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In his book, Boombustology, Vikram Mansharamani reminds us that when markets get bubbly,
money starts flowing in Picassos, Warhols and the
like. Normal folks on main street are hawking cheap paintings at garage
sales to fill their gas tanks. But the stock market has doubled in that
last two years and Kelly Crow reports, ‘The
Art Market Snaps Back.’ In the Friday Journal feature, Crows
writes that the market will be tested as $1 billion of
Impressionist, modern and contemporary works go to auction next week.
Crow writes that some buyers are shy this time, having been burned
just a couple years ago.
But plenty more, flush and giddy, are just now joining in and paying
little attention to prices. As a result, the art market’s current
state, while off from peak levels, still feels slightly breathless. Record
prices are being paid for individual favorites like Pablo Picasso, whose
“Nude, Green Leaves and Bust” sold at Christie’s last May
for $106.5 million, the most ever paid at auction for a work of art.
We’ve seen this all before. In his book, Mansharamani provides an interesting sidebar with a chart
of Sotheby’s common stock going back to mid-1988, just before the final
run-up of the Japanese stock market. The stock price for the auction house
peaked as the Nikkei was peaking. It ran to higher highs as the Internet bubble
was cresting. Sotheby’s stock price ran to an all-time high of $58 with
US house prices in 2006/7. The subsequent financial meltdown sent the
stock plunging to the $7 range in early 2009.
Now, after the Federal Reserve’s QE1 and 2 have fueled U.S. stock
and commodity price runs ups, Sotheby’s stock ended this week at
$50.52.
“The speed of the art market’s recovery is astonishing,
but it’s a differently revived market,” said Michael Plummer, a
principal of Artvest. “The lesson of the
crash was to do your homework. Collectors feel wiser for the
experience.”
Yep, it’s always different this
time.
Doug French
Mises.org
Douglas French is president
of the Mises Institute and author of Early Speculative Bubbles &
Increases in the Money Supply. See his tribute to Murray Rothbard.
Article originally published
on www.Mises.org. By authorization of the
author
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