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From the NYT:

With Art, Investing in Genius
NOV. 28, 2014

By JAMES B. STEWART

$82 million only gets you Elvis, not Brando

If there were any remaining doubts that “making money is art,” as Andy Warhol famously pronounced in his 1975 book, “The Philosophy of Andy Warhol,” they were surely vanquished on Nov. 12. His silk-screen print “Triple Elvis (Ferus Type),” an image taken from a Hollywood studio publicity shot showing Elvis Presley with a gun, sold for nearly $82 million at a Christie’s auction packed with bankers, hedge fund managers and art dealers.

In just two weeks this month in New York, the auction houses Sotheby’s and Christie’s sold over $2 billion in art, a record for major New York fall auctions. …

The lofty sums stunned even longtime art market watchers. “It’s phenomenal,” said Michael Moses, a founder of the Mei Moses Fine Art Index, a widely followed measure of art prices, and a retired professor at the New York University Stern School of Business. “At the Christie’s postmodern and contemporary sale, the average compound return was 20 percent annualized. That’s amazing.”

For better or worse, fine art is now firmly planted alongside equities, bonds, commodities and real estate as an asset class. Financial terms like “compounded rates of return” have elbowed their way into the traditional vocabulary of connoisseurship even as art’s old guard has trouble with the word “sell.” (“Deacquisition” is preferred.)

This month’s record sales left some dealers and collectors talking about irrational exuberance and a potential bubble, especially in the soaring contemporary-art market. But Evan Beard, who leads Deloitte’s art and finance practice in the United States, said he didn’t agree. “If you were seeing second-rate works selling for huge values, then you’d say there’s dumb money out there,” he said. “But the works selling for these high multiples are important works that art historians have deemed innovative and have had influence. People want to own original works of genius.”

Mr. Moses said that it was hard to describe the art market as exuberant, when overall returns — about 3.5 percent annually — have barely outpaced inflation and have trailed equities and, in recent years, even fixed income.

Keep in mind that the interested parties in the art market are quite capable of concocting immense public prices for selected works via back-scratching favor banking to generate publicity. Let’s say you and I each own a lot of Jeff Koons sculptures. I own an original Jeff Koons statue of Michael Jackson and his chimp and you own an original Jeff Koons balloon poodle statue. I sell my statue to statue to you (via intermediaries) for $101 million and you sell yours to me (via intermediaries) for $103 million. Now, all the chumps out there have two documented data points proving that Jeff Koons statues are worth 9 figures, and the value of your holdings in Koons goes up.

He noted that it was contemporary and postwar works that had shown the biggest gains. “The single most surprising change in the art market is the relative increase in the value of recent art,” said David Galenson, a professor of economics at the University of Chicago who has done groundbreaking research into valuations in the art market.

While some art historians, curators and dealers bemoan the emergence of fine art as just another economic asset class, “art and money have always been joined by an umbilical cord of gold,” Professor Galenson said. “The Renaissance ideal has gone the way of the dodo bird. I say, Get over it. Steven Cohen doesn’t make any pretense of being an art history major. Maybe he’s the Andy Warhol of collectors.”

In a recent survey of art professionals by Deloitte, 76 percent said collectors viewed art, at least in part, as an investment — up from 53 percent two years ago. And 72 percent said their clients’ primary reason for buying art was related to the “social and networking scene” and the status associated with buying art, compared with 59 percent in 2012.

Given the money involved, it probably shouldn’t be surprising that bankers are treating art like any other asset class, which, in turn, is helping drive up prices and create a more liquid market. More banks are lending against art as collateral. Some are even starting to create collateralized debt obligations with art as the underlying asset — much as bankers packaged subprime mortgages before the financial crisis.

This will end well.

John Arena, senior credit executive for fine art at U.S. Trust, said the bank had a long track record in art lending and had billions outstanding in loans guaranteed by art. “Contemporary and postwar art is the driving force,” he said. “The trajectory has gotten steeper, and the loan requests have gotten much higher. In contemporary art, you’re dealing with a younger generation of collectors, who are comfortable with the economic aspects of their art. They’re leveraging it and using it to take advantage of other investment opportunities, while still being able to enjoy it and keep it on their walls.”

He said U.S. Trust would lend up to 50 percent of a work’s appraised value but that it wasn’t packaging the loans into C.D.O.s. “I’ve heard people are doing that,” he said. “But it scares me. That’s not our game.”

The soaring prices are being driven by market forces rather than any aesthetic or artistic awakening, Professor Galenson said. “Aesthetics have nothing to do with it.”

