Eli Broad suggests difficult times ahead for the art market!!

We now interrupt this MAO summer blog vacation for breaking news.... well.. actually.. we at MAO already sounded the art bubble bursting warning sirens last week!! Well... the party was nice while it lasted.. I hope everyone had fun!

So here is one other MAO-want to be collector's thoughts...

Brought to you from Linda Sandler of Bloomberg News...(photo#1..Atomic Bomb Explosion, Sub-Surface Blast, by Charles Bittinger,Oil on canvas, 1946)

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Goldman Backer Broad Says Hedge-Fund Losses Will Cut Art Prices
2007-08-17 01:41 (New York)


By Linda Sandler
     Aug. 17 (Bloomberg) -- Billionaire Eli Broad, who'll help
shore up Goldman Sachs Group Inc.'s Global Equity Opportunities
Fund, said art prices will decline as a result of losses by hedge
funds and other large contemporary art collectors.
     ``Many of the buyers of contemporary art have been hedge-fund
managers and other investors who obviously are having a difficult
time and have lost lots of money,'' the California collector said
in an Aug. 15 e-mail sent by a spokeswoman. ``The art market will
soften, and an adjustment in values will take place, but it may
not happen for six months to a year.''
      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.
     Edward Dolman, chief executive officer of the world's largest
auction house, said Christie's