Where Smart People Are Investing Now

Shaun Curry, AFP/Getty Many collectors still see the art world as one of endless opportunity.

Because I’m an art consultant, I’m constantly asked what’s happening in the art world these days. Like most business, it’s been affected by the plunging economy. More than one client has called, crying, “I wish I had bought that painting you offered me six months ago. I wouldn’t have had that money in the market. I would have had SOMETHING I could look at and enjoy.”

But what to do now? That’s the rub. Even seasoned collectors are asking, “Should I buy? Sell? Hold? Or what?” History may be helpful; analyzing the art world over the past ten years may be helpful in understanding how to maximize your spending power while giving your own collection a boost.

The sea change this decade isn’t one of taste, as in the ‘90s…This time, it’s the way business will be conducted.

In the past few years, the market for contemporary art enjoyed a dramatic trajectory, and captured the most interest and media attention. It behaved quite differently from the rest of the art market. Years ago, when I began as a consultant, I’d take clients to the shows of the hot artists. Prices were in the $3,000-$30,000 range. If you weren’t sure about the work, no problem. You could wait until the artist’s show to see how the artist developed, and although prices might move up a bit, you could take your time before making a decision.

In recent years, however, as the numbers of collectors increased, all looking for the next Warhol, new work was grabbed up almost as soon as the paint dried. No longer could you take the time to ponder. If you didn’t pounce, the work could well double, triple, or suddenly leap into the hundreds of thousands or even millions in the next show. Suddenly, you had to be a museum or substantial collector to get a piece, and most people chasing the new work were given a polite kiss-off. They could put their names on a waiting list. In gallery-speak, that meant, “Forget it. You’ll never get one.”

When auctions started selling the works of these hard-to-get contemporary artists, collectors who were getting the brush-off from the galleries saw a way to get what they wanted. Now collectors, adrenaline racing with competitive zeal and willing to pay a premium over gallery prices, could slug it out against each other in bidding wars. There were enough young hedge fund managers and others making record money who didn’t care if they paid a few hundred thousand more for something if they could drop the name of their conquest at a dinner party. The competitive name-dropping soon extended beyond the hot artist to the star dealers. At a dinner, my partner, Abigail Asher, asked a young investment banker what he’d bought recently. His answer: “I just bought a painting from Gagosian.” Abigail countered, “I asked WHAT you bought, for heaven’s sake, not WHERE you bought it from.”

Buyers of hot artists realized that they could flip their works at auction and make quite a killing. In November 2007, Abigail and I marveled that a Damien Hirst spin painting, dated that same year, was sold at auction. Even if it was painted in January and it was left to dry a week or two, then shipped to the dealer, who unpacked, photographed, and catalogued it, by the time it was sold by the dealer and somehow made its way to the United States, it could have been consigned no later than the end of August for the November auction. At most, the owner could have had it only for two or three months. Headspinning.