Christie’s sets global record with $495m contemporary art sale
In his 1985 report, “Popular Culture and the Stock Market,“ Robert Prechter commented on art this way:
Popular art, fashion and mores are a reflection of the dominant public mood. Because the stock market changes direction in step with these expressions of mood, it is probably another coincident register of the dominant public mood and changes in it.
This is why I pay attention to headlines announcing record art sales. Art is just another aspect of social mood, and is subject to the same extremes. Note the following:
Brett Gorvy, the auctioneer's chairman, said the evening’s sale was “the highest total in auction history”.
“The remarkable bidding and record prices set reflect a new era in the art market, wherein seasoned collectors and new bidders compete at the highest level within a global market,” he added.
Notice that Mr. Gorvy says that record prices "reflect a new era in the art market." Socionomically, record prices merely reflect a new extreme in social mood.
The article goes on to note that "the sale attracted intense bidding at a time when cash-rich individuals are opting to pour money into art." Yet it's also a time when governments are confiscating cash from cash-rich bank accounts.
Study this paragraph carefully:
Long-term returns, particularly at the high end of the market, continue to perform well relative to many other asset classes, which is driving up prices. According to Knight Frank’s Wealth Report 2013, art has seen a 92 per cent increase in value over the past five years and a 199 per cent increase over ten years.
The Federal Reserve has fought a near constant battle against credit deleveraging since 1998. That the art market has been a primary beneficiary of this is far more about a temporary hedge against money debasement than a permanent store of value.
This misguided value perception will flip when social mood turns negative and the dash for cash begins. "Priceless" works of art will be sold for whatever cash they can muster before they truly do become priceless.
“No one knows if we have reached a peak or if these prices are just going to keep going higher. They were quite astounding, really eye-popping numbers,” said Dorsey Waxter, president of the Art Dealers Association of America, who attended the sale.
“There were works on paper that were considered just as valuable as those on canvas, which has never been the case,” she added.
This reminds me of penny stocks in 1999.
The FT also noted that "demand for high-end art has increasingly been driven by investors from Asia and other emerging markets looking to acquire trophy works."
Probably very true. Sadly, America's largest export, compliments of the Federal Reserve, is commodity and currency inflation. Argentines are so desperate to guard against their government's destruction of their pesos that they are buying BMWs. The art market is no different. Neither is Asia.
Will this record-setting art auction affect my trading decisions today? Not really. But it will get filed under "Macro mood."
Regarding the S&P, the volume shelf at 1647 still has not been hit. There is another higher one at the 1657 area. There is also a lower, wider one from roughly 1626-1632. The Aussie dollar broke down through a multi-year trend line last night. It is critical that .95799 hold if it wants to stay strong.
Asia and Europe are mostly higher. The yen is still showing buoyancy. I'm wondering if today turns out to be a range-bound sleeper.
The S&P requires more of an extension down to put the pressure on. Otherwise, there could be surprising buy pressure back to 1670.
As Dorsey Waxter said above: “No one knows if we have reached a peak or if these prices are just going to keep going higher.”