What does matter, Professor Galenson’s research suggests, is innovation by the artist. “It’s really incredibly simple,” he said. “Valuable paintings are innovative. Valuable artists are innovators. Cézanne did his most influential work at the very end of his career, Picasso at the very beginning, when he invented Cubism. Nineteen sixty-two is when Warhol started using mechanical reproductions and photography and reinvented modern art. His works from the 1960s are the very most expensive. Those from the 1980s are much less.”

Mr. Beard, of Deloitte, said he found Professor Galenson’s research persuasive. “That you saw the ‘Triple Elvis’ sell for so much has nothing to do with its aesthetic value or coolness or hipness and everything to do with the fact that historians agree that Warhol with this work influenced art history,” he said.

That was the conclusion of Tom Wolfe’s “The Painted Word” in 1975, that the real creative artists weren’t the guys holding the paintbrushes, but the critics holding the pens who explained why you were supposed to care about one guy and not about another guy.

In this respect, the auction catalog may be more important to a work’s value than the art itself. Monet’s portrait of Alice Hoschedé may be very beautiful, but its sales price of $33.8 million represents a compounded rate of return of just 5.4 percent since its last sale, according to Mr. Moses. And for Impressionist and modern works as a whole, the average was only 3.9 percent.

By comparison, consider the work of the Japanese artist Kazuo Shiraga, who died in 2008 after becoming a Buddhist monk. Mr. Shiraga is hardly a household name, and he didn’ t figure in the headlines from this month’s sales. But his “BB56” sold for $4.9 million, which represents the single best compounded rate of return — 53 percent — of any work sold this month, according to Mr. Moses’ calculations. (The work last sold at auction in 2008 for a little over $300,000.)

The description of the work from Christie’s catalog hits all of Professor Galenson’s benchmarks.

It’s innovative: “Painted directly with the artist’s feet as he suspended himself above the canvas from a rope hanging from the ceiling, the painting represents a unity of the central tenets of postwar abstraction with performance art.”

And it’s from the most influential period of the artist’s work: “Painted in 1961, ‘BB56’ dates from a highly significant time for the artist,” the catalog description says, adding that 1962 “was the year in which Shiraga was given his first solo show outside Japan, at the Galerie Stadler in Paris, where this painting was exhibited.”

That it may look, to some, like a child’s finger painting is irrelevant. “A lot of contemporary art is aggressively ugly,” Professor Galenson said. “That doesn’t matter in terms of its value.”

We live in a world of 7 billion people so there are 7,000 individuals with one-in-a-million artistic talent. There are a lot of very talented artists out there right now making a decent living selling beautiful art to millionaires.

But this Billionaire Boys Club of Art Collectors seems pretty divorced from normal aesthetic urges.

Robert Ryman, Untitled, $15.2 million. And if you get tired of hanging it on your wall, it makes a fine non-slip floor tile in your bathroom: safety first!

For example, here’s a Robert Ryman white painting that recently sold at Sotheby’s for $15 million.

Billionaires are, almost by definition, extremely good at buying and selling stuff. And they love buying low and selling high. After they’ve made their pile, buying a white painting for say $8 million and then unloading it on some other billionaire a few years later for $15 million is fun for them. And the fact that the painting could turn out to be a worthless forgery made by some Chinese guy in Queens for $400 just makes the game more exciting. Small timers can’t afford to play this game.

The more random the piece of stuff they’re competing with other billionaires over, the better. A white painting is a great test of a billionaire’s salesmanship and investorship precisely because it doesn’t have any value other than all the salesmanship that has been projected onto it over the years. It’s a blank slate! (Hey, that sounds like a pretty good sales pitch.)

So maybe that helps explain the mystery of why billionaires are so much more enthusiastic about contemporary painting these days than non-billionaires: because the paintings are just embodied metaphors for buying and selling. And billionaires love buying and selling. Buying and selling has been very very good to them.

For the rest of us, buying and selling is something we’re not all that good at, so we don’t see much appeal in playing a buying and selling game using blank slates.

Personally, I’d get more of a kick out of competition among billionaires if a few of the more sporting decided to parachute into remote Kerguelen Island in the Southern Indian Ocean armed with hunting rifles, and then have boat come along a month later to pick up the sole survivor/winner.

 
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  1. res says:

    In the back scratching scenario how does everyone deal with the resulting capital gains tax? Just a cost of doing business?

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    • Replies: @Eric Rasmusen
    One way to deal with that would be to quietly resell the works for their true, low value. Then the capital loss wipes out the capital gain. The tax people don't care whether the sales are public info or not.
    , @Roadrunner
    you use an IRS 1031 'Like Kind Exchange' which allows you to defer capital gains payment if you quickly buy something substantially equivelent to the piece you sold. It doesn't eliminate cap gains tax which you will have to pay eventually but gives you the potential to kick the can down the road, eventually into your estate, perhaps.
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  2. I sell my statue to statue to you (via intermediaries) for $101 million and you sell yours to me (via intermediaries) for $103 million. Now, all the chumps out there have two documented data points proving that Jeff Koons statues are worth 9 figures, and the value of your holdings in Koons goes up.

