Sotheby's: "Not Every Artwork Is A Masterpiece" plus the FT's Izabella Kaminska. Oh, and Beanie Babies

Now is the time we juxtapose!

From Art Market Monitor, August 7:

Jean Michel-Basquiat, Untitled, 1982

During Sotheby’s earnings call late last week the firm commented twice on the state of the art market. It’s worth highlighting these two comments, which reinforce each other, because they seem relevant in a number of ways to both understanding what happened in the first half of 2017 and what might happen later this year and beyond.

In his prepared remarks, Sotheby’s CEO, Tad Smith had this to say about the overall market:

The things we sell fall largely into two groups:

1. The first group is masterpieces that are fresh to the market and are in excellent condition. Demand for works in this first group is robust and pieces sell at very high – some would say “eye-popping” prices. However, that is only a small part of the market story.
2. If a piece we sell is not fresh, not the best example of an artist’s oeuvre, or not the most desirable artist, then demand for the piece is quite discerning and the price will need to be realistic in order for it to sell. In other words, the market for fine objects is healthy and efficient but neither frothy nor depressed.
3. One consequence is that we are working hard to get prospective consignors either to part with their masterpieces we described in group one or to realize that their favorite work of art is really in group two and they need to be realistic about price expectations for it to sell.

...MORE

Sotheby’s Q2 2017 Earnings Call

The painting above was hammered down by Sotheby's for $110.5 million on May 18, 2017.

From FT Alphaville:

When altcoin life imitates art

A couple of weeks ago bitcoin, the decentralised cryptocurrency, experienced a splintering event in a bid to address its network capacity constraints. The event saw a rival version of Bitcoin spawned, now known as Bitcoin Cash, which is capable of handling many more transactions per minute than the original version of bitcoin.As of Monday, Bitcoin Cash was worth a collective $5bn or so on the market. (See latest prices by way of the Kraken market:)

Unusually, rather than skim that value from the original currency — in a way that efficient market hypothesis would have predicted — the splintering led to an explosion in the price of the original. On Monday, to the delight of Bitcoiners everywhere, Bitcoin ‘originals’ were fetching in excess of $4200 per coin, a price rise of more than 28 per cent on the week.

At this point, what serious investors would want to know is just how realisable these prices are in practice.

And here’s the issue.

It’s one thing to put a price on a fantasy asset and trade it within a close-knit community which believes all their fantasy assets are equally valuable. It’s an entirely different thing to see it hold that value in the real world.

Take as an example an artist who decides a sculpture he has made is worth $1m. If he can only trade it for another sculpture by another artist who also decides his sculpture is worth $1m, does that really prove it’s worth $1m? Probably not. It just implies two artists are living in a fantasy world where they collectively think they can generate millions of dollars of value by moulding some material and swapping it with each other in perpetuity. It also implies they don’t currently have much need for anything else in their lives (they’re either already comfortably well off, or sacrificing consumption for the sake of acquiring the one piece of art — which may be by another artist other than themselves — that will one day be wildly demanded by the conventional market)....MUCH MORE

She goes on to point up some of the places where the analogy fails which reminded me that I had planned to draw some parallels between Beanie Babies and Bitcoin, beyond the alliteration, of course.

Here's one of the price projections from 1998's Beanie Baby Handbook via BuzzFeed:

...Basically, if you can afford to do this, simply putting away five or ten of each and every new Beanie Baby in super mint condition isn't a bad idea.

Stripes the Dark Tiger was estimated to be worth $1,000 in 2008.

But today you can get it for $9.95.

There are differences in utility between Beanie Babies and Bitcoin (and Beanie Babies and art) so I didn't push the comparison but I do like this relative value chart from Girl with Glasses: