7/25/2014

Berry-Hill Galleries Update


Artnet reports on an arbitration approved by a NY State Supreme Court judge in ruling Berry-Hill Galleries  owes 624 Art Holdings (a private investment firm) $3 million for various art transactions. Take a few minutes and read about some of the rather convoluted and unethical dealings Berry-Hill had with its clients and investors.

artnet reports
It’s been nearly a decade since the once prestigious American art dealer Berry-Hill Galleries filed for Chapter 11 bankruptcy, but the gallery’s financial woes continue even today. A recent ruling in a complicated dispute with a private investment company, signed by New York State Supreme Court judge Shirley Kornreich late last month, shines additional light onto the murky, unethical business practices the gallery used to attract financing and facilitate deals.

An arbitrator ruled that James Hill and Berry-Hill Galleries must pay roughly $3 million to 624 Art Holdings, the name under which a private investment firm in midtown Manhattan pursued claims against Hill and the gallery for various unfulfilled art deals. According to a 30-page arbitration decision, obtained by artnet News, the convoluted schemes and ensuing disputes played out over the course of the last seven or eight years, and were happening even as the gallery was on the hook for tens of millions of dollars in connection with its bankruptcy filing.

Shady Business on a Charles Sheeler Painting

According to the legal documents, 624 came to Berry-Hill looking for help with an art investment. Instead, the gallery acted to channel funds to its own needs.

On January 18, 2006 Berry-Hill purchased a painting titled Meta-Mold by Charles Sheeler on 624′s behalf for $550,000. Two years later, the gallery sold the Sheeler, though they failed to realize much of a profit for their client: the deal was worth $475,000 in cash “and in-kind exchange of another artwork” titled Skating Scene by Regis Gignoux (a French painter who, quite frankly, we have never heard of before), worth $75,000.

The way Berry-Hill maneuvered, however, it gained and 624 lost out big time. According to the report, 624 Art Holdings got the Gignoux. But the nearly half-million dollars in cash proceeds from the Sheeler sale went instead to pay off one of Berry-Hill’s creditors, American Capital Strategies.

A Three-Way Fight Over a Bellows

Another even more spectacular dispute with 624 involves Jersey Woods by George Bellows, and shows how one bad deal led to another.

According to the court papers, way back  in 2003—well before the 2005 Berry-Hill bankruptcy filing—collectors John and Toni Bloomberg had filed a complaint in New York Supreme Court against Berry-Hill alleging fraud in the purchase of the Bellows painting. They had bought the work from the gallery for $750,000 and only later learned it was “in damaged, unsellable condition.” Sotheby’s attempted and failed to sell the painting at auction “due to its extensive damage,” the decision states. In September 2004, the Bloombergs and Berry-Hill reached a settlement agreement over the lemon Bellows: The gallery agreed to repurchase one-half interest in the painting for $300,000.

However, the opportunity to make peace with the Bloombergs was at the same time an opportunity to engage in further questionable dealings with 624: According to the ruling, Berry-Hill actually fulfilled their obligation by getting 624 to put up the money, essentially selling the investment group a half share in a painting they already knew was damaged—and had already been sued for.

The arbitrator’s statement in his finding is damning: He says that Berry-Hill “failed to disclose to 624 that 1) the Bellows was damaged and unsellable 2) the painting is the subject of a legal dispute and encumbered by the Bloomberg settlement and 3) that [Berry-Hill] used 624′s funds in order to partially extinguish legal claims.” An executive of 624 Art Holdings is quoted in the decision to the effect that he would not have put up the money if the background had been known: “I am not in the business of financing other people’s litigation settlements.”

A Storm of Other Complaints

The decision also includes a dispute over a George Inness painting, Approaching Storm, which may have been a fake, as well as a variety of other complex-sounding schemes. All told, the damages total roughly $3 million.

In a call with artnet News, Samuel P. Israel, the attorney for 624 Art Holdings, summed up his client’s take on the matter:

“[James] Hill apparently converted our client’s property in part to pay off debt that he personally guaranteed. The case had to do with independent acts by which Hill exploited an agency relationship to convert funds and artwork with which he was entrusted. The specifics of the misconduct are ornate and the character at the center of the story—Hill—is a cross between Falstaff and Mrs. Macbeth. He tells fairy tales about the intrinsic beauty of the works even as he purloins and liquidates them to pay off his own debt.”
Source: Artnet News

7/24/2014

New Estate Tax Legislation???


