Portraits as Art Market Currency Pt. 6 – artmarketblog.com

Portraits as Art Market Currency Pt. 6 – artmarketblog.com

As the final post in this series I want to summarise my findings, but before I do I want to reiterate the reason that I wrote this series of posts on Portraits as Art Market Currency. The catalyst for this series of posts was, and still is, the continuing saga relating to the supposed instability of some of the world’s most significant economies. Economists and journalists have been making predictions for quite some time regarding the supposedly impending crisis that range from “the extent of the crisis is being grossly exaggerated” to “it is only a matter of time before we experience a catastrophic global financial crisis”. Even though opinions relating to the extent of the crisis vary greatly, it seems that a majority of experts believe that there is at least a significant chance that there will be a series of negative events relating to the economic status of some countries in the near future. Although it is unlikely that a complete global financial meltdown will take place, hypothesising on the effects that such an event would have on value of the art market reveals extremely interesting information regarding the way fine art is valued, and the way we assign value to art objects. This information is extremely useful for investors in fine art as it highlights the importance of having a strategy, and provides indications of how that strategy should be structured.

The reason I made the comparison between portraits and currency is because the way we assign value to currency can tell us a lot about the way we assign value to fine art. For several decades there has been heated debate surrounding the way currency is valued – a debate that stems from the global change to a fiat money system from a Gold Standard. To recap , the Gold Standard “was a commitment by participating countries to fix the prices of their domestic currencies in terms of a specified amount of gold” (US Library of Economics and Liberty). The benefit of the gold standard is that currency essentially had intrinsic value because it was basically able to be exchanged for a certain amount of gold. According to gold expert Paul Nathan in an article on Kitco.com “The intrinsic theory of value holds that worth or value is contained within an object. It holds that economic goods possess value inherently, innately, despite the market, despite supply and demand, i.e., in spite of men’s values, choices, and actions”. The Fiat money system, on the other hand, is currency that a government has declared to be legal tender, despite the fact that it has no intrinsic value and is not backed by reserves. Historically, most currencies were based on physical commodities such as gold or silver, but fiat money is based solely on faith. Because fiat money is not linked to physical reserves, it risks becoming worthless due to hyperinflation. If people lose faith in a nation’s paper currency, the money will no longer hold any value.

What I found particularly interesting when researching this topic is that the art market can essentially be divided into two different markets – one market that has similarities to the Gold Standard, and another market that has similarities to the fiat money system. Just like the fiat money system, the contemporary art market relies very much on faith in the artists whose work is being bought and sold. The value of the work of contemporary artists is dictated by the galleries who sell the work with buyers basically expected to have faith in the valuation set by the gallery. Just like with fiat currency, if people lose faith in a contemporary artist then their work is severely devalued, or even rendered worthless. The market for classical figurative works of art, on the other hand, resembles the gold standard because of the intrinsic value many of these works contain due to their physical characteristics and their status as historical documents. Regardless of what happens to the art market or to the reputation of the artist in question, such classical figurative works of art (portraits in particular) will always have significant technical, historical and documentary value; just as currency backed by gold will always have value regardless of what happens to the economy of the country whose currency is backed by the gold. When it comes to art investment and wealth preservation, the security and stability of the value placed on a work of art is extremely important. Although the glamorous world of contemporary art market speculation may seem to be the most popular and most viable method of profiting from the purchase and sale of art – fine art is, by the very nature of the art market, a long term investment. In fact, the benefits of investing in art can only really be taken advantage of when a long term approach is taken.

To finish with there are three important points that I want to emphasise:

1. the long term value of a work of art is linked to a certain degree to the extent to which one can disassociate the work of art from the artist, and the extent to which one can assign value to the actual characteristics of the art object as an independent entity.

2. the value that can be placed on portraits because of their status as historical documents is the sort of future proof intrinsic value that will always remain with the portrait and cannot be disassociated from the portrait. It is this sort of intrinsic value that makes the portrait a good candidate for use as currency.

3. when it comes to art investment and wealth preservation using fine art, it is possible to take a strategic and mathematical approach that virtually guarantees success over the long term. This sort of approach requires, however, require discipline, patience and objectivity.

