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At New York's annual Spring 
Auction Week, the world's 

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biggest auction houses like 
Christie, Sotheby's and Phillips

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hold some of the most important 
art auctions of the year, 

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showcasing a wide range of art 
including impressionist, modern 

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and contemporary works, 
attracting collectors and buyers

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from around the world. 
On display are iconic works by 

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legendary artists like Pablo 
Picasso, Claude Monet, Roy 

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Lichtenstein and Mark Rothko. 
Each piece representing A 

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distinct era and movement in art
history. 

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The works on sale at the three 
major auction houses came in 

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this year with an estimated 
price range of between 1.2 

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billion to $1.6 billion. 
The crown jewel of the season 

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was being sold at Sotheby's, A 
sculpture by Alberto Giacometti 

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titled Grand Tete Mons or Large 
Thin Head, which Sotheby's 

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describes as being Giacometti's 
masterpiece. 

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The sculpture was conceived in 
1954 and cast in 1955 in an 

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edition of 6. 
The one on sale was the only one

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painted by Giacometti, making it
the most special of the series 

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and entirely unique. 
An unpainted cast was sold in 

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2010 by Christie's for 
$53,000,000, so this one was 

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expected to go for at least $70 
million. 

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It was described in the catalog 
as a uniquely painted bust of 

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the artist's younger brother, 
Diego, who was Giacometti's 

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lifelong companion. 
Now, I don't have a younger 

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brother, but I imagine that if I
did and I had the free time, I'd

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make something like this, too, 
and tell him that it's what his 

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head looks like. 
That's just how brothers are. 

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Look, I'd say there's no room in
there for a brain, just like 

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with your head. 
Giacometti is considered an era 

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defining artist. 
His Walking Man sculpture, when 

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it sold in 2010, became one of 
the most expensive sculptures to

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ever be sold at auction. 
It's culturally significant 

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enough to be depicted on the 100
Swiss franc banknote. 

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Although he painted, drew and 
designed decorative objects, 

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Giacometti is most famous for 
his sculptures. 

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After the Second World War he 
began to create elongated 

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figures, often walking or 
standing whittled down to 

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heavily worked but stick thin 
figures which became associated 

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with existentialist ideas and 
post war trauma. 

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Grand Tete Mons came in with the
highest estimate of the week. 

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It was expected to go for around
$70 million as a number of 

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Giacometti sculptures have sold 
for over $100 million over the 

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last decade. 
Sotheby's pulled out all of the 

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stops for this auction. 
It was on the cover of the 

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catalog and they created a video
to promote the sale where a 

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Frenchman says that he likes it,
or at least I think that's what 

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he's saying. 
I'm not very good at French. 

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I feel like when I look at the 
busted Diego, I'm, I'm, I'm 

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feeling human, that there's 
something which is like he's 

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nearly touching my soul. 
This is substantial, monumental.

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This is his magnum opus. 
It's very clear here that the 

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likeness is actually closest to 
Alberto's own head, so there's 

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an ambiguous jewel status here. 
This is both the artist and not 

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the artist. 
That last bit was a bit harsh, 

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but I guess it can backfire when
you make fun of the shape of 

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your brother's head and you also
look like him. 

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But anyhow, a public auction 
like this is always a risk. 

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As with a really valuable 
artwork, if it doesn't sell, 

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everyone sees the lack of 
interest and the piece is 

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considered burnt, you won't be 
able to sell it again for a long

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time unless you're willing to 
sell at a huge discount. 

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For this reason, auction houses 
will often either guarantee a 

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price themselves or find a 
guarantor, someone who agrees to

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buy the piece for an undisclosed
price in Case No one bids. 

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In this auction, the seller 
didn't want a guarantee, which 

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made the sale a true test of the
market, but it didn't work out. 

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In volatile or uncertain art 
markets, private sales, whether 

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through a dealer or an auction 
house, are often preferred by 

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sellers who like the additional 
control and prefer keeping the 

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details and level of demand out 
of the public domain. 

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At the top of the market, where 
pricing is often well 

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established, it's often possible
for buyers and sellers to agree 

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on a fair price privately 
without needing the price 

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discovery function of the public
auction market. 

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When markets are really hard, or
there's a perception of it being

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a seller's market, sellers are 
more easily enticed to sell at 

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public auctions, where the 
excitement can push prices 

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higher than expected. 
And establishing a new high 

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price for an artist so publicly 
can mark up all of their other 

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work. 
But there is a risk. 

