Sotheby's Bank: Wonkish comments on Sotheby's strategy

Yesterday Sotheby's announced plans to  return capital to shareholders, responding to 'much welcomed feedback and input from investors' (like Dan Loeb, who called for the CEO to be sacked). They are taking lots of predictable steps to cut costs and return capital to investors. One of the more curious aspects is the separation of Sotheby's Financial Services ('SFS') from the auction business. 

SFS is essentially a pawnbroker, lending money against art. Its competitive advantage is that it knows the art market. Its competitors in the finance industry cannot value art as collateral, and cannot easily sell it if they have to repossess. Sotheby's will often know the identity of the underbidder, and know the other collectors who will be interested. The hefty auction transaction costs are paid to Sotheby's itself. The business couldn't work without that relationship. 

They now seek 15% return on equity in their auction business, and 20% in their financial services business, which lends money against art. Return on equity is a measure of how much profit a business generates from the investor's funds. It can be increased by borrowing more money (leverage). For example, if you buy a house for £1m cash and sell it for £1.1m, your return on equity is 10%. If you did the same trade with a £100k deposit and 90% mortgage, your return on equity is 500%, minus and interest paid. In the boom years, banks increased return on equity by borrowing more money. That boosted returns in the good years, but increased risk when things went wrong. The attraction of lending to Sotheby's is that they typically have a lot of cash on-hand, because they are paid by buyers before transferring money to sellers - so their cashflow cycle should be positive, notwithstanding seasonality. Lending it out via SFS is more attractive than depositing it at the bank. 

The higher target return in the financial services business seems driven by increased leverage. It is repaying an inter-company loan, and taking on the whole of the firm's credit facility. I assume that the facility is guaranteed by the parent company (or directly to the parent company), as the finance business is too small, too volatile and too uncertain to be able to borrow at good rates. And it couldn't succeed without Sotheby's' expertise and relationships. Given SFS's dependency on Sotheby's, separate return on equity targets are really internal accounting adjustments.  

Lending money is the easiest business; there are always willing customers. The skill is in getting it repaid. Sotheby's seems remarkable relaxed about repayment, with high levels of loans 30 days and 90 days past due, and a volatile split between 30 days and 90 days past due. That reflects the specialist nature of the business, with relatively large loans against good collateral. I suspect they boost returns by charging additional fees on over-due loans, without worrying too much about when they are repaid because they are confident in the collateral. But lending is inherently extremely risky, and has the potential to swing into huge loss when things go badly. I hope for a lot more disclosure on the finance business in their accounts, so that investors can assess the risks independently.

If you can get past the inelegant corporate-speak and the 'going fowards' (don't they read Lucy Kellaway?), the strategy review seems broadly sensible, with better cost discipline and a more efficient capital structure. I think Sotheby's is wise to resist the more extreme demands of the activist investors, who want to squeeze cash out of the business to get a quick return. Auctioneering is a cyclical business; it's prudent to retain capital for tougher times. But growth plans for SFS introduce significant risk, and performance is hard to assess with the limited information provided in the accounts. The differential return on equity targets involve a degree of smoke and mirrors, and increasing leverage means increased risk.

Cost of Photography

Picture: DutchNews.nl

Yesterday a visitor smashed a unique vase at the Groninger Museum, backing into it when taking a photograph. It shows why the Soane Museum's photography policy is so wise:

"Photography can be intrusive and distracting for visitors. Those taking photographs are often concentrating on what they are doing more than on their surroundings and this increases the risk of accidental damage to works of art." 

The Soane provides links to free pictures on Flickr and is willing to consider granting special permission to take pictures. Their pragmatism and helpfulness is admirable; their prohibition on photography more so. It's a shame that the Soane's former director is now allowing photography at the Fitzwilliam Museum. A visitor smashed a precious vase at the Fitz, too (not related to photography).

My thoughts on museum photography here. Thanks to Maaike Dirkx for alerting me to the Groninger Museum story.

