You might
think that an economic recession
would be bad news for art
collectors. With wages sinking
and savings evaporating, you
might think art lovers would
have difficulty expanding their
collections.
Not
necessarily. A
piece from
The Wall Street Journal
last week explained that the
failure of a number of large
banks may put their corporate
art collections back on the
market on the cheap:
Companies in trouble sell
whatever can raise them money,
and art collections are but one
more asset. Arthur Andersen, the
accounting firm brought down by
the Enron scandal, for instance,
turned two floors of its Chicago
offices into a gallery showroom
in 2002, selling more than 2,000
art works over a five-day
period. In 2006, the New York
futures broker Refco Inc., which
filed for bankruptcy protection
the previous year while under
investigation for hiding $430
million in debt, sold 321
photographs for $9.7 million at
Christie’s auction house over a
three-day period.
And
today a Dutch painter named
Norbertus
announced that he’s pegging his
prices to the Dow Jones
industrial average. From the
press release:
Using
the Dow’s level of 10,000 as a
benchmark, Norbertus will
discount prices for his work
when the market goes below
10,000 and increase prices when
it goes above 10,000. At a Dow
level of 8,500, purchasers will
receive a 15% discount on his
paintings.
Why would he do this? Norbertus
is confident the ride below
10,000 will not last and hopes
to send a positive message, “I
wholeheartedly believe in the
recovery and future of the
financial markets.” He is
convinced the current crisis
originates simply out of
sentiment, “The market will turn
around as it always has, hence,
my willingness to tie my pricing
to the Dow Jones.”
Of
course, in times of economic
downturn, one would expect the
prices of nonessential purchases
like cultural goods to fall.
(Which may explain why
Sotheby’s
stock price
has fallen 72.6 percent over the
last year.) But tying your
prices to the Dow may be just
the right gimmick to attract
collectors who are cash-strapped
by the liquidity crisis.
Note,
of course, that all these things
are good for art lovers — and
not necessarily for art
investors. I’ve seen a couple of
stories recently that quote
people who say works of art may
be a safer place to invest one’s
savings than the stock market or
even
Treasury bonds.
But as the George Mason
University economist
Tyler
Cowen wrote
in an aside in today’s Times,
the market for contemporary art
assets may soon “plummet.”
A recent
article in The Times of London
also quoted an art insurance and
valuation expert implying that
art works should be purchased
for their aesthetic, rather than
their economic, value: “There is
an urban myth that fine art and
antiques are recession-proof.
This is wrong. This market lags
behind the economic cycle by
around a year to 18 months. So
people should not rely on it.”
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