Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 1: I'm Joe Wisenthal and I'm Tracy Alliwhite. Tracy, did you
Speaker 1: know we just had something in New York that's apparently
Speaker 1: called Gig a Week. See now, I don't know how
Speaker 1: to answer this question because we're sort of talking about
Speaker 1: it a few minutes before we started recording. I am
Speaker 1: aware that there was a big, big art auction. I
Speaker 1: was unaware that it's actually called gig a Week. Yeah,
Speaker 1: I didn't realize that either. Like I guess, every once
Speaker 1: in a while, auctions, big weeks of art auctions are
Speaker 1: kind of like Mardi Gras New Orleans or something. They
Speaker 1: just suddenly just pop up and your feet just gets
Speaker 1: dominated by people who are at this event, and you're like, oh, yeah,
Speaker 1: this is happening again. So obviously in New York recently,
Speaker 1: we just had a series of gigantic art auctions, and
Speaker 1: apparently because of how much money the art sells for
Speaker 1: during the course of the week, they called gig a
Speaker 1: Week because over a billion dollars of art gets sold. Okay,
Speaker 1: so lots of money, uh flowing through those auctions. And
Speaker 1: there was one point of interest in particular because I
Speaker 1: remember you actually tweeting about it. But the father of
Speaker 1: Treasury Secretary Steve Manuchin, he bought a pretty large how
Speaker 1: do I describe it? A sculpture that resembles like a
Speaker 1: balloon bunny. Yeah, and I don't even think it was
Speaker 1: at large, although we can get into it. But yeah,
Speaker 1: so a balloon bunny sold for a ton of money.
Speaker 1: I forget how much. It sold for a crazy amount.
Speaker 1: And the guy who bought it at the auction, although
Speaker 1: I guess he was just a dealer, so he bought
Speaker 1: on behalf of someone else was the Treasury secretary his dad.
Speaker 1: But it was sort of like this perfect, you know,
Speaker 1: zeitgeist other moment thing, an insane amount of money for
Speaker 1: a sculpture of the Treasury secretary's dad. So it seems
Speaker 1: like a good time to talk about the art world
Speaker 1: and the financialization of the art world and where it's
Speaker 1: all going and what it says about the state of
Speaker 1: the economy. Oh, I feel so cultured. This will be
Speaker 1: the most cultured episode of add thoughts. That's probably true
Speaker 1: because I don't think we've talked about this before. So
Speaker 1: without further ado, I wanted to bring in our guests
Speaker 1: and It was actually from a tweet by our guests
Speaker 1: that I the first time I saw the whole thing
Speaker 1: about Manuchan's dad and making the big purchase. So Margaret Carrigan,
Speaker 1: she's the deputy art market editor at the Art Newspapers,
Speaker 1: from her tweet that I saw about the Coon's Bunny sale,
Speaker 1: thank you very much for joining us, Thank you so
Speaker 1: much for having me. So what was that like being
Speaker 1: in the room when the Coon's Bunny sold? And how
Speaker 1: much was it? And sort of tell us what that
Speaker 1: was all about. Well, being in the room, I have
Speaker 1: to say, was pretty much business as usual. This has
Speaker 1: become very de regret to be selling art for that
Speaker 1: much money. Now. Of course I say that rather fliquently
Speaker 1: because I have to cover these all the all the time.
Speaker 1: But you know, it wound up soling for just over
Speaker 1: ninety million, and that's that's nothing to you know, looked
Speaker 1: down your nose at the Coon's Bunny. Work was actually
Speaker 1: really interesting because it sold for eighty million dollars and
Speaker 1: with fees that came out to about million. It was
Speaker 1: sold without a guarantee. Now that's kind of like a
Speaker 1: big deal for a piece that has that much worth
Speaker 1: behind it. More and more frequently, we're seeing the use
Speaker 1: of third party guarantees by auction houses to basically offset
Speaker 1: the risk of selling these high value works of art.
Speaker 1: And this one, they were just kind of let fly
Speaker 1: by the seat of its pants to see how it did.