New York, Old Masters

It's Old Master week in New York, but sadly I'm stuck in London. I can still enjoy the viewings vicariously as the major auction houses publish good quality pictures online, and I saw some of this highlights in London in December. The stand-out masterpiece is the Rothschild Prayerbook, which is one of the greatest works of art to be sold this decade. I was fortunate to see it in London, a group of us crowding around slack-jawed as the pages were turned. But many of the minor works of art are also of great interest; some of the most expensive lots are fashionable rather than great, and there are lots of cheaper pictures that I'd take over some of the $1m+ lots. Take this small Pieta by Lo Spagna at Sotheby's. It's a beautiful example of the influence of Raphael's early style, an absolute classic of the Italian Renaissance, and it's estimated at just $150k-$200k. 

Picture: Sotheby's

It looks well-preserved, and might be an independent work of art rather than a predella panel. This is Lo Spagna at his best, but even at his best he wasn't a great artist. The drapery is mechanical, the figures are rather wooden and the horizon isn't horizontal, but it's still a picture I'd love to have - a clear, moving composition from the cusp of the High Renaissance. From the expensive lots at Sotheby's I liked the remarkable Portrait of a Gyrfalcon viewed from three angles ($700k-$1m), a Tetrode bronze of Samson Slaying the Philistine ($800k-$1.2m) and a wonderfully rude Fragonard ($6m - $8m).

Picture: Christie's

Christie's has a rare Michael Sweerts A Woman Grooming Her Child's Hair (above), estimated at just $200k - $300k. Christie's recently valued another Sweerts, In The Studio, at $5m - $10m in their controversial appraisal of works in the Detroit Institute of Arts. Why the difference? The cheaper picture is smaller, less well known, apparently less well preserved, of a less attractive subject (de-lousing!) and its attribution is uncertain. I still think the estimate is too low.

At first glance the condition seems poor - the weave of the canvas is quite prominent and there seem to be lots of small losses. I haven't seen the original, but I suspect it's not actually as badly preserved as it seems. Sweerts was known to use coarse canvases and paint thinly, using only a few highlights rather than the delicate glazes used by other Dutch masters. Even if the damage is only apparent, it is off-putting. But the bigger question is whether it is by Sweerts at all. The catalogue entry gives the picture wholly to Sweerts, but doesn't reference Kultzen's catalogue raisonné (which I don't have, but presumably doesn't include it as autograph). It references the catalogue of the 2002 Sweerts exhibition, but doesn't mention that it's listed there as only 'attributed' to Sweerts. Going only by the photograph, it looks right to me and a bargain at its estimated price. Sweerts is a rare and fascinating artist; you can read more about him here.

Prices for pictures by Dutch artists can vary enormously. A telling contrast is that Christie's has a Jan van Goyen landscape estimated at $20k-$30k. Sotheby's has a slightly smaller Jan van Goyen landscape (above) estimated at fifty times as much, $1m - $1.5m. Van Goyen was prolific, and his pictures vary greatly both in intrinsic quality and state of preservation. The Sotheby's picture, which I saw in London, is outstanding; if you want a Van Goyen, you'll want that Van Goyen. It really is fifty times better. I also loved this tiny Ostade at the London preview. It has a substantial estimate of $500k-$800k, but it's another exceptional picture that is far superior to his more run-of-the-mill production.

Picture: Christie's

The Christie's Renaissance sale is quite a mix, with a lot of pictures I don't care for. Some are in poor condition, like this Pontormo. The Lotto, which I saw in London, is a wreck and the head of St Catherine is ghastly. I disliked all of the Botticelli-ish pictures in the sale. But there are also some very fine things. This splendid Salvator Mundi is given to Jacopo de Barbari; I suspect it will do better than its estimated $400k-$600k. They have a particularly strong offering of early Netherlandish pictures, which are rather scarce. As well as the Rothschild Prayerbook, they have this lovely unattributed St Catherine estimated at $250k-$350k, inexplicably deaccessioned by the Met, a stunning Van Orley Virgin and Child that I admired when it was on loan in Minneapolis, and cheap at its estimate of $500k-$800k, another Virgin and Child by the Master of the Stern Virgin and Child, and a beautiful and well-preserved Provost Annunciation at $2m-$4m.

