booming art market

The following article is on the issue of booming art market and how the art collectors and savvy entrepreneurs react to it.

With record Sotheby's sale, art market keeps booming
Collectors dropped a historic $362 million at Sotheby's evening contemporary art auction this week - a sign that for dealers and gallery owners, good times are still rolling.
By Herman Wong
May 16, 2008: 6:22 PM EDT

http://money.cnn.com/2008/05/16/smbusiness/art_sales_record.fsb/index.htm

http://money.cnn.com/2008/04/15/smbusiness/singing_in_rain_art.fsb/index.htm?postversion=2008041609


(FORTUNE Small Business) -- The sky may be falling on the economy, but the art market is flying high.

Sotheby's spring contemporary art auction on Wednesday evening was the most lucrative auction in the company's history, blowing past the high end of Sotheby's estimate with sales totaling $362 million, including a record $86.3 million for a 1976 Francis Bacon triptych that had been expected to sell for about $16 million less.

Such extravagant consumption is an optimistic sign for art dealers.

Change in targeting consumers groups from mainly U.S. and Japan in late-80’s to China, the Middle East, and Russia which field wealthy collectors, all of whom enjoy the effects of weak US dollar. Focusing on the international market brings in more buyers. Another factor leads to expand of art market is because of arts fairs held overseas annually bring in new clients and high-volume sales. According to New York City gallerist Josee Bienvenu, four shows in London, Mexico City, Miami, and Basel, Switzerland have been robust and attract more art dealers and art collectors.

"The secondary art reaffirms how the art market is doing overall," said Aldo Castillo, 51, a Chicago art dealer. Sotheby's results show that art has kept its value even as times are bad, he said, with buyers likely seeing it as a better investment as the real estate and stock market suffer losses.

While the modern and contemporary art markets are prone to wide fluctuations predicated by the economy and changes in popular taste from decade to decade, one sector of the art market - ancient art or antiquities is stable. Christie’s and Sotheby’s for instance have been auctioning ancient art for well over 100 years and ancient Egyptian, Greek, and Roman art have never suffered from a sudden down turn in value. Furthermore, antiquities continue to be a veritable bargain in comparison to modern art and a much sounder investment, generally appreciating between 8% and 10% annually in value. Only recently have antiquities begun to reach the new height as a result of booming art market. Over the years one may fall out of favor in modern master but one can still purchase an Egyptian statue or a Greek vase that will never go out of style.

New York dealers - closer to the epicenter of the Wall Street meltdown - were encouraged by the record prices but struck a more cautious tone.

The good sales news is a positive turn after the collapse of investment bank Bear Stearns, which depressed some collectors' enthusiasm, says James Cohan, a New York City gallery owner.
"I would hope that it would give the modest collector confidence in the market," Cohan, 48, said.
"[The prices] seem stratospheric," Cohan said. "We're playing in numbers that are telephone numbers, and so it's sort of stops being part of our reality." Cohan, who has a diversified base of buyers that include institutions and European and Asian collectors, says he remains "cautiously optimistic" about how he'll do this year.

Josee Bienvenu, 36, of Josee Bienvenu Gallery in New York City said that the art market has grown bigger and more diverse, making it less vulnerable to the kind of crash witnessed in the late 80's and early 90's. Still, she believes that after a year of frenzied buying the market will quiet down a bit.

In the short run, increase in demand for contemporary art work causes demand curve shift upwards and increase in equilibrium price. High auctioning price leads to high profits for painters. In the long run, the lure of profits attracts new suppliers to the market. The additional suppliers expand the supply of ethanol, causing the price of art work to fall. Overproducing of artists leads to some collectors’ concern of devaluation of piecework.


"People are going to be a bit more discerning," she said.

Some art sellers simply don't understand the commotion. Seattle art dealer Greg Kucera said the New York auctions only highlight that business continues as usual. Kucera, 52, said the fascination with an impending art market crash comes from the media.

"I keep being surprised that everybody thinks this is still a big story that art is doing well," Kucera said. "I just have the sense that it's kind of the news media's attempt to predict what's going to happen, rather than report it."

Xinyi