I've seen this type of article over the last few months far too many times. It claims the art market is hot. I'm not here to say whether the art market is hot or not. But, what bothers me about this article (and those who keep generating it) is that the basis for the hotness is on the recent performance of the big New York auction houses such as Sotheby's. Apparently, the secondary market for post-war and contemporary works generated billions of dollars this past year. The primary reason for this record haul is the weak dollar, expanding world wealth and a slew of new buyers from countries new to this type of art buying.
In my opinion, measuring the art market in this way is the equivalent of measuring the performance of my IRA based on the few shares of Southern Company I own. Since October, Southern Company’s stock increased 6.25% - most excellent. So my IRA is hot, right? (cough cough). Not exactly. Instead, if we look at the broader based S&P 500 Index, we see it is down 13.8% for the same time period. Ouch. I’d say that’s a more realistic picture of all of our investment portfolios.
There is no question that Sotheby's is a giant in the art market. But Sotheby's should only be considered one player in judging the "art market" as a whole. In this country alone, there are hundreds of art museums, thousands of commercial art galleries, and probably tens of thousands of people who consider themselves full-time artists. Wouldn't it be better to judge the strength of the art market based on the recent performance of all those museums, art galleries and artists?
A little side note… Sotheby’s stock price has fallen 32.5% since October. Thankfully, Sotheby’s isn’t in my portfolio.
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