August 20th, 2007

Did hedge funds inflate the art & jewelry auction market?

267 carat diamond necklace bought for $30 million dollarsBlogger Modern Art Obsession feels that the Art market is experiencing a bubble that is about to pop. It seems Hedge Fund managers were getting into the game and inflating prices.

He quotes an article whose headline I had run into but did not read until now. Excerpt:

Sellers are flocking to the auction houses after an 11-year
quadrupling of contemporary art prices. The London jeweler and art
collector Laurence Graff said he consigned 30 U.S. artworks to
Christie’s International, after getting guaranteed minimum prices.
“Whatever happens, we’ll get our money,” Graff said in a
telephone interview this week. “It might be good timing. It won’t
be bad for sure.” Works on the block didn’t include his favorite
Andy Warhols or any “masterpieces,” he said.

Meanwhile, Damien Hirst’s $100 million diamond skull is
taking longer to sell than the U.K. artist said he expected on
June 2.

Jonathan Gasthalter, a spokesman for hedge-fund manager Cohen,
whose collection includes works by Hirst and Warhol, declined to
comment on whether Cohen might slow his art purchases.
Many collectors and dealers are on vacation, so the first
test of the market will be the London auctions during the Frieze
Art Fair
, which runs Oct. 11-14, said Daniella Luxembourg, a
private dealer in London, Geneva and New York.
“The week of Oct. 11 will be a mini-test,” Luxembourg said
this week. “The big test will be the November auctions in New

Graff, jeweler to celebrities such as Paris Hilton, said
year-over-year sales doubled at Graff Diamonds‘ recent Monte Carlo
show, which included stones of more than 100 carats each.
“When you have a diamond, you really own it,” said Graff,
who placed second on the Sunday Times Rich List of self-made
Britons, with a fortune of 1.5 billion pounds. “When you’re
speculating in the market, you have zero control.”

None of this is really news if you follow the auction market closely. I don’t know much about art but I do attend Jewelry Auctions from time to time and the “deals” have left this world a long time ago. Auctions are a very sophisticated way to market high end goods… expensively. Some people don’t like to go the store and shop for “special” items. Auctions make the sale seem special and some feel they can get a deal…. Which only inflates the value…

But things can only get so expensive for so long before the bubble bursts…


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