[a4mnt]

Taken from one of the London freebies in an article on the art market (and the rising prices at auctiosn recently etc) :

Melanie Gerlis, arts market editor of The Art Newspaper stated :

"Unless the stock markets crash there seems no sign of a slow down in the market. People like art. It excites them and is seen as a socially powerful matter."

[Octopus UK]

Not exactly rocket science is it?

[dgb133]

Just to throw a wrench in things, one more time

Sorry, I'm a born skeptic. Not to say I'm not riding the wave of inflated art prices myself. I just don't believe it's an endless ride that never goes downhill.

Booms Were Made to Go Bust

First of all, it's no big deal to predict booms and busts. All markets boom and bust. It's just easier to predict a bust because the signs are so obvious -- like excess euphoria, easy access to money, huge profits, and scores of happy amateurs entering the market.

Booms are harder to predict. They start silently, like oak acorns buried in the ground -- you don't notice them until they're towering trees. For example, few people recognized Microsoft or Google for the giants they were until after they'd become major players and the big profits had been made.
_________________
Sound familiar?

finance.yahoo.com/expert/article/richricher/37414;_ylt=AikxUqGU5L3TrKA9JqKk_hiER4V4


I'm not sure about the UK but in the states Housing bubble has burst, sales reached a 14 year low here this month. Subprime mortgage companies are or have been imploding, a Bear Stearns hedge fund or two have collapsed (tip of the iceberg) And Americans have a record amount of debt on ther credit cards. Oil and gas prices still rising. And terror threats still in the background. Take a look at the Yahoo link for other takes...

That said the stock market is at or near an all time high. Two things I say to that is, you ever hear the phrase, you buy when there's blood in the "streets." Same thing about collecting profits but in reverse. The other thing is top callers are always early. People were talking about the housing bubble in the US a couple of years before it finally peaked. Give it time.

My honest opinion is that 2007 and early 2008 will mark the end of this wave.

[tadghostal]

dgb133

In general, you make some good points. I don't have to tell you that stocks are very different from homes and art in many ways because you already know that. What I am curious about is the thrust of your argument that the art will become less expensive when the "bubble bursts." I have an alternative to suggest which may or may not hold water--I'll leave that to you.

Consider this: The stock-market is a place where most individuals are not able to buy anything of intrinsic value--there is no utility whatsoever in owning securities. Therefore, the only purpose in buying securities is to realize appreciation or dividends. There are two types of investors in the securities markets--those who are "locked in" (folks who are penalized for moving money out of their retirement funds), and those who are not. When the stock market dumps, those who are not locked in sell at a discount, and run for cover while those who are locked in take the losses.

Housing is quite different. People get a tremendous utility from it. They live in their house, and if they are comfortable and enjoy the place, it becomes their home. People are loathe to give up on the fringe benefits of ownership (changing and using the house as they see fit), and despite what might be "losses" on paper, few are willing or interested in selling their homes during a downturn. Mostly, sellers will be those who are forced to do so in one form or another (can't afford the payments any longer, inherited a home and can't afford to pay it off, have been transferred, etc). But by and large, downturns in the value of housing has no real effect on people at all, because the "gain" or "loss' in the value of anything is purely theoretical until a sale is made. Few people sell their homes during downturns, so no loss is ever experienced.

Art is likely to be the same. Its true, there is probably a period in the future when prices come down. But will that matter to most of us? That's unlikely. Folks associate numbers with their goods, and its hard to persuade them otherwise. Rather than sell at a "loss" (what you would rightly suggest is true market value), they'd prefer to hang on to their piece. And if the market never comes back, that may simply harden their resolve to never release their piece. Why would they? The art is beautiful, and as long as they still enjoy it, what reason would they sell? If you're only going to get a fraction of what was paid, then there is simply no sense in doing so.

And I think you'll discover that behavior is closely reflected in previous downturns. Art markets get hot, grab headlines, and then they cool. A few pieces sell at lower prices (which also grab headlines), and then the availability of works dries up. People store their works. Why? Because unlike securities, art has an intrinsic value. It has utility in the direct enjoyment it brings to its owners. Owning stock provides zero pleasure beyond the ethereal "gains" one might see on their statement. But as soon as those gains turn to losses, all a person gets from their stocks are pain. Who would want to hang on to something like that? Not many, which is why they commonly sell stocks at huge losses.

