Tuesday, 22 December 2015

Why the old master market really is dead

The lackluster totals from the recent old master auctions in London prompted more observations about the parlous state of the old master market. I liked Scott Reyburn's account in the New York Times, but Bendor Grosvenor has issued a firm critique with useful data. But I'm still with Reyburn, and I think Bendor's evidence reinforces Reyburn's conclusion, if we put it in context.

The important question is what you're comparing against. The value of money itself changes, so you have to adjust for inflation. But over time economies tend to grow, so any sector simply keeping up with inflation isn't doing so well. Sectors wax and wane, of course. But if the auto industry is booming and Ford's sales are increasing in double digits, it's not enough for General Motors to say they're doing great because their sales are in line with the overall economy. Bendor's charts show old masters just about keeping up with inflation at a time when the potential market is booming because there are far more very rich people in the world, with far more disposable income. It's just that they're spending that income on modern and contemporary art, which is booming. That can't be explained away as a speculative bubble, because it's supported by strong market demand that's boosting all kinds of luxury products—except old master paintings.

It's not just that there are more rich people. Wealth increased significantly in the post-war boom, but there was a big lag before the art market took off. One reason for that is relatively high tax rates and relatively high returns to labour rather than capital. But that didn't change until the subsequent growth of the art market was already well underway. I think the other aspect is that returns on investment were strong as the economy recovered after the war. There was high demand for capital, and good long-term returns. Today that's not so true; returns on all asset classes are muted and  growth is sluggish. So it makes sense for the elite to divert resources towards consumption—which, again, is exactly what we've seen in the luxury good industry, and in every sector of the art market except old master paintings. Old masters really are the anomaly.

Historically the old master market performed much as you might expect based on the changing fortunes of the very rich. In the early twentieth century they were booming, as American millionaires entered the market for the first time. After the depression prices fell sharply. There have been plenty of strong trends, even if they even out over the very long term. Incidentally, even in the boom years of the early twentieth century dealers complained about the difficulty of obtaining good mark-ups on pictures bought at auction; Duveen liked to buy collections en bloc to avoid the anchor of publicised prices, and Wildenstein kept things in stock for decades before resale. Agnew used to sell stock bought at auction on very thin margins in the nineteenth century. And there are still plenty of dealers buying at auction and then selling retail in Mayfair or at Maastricht. I think the bigger story is that old master dealers are being squeezed in a declining market, not that their old business model has suddenly failed.

Finally, we can look more anecdotally at the market itself. Some parts do better than others; prices for Dutch pictures and Brueghels seem to have softened recently. Elizabethan portraits are doing better. French eighteenth century pictures are especially out of favour. But the overall impression is that really good mid-range pictures are selling consistently poorly if you think in terms of their relation to house prices, or to the incomes of the relatively affluent (top professionals and business leaders). Today a month's income for a barrister, or partner in a big accounting or consulting firm would buy a picture that would grace a museum. And there are more people earning those salaries than ever before. It's just that they're buying contemporary art.

A coda on data
Because each old master painting is unique, there's no reliable indicator equivalent to, say, the price of gold. Even the same picture re-sold may come with a different attribution, or following restoration that may have helped or hurt its value. Sales volume in the overall market is hard to find, because of coding and categorisation issues. The top auction houses re-position themselves from time to time, going into the mid-market and then pulling back. Supply is only slightly elastic. The 'three Ds' (death, divorce, death) produce a reliable stream of consignments from forced sellers, but rising prices don't automatically secure big increases in supply. But rising prices do tempt treasures into the market, so there's a degree of pro-cyclicality in raw sales data, as well as volatility because the market is so thin.

