Manipulated Art Auction Results Affect Perception of Art Market- artmarketblog.com

Manipulated Art Auction Results Affect Perception of Art Market- artmarketblog.com

Why is it that we continue to use auction results as an indicator of the health of the art market when they are obviously not an accurate representation of the health of the art market and do not reflect the sentiment and actions of buyers and sellers who are making transactions via fairs, galleries or brokers. At the moment sellers are abandoning the auction houses because they don’t want to risk having their works not sell or sell for below the estimate. Either of these two scenarios would be obviously detrimental to people’s perception of the value of the a particular work especially if the work was valuable enough to warrant media reports on the auction result. If sellers are making alternative arrangements to sell their work then there will obviously be a negative effect on the art auction industry yet no-one seems to be taking this into account when reporting on auction results.

If auction results were to be used as an indicator of the state of the art market then wouldn’t the reserves and estimates have to remain the same as they were prior to the financial crisis taking hold because by lowering the estimates and reserves the auction houses are manipulating people’s perception of the auction results by using what is effectively a tactic employed by the auction houses to lure bidders. Guaranteed prices for sellers and irrevocable bids for buyers also skew the results which means that works with either a price guarantee or an irrevocable bid should not be included in results used to determine the status of the art market. In a nutshell, there are so many ways that auction houses can manipulate auction results and market sentiment that auction results can never be taken at face value.

Most people seem to believe that if someone is willing to pay $50 million for a Picasso painting that had an estimate of $40 million that the art market is going strong yet if that Picasso painting fails to sell or only sells for $30 million then all of a sudden it’s all doom and gloom. What if the person who would normally have been more than willing to spend $50 million on the Picasso decided to spend his money on ten works worth $5 million instead?. What if the person who was going to buy the Picasso instead went to a gallery and bought another Picasso for $50 million? . Just because an expensive and highly desirable work of art fails to meet expectations doesn’t mean that the money isn’t being spent on art just that it isn’t being spent on that particular work of art. Just because only 60% of the lots at an art auction are sold or only 60% of lots are sold by value doesn’t mean that the money isn’t being spent elsewhere at fairs or galleries.

Renoir might have said that “There’s only one indicator for telling the value of paintings, and that is the saleroom” but in today’s market where manipulation of prices and sentiment is rife the saleroom is not the only indicator for telling the value of paintings. The only true indicator of the health of the art market is the amount of money that people are spending on art regardless of what it is or where it was purchased.

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications.

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10 Responses

  1. The oppurtunitiy is to include the sales records made by artists, galleries, dealers, brokers and collectors in the data bases that list the auction houses results.

  2. Ah Nicholas

    I love your letter! I love your youth and enthusiasm for what is essentially a corrupted marketplace! It is not only the art auction rooms that reflect the current state of the marketplace but also the stock market, antique sales and residential markets.

    During my life as an artist (first love and continual thread of my life), but also as an economic development consultant to government (had to do this as well to keep bread on the table for family)….. ah yes, a short 40 troubled yars based around money and art…….I have come to realise that the most true words that were ever given to me were by a dealer…….

    He said “A thing is only worth what the buyer is willing to pay on the day!” It has taken me another 20 years to understand the full implications of that statement.

    Perception is indeed a powerful motivator and if Damien Hirst can get a buyer to perceive that his ‘dead cow’ is worth $22 million, then on that day and for that moment, it is worth it! That is the art of Damien Hirst! Not the cow, but the ability to make a market believe!

    Graziers if confronted with a dead cow, even with formaldehyde and golden hoofs, would find the idea ludicrous! Do you know how many cows farmers have to burn and bury in their paddocks daily across the world? But their not artists so the perception is that their dead cows are worthless!

    And does it matter? Well yes, indeed it does, really….. we now live in times where commonsense has been replaced by greed! where investment has been replaced by speculation! Where celebration of the ordinary is heralded as a great thing and anything that has taken time, patience and learning is derided as ‘old fashioned’!

    The auction rooms are full of not ‘art lovers’ but speculators! Oh I am sure that there are one or two genuine art lovers in the room, but for the most it is people who just want to make a quick buck! Dealers, gallerists, investors, artists themselves pushing the prices……..the art sold is often not of a high quality but is of sufficient value to look OK.

    I put gallerists there as well as I have found some there buying to put on their gallery walls at a higher price.

    What to do? Ah that is the question for a young man like you?

    and thank you for the time, energy and love you divest in thinking about the problem……may you find a solution……

    Joy

  3. Hi Joy,

    Thanks for the comment. I totally agree with everything that you have said especially the bit about the auction rooms being full or art speculator as opposed to art lovers. Unfortunately so true…

    Nick

  4. Your observations have some merit – or would have, in normal times. These are NOT normal times, meaning the price (not the value) of all assets are tumbling: stocks, bonds, oil, gold, wheat, timber, houses, commercial property, Yankee baseballs. It’s called “disinflation” at current levels, a shuffle and stumble away from “depression.”

    Let us recall that all prices, as well as values, are arbitrarily assigned, regardless of whether we’re discussing sugar, pez dispensers or fine art. Value is not inherent in anything. The collective determines value and translates it through pricing when a thing is exchanged for money or rent or a side of deer. Isn’t life wonderfully simple when you make it so?

    The “health” of a market (of stocks, houses, paintings by Monet) can be gauged temporarily, fleetingly, by observing the MOST RECENT TRADE. For example, when the NY Stock Exchange opens with GE trading a buck lower than the previous day, that is it’s current price for all GE shares, determined by as few as two participants trading one share. All the millions of individuals and institutions who also own GE don’t have to do a thing, and the price (again, perhaps not the underlying business value) of THEIR GE stock has fallen. Same with art at auction.

    Sure, maybe some people are swapping Renoirs and Fra Angelicos for pieces of eight in the back of flea market tents in South Jersey, but it’s doubtful serious collectors or museums would call that a sign of a healthy market.

    And, yes, probably all markets are jiggered somehow at some point, so buyer beware!”

    Keep going! You’re getting close!

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