    What about capital gains taxes? Is that part of the reason for the “intermediaries”?

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  3. eah says:
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  4. syonredux says:

    15 million for a white canvas, eh? Call me crazy, but I would rather spend that kind of money buying real 2oth century masterpieces:

    http://en.wikipedia.org/wiki/Hotel_Lobby

    http://en.wikipedia.org/wiki/Office_in_a_Small_City

    http://www.artchive.com/artchive/H/hopper/theatre.jpg.html

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    • Replies: @Zippy
    Syon, your post inadvertently points out a problem with collecting high-value works. One of the pieces you point to is in the collection of the Indianapolis Museum of Art, a second is at the Met, and the third at MOMA.

    Since museums won't sell their works (absent serious justification), real masterpieces are in museum collections. What, you want a fourth-tier Edward Hopper? A leftover Monet? I suspect that a lot of these late 20th-century guys get bought at huge prices because, really, who is left?

    That said, I do wish billionaires had better taste, or at least bought artists who did their own work.
    , @Hacienda
    Do I get to be called boy if I say those paintings are ugly as f+ck?

    They are ugly as f+ck. But you know it's a matter of taste, right? Right?
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  5. Zippy says:
    @syonredux
    15 million for a white canvas, eh? Call me crazy, but I would rather spend that kind of money buying real 2oth century masterpieces:

    http://en.wikipedia.org/wiki/Hotel_Lobby

    http://en.wikipedia.org/wiki/Office_in_a_Small_City

    http://www.artchive.com/artchive/H/hopper/theatre.jpg.html

    Syon, your post inadvertently points out a problem with collecting high-value works. One of the pieces you point to is in the collection of the Indianapolis Museum of Art, a second is at the Met, and the third at MOMA.

    Since museums won’t sell their works (absent serious justification), real masterpieces are in museum collections. What, you want a fourth-tier Edward Hopper? A leftover Monet? I suspect that a lot of these late 20th-century guys get bought at huge prices because, really, who is left?

    That said, I do wish billionaires had better taste, or at least bought artists who did their own work.

    Read More
    • Replies: @syonredux

    Syon, your post inadvertently points out a problem with collecting high-value works. One of the pieces you point to is in the collection of the Indianapolis Museum of Art, a second is at the Met, and the third at MOMA.

    Since museums won’t sell their works (absent serious justification), real masterpieces are in museum collections. What, you want a fourth-tier Edward Hopper? A leftover Monet?
     
    Perhaps it's just me, but I would much rather own a fourth-tier Hopper than a first-tier Warhol
    , @Sam Haysom
    Does anyone know if the Chinese billionaires buy western art? Because some of these prices are getting to the point where even kids of someone as rich as big Santorum backer Foster Friess (the 750 million range) would have a hard time competing.

    Which brings up another question. Like Zippy points out this isn't just a bubble, it is a bubble driven by second and even third rate art. If the Detroit Institute of Arts ends up having to sell off some of its works by first rate masters, could that end up putting deflationary pressures on some of these Pop Art, Abstract Expressionism and Impressionism prices. Let's say The Wedding Dance by Breughl goes on sale and sells for $350 million dollars or even $400 million. Does Qatar look at Cezanne's The Card Players that they just paid 252 million for and start thinking wow did we overpay? Even at $500 million which would roughly double the price Qatar paid, is The Card Players really half the painting that The Wedding Dance. I get that there isn't a science to this stuff. But you see this sometimes in baseball where the players that sign before the premier free agent often do better than those that sign after the market has been set by the primer free agent's contract figures.
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  6. Priss Factor [AKA "dna turtles"] says:

    If a black guy with a blonde wig is a woman and if ‘gay marriage’ is real marriage, then anything is anything. Even shit is art.

    It’s like Obama saying he’s offering amnesty to illegals so that they will come out of the shadows to obey the law. It’s surreal politics.

    First, illegals were not hiding in the shadows because, after all, US has done little to find them and deport them. They were brazenly marching and demanding that US citizens cave into their demands.
    If anything, patriotic US citizens have been hiding in the shadows in their fear of expressing opposition to illegal immigration lest they seem ‘reactionary’, ‘racist’, or ‘xenophobic’ or some other bogus term tossed around by MSM.
    Furthermore, how does rewarding lawbreakers goad them to obey the law?

    If I break into your house, should you give me the deed to the property so that I will obey property laws? Surreal.

    A strange world when US citizens must hide in the shadows with fear of expressing their patriotism while illegals blatantly and proudly march holding up placards(often insulting of America) in open daylight with zero fear of being met with justice for their violation of American laws.

