Economist Marc Faber's Gloom, Boom & Doom Report, Upcoming Winter 2011

Posted by Kenny Schachter on 07th November 2011

Christies got off to a miserable start to the fall New York auction season of Impressionist, Modern and Contemporary art. Could it be that the art world is actually part of the real world? The news couldn’t have been more depressing in the days leading up to the sale, with the stock market repeatedly hammered, haircuts or not. In an evening with the action more akin to a library than an auction, one artist record was set for Max Ernst at $16.3m, vs. his previous record of $4m; and, just as startling was a twice the high estimate, $5.1m, for a Picasso print, a record for any individual graphic work. Otherwise, one marquee name casualty after another defined the sale. Another little bright spot, literally, was a Picasso smaller then the page this is written on which exceeded the $1.2m high estimate and sold for in excess of $1.5m.

 
Sotheby’s Imp/Mod sale the following night was in stark contrast to the devastation at Christies. According to Tobias Meyer, Sotheby’s chief auctioneer: “If ever there was a turnaround, I think it happened tonight,” Welcome to the 24-hour recession: The art market cycle is apparently shorter than Wagner’s Ring Cycle and quicker than a lap around the Nurburgring.
 
The highlight of the Sotheby’s sale was a Klimt landscape stolen by the Nazi’s and restituted to the heir of its rightful owner by an Austrian Museum; the painting fetched $40.4m in a pissing match between two well heeled and determined bidders, about all it takes to make a market (zoom). A late, harsh and stark Picasso of a reclining nude being serenaded by a bearded flute player, also fully frontal (and with splayed legs) made a record for a 1960’s painting, selling for $23m. And a candy colored impressionist painting of a bridge by Cailebotte sold for a record $18m that last traded hands in 2008 for $8m. Please show me a single sector in today’s declining markets where such returns are attainable?
 
In an article on Bloomberg.com, Pritzker Prize winning architect Rem Koolhaas, bemoaning the state of capitalist markets and the EU, said: “We put our confidence in a system which is irrational, if not crazy and totally emotional,” he says. “It’s clear that was an absurd and misplaced confidence.” Was it? And what might be the alternative? To some extent, we are all irrational, if not crazy and over emotional, and the art world seemingly more so!