A recent article from BusinessWeek tells us about the current state of the contemporary art market.
"The New Art Sharks" hones in on the new breed of buyers in the market, who are bidding up prices well beyond reason. Chief among them: newly rich members of the "financial engineering" economy. Also known by their other moniker, "hedge fund types".
I think that what you will read in this article is an excellent illustration of what was discussed in Friday's post, "Tangible Investments". At one end of the market, you have a group of very wealthy people throwing huge amounts of money at a select group of artists, while vying for the title of "ultimate collector". This is just where the silliness begins, as wealthy collectors battle each other for the latest and greatest (read: fashionable) works.
Here's one of my favorite segments of the article:
Cohen is snatching up some of the best contemporary pieces. Last year he paid London ad mogul Charles Saatchi $12 million for a 1991 installation by Britain's Damien Hirst that consists of a 14-foot shark pickled in formaldehyde, believed to be the highest price ever paid for a work by a living artist. Trouble is, the shark has deteriorated, so Cohen is getting Hirst to refurbish the piece. Paying millions for a rotting shark may seem wacky, but the purchase played in the art world as a major victory for New York's Museum of Modern Art over London's Tate, the thinking being that Cohen will give the shark to MOMA. Heller calls the work "a masterpiece" and says MOMA is one of several institutions Cohen would consider if he decided to give it away.
Will a mania in the art market be followed by buying panics in other segments of the collectibles arena? While some of the recent action in the art market seems to be fueled by a competitive spirit among collectors, rather than a sense of inflationary psychology, the more accessible areas of the collectibles market may see some frenzy of their own in the not-too-distant future.
I remember the stories of people forming lines around the block for gold coins back in 1979-80 at the height of the gold price surge and the craze for Chinese ceramics that took hold around that same time period. What will it be like next time around?