Bendor's data show sales increasing slightly above inflation, which in the context I've described is frankly dreadful. Sotheby's closed its Olympia saleroom and Phillips withdrew entirely from the old master market in that period. The data are difficult to obtain, because old master picture sales sometimes include drawings and sculptures (including a £29.7m Raphael), and old masters are sometimes sold in other sales (such as mixed single owner sales). The trend line is influenced by start date; I calculate Sotheby's results from 2002 to have been £153m, inflation-adjusted, which may have given a different slant to the trend. But the only element I really object to is comparing performance with the FTSE without reinvesting dividends, which is meaningless (do we assume the dividends were just eaten?). I don't think art should be treated as an investment class, for the reasons Bendor himself sets out. And for what it's worth, I don't think it's right to call the contemporary market a 'speculative bubble', though economic shifts could easily see significant price falls.

Artprice has an alternative index showing old master prices declining, but their index shows far more volatility than I perceive in the actual market, so take their data with a pinch of salt.

Monday, 14 December 2015

Old Master Results

Picture: Sotheby's
London's auctioneers put on a fine show last week: plenty of good pictures with mostly quite reasonable estimates. But results were disappointing. High levels unsold (about half the Christie's evening auction), and no really spectacular prices. There seemed to be less trade buying than usual, and dealers declining to add to their stock is a bad sign. The day sales did a little better, but prices are still astoundingly low compared to contemporary art, and unprecedented relative to the immense resources of the wealthy global elite. The large number of unsold pictures indicates that prices are 'sticky downwards', as economists say: sellers are reluctant to crystallise losses relative to their expectations, so they decline to sell. It implies market weakness, but the inherent volatility of the art market makes the signal hard to read. We must also be cautious of drawing conclusions too hastily from a small sample of lots sold in a single week, although it really only confirms long-standing trends.

The high-end market is sewn up by Christie's and Sotheby's, and usually reported as a messianic struggle between them. But reporters are measuring the wrong thing when they compare value of sales, a metric chosen because it's easily available and easily understood rather than because it's actually important or meaningful. If you're selling pictures, you want to know which auctioneer will get the higher price, and it's not clear to me that either has a clear edge. Knowing how much they've sold for other people doesn't answer that question. If you're a shareholder, you want to know about risk-adjusted return. Sale volume doesn't help that analysis: you need to know the commission charged and guarantees granted. And mere observers like me would be happy if either of them could just make navigating their websites easier than bitcoin mining.

On the face of it Christie's sale was a disaster. But it really comes down to a handful of pictures. Their top lot, Hoffmann's Hare didn't sell, despite being one of the best things offered in London in recent years. Maybe private equity magnates think hanging a fluffy bunny on their wall would convey the wrong message. When I first saw it I thought the estimate would be £3m-£5m, but it was actually pitched at a slightly more aggressive £4m-£6m. Given its appeal, I didn't think that unreasonable, and it was quite plausible that a couple of interested collectors could have pushed it well beyond that. A small Claude drawing sold recently for just shy of the Hoffmann low estimate, after all. Sotheby's top lot, a Constable that didn't inspire me, sold to a single bidder at its reserve. If that buyer had gone for the Hoffmann at Christie's, it would have looked very different.

We don't know the economics of either auction, particularly how much commission they earned (assume negative seller's commission). The other expensive lot at Christie's was withdrawn; surprisingly, it was consigned by Christie's itself, having taken ownership when it failed to meet its guaranteed price a few years ago. It was sold privately, I'm told above its high estimate. That would also have boosted their total significantly. It ought also to boost profits too, as it would have been taken to inventory at the lower of estimated realisable value and purchase price. I'd say a prudent accounting treatment would be to discount by at least 20%, causing a big loss then but a decent profit now.