    On the bright side, let RULE OF LAW die. If our enemies are gonna operate by breaking rules and doing as they please, then we should do likewise. We need to go Checheny.

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  7. Or, is the art market a highly sophisticated form of money laundering? Just a hunch.

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    • Replies: @peterike
    Or, is the art market a highly sophisticated form of money laundering? Just a hunch.

    Partly, yup.
    , @Rapparee
    This may not say anything about the legal art scene, but stolen art is often used on the black markets in lieu of big cash payments, since it's high-value and easily transportable. We like to imagine that some underworld kingpin with unusually sophisticated tastes is taking time out of his day to contemplate the nuances of the magnificent but ill-gotten masterpiece on his wall, but in reality, many of the famous paintings stolen in high-profile heists just sit in boxes for decades and get occasionally swapped for cargoes of drugs or weapons. Since it's impossible to unload publicly, the black-market value of any work is a tiny fraction of its legal value, but for pieces that would otherwise fetch hundreds of millions of dollars, that's still some serious money.
    , @Bill
    Great comment.
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  8. The Emperor’s New Tailors also know their way around paintbrushes.

    If only their paints were as exquisitely invisible as their threads, no canvases would be wasted.

    Who is the child who will be believed when exclaiming what meaningless rubbish this is?

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  9. “So maybe that helps explain the mystery of why billionaires are so much more enthusiastic about contemporary painting these days than non-billionaires: because the paintings are just embodied metaphors for buying and selling. And billionaires love buying and selling. Buying and selling has been very very good to them.”

    Genius theory.

    I wonder if there’s another factor too. It’s that the rich-and-powerful tend to do what other rich-and-powerful people do. Where big-ticket stuff goes, they don’t think deeply about it. They don’t have a lot of quirky personal tastes and preferences. They just choose from the same short list of sources and creators that everyone else like them chooses from. “Everyone else — everyone else like me, that is — is wearing Alexander McQueen, driving a Tesla, commissioning a Zaha Hadid and buying a Jeff Koons? Then I will too.”

    A few architects I know tell me that this “I do as everyone else in my class does” thing is a major factor in explaining why so many horrendous new buildings keep getting built.

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  10. peterike says:
    @Gary Seven
    Or, is the art market a highly sophisticated form of money laundering? Just a hunch.

    Or, is the art market a highly sophisticated form of money laundering? Just a hunch.

    Partly, yup.

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    • Replies: @josh
    I'm kind of shocked Steve didn't mention this, unless it falls under the category "favor-banking".
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  11. Rapparee says:

    And they love buying low and selling high. After they’ve made their pile, buying a white painting for say $8 million and then unloading it on some other billionaire a few years later for $15 million is fun for them.

    I’m reminded of James Garner’s 1963 performance in The Wheeler Dealers. At various points, his Texas oilman character becomes a restaurateur, stock market trader, and (of course) modern art collector. He sums up the rich deal-maker’s philosophy of life quite eloquently:

    You don’t do wheelin’ and dealin’ for money. You do it for fun. Money’s just the way you keep score“.

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  12. peterike says:

    Years back my father had scooped up some paintings that were reputedly by famous artists dirt cheap in thrift shops (this was back when it was possible for this to happen). He had them checked by Sotheby’s who said nope, they are forgeries. He used to lament, “If Rockefeller owned those paintings they would be real.”

    Maybe that’s less true these days, I dunno. Though the art market is certainly packed these days with crass Russians, Indians and Chinese who have no taste whatsoever and will buy anything because it’s got a blingy price tag. One of the worst things about losing the WASPs as a ruling class is that we had refined taste replaced by vulgar Jewish taste (thank you for the toilet flushing gag, Norman Lear!), and now it’s getting even worse. The new global billionaire class is kind of like giving the people from “The Jersey Shore” a giant pile of cash and letting them have at it.

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  13. I was under the impression that artists like Picasso and Warhol generated hundreds and hundreds, if not thousands, of one-off pieces over their lives, plus innumerable prints and other pieces that that were produced in editions of numerous identical copies. What’s the real scarcity? Or are there a handful that have been designated as being the valuable works and the others are just minor ones? What’s the current market value of their entire output? From the sound of the article, it seems that if they could have originally sold their own work at today’s resale values, they would have been multi-billionaires.

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    • Replies: @Steve Sailer
    Picasso was already close to being a billionaire by his death in the 1970s.
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  14. Art Deco says: • Website

    Personally, I’d get more of a kick out of competition among billionaires if a few of the more sporting decided to parachute into remote Kerguelen Island in the Southern Indian Ocean armed with hunting rifles, and then have boat come along a month later to pick up the sole survivor/winner.

    Like Ten Little Indians (except they all know the game from the start)??

