Back in the heydays of 2005-2008, investment advisers everywhere were pushing alternative asset classes, including real estate, private equity, hedge funds, and, fashionably, modern and contemporary art.
All of these assets rose on the tide of cheap money, and, in some cases, appreciated beyond any comprehension. The less “real” or liquid the market, the greater was the appreciation. In the case of modern and contemporary art, it became impossible to walk around the art district in Colaba (or, for that matter, Bond Street in London or Park Avenue in New York) without tripping over hundreds of newly minted art dealers and slime-green-behind-the-ears collectors.
The parties were fabulous, everybody was fashionable, and Art Basel Miami became the Vatican of cool.
Slow forward to 2009-10 and there are layers of still drying blood on the streets. Oddly enough, nobody is trying to make art out of it — yet.
In the wake of the developed markets’ financial crisis of 2008, prices of modern and contemporary art crashed, like those of all other “alternative assets”, following the age-old principle that the higher you rise the harder you fall. Indian contemporary art, which was the runaway winner on the way up, was the slammed-down loser on the way down. Subodh Gupta’s stainless steel utensil paintings, which created a major flurry at nearly $1.5 million in 2008, were selling at (a still more-than-respectable) $250,000 in 2009. As punters picked themselves up from the floor, prices have risen a bit — one of Subodh’s works went for close to $500,000 in May this year, a 100 per cent rise to be sure, but still just 35 per cent of its supposed value two years ago.
Prices of international contemporary art, much of which was also driven by the there-is-no-risk-anymore speculation, fared a bit better, with some works selling in June at about 65 per cent of their auction value in 2008.
However, the really remarkable news is that some works of art — both international and Indian — are suddenly commanding unbelievably high prices, higher even than the frenzied peaks of 2008. In May this year, a Picasso masterpiece was bought for over $100 million, topping the all-time record set in 2004 and nearly 20 per cent higher than the top estimate. Even more amazing, a sculpture by Giacometti went for (also) more than $100 million, nearly five-ten times the high estimate. Closer to home, a painting by Raza sold for Rs 16.5 crore ($3.5 million) in June, easily beating the highest price previously paid for any of the Indian progressives (about Rs 5 crore for a painting by Souza during the wild ride in 2008). And, closing the circle, in a sense, a sculpture by Bharti Kher, Subodh’s wife, sold (again in June) for $1.5 million, becoming the highest-priced Indian contemporary artwork ever sold.
Now, all this amazing price action is happening while global markets are once again shunning risk. It is hard to find a serious analyst who is not bearish about the world economy. Whether it’s the near-certainty of a Greek restructuring; or the impact of dubious sovereign debt holdings on bank profitability and enthusiasm to lend; or the likelihood of the austerity in Europe leading to a decline in demand and a double-dip recession; or the chickens coming home to roost in the US economy with a second wave of housing defaults; or the impact of the new financial regulations; or the increasing uncertainty in China with the labour unrest and increasing inflation; or whatever, bearish analysts are having a field day.
As a result, financial markets are extremely nervous — the VIX is jumping edgily higher, global equities are threatening to fall out of bed, and US Treasuries are, once again, rocking as a safe haven.
Clearly, something entirely different is happening with art.
Could it be that after a decade or so of buying into the alternative asset class crap, people are beginning to look at art as art again? And, with people again looking at value, as opposed to price, extraordinary works could certainly command extraordinary prices. Unsurprisingly, these huge hits are few and far between. All the auctions have smaller catalogues and a larger brought-in percentage (than back in 2007-08); and other than the few real gems, prices are languishing. Indeed, it would seem they could — and, perhaps, should — languish further, seeking a more reasonable balance of price and value.
To my mind, this is an excellent thing. Perhaps it is part of the new cycle of life that appears to be taking shape, shifting away from the what’s-good-for-Goldman-is-good-for-the-world mentality to one where moral standing and high-quality brainwork would lead over connections and capital.
Inshaallah!
