At New York's annual Spring Auction Week, the world's
biggest auction houses like Christie, Sotheby's and Phillips
hold some of the most important art auctions of the year,
showcasing a wide range of art including impressionist, modern
and contemporary works, attracting collectors and buyers
from around the world. On display are iconic works by
legendary artists like Pablo Picasso, Claude Monet, Roy
Lichtenstein and Mark Rothko. Each piece representing A
distinct era and movement in art history.
The works on sale at the three major auction houses came in
this year with an estimated price range of between 1.2
billion to $1.6 billion. The crown jewel of the season
was being sold at Sotheby's, A sculpture by Alberto Giacometti
titled Grand Tete Mons or Large Thin Head, which Sotheby's
describes as being Giacometti's masterpiece.
The sculpture was conceived in 1954 and cast in 1955 in an
edition of 6. The one on sale was the only one
painted by Giacometti, making it the most special of the series
and entirely unique. An unpainted cast was sold in
2010 by Christie's for $53,000,000, so this one was
expected to go for at least $70 million.
It was described in the catalog as a uniquely painted bust of
the artist's younger brother, Diego, who was Giacometti's
lifelong companion. Now, I don't have a younger
brother, but I imagine that if I did and I had the free time, I'd
make something like this, too, and tell him that it's what his
head looks like. That's just how brothers are.
Look, I'd say there's no room in there for a brain, just like
with your head. Giacometti is considered an era
defining artist. His Walking Man sculpture, when
it sold in 2010, became one of the most expensive sculptures to
ever be sold at auction. It's culturally significant
enough to be depicted on the 100 Swiss franc banknote.
Although he painted, drew and designed decorative objects,
Giacometti is most famous for his sculptures.
After the Second World War he began to create elongated
figures, often walking or standing whittled down to
heavily worked but stick thin figures which became associated
with existentialist ideas and post war trauma.
Grand Tete Mons came in with the highest estimate of the week.
It was expected to go for around $70 million as a number of
Giacometti sculptures have sold for over $100 million over the
last decade. Sotheby's pulled out all of the
stops for this auction. It was on the cover of the
catalog and they created a video to promote the sale where a
Frenchman says that he likes it, or at least I think that's what
he's saying. I'm not very good at French.
I feel like when I look at the busted Diego, I'm, I'm, I'm
feeling human, that there's something which is like he's
nearly touching my soul. This is substantial, monumental.
This is his magnum opus. It's very clear here that the
likeness is actually closest to Alberto's own head, so there's
an ambiguous jewel status here. This is both the artist and not
the artist. That last bit was a bit harsh,
but I guess it can backfire when you make fun of the shape of
your brother's head and you also look like him.
But anyhow, a public auction like this is always a risk.
As with a really valuable artwork, if it doesn't sell,
everyone sees the lack of interest and the piece is
considered burnt, you won't be able to sell it again for a long
time unless you're willing to sell at a huge discount.
For this reason, auction houses will often either guarantee a
price themselves or find a guarantor, someone who agrees to
buy the piece for an undisclosed price in Case No one bids.
In this auction, the seller didn't want a guarantee, which
made the sale a true test of the market, but it didn't work out.
In volatile or uncertain art markets, private sales, whether
through a dealer or an auction house, are often preferred by
sellers who like the additional control and prefer keeping the
details and level of demand out of the public domain.
At the top of the market, where pricing is often well
established, it's often possible for buyers and sellers to agree
on a fair price privately without needing the price
discovery function of the public auction market.
When markets are really hard, or there's a perception of it being
a seller's market, sellers are more easily enticed to sell at
public auctions, where the excitement can push prices
higher than expected. And establishing a new high
price for an artist so publicly can mark up all of their other
work. But there is a risk.
This is what it looks like when an auction goes really well. $77
million, $78 million. Seventy 9 million dollars, $80
million at $98,000,000. The hammer is upset.
I'm selling on this side of the room.
It's Yuki's bit of Fair warning and selling.
Thank you Sir, for $98 million. Thank you, Yuki.
Congratulations. Thank you very much.
LO3 Hundreds. Jacametti Seller was the
Soloviev Foundation, a nonprofit established by Sheldon Solo, who
died in 2020. The Solo family have owned this
piece for quite some time. Shelton bought it in 1980, so
it's been in the family for 45 years.