Part 1:
http://artmarketblog.com/2010/08/10/portraits-as-art-market-currency-pt-1-artmarketblog-com/

Part 2:
http://artmarketblog.com/2010/08/19/portraits-as-art-market-currency-pt-2-%e2%80%93-artmarketblog-com/

Part 3:
http://artmarketblog.com/2010/08/31/portraits-as-art-market-currency-pt-3-2/

Part 4:
http://artmarketblog.com/2010/09/10/portraits-as-art-market-currency-pt-4-artmarketblog-com/

Part 5:
http://artmarketblog.com/2010/09/17/portraits-as-art-market-currency-pt-5-artmarketblog-com-2/

**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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Art Market Hedge Trends – artmarketblog.com

Art Market Hedge Trends – artmarketblog.com

Although investing in fine art is considered to be a hedge more mainstream investment markets, a new trend has emerged that has seen numerous attempts to launch projects that aim to introduce alternative methods of investing in art as a hedge against the traditional method of investing in art – purchasing a work of art and taking physical ownership. One such project is the collaboration between artist Tom Saunders and art collective Idefix Bloc which with an exhibition of Saunders’ work titled SHOP + OFFICE held at murmurART gallery East London. What makes the SHOP + OFFICE exhibition so unique is that Saunders was not offering his work for sale in the traditional sense. Instead of collectors and investors purchasing physical ownership of an art object that Saunders had produced, as would normally be the case, Saunders offered potential clients the opportunity to purchase the right to buy his art in 10 years’ time for £1 for an immediately payable fee of £2000 pounds, the price that Ferguson Solicitors, the UK law firm, believes is the correct price for an “option” contract, which is essentially what Saunders is offering. Basically, you can pay £2000 now for the right to purchase any piece of the artist’s work in 10 years time for only £1. The lure for investors is the potential to earn huge profits if Saunders becomes a highly successful artist whose work sells for large sums of money, or at least significantly more than the £2000 investment. Saunders’ work could, of course, turn out to be worth less than the £2000, but that is the risk investors take. There are, however, contract provisions that cover premature death or non-production.

Over in India, another innovative art investment project has been started by an Indian entrepreneur. Indian investor Arun Rangachari, chairman of venture capital firm DAR Capital, has purchased the rights to the entire life’s work of a reclusive Italian artist by the name of Montanari, who has lived in seclusion for the past 18 years. Rangachari is building up an art collection, of which the work of Montanari will play a significant part, with the intention of setting up an art fund in the future. Before selling any of the paintings, Rangachari plans to increase the value of Montanari’s work by holding exhibitions and building a foundation dedicated to the artist’s work. According to artnewspaper.com ‘His (Rangachari’s) first art investment consists of 40 paintings by the Italian artist Americo Montanari, with the option to buy many more……..When asked why his art fund would succeed when other ventures, including Indian-based funds, had recently failed he said: “Our entry level will be affordable, we’ll be focusing on artists who have not yet built a reputation and we will have no hidden costs, everything will be up front, so we’ll be quite different from everyone else.”’

The Chinese are also getting in on the act with Chinese financial corporation Shenzhen Artvip Cultural Corporation recently going public with China’s first openly traded art portfolio. The portfolio, which comprises of 12 paintings by contemporary artist Yang Peijing, is being traded on the Shenzhen Cultural Assets and Equity Exchange (SZCAEE) in the form of 1000 shares. All 1000 shares sold out on the first day of trading for a total of US$354480 with profits from trading the works of art to be dispersed by Artvip as the works are traded. According to artinfo.com: ‘Established in 2009 by the Chinese government, SZCAEE functions as an alternative platform for the trading of a wide range of cultural assets — including artworks, luxury goods, and films — as part of the Chinese government’s attempt to commercialize, diversify, and regulate the public exchange of such cultural properties. SZCAEE plans to offer a second 1000-share portfolio, featuring 40 works by Yang Peijiang, sometime in the future.’

Interestingly, each of the above projects are focused entirely on the work of a single living artist, which is comparable to investing in a single business. The benefit of focusing on the work of a single living artist is that the future output of the artist can be controlled by a certain degree by those with a vested interest. There is also the potential for a much larger return from the work of a living artist as a result of the progression of the artist’s career. In terms of downsides, the most obvious downside of investing in the future of a living artist is the uncertainty. Whether the rewards are worth the risk is yet to be seen……..