Speaker 1: Before we get into the question of guarantees and how
Speaker 1: all that works, I just want to talk about the
Speaker 1: bunny a little bit more. And when I saw that
Speaker 1: it was sold for million dollars, I assumed it was
Speaker 1: one of these gigantic sculptures that's as big as an
Speaker 1: entire room where you need to add a wing to
Speaker 1: your house. But it's not really even that big right now,
Speaker 1: only about three and a half feet. That's crazy. If
Speaker 1: it's appropriate, I'd love to give people a visual of
Speaker 1: this bunny. Is looks like a balloon animal and this
Speaker 1: is kind of something that the artist of Coons is
Speaker 1: famous for. It's one of his most iconic works. It
Speaker 1: was one of only four ever made, so in that
Speaker 1: way that because there's a limited amount of these bunny
Speaker 1: sculptures out there, it had a lot of cash a
Speaker 1: but yeah, when you look at it, it looks like
Speaker 1: a silver toy. So let's get back to the guarantees, then,
Speaker 1: can you walk us through what those are exactly? And
Speaker 1: you know you mentioned that it was unusual that the
Speaker 1: coon's bunny or rabbit didn't come with a guarantee given
Speaker 1: the price tag attached to it. How how much of
Speaker 1: the art market currently does come with a guarantee. Well,
Speaker 1: within the last gig a week um earlier in May,
Speaker 1: about all lots were guaranteed, and that could be either
Speaker 1: by an in house guarantee or a third party guarantee. So,
Speaker 1: just to back it up a little bit, in their
Speaker 1: simplest form of guarantee is like, it's just an agreement
Speaker 1: between a seller who wants to consign their work with
Speaker 1: an auction house and the auction house that no matter
Speaker 1: what the outcome of the sale, that seller is going
Speaker 1: to get their money's worth. So the terms and the
Speaker 1: conditions of these agreements can really vary, and they're always
Speaker 1: very secretive, so we don't really know that what goes
Speaker 1: into outlining all of these bare bones guarantees. But whatever
Speaker 1: terms the auction auction house decides to offer is a
Speaker 1: big incentive for that seller to consign with them, So
Speaker 1: it's definitely within the best interests of the auction house
Speaker 1: to minimize the risk for the consigner as much as
Speaker 1: possible if they're trying to get these like high value
Speaker 1: trophy works of art like a coon's rabbit sculpture, because
Speaker 1: they think that will help push it forward on the
Speaker 1: auction block. So just break this down a little bit further.
Speaker 1: Let's say I have a Coon's bunny in my collection
Speaker 1: or some other piece of art that I want to sell,
Speaker 1: and I know it's going to be a big hit
Speaker 1: and multiple how many like big auction houses are there
Speaker 1: in the US. There's three predominant ones, the Christie's, Southeby's,
Speaker 1: and Phillips, and so in theory, what they say is
Speaker 1: list with us or sell it through us, and will
Speaker 1: provide you some guaranteed minimum set right exactly and where
Speaker 1: does that come from? Then there's a third party entity
Speaker 1: that promises to do the bidding. Explain how that all
Speaker 1: works in the traditional just guarantee model with like the
Speaker 1: in house guarantee. And I feel like this is important
Speaker 1: to set up a ut why third party guarantees are
Speaker 1: kind of on the rise right now. Basically the auction
Speaker 1: houses started doing this a lot to attract these bigger
Speaker 1: collections and these bigger works of art, and it can
Speaker 1: play out in one of three ways. In one way,
Speaker 1: the lot fails to sell, and in that case it's
Speaker 1: what's called bought in by the auction house. So the
Speaker 1: auction house then owns that work of art and pays
Speaker 1: the consigner whatever they're you know, lowest bit was. And
Speaker 1: then the problem with that is when and when a
Speaker 1: work is bought in, it's called what's burnt and people
Speaker 1: like act like it was no good for the art,
Speaker 1: and so it actually lowers the value of that work
Speaker 1: of art. Now, if it actually goes for its guaranteed price,
Speaker 1: then everybody wins, you know, the seller gets the money
Speaker 1: they were hoping to get for the work, the auction
Speaker 1: house gets a little off the top. It's all good.