Investment News ran an article on a US House of Representatives bill which now has 221 co-sponsors to end inheritance taxes. Additionally the legislation also makes permanent the 35% gift tax rate with a $5 million lifetime exclusion. The Republican controlled House expects the bill to come to a vote this fall given the number of co-sponsors.

Where the bill would run into difficulties is in the Democratic controlled Senate, where is it not expected to come to a vote this year, and would then need to be re-introduced in 2015. The article alludes to political concerns rather than true concerns over updating and extending current estate tax laws.

Currently there are no sunset provisions in the existing estate tax laws, although they can be changed by Congress. Even with the large number of house members co-sponsoring the new bill, it will probably not pass both houses and become law. Currently the 2014 estate tax exemption is $5,340,000 (up from $5,250,000 for gifts made and estates of decedents dying in 2013), with a 40% tax on amounts above the exemption.

The Investment News reports on the legislation
Backers of a bill that would eliminate the estate tax are pushing for a vote in September now that they have achieved enough supporters to exceed a House majority.

The measure, which ends inheritance and generation-skipping transfer taxes, has 221 co-sponsors, or three more than needed for a House majority. The legislation also would make permanent a 35% gift-tax rate with a $5 million lifetime exclusion.

Palmer Schoening, executive director of the Family Business Coalition, said a House floor vote had been scheduled earlier this summer but was postponed after House Majority Leader Eric Cantor, R-Va., lost a primary election in June.

The groups pushing the bill are now urging incoming House Majority Leader Kevin McCarthy, R-Calif., to put the measure on the House's fall agenda.

“We feel really good for a September vote,” Mr. Schoening said.

A spokesman for Mr. McCarthy did not respond to a request for comment.

Momentum for the estate-tax bill comes in part from House members who are running for the Senate in Arkansas, Oklahoma and Colorado, among other states, who want to showcase the vote.

“There are a number of members who are motivated to get this vote for political reasons,” Mr. Schoening said. “It's the most popular bill in the Republican conference right now.”

Its lasting impact is less certain. Even if the Republican-majority House approves the bill, it is not likely to be addressed by the Democratic-led Senate before the end of the congressional term in December. Any bills that fail to get full congressional approval have to be re-introduced in 2015.

But moving the bill through the House now will position estate-tax reform for later debate on broader overhaul.

“It shows that when tax reform gets going in earnest, this is an important issue to a lot of members,” said Marc Gerson, a partner at Miller & Chevalier and a former Republican tax counsel on the House Ways and Means Committee.

It may take another election, one that changes the party in the White House, to end the estate tax. If Republicans take control of the Senate — where an estate-tax bill has 37 co-sponsors — this fall, the party still faces a veto from President Barack Obama over the next two years.

In his fiscal 2015 budget, Mr. Obama proposed a top estate and gift tax rate of 45% with a $3.5 million individual exclusion for estates and a $1 million exclusion for gifts. Currently, estates are taxed at a 40% rate with a $5.3 million individual exclusion that is indexed for inflation.

Many Democrats oppose reducing or eliminating the estate tax because they say it mainly benefits the rich.

“In an environment where there's a concern about income and wealthy inequality, I don't see a strong likelihood of passing an estate-tax bill until 2017 at the earliest, if at all,” said Suzanne Shier, chief tax strategist and wealth planning practice executive at The Northern Trust Co.
Source: Investment News

7/23/2014

Investing in Art


Yesterdays post on the Artvest report on the DIA has drawn a lot of attention and many downloads by readers of the AW Blog.  If you have not yet downloaded the report please do so, as I will only keep the report on my cloud server temporarily.  Link to download the report is  https://app.box.com/s/6wmjw6qve42c99tta48c

For today, Bloomberg ran an interesting article on investing in art, and how higher priced pieces seem to fair better over the long run. But again we are talking about the top selling artists which are mostly out of reach for many collectors.

Bloomberg reports
Every time a billionaire collector breaks another sales record at auction, those in the know snicker: Yet another hedge fund prince has publicly overpaid for an asset that's almost guaranteed to fall in value.

The examples are plentiful, like the disastrous Damien Hirst auction the night Lehman Brothers went under. At that auction, £98 million of art was sold, and then promptly lost 30 to 50 percent of its value.

Felix Salmon took on the claim that the top 50 contemporary artists in the world outperform the S&P 500, pointing out that the art price index rose largely by dropping the artists whose prices fell. "The real point here is that contemporary art is always full of here-today-gone-tomorrow art stars, who create art which goes from being white-hot to being pretty much unsellable," he writes. "In 1988, for instance, the C50 included where-are-they-now names like Theodoro Stamos, Pierre Alechinsky, James Havard, Jean Fautrier, and even Saul Steinberg, the New Yorker illustrator, who appeared just above Robert Rauschenberg on the list. Last year, the most expensive Steinberg sold at auction reached just $28,750."

I've written about same phenomenon -- one about art flippers, and one about the Frick Collection's collecting symposium. Hoping to quantify the chance of making money in the art market, I requested a report from Artnet that compiled the top 10 living artists in 1993 and 2003 and followed their sales through 2013, expecting to see a story of booms and busts. Surprisingly, almost all the artists at the top of the rankings maintained or expanded their market value.

Let's go back about 10 years. It's impossible to track all the ways that art is sold, but there are databases of auction sales that give us a rough idea of According to Artnet, the top 10 living artists of 2003, ranked by total auction sales, were:

Gerhard Richter: $32,127,829
Cy Twombly: $10,716,969
Jasper Johns: $8,625,096
Frank Stella: $8,392,128
Ed Ruscha: $7,335,674
Agnes Martin: $6,037,900
Tom Wesselmann: $5,880,799
David Hockney: $5,135,596
Zao Wou-Ki: $5,133,200
Damien Hirst: $5,084,114

And here's what their growth looks like:



Total sales for every one of these artists grew. For eight out of 10, the increase was more than 200 percent in a decade. Most had not only seen an increase from 2003 but (with the glaring exception of Damien Hirst) have now exceeded their sales in 2008, the last art market peak.

Maybe 10 years is too short a period to see the bust. How about 20 years back? Here are the sales of the top 10 artists in 1993:

Roy Lichtenstein: $3,898,219
Fernando Botero: $3,624,240
Sam Francis: $3,186,429
Gerhard Richter: $3,041,133
David Hockney: $2,887,245
Willem de Kooning: $2,802,658
Frank Stella: $2,723,597
Cy Twombly: $2,652,662
Karel Appel: $2,567,574
Roberto Matta: $2,102,424

And here's a chart of those artists over 20 years.


Not too shabby. Even if, like Karel Appel or Frank Stella, their prices haven’t gone gangbusters like Gerhard Richter's -- and no living artist has gone gangbusters quite like Gerhard Richter, whose auction sales have exceeded $100 million for six of the last seven years-- everyone’s sales are solid. There's certainly no evidence that their work is unsellable. Sales for four out of 10 went up more than 2,700 percent over that period, an astonishing number for any asset category.

The glaring caveat is that these numbers reflect total sales at auction. The median price for each artwork isn't included, so in theory, one Lichtenstein artwork could have been sold in 1993, and 1,000 could have been sold in 2003. This information, in other words, gives a picture of the artist's market share in broad strokes.

But broad strokes are all we need here: The charts are decent indicators of the market relevance associated with each name. If you bought a Cy Twombly in 1993, there's a very high chance you'll find a buyer for the work now.

A second caveat is that looking at 10- or 20-year periods masks some ups and downs along the way. You can see the full data for the 1993 and 2003 lists here and here. For this post, I've simplified the charts to highlight the long-term trend, but there are years of worse performance along the way. That kind of fluctuation has always characterized the art market. Take the tale of Lawrence Alma-Tadema, a pinnacle of the Victorian-era Academic Style whose painting "The Finding of Moses" sold for $25,000 in 1905. In 1942, his art was so passé that the same painting sold for $682. In 2010 it sold again for $23.5 million.

