Art advisor Todd Levin
In a video over at Fortune, art advisor Todd Levin talks about the current art market bubble, and how growing income disparity in the West has precipitated vertiginous record art auction prices that cannot be maintained. It's illuminating to hear this from the perspective of an art advisor.
Do people hope that an art work that they buy today will be more at sometime down the road? I think I would be disingenuous to say anything other than of course, anybody would hope that. Fundamentally, the market hasn't changed that much in the last 10 or 20 or 30 years, what has changed is the amount of money sloshing around in the market, and that's due to an excessive amount of excess capital in the hands of a smaller group of people. They're certainly not going to put it in a bank at 1%, they're certainly not going to hide it in their mattress, so they need to find assets. Art has been a favored location to place a portion of one's assets. There has been a strong interest lately in flipping. Collectors buy extraordinarily young art and then immediately putting that up at auction and flipping that work for five, ten more times than they initially purchased for only six months, a year or two ago. If somebody has a work of art, they will take it to Sotheby's and/or Christies and get what is called an auction estimate, and that estimate will be what the auction house believes what that item will sell for. Then there will be a discussion as to whether the persons who owns this piece wants to sell it outright or if they would be interested in a financial guarantee. Whether the piece sells or not they are absolutely guaranteed a certain amount of money no matter what happens.
Image via Fortune
The benefit of guarantees for auction houses is at its core that they can attain the work that they're trying to get for the auction. They're in direct competition and its a very, very tough game to get the very best, very high quality work. In order to do that they simply have to belly up to the table and pull out their wallet. These guarantees are fundamentally the steroid of the auction world, and so these things can be very addictive. The auction houses are experiencing a situation where every auction total is higher than the last and these vertiginous upward prices can't be maintained forever. Some day, the music is going to stop, and somebody's going to be found without a chair to sit on. And that's going to be a very hard day.
What's your take on Levin's thoughts? How long can this bubble last?