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  15. @Officious intermeddler
    I was under the impression that artists like Picasso and Warhol generated hundreds and hundreds, if not thousands, of one-off pieces over their lives, plus innumerable prints and other pieces that that were produced in editions of numerous identical copies. What's the real scarcity? Or are there a handful that have been designated as being the valuable works and the others are just minor ones? What's the current market value of their entire output? From the sound of the article, it seems that if they could have originally sold their own work at today's resale values, they would have been multi-billionaires.

    Picasso was already close to being a billionaire by his death in the 1970s.

    Read More
    • Replies: @athEIst
    Warhol's estate was $400 million.
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  16. Rapparee says:
    @Gary Seven
    Or, is the art market a highly sophisticated form of money laundering? Just a hunch.

    This may not say anything about the legal art scene, but stolen art is often used on the black markets in lieu of big cash payments, since it’s high-value and easily transportable. We like to imagine that some underworld kingpin with unusually sophisticated tastes is taking time out of his day to contemplate the nuances of the magnificent but ill-gotten masterpiece on his wall, but in reality, many of the famous paintings stolen in high-profile heists just sit in boxes for decades and get occasionally swapped for cargoes of drugs or weapons. Since it’s impossible to unload publicly, the black-market value of any work is a tiny fraction of its legal value, but for pieces that would otherwise fetch hundreds of millions of dollars, that’s still some serious money.

    Read More
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  17. syonredux says:
    @Zippy
    Syon, your post inadvertently points out a problem with collecting high-value works. One of the pieces you point to is in the collection of the Indianapolis Museum of Art, a second is at the Met, and the third at MOMA.

    Since museums won't sell their works (absent serious justification), real masterpieces are in museum collections. What, you want a fourth-tier Edward Hopper? A leftover Monet? I suspect that a lot of these late 20th-century guys get bought at huge prices because, really, who is left?

    That said, I do wish billionaires had better taste, or at least bought artists who did their own work.

    Syon, your post inadvertently points out a problem with collecting high-value works. One of the pieces you point to is in the collection of the Indianapolis Museum of Art, a second is at the Met, and the third at MOMA.

    Since museums won’t sell their works (absent serious justification), real masterpieces are in museum collections. What, you want a fourth-tier Edward Hopper? A leftover Monet?

    Perhaps it’s just me, but I would much rather own a fourth-tier Hopper than a first-tier Warhol

    Read More
    • Replies: @SFG
    Amen to that.

    BTW: what Renaissance ideal? Leonardo, Michelangelo, Raphael, Donatello, and all the other ninja^H^H^H^H^H greats of Western Civ were paid by rich merchants, princes, and cardinals. Artists have to eat, and art usually isn't useful, so only rich people can afford to splurge on something as useless as a painting.

    I am depressed by the declining artistic quality of art, though. We've gone from the Sistine Chapel to blank canvases.
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  18. @Zippy
    Syon, your post inadvertently points out a problem with collecting high-value works. One of the pieces you point to is in the collection of the Indianapolis Museum of Art, a second is at the Met, and the third at MOMA.

    Since museums won't sell their works (absent serious justification), real masterpieces are in museum collections. What, you want a fourth-tier Edward Hopper? A leftover Monet? I suspect that a lot of these late 20th-century guys get bought at huge prices because, really, who is left?

    That said, I do wish billionaires had better taste, or at least bought artists who did their own work.

    Does anyone know if the Chinese billionaires buy western art? Because some of these prices are getting to the point where even kids of someone as rich as big Santorum backer Foster Friess (the 750 million range) would have a hard time competing.

    Which brings up another question. Like Zippy points out this isn’t just a bubble, it is a bubble driven by second and even third rate art. If the Detroit Institute of Arts ends up having to sell off some of its works by first rate masters, could that end up putting deflationary pressures on some of these Pop Art, Abstract Expressionism and Impressionism prices. Let’s say The Wedding Dance by Breughl goes on sale and sells for $350 million dollars or even $400 million. Does Qatar look at Cezanne’s The Card Players that they just paid 252 million for and start thinking wow did we overpay? Even at $500 million which would roughly double the price Qatar paid, is The Card Players really half the painting that The Wedding Dance. I get that there isn’t a science to this stuff. But you see this sometimes in baseball where the players that sign before the premier free agent often do better than those that sign after the market has been set by the primer free agent’s contract figures.

    Read More
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  19. Steve,

    100 MILLION for a lousy silk screen!!! Think of all the Hasbara that could have been bought to keep us goyishe kops in line.

    How about instead a new version of the Scofield Reference Bible with a new analysis on why it is absolutely imperative that Iran be nuked back into the stone age in order for the saved to be brought up by the Rapture.