So what does all this mean? I had expected that tracking the sales of 20 artists would show a few big successes and a lot of cratering disappointments. In fact, sales for almost all of the artists have grown. But that doesn't mean Salmon and the rest of the contemporary art market detractors are wrong. It simply demonstrates that the very pinnacle of the art market follows its own rules.

Instead, the real explanation may be that these artists are bought and sold by a very small group of very, very wealthy individuals who have pockets deep enough to weather the tempestuous swells of world financial markets. It would go a long way toward explaining why prices remain steady even as the lower 40 artists in each year's C50 index underperform or simply disappear.

Whether or not the cream of the crop stays on top forever is uncertain. For now, it seems that buying the artists at the top of the sales rankings may be a successful 10- to 20-year approach. And that means that if you're hoping to get stupendously rich from the art market, the best strategy (ready to write this down?) is to start out rich.
Source: Bloomberg

7/22/2014

Artvest / Detroit Institute of Arts Report


Fellow appraiser Judith Vance, ASA was able to obtain a copy of the Artvest report prepared for the Detroit Institute of the Arts. I have to print and read, but I wanted to get it online and out to fellow appraisers.

The report is not titled an appraisal report, but an expert witness report and includes market analysis, qualifications, collection evaluations, review of Christie's report, cultural impact, and limiting conditions. FYI, the noted 26(a)(2)(B) rule is a Federal rules for expert reports in civil procedures.

I have uploaded the report to a cloud server for viewing and downloads.  I will keep it up for a few weeks, so if you wish to keep a copy for your files and reference, please download and save locally on your device.

Follow the link to download the full report (enjoy), it  is about 2.5 mb in size, and 112 pages with charts and profiles.

 https://app.box.com/s/6wmjw6qve42c99tta48c

The block quote below contains the table of contents and the scope of opinion.
Table of Contents

I. Scope of Opinion and Disclosures Required Under Rule 26(a)(2)(B)

II. Qualifications

III. General Art Market Issues

IV. Evaluation of the Collection of the Detroit Institute of Arts

V. DIA-Specific Market Issues Affecting Selling Strategy and Value

VI. Potential Factors That May Affect the Liquidation of the DIA Collection

VII. Critique of Houlihan Lokey Analysis and Indications of Interest

VIII. Critique of the Christie’s Recommendations for Monetization

IX. Cultural Impact

X. Conclusion

XI. Assumptions and Limiting Conditions


I. Scope of Opinion and Disclosures Required Under Rule 26(A)(2)(B)

1. I have been retained by Cravath Swaine & Moore LLP on behalf of its client The Detroit Institute of Arts (“DIA”) and by Jones Day LLP on behalf of its client The City of Detroit, Michigan
(together “Counsel”), in connection to the matter that is the title of this report.

2. Counsel has asked me to form an opinion with respect to the following:
a) The indicative value of the works in the DIA Collection
b) The feasibility and likely effects on the market and value realization of a sale of the DIA collection under a variety of market and sale conditions
c) Creditor-proposed sales of the DIA’s collection, including analysis of certain third party indications of interest
d) Monetization alternatives described in Christie’s report to the City of Detroit
e) Infirmities in any rebuttal expert reports, which I will address in any supplemental report as necessary

3. In addition, this report contains a summary of the information that I relied upon in the development of my opinions and a statement of qualifications. My opinions, detailed herein, are based upon the data and other information available to me as summarized in this report.

4. A detailed list of the sources of information relied upon is presented in Exhibit A.
5. My curriculum vitae and lists of recent testimony, publications and relevant presentations are presented in Exhibit B.

6. Exhibits D through F are additional sources, tables and calculations that I have relied upon.

7. Artvest Partners LLC is compensated at a fixed fee of $112,500 for preparation of this report, and $6,000 per day (or $3,500 per half day) for expert witness testimony at deposition or trial.
8. I reserve the right to supplement and/or revise my report if additional information becomes available and to prepare and present an additional report in reply to any expert report proffered in response to this report. I also may be asked to testify at deposition and trial.

