The spring auctions are in full swing but the art market is dancing to a radically different rhythm this year. Gone are the days when discretion was the better part of excess. But what happens now as the aftershocks of embarrassment follow the earthquake of financial collapse?
For one thing, everyone expected an avalanche of art to come to market—especially from the collections of hedge-fund guys and real-estate moguls whose fortunes dissolved even more rapidly than they were made. We anticipated auction catalogs stacked liked skyscrapers, but we were wrong. The auction houses are suffering major losses. Sotheby’s reported $24 million in losses last fall as the result of overestimating the value of work and giving hefty guarantees to collectors. The speculators and nouveau mega rich in a heady age of devil may care have already burned most of their money behind them. Some of the rock-star artists who experienced meteoric rises, helped by manipulations on the auction block, are now in freefall. The current lack of demand for their art has left their factories wanting. Although some of these artists are significant, the collapse of hyped and manipulated markets may take a generation to disassociate the art from the feeding frenzy of the 2000s for it to find their place in history.
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Great art that is inextricable from the history of art is still “hot.” And the focus is on the most important artists of 20th century rather than on this year’s new sensation. At last week’s impressionist and modern sale at Christie’s, two late Picassos were offered. This much-maligned period was shown at my gallery, Pace, in 1981 in its first exhibition since Picasso’s death. That exhibition influenced a generation of artists and created a new market for the work. Currently there is an exhibition of Mosqueteros (one subject of Picasso’s late period) curated by John Richardson at the Gagosian Gallery, which once more brings this era into even greater focus. The exhibition had a profound influence on the prices paid for the two late Picassos up for auction last week.The first (and the cover of Christie’s catalogue) is highly decorative, colorful, and easy to like, which, predictably, brought the highest recorded price for a late painting: $14.6 million. The second (which was sold by Julian Schnabel) is an "artist’s" painting; strong and challenging, devoid of decoration and gravid with the passion and fury that accompanies old age. It brought a considerably lower price of $7.7 million, even though, to my mind, it is a better painting.
These are clearly not recession prices. Still, Sotheby’s and Christie’s are not placing realistic and conscionable estimates on many of the works of art offered. This is done to secure the work and readjust the reserves later, if interest is fallow. At Sotheby’s last week, Giacometti’s Cat, largely considered a dog of a sculpture, in contrast to Giacometti’s Dog, which is unanimously considered the “cat’s meow” of Giacometti’s sculpture, failed to sell. The last “top of the market” price for the Dog was $16 million while the much-hyped Cat was estimated pre-sale at $16 million to $24 million. A sweet, charming but unimportant Picasso of Maya holding a toy boat, worth between $8 million and $10 million, in my estimation, was overestimated at $16 million to $20 million. The reality check on these preposterous estimates was that both works failed to sell.
The fact that art auctions are only a part of the art market is rarely acknowledged. The auction houses should not be confused with art galleries as they are sales rooms for art today, and wine, jewelry, memorabilia, furniture, and real-estate tomorrow. But auction houses can no longer afford to guarantee the sale of works of art and owners of great works are loath to take a chance at auction. For two reasons: They fear that they will not achieve top dollar in a time of crisis and the fear "burning" the work if it doesn’t achieve its reserve price. A work that doesn’t sell loses its luster and value for years until the stigma passes. Consequently, more collectors are often selling through dealers, where the work is shown privately to few clients and the sale is made without "burning" the painting. The art gallery market in total far exceeds the auction market annually, but you don’t read about it in the papers.
And while top prices for art are lower than a year ago, sellers of great works still expect last year’s prices. The memory of the madness lingers on. In 2007, a well-known collector purchased Jeff Koons' still-to-be-fabricated Cracked Egg for slightly more than $2 million. Eight months later, when the Egg was delivered, the collector discovered that it would not fit in his still-to-be-redecorated townhouse and asked the dealer if he could sell it back. The dealer agreed and the two settled on a price that even included a small profit for the collector, something previously unheard of in the realm of artists’ new work. But the story does not end there. In the aftermath of that resale to the dealer, rumors flew about subsequent resales, until the art world learned that only a few months later the same dealer had sold the work to a Russian collector for $22 million.
The auction houses should not be confused with art galleries as they are sales rooms for art today, and wine, jewelry, memorabilia, furniture, and real-estate tomorrow.
There lies the dilemma temporarily facing the art market. Art prices during the last three years were driven by the auction highs and galleries believed they were real. And they were—for a moment. Historically, gallery prices for an artist’s new work were less than what was paid for earlier works brought at auction. When an artist had a sold-out show, the prices of the next works increased by 10 to 20 percent without regard for prices at auction. When an artist’s auction prices exceeded the gallery’s, the gallery didn’t raise its prices. (By the same token when an artist’s price was less at auction, galleries did not lower its prices.) In the feeding frenzy of 2005-2008, the price of works increased as fast as the audience could consume them.
The booming economic virus created a pandemic of collecting and now the virus has moved on, but it is certain to mutate over time and will return in a different form. Prices are still very high for the best works of art and the paralysis that the virus inflicted on the rich seems to be abating—the signs of which can already be seen at the auctions and in the galleries. There is still greater wealth in the world than ever before and far more than there is great art to buy.
Arne Glimcher is the founder and chairman of the PaceWildenstein art gallery. He is also a published author, and a film producer and director, whose pictures include The Mambo Kings, Gorillas in the Mist, and Picasso & Braque Go to the Movies.