Art sales are thriving despite recession. Why?

Art market analysis: Why works make records in a recession

In her new column, Lindsay Pollock examines how prices at auction can remain high despite the downturn

Source: Art News paper

By Lindsay Pollock |

Leaves and Bust, 1932 (Photo: Kate Carr)" width="468"">

Interior view of the Brody residence, with Picasso's Nude, Green Leaves and Bust, 1932 (Photo: Kate Carr)

The reign of Alberto Giacometti’s emaciated Walking Man I as the
world’s priciest trophy at auction is likely to be short-lived. The
six-foot tall bronze, which fetched an outsized $104.3m in February at
Sotheby’s, London, is expected to be overtaken by a painting of
Picasso’s lusty, lilac-hued mistress, Marie-Thérèse Walter, coming up
for sale on 4 May at Christie’s, New York.

The 1932 Nude, Green Leaves and Bust bears the largest pre-sale auction estimate in history: an “on request only” $70m to $90m. But
dealers say the painting may well hammer down for over $100m. It is from
the same series as casino owner Steve Wynn’s celebrated Le Rêve,
also 1932, which was sold to hedge fund manager Steve Cohen in 2006 for
$139m, before Wynn accidentally plunged his elbow through the canvas
and called off the deal. Christie’s painting has a third-party
guarantor, so someone, somewhere, has locked in a bid for at least $70m.

If the Picasso performs as expected, it will be the second time in four months—amid a painful global recession—that the record for a work at auction is smashed. Until
the Giacometti sale, the previous record, Sotheby’s sale of Picasso’s
sensitive Boy with a Pipe, 1905, in 2004 for $104.1m, had lasted
for six years, through a boom. Now, as the recession drags on, experts
predict another record sale. How could this be?

While economists are quick to point to signs of recovery, the recession is by no means over. Perhaps part of the answer lies in who exactly is
suffering in this downturn. While the homeless proliferate, and the
middle-classes buckle down, the wealthiest seem to thrive. A recent list
of the top hedge-fund managers revealed that 25 earned over $25bn, yet
pay some of the lowest tax rates in the US. If just a couple—like the
acquisitive Steve Cohen, number five on the list—decided to dress up
their walls, the auction prices would again soar.

Indeed, counter-intuitively, now may be a good time to put a masterpiece on the block. The uncertain economy means auction catalogues aren’t clogged with goods. Buyers can focus. A dearth of
enticing offerings over the last couple of seasons means buyers are
primed. To be sure, neither the Picasso nor Giaco­metti came to market
for purely discretionary reasons. The Pic­asso comes from the estate of
Los Angeles philanthropist Fran­ces Brody, who died in 2009. Mrs Brody
and her husband bought the painting in 1951 at the Paul Rosenberg
Gallery, for the then princely sum of $19,800. At the time the painting
was considered decorative, hardly the critically significant example
these Marie-Thérèse pictures were later deemed to be.

The Giacometti was sold following the sale of Dresdner Bank. Both works are blue-chip, cerebral, classic—ultra-safe bets. Both are also, in a sense, serial works. The Giacometti was cast in an
edition of eight. The Picasso is part of a now celebrated series,
promoted by Acqua­vella Galleries who mounted a blockbuster,
non-commercial show in 2008 featuring examples of these pictures. Loans
came from Wynn, Cohen, MoMA and the Guggenheim. Meanwhile, Picasso’s
biographer, John Richardson, is at work on a show opening at Gagosian,
London, next month (4 June-28 August), hoping to capture the same rave
reviews the “Mosqueteros” show garnered at Gagosian New York last year.

Looking back, plenty of 20th-century milestone sales occurred in lousy economic times. The wealthy remained wealthy and there was opportunistic buying. The difference was that record-setting works
were either old masters or 19th-century pictures—that era’s rare, safe
and desirable.

One of the most significant transactions took place amid the Great Depression. In 1931, Andrew Mellon bought 20 old masters from the Soviet government, with a view to
establishing a new national museum in Washington, DC. Mellon paid $7m
for the works, plucked from the Hermitage’s walls. The booty included
Raphael’s Alba Ma­don­na, around 1510, and Bot­ticelli’s Adoration
of the Magi, around 1481-82: Mellon paid $1.2m for the Raphael
alone. In 1937, Mellon donated 125 master­pieces to Washington’s
Nat­ion­al Gallery of Art. It is reminiscent of today’s sprees by
Qa­tar, Abu Dhabi and other regions with new museums to stock.

Another form of distress selling—a British Earl with estate taxes to pay—brought Diego Velázquez’s 1649-50 portrait of Juan de Pareja to Christie’s in November, 1970, in another US recession. It
was bought by the Wildenstein Gallery on behalf of New York’s
Metropolitan Mus­eum of Art for $5.54m, another auction record. A
short-lived consumer-driven recession in 1980 didn’t dampen the
prospects for J.M.W. Turner’s Juliet and Her Nurse, 1836,
auctioned at Sotheby’s in London for $6.4m. The sale was discretionary,
consigned by 82-year old Flora Whitney Miller, daughter of the founder
of the Whitney Museum. Estimated to sell for over $1m, Argentina cement
heiress Amalia Lacroze de Fortabat was the buyer.

It wasn’t until 1990—just before the last major recession—that Christie’s sold Van Gogh’s painting of his physician, the 1890 Portrait of Dr Gachet, for $82.5m to Japanese paper magnate
Ryoei Saito who also snagged Renoir’s Au Moulin de la Galette,
1876, at Sotheby’s the following night for $78m.

If Mrs Brody’s Picasso sells as well as expected, it will add to the auction houses’ returning momentum, begun for the walking man. Dealers
are already groaning that the auction houses are back in control when it
comes to getting the goods. But with the unscripted drama of the
saleroom there is no way to predict. We may all be sitting in New York,
eyes glued to Christopher Burge’s gavel, only to watch everything freeze
over. You can be sure, if the Picasso is hammered down for a “lowly”
$70m, the recession will be blamed.