9. I reserve the right to use any charts, tables or graphs contained in this report as demonstrative exhibits to support my testimony at deposition or trial.
Click HERE to download the report

7/21/2014

A Lawsuit and Claim of High Percentages of Fakes in the Art World


The Sydney Morning Herald is running an article on an art lawsuit by an attorney collector who claims a of a piece by Australian artist Albert Tucker is a fake. The Tucker painting was purchased for $86,000.00 and when later shown to Sotheby's experts, it was deemed a fake. The owner is now suing Christie's for an incorrect attribution and catalog description which she relied upon when purchasing, an art dealer who had consigned the painting to Christie's and an art consultant who recommenced purchase of the painting.

OK, so that is not all that unusual, but what is interesting is that within the court proceedings is the claim that up to 30% of artworks sold in Australia are forgeries. I am not really sure what the claim is based upon, if there is any actual evidence or not.  In any event, it is interesting to see these types of cases actually go to trial.  I will try to post the results when settled.

The Sydney Morning Herald reports
Up to 30 per cent of the artworks offered in the Australian art market could be forgeries, the Supreme Court has been told in a case that threatens to lift the lid on dubious practices in the art world.

The plaintiff, Louise McBride, a Sydney barrister, is suing auction house Christies as well as classic car and art dealer Alex Holland and her own art consultant and former friend, Vivienne Sharpe, over the purchase in May 2000 of a painting entitled Faun and Parrot, said to be painted by late Australian artist Albert Tucker.

The case is unusual because most cases of art fraud settle before trial to avoid embarrassment and damage to the art dealers' reputation.

Many never come anywhere near court – owners usually choose to quietly put the painting back into the market. In 2012, three fake Whiteleys surfaced and one buyer began legal proceedings but settled with the auction house before the trial.

But Ms McBride has decided to pursue her claim after Sotheby's told her it was probably a fake when she tried to sell it.

Opening the case, Francis Douglas, QC, said his client had relied on the description in the Christies catalogue, and  the advice of Ms Sharpe when she paid $86,000 for the work.

He said there was "no doubt that Christies had expressed an opinion" that the work was that of Albert Tucker and signed by him. No question mark was attached to the item – the usual convention used by Christies when there was some doubt, he said.

Mr Douglas also said works of dead artists were particularly susceptible to forgery and some people believed between 20 per cent to 30 per cent of the works on the secondary market were fake.

But Ms McBride has since discovered that Christies had two conflicting provenances for the painting, listing different galleries as its original source. The one referred to in the catalogue said it had been bought by a Mr Ivan O'Sullivan at the Tolarno Gallery in Melbourne in 1969 and inherited by his son, Barry.

Mr Douglas said Christies did nothing to check the provenance, and there were doubts about whether any of Christies' experts even inspected the painting before the auction.

But soon after the sale, Christies received another version of events from Mr O'Sullivan: that it was purchased from Dominion Galleries in Sydney by his father.

Christies then consulted Melbourne University art experts after the May auction about Ms McBride's painting and another painting after concerns were raised about whether there were several Tucker fakes on the market.

Despite advice from university experts that both works were suspect, Christies proceeded to auction the second suspect work in August that year. It has since repaid the $69,000 to Australia Club, the purchaser, the court heard.

The man actually consigning the painting to Christies, which was not disclosed to Ms McBride until much later, was car dealer and art collector Alex Holland. He, in turn, acquired it from the now bankrupt Peter Gant, a man who the the court was told had been named in a Four Corners report as associated with fakes in 1999.

"Mr Gant was identified as having sold a fake Drysdale for $250,000; as having supplied and sold fake Nolans; as having been the supplier of a batch of lalique glassware that had been irradiated to turn it purple and thus increase its value, and as being involved in a dispute with Charles Blackman about some paintings that Mr Blackman said to not be his work," Mr Douglas said.

He said his client was indifferent to who would be held responsible: Christies, Mr Holland or Ms Sharpe.

Christies is expected to argue that Ms McBride is not the rightful plaintiff but rather it was owned by her superannuation company or her husband's company, now in liquidation. It will also argue that the claim is outside the statute of limitations.

Ms McBride is also alleging that Ms Sharpe received secret commissions in relation to the sale of another artwork by Jeffery Smart. She says Ms Sharpe recommended she take an offer of a guaranteed price for the work, with the auction house and her sharing any upside in the ratio of 60 per cent to 40 per cent.

