one year ago today:

R. Lord
December 10, 2007
Contemporary Art Seminar


Bubbles Burst, But Diamonds Last Forever

In an ad for UBS, proud sponsor of Art Basel and Art Basel Miami Beach, a contemplative young suit gazes out a window. Superimposed on the pane, a quote from the great Lucian Freud: “The longer you look at an object, the more abstract it becomes, and ironically, the more real.” Ah yes, reading art is like a magic eye. If you squint long enough, look past it long enough, you’ll get the message. Take this ad for example. If we place ourselves in the POV of our Brooks Brother on the ottoman, and look past the words, past the expanse of edgeless glass, what do we see? A beach, yes, but hey, its not just any beach, Miami Beach? Duh, it’s an ad for Art Basel Miami, but with that kind of proximity to water, it must be one of the man made islands, and with that un obstructed view it must be, ah yes, Di Lido. And we’re on the second floor. And looking closer, I recognize that sandalwood deck. This is the Scholl’s bedroom, isn’t it? Dennis Scholl, is a real estate investor and prominent Miami art collector who owns former gym/exhibition space World Class Boxing in Wynwood. This is real after all. Or at least, a real estate.
The art market bears more than passing resemblance to the ebbs and flows of the real estate market. After the stock market crash of 1987, consumers wanted to put their money into something, well, less real. Just like UBS says:
“Art awakens new ways of seeing the world. Just as art is a means of sharing insight with people, we share fresh financial perspectives with our clients in creating tailored investment solutions. Together, let’s view the possibilities.”
Art, from an investor standpoint is an easily inflatable entity. Just like the real estate market, the art market is insulated. New York real estate is a prime example, as the island of Manhattan is not getting any bigger or less attractive. A straw poll of graduating seniors could tell you that.
But forget the renters. The H-page of a dictionary of American idioms would tell you that we love our homes. Among Americans, home ownership is widely accepted as preferable to renting in many cases, especially when the ownership term is expected to be at least five years. This is partly due to the fact that the fraction of a fixed-rate mortgage used to pay down the principal builds equity for the homeowner over time, while the interest portion of the loan payments qualifies for a tax break, whereas, except for the personal tax deduction often available to renters but not to homeowners, money spent on rent does neither. However, when considered as an investment, that is, an asset that is expected to grow in value over time, as opposed to the utility of shelter that home ownership provides, housing is not a risk-free investment. It’s speculation.
The effervescence for home ownership is currently high even by American standards. Speculative bubbles are a temporary market condition created through excessive buying, and an unfounded run-up in prices occurs. Generally a result of the "bandwagon effect." Investors, seeing an upward trend in prices, quickly enter long positions in an attempt to participate in the stocks' profitability. Typically, these bubbles are followed by even faster sell-offs once the prices begin to decline. Insulation or bubble, this season it’s all about pink . But don’t hate the player.
Everybody plays the fool. If you pay a silly price, you wait for someone sillier to come along and pay more. It’s just like unloading bad coke: you bought it, didn’t you? Why wouldn’t that guy? All’s fair in Art+Auction because someone will always take your money. Collectors are affected by rising interest rates from auction houses in the same way that homebuyers or property investors are affected by similar rate increases. It would seem that the art auction houses have over cranked the dial on the thermastat by taking the same risks as the mortgage lenders by giving minimum price guarantees to their clients, which means that they are gambling on their ability to achieve the sale prices they have promised their vendors. Not only are the auction houses risking their own businesses but they are also creating false expectations of the art market and presenting a manipulated view of the art market by promising minimum sale prices just to secure the sale of particular artworks which may not reflect the “true” market value of the artwork. But don’t expect our freshly promoted young collector from Goldman-Sachs to care that Christie’s sales commissions are now double their rates at the time of the Sotheby’s-Christie’s price-fixing scandal.
Until recently, contemporary art dealers have held the sole spots at art fairs. New developments in the art market, however, suggest that the heavy hitting auction houses are moving in on this last untouched dealer-only territory, and dealers are not pleased. The Art Newspaper reports that Christie’s and Sotheby’s both had booths at the European Fine Art Fair in Maastricht last March. Further moves have been made, as well, leaving art dealers nervous that the auction houses are poaching on them a bit too closely this time. In another audacious maneuver, Christie’s recently purchased contemporary art gallery Haunch of Venison, gaining further access to at least two other contemporary fairs Frieze and the Armory Show this year
Beating the system in 2001 sure made Christie’s cocky. Poor Taubman had to go back to plain old real estate. My father was Taubman Co.’s new senior V.P of Leasing. I had to move from Aspen, CO to Bloomfield Hills, MI. I never asked who “lent” us the new Rauschenberg.
With definite, but few exceptions, dealers play the victim when its their own damn fault. Fear of re-sale at auction has evolved into a projection of snobbery. If you want a Ruff from a Rubenstein, you’d better find a Rubell. The franchises rely on the most bourgeois system of validation of perspective clients: their social climbing skills. Like Saatchi says:
“Pompous, power-hungry and patronizing, these doyens of good taste would seem to be better suited to manning the door of a night-club, approving who will be allowed through the velvet ropes. Their behavior alienates many fledgling collectors from any real involvement with the artist's vision.”
You can put my father on the (nonexistent) waiting list, but he can pay his way out of purgatory. And at least he cares about the renters (well, he pays mine).
$$$

Big League Chew was introduced in 1980. It was created by Portland Mavericks south-paw pitcher Rob Nelson, and pitched to the Wrigley Company by former New York Yankee All-Star Jim Bouton, a once teammate of Nelson's, as the soft, safe, endorsable alternative to the tobacco-chewing habit common among ballplayers in the 1970's. Chosen by professional players, it was that familiar pink of conventional bubble-gum, shredded, and packaged in a flashy aluminum pouch with caricatures of players who look like they did not give up the dip. Camel without the cancer—clearly a hit with the youngsters.

So If Art:Reality::Big League Chew®:Dip,
Then Auction Houses:Dealers::Nicorette®:Hypnosis—and Saatchi is Steinbrenner.

Under his ownership, the longest in Yankee history, the club has won 10 pennants and 6 World Series titles. His outspokenness and role in driving up player salaries have made him one of the sport's most controversial figures, though his willingness to spend to build the club (and its post-season success since 1976) have earned him grudging respect from some baseball executives, while at the same time earning him the contempt from some non-Yankee fans.
—Hirst is Berra
G AB R H 2B 3B HR RBI SB BB SO BA OBP SLG TB SH HBP
2,120 7,555 1,175 2,150 321 49 358 1,430 33 704 414 .285 .348 .482 3,643 9 52

"If people don't want to come out to the ballpark, nobody's going to stop them."
11995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007*
$417$129,000$159,150$2,209,394$3,024,005$3,536,048$2,238,581$2,164,741$4,955,514$26,779,583$10,138,658$18,300,358$48,654,800

“Art is the most fabulous currency.”


If it is a Red line you are looking for, good luck. In the art market, it is no longer us vs. them, but, as UBS reminds ArtForum readers: “You & Us”. Viscous cycle, or déjà vu all over again: art or malapropism, decide for yourself. It’s all speculation. It may feel like cricket, but extra innings can’t last forever. Aerosmith said it best in their 1997 single “Pink” from the album Nine Lives: Pink, it’s like red but not quite
And I think everything is going to be all right no matter what we do tonight.