**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

2010 Art Market Status Report – 2nd half – artmarketblog.com

2010 Art Market Status Report – 2nd half – artmarketblog.com

The art market has found its self in a rather interesting predicament.  On the one hand, confidence in the art market has increased considerably since the beginning of the year.  On the other hand, the ever increasing likelihood of a major financial crisis has seen more cautious and selective buying.  Adding to the drama is the increasingly obvious lack of top quality paintings by the Old Masters, which the market is currently showing a very healthy appetite for.

On the 13th of July an impression of Edvard Munch’s controversial work Madonna sold for an amazing £1,252,000 at Bonhams – twice its lower estimate of £500,000. This makes it the most expensive print ever sold in the UK and the second most expensive print in the world. At Bonham’s 19th Century Paintings sale held on the 22nd Apr 2010, ‘Female figure study’ , a drawing on paper by John Constable with a hidden history, sold for four times it pre-sale estimate to make £24,000. Also achieving success was an interesting  ‘Portrait of a Gentleman’ by George Dawe (British 1781-1829) which was the subject of fiercely competitive bidding and finally sold for £43,200 against a pre-sale estimate of £4,000-6,000.

At Christie’s Victorian & British Impressionist Pictures Including Drawings & Watercolours sale on the 16th of June,  Sir George Clausen’s ‘Head of a young girl (Rose Grimsdale)’ made £505,250 against an estimate of 250,000 – 350,000 setting a new world auction record for a work on paper by the artist. The same sale also saw a new record for Archibald Thorburn with yet another work on paper titled ‘Grouse in flight’ which made £217,250 against an estimate of 60,000 – 80,000

At Christie’s 23 June 2010 auction of Impressionist and Modern Art the top price was achieved by ‘Portrait of Angel Fernández de Soto’, 1903, a Blue Period masterpiece by Pablo Picasso (1881-1973), which sold for £34,761,250 against an estimate of 30,000,000 – 40,000,000.  Another portrait titled ‘Frauenbildnis (Portrait of Ria Munk III)’, one of the last great female portraits painted by Gustav Klimt (1862-1918), sold for £18,801,250 against an estimate of £14 million to £18 million.

Yet more portraits achieved high prices at Christie’s Old Masters & 19th Century Art sale held on the 9th of July at their South Kensington saleroom. Margaret Sarah Carpenter’s ‘Portrait of a young girl’, who is thought to be Henrietta Carpenter, reached £32,450 against an estimate of 7,000-10,000 and achieved a new world record price for the artist at auction. A work from the Studio of Sir Peter Lely titled ‘Portrait of King Charles II’ also fetched £32,450 against an estimate of 6,000-8,000.

Over at Sotheby’s the ‘An Exceptional Eye: A Private British Collection’ sale held on the 14th of July saw a watercolour over pencil by John Robert Cozens titled ‘The Lake of Albano and Castel Gandolfo’ reach £2,393,250 against an estimate of 500,000 ‐ 700,000 –  the top price of the sale and a new record for the artist at auction.  The portrait miniatures performed particularly well with the Sotheby’s press release stating that “a very high price achieved for an early work by John Smart (lot 17, £56,450), and a record for a work by Bernard Lens (lot 10, Portrait of King Charles I, sold for £58,850)”