As I mentioned earlier, the artwork came to market without a
minimum price guarantee, which would have ensured that the
seller made a sale regardless of the auction outcome.
It's become rare for sellers at this price point to take that
kind of risk, but according to the New York Times, Solo have a
history of not seeking guarantees, as the family are
confident in the value of the works they own and prefer to
negotiate for a portion of the buyer's fees from the auction
house instead. There's a number of ways that
art auction guarantees can work, but the idea is to fix a minimum
sale price for a piece of art, ensuring that the seller
receives at least that amount regardless of the auction
outcome. The guarantor might place an
irrevocable bid, ensuring that they buy the work if it doesn't
sell for more than that price in the live auction.
If the work sells above the guarantee, the guarantor and
seller might split the additional profit.
This means that the guarantor is compensated for the risk that
they take. There are, of course, many ways
these contracts can be structured, as it's down to the
buyer and the guarantor to work it out.
Sometimes the auction house guarantees the sale, and other
times it's a third party. When the credit crunch hid in
2008, Sotheby's and Christie's found themselves holding $63
million worth of art that they had guaranteed with house money.
Since then, auction houses have aimed to shift their guarantees
to third parties in order to minimize in house financial
risks. On the day of the auction, the
auctioneers started bidding at $59,000,000, a low price as
bidders know that other Giacometis have gone for over
$100 million. A hush came over the room as no
one raised their paddle to bid without a bidder.
The auctioneer started raising the price tag, bringing it all
the way up to the reserve price or the minimum that the seller
would accept. He slowly raised the price to
$64,250,000 and there were still no bids.
A hush came over the room as people looked around at each
other. 4 minutes passed before the hammer came down unsold.
64,000,250. Pounds No one stepped up to buy
the most anticipated piece of the week.
Overall, the spring auction season fell short of its lowest
target. The combined estimate for the
three major auction houses ranged from 1.2 billion to $1.6
billion, while the actual take was $1 billion, according to The
New York Times. The Giacometti's failure to sell
was a body blow to Sotheby's modern sale.
It alone made-up almost 30% of the auctions presale low
estimate of $240.3 million and the sale as a whole generated
only $152 million after fees were stripped out.
They report that the Christies auction one day earlier was also
one of the most anticipated auctions of the season.
And it proved to be anticlimactic too, where many
objects were pre sold to guaranteed bids and there was
little evidence of the enthusiastic buyers who defined
the market's peak in 2022, according to the Wall Street
Journal. We have to go back to 2008 to
see a big auction failure like this.
So is this an economic indicator?
Obviously, very few people can afford to buy artwork worth 10s
of millions of dollars. And the kind of people bidding
are business leaders and Wall Street executives who are likely
to have their fingers on the pulse of the economy.
One of the worries in the news reports is that if these people
have stopped spending, it may mean harder times ahead for
everyone else. A Sotheby's executive after the
event commented that collectors might be nervous about the
current political and economic situation.
This feels like quite a change in temperature.
Just six months ago, the art market was feeling much more
exuberant as the news was filled with the story of crypto bro
Justin Son, who paid $6.2 million for banana duct tape to
a wall, which he then ate and bragged about on social media.
As crazy as that story might have seemed, it wasn't the first
time that Sun had splurged on fine art.
Four years earlier he spent $15 million on a Board Ape NFT,
which is nothing, and thus spending less than half of that
amount and getting a healthy snack had to feel like a real
bargain. Son is known in the crypto
industry as a connoisseur of the finer things in life.
He owns a Donald Trump branded gold watch and also reportedly
spent $75 million on the Trump meme coin, which I'm told is
great. Six months ago when the banana
sold, the stock market was booming and investors were
excited that it would go even higher.
Today, the news is filled with gloomy articles about trade
wars, tariffs and growing geopolitical tensions.
According to the Times, some of the biggest stars of the art
world flopped or sold below expectations in auctions that
were stressful to watch. A $30 million Warhol painting
was pulled mid sale when the consigners realised that nobody
would pay its asking price. A Mundurin painting with A pre
sale estimate of 50 million, $1,000,000 sold when a single
bidder, presumably it's guarantor, paid $47.6 million
including fees. There were some success stories.