Speaker 1: And then best case scenario is it's going to sell
Speaker 1: for more than it's guaranteed price, and then the auction
Speaker 1: house nets that profit and everyone's a little bit happier.
Speaker 1: It's a little bit cookid. Now that's where the third
Speaker 1: party guarantee really gets going, because they realize that they
Speaker 1: can bring in the auction houses realize that they can
Speaker 1: bring in another person to offset the risk for them
Speaker 1: and that person gets paid out and makes a little
Speaker 1: money off the top, and so does the auction house.
Speaker 1: That's really where it's at right now. With the third
Speaker 1: party guarantee. We've seen the rise of them over the
Speaker 1: last couple of years exponentially, and these are also known
Speaker 1: as irrevocable bids. And what that means is basically that
Speaker 1: third party guaranteer is saying, I put a bit on
Speaker 1: this work no matter what, for this amount. That amount
Speaker 1: is secret, No one knows what that is, and that's
Speaker 1: just negotiated between the auction house and the consigner and
Speaker 1: the third party guarantee before the auction happens. It's probably
Speaker 1: near the low estimate for the work, so that's what
Speaker 1: the usual benchmark, but it could be more, it could
Speaker 1: be less. So it means that when that when that
Speaker 1: third party guaranteer comes in with that work, it's basically
Speaker 1: establishing a market value for that work right then and
Speaker 1: there that no one else knows about. H that's really
Speaker 1: interesting that it's done sort of off of the public market,
Speaker 1: I guess. So walk us through who these third party
Speaker 1: guaranteurs are. And just to be clear, if if the
Speaker 1: art doesn't sell for more than the minimum guaranteed price,
Speaker 1: do they take delivery of that art? Yeah, that's the thing.
Speaker 1: For the most part, these guaranteers used to be dealers
Speaker 1: or collectors that had the capital or the expertise to
Speaker 1: kind of be like, yes, I will front this money
Speaker 1: for this piece. Now that is not necessarily the case anymore.
Speaker 1: We're seeing a lot more people wanting to get in
Speaker 1: on this because they've heard that they're good returns on these.
Speaker 1: So we're seeing a little influx of people that are
Speaker 1: just interested in getting the work, but they will take
Speaker 1: possession of the work if it doesn't sell to somebody
Speaker 1: to a higher bidder. Let's talk about those returns that
Speaker 1: they expect, and let's just sort of go through the math.
Speaker 1: So let's say that there is a piece and maybe
Speaker 1: at the high end they think it could fetch twenty
Speaker 1: million dollars and I'm just talking hypothetically, and maybe the
Speaker 1: ranges tend to twenty and I'm one of these third
Speaker 1: party guaranteurs, and I say, Okay, I'm gonna guarantee that
Speaker 1: I'll bid ten million dollars on it. And then let's
Speaker 1: say it's a blockbuster auction, it goes to twenty million
Speaker 1: dollars and I don't have to. I don't lose any money.
Speaker 1: I didn't buy the piece. What do I get paid
Speaker 1: for having offered that ten million dollar guarantee? Well, the
Speaker 1: math is where it gets tricky. The easiest way to
Speaker 1: look at that is that if you guarantee that work
Speaker 1: for ten million dollars and it went for twenty then
Speaker 1: you are getting a share of that extra ten million
Speaker 1: that it went for. I see, But that breakdown is
Speaker 1: not necessarily clear. That's something that's negotiated between the guaranteer
Speaker 1: and the auction house. But that payout is based somewhere
Speaker 1: on the spread between what I had offered as my
Speaker 1: guarantee and the ultimate price. But in theory, that could
Speaker 1: be a very fast, huge return for me if it
Speaker 1: turns out that the final price is much higher than
Speaker 1: what I had Yes. Absolutely, And in fact, we're seeing
Speaker 1: guarantees being made up until like ten minutes before an
Speaker 1: auction starts. Now it is very new. It used to
Speaker 1: be these were secured more in advance, and they would
Speaker 1: be notated in the catalogs that you would pick up
Speaker 1: at the beginning of an auction, and that are distributed
Speaker 1: the week before the auction. Now, however, there is usually
Speaker 1: like a running tally that the auctioneer will give off
Speaker 1: and the beginning. Some are marked in the catalog, but
Speaker 1: some are made literally as they're walking up into the podium.