A few other observations:

  • Vive la France! The Louvre made a great purchase of the Master of the Dreux Budé Triptych's Arrest of Christ for £965k (pictured above). It's a good and unusual picture that would complement any of the great collections of northern renaissance painting. Well done them for getting it directly from auction. Another fine French museum acquisition was Cabanal's Portrait of an Artist from the Winter Collection sale, for just £6,250. There are plenty of opportunities for good but cheap pictures that museums could be buying, but it's rare for them to do so. Do watch La Tribune de l'Art for the most thorough coverage of museum acquisitions, including the Cabanal.
  • Things I got right: of the pictures I thought looked cheap, the Moillon doubled estimate, Flinck, MignonBachiacca and Testa all exceeded estimate (even before premium). Two early Italian pictures I thought seemed cheap sold for approximately double and triple their respective estimates.  
  • The pictures I thought expensive mostly did poorly, which wasn't my expectation. The Constable scraped its reserve with one bid, view pictures and the Bosschaert still life did poorly, and the Henry VIII sold below low estimate. Tudor portraits have been madly expensive recently; historically interesting, but artistically dull. 
  • Things I got wrong: the Cariani was a bargain at its low estimate (£100k, £125k with premium), though dark pictures of Christ with the Cross are not the most 'commercial'. Baciccio made its high estimate (£35k with premium), but I still say it was cheap at that price. Mr Market didn't share my fondness for the early Cologne picture that made just £50k. I was surprised the Verspronck didn't sell; I thought it might exceed the estimate. His portraits are not rare, but this was a good one (though not in perfect condition). The Standard Bearer by Verspronck made $1.5m in 1998, and is now in the National Gallery, Washington. This one wasn't nearly as spectacularly swashbuckling, but similar order of quality.
  • So I was more right than wrong. I'm a genius, right? Well, alas no. Estimates aren't really predictions. Some pictures are estimated low to encourage interest (and tease us). Some are estimated 'robustly' to signal their importance (e.g. Hoffmann). And others are estimated high because the seller has demanded a high reserve. The auction house has marginal costs that aren't fully recovered from cataloguing fees, and they don't want too many unsold lots. But against that, they want to ensure their sales have a reasonable balance and low marginal costs make it worthwhile to take a punt if there's even a small chance of selling. There might also be opportunities for commission from private sale after the auction, and including some lots with high reserves might facilitate other consignments from the same seller. Sometimes unsold lots are no surprise to anyone, even the auctioneers. But that doesn't mean they're acting irrationally. 

Monday, 7 December 2015

Old Master Auctions

A hare among plants
Picture: Christie's
It's the week of the winter old master sales in London, and Sotheby's and Christie's have some great pictures for sale just in time for Christmas.

Best of all is surely this wonderful hare, at once stunningly beautiful, marvelously endearing, and art historically important. It's painted on vellum by Hans Hoffmann, who was clearly inspired by Dürer, but working a generation after his death. It's bigger than you'd imagine, combining a meticulous miniature technique with impactful presence at a distance. It's being sold at Christie's on Tuesday with an estimate of £4m-£6m. It's a prudent estimate, but given its potential appeal outside traditional old master collectors, and the tendency for some old master drawing collectors to pay enormous prices for the very best works, it could conceivably soar above that. You can zoom in on the detail on Christie's website. 

The Hoffmann is the top lot at Christie's, but many of my favourite pictures weren't actually the most expensive. A newly-discovered bouquet of flowers by Abraham Mignon at Sotheby's estimated at £200k-£300k is beautifully preserved and ranks as one of the finest Dutch flower pictures I've seen at auction, but he is less appreciated than Bosschaert or Huysum, and Mr Art Market can remember only so many names at one time. 

