Fed Causes Art Auction Binge

Eli Broad ---“No one wants paper money — they want art.”

I know where all those Wall Street bonuses went: contemporary art. The latest auctions from Christie's, Sotheby's, and Phillips de Pury were for the most part blockbuster sales where the works of living and dead Contemporary artists reached new highs.

These art auction houses exceeded all of their estimates on sales this week. Tuesday night Christie's sold a mind altering $231.9 million. On Wednesday evening Sotheby's brought in $190 million at their auction. Then Thursday night, Phillips de Pury, the most interesting auction, brought in $37.9 million. Each house exceeded their pre-auction sales estimates.

Let me digress a minute on the economics here.

If bankers like Goldman Sachs, JP Morgan, Citigroup, and Bank of America have a full quarter of "perfect" trading days, then the huge profits generated find their way into the pockets of those who achieved this investing miracle. But, as readers of The Daily Capitalist know, this was no miracle. It was a gift from the Fed to these bankers.

The Fed has created the opportunity of the new decade, a sure thing carry trade. Borrow money from the Fed at next to zero interest rate cost, and reinvest in bonds elsewhere and make a killing. Don't get me wrong; I am sure this is not as easy as it sounds. But ... I mean is there some super-secret high-powered trading formula that has achieved these returns? I don't think so.

For every buyer, as we well know, there is a seller. The crash fell on some harder than others:

The Phillips' sale was a court ordered sale of the collection of CNET co-founder, Halsey Minor. Minor found himself owing $21.6 million delinquent loan to ML Private Finance L.L.C., an affiliate of Bank of America’s Merrill Lynch. While the sale grossed $37.9 million, there were other collections included in the sale, so it's hard to know from the article if Mr. Minor's creditors were paid. I'll guess that they were. From the NYT article:

Mr. Minor’s collecting taste reflected many of the most popular figures of the past decade. The star of the sale was “Nurse in Hollywood #4, 2004,” one of Richard Prince’s “naughty nurse” paintings, which had been owned at one point by Steven A. Cohen, the hedge fund billionaire. The painting, which had been estimated to bring $5 million to $7 million, went for $6.4 million to a telephone bidder. It was the most expensive work of the evening. One of Mr. Prince’s “joke” paintings — “The Chatterbox Hotel,” from 1990, was estimated at $800,000 to $1.2 million. Another telephone bidder bought the painting for $750,000 or $902,500 with Phillips’s fees.

 

Mr. Minor owned many paintings by Ed Ruscha, including “Angry Because It’s Plaster, Not Milk,” a 1965 canvas of a colorful bird hovering over a glass of milk that looks as though it is about to spill. Three bidders wanted the painting, which was expected to fetch $2 million to $3 million and sold to Deborah McCleod of the Gagosian Gallery in Los Angeles for $3.2 million.


$6.4 million

It gets better. The Christie's $231.9 million sale included the collection of author Micheal Chrichton who died in 2008. In a ground breaking price for Jasper Johns, he's still alive, his "Flag" painting of the U.S. flag went for $28.6 million, second highest price ever paid for a living artist.


$28.6 million

The Crichton sale included pieces by David Hockney, Roy Lichtenstein and Robert Rauschenberg.

Another big seller was “Studio Painting,” one of Rauschenberg’s “Combines,” a term the artist coined for works in which he used castoff objects like rubber tires, flatware or furniture. This painting, executed in 1960-61, is made up of two canvases with a rope, a sandbag and a pulley. The work, which was estimated at $6 million to $9 million, was bought for $11 million by an unidentified telephone bidder. ...

 


$11 million

 

Of the 79 works up for sale, only 5 failed to sell. The evening totaled $231.9 million, above the high $207.4 million estimate. (Final prices include the buyer’s commission to Christie’s: 25 percent of the first $50,000, 20 percent of the next $50,000 to $1 million, and 12 percent of the rest. Estimates do not reflect commissions.) ...

 

Whether it was the magic of the Crichton name or the art that was on offer, Christie’s salesroom was overflowing with an all-star cast, including the superagent Michael Ovitz, the fashion designer Marc Jacobs, the hedge fund manager David Ganek and the newsprint magnate Peter Brant.

 

Eli Broad, the Los Angeles financier, was there, too. “Gold was up today,” he noted as he was leaving. “No one wants paper money — they want art.”

Then the Sotheby's auction at $190 million had some amazing prices:

“Buying was totally global,” Tobias Meyer, head of Sotheby’s contemporary art department and the evening’s auctioneer, said after the sale. “There were many new collectors who came into the market tonight.” ...

 

All eyes were on the 1986 Andy Warhol “Self Portrait,” which sold for $32.6 million, well above its $15 million high estimate. That and the Mark Rothko canvas each brought more than Jasper Johns’s “Flag” from the much-publicized estate of the best-selling writer Michael Crichton, which fetched $29.6 million at Christie’s on Tuesday night. Christie’s however, did better over all in its postwar and contemporary sale, with a total of $231.9 million.

 

The seller of the Warhol was Tom Ford, the fashion designer, movie director and collector. He was not at the Sotheby’s sale, but was said to be watching it on the Internet from his London home.

Can you picture this in your foyer? Yikes.

One parting shot. Most of this stuff is crap. Maybe Rothko, but the rest ... These newly-minted-alpha-males-now-art-connoisseurs love to show off their wealth to their buddies. I've never heard one of them admit that they do it for investment potential. They blather about how great the art is. Who wouldn't be impressed with this Andy Warhol. I may sound overly arrogant here, so forgive me; I can't help myself. I've been interested in art for many, many years and I have art and I have opinions. Maybe I'll pontificate one of these days, but for now, I'll just be snotty.