Speaker 1: If the auction house is are incentivized to offer minimum
Speaker 1: guarantees in order to get you know, interesting art consigned
Speaker 1: to them from perspective sellers, and if the third party
Speaker 1: guaranteurs are sort of incentivized to provide a floor of
Speaker 1: some store, is is that dynamic? Is that one of
Speaker 1: the reasons why art prices seem to be getting higher
Speaker 1: and higher, at least for certain pieces. Does it add
Speaker 1: upwards pressure on the price of art? So this is
Speaker 1: such an interesting question, and it really gets to the
Speaker 1: heart of the art market in general and why it's
Speaker 1: just so shadowy and weird. So far, there has not
Speaker 1: been of a huge correlation between the use of third
Speaker 1: party guarantees and the upward prices of art in general.
Speaker 1: That seems to just being dueled by general you know,
Speaker 1: wealth in the world today that's driving those prices forward.
Speaker 1: But this a lot of these studies that have been
Speaker 1: done about the correlation between third party guarantees and the
Speaker 1: price of a work of art came out several years ago,
Speaker 1: and this has changed just within that time. To backchecked
Speaker 1: just a little bit, the use of these irrevocable bit
Speaker 1: bids became increasingly popular after the two eight financial crisis
Speaker 1: when the major auction houses had to pay out some
Speaker 1: big sums to consigners for works that they had guaranteed
Speaker 1: in house when those failed to sell. And I think
Speaker 1: between Christy's and Sotheby's two million was paid out for
Speaker 1: these consigners that guaranteed work with them and they couldn't
Speaker 1: sell it. So that's when they we really started to
Speaker 1: see people bringing in the third party guaranteers, and again
Speaker 1: those were significant usually significant collectors like the Mods and
Speaker 1: mcgrat families like those people were the ones fronting the
Speaker 1: money for these things. Also, big name um dealers like
Speaker 1: a Gosion Pace Jasmin, they'd come in and also front
Speaker 1: the money for it because they'd be looking to, you know,
Speaker 1: kind of back their own artists markets. So this third
Speaker 1: party model actually started to increase the liquidity of the
Speaker 1: art market, which is the notorious problem because it's at
Speaker 1: attempting people to buy and sell work when they didn't
Speaker 1: necessarily need to by offering the promise of some kind
Speaker 1: of return on it, and it started to morph into
Speaker 1: the speculative tool then and now there are just a
Speaker 1: lot more people that are wanting to get into this.
Speaker 1: And then I think according to a recent report that
Speaker 1: was published in the Wall Street Journal, before the recession,
Speaker 1: there was a handful of people doing third party guarantees
Speaker 1: and they you know, the overage and half the buyer's
Speaker 1: premier in exchange for staking these works. And today guaranteers
Speaker 1: say that they're expanding ranks, have already started whittling the
Speaker 1: returns on this, and they're only getting about fifteen of
Speaker 1: that overage. So it's kind of an interesting dynamic where
Speaker 1: there's not a lot of like concrete numbers to back
Speaker 1: up why this is financially feasible for some people. So
Speaker 1: it's interesting thinking about these kind of returns. And you
Speaker 1: mentioned that a lot of the third party guaranteurs were
Speaker 1: these famous collectors of art, and they had lots of them.
Speaker 1: But essentially you could, I mean, is it getting to
Speaker 1: the point where people are who have zero interest in
Speaker 1: art or the art world are backing funds they just
Speaker 1: do nothing. But you know, you have one guy's like
Speaker 1: I'm really good at price and guarantees back me. Give me,
Speaker 1: you know, I'll raise a hundred million and we'll do
Speaker 1: all these and you don't have to care about art
Speaker 1: at all, but makes some money for you. Yeah, there
Speaker 1: has been a huge woman like a boutique industry of
Speaker 1: businesses that are actually tailored to backing guarantees essentially. I
Speaker 1: mean they do other work as well. And this is
Speaker 1: it's kind of a big function of what is called
Speaker 1: art secured lending at this point, where people are leveraging
Speaker 1: specific works of art arty and their collection or the
Speaker 1: entirety of their collections get money upfront to guarantee other works.
