Bubble, Bubble, Toil and Trouble: Journalists Brood on an Art Market Crash

On the eve of this summer’s annual Art Basel fair in Basel, Switzerland, I’ve noted that some art writers have eagerly predicted the demise of the so-called “art bubble”; a few of them are persuasive enough to instill real fear and a loss of confidence. It almost makes you wonder if their doomsday predictions could actually come true. Well, fear not, they won’t.


There are two main reasons for the popularity and persistence of the art bubble apocalypse myth. First, it makes good copy: gloomy predictions always draw an audience. Second, the thought that collectors, speculators, dealers and advisors are reaping the financial gains from these “insane“ prices seems awfully unfair to many of those in the art world who don’t. But it’s not the prices that are wrong, it’s the logic that is flawed: art and the art market are two altogether different things. The goal of the art market is to sell artworks and achieve the highest possible price; there’s no morality in it. Sometimes these prices may sound extreme, vulgar, indulgent or decadent, but many things are this way, and you don’t, for instance, read many articles lamenting the obscene sizes and prices of today’s mega-yachts—or cruise ships, for that matter.


Let’s put the art market in perspective. Think about the value of Google, which boasts a $189 billion market cap, or Facebook, with a market cap of $58 billion, down from an IPO price of about $100 billion only a few weeks ago. The average trading volume of Google in a single day is $2.4 billion dollars. The approximate total sales in the entire global contemporary art market in a year is around $6 billion, or what would likely be only two or three days’ worth of trading in Google stock. If these companies’ young billionaire founders, Sergey Brin or Mark Zuckerberg, bought up all the contemporary art sold in an entire year, they wouldn’t even feel the pinch.


Two weeks ago, in an article in The New York Times Magazine that asked if we are in an art bubble, business writer Adam Davidson admitted to understanding nothing about the art market, but still managed to come to a sound conclusion: the art market “is a proxy for the fate of the superrich themselves.” His view is that as long as the rich get richer, art prices will hold steady or increase. My bet is that he’s right. But he ends his article by confusing art and the art market: “It makes me happy to think that this world of art-as-investment is a minuscule fraction of the art world overall.” But one has nothing to do with the other; why should the “art world overall” bear any relation whatsoever to the $120 million paid at Sotheby’s last month for Edvard Munch’s The Scream?


Mr. Davidson is hardly the first journalist to brood on a bubble in recent years. U.K.-based writer Ben Lewis’s documentary The Great Contemporary Art Bubble, which predicted an art market crash, came out in 2009—good timing. But, though the market did dip, sadly for Mr. Lewis it then rebounded and has now risen, in some cases, to new heights. The esteemed Souren Melikian also recently intimated he felt the bubble when he said: “Right now, the art market situation offers uncomfortable similarities with the state of affairs in the spring of 1990,” so bubble predictions today aren’t the exception, they are the norm.The latest entry in the department of doom and gloom comes from Artnet.com’s endearing Charlie Finch, who last week fearlessly gave us his take on this precarious situation in a piece titled “Will the Art Market Crash?” He posited that the perfect storm of bad worldwide economic news means that the market cannot “continue its contrarian record sales indefinitely.” He then convincingly played the economist, speculating that deflation will make the rich horde cash and stop spending on art, and then midrange collectors “will panic … as collectors argue that the $100 million Munch might just as well be worth $10 million in an environment of falling prices.” Mr. Finch took the full cold plunge when he spouted, “I predict that, in six months, art prices will be down, across the board, by 50 percent, falling faster with no takers.”


Extreme views make for exciting reading. Their conclusions may differ, but Messrs. Davidson, Lewis, Melikian and Finch all share the same premise: art values are in a precarious “bubble.” Having been a zealous contemporary art collector for some 20 years, and having recently opened my own gallery, I do not share their view. No one can predict the future, but let me fill in some of the blanks for my soothsaying, doomsday-predicting friends.


