Mei Moses Art Market Insights

Beautiful Asset Advisors/Mei Moses Art Indexes has just released their analysis of the world wide auctions from Sotheby's and Christie's through May, 2011. The trending from the analysis is very positive especially when compared to the S&P 500 total return index during the same holding periods. In summary the report states data from 38 May world wide auction sales yield a 10.6% increase in the Mei Moses world all art index tracking value since the end of 2010 compared to 8 gain in the S&P 500 (see graph).

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A portion of the recent BAA press release states on lots which failed to sell

It is also interesting to analyze the works that failed to sell in these auctions. Of the 25 works that did not sell we had prior auction results for 10 of them. Why a work does not sell is an open question in the art market. Reasons vary from changes in condition, overly aggressive expectations by the auction house or owner, the prior purchase was consummated at a price far in excess of the high presale price estimate and there is currently no buyer willing to continue the mispricing of this trophy item etc. Our research shows that the single best predictor of the current auction price of a work that had sold at auction sometime earlier is that price inflated to the current time period by changes in our appropriate collecting category index over the time period from purchase to sale. In financial circles this is know as “Marking to Market”.

It is interesting to note that 8 of these 10 lots that did not sell had a low presale price estimate greater than the index increased prior purchase price. As an example consider the failure of one of the most significant works of the sales, Claude Monet’s Iris mauves. It had a presale low estimate of $15 million and had sold in 1997 for $3,850,000. This purchase price was only slightly above the high presale price estimate in 1977 of $3.5 million. If the work had appreciated at the same rate as the new Mei Moses® world impressionist index from 1997 until the end of the first quarter of 2011 its value would be $8.9 million. This value is way below the presale low estimate of $15 million and reveals that the owner or auction house had return expectation far above those produced by the impressionist market over that time period. Using the same Mark to Market methodology to enhance the prior purchase price low presale estimate of 2.5 million would generate a current market low presale estimate of $5.77 million almost 1/3 the 2011 value used by the auction house. It would be interesting to hear the explanation as to why there was such a dramatic above market change in the presale estimates from 1997 to 2011.

To read and download the full press release visit the BAA site at http://www.artasanasset.com and click on recent press releases and then on May All World Art.

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