A Look at the NY Sales

 Barron's takes a quick look t the NYC sales and so far the reactions and sales have been positive. As I posted earlier, the Monday sale at Christi's did OK, and as expected, but then Sotheby's had some records set on Tuesday evening.

All in all, total sales for the week according to Barron's may hit $1.5 billion.  Two sales so far are totaling about $750 million.

Barron's reports

The spring art season kicked off on Monday in New York, and could produce $1.5 billion of sales in a blockbuster week for auction houses Christie’s, Sotheby’s (ticker: BID), and Phillips. The auctions will give an indication of the health of this luxury market—and how the superrich are feeling. So far, despite trade-war worries and stock-market volatility, they’re feeling pretty amazing.

The first major sales went well, with a haystack painting by Claude Monet setting a record at Sotheby’s Impressionist and Modern Art sale Tuesday evening. The $110.7 million price shatteredthe previous record for Monet, and set a record for any Impressionist work.

The 56 works on offer sold for $350 million, the auction house said.

This was the second major sale of the season. The first, the Impressionist and Modern Art evening sale at Christie’s on Monday, realized $399 million. The auction was 86% sold by lot, and came in at 96% of the pre-sale estimate.

The top lots were Cézanne’s Bouilloire et Fruits, which sold for $59.3 million, and Van Gogh’s Arbres dans le jardin de l’asile, which went for $40 million. Those were two of the five works auctioned on Monday from the collection of media heir S.I. Newhouse; six more are for sale in the Post-War and Contemporary Art sale on May 15.

Confidence in the art market had weakened heading into the year, taking a “U-turn,” according to ArtTactic’s 2019 report. “Global economic and political uncertainty could derail the fragile confidence in the buoyant art market,” the report stated.

Yet, despite the art market’s global nature, it seems insulated so far from trade concerns and U.S.-China friction. Evan Beard, who runs the National Art Services business at Bank of America’s private bank, sees three main reasons for that: Tariffs largely affect consumer cyclicals, such as technology; art and luxury goods are mostly manufactured in Europe; and, art buyers can be economically irrational.

“You’re looking at the wealth effect,” Beard tells Barron’s. “The folks buying those works are doing it for reasons of cachet and status; there is one opportunity to get an absolutely perfect Cezanne.”

Art buyers, he says, are more sensitive to interest rates, considering the opportunity cost of buying a work.

“Prevailing low interest rates is much more correlated to aggressive buying of arts and luxury goods than tariffs brinkmanship between two large economies,” he says. “This week, we’re going to see strong auctions, which is a sentiment signal not just in the art market but the higher end of the wealth spectrum, that we’re still in a pretty strong global economy with low interest rates, robust global equity markets, and pretty tame inflation.”

The trade conflict presents some risk to the art market, however. For years, Chinese buyers have been seen as the great hope for growth. If economic relations between the U.S. and China worsen, that might create trouble for the auction houses, galleries, and air fairs that do cross-border business.

But “no one expects that,” Beard says.

“It is more than anything a sentiment-driven market,” he adds, citing the art market’s delay even in noticing the 2008 financial crisis. Sotheby’s had a major Hearst sale the day Lehman Brothers collapsed, “and it had absolutely no impact—it was a successful sale,” he says.

The Impressionist sales are fun, but haven’t been the main event for a long time. Most of the action is in contemporary art. This week a balloon bunny by Jeff Koons, from the Newhouse collection, is up for auction. It is expected to sell for up to $70 million.

Robert Rauschenberg’s Buffalo II is forecast to fetch at least $50 million at Christie’s contemporary sale on Wednesday. On Thursday, Sotheby’s will auction Mark Rothko’s Untitled, 1960 in its contemporary sale, probably for at least $35 million.

Well before the auctions begin, risk-takers had signed up as “third-party guarantors,” submitting “irrevocable bids.” Going into this week, third-party guarantors had pledged to buy at least 84 works, for an estimated $611 million combined, the Wall Street Journal’s Kelly Crow reports. The guarantors take up to a third of the sellers’ proceeds, above the agreed-upon bid.

When a work gets consigned, three deals happen, Beard says: There is a “knockdown, drag-out bake-off” between the auction houses, followed by negotiations on the financial instruments around the work, such as third-party guarantees, and then the actual bidding at auction.

“Currency hedges, credit facilities, interest-rate hedges, irrevocable bids, third-party guarantees, house guarantees—the art market is starting to look more like a sophisticated financial market,” Beard says.


Beard calculates that the works sold in the fall generated about a 5% internal rate of return, lagging behind the S&P 500 index but beating Treasuries. Beard expects about the same in this season.

But, again, that’s not really why people buy art.

The big-ticket lots are “something two billionaires, maybe more, are going to wrestle over,” he says. No one bids, he says, “looking to get a great internal rate of return. That, Newhouse got, because he got [the Koons] for $1 million. The folks bidding are getting a cultural trophy and the cachet of owning one the most iconic works of art from the 1980s.

This season, he adds, will be defined by “the tenacity and testosterone of a couple of bidders.”

Source: Barron's 

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