Speaker 1: So it's this kind of like circular loop here and
Speaker 1: then but beyond that, we've seen a lot of guarantees
Speaker 1: at Southeby's and Christie's mainly, but also Phillips and I
Speaker 1: think last year around one point three billion combined was
Speaker 1: guaranteed in sales across those auction houses all year long.
Speaker 1: That's according to a report by arch Tactic, which is
Speaker 1: an auction tracking firm, and all of these are counted
Speaker 1: about fifty of the value of the houses, evening sales
Speaker 1: of like postwar contemporary which is like the big money
Speaker 1: maker sales that you see all the headlines about. That's
Speaker 1: up thirty from recently, I think two thousand and sixteen.
Speaker 1: And what's really interesting about that is that a lot
Speaker 1: of these art financing companies are offering loans to investors
Speaker 1: that they expect will guarantee works. There's one called Athena
Speaker 1: that publishes lists of auction offerings that will look like
Speaker 1: safe bets going into the major auction rounds. Other companies
Speaker 1: also offer these art back loans to guaranteers that are,
Speaker 1: you know, just so that they can buy out the
Speaker 1: work that they stake that ended up not selling that
Speaker 1: they thought would. And then, like I said last night,
Speaker 1: guarantee are kind of feeling as well because there's a
Speaker 1: sense that, like you, the markets shifting at any given time.
Speaker 1: There's a new firm called pi X I think started
Speaker 1: within the last couple of years. They are trying to
Speaker 1: turn the guarantee into a sort of like derivative, with
Speaker 1: shares of risk being parceled out to like a dozen
Speaker 1: investors in any given time who don't know one another
Speaker 1: and don't share the same taste in art, and maybe
Speaker 1: don't even like art, and it's kind of aimed at
Speaker 1: bringing an institutional investors, and they're offering these contract on
Speaker 1: future sales and treating it like a futures contract and
Speaker 1: therefore it's tradeable. So it's the first product like that too,
Speaker 1: also to be authorized by the UK's Financial Conduct Authority.
Speaker 1: We haven't have the same kind of ruling on it
Speaker 1: in America. But actually, which is interesting because the US
Speaker 1: market is the largest art market in the world and
Speaker 1: it's also where most of these guarantees are happening. Wow. Okay,
Speaker 1: so it sounds like there's quite a lot going on.
Speaker 1: I suppose if you put all of this under the
Speaker 1: umbrella term like the financialization of the art market, I'm
Speaker 1: wondering is is that financialization is part of it reflect
Speaker 1: active of the nature of the art market itself at
Speaker 1: the moment. And what I mean by that is you
Speaker 1: have a bunch of people who are sort of interested
Speaker 1: in it, maybe because they have newfound wealth, um. But
Speaker 1: at the same time, you have a lot of new artists,
Speaker 1: modern artists, who are you know, contributing new pieces, and
Speaker 1: it feels to me like for a lot of that
Speaker 1: modern art it's much harder to attach a firm price
Speaker 1: tag to it right, because you don't really know what's
Speaker 1: going to happen with the artist. You don't really know
Speaker 1: what the scarcity value of that art is going to be.
Speaker 1: You know, if if Jeff Coon's wakes up and decides
Speaker 1: to do another like five hundred bunny statues, does that
Speaker 1: diminish the value of the one that Robert Manuchin just bought?
Speaker 1: Is that part of the problem when it comes to financialization.
Speaker 1: Are people trying to solve that issue through all these
Speaker 1: different financings, Yes, although I'm hesitant to say solved because
Speaker 1: there's a huge tension here between the finance industries approached
Speaker 1: art and the art world's approach to art, which has
Speaker 1: been really interesting to see this because the issue is
Speaker 1: is that institutional investment has always kind of shied away
Speaker 1: from the art market because it is just so i
Speaker 1: liquid and so unregulated and shadowy. There's an adage that's
Speaker 1: like the art world is the most unregulated market behind
Speaker 1: guns and drugs, and I don't really know if that's true,
Speaker 1: but it's certainly like take something rather nerdy and sexes
Speaker 1: it up. But the opacity and the volatility of the
Speaker 1: market for especially contemporary art, because supply is so unregulated.
Speaker 1: These artists are still alive and working and creating art
Speaker 1: for the most part, makes it a really bad investment prospect.
Speaker 1: So there hasn't been a lot of things like that
Speaker 1: going on until the last couple of years. That being said,
Speaker 1: I do want to like offer because I feel like
Speaker 1: there's a lot of media hype around what's happening with
Speaker 1: the art market right now. It does command a lot
Speaker 1: of attention, and it does futch these big numbers which
Speaker 1: drawing people and be like, oh wow, this has never
Speaker 1: been seen before. I will say, I think that there
Speaker 1: has been a lot of speculation on the art market
Speaker 1: in smaller, more delegitimized fashion for a really long time.
Speaker 1: Something I always like to bring up actually is that
Speaker 1: in the early twentieth century, there is actually this French
Speaker 1: financier named Andre Lavelle who kind of started out what
Speaker 1: we would turn the first art investment fund when he
Speaker 1: pulled together money from I think like a dozen people
Speaker 1: and created this scheme called the Delure excuse my terrible French,
Speaker 1: which it means the skin of the bear um and
Speaker 1: this pool of money was used to invest in around
Speaker 1: a hundred works of art at the time by up
Speaker 1: and coming artists that were performing well, selling well. That
Speaker 1: included then oh I remember this, Yeah, I concluded people
Speaker 1: like Bablo Becaza at the time, like he was an
Speaker 1: emerging artist doing well. And um, the collection was liquidated
Speaker 1: in nineteen fourteen and everyone, you know, profits were shared
Speaker 1: out to everyone that invested, and by then the works
Speaker 1: had about like quadrupled in price. It was a tidy
Speaker 1: little something that they got. When was this this century?
Speaker 1: It was in the early twentieth century. Yeah, so this
Speaker 1: isn't exactly like a new idea per se. And like
Speaker 1: by the fifties and sixties then New York Times is
Speaker 1: already publishing articles about using art as an investment tool,
Speaker 1: but it was just happening on such a smaller level. Now,
Speaker 1: like you said, Jacy, like the art market is just grown,
Speaker 1: it's just bigger now. That's like you said, there's just
Speaker 1: more people with money and they want somewhere to spend it.
Speaker 1: And then according to the annual Ubs and Art Art
Speaker 1: BOSL Art Market Report, which is published every year, last
Speaker 1: year's dales amounted to sixties seven billion worldwide. Most of
Speaker 1: that was in the US, but that is also trailed
Speaker 1: by UK and China. But yeah, I want to go
Speaker 1: back to something you said very early on that I
Speaker 1: meant to follow up on that, which, as you said,
Speaker 1: when the auction house had its own in house guarantee
Speaker 1: and had to take inventory, and that was called the
Speaker 1: art being burnt in Is that what you said? But
Speaker 1: if it's botten, it was burnt, and so then there
Speaker 1: was a stigma to attach to that art forever. Is
Speaker 1: there a stigma the same way attached to pieces of
Speaker 1: art that had to be acquired by a third party guaranteur?
Speaker 1: So not really, that's yeah, Okay, this gets into the
Speaker 1: thing I mentioned earlier where there is kind of a
Speaker 1: moral issue at state between the art world and the
Speaker 1: way the art world conceives of itself attributing value to
Speaker 1: a work of art, and the financial world way of
Speaker 1: attributing value to a work which is purely monetary. The
Speaker 1: issue with the art world's approach to this and and
Speaker 1: and the use of third party guarantees and something like
Speaker 1: that is because it does increase the frothiness of the
Speaker 1: market and gets people participating in it that wouldn't otherwise.
Speaker 1: They're worried that the actual like um intangible good of
Speaker 1: cultural value will be lost in art. That is obviously
Speaker 1: a really great like pr campaign. This is also just
Speaker 1: an issue of like controlling the marketplace to um when
Speaker 1: it comes down to the fare punk they want people
Speaker 1: that have this insider knowledge working and like establishing the price.
