Even who gets admitted as a guest and when (there are earlier entry slots for the VIP VIP’s) are status-laden choices by the powers that be.


With the nonstop attendant social flurry, the Miami Basel fair is undoubtedly number one on the charts for schmoozing the art party circuit. However, in hot market times at fairs there is competition to purchase new material, and fast, which in such a public forum is not the ideal way to understand and participate in the market. Art should be a slow burn, a contemplative process, not an ad hoc, spur of the moment, decision-making experience.


The mindset of many students in today’s art academies seem to be as much about seeking tuition in PR, self-promotion, and networking as about learning to draw a nude accurately. After Marcel Duchamp put a urinal in an exhibition and declared it art in 1917, the Yellow Pages have became an integral tool of the artist. The readymade, Duchamp’s term for plucking an industrial object out of a catalogue and re-contextualizing it in a gallery setting and calling it art had been replaced by what I call the had-it-made—where a few calls to a fabricator can overcome any shortcomings in virtuosity. How many art stars of today could draw other than a stick figure?


Also, the caution and conservatism you see at the graduate level in art is mindboggling; they are often no different than business or law departments, a professional finishing school readying the mini entrepreneurs to crack the art market. One student during critiques I was giving told me that a known visiting contemporary artist told her not to use a particular material for a work, which assertion in my estimation had absolutely no foundation in reason. The visiting artist probably couldn’t think of anything else to say, though I admit you really are on the spot in some of those critique sessions having to think on your feet all day to needy young artists. So what did the artist do? Of course she trashed and remade her work. At the grad level at least, it’s about connecting with guest lecturers and visiting artists and paving the way to a lucrative niche of one’s own.


Fifteen years ago I bought two artworks, one by Janine Antoni and another from Glenn Ligon both from a struggling artist who had been given the works as gifts. When I tried to sell the pieces years on the results were astonishing: both artists independently declared the works to be not art. In the case of Antoni, the piece was hand-painted plaster casts of her nipples that formed the basis of a later work made in gold. In fact, this was more “art” then the art she normally exhibited. And even more baffling, the Ligon works I purchased in good faith were classical charcoal renderings of some kids involved in a famous rape assault in Central Park at the time. Both artists made efforts to preclude me from selling the work I rightfully owned. It boiled down to issues of trying to control perceptions of the artists and the works. Only in art can someone equally state that an object lifted off the street or appropriated from a newspaper or magazine is his or her creation and simultaneously declare that something made the old fashion way is garbage. Anyway, I traded one and sold the other at auction as the houses don’t seem overly concerned about the intent of the artist when it comes to what is or isn’t art.


The museum realm, more mid-level than Tate or Serpentine scale, resembles small town politics, with little money and little opportunity to make a sizable impact. In a time when even the biggest institutions such as the Metropolitan Museum in New York, have been so strapped for cash they can’t paint the walls between exhibits, museums are losing their capacity to make a bang. Being in such financial straits has in turn reduced the scope and adventurousness of public museums programming capabilities and thereby removed the stinger of these venues. Many times, they can no longer afford to make a difference, instead opting for easy to swallow, crowd pleasing events. With less and less funding, there is sadly less at stake for institutions across the board.


Another casualty of the recent transformation of the art world is the slow death of the critic. To make an impact today, an art writer has to become a judge on a reality TV show to make themselves heard like New York Magazine’s Jerry Saltz. What Saltz did do that will have lasting repercussions is utilize facebook to transform criticism as we knew it into a democratic participatory sport, and a contact one at that. I still remember quaking in my boots over 20 years ago every time his illustrious wife, New York Times writer Roberta Smith, visited a show I curated; her reaction could reduce me to tears—not to mention the joy (to my bank account) she could equally dispense with a favorable review. Those days are largely behind us. Even a bad article by Smith was capable of moving markets.


Don’t get me wrong, I am no cynic, but rather an art making, buying, selling, critiquing, presenting and collecting hypocrite. There is no place I’d rather be personally and professionally, mainly due to such ambiguities and gray areas that still exist in the wild, wild world of art. For the uninitiated, the art world has its very own language, but don’t be daunted. And it’s not all about money either; art is the only free lunch left in town as galleries and most museums don’t charge admission. Go on and try it.

Art Market Spring 2010, Forecast: Clear Skies Ahead

The Spring New York Auctions of Impressionist, Modern and (even) Contemporary art all blasted through the highest expectations, in the midst of a stock market convulsing in an unprecedented manner; are we in a new age of uncertainty and chaos? Shares crash by day as art soars by night. But as suspected, art made new records after less than ten lots into the first sales—that would be the $106m Picasso if you have been buried in volcanic ash. To think art has reached parity with office buildings; but, better than shares, hedge funds, Goldman Sachs(!), currencies, Greece, Portugal, Spain (and UK?), where else can you achieve short term returns of 20, 30, 40%+ in today's markets?


The forecast is for a long-term boom in classical art, as well as recognized, signature works by contemporary practitioners. The New York Times stated re the contemporary sales: "Americans dominated the buying, in contrast with last week’s sales of Impressionist and modern art, where Europeans, Asians and Middle Easterners were the big spenders." Wait till the European, Asian and Middle Easterner laggards catch on to contemporary... Tomorrow’s next hedge fund star: the art manager.


Strangely, there are many day to day art professionals that bemoan the historic figures attained by art, says one: “…art that sell(s) at auction die two deaths: We do not see them again for decades, and cannot think of them without also thinking of money.” The first is the result of the free market system (consider the alternatives) and the latter the result of the free market system (alas, its all vanity). Why the constant pooh poohing about the big bucks Picasso? Why can't everyone coexist, the trophy hunters and enthusiasts in trenches? There is certainly a trickle down as one segment begets the other. But hey, guess what: we can all relax! In effect the $106m pays all our art world salaries. Even the $8m paid for young Italian artist Maurizio Cattelan's proboscis sticking out of an actual hole in the floor; pretty much anything will go nowadays.