Marlene Dumas 1997 Portrait Miss January sold for $13.6 million
including fees and came close to achieving the highest price for
an auctioned artwork made by a living female artist ever.
Some are questioning if this auction is a sign that some of
the post war masters are starting to lose their audience.
We saw something similar in the classic car market last summer
when dealers described the Pebble Beach auction as a
bloodbath with the most expensive cars doing the worst.
Blue chip sports cars from the 1950s and 60s that were priced
above the $1,000,000 mark either didn't sell or sold below the
low end of their price estimates.
Newer classics from the 1990s and 2000s, like a Ferrari F50
did a lot better. These are usually cheaper cars
and of interest to a much younger demographic than the
boomers who would have bought the older classics.
Some of the dip in blue chip classic car prices at Pebble
Beach was attributed to boomers selling their collections and
the younger buyers being less interested in that era of cars,
according to the Times. Some of the bad auction prices
were to be expected, as our insiders had already been
predicting that the spring sales would be troubled months ago
when they told reporters that they were already focusing on
their consignments for November auctions.
They say that there was a noticeable absence of bidding
this spring by Asian collectors, who have been a major force in
the art market for 40 years, and that the struggling Chinese
economy and the ongoing trade war have hurt the pocketbooks of
the ultra wealthy. According to a recent report
from UBS, the art market has been slowing for some time now,
having peaked in 2022. Their research shows that global
art sales declined by 12% in 2024 after a strong post
pandemic recovery. They say that the main drag on
growth has been the high end of the market, which thinned out
significantly in 2023 and 2024, creating lower aggregate values.
Despite stronger sales in some lower price segments, their
research shows that the US maintained its position as the
leading art market worldwide, accounting for 43% of global
sales by value. The UK regained its position as
the second largest market with 18%, while China, including
mainland China and Hong Kong, fell by 4% to 3rd place with
15%. So is art a good investment?
Well, according to research from Elroy Dimson, who has researched
the returns on global stock markets and other asset classes
using 100 and 25 years of often hand collected data, over the
period from 1900 to 2012, art stamps and rare violins have
appreciated at an average annual rate of 6.4% to 6.9% in nominal
terms or 2.4 to 2.8% in real terms, meaning that they've
achieved higher average returns than government bonds, bills and
gold. However, he points out that it's
important to recognise the importance of transaction costs
in collectibles markets, which can often wipe out all of the
excess returns. Art auction fees are not
officially published and are frequently negotiated by both
buyers and sellers. But often the seller pays a fee
which can be as high as 10% for lower priced works and as low as
2% for higher priced works. The big money comes from buyer
fees, which are paid on top of the final sales price.
The numbers I could find are 25% on sales up to 600,000 dollars,
20% for sales up to $6 million, and then 14 1/2 percent on sales
above that number. As you can imagine, transaction
costs like these wipe out pretty much all of the returns on art
investing. In addition, Dimson highlights
that price volatility is much higher on collectibles than is
suggested by conventional measures of risk, and these
assets are exposed to fluctuating tastes and potential
frauds. A considerable cost that impacts
the returns on collectibles are storage and insurance costs.
How high these costs are varies depending on whether the object
is bought purely as an investment, where it can be
locked away cheaply and efficiently, or if it's been
bought as a source of pleasure and put on display, in which
case these costs will be a lot higher.
A big risk, as we discussed earlier, is that tastes can
change. Dimson points out that this is
not just about aesthetic tastes, but also about global wealth
distributions, which, as they change, can have important
consequences for the prices of collectibles.
He points out that the Japanese boom in the late 1980s caused a
bubble in the type of art favored by Japanese collectors.
So should regular people care about art prices, or is this
just something for the ultra wealthy to worry about?
Well, according to a 2018 paper in the American Economic Review,
art prices and auction volumes tend to increase during economic
expansions and decrease during contractions.
So while there doesn't appear to be anything predictive about the
art market, it may help to tell us where we are right now.
Thanks for tuning into this week's podcast, with special
thanks to my supporters on Patreon who make it all happen.
If you want to support the channel, you can sign up using
the link in the description. Have a great week and talk to
you again soon. Bye.