mannerist finance
May 14, 2019 1:58 PM   Subscribe

Art Speculators Bid to Lose [WSJ]- "David Geffen, Peter Brant and other collectors pledge to bid on art they want but new third-party backers[Economist] aim to reap fees by getting outbid; ‘they don’t know what they’re doing’"
Are Auction Guarantees the New Private Sales? Yes, for Art Sellers Who Don’t Want to Get Ripped Off // Why Guarantees Are Actually Good for the Art Market

Guarantees: the next big art market scandal?

via Matt Levine's Money Stuff [Bloomberg]
So art valuation is, uh, more art than science, sorry. This means that some stuff that happens in financial markets— dealers lying to customers about the price that they paid for a bond, say— happens in comically exaggerated form in the art market. If you buy a bond for 79.50 you can tell a customer that you paid 79.8 and charge him 79.9, but there are some limits; even a relatively unsophisticated customer knows that the bond didn’t cost you, like, 200. Bonds just don’t do that. But you can buy an art for $1,000 and sell for $450 million, which gives you a lot of leeway to make up a number in between.


But the really delightful thing is that so much of the apparatus of modern scientific finance exists in the art world anyway.
posted by the man of twists and turns (13 comments total) 3 users marked this as a favorite
 
(Ahhh, I was just about to do an FPP with the Salvator Mundi link!)
posted by RedOrGreen at 2:25 PM on May 14




The art market is the scam that people believe is the scam in the equities markets.
posted by JPD at 4:39 PM on May 14 [2 favorites]


Okay, this is just fascinating.
posted by Bugbread at 6:50 PM on May 14


The part about how all the art magazines are playing along because otherwise they'll be blackballed by the auction houses for advertising does illuminate things a bit. Because it is so transparently a fraud -- just find the videos and pictures that show it before it was repainted, 90 percent of the picture is bland to downright crude, certainly not a Great Master, except for possibly the right hand, which also looks to have been painted separately.
posted by tavella at 8:08 PM on May 14 [1 favorite]


There is a fairly good argument floating around that the village voice got bought out and killed because it was one of the few independent outlets with enough clout to do damage to these speculation prices of art objects via reviews.
posted by The Whelk at 8:10 PM on May 14 [4 favorites]


Whenever I read about money laundering, the art market features so prominently it makes me wonder if that's the only thing these fantastic prices are all about. I think the prices would be a lot different if bidders had to prove their financial bona fides. Price guarantees obviously please the crooks.
posted by adept256 at 8:29 PM on May 14


I keep saying, it's like Tide for rich people.
posted by RobotVoodooPower at 8:37 PM on May 14


And of course, art dealers have been shady AF for all history:

I had only just arrived from Arpinum when your letter was delivered to me; and from the same bearer I received a letter from Arrianus,[1] in which there was this most liberal offer, that when he came to Rome he would enter my debt to him on whatever day I chose. Pray put yourself in my place: is it consistent with your modesty or mine, first to prefer a request as to the day, and then to ask more than a year's credit? But, my dear Gallus, everything would have been easy, if you had bought the things I wanted, and only up to the price that I wished. However, the purchases which, according to your letter, you have made shall not only be ratified by me, but with gratitude besides: for I fully understand that you have displayed zeal and affection in purchasing (because you thought them worthy of me) things which pleased yourself—a man, as I have ever thought, of the most fastidious judgment in all matters of taste. Still, I should like Damasippus[2] to abide by his decision: for there is absolutely none of those purchases that I care to have. But you, being unacquainted with my habits, have bought four or five of your selection at a price at which I do not value any statues in the world.

Cicero - 55BC

posted by adept256 at 8:54 PM on May 14 [3 favorites]




It is difficult to imagine a reason to keep art works in a freeport unless there is speculation going on. If you are collector of fine art, you want to be able to see and to appreciate what you own. But if you are a speculator, all you need is private and secure storage, since you are betting that the work is going to increase in value. So the freeport is the perfect place to park your speculative art purchases, because they cannot be traced to you and no government can tax you on these assets.
posted by They sucked his brains out! at 6:48 AM on May 15


More on freeports on Kottke, including a video interviewing a journalist who formerly worked in the Geneva freeport.
posted by They sucked his brains out! at 6:57 AM on May 15


From The art bubble: "A David Hockney painting has sold for $90m ... An asset’s value is the discounted time stream of the economic value it can create ... a dozen people might practically be engaging with it at once.... On exhibition eight hours a day, every day of the year, that’s 12 x 365 x 8 = about 35,000 person-hours of engagement per year.

An asset worth $90m has to return about $4.5m worth of value per year at 5%, so for this painting, the viewers have to think it worth $130 per hour.

Obviously this whole story is a fantasy...Prices like this are speculative “bigger fool” bets; someone expects to sell it for more than $90m ... we’re talking about tulip bulbs and the sociology of a chain of fools, not economics and not art."
posted by Mr.Know-it-some at 8:32 AM on May 15 [1 favorite]


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