This is a fine and rare portrait by Amberger, but I find the estimate of $4m-$6m inexplicable. I suppose there must be some deep-pocketed collectors of early German paintings that they expect to vie for it. The obvious buyer should be the Thyssen in Madrid, which owns its pair. I understand that Thyssen specifically earmarked some of his pictures as inalienable, but permitted others to be sold to fund acquisitions. There are lots of second-rate Thyssen pictures that could justifiably be sold to reunite husband and wife, even if the estimate is steep. 

Seventeenth century French paintings must be deeply unfashionable; some of the estimates seem weirdly low. I saw this Bourdon at Wildenstein a few years ago; it was previously in the Spencer collection, and it seems an amazing bargain if it sells within the $50k-$70k estimate. The attribution of this Laurent de la Hyre Virgin and Child is uncertain, but still seems cheap at $40k-$60k. A version of Sancerre's famous La Femme Voilée is estimated at $60-$80k and a Virgin and Child with St Anne formerly attributed to Bourdon and now to Louis Licherie de Beurie is an attractive Poussin-esque picture, worn and not great but a steal at $20k-$30k.

Picture: Christie's

From the drawings sales, this Gericault is the stand-out lot from the Christie's sale (est. $150k-$250k). I'd love to buy it for the British Museum. Their outstanding collection of Renaissance drawings rather tails off by the nineteenth century. None of their Gericaults are equal to this. 

Sotheby's lists this Bearded Old Man as 'Attributed to Rembrandt', but their estimate of $25k-$35k says that they don't believe it's a Rembrandt. Neither do I; absolutely in Rembrandt's style, but it's a laboured attempt to replicate the master's economical drawing technique. The arms are particularly awkward. My choice from the Sotheby's sale is this marvellous seventeenth century Florentine red chalk Study of a Man, estimated at just $15-20k. Much better quality than the Rembrandt-ish drawing.

First Bohemians

Picture: Amazon

Vic Gatrell The First Bohemians: Life and Art in London's Golden Age Allen Lane 2013

The sensationalist title is misleading; this isn't a cod-sociological history of bohemianism, and let's be thankful for that. It's a micro-history of artists in eighteenth century Covent Garden, and it's much the best social history I've read recently. The illustrations are well-chosen (and well-printed), and the discussion of art is substantive, serious and perceptive. It's much the best of the many recent social histories of eighteenth century England. But it is one-sided; this book is resolutely about low-life (whether those low lives were lived by struggling artists or corrupt aristos). 

Fascinating and amusing anecdotes abound. I was taken by the discussion of coffee shops, which were rather earthier than Habermas's genteel public sphere: "Where the Sign is painted with a Woman's Hand in't, 'tis a Bawdy-house; where a Man's, it has another Qualification; but where it has a Star in the Sign, 'tis calculated for every lewd Purpose" (Thomas Brown Amusements Serious and Comican, Calculated for the Meridian of London, 2nd edition 1702, p. 130, quoted p.94). He identifies a shift from text-based to image-based commentary (p. 224), which I question. More commentary of all kinds is produced from the eighteenth century onward, much of it 'text-based'. And much earlier commentary was visual, although less of it survives. 

Some social history emphasises similarities to today - an approach especially prevalent in historic houses and museums that try, sometimes too hard, to help patrons relate to the past. Gatrell emphasises estrangement. He focuses on the dirt and the squalor. Bohemianism originated at the intersection between the literally grubby reality of eighteenth century life and the emerging ideas of artistic genius: "Both the cult of genius and rising expectations were making failing artists more self-conscious than their predecessors had been" (p. 150). Squalor was not new, but the aspiration ideas emerging from the filth were novel. And  the ideas have survived better than our sense of their context. That is the balance that Gatrell addresses.