[dgb133]

Good points too. Just a couple more things I'd ponder.

Owning stock provides zero pleasure beyond the ethereal "gains" one might see on their statement. But as soon as those gains turn to losses, all a person gets from their stocks are pain. Who would want to hang on to something like that? Not many, which is why they commonly sell stocks at huge losses.

For owning stocks, a lot of people do get intrinsic value out of it. A lot of people that own stock like the company, shop with the company or work for the company. And a lot of people do get a sense of pride and satisfaction when their companies do well or when they shop there. So to many people the emotional aspect is still there and to many people they have an emotional attachment to a stock and will try and hang on and get caught up in all of the emotional traps that can happen when you buy and sell art. I've seen it happen. But also to many it is a lot more abstract than that as you suggest.

But I can also tell you that when you have a print that you decide to sell (usually for monetary purposes in that you want to buy another print or just pay off bills) and then list it on ebay at what you think are fair and reasonable prices and nobody buys it after a couple listings. I can tell you thats very debilitating. And although you might love that artist I'm tellling you that every time you look at that print from now on you will have a hard time not thinking about how it's your albatross. And as much as you think you can just keep it and enjoy it, it will be on your mind. And unless you really do have enough cash to sit on it for a long time to find the right buyer (not usually the case) then you start to get desperate and you get this sense of feeling that you just want to unload it at any price and eventually you'll probably break down and take whatever best offer you can get because you don't want to look at it or think about it anymore. It's happened to me twice. And I still love love love the artists that I've taken serious losses on. But I tell you what, I don't know if I'll ever buy another peice of work by them because of that.

...Now if Banksy's ever drop in price and a lot of people start losing money and a lot of people have that albatross hanging on their wall while they're stuck paying off 5-10,000 on their credit cards. They're not going to be buying any more Banksy's. At that point most people take their losses and move on and try and forget it. I'm telling you that a huge part of the enjoyment of owning a Banksy has to do with the fact that it's value is going up up up. To all of the people that happen to buy at the top, whenever that is. They are going to lose a big part of that satisfaction and buying and selling Banksy prints won't be much fun for any of them any longer. And a serious number of people will now be out of the market and not driving up prices anymore, ever.

The other problem with art is that it's not a necessity. You need a house and although you don't really need stocks per se, people do need a savings and a retirement fund for all practical purposes. (Something more liquid and more stable than an "art" retirement fund) So in my opinion art is the most expendable of the three even though you might get more out of it.

We shall see....

[tadghostal]

I'd hope people are not buying art "on margin" as you suggest, but fear you may be right. Borrowing for a house is OK. If borrowing money for stocks, you better be damn sure what you're doing. If borrowing for art, you are treading on treacherous grounds--particularly if your only reason to buy is for profit; then it's just plain foolish.

[meatbag]

tadghostal said:

I'd hope people are not buying art "on margin" as you suggest, but fear you may be right. Borrowing for a house is OK. If borrowing money for stocks, you better be damn sure what you're doing. If borrowing for art, you are treading on treacherous grounds--particularly if your only reason to buy is for profit; then it's just plain foolish.

+1
quoted for truth.

[ctc2]

I think many many people are buying or have bought Banksy for the mere fact that they are caught up in the buy low sell high circus. I will admit that in the early days of me buying from POW I justified it by saying to myself that these might be worth something some day. That was even in the face of the fact that I just liked the images. The way I found out about Banksy was through the Esquire article that appeared in the US. I would be a liar if the statement that "Banksy is the next Warhol" contained in the article did not catch my eye. Had I not liked the images, I would have never bought them. All I am saying that I think the
value aspect or the chance to have something that others want but either cant afford or have access to has an appeal.
My point about this is that a lot of art value in the contemporary works is about emotion. Emotion can be manipulated, created, taken away etc. In my opinion, emotion is driving much of the Banksy craze. It is good art, dont get me wrong. But, it is getting a little out of control, in my humble opinion.