    Oh well I am sure Goldman Sachs is hard at work making sure that Uncle Sam will bail out all these Junk Art collateralized debt obligations.

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  20. Ezra says:

    Genius.

    I’ve always thought that a whiff of fraudulence was a feature (as opposed to a bug) of a successful contemporary artist. If it seemed like there was a chance that the artist themselves were con-men deliberately selling worthless junk to suckers, then all the better for their reputation, that this was part of the thrill.

    I could just never figure out why. Until now.

    Probably this theory applies more generally to the psychology of asset price bubbles. Part of the drive to believe in the “greater fool” story is the desire of the marks to believe they’re in on the con.

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  21. SFG says:
    @syonredux

    Syon, your post inadvertently points out a problem with collecting high-value works. One of the pieces you point to is in the collection of the Indianapolis Museum of Art, a second is at the Met, and the third at MOMA.

    Since museums won’t sell their works (absent serious justification), real masterpieces are in museum collections. What, you want a fourth-tier Edward Hopper? A leftover Monet?
     
    Perhaps it's just me, but I would much rather own a fourth-tier Hopper than a first-tier Warhol

    Amen to that.

    BTW: what Renaissance ideal? Leonardo, Michelangelo, Raphael, Donatello, and all the other ninja^H^H^H^H^H greats of Western Civ were paid by rich merchants, princes, and cardinals. Artists have to eat, and art usually isn’t useful, so only rich people can afford to splurge on something as useless as a painting.

    I am depressed by the declining artistic quality of art, though. We’ve gone from the Sistine Chapel to blank canvases.

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  22. ricpic says:

    I’m convinced that Jeff Koons’ appeal to these billionaire buyers is the go-screw-yourself message that his perfectly smooth blank affectless objects convey. Koons is the dominatrix of the art market. And what is more utterly irresistible to a billionaire than to be abused and humiliated by a dominatrix?

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    • Replies: @Zippy
    ricpic if I were a billionaire, I'd pick a dominatrix a lot better looking than Jeff Koons.

    syon, I kind of see your point, though I probably like Warhol better than you do. I remember going to the Art Institute and seeing Hopper's Nighthawks over and over again.

    Anyhow, if I were a billionaire I'd find living American artists whose work I liked. Not for its "investment" value, but because I thought it was beautiful. Then I'd become a patron.

    Graffiti artists and blank canvas types need not apply.
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  23. Art?

    Hell’s bells, billionaires today trade in all that’s fungible – they even trade in Globally Interchangeable Labor Units (people!) across those arbitrary lines once known as borders.

    “Mongo only pawn in game of life.”

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  24. Anon says: • Disclaimer

    The reason this happens is that there aren’t too many investments that a group of billionaires can play their modified version of a Ponzi scheme with. If a diamond has a going market price per karat of 100 dollars, you can’t suddenly declare your 70 karat stone is worth a billion and get someone to buy it. As long as gold is pegged to anything, you can’t artificially inflate the price of that, either. Stock and bonds have prices that are mostly out of your personal control. You can try to play with commercial real estate, but the important thing about most commercial real estate is that you actually make a lot more money by hanging onto it forever and having someone pay you monthly rents or leases. Selling a good location is dumb. You can try to flip houses, but you’ll have to buy a heck of a lot of them to net 100 million, and that means a massive outlay for spiffing them up and huge management fees just to handle the business transactions, and your prices are always weighed down by what the rest of market is doing in your area anyway.

    ‘Fine’ art is remarkably free of market realities or anything else, which is why it lends itself to thing sort of Ponzi-style behavior. If you get enough billionaries, you’re going to see a lot more of this in the art market. Their dupes are the multimillionaries.

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  25. […] Source: Steve Sailer […]

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  26. hal says:

    A few points:

    One: The great masterpieces were complicated. They took a long time to make, and they were visually engaging, so that one could see more upon each visit. This is what made them valuable. Today’s art starts with value because, “D’oh, art is expensive.” Then whatever is expensive is art. Methinks there is too much loose money around. This will end well indeed!

    Two: We crowd source items of equally sparse value. For example, hang time. We do it for the price of a ticket, or for whatever share of that beer’s ad dollar goes to team owner. But we value time spent in the air, time spent grabbing that ball from its downward trajectory, time spent pumping that ball a few times before passing to another great imp who is airborne and likely to put that ball into a hoop. We air time value equal to blank canvasses.

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  27. IA says:

    The 80s had a big run-up in art sales. Then, the stock market downturn around the latter half and real estate bubble burst starring Neil “interest-free” Bush, Silverado, and Charles Keating who went down.

    More and more modern art is like medieval relics. Originally, a relic performed a miracle. Today, because of emptiness and irony, there can be no transcendent mystery and storytelling. Only status signaling and satisfaction in the exasperation and befuddlement of the non-initiate. Cruel really.