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This is what it looks like when 
an auction goes really well. $77

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million, $78 million. 
Seventy 9 million dollars, $80 

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million at $98,000,000. 
The hammer is upset. 

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I'm selling on this side of the 
room. 

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It's Yuki's bit of Fair warning 
and selling. 

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Thank you Sir, for $98 million. 
Thank you, Yuki. 

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Congratulations. 
Thank you very much. 

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LO3 Hundreds. 
Jacametti Seller was the 

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Soloviev Foundation, a nonprofit
established by Sheldon Solo, who

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died in 2020. 
The Solo family have owned this 

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piece for quite some time. 
Shelton bought it in 1980, so 

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it's been in the family for 45 
years. 

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As I mentioned earlier, the 
artwork came to market without a

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minimum price guarantee, which 
would have ensured that the 

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seller made a sale regardless of
the auction outcome. 

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It's become rare for sellers at 
this price point to take that 

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kind of risk, but according to 
the New York Times, Solo have a 

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history of not seeking 
guarantees, as the family are 

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confident in the value of the 
works they own and prefer to 

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negotiate for a portion of the 
buyer's fees from the auction 

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house instead. 
There's a number of ways that 

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art auction guarantees can work,
but the idea is to fix a minimum

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sale price for a piece of art, 
ensuring that the seller 

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receives at least that amount 
regardless of the auction 

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outcome. 
The guarantor might place an 

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irrevocable bid, ensuring that 
they buy the work if it doesn't 

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sell for more than that price in
the live auction. 

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If the work sells above the 
guarantee, the guarantor and 

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seller might split the 
additional profit. 

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This means that the guarantor is
compensated for the risk that 

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they take. 
There are, of course, many ways 

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these contracts can be 
structured, as it's down to the 

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buyer and the guarantor to work 
it out. 

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Sometimes the auction house 
guarantees the sale, and other 

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times it's a third party. 
When the credit crunch hid in 

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2008, Sotheby's and Christie's 
found themselves holding $63 

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million worth of art that they 
had guaranteed with house money.

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Since then, auction houses have 
aimed to shift their guarantees 

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to third parties in order to 
minimize in house financial 

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risks. 
On the day of the auction, the 

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auctioneers started bidding at 
$59,000,000, a low price as 

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bidders know that other 
Giacometis have gone for over 

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$100 million. 
A hush came over the room as no 

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one raised their paddle to bid 
without a bidder. 

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The auctioneer started raising 
the price tag, bringing it all 

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the way up to the reserve price 
or the minimum that the seller 

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would accept. 
He slowly raised the price to 

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$64,250,000 and there were still
no bids. 

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A hush came over the room as 
people looked around at each 

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other. 4 minutes passed before 
the hammer came down unsold. 

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64,000,250. 
Pounds No one stepped up to buy 

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the most anticipated piece of 
the week. 

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Overall, the spring auction 
season fell short of its lowest 

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target. 
The combined estimate for the 

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three major auction houses 
ranged from 1.2 billion to $1.6 

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billion, while the actual take 
was $1 billion, according to The

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New York Times. 
The Giacometti's failure to sell

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was a body blow to Sotheby's 
modern sale. 

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It alone made-up almost 30% of 
the auctions presale low 

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estimate of $240.3 million and 
the sale as a whole generated 

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only $152 million after fees 
were stripped out. 

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They report that the Christies 
auction one day earlier was also

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one of the most anticipated 
auctions of the season. 

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And it proved to be 
anticlimactic too, where many 

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objects were pre sold to 
guaranteed bids and there was 

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little evidence of the 
enthusiastic buyers who defined 

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the market's peak in 2022, 
according to the Wall Street 

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Journal. 
We have to go back to 2008 to 

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see a big auction failure like 
this. 

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So is this an economic 
indicator? 

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Obviously, very few people can 
afford to buy artwork worth 10s 

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of millions of dollars. 
And the kind of people bidding 

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are business leaders and Wall 
Street executives who are likely

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to have their fingers on the 
pulse of the economy. 

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One of the worries in the news 
reports is that if these people 

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have stopped spending, it may 
mean harder times ahead for 

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everyone else. 
A Sotheby's executive after the 

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event commented that collectors 
might be nervous about the 

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current political and economic 
situation. 

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This feels like quite a change 
in temperature. 

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Just six months ago, the art 
market was feeling much more 

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exuberant as the news was filled
with the story of crypto bro 

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Justin Son, who paid $6.2 
million for banana duct tape to 

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a wall, which he then ate and 
bragged about on social media. 

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As crazy as that story might 
have seemed, it wasn't the first

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time that Sun had splurged on 
fine art. 