At Sotheby’s Impressionist & Modern Art Evening Sale held on the 22nd of June, the top price paid was again for a portrait.  Edouard Manet’s ‘Portrait de Manet par lui-même, en buste (Manet à la palette)’ fetched £22,441,250 against an estimate of £20,000,000-30,000,000 –  a record for the artist at auction. The top-selling lot of the June Russian Paintings Day Sale was Boris Grigoriev’s oil on canvas Portrait of the artist’s son, Kirill, which sold for the sum of £253,250, above its high estimate of £200,000.  Another portrait, Alexander Evgenievich Yakovlev’s ‘Titi and Naranghe, Daughters of Chief Eki Bondo’, took top spot at the 7 June Important Russian Art Sale selling for £2,505,250 – more than triple the £700,000 – 900,000 estimate .  Sotheby’s sale of the long-lost art trove of Ambroise Vollard saw more records set for works on paper held in Paris on the 29th of June. According to the Sotheby’s press release from the sale: “Key works among the highlights of the group were an extremely fine impression of Picasso’s celebrated 1904 etching ‘Le Repas frugal’ (another portrait), which more than doubled its high estimate of €300,000 to bring €720,750 (£584,078), the highest price of the sale. A monotype by Edgar Degas, ‘La Fête de la patronne’, circa 1878-79 soared past pre-sale estimates (€200,000-300,000) to bring €516,750. Paul Gauguin’s ‘Trois Têtes Tahitiennes ‘sold for €312,750 (£253,445) well above the estimate of €100,000 to €150,000 and a record was set for a print by Pierre-Auguste Renoir when ‘Le Chapeau Epinglé, Deuxième Planche’ more than tripled its high estimate of €80,000 to bring €252,750 (£204,822). Man Ray’s ‘Autoportrait solarié’ fetched €168,750 ($206,138)”

On the 2nd of June at Sotheby’s in London, in the sale of 19th Century European Paintings, one of the finest figure paintings by Jean-Baptiste-Camille Corot ever to have appeared on the market was purchased by the Musée d’Art et d’Histoire in Geneva for £1,609,250, exceeding its pre-sale high estimate of £1.2 million.  According to Sotheby’s “‘Jeune femme à la fontaine’ enjoyed an exceptional early provenance before it was requisitioned during the Nazi period, and was recently restituted to the heirs of its erstwhile owners.”

The results that I have highlighted above give a good indication of the current market sentiment and the market trends that are likely to define the market for the near future.  To start with, the popularity of portraits is a major indication that buyers are seeking the safety of the academic and the scholarly.  With portraits in particular, the level of skill and talent of the artist is pretty much immediately obvious to even the most untrained eye. When it comes to fine art, and portraits in particular, I do not think that people use the term craftsmanship to describe the work carried out by some artists.  To accurately portray the physical attributes and the personality of the sitter is, in my opinion, a craft that requires skill, training and a healthy dose of talent.  When one adds the historical value and importance of portraiture, the appeal of a famous (or not so famous) face from history to an investor becomes even more apparent.

I have spoken about the concept of fine art as a form of currency in previous posts.  If ever there was a type of art that was more suited to being used as a form of currency, it would have to be portraiture.   The number of common features that most portraits share, combined with the ease with which one can judge and value a portrait based on intrinsic and extrinsic characteristics, makes the portrait a prime candidate for an art world currency.  As I have said before, scholarship is the key to successful art investment, and successful wealth preservation using art for that matter.  Portraits are usually afforded the honour of in depth scrutiny and attention by scholars and academics because of the information that portraits can provide about various branches of history.  For this reason, among others, portraits are given the sort of long term continued attention that constantly adds value.

The second trend that I have alluded to is a greater interest in works on paper – in particular original drawings and watercolours.  I personally of the opinion that the increased popularity of watercolour paintings, particularly those by British artists, is due to the greater interest in the art of the Victorian era which was the golden age of British watercolour painting. Although original works on paper, such as drawings and watercolours, are often looked upon as the less valuable mediums in the scheme of things, the tide can change very quickly as it has recently.  As well as the revival of interest in Victorian art, a shortage of major works by the Old Masters and the Impressionists has driven buyers to seek the qualities that they are looking for in other mediums and periods. An article titled ‘Young masters in an old game’ from The Guardian newspaper written by John Windsor in November 2009 sums up the situation surrounding works on paper perfectly with the following statement: “Taste is shifting from new, ill-conceived conceptual art of the Brit-pack variety – costing thousands but faltering at auction, towards old, traditional skill-based art……. but you do need to develop an eye for quality – the easy, confident line of a master draughtsman, the luminosity of a watercolourist’s washes.” It is a shame that the watercolour painting is considered the poorer cousin of the oil painting because there are so many amazing watercolours by some of the world’s greatest artists that do not receive the exposure that they deserve.

**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

Art Market Blog – Will New Online Art Auctioneer Succeed ?

