This has nothing to do with you

Three winners in February’s art auctions: Lucian Freud’s “Pregnant Girl” (1961) sold for £16.1 million.

Three winners in February’s art auctions: Lucian Freud’s “Pregnant Girl” (1961) sold for £16.1 million.

If you ever had the idea that being obscenely rich has something to do with intelligence, one glance at the international art market (or the presidential race) ought to put you straight. If that were the case, people wouldn’t pay millions of dollars for a Tracey Emin or Chapman Brothers work.  Recent reports that the high end art market is softening shouldn’t cause you to lose sleep.

The art market has been experiencing a hard correction so far this year. February’s London sales of contemporary art were down 50% at Christie’s and 44% at Sotheby’s, compared to the same sales last year. Impressionist and modern art were down 35% at Christie’s and 50% at Sotheby’s.

Peter Doig’s “The Architect's Home in the Ravine” (1991) sold for $12 million.

Peter Doig’s “The Architect’s Home in the Ravine” (1991) sold for $12 million.

Auction houses follow a simple formula: the buyer and the seller both pay a premium to the house for handling the sale. In recent years, they have added a fillip that has driven up prices: guarantees. These come in two forms. Either the auction house promises the seller a fixed amount regardless of the sale price, or a third-party bidder promises to buy the item in exchange for some of the profit if they’re outbid. That kind of price-fixing drives prices in a bull market, but it’s ultimately inflationary, and why we saw headlines like “Chinese investor puts $170.4 million Modigliani on his American Express card.”

As prices tank, however, auction houses find themselves in the position of not covering their bets. Last year, Sotheby’s announced a fourth-quarter loss of $12 million. This was generated by their guarantee on the estate of A. Alfred Taubman. Taubman was Sotheby’s own former chairman who, coincidentally, served ten months in prison for price-fixing.

Adrian Ghenie’s “The Sunflowers in 1937” (2014) sold for £3.1 million.

Adrian Ghenie’s “The Sunflowers in 1937” (2014) sold for £3.1 million.

The art market is a huge business, accounting for some $66 billion in sales in 2014. Much of that market is divorced from the reality of making art—it’s speculation on pictures and is tied more to the global stock market than any kind of intellectual property.

So it’s no surprise that as the price of oil bumps against historic lows and China’s central bank tries to figure out what to do with the yuan, those smart young sales people on the auction floor are finding fewer foreign customers on whom to practice their language skills. Art is a so-called lagging indicator, which means it shows you what’s already happening. And the only thing we know for sure is that the froth has blown off the international markets. Beyond that, it’s anyone’s guess.

For the average bloke making pictures in his or her studio, not much has changed. Our buyers are looking for a picture to treasure, not an investment to offset their holdings in gold. As long as people are working, who cares if the wealthy take a bath on their art investments?

Carol Douglas

About Carol Douglas

Carol L. Douglas is a painter who lives, works and teaches in Rockport, ME. Her annual workshop will again be held on the Schoodic Peninsula in beautiful Acadia National Park, from August 6-11, 2017. Visit for more information.