Speaker 1: They don't want people coming in and essentially backing an artist,
Speaker 1: like you know, completely inflating its market and making it
Speaker 1: unsustainable for the next twenty years. So, just going back
Speaker 1: to that fund that you mentioned in the early nineteen hundreds,
Speaker 1: I remember a sort of similar instance of a certain
Speaker 1: art dealer who started collecting a bunch of avant garde
Speaker 1: artists at the time, like you know, Picasso and Van Gogh,
Speaker 1: and he ended up like investing a lot of money
Speaker 1: in those artists sort of supporting them, and by doing
Speaker 1: that he managed to you know, almost start the market
Speaker 1: for that art. So I guess my question is when
Speaker 1: it comes to the third party guaranteurs, how much power
Speaker 1: are they actually wielding in the art market when it
Speaker 1: comes to deciding, you know, this artist is going to
Speaker 1: be cool or valuable, Uh, you know this one, maybe
Speaker 1: not so much. Are they the arbiters of future art prices?
Speaker 1: That's kind of the question that's at stake right now,
Speaker 1: and why the art world is really confused about how
Speaker 1: third party guarantees will shake out long term. There's just
Speaker 1: not a lot of data to indicate that they're doing
Speaker 1: much more than essentially falsely propping up the market for
Speaker 1: some artists work and maybe the market in general. The
Speaker 1: biggest concern about it is that they're just falsely establishing
Speaker 1: prices based on whatever they're willing to pay behind closed doors.
Speaker 1: I don't know if that's like actually that new of
Speaker 1: an issue, because most auction houses are making a lot
Speaker 1: of revenue through private sales anyway, So it might just
Speaker 1: be making visible something that's been going on for a
Speaker 1: really long time, and that might just make the art
Speaker 1: world uncomfortable because it's been so opaque for so long.
Speaker 1: And again, like I said, it is increasing the liquidity
Speaker 1: of art, which has always been a real issue in
Speaker 1: it as an asset class. So the question you pose
Speaker 1: is the question that we're still trying to figure out.
Speaker 1: And I just think that there needs to be a
Speaker 1: lot more analysis these auctions that separate out guaranteed works
Speaker 1: and the results for those versus non guaranteed works, and
Speaker 1: so far there hasn't been a lot of that that's
Speaker 1: come forward. Margaret Kerrigan, this is a fascinating conversation. I
Speaker 1: love how in depth had got really appreciate you coming
Speaker 1: on and to your last point. It'll be interesting to
Speaker 1: see what that analysis wanted eventually happens actually before to
Speaker 1: seeing what comes with it. Sounds good. Thank you for
Speaker 1: joining us, Thank you for having me. Thanks Margaret. That
Speaker 1: was great, Tracy. I really enjoyed that conversation the whole
Speaker 1: time I was thinking about it. And that last point
Speaker 1: that Margaret made about the introduction of liquidity to the market.
Speaker 1: It seems like we're seeing this all over the place,
Speaker 1: which is people trying to conceive of ways to bring
Speaker 1: liquidity to traditionally illiquid assets. So you see it obviously
Speaker 1: with art, people try to do it with wine. You
Speaker 1: see I get ads on Instagram for invest in classic cars.
Speaker 1: And another thing that we're seeing a lot, and it's
Speaker 1: actually much bigger deal is um houses and the rise
Speaker 1: of eye buying and you upload some photos and specs
Speaker 1: of your house to website and it spits out an offer.
Speaker 1: It feels like we're sort of in this era of
Speaker 1: everyone trying to figure out how they can make uh,
Speaker 1: sort of traditional ill liquid assets trade more like liquid assets. Yeah.
Speaker 1: And I mean, on the one hand, a lot of
Speaker 1: that would make sense, right because as you sort of
Speaker 1: get technological platforms that are able and capable of doing that,
Speaker 1: then you could see why a lot of people would
Speaker 1: try to do it. But I gotta say, I know
Speaker 1: you mentioned traditional assets then, but the conversation reminded me
Speaker 1: of something else, which is cryptocurrencies, right, and the notion
Speaker 1: that you have all these different cryptocurrencies and a giant
Speaker 1: market trying to attach a value to them based pretty
Speaker 1: much on adoption and maybe a little bit of underlying technology.
Speaker 1: Maybe it just it reminds me of the art market, right, Like,
Speaker 1: how do you go to an art market and say
Speaker 1: this painting is inherently better or more valuable than this
Speaker 1: other painting. Yeah. I think about this a lot too,
Speaker 1: even with like sometimes when I'm walking through Central Park
Speaker 1: and I look at those gigantic, really skinny skyscrapers, or
Speaker 1: people pay insane amount of money for a condo that
Speaker 1: they might not even live in, and it does feel
Speaker 1: like we are in an age in which a lot
Speaker 1: of money is paid out to things and the main
Speaker 1: value that those things have is that they're worth a
Speaker 1: lot of money, Like there's a recursiveness to it, so
Speaker 1: the price itself sort of abused value in it. I
Speaker 1: I always make this joke when I see really expensive
Speaker 1: art sales, like the one million dollar Coon's Bunny, where
Speaker 1: it's like a million dollars, it's a steal of a price,
Speaker 1: but att million dollars it would have been, Uh, it
Speaker 1: would have been a rip off where it's like suddenly
Speaker 1: the fact that something gets more expensive suddenly make makes
Speaker 1: it a better value. See. I'm wondering how many expensive
Speaker 1: art auctions you're going to uh that you need to
Speaker 1: have set piece jokes for each one of them. After
Speaker 1: we have these conversations, I do feel like an indescribable
Speaker 1: urge to log onto the Christie's website and start looking
Speaker 1: at art, which I'm sure would be a terrible, terrible idea. Yeah,
Speaker 1: I think that would be a bad idea. But you know,
Speaker 1: maybe like we can find some up and coming artists,
Speaker 1: maybe we can find the next Picasso and sort of
Speaker 1: make them a thing. Yes, please donate to the Odd
Speaker 1: Thoughts Art Fund so we can start providing minimum guarantees
Speaker 1: for artwork worth what maybe two other things that I
Speaker 1: thought of real quickly is like one is in the end,
Speaker 1: like there are outside returns in art guarantees. It's only
Speaker 1: a matter of time before institutions drive those returns to
Speaker 1: where they aren't any better than anything else. So you
Speaker 1: sort of think, like if you just have like a
Speaker 1: few families offering guaranteed returns, by the time it gets
Speaker 1: to the point where anyone with some money can go
Speaker 1: into an art guarantee fund like you could, you have
Speaker 1: to imagine that the juicy returns can't last too long, right,
Speaker 1: Like the liquidity currently being hoarded in the art market
Speaker 1: eventually is going to lead to all the sort of
Speaker 1: price arbitrage possibilities being arbitraged out, I guess. And in
Speaker 1: the end, any attempt to sort of via financial alchemy
Speaker 1: turn a sort of naturally a liquid, non commodified market
Speaker 1: like art into a liquid tradeable asset, like it's probably
Speaker 1: gonna end to some people taking huge losses when there
Speaker 1: have a budget inventory on their books and it goes
Speaker 1: out of style or there's a financial crisis or something
Speaker 1: like that. Like in the end, someone's going to lose
Speaker 1: big time on this stuff. Well, I guess we'll find
Speaker 1: out won't we. I guess we will, all right. This
Speaker 1: has been another edition of the Odd Thoughts Podcast. I'm
Speaker 1: Tracy Alloway. You can follow me on Twitter at Tracy Alloway,
Speaker 1: and I'm Joe Wisenthal. You can follow me on Twitter
Speaker 1: at the Stalwart. And you should follow our guest on Twitter,
Speaker 1: Margaret Carrigan. She's at Real Life Maggie, and be sure
Speaker 1: to follow our producer Laura Carlson. She's at Laura M. Carlson,
Speaker 1: as well as the Bloomberg head of podcast, Francesca Levie
Speaker 1: at Francesca Today. Thanks for listening.