Sometimes Gatrell fights too hard to establish his own novelty: "We live in a world which fetishizes fashionably approved art works and forgets the conditions of their production ... the last thing they should be allowed to do is prettify our notion of the culture that produced them" (p. 213). In my experience both popular and academic art history is obsessed with 'conditions of production' and with stories of struggling artists. He thinks it's "odd that well-bred art historians so ignore the fact that eighteenth-century art was predominantly the creation of middling and humble men, just as they sidestep its implications for the toadying that ensued from it." (p. 142). I don't think it is ignored, and I don't think the implications of the observation that artists were often poor are especially profound. But I still love this book; it does redress a balance in social history, and it is well written and learned. 

New and upcoming art books

Picture: MS

I finally conquered my teetering pile of unread books over the Christmas break, just in time for the promising crop of titles for 2014. Sorry for the gratuitous cat photo, but what pile of books is complete without a cat? Here are the upcoming highlights that I've added to my wishlist.

Richard Verdi Rembrandt's Themes: Life into Art Yale University Press March 2014 £25 Richard Verdi was director of the Barber Institute in Birmingham, and has written on a wide variety of periods and subjects - Cezanne, Poussin, Klee, Parrots and now Rembrandt. Especially looking forward to this.

Carlo Falciani & Antonio Natali et al Pontormo and Rosso Fiorentino Mandragora March 2014 £35 Catalogue of a forthcoming exhibition in Florence that I really hope I can get to. A-list roster of catalogue contributors - looks like this will become a key text on Italian mannerism.

Alessandra Zamperini Paolo Veronese Thames & Hudson March 2014 £60. Promising monograph published to coincide with the National Gallery exhibition (I've already got my season ticket!).

Jonathan Brown In the Shadow of Velazquez: A life in Art History Princeton University Press May 2014 £25 Autobiographical book based on lectures at the Prado. I'm a fan of both Velazquez and Jonathan Brown. Can't wait! 

Roger Scruton The Soul of the World Princeton University Press April 2014 Defending transcendence against the onslaught of scientistic atheism. I love and hate Scruton in equal measure; I rarely agree with him entirely, and sometimes despise him absolutely. But he is a fine writer and a sophisticated thinker and I enjoy his writing immensely. And you can tell this book will be good because there's a nice Poussin on the cover. Contrary to popular wisdom, you can tell a lot about a book from its cover.

Morton Steen Hansen In Michelangelo's Mirror: Perino del Vaga, Daniela da Volterra, Pellegrino Tibaldi Penn State University Press 2013 £57.35 I'm picking up a copy from the London Library tomorrow.

Lorne Campbell The Sixteenth Century Netherlandish Paintings, with French Paintings before 1600: National Gallery Catalogue Princeton University Press July 2014 £95 (sic!) The latest in a fabulous series of NG catalogues. Shame about the cost.

Martin Postle and Robert Simon Richard Wilson and the Transformation of European Landscape Painting Yale University Press March 2014 £45 This looks fantastic. I've always liked Wilson and thought him rather under-rated. This book situates him in a European rather than parochially British context.

Mark Hallett Reynolds: Portraiture in Action Yale University Press June 2014 £50 Latest in the excellent series of Paul Mellon Centre Studies in British Art. 

Jonathan W. Unglaub Poussin's Ordination: History, Faith and the Sacred Landscape Princeton University Press 2013 £9.99 In the Kimbell's excellent series of short books focusing on works in its collection, this one on their fantastic recent Poussin acquisition. Don't be put off by the ghastly subtitle!

Tom Nichols Titian and the End of the Venetian Renaissance Reaktion 2013 £49 Self-recommending.

Perrin Stein et al Artists and Amateurs: Etching in eighteenth century France Princeton University Press 2013 £45 Catalogue of an exhibition at the Met, which has been positively reviewed. I've been consistently impressed by the Met's exhibition catalogues, and I'm keen to get my hands on this one.

Malcolm Bull Inventing Falsehood, Making Truth: Vico and Neapolitan Painting Princeton University Press 2013 £16.95 Sounds arcane, but anything by Bull will be good.