All is not well in the art market and hasn’t been since late 2008. While a few trophy pieces make record prices at auction each season, like colorful Basquiats (if they are from 1982), and colorful Richter abstractions, underneath this spectacle things move with difficulty and sometimes grind to a halt. Today’s collectors are fickle, they find comfort in following the prevailing trends, and so what’s hot now can very easily be cold tomorrow. All that glitters is not gold.


Despite the highflying golden outliers, there is no bubble and there hasn’t been one since the one that burst in the 1990s. My prediction is that there will never be one again. I don’t see art market history repeating itself, and I don’t fear a tulip-style crash. Fine art was undervalued for a long time, and for a number of reasons. Before the Internet, the glitzy retail auctions and the now-ubiquitous art fairs, collecting tastes were often quite regional. Aside from a few global names, Europeans were primarily interested in collecting European artists, and Americans bought Americans. Even inside the U.S., the Los Angeles art market was separate from the one in New York. West Coast museums know it too; they recently staged the massive “Pacific Standard Time” series of exhibitions to showcase the generation of excellent artists that never quite made it out of L.A. Well, it still didn’t really work.


Today the picture is very different: L.A. dealers who operate from Berlin sell hot artists to collectors in New York, while new and hungry Filipino or Chinese collectors regularly appear at art fairs in Basel or Paris. I’m not suggesting that there are all that many of them; I am well aware that there are very few people with the money and the conviction to purchase a historic Munch for $120 million or a Cézanne for $250 million, but there are a few, and it’s likely that with time there will be more. Consider that this phenomenon is not restricted to art alone; just this week a 1962 Ferrari GTO, one of only 39 ever built, sold privately for $35 million, a world record for a car. The collectable car market also crashed in the ’90s but today, for the top trophy cars like GTOs, Testarossas or Spyder Californias, it is going up higher and higher and looks like it will never turn back. However, if you are thinking that a ’50s Porsche Spyder or a ’60s Aston Martin DB4GT will ever make these numbers, you are likely to be very disappointed. The big prices exist only for the rarest of Ferraris, though a prewar Bugatti or Alfa-Romeo may perhaps squeeze into these megabuck garages once in a while.


Art isn’t the only asset class to have often been repriced. The value of some vintage French Bordeaux wines has tripled over the past few years (though beware this is not the rule with all wine). When the Chinese coveted Château Lafite, it jumped by a factor of two or three times the value of a comparable Château Latour. The Chinese were the big buyers (as recently as last year), so Lafite ruled the wine market, though many experts might argue it tastes no better than a fine Latour or Mouton Rothschild. Now the Chinese buyers have backed off, so Lafite prices are easing off: Château Lafite may have been in a bubble, but the wine market overall was not and is not.


There is, theoretically, a limited supply of “trophy”-grade historic art, though the definition of what is or is not “historic” is a moving target and subject to constant change and review. Those outstanding record blockbuster sales notwithstanding, a global, informed and well-travelled audience has repriced fine art as an asset class. Collectors as a rule are willing to pay more for emerging, young, midcareer as well as blue-chip art, and this phenomenon will not reverse itself—though it might slow down, and I believe it already has.


Nothing is forever, of this we can be sure, but that doesn’t mean we will ever go back to the way it used to be. Those who are enthusiastically waiting to hear a big “pop!” in the market bubble will yet again be disappointed. From now on all we are likely to hear is a tight snap or a faint crackle.


  1. As a friend said to me a while ago,  the change isn’t in the value of the art it’s in the valuelessness of money.  Governments will bail out any billionaire who blows a giant bet, and pay him back with the taxes of the middle class. As long as we’re willing to privatize the gain and socialize the loss the bubble will continue. 

  2. The difference between the Ferrari and a Jeff Koons?  The Ferrari is a rare, beautiful work of art that cannot be replicated.

    1. They’re both made mostly by machines.  Replication is no more than a question of expense. 
      But the Koons is more interesting.  Irony can be applied to a Ferrari, with Koons it’s built in.

  3. Gallery owner and “intrepid collector” does not believe the art market will crash.

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