Sotheby's Stock and Skyscrapers

The Financial Times has an interesting piece about a theory from an investor and author that warns that in the past peaks in Sotheby's stock indicate market bubbles and of course bubble bursts.  The FT reports on the theory the Chinese market is fueling art prices, and therefor the rise in Sotheby's stock.  Based upon passed indicators there could soon be a decline.  He also correlates the building of skyscrapers to art bubbles as well, noting that by 2015 China will have 4 of the worlds 10 tallest buildings.

This certainly gives us something to think about, but I am not sure it would be wise to use in an appraisal market analysis (especially the skyscraper theory).

The FT reports (I cut and pasted the full post)

Could Sotheby’s stock price be an “alarm bell” for a immering financial crisis? This is the theory of author and investor Vikram Mansharamani, who also lectures at Yale on “Financial booms and busts”. In his new book Boombustology (Wiley), Mansharamani says that record prices in the art market are “scarily accurate bubble predictors”. He points to China’s meteoric rise in the auction world as a sign of froth as a newly rich society “spends its easy money with exponential flamboyance”.

We have been here before, he warns. Peaks in Sotheby’s generally stable stock price correlate uncannily with three bubbles over the last 20 years, while the fourth – China – is happening now (at press time, the stock stood at $50.3, just below its peak of $55.7 in April).

The late 1980s Japan crash, the internet bubble a decade later and then what he calls the “great recession” of 2008-2009 – all saw Sotheby’s stock take a plunge – and he tracks this with a chart. Mansharamani points to current record prices, from $18m lavished on a vase estimated at $800 to the $106.5m Picasso that supposedly went to a Chinese buyer as symptomatic of “overinvestment, overconfidence and easy money”. And he cites another indicator of bubbles – skyscrapers. Classically these were erected just before financial busts – in 2015, says Mansharamani, Chinese skyscrapers will occupy ranks two, three, five, nine and 10 of the tallest new buildings.