James Hall The Self-Portrait: A cultural history Thames & Hudson April 2014 £19.95 I've never read any of Hall's books; I find their titles portentously off-putting (Michelangelo and the reinvention of the human body and The Sinister Side: How left/right symbolism shaped western art). It will be interesting to see if he has anything new to say about this well-worn theme.

Anita Georgiavska-Shine & Larry Silver Rubens, Velazquez and the King of Spain Ashgate February 2014 £70 Study of the Torre de la Parada, which was decorated by Rubens and Velazquez. Both artists' contributions have been extensively studied; this book considers them in unison. I recently read the Rubens Corpus volume on Rubens' contribution to the Torre de la Parada, written by Svetlana Alpers, so looking forward to this as a follow-up.

Rachael Z. Delue Cézanne and the Modern: Masterpieces of European Art from the Pearlman Collection, Princeton University Art Museum Yale University Press January 2014 £50 There are some outstanding masterpieces in the Pearlman Collection. I look forward to seeing it in its entirety in this new catalogue.

David Bindman Warm Flesh, Cold Marble: Canova, Thorvaldsen and their critics Yale University Press March 2014 £30 Considers impact of Kantian aesthetics on their output and the 'relationship between the whiteness of marble and ideas of race'. Hmm.

Pascal Griener & Oscar Batschmann Hans Holbein Reaktion 2013 £17.95 New edition of an excellent study of Holbein. The new edition is small format, but the illustrations are good and I might buy it despite already owning the original edition.

Camille Paglia Glittering Images: A journey through art from Ancient Egypt to Star Wars Vintage 2013 £11.53 Barking mad, but in a good way.

Keith Christiansen Piero della Francesca: Personal Encounters Yale University Press May 2014 £12.99 Short catalogue of forthcoming Piero exhibition at the Met.

Laura M. Giles et al Italian Master Drawings from the Princeton University Art Gallery Yale University Press April 2014 £50

Eik Kahng Delacroix and the Matter of Finish Yale University Press February 2014 £21.40 Blurb is intriguing.

Plenty to review this year!

At the National Gallery

Picture: National Gallery

This rediscovered Pontormo has been on loan to the National Gallery since 2009. It's a fantastic picture, and it stands out for its fine condition. Its varnish is discoloured, but it's escaped the devastating scrubbing that ruined so many of the NG's own pictures. It's a shame that it's stuck in a corner - it really needs to be appreciated from both sides. Maybe they could swap it with the Franciabianco nearby. It's been published in the Burlington and exhibited at the National Gallery for years, but it's still not as well known as is its desert. Many people neglect it because it's less bright than the over-cleaned pictures nearby, and it's also competing with Raphael, Sebastiano's Raising of Lazarus and Bronzino's Allegory. But it holds its own even in that august company. There's a very damaged Pontormo portrait coming up at Christie's later this month with an estimate of $300k - $500k. This well-preserved one is worth a hundred times more. 

I'm delighted that the awful glazing on the Rembrandts that I complained about recently has gone. They were glazed for an exhibition, using poor-quality glass that gave off distracting reflections, short-changing the exhibition's visitors. The glass was left on after the exhibition, but has now wisely been removed. They now look fantastic - great paintings, well-framed and well-hung.

Picture: National Gallery

There are two new loans in the British Paintings gallery, a Reynolds and a Lawrence. Reynolds' Captain Keppel (above) is from the National Maritime Museum. I don't care for it. The wall text remarks on its debt to the Apollo Belvedere, but to my eyes its attempt at recreating an ancient heroic pose for an eighteenth century English gentleman is faintly ridiculous. Reynolds' art historical appropriations weren't always successful (and I can't forgive him his alleged experimental destruction of a Rembrandt!). The Lawrence, on the other hand, is spectacular. Despite the youth of his subject, Lawrence's dashing pose is wholly successful, and it's brilliantly painted. There's another version next door at the National Portrait Gallery, but I still hope the NG can acquire this one. So much better than the minor little Lawrence they acquired recently, which is quite out of its depth among the highlights of British art that are one display in that room.

