Swiss Freeports Are Home for a Growing Treasury of Art
Discussing the boom in world-wide "freeport" construction, the article serves up an interesting statistical tidbit (emphasis mine):
THIS construction boomlet is a novel way to gauge the art market’s strikingly swift recovery from a precipitous fall in 2008, when sales at auctions, the industry bellwether, shrank in the aftermath of the Great Recession. Global sales in 2011, both at auction and in private deals, were estimated at $64.1 billion, according to Clare McAndrew, an art economist, That total is just shy of the record high of $65.8 billion set in 2007 — and well ahead of the 2009 trough of $39.4 billion.
Note there was a 40% decrease from the highs of 2007 to the lows of 2009.
At the high end, some works are fetching prices that far exceed the heights of five years ago, when the phrase “art market bubble” was commonplace. In June, Christie’s sold a 1981 painting by Jean-Michel Basquiat for $20.1 million, a record for the artist at auction and a figure that far surpassed the $14.6 million it sold for five years ago at Sotheby’s. The same month, “Blue Star,” by Joan Miró, sold at Sotheby’s for close to $37 million, more than double the sum it earned at auction in Paris in 2007.
There should be anxieties when art-world bullishness exceeds the 2007 peak even though none of the world's major stock indices are close to new highs, thus sending a giant sell signal for speculation.
In record time, the art market decline of 2009 has given way to new anxieties about overinflated prices. (“How long can the art market walk on water?” read a headline in a July-August issue of The Art Newspaper.) A major reason, Ms. McAndrew says, is the arrival of Chinese buyers in large numbers, as well as buyers from Russia and the Middle East. Then there is the newfound sense among collectors worldwide that art is a smart commodity to buy in the midst of economic turmoil.
“People have realized that art is a safe haven asset when other markets are doing poorly,” Ms. McAndrew says. “In general, art holds its value over time, and in some cases it increases.”
Ms. McAndrew would do well to note that a 40% decrease in global art sales does not support her statements.
Private deals at the lower end of the market are booming, too. Only three years ago, says Wendy Goldsmith, director of Goldsmith Art Advisory in London, “we’d sit there staring at our phones, willing them to ring.” Now, she describes a conversation with an artist who is “not museum quality,” with eight pieces of newly produced art and a waiting list of 81 people. (“What do you suggest I do?” the artist asked Ms. Goldsmith, a little desperately.)
The lines for the marquee contemporary names are even longer.
“I bought a Gursky for a client,” Ms. Goldsmith says, referring to Andreas Gursky, whose stunning, large-scale photographs come with stunning, large-scale price tags. “I had to write Gursky a letter about my client’s collection. I had to explain why my client wanted this photograph so much. And this piece cost over $1 million. It was like pledging your first born.”
“The machinations are fascinating,” she adds. “They’re also spiraling out of control.”
Spiraling out of control is the article's most salient message. So it was even more fun to turn the page and find:
The Long-Term Argument for Dow 20,000
Here's the gist from a new position paper by Seth J. Masters, chief investment officer of Bernstein Global Wealth Management, and presented by Times writer Jeff Sommer:
Over 10-year periods since 1900, stocks have outperformed bonds 75 percent of the time, according to Bernstein’s calculations. But today, bond prices are relatively low — their yields, which move in the opposite direction, are extraordinarily low — and stock prices are relatively high. So the firm sees the chance of stocks beating bonds over the next 10 years at 88 percent.
The most amazing thing about the article is right here:
This article has been revised to reflect the following correction:
Correction: July 22, 2012
An earlier version of this article said inaccurately that today’s bond prices are relatively high, rather than low.
In other words, the article, as written, was correct, and the correction is wrong. Bond prices are very high. Yields are very low.
Regardless of whether Mr. Sommer understands bonds or not, Masters' and Bernstein's entire argument is that since stocks have outperformed bonds 75 percent of the time, the chances of stocks beating bonds over the next 10 years is . . . 88 percent. Wow. Then, by projecting an 8 percent median annual return for a diversified portfolio of global and domestic stocks over the next 10 years versus 2 percent for 10-year Treasuries, Masters, through the magic of extrapolation, bravely predicts “the Dow could hit 20,000 in five to 10 years.
Lastly, a friend forwarded an email to me from Bergdorf Goodman promoting footwear. Oh My God. Fashion's socionomic overtones keep getting better and better. I can't wait for the September issue of Vogue to hit the stands.
For example, check out this line that was at the bottom of the email:
NO FEAR OF HEIGHTS
This is just what I want to see and hear at this juncture: bulls with no fear in a multi-year bear market rally as they reach for the glory of former highs. Take a good look at those shoes. The bear is about to show its teeth and its claws.
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