Where Smart People Are Investing Now

I don’t know why there was such an outcry when Damien consigned enough paintings and sculptures to Sotheby’s to create an auction all by himself. Chinese artists have been selling their works at auction for years. And people have been buying them on spec, hoping that when millions more Chinese become millionaires, they’ll all want their national patrimony.

During this period, if you had and wanted to sell a work by a hot artist, or any important painting, it became clear that auction was the way to go. The two major auction houses, Sotheby’s and Christie's, competing against each other, would be falling all over themselves to give you a splendid guarantee (an amount they’ll pay you, no matter what the piece brings at auction), as well as sharing the buyer’s commission with you and sometimes even giving you such bonuses as a single painting catalog. Dealers complained, and it began to appear that the art world would resolve itself into two auction houses and only a small handful of dealers.

Now, all that will change. The sea change this decade isn’t one of taste, as in the ‘90s when collectors turned away from Impressionism and moved into collecting Contemporary art. This time, it’s the way business will be conducted. No longer will auctions be the center of the universe. If you have significant works to sell, you’ll probably give them to dealers, not auctions. The days of the guarantees from the auction houses are over—at least for now, and if the market remains volatile, you won’t want to risk having your work publicly tainted by not selling at auction. Of course, if your business is seriously down, or you were an investor with Bernie Madoff, you may not want to be publicly perceived as a loser who needs to sell. If so, you’ll probably consign to a dealer.

Although the fall sales were dismal, some weren’t as bad as you might think. In the Impressionist and Modern sales, for instance, items that had come up before in the past ten years or so did quite well. In times like these, those aren’t bad profits.

These results and similar experiences some collectors have had, both at auction and privately, have confirmed many collectors’ faith that art is still a good long term investment. Some collectors are bottom fishing or making post-sale offers for works that didn’t sell at auction. Some are paying record prices to get the unique gems they want, and some are sitting this season out saving their cash for great things that may soon shake loose. Whatever their strategy, there are smart people who still see the art world as one of endless opportunity. If you haven’t bought art, maybe it’s time to dive in—but be careful.

Barbara Guggenheim regularly contributes humor to W and ELLE magazines. She's written several books, including Decorating on eBay and How to Be Smart Money in Art.

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