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Four years earlier he spent $15 
million on a Board Ape NFT, 

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which is nothing, and thus 
spending less than half of that 

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amount and getting a healthy 
snack had to feel like a real 

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bargain. 
Son is known in the crypto 

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industry as a connoisseur of the
finer things in life. 

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He owns a Donald Trump branded 
gold watch and also reportedly 

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spent $75 million on the Trump 
meme coin, which I'm told is 

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great. 
Six months ago when the banana 

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sold, the stock market was 
booming and investors were 

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excited that it would go even 
higher. 

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Today, the news is filled with 
gloomy articles about trade 

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wars, tariffs and growing 
geopolitical tensions. 

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According to the Times, some of 
the biggest stars of the art 

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world flopped or sold below 
expectations in auctions that 

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were stressful to watch. 
A $30 million Warhol painting 

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was pulled mid sale when the 
consigners realised that nobody 

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would pay its asking price. 
A Mundurin painting with A pre 

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sale estimate of 50 million, 
$1,000,000 sold when a single 

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bidder, presumably it's 
guarantor, paid $47.6 million 

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including fees. 
There were some success stories.

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Marlene Dumas 1997 Portrait Miss
January sold for $13.6 million 

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including fees and came close to
achieving the highest price for 

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an auctioned artwork made by a 
living female artist ever. 

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00:12:16,120 --> 00:12:19,800
Some are questioning if this 
auction is a sign that some of 

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the post war masters are 
starting to lose their audience.

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We saw something similar in the 
classic car market last summer 

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when dealers described the 
Pebble Beach auction as a 

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bloodbath with the most 
expensive cars doing the worst. 

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Blue chip sports cars from the 
1950s and 60s that were priced 

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above the $1,000,000 mark either
didn't sell or sold below the 

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low end of their price 
estimates. 

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00:12:45,000 --> 00:12:50,120
Newer classics from the 1990s 
and 2000s, like a Ferrari F50 

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did a lot better. 
These are usually cheaper cars 

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00:12:54,040 --> 00:12:57,160
and of interest to a much 
younger demographic than the 

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00:12:57,160 --> 00:13:00,400
boomers who would have bought 
the older classics. 

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00:13:01,000 --> 00:13:04,480
Some of the dip in blue chip 
classic car prices at Pebble 

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Beach was attributed to boomers 
selling their collections and 

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the younger buyers being less 
interested in that era of cars, 

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according to the Times. 
Some of the bad auction prices 

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were to be expected, as our 
insiders had already been 

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predicting that the spring sales
would be troubled months ago 

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when they told reporters that 
they were already focusing on 

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their consignments for November 
auctions. 

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They say that there was a 
noticeable absence of bidding 

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this spring by Asian collectors,
who have been a major force in 

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the art market for 40 years, and
that the struggling Chinese 

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economy and the ongoing trade 
war have hurt the pocketbooks of

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the ultra wealthy. 
According to a recent report 

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00:13:49,520 --> 00:13:53,720
from UBS, the art market has 
been slowing for some time now, 

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having peaked in 2022. 
Their research shows that global

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00:13:58,360 --> 00:14:03,240
art sales declined by 12% in 
2024 after a strong post 

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pandemic recovery. 
They say that the main drag on 

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growth has been the high end of 
the market, which thinned out 

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significantly in 2023 and 2024, 
creating lower aggregate values.

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00:14:16,840 --> 00:14:20,920
Despite stronger sales in some 
lower price segments, their 

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00:14:20,920 --> 00:14:25,160
research shows that the US 
maintained its position as the 

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00:14:25,160 --> 00:14:29,440
leading art market worldwide, 
accounting for 43% of global 

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00:14:29,440 --> 00:14:33,680
sales by value. 
The UK regained its position as 

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the second largest market with 
18%, while China, including 

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00:14:38,080 --> 00:14:43,160
mainland China and Hong Kong, 
fell by 4% to 3rd place with 

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00:14:43,160 --> 00:14:47,520
15%. 
So is art a good investment? 

