Saturday, February 11, 2012

Fancy a game of cards? The stake is $250 million

Cézanne's Card Players — an acknowledged masterpiece of post-Impressionist painting (left) — has demolished all previous art market records by selling to the Qatari royal family for a reported $250 million in a private treaty sale. The price reveals the extent to which the art market now occupies a parallel universe entirely out of synch with normal economic reality.

Cézanne's two rustic workmen are shown playing cards, but a game of dice might have been more appropriate for the price of this picture is the most graphic illustration to date of the random nature of art market pricing. (Where better to start on this than the American economist William Baumol's 1986 paper — 'Unnatural Value: Or Art Investment as Floating Crap Game', American Economic Review, 76, 1986, pp10-14).

Drawing on the classical economic theory of Adam Smith, Baumol was one of the first to explain how the art market lacks the mechanisms that govern other forms economic activity in which market prices for commodities are always propelled back towards a "natural price" by the equilibrating forces of supply and demand, etc. As a non-fungible asset, art does not respond to that gravitational pull, resulting in off-the-scale prices like the Qatari Cézanne purchase.

Wealth managers and investment advisors will be salivating at the news of this price for it reinforces the hypnotic illusion that art is not merely a safe store of value but an asset that can deliver staggering returns on investment.

And what of the broader cultural impact? There was a time when museums provided an environment in which to focus on the aesthetic attributes of a work of art without the white noise of commerce and controversy interfering in the contemplative process. But such is the hype around these astronomical prices that this version of Cézanne's Card Players is at risk — like the Parthenon Marbles in the British Museum — of being famous for all the wrong reasons: "Wow, this picture's worth a quarter of a billion dollars."

Arguably more interesting still is the influence this price could have on how European and North American museums manage their collections. Many of them are already wrestling with the dilemmas of deaccessioning certain objects — to sell or not to sell? The prospect of a single picture raising $300 million or more is very likely to lead some museum boards to countenance previously taboo solutions for fixing their balance sheets.

This picture came from the collection of the Greek shipping magnate George Embiricos. With many more equally important pictures still in private hands and the great maw of emerging market money opening ever wider, who is to say that other Greek shipping families won't decide to liquidate some assets. A price of $250 million may seem off the scale, but it will soon be surpassed.

A couple of years ago, during the toxic disputes swirling around the Barnes Foundation, New York dealer Richard Feigen was filmed speculating about the value of the Barnes Collection's own version of Cézanne's Card Players (Cézanne painted five variations of the theme). "Who knows what it could be worth?" he mused (I'm paraphrasing here). "A hundred million? Two hundred million? A billion dollars?"

Already there is speculation that the actual price for the Qatari Cézanne may have been well above the $250 million quoted, but a classic art market omertá has descended so we may never know.

Also worth noting here is the direction of flow. Like China, Qatar is now a huge magnet pulling in treasures from European and North American collections. When, or whether, this process will ever stop is impossible to say, but if the odious Assad regime finally falls in Syria and the social networking-driven contagion of unrest spreads to the bloated, oil-rich desert kingdoms, these oligarchies could tumble too and their powerful cultural magnets would quickly lose their gravitational pull.

It's well to remember that they're all built on sand.


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Tom Flynn said...

Thank you, Diane,
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All best,