Archive for the ‘Hedge funds and art market’ Category

The International Art Markets

September 25, 2008

The publishers of The International Art Markets: The essential guide for collectors and investors kindly sent me a copy to read and review.  It has obviously taken me forever to do this because this book covers the markets in Sub-Saharan Africa, Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile, China, Czech Republic, Denmark, Iceland, Finland, France Germany, Greece, India, Indonesia, Ireland, Israel, Italy, Japan, Malaysia, Mexico, Middles East, North Africa, The Netherlands, New Zealand, Norway, The Philippines, Poland, Portugal, Russia, Singapore, South Africa, South Korea, North Korea (just kidding), Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, USA and Venezuela.  I guess since I already spent 70k at Sotheby’s Institute learning about all of this, I was the right person to ask

Edited by James Goodwin, with contributions by some of my old grad school professors and other associates, I have to admit that I was a little nervous to read and then publicly review. Especially since the chapters on the markets in Sub-Sahara Africa and Portugal are each twice as long as the one on the American market. And because the book cost $100 and there are advertisements for a diamond company on the first page … but I was pleasantly surprised, who knew the market in the Czech Republic was so interesting?

Each week I will write on a country above, starting tomorrow with Sub-Sahara Africa…


Pigeonholing the Player

January 30, 2008

On January 28th, Artprice.com, a pretty reliable, yet clunky price database primarily used for European artists, has devised a way to measure the art “Players’ confidence” with their new Art Market Confidence Index (AMCI), live.

What’s become one of my favorite things is when a group or individual attempts to use an assessment created for financial services to gauge the art market. There are characteristics intrinsic to the art market which make this impossible (quickly: information asymmetry, absence of mark-to-market prices, no price standardization or transparency, costs, conflicts of interest, the fact that the art market is the largest unregulated money market, etc…).

So back to AMCI. All you have to do is go to their website and answer these 4 simple questions:

According to you, would now be the appropriate time to buy art works?

YES

NO

INDIFFERENT

Is your financial situation better or worse than it was 3 months ago?

BETTER

WORSE

STABLE

In the next 3 months, will you expect the economic climate to be:

FAVORABLE

UNFAVORABLE

IDENTICAL

What do you expect art prices will be in the next 3 months:

RISE

FALL

STABLE

You are then taken to this screen (link takes you into my account so you don’t have to share your info with ArtPrice or use LAUREN@IRVINECONTEMPORARY.COM and password – LAUREN) to see the live graph.

Looks like the Consumer Confidence Index doesn’t it? Generalized, and vague – self-fulling rather than foretelling. This indicator is not revealing. I just hope it will not influence behavior.

(confidence has decreased from -5.8 to -8.6 in the time it took me to write this)

Hirst – the unwise investor

September 2, 2007

Rob Cox from the Dow Market Watch presents a new way to look at the skull

The skull cost $24m to create (in raw materials) – that was probably split with his dealer and assembled with the help of Bond Street jewellers Bentley & Skinner. Thus, the price paid represents just four times the cost of production.

Assume that Hirst split the $100 million with the White Cube Gallery or his dealer, Jay Jopling (who financed 1/2 the cost of the materials)

That leaves Hirst with $13 million after deducting his original investment.

“But if the art market is really turning, perhaps Hirst should go back to the sharks. The up-front investment is a lot lower” (Rob Cox).

Someone Bought It!

August 30, 2007

and randomly MSN reports on it: http://www.msnbc.msn.com/id/20517869/?GT1=10252

An investment group? Couldn’t be Philip Hoffman of The Fine Art Fund in London – they know better. Maybe it’s that British trader Chris Carlson who has become known for his cheeky quotes, “I love the fact that the art market is unregulated – it’s a nice change from the other markets I’ve worked in” (The Art Newspaper, July/Aug. p. 48).

(I mean we all think this in the private sector, but who actually goes on record with that, he even has worse ones – - – “unregulation” means our clients are “unprotected”)

But Carlson’s self-proclaimed “first hedge fund for art”, The Art Trading Fund, is only worth $50 million, so they couldn’t even afford it.

The Art Newspaper also reports that the £50m ($100m) price was dropped to £38m ($76m), which of course Hirst’s agent denies…

And there is also huge speculation that Americans bought it !?

Blame it on the Hedge Funders

August 7, 2007

Those of you who read the article, Liquid Skies, written by Charlie Finch published this week on Artnet News may feel a little anxious about your recent and future purchases.

Readers – Stay calm. The world isn’t going to end, not even the contemporary art world, but Charlie Finch is right – the art market has been over-inflated by players who aren’t realizing the distortions they are creating by their high volume manipulations, I mean transactions… but, those dealing in the alpha market (think Warhol and Hirst) are the most vulnerable.

In the beginning of the piece, Finch compares the characteristics of hedge funds to the art market and investing in fine art – high fees, information opacity, low regulation, long hold periods, and difficult/slow turnover – basically high risk, and possible high reward.

In response to Finch’s comments regarding German and British banks – Yes, the subprime market (the subprime market serves borrowers who have poor or no credit histories or limited incomes and can’t meet the credit standards to get loans in the prime market) has destabilized their banks – but according to a British statistician friend of mine who I sent a panicked email to – they’ll survive.

Everyone knows that an increase in leveraging, in any sector, equals a less stable marketplace. So one could argue that, looking back, this is a good example of what happens when risk advisors don’t estimate all the variables involved – a small increase in interest rates was enough to seriously refute their assumptions.

Although I agree with Finch, Collectors – don’t panic Please don’t look with disdain at the contemporary art on your walls, just start learning to appreciate the psychic benefits and enjoyment of owning it… instead of fantasizing about its resale value.

In some ways, the skull is still for “re-sale”

August 5, 2007

Another interesting twist on “the investment group” that bought the Hirst skull – Hirst is a member



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