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  28. @res
    In the back scratching scenario how does everyone deal with the resulting capital gains tax? Just a cost of doing business?

    One way to deal with that would be to quietly resell the works for their true, low value. Then the capital loss wipes out the capital gain. The tax people don’t care whether the sales are public info or not.

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  29. Jacobite says: • Website

    Bad Pop Art:

    Good Pop Art:

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  30. Zippy says:
    @ricpic
    I'm convinced that Jeff Koons' appeal to these billionaire buyers is the go-screw-yourself message that his perfectly smooth blank affectless objects convey. Koons is the dominatrix of the art market. And what is more utterly irresistible to a billionaire than to be abused and humiliated by a dominatrix?

    ricpic if I were a billionaire, I’d pick a dominatrix a lot better looking than Jeff Koons.

    syon, I kind of see your point, though I probably like Warhol better than you do. I remember going to the Art Institute and seeing Hopper’s Nighthawks over and over again.

    Anyhow, if I were a billionaire I’d find living American artists whose work I liked. Not for its “investment” value, but because I thought it was beautiful. Then I’d become a patron.

    Graffiti artists and blank canvas types need not apply.

    Read More
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  31. Tom Wolfe seems obsessed with the weirdness of the expensive art world. It played a small but important role in A Man in Full and like 25-40% of Back to Blood is about Russian billionaires buying art.

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    • Replies: @Sam Haysom
    And 100 percent of the Painted Word.
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  32. Anonymous says: • Disclaimer

    Relevant: http://www.abeldanger.net/2014/05/cia-laundering-money-through-inflated.html

    It’s down the rabbit hole but the example given with Embiricos is pretty interesting if true.

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  33. Jacobite says: • Website

    Anyhow, if I were a billionaire I’d find living American artists whose work I liked.

    One hardly needs to be a billionaire in order to acquire good contemporary artwork. The key element for the collector is good taste not money.

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  34. Priss Factor [AKA "terrapin gape"] says:

    “For example, here’s a Robert Ryman white painting that recently sold at Sotheby’s for $15 million.”

    That’s a floor tile.

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  35. peterike says:

    Much as I hate to link to that hotbed of Progressive Conventional Wisdom, the New York Review of Books (to which I subscribe), they published a fantastic take-down of the Koons exhibit at the Whitney. Really, if you care about this at all, give this a read.

    http://www.nybooks.com/articles/archives/2014/sep/25/cult-jeff-koons/

    A tasty sampler: The vacuum is the work itself, displayed on five of the six floors of the Whitney, a succession of pop culture trophies so emotionally dead that museumgoers appear a little dazed as they dutifully take out their iPhones and produce their selfies.

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  36. peterike says:

    Take a moment to appreciate the brilliant huckster scam that is the modern art market. And I mean the market for contemporary painters, not whatever a Picasso might demand.

    For starters, there is literally no discernible difference in talent or inspiration between the artist that sells for millions and the one that starves. They all produce junk that is equally dreadful. So how does Artist A rise from the ranks while Artists B to Zed slave away at Starbucks waiting to get discovered?

    Well, this is where the critics come in, those handy go betweens that navigate the waters between the three corners of the market: artists, buyers, and dealers. They can make the next Bruce Nauman or Ed Ruscha or whatever purveyor of crap you want. The key, of course, is to control the supply. I mean if you designated as geniuses the next 1000 slobs out of art school (might as well, they’re all just as good) then you’d flood the market with too much work. So there is a selection process. Now HOW that selection process works I don’t know. Maybe it involves back-room BJ’s, who knows. But it happens.

    Then once a new artist is crowned as The Next Big Thing, their previously worthless dreck now starts shooting up in value. This makes the dealers happy (because they got a lot of it cheap), this makes the buyers happy (they don’t care what it looks like, they just want it to be expensive and/or “cool” and “the in thing”). This makes those few chosen artists happy and gives the rest a reason to continue dreaming (and, possibly, to continue giving BJ’s to art critics and gallery owners).

    It’s all one big happy family. Now and again someone calls “fraud” on the whole stinking charade, but those voices are drowned out via a chorus of mockery and nose-sniffing — you know, the way the Progressive Establishment drowns out everything it doesn’t want. As long as the system remains insular and the art community talking only to one another, then it wins. The explosive rise and concentration of mega-wealth into fewer hands is the perfect petri dish for all this. Just as it now means you can buy an apartment in New York for $95 million dollars that is objectively worth only a fraction of that, you can likewise buy a piece of abjectly dreadful art for millions because art. It’s an entirely self-fulfilling prophecy, and in its way it’s the best ponzi scheme ever invented.

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  37. Old fogey says:

    Sounds as if a lot of people have read Miles Mathis’ essays on the current art scene and money laundering.