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Well, according to research from
Elroy Dimson, who has researched

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00:14:51,720 --> 00:14:55,160
the returns on global stock 
markets and other asset classes 

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00:14:55,320 --> 00:15:00,360
using 100 and 25 years of often 
hand collected data, over the 

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00:15:00,360 --> 00:15:05,760
period from 1900 to 2012, art 
stamps and rare violins have 

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00:15:05,760 --> 00:15:12,400
appreciated at an average annual
rate of 6.4% to 6.9% in nominal 

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00:15:12,400 --> 00:15:18,120
terms or 2.4 to 2.8% in real 
terms, meaning that they've 

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00:15:18,120 --> 00:15:22,720
achieved higher average returns 
than government bonds, bills and

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00:15:22,720 --> 00:15:25,920
gold. 
However, he points out that it's

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important to recognise the 
importance of transaction costs 

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00:15:29,760 --> 00:15:33,960
in collectibles markets, which 
can often wipe out all of the 

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00:15:33,960 --> 00:15:37,680
excess returns. 
Art auction fees are not 

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00:15:37,680 --> 00:15:41,520
officially published and are 
frequently negotiated by both 

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00:15:41,520 --> 00:15:45,440
buyers and sellers. 
But often the seller pays a fee 

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00:15:45,440 --> 00:15:49,560
which can be as high as 10% for 
lower priced works and as low as

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00:15:49,560 --> 00:15:54,280
2% for higher priced works. 
The big money comes from buyer 

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00:15:54,280 --> 00:15:58,200
fees, which are paid on top of 
the final sales price. 

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00:15:58,440 --> 00:16:04,120
The numbers I could find are 25%
on sales up to 600,000 dollars, 

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00:16:04,400 --> 00:16:11,200
20% for sales up to $6 million, 
and then 14 1/2 percent on sales

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00:16:11,200 --> 00:16:14,760
above that number. 
As you can imagine, transaction 

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00:16:14,760 --> 00:16:18,800
costs like these wipe out pretty
much all of the returns on art 

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00:16:18,800 --> 00:16:22,160
investing. 
In addition, Dimson highlights 

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00:16:22,360 --> 00:16:26,480
that price volatility is much 
higher on collectibles than is 

250
00:16:26,480 --> 00:16:29,800
suggested by conventional 
measures of risk, and these 

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00:16:29,800 --> 00:16:33,680
assets are exposed to 
fluctuating tastes and potential

252
00:16:33,680 --> 00:16:36,680
frauds. 
A considerable cost that impacts

253
00:16:36,680 --> 00:16:40,880
the returns on collectibles are 
storage and insurance costs. 

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00:16:41,080 --> 00:16:45,160
How high these costs are varies 
depending on whether the object 

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00:16:45,160 --> 00:16:48,280
is bought purely as an 
investment, where it can be 

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00:16:48,280 --> 00:16:51,760
locked away cheaply and 
efficiently, or if it's been 

257
00:16:51,760 --> 00:16:55,240
bought as a source of pleasure 
and put on display, in which 

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00:16:55,240 --> 00:16:57,920
case these costs will be a lot 
higher. 

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00:16:58,280 --> 00:17:02,040
A big risk, as we discussed 
earlier, is that tastes can 

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00:17:02,040 --> 00:17:04,880
change. 
Dimson points out that this is 

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00:17:04,880 --> 00:17:08,960
not just about aesthetic tastes,
but also about global wealth 

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00:17:08,960 --> 00:17:12,640
distributions, which, as they 
change, can have important 

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00:17:12,640 --> 00:17:15,200
consequences for the prices of 
collectibles. 

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00:17:15,520 --> 00:17:19,839
He points out that the Japanese 
boom in the late 1980s caused a 

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00:17:19,839 --> 00:17:23,680
bubble in the type of art 
favored by Japanese collectors. 

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00:17:24,119 --> 00:17:28,560
So should regular people care 
about art prices, or is this 

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00:17:28,560 --> 00:17:31,360
just something for the ultra 
wealthy to worry about? 

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00:17:31,680 --> 00:17:35,960
Well, according to a 2018 paper 
in the American Economic Review,

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00:17:36,240 --> 00:17:40,640
art prices and auction volumes 
tend to increase during economic

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00:17:40,640 --> 00:17:43,880
expansions and decrease during 
contractions. 

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00:17:44,080 --> 00:17:47,160
So while there doesn't appear to
be anything predictive about the

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00:17:47,160 --> 00:17:51,640
art market, it may help to tell 
us where we are right now. 

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00:17:52,520 --> 00:17:55,400
Thanks for tuning into this 
week's podcast, with special 

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00:17:55,400 --> 00:17:59,000
thanks to my supporters on 
Patreon who make it all happen. 

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00:17:59,240 --> 00:18:02,200
If you want to support the 
channel, you can sign up using 

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00:18:02,200 --> 00:18:05,480
the link in the description. 
Have a great week and talk to 

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00:18:05,480 --> 00:18:06,840
you again soon. 
Bye.