Awesome Auctions: What Does It All Mean?

This is the moment when art-market observers are called upon to tell the astonished public how to regard seemingly extravagant expenditures for paint on canvas.

We hear such insights as: "Art is worth what people are willing to pay for it." "There are lots of very wealthy people who want art." And that favorite question of party-pooping pundits: "When is the bubble going to burst?"

The best take on the past two weeks that I've seen thus far comes from veteran art writer Martin Gayford in today's Bloomberg, who opines:

Has the art world gone crazy?

There is, inevitably, the shock expressed by those who feel that the crudity of finance sullies the purity of art....The appropriate response to such concerns is phooey.

To which I would only add that while the shocked response of the general public over the excesses of the super-rich is a time-honored tradition, there IS something new about the current bull market in art---that it's continued so strong for so long.

Just about every veteran art-market observer (myself, to my profound embarrassment, included) has been predicting for quite some time that the "bubble" was about to burst.

The question we now must ponder is whether there is a real sea change in the art market: Will there always be enough masterpiece-minded money around, somewhere in the world, to support prices at current or higher levels?

I'll have to leave that question to the economists. What I do know is that if a correction does come, the auction-house specialists had better be prescient in anticipating it. Price guarantees and other forms of leverage work to the houses' advantage in a bull market, which is why all the hand-wringing in the press about the risks they took this season proved to be hogwash.

But if the market heads south, the bull market-driven presale estimates and the financial risks of loans and guarantees suddenly become very dangerous. We've seen this happen before. It's always tempting to believe that the good times will roll forever. That belief has always proven wrong.

The auction-house experts had better have their ears to the ground and their hands ready to pull the emergency brake.