Art Market Blog – Will New Online Art Auctioneer Succeed ?

gavel.gifThe online fine art sales and art price data website artnet (http://www.artnet.com) has just announced that it will be introducing an online auction service due to start on the 25th of February. According to a press release by artnet “The expensive modus operandi of conventional galleries and auction houses is the reason for high transaction costs which are impairing the liquidity and growth of the art market. artnet’s alternative auction platform is designed to solve this problem”. The problem is that several other companies have attempted to solve this problem and have failed. In 1998 Sotheby’s entered the online auction market but after spending 100 million dollars on the venture it was deemed to have not been a success and was subsequently shut down. Christies also looked into taking a slice of the online art auction pie shortly after Sotheby’s but pulled the plug on their plans after considering the massive cost of startup, the legal liabilities and the fact that Sotheby’s got in first. Turns our Chritisie’s made the right decision.

Even more startling is the fact Artnet have already attempted to launch an online auction site without success. At the time Artnet.com CEO and founder Hans Neundorf said in a statement about the closure of the Artnet.com online auction service that “I remain still an enthusiastic supporter of online art auctions but our Gallery Network has clearly been the more successful service to the art community. This move puts the company on a speedier path to profitability.” It is true that the art market has enlarged considerably since Artnet made their initial online auction attempt but there are also a number of players in the online art auction market that I would have thought had already taken much of the new business.

People who are to purchase big ticket artworks are unlikely to want to take the risk of making a purchase without having been able to thoroughly examine the work in the flesh and those looking to purchase lower priced items already have several established online auctioneers to go to. In order to be successful Artnet will have to offer something that the other online auctioneers don’t, and it will have to be something that is significant enough to lure buyers and sellers away from the traditional auction houses and the other online art auction services. Artnet have emphasised that they are saving costs which they are passing on to the buyers and sellers by not having to physically handle the artwork but have also made the point that a team of experts will be overseeing the quality and authenticity of the artworks. What I cannot figure out is how these experts will be able to ensure quality and authenticity if they are not going to be able to physically inspect each work so I hope that Artnet has it figured out.

I am in no way saying that this venture by artnet is doomed to fail, in fact I really hope that it doesn’t, but there are certain realities that need to be taken into consideration. The first auction for Artnet’s new venture will start on the 25th of February and will include some fantastic affordable works and potential bargains (no buyers premium) by the likes of Warhol, Miro, Sherman, Sera and many others. Artnet online auctions can be found at http://www.artnetonlineauctions.com

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

Art Market Blog – My Two Year Old Did That, Really !!

Art Market Blog – My Two Year Old Did That, Really !!

linsky.jpgEvery year the best works of art from the New South Wales HSC (Higher School Certificate) visual arts exit exam are exhibited at various locations. According to the ArtExpress website, ArtExpress is a cutting-edge, stylish series of contemporary exhibitions of outstanding artworks created by NSW Higher School Certificate (HSC) Visual Arts students from both metropolitan and regional New South Wales, Australia. I think that ArtExpress is a fantastic concept that has produced some interesting artworks over the years and has no doubt encouraged plenty of young artists to follow a career in the visual arts.

An recent article in a local paper about the ArtExpress show commented that the artworks in the show were so good that you wouldn’t even know that they had been produced by students. I am by no means suggesting that the artworks that these students have produced are not of a high standard but to suggest that they are equal to the work being produced by professional artists is a both naive and silly for the reason that in the contemporary art world an artwork is judged on way more than the physicality of the artwork. One of the biggest problems with the contemporary art market is that because the actual physical representation has become less important and the concept more important it is becoming harder and harder to actually determine whether an artwork is a good investment.

Take for instance the two year old toddler whose paintings, which included works created using tomato ketchup while sitting in a highchair, and profile were put on the Saatchi gallery website by his mother minus the details of his age. Amazingly enough, an art collector and artist from Manchester in the UK purchased one of the toddler’s works for 20 pounds. Even more incredibly a Berlin gallery emailed the artist saying they were having an exhibition and thought Freddie’s work was of a high standard and would like him to participate.

What does this tell us about the contemporary art market, well, that one needs to be aware of the factors that determine the desirability and profit potential for an artwork and make sure that you know everything about the artist and their work before investing in an artwork or you might get fooled into buying the work of two year old.

Image Above – Sunrise by Freddie Linsky

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