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  • Martin Sosnoff

Bombs Away On Iconic Art

Serious slippage recently in prices for iconic art at auction scarcely made a ripple in financial markets. Traders stayed focussed on whether the FRB would cut rates 25 basis points or wait a little longer.

The Street seemed to say “Let the fat cats suffer a little with their $100 million picks in contemporary art.”

After all, canvases by Warhol, Basquiat and Jackson Pollock are just icing on the cake, a rich man’s dalliance. “Let 10-day auto sales decline along with home building.  Then we’ll sell down.”

I take the art market more seriously. Not only as an indicator of weakening discretionary spending, but an expression of a more cautious state of mind by wealthy players who could impact prices for super growth stocks, like Nvidia, Apple, Amazon et al.

At recent, auction sales, the market for high priced pieces faded as much as 15%. Auction houses like Sotheby’s and Christie’s have dropped their appraisals on my collection by around 15%.

There are side deals where you can get a guaranteed price from a cotene of operators who pocket any surplus above what they’ve guaranteed to the seller.

This is a “Don’t cry for me Argentina” kind of situation. If you bought a Basquiat or Pollock canvas in the early fifties for pocket change, why care if you have to mark down your inventory of abstract expressionist paintings from $100 million to $85 million?  

Subliminally, if your art inventory has just dropped 15%in  value how likely are you to pull in your market activity? Chances are you hang in.

I’ve marked down our collection by 15%. It’s all earmarked for our foundation so interim pricing has no immediate impact. Anyway, savings on taxes from art giveaways are limited to your purchase price, not their market value.

Sizable stock market declines are tied more to economic activity for home building and 10-day auto sales along with 

commercial construction and capital spending. Rich people don’t buy small houses or control the direction of oil futures. But, any hesitancy in leading indicators can turn off luxury spending and demand for commercial office space.

If Steve Wynn et al need to mark down their art collections it can spread to top end categories, but so far demand for personal jets and super yachts is implacable.

What will turn off securities markets is escalating interest rates. Going back to early sixties I used to pay as much as 9% for my stock market capital. Even in rabid markets 9% money usually ends a stock market's up cycle. Actually, Paul Volcker, early eighties took the country up to a 15% rate. Inflation was beaten down and we began a new expansionary cycle. Lasted for years. Contemporary art prices waxed buoyant for decades

So far,  the drop in art prices hasn’t impacted other hard commodities like gold and oil. I’d love to see this happen. Gold for me is an anachronism. Let the gold bugs play their game. The collapse of the baking system, 2009-’10 did impact the art market.  The price of oil futures is reality, affecting the cost of doing business for many industrials and for many consumers as well,  driving up home heating and car gas.

Deep basic, the country can take care of its overvaluation in tech houses by ignoring their trajectories, which alone make them vulnerable to any sensible security analysis, and to historic cracks in overvaluation, which are self-generated. 

I consider Nvidia, Meta, et al as too difficult to analyze, so I stay away from them. The FRB eventually takes charge of the macros, but not early on.

That I need to mark down my pricey pictures really has no meaning for me or for the country. Early fifties, New York emerged as the art capital for abstract impressionism. Investors saw no leakage to prices for securities. This runs as a missed opportunity but was readily ignored. 

In 1954, just back from the Korean war I stood jobless and penniless. I bought art for $300 a piece and paid for it $25, monthly. Dealers were our friends and carried me on their books for years and years. Meanwhile, Peggy Guggenheim and David Rockefeller were guided to Pollock, Rothko and company. 

Ironically, the current lapse in art prices has no meaning if you bought for a song, in the fifties.

Stocks like Apple and Nvidia don’t get my money.  Why worry about downside gaps. If anything, I need to deal with my low investment profile. Nor do I trade in oil futures and gold. No edge here in my comprehension base. 

Excepting the hurricane season, art stays on our walls and terraces. I saw Basquiat as the symbol of what it was like growing up in America as a jazzy black kid who wielded a chalk stick like it was a baton. It took a couple of years for all of us to catch on to his genius. 

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