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    • Replies: @Bill
    Miles Mathis is one weird dude. He's got an essay arguing that the derivative of ln(x) is not equal to 1/x. Can't say I like his paintings much, either.
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  38. athEIst says: • Website
    @Steve Sailer
    Picasso was already close to being a billionaire by his death in the 1970s.

    Warhol’s estate was $400 million.

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  39. josh says:
    @peterike
    Or, is the art market a highly sophisticated form of money laundering? Just a hunch.

    Partly, yup.

    I’m kind of shocked Steve didn’t mention this, unless it falls under the category “favor-banking”.

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  40. @Jokah Macpherson
    Tom Wolfe seems obsessed with the weirdness of the expensive art world. It played a small but important role in A Man in Full and like 25-40% of Back to Blood is about Russian billionaires buying art.

    And 100 percent of the Painted Word.

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  41. Hacienda says:
    @syonredux
    15 million for a white canvas, eh? Call me crazy, but I would rather spend that kind of money buying real 2oth century masterpieces:

    http://en.wikipedia.org/wiki/Hotel_Lobby

    http://en.wikipedia.org/wiki/Office_in_a_Small_City

    http://www.artchive.com/artchive/H/hopper/theatre.jpg.html

    Do I get to be called boy if I say those paintings are ugly as f+ck?

    They are ugly as f+ck. But you know it’s a matter of taste, right? Right?

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    • Replies: @Reg Cæsar

    They are ugly as f+ck.
     
    They are ugly as f[HIV]+ck.

    FIFY (Fist it for you)!
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  42. Rifleman says:

    Personally, I’d get more of a kick out of competition among billionaires if a few of the more sporting decided to parachute into remote Kerguelen Island in the Southern Indian Ocean armed with hunting rifles, and then have boat come along a month later to pick up the sole survivor/winner.

    I thought Rory Calhoun was excellent in that Gilligan’s Island episode.

    Just to give everyone an idea of how far “modern art” has come, notice this painting of Izaak Walton by Jacob Huysmans oil on canvas, circa 1672.

    This was long before photography, video, etc.

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  43. Bill says:
    @Gary Seven
    Or, is the art market a highly sophisticated form of money laundering? Just a hunch.

    Great comment.

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  44. ABN says:

    Personally, I’d get more of a kick out of competition among billionaires if a few of the more sporting decided to parachute into remote Kerguelen Island in the Southern Indian Ocean armed with hunting rifles, and then have boat come along a month later to pick up the sole survivor/winner.

    Before or after you resettle the resurrected mammoths there?

    But seriously, I think a lot of this modern art enthusiasm is a variation on the Leapfrogging Loyalties theme. Our elites don’t think of themselves as patrons and custodians of our common civilization. They pride themselves on how they’re better than that–more sophisticated, more transcendent. The more repulsive it is to middlebrow tastes, the better.

    Relatedly, it can be interpreted as filling the same need that Cultural Marxism fills. How do you maintain your cool, radical credentials when any honest old leftist would regard you as a class enemy? How can you still épater le bourgeois when you’re a quintessential capitalist? Clearly, narrow-minded proles are the real oppressors because they won’t pay a million dollars for a used napkin or whatever.

    Of course, you also have a lot of ultra-rich, particularly foreign New Money, who just want to like what the culture-makers like. It’s like how Asians in America identify with the left/Democrats. They don’t share the pathologies that animate the Western left, but as long as it’s high-status they’ll go along with it.

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  45. Bill says:
    @Old fogey
    Sounds as if a lot of people have read Miles Mathis' essays on the current art scene and money laundering.

    Miles Mathis is one weird dude. He’s got an essay arguing that the derivative of ln(x) is not equal to 1/x. Can’t say I like his paintings much, either.

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  46. @Hacienda
    Do I get to be called boy if I say those paintings are ugly as f+ck?

    They are ugly as f+ck. But you know it's a matter of taste, right? Right?

    They are ugly as f+ck.

    They are ugly as f[HIV]+ck.

    FIFY (Fist it for you)!

    Read More
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  47. […] see that Paleo Retiree shared some similar thoughts in the comments section of a recent Steve Sailer post. They’re worth quoting […]

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  48. […] Yes very much so and not just that particular piece. This compliments the article you posted earlier. Billionaires and Art – The Unz Review […]

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  49. @res
    In the back scratching scenario how does everyone deal with the resulting capital gains tax? Just a cost of doing business?

    you use an IRS 1031 ‘Like Kind Exchange’ which allows you to defer capital gains payment if you quickly buy something substantially equivelent to the piece you sold. It doesn’t eliminate cap gains tax which you will have to pay eventually but gives you the potential to kick the can down the road, eventually into your estate, perhaps.

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