Some pictures sell cheaply because the market just doesn't appreciate them. Others seem just to have particularly conservative estimates. Here are some things that look cheap to me: 
Apricots in a ceramic bowl, with plums on a stone ledge
Picture: Christie's
Louise Moillon is a wonderful still life artist, absent from many major museums. Christie's has this lovely still life of apricots estimated at £70k - £100k. Its panel is badly warped, and there are paint losses along the cracks. But fundamentally it looks in rather good condition, and hasn't suffered the overcleaning endemic to seventeenth century still life. It needs careful restoration, but a bargain at that price.
Picture: Sotheby's
This Cariani Christ Carrying the Cross is a new discovery, and is unusually good for the artist. The estimate is just £70k-£100k at Sotheby's; it made a powerful impression at the viewing, and I suspect it will sell rather higher. It's a really moving image that wouldn't look out of place in a major museum, but it's perhaps not the most 'commercial' subject. 
Picture: Sotheby's
A more immediately attractive Italian picture, also at Sotheby's, is this wonderful Bachiacca, which is also notably well-preserved. Its estimate of £150k-£200k is rather than than the inflation-adjusted £16k that Agnew's paid for it in 1965 (around £277k today). Do zoom in on the Sotheby's website to get a better view of the details. Second-tier Italian artists like Bachiacca seem really undervalued to me, especially compared to Dutch pictures. 
Christ in Glory, in a painted oval
Picture: Christie's
Christie's has this Christ in Glory by Il Baciccio estimated at just £20k-£30k. Justice demands ten times as much; it looked spectacular at the viewing, though harder to appreciate in reproduction. 

Among the array of gold-ground pictures, it was two cheaper panels that particularly appealed to me. Sotheby's has Cola di Petruccioli da Orvieto's Madonna and Child Enthroned estimated at £60k-£80k and Giovanni da Modena's St Sebastian (£15k-£20k). 
Picture: Sotheby's
I greatly liked this anonymous Adoration of the Magi from Cologne, c.1450. This kind of picture rarely appears on the market, and it's high-quality despite its anonymity. Good value at its £50k-£80k estimate, at Sotheby's. Unusually it has been restituted twice. It was confiscated from a member of the Thyssen family, and returned after World War II. But now it's been returned to the heir of the owner before Thyssen, who presumably sold under duress. It's the sort of picture that regional British museums should pursue, instead of buying more overpriced Constables and Gainsboroughs. 

Among the Dutch pictures, this powerful portrait by Verspronck really stands out. He was a variable artist, but this is a particularly good example, despite some wear. The estimate of £100k-£200k is in line with his more pedestrian work; this deserves to sell for more. The other striking Dutch picture is a Govaert Flinck Tronie of a Young Woman, estimated at £200k-£300k. The market for Dutch pictures has been moderating recently, after years of strength, but this fine and immediately attractive picture is the sort of thing that might sell very highly. Both are at Sotheby's. 
A tulip, a Snakeshead, a Love-in-a-mist, a double variegated columbine, a Dog Rose, a Maiden’s Blush Rose, lilies of the valley and a pansy in a pot with a garden tiger moth, a shell, and a caterpillar on a ledge, a butterfly above
Picture: Christie's
Jan Wijnants isn't a particularly exciting artist, a Dutch landscapist less inventive and less brilliant than the bigger names. But Christie's has a delightful one on a very small scale at just £7k-£10k. Looking beyond the name you can find some exceptionally good value pictures in the day sales. Dutch flower still lifes are highly valued, but collectors tend to pursue the biggest names. Bosschaert is especially prized, and Christie's has one estimated at £600k-£800k. Estimate is reasonable and in line with comparable pictures, but it's no bargain at that level. More interesting to me is the picture hanging opposite at the viewing: a rare flower piece by Jacques de Gheyn II estimated at £100k-£150k (above). 
Picture: Sotheby's
For some things to seem relatively cheap, others must be expensive. Sotheby's top lot is a big Contstable estimated at £8m-£12m. I'm not a great fan of Constable, and that price can buy you many better pictures. Buy the wonderful Mabuse instead, which I neglected to mention only because its worth is already reflected in the £4m-£6m estimate (pictured above). The market for Brueghel and Cranach has moderated, but second-rate pictures still attract high estimates. I have a suspicion that the Holbein school Portrait of Henry VIII at Sotheby's will sell for more that its estimated £800k-£1.2m, but despite being a relatively good studio work it still seems too much to me. Iconic image of Britain's favourite psychopath, but not an inspiring picture. And view scenes always seem absurdly expensive to me: pretty and decorative, but rarely really good. Christie's has a really superior Guardi, but still doesn't seem worth £1.5m-£2.5m to me (though people with actual money will disagree, and it's their votes that count!). 
Aeneas and the Cumaean Sibyl presenting the Golden Bough to Charon
Picture: Christie's
Poussin is one of my very favourite artists, but to my surprise his Holy Family with the Infant St John the Baptist was one of my least favourite picture at Christie's. It's an early work, before he developed the austere classical style that's his hallmark. And it's not in great condition; selective cleaning has altered contrasts, and tonal variation has been lost. Not worth £400k-£600k, in my view; better off with the big Pietro Testa Aeneas and the Cumaean Sibyl presenting the Golden Bough to Charon, the next lot in the Christie's sale, estimated at £300k-£500k. It's over two meters wide, but a really fine picture (above). 

The viewings are always a revelation, a display of privately owned pictures that you wouldn't otherwise get to see. It surprises me that more people don't attend; they are free and open to everyone, but it seems to be a preponderance of dealers and collectors rather than art historians or the merely curious.

They've typically been less well-studied than museum pictures, and I welcome the chance to form a view relatively unclouded by the dense heritage of scholarly opinions expressed on museums' pictures. It's also a way to develop a feel for condition, which is less apparent in museums that restore to a common standard. In the auction rooms you can see pictures in a range of states: battered and broken, overcleaned, repainted, cracked or torn, but sometimes marvelously pristine beneath dirty varnish. This season's sales had a lot of things especially to my taste, and there are many more wonderful pictures. Do have a look at the catalogues for the Master of St Ursula, Ambrosius Benson, a fascinating picture from the workshop of Joos van Cleve that was updated in a more modern style, a newly discovered (sadly worn) Spranger, a wild mannerist picture by Mirabello Cavallori, the Master of the Dreux Budé Triptych (possibly the earliest noctural panel painting), Ligozzi, Gandolfi and excellent pictures by Herri met de Bles and Hans Rottenhammer.

Thursday, 3 December 2015

'Saving' treasures

Art Fund director Stephen Deuchar has written an intemperate article about Britain's export controls, in the context of the sale of the Penrhyn Rembrandt. Bendor Grosvenor has written a considered response (naturally my choice of adjectives reflects my position in the debate!). I'd put a slightly different emphasis on the debate, so here are my thoughts: 
  • Prohibiting export of works of art is an arbitrary confiscation of private property. A picture that can only be sold in one country is worth less than one on the global market. Spanish law effectively confiscates pictures as soon as they arrive on their shores. It's bizarre policy to punish people for buying art. You can still believe in punitive tax on gifts and inheritance, and taxing the rich until the pips squeak, You can still disbelieve in the merits of private property. But punitively confiscating wealth if it's in the form of art is utterly bizarre.
  • I disagree with Bendor Grosvenor that the works of art that have been saved are those that objectively are most cherished by the nation. I think donors place a lot of belief in the expert assessments of works that must be saved. And I don't think they always make the right choices. Personally I'd take the Le Brun, which was let out without a squeak, over the Van Dyck. And I wholeheartedly agree with the museum director who told Bendor that the Penrhyn Rembrandt isn't the best in the country. Apparently the Art Fund has never failed in its appeals, which means they're probably taking too few risks. 
  • There really are some things that it's in the national interest to save because they are so strongly connected to the country. I'm not convinced that applies to everything that is export-blocked, and I don't think there is such a strong case for trying to save things simply because they are especially important. In any case, the really good things are usually the ones that get away because we can't afford them. I agree with Bendor that the answer is funding, not export controls. 
  • Stephen Deuchar completely misses the point of what the Art Fund ought to be doing: helping to pay for really good museum acquisitions. Limiting it to 'saving' the stuff that happens to be in the UK is needlessly limiting. Pictures that can be exported are worth more because they can be sold to a global market. The other side of that is that we can buy better things if we look around the world for the best acquisitions, rather than trying to 'save' things that happen already to be here, deferring to the historic judgment of British collectors. 
  • Here are some ideas from me on what to buy. And now I'm off to see the Gentileschi at Sotheby's.