Visiting the NG at this time of year is a particular pleasure, so far from tourist season. Its director, Nicholas Penny, is the best of his generation, as you'll see from this wonderful recent interview. They just need to repaint the ghastly purple walls, go back to 10am opening rather than five or ten past, move the Portormo, transfer all of its conservators to the security department and have them guard the pictures rather than 'restore' them to death and buy the Lawrence and the Pontormo. Easy! 

The Quality Instinct

Picture: Amazon

Maxwell L. Anderson The Quality Instinct: Seeing art through a museums director's eyes University of Chicago Press 2013, £30

Maxwell L. Anderson is the youngest person ever to have graduated with an Art History PhD from Harvard, at the tender age of 24. If you missed that on page 3, he tells you again on page 29. The book is part memoir and part guide to looking. It's sometimes brilliant, but Maxwell's self-regard rankles. And when he's not telling us how clever he is, he's trying too hard to be hip. He arranged to send a Mesopotamian tablet into space because "how cool would it be to send the oldest object ever on a journey to orbit the earth?" (p. 94). He thinks the Mona Lisa is famous only because it was stolen - or, in Anderson-speak, "ripped way out of its comfort zone" (p. 95). But if you can get past these excruciating passages, Anderson is often sensible and insightful.

He is passionate about sharing his knowledge with the public, and he understands the difference between accessible communication and dumb populism. He is leery of the light entertainment provided by exhibition videos, and he is a brilliant critic of the commercial exhibitions that now proliferate:

They all include highly dramatic recreations of the original milieux of the works on view. Their lighting involves dramatic pin spots rather than the more subtle wash that typically illuminates works of art in museums - and not coincidentally helps preserve them for posterity The quality of the objects on display is erratic. There is next to no new scholarship resulting from any of these enterprises. And all of them assume that visitors hunger for theme-park experiences rather than unvarnished, individual encounters with works of art. (p. 73)

Anderson's account of his early career is compelling, enlivened with anecdotes about fearsome scholars of yesteryear. Professor von Blanckenhagen told him "Mr Anderson, let me warn you of something. In my experience, young people propose things that are new but not right, or right but not new" (p. 142). No pandering to students in those days! Anderson's tales of hunting through the store rooms at the Met are quite wonderful, and he clearly has a good eye. His taste in contemporary art is more wide-ranging than mine, and I enjoyed having a guide with such visual intelligence to show me works for which I have little instinctive sympathy.

Most of the book is a guide to assessing quality, using examples that range widely across time, place and media. His comments are always perceptive and interesting, but his approach is unsystematic in its mix of anecdote and analysis. The framework he provides is helpful in organising his material, but too schematic as a tool for looking. Jakob Rosenberg's On Quality in Art is still a better source.

Despite being the youngest ever Harvard Art History PhD, he is often wrong or off-key. Oxygen was identified by Joseph Priestley not Joseph Priestly, and it was discovered at Bowood not Lansdowne House. He describes the shift in perspective that's called parallax, but he uses the less appropriate term 'synesthesia' instead. He cites Isaiah Berlin as a critic of relativism when Ernest Gellner would be better in the context, suggesting that his reading has been selective. He generally uses the terms postmodernism, poststructuralism and relativism interchangeably, thinking of them as infections to be avoided rather than ideas worthy of engagement. His summary of Foucault does not suggest familiarity with the work of this most fascinating and sophisticated scholar.

He thinks Sterling Clark had an unerring eye, which anyone seeing the bunch of Renoirs he bought will have cause to doubt. The Becket Casket was bought by the V&A with contribution from the National Heritiage Memorial Fund, not bought by the fund. He claims that the art market thinks price is the best measure of quality, but markets don't have views. The market is a mechanism that establishes price, and in my experience participants in that market are perfectly well aware that price and quality are different things. But for all its flaws, this book inspired lots of little cheers when it attacked the pretensions of relativists and obscurantists and cynical showmen.