Fall Art Sales: The E-Word

Is it the economy, stupid?

If so, these excerpts from Scott Patterson's "Economic Jitters Sap Stocks," posted just minutes ago on the Wall Street Journal's website (to which I am not permitted to link), should give pause to those predicting record-breaking results for the next two weeks of major Impressionist, modern and contemporary auctions at Sotheby's and Christie's:

The string of weak economic reports continued again Thursday [today], knocking stocks lower and dragging the Dow Jones Industrial Average below the 12000 level.....

Weak productivity is bad news for stocks, since it means corporate profit margins could get squeezed....On top of the productivity report, retailers appear to have had a lackluster month in October. According to results tracked by Thomson Financial, nearly 60% of the 43 companies that have reported same-store-sales results for last month have missed expectations.

And let's not even talk about the full-blown slump in the real estate market.

Sure, there's still lots of money around, as todays articles in both Bloomberg and the NY Times suggest. But even hedge funds are not as heady as they used to be, and discretionary, high-ticket art purchases are hypersensitive to "economic jitters."

I was reminded of the delicate psychology of art buying by this passage from Lindsay Pollock's new biography, "The Girl with the Gallery," about pioneering dealer Edith Halpert's efforts to persuade Abby Aldrich Rockefeller to keep buying after the stock market crash of 1929:

Mrs. Rockefeller...was not in a mood to spend. With the spiking unemployment rate and shantytowns springing up around New York, there was something unseemly about dropping money on art. Unmoved by Edith's urgent plea, Mrs. Rockefeller wrote back that she already owned similar works and was making a sincere effort to stay within her budget.

Today's situation is far from a Great Depression, but the mentality of economically uncertain times may already be upon us. This month's major art sales, in which many works recently on the market are returning to market, has an aura of last-chance profit taking. And the high number of works being sold with guarantees (undisclosed amounts that the auction house promises to pay the seller, whether or not the bidding actually attains that level) suggests that sellers are getting nervous that prices may be heading south: Feeling a strong need for protection on the downside, they are willing to forfeit a large chunk of any excess amount, above the guarantee, that may be fetched by the work if the bidding is strong.

COMING SOON: More on guarantees.