We noted earlier the interest some firms were showing in trying to create art investment funds. Unfortunately for them, John Dizard in the FT.com notes some of the “froth” is coming out of the art market. He also notes some similarities (and differences) between the art market and the stock market.
The art market is far more differentiated and does not have the transaction volume or the more universal measures of value that traded securities markets have. Yet it is subject to the same greed and despair. At present, contemporary art dealers are voicing much the same message as that of the post-peak brokers: it’s not an art market but a market of artists. I’m not selling Google, I’m selling the next Google.
What may be more unsettling for art investors that the big spenders, i.e. hedge fund managers, have ratcheted back their demand in light of “diminished earnings prospects.”
That does not mean that we are staring into a dotcom-type black hole. A rule of thumb has been that the art market continues strong for at least a year after a stock market decline begins. And the stopwatch has not started yet. There are still many people who want to turn their cash into something other than a string of numbers or another cupola on the second house.
So the contemporary art world will stay active but the edge is coming off the collectors’ hunger to consume.
We have not seen any evidence pointing to art as a leading indicator for the stock market, but this is an interesting data point none the less.