[ABC]

meatbag said:

tadghostal said:

I'd hope people are not buying art "on margin" as you suggest, but fear you may be right. Borrowing for a house is OK. If borrowing money for stocks, you better be damn sure what you're doing. If borrowing for art, you are treading on treacherous grounds--particularly if your only reason to buy is for profit; then it's just plain foolish.

+1
quoted for truth.

I do agree but how would you convince most who have purchased from the likes of Banksy, Micallef and Neate over the last year or so, they have made so much money that plain foolish is wasn't.

[snorky]

Right.

Lets start with a basic premise.

Everything is related and Nothing is related.

Quoting an art dealer about the prospects for the future direction of your piece is like asking your estate agent about the prospects on an increase of the value of your house next year - they would not last long in the game should they admit that

a) they dont know

or

b) its going to crash and you will be losing money hand over fist in a years time

It is not in their interest to be anything other than bullish. Even in a falling market - be it banksy, houses or toilet duck, they may tacitly recognise the current malaise , but will never confirm that the future looks even bleaker.

They are in sales , so on the face of it are invariably glass half full people, whereas average victims like me/us are a "glass drained and empty , smashed on the side of the bar and ground into my face , as i collapse onto the floor and blood spurts from my severed arteries" type of people.

This once again takes us back to Value - that old steadfast of discussion on this forum - and has we all know, value is displaced from the real world in the majority of cases - a Banksy print has no intrinsic value at all - theres nothing you can realise from a piece of paper with a bit of paint on, unlike a car, where their is a hight likeleyhood of a return , even on the basic raw naterials in its construction.You can chart the likely scrap value of your car up to a point by following scrap steel prices.

Banksys are elastic and finite - there is no daily requirement for Banksy consumption round the world, Chinses industry does not require 400 Morons a day to function , but it does require x tonnes of oil.Banksys are a Luxury item and by falling into this category, a whole raft of caveats apply.

So what does a rising market mean for us Banksy holders ?

On the face of it, it all good news - here we have an asset that cost us whatever and now its worth more - that cant be bad can it ?

Its unrealised "value" can have remarkable effects - it can out a spring into our step, it can boost our confidence ( " what a smart cookie I am for that astute investment " ), it can provide hours of chat and be a talking point at your next dinner party. In short, even without realisng the fiscal appreciation, there can be benefit, even if it isnt readily measurable.

There is also a down side.When you have a print worth £5000 on your wall, you can never view it the sam,e as the one you paid £60 for a couple fo years earlier, even thought nothing has materially changed, apart from it being slight older and maybe slightly rarer ( your J&J cant ever be part of a growing number, it can only be part of a falling number of editions )

When the print increases ten or twenty fold, you can never view it the same way - your household insurance will certianly not view it the same. You may have to install alarms or pay for appraisals to ensure you are covered for that Holiday you have been promising yourself and the flat will be empty for a week or two.The likelleyhood of you being subject ot a crime of deception , violence or theft massively increase when that £70 prints value increases on a daily basis.

In short, a rising market means you can never look at the print in the same light ever again. Converseley, a market that is crashing has the same effect- how many times have you said to yourself " if Only I had sold when..........."

This is how perceived "value" - or one or two facets of it affect our daily lives. If someone said to you - I will lease you that signed Golf sale to hang on your wall for £5.47 a day for 5 years, you would tell to to f*ck off, but in effect, this is what many are doing at the minute when they pay £10K for the print at auction and keep it for 5 years -this is a print - not something you can eat or drink or will protect you from global warming or disease. In 5 years, one the bling and one dimensional followers of advertisings targetted campaigns have moved onto the next big thing ,it could be worth the £50 it originally cost and you have effectively paid £5.47 a day for the privilige of hanging it on your wall

Enjoy the print, f*ck the art dealers and if you have to, sell it to the highest bidder, with their twisted notion of "value" & "worth" and use the proceeds to do something with your life.

All art dealers are in it for personal profit. Thats what gets them up in the moring and puts the rictus smug grin on their shiny faces every day.

Pinch of salt neede here.

um

[mcnuts]

snorky said:

Lets start with a basic premise.

Everything is related and Nothing is related.

"We believe in nothing!"


(too obscure?)