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The ‘Emerging Art Bubble’ Has Burst

by Michael Krieger, Liberty Blitzkrieg:

Earlier today, Bloomberg published a fascinating article on the collapse of what is known as the “emerging art market.” Namely, a slice of the art world where spraying a canvas with paint from a fire extinguisher had been commanding six figures a pop. Well all of that is now over, as the space has experienced a stunning collapse.

Bloomberg reports:

Art dealer and collector Niels Kantor paid $100,000 two years ago for an abstract canvas by Hugh Scott-Douglas with the idea of quickly reselling it for a tidy profit. Instead, he is returning the 28-year-old artist’s work to the market this week at an 80 percent discount.

Such is the new art season. At auction houses in London and New York, sellers are preparing to bail on their investments after the emerging-art bubble burst and the resale market for once sought-after artists dried up.

“I’d rather take a loss,” said Kantor, who is offering the Scott-Douglas work at the Phillips auction in New York on Sept. 20. “I feel like it can go to zero. It’s like a stock that crashed.

Prices for works by young artists such as Scott-Douglas and Lucien Smith soared with the auction market in 2014, sometimes reaching hundreds of thousands of dollars, when they were traded like bull-market tech stocks. But since auction sales began to drop in late 2015, the emerging names have been hit especially hard. Sales by some artists are down 90 percent or more as the glut of work and nosebleed prices scare away buyers.

That’s because speculators purchase art to resell it, not to keep it.

Today’s market is a far cry from a few years ago, when young artists churning out process-based abstract work presented opportunities for outsize returns.

The works were often created by artists still in their 20s. Smith saw a painting he made while an undergraduate at New York’s Cooper Union fetch $389,000 at Phillips in 2013, two years after it was purchased for $10,000.

This week, estimates for three Smith pieces are as low as $7,000. One, from the series he made by spraying more than 200 canvases with paint from a fire extinguisher, is estimated at $12,000 to $18,000. A bigger spray work sold for $372,120 two years ago.

Before consigning his piece to Phillips, Kantor tried selling it privately for a year — through Blum & Poe, the work’s former owner, even on EBay. At one point he was asking $50,000 but couldn’t get an offer.

While interesting in its own right, the reason I flagged this article is because it comes on the heels of reports of plunging sales figures in the ultra luxury segments of various real estate markets including Aspen, Miami, Manhattan, the Hamptons and Greenwich, CT. All of which followed a weakening London’s high end real estate sector last year, which proved to be the perfect leading indicator.

Read More @ LibertyBlitzkrieg.com

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