She was unaware, she says, that 30 per cent of the upside going to the auction house was in fact flowing to Ms Sharpe's pocket.
The case continues. 
Source: The Sydney Morning Herald

7/20/2014

Passion Investments


The Middle Eastern publication Gulf News ran a post on passion investments, what they are and how they differ from more standard investments and financial instruments. The article looks at how HNWI (high net worth individuals) included passion investments such as fine art, watches, wines and other luxyr goods into portfolios of standard investments and real estate. This is all good for appraisers. As more HNWI become interested in collecting fine art, antiques, wines and other luxury goods, the more potential clients and substantial assignments become needed.

Just this past week I had a call from a private lending group looking for information on a period piece of continental furniture they were thinking go lending against. The owner of the property had little legitimate documentation to support the value claim. I informed the lender more information and documentation were needed. Hopefully that will lead to additional work and assignments.

The Gulf News reports
Passion investments like fine art, vintage watches, premium wines etc. have all the characteristics of real assets, functioning as a store of value or even appreciating over the longer term. But what are the differences to standard investments?

Best-in-class examples set auction records across most of the collectibles categories. For instance, a 1967 Ferrari NART spider sold for $27.5 million (Dh101 million) or the ‘Three Studies of Lucien Freud’ from Francis Bacon that set a new record, selling for $143 million in 2013.

Passion investments in terms of the very rare and precious examples are indeed a special type of luxury product with many HNWI looking to ‘invest’ into a trophy asset. Most often the collectibles fetching record prices at auction come with a history of famous owners, which provides value and cannot be replicated. The positives in terms of the pleasure derived from owning such status assets are easy to understand but from an investment perspective there are often some negatives. For example, collectibles do not have a fundamental value or any income-generating aspects and they cannot be marked to market, since the only way to find out their market price is by selling them. Furthermore, collectibles are illiquid and subject to high transaction and holding costs. Lastly, they are also more exposed to changing tastes and trends in the market. However, passion investments are real assets which bring an ‘emotional’ return next to — occasionally — a potential financial return.

China: important growth driver

In May this year alone, art sales in New York accounted for a combined selling value of $2.2 billion. In 2013, the global art market hit a record $64 billion in sales volume, according to the European Fine Art Foundation (TEFAF), marking a 7.5 per cent increase over 2012. The positive performance of passion investments and growth of the global collectibles market in the last decade have coincided with a dramatic incline in the global number of HNWIs in Asia and especially China. The recent Hurun survey states that China’s super-rich are avid collectors with 70 per cent of wealthy Chinese ranking collecting as their hobby.

The global art index category measures the financial performance of the most sought-after schools: modern art, old masters, 19th century art, post-war, contemporary art and paintings such as traditional Chinese works of art. The price return of four of the five categories has been similar — prices fell during the global recession and have barely recovered since then. The only outstanding performance has come from traditional Chinese works of art, almost doubling in value since 2008, as Chinese collectors have been primarily buying Chinese art. This is slowly starting to change however, and in 2013, Chinese buyers increasingly competed at high-profile auction sales of modern and contemporary Western art.

Investing in time

Watches were the most preferred investment of passion among Chinese (close to 60 per cent own more than five time pieces), albeit narrowing their distance to Chinese classic art, whereas jade ware recently emerged as a preferred luxury asset of choice. Comparing the performance of collectable watches over the last decade with the preference for collectibles among Chinese HNWI shows a disparity — that is, watches not yielding the highest returns despite their strong popularity. This suggests two things — firstly, that not all watches are collected for investment purposes and secondly, that not all watches are good for investment. While over the last decade rare watches still attracted the interest of passion investors and are increasingly sought for collections curated by high net worth enthusiasts, growth has slowed in the watch industry compared to the record years of 2010 and 2011.

Auction sales of watches have reached new heights. Who possessed a coveted item was able to achieve returns way above investments into bonds and equities. An example is a well-preserved Rolex ‘Paul Newman’ Daytona, which gained fame as the actor Paul Newman wore the Rolex in the film ‘Winning’. This watch was once to buy for less than $1,000 before it surpassed the $1 million threshold at a Christies auction in 2013.

The world of watches is full of anecdotes and legends which help drive up the price. However, developments as seen in the art market cannot be anticipated. Nevertheless, there are many watch buyers who choose their watches carefully under the aspects of value received or even under the prospects of value growth, especially in times when many traditional investments promise little or only volatile returns. What increases the chance for value retention or even a positive performance is a well-known luxury brand. However, this is only one aspect among many, as not every model of a premium producer may hold its value over time. By far the most important requirement is that the watch is rare.

The online auction market is growing

Purchasing online is becoming the norm even for a sector as traditionally conservative as collectibles. Collecting was once the preserve of well-informed enthusiasts. But this has changed thanks to specialist websites and a handful of international dealers entering the digital auction market, by doing so slowly increasing transparency, while also intensifying competition. The internet has tremendously increased the ease to conduct pre-purchase research and has facilitated trading opportunities. TEFAF estimates that online sales in 2013 amounted to over $3.2 billion or around 5 per cent of global art market sales.
The online auction market — especially for art — is growing very fast, which may shed more light on the collectibles market and further increase the availability of price data. We believe that the growth of new technology and new online businesses will increase competition potentially, bringing the high transaction costs down and broadening the network of available expertise.

Conclusion

Headline-catching record prices could encourage people to buy trophy assets. But the headline sales are the exception rather than the rule. In reality, only a few artists and very few haute horlogerie pieces have held their value or even constantly appraised over the long term. Collectibles are subject to fashion, taste and supply which makes them difficult to value within a portfolio of mainstream assets. Furthermore, they are generally less regulated, are often illiquid and costly to trade. But just because items are hard to value it does not mean that they do not have value. The key is to draw a line between mass-produced luxury goods and genuinely rare items. We would therefore refrain from investing in alternatives assets such as collectibles for pure financial reasons. Collectibles are a long-term investment made first for a return of joy and only second for financial gain.
Source: The Gulf News

7/18/2014

Layoffs at Sotheby's


The Wall Street Journal is reporting that Sotheby's plans to layoff a "modest" number of workers by the end of the year. The announcement stated some staff would be re-assigned to growing departments or laid off and is part of its long term strategy to compete in the current marketplace.  The report did state the expected layoffs would most likely be from back room operations.

The Wall Street Journal reports on the layoffs
Sotheby's  said it plans to lay off a "modest" number of its global workforce by the end of the year as it takes a harder look at its operations, according to a statement issued by the auctioneer on Thursday.

The announcement follows a staff meeting held at Sotheby's New York headquarters Thursday morning in which executives told staff that an undisclosed number of its workers would be reassigned to expanding departments or laid off, according to staff members who attended the meeting.

The company said the job cuts are part of a "long-range" process that began earlier this year in which the company took a closer look at which areas of the auction house were growing or lagging. "Some departments will be expanded and new positions created," the statement said, "while other areas will see modest staff reductions by the end of the year. Our goal is to build on the strong results we have been achieving, continue to increase our ability to compete in the marketplace, and better serve our clients."

One staff member said he expects the layoffs would come mainly from those working in back-office departments like payroll, shipping and catalog production. The staff member said executives at the meeting gave the impression that higher-profile sales staff and specialists who directly assist collectors wouldn't be affected. During the recession, the company laid off nearly a fifth of its workforce, but it has lately bolstered its ranks, particularly in Asia.

Another staff member said they felt that the number of layoffs would rank in the dozens.

The timing of the layoffs, on the heels of hedge-fund activist Dan Loeb's arrival on Sotheby's board, suggests the house is taking a harder look at the fine print of its operations across the board.

Staff members said they weren't surprised to learn the company was enacting belt-tightening maneuvers because Mr. Loeb had campaigned publicly for a leaner, more profitable company in his presentation to shareholders this spring.

The shake-up comes at a time when art prices at auction are soaring, thanks to an influx of newly wealthy buyers. On Tuesday, Sotheby's said that, as of July 14, it had auctioned $3.3 billion worth of art during the year, up 29.4% from a year ago. Rival Christie's International PLC said it auctioned $3.6 billion in art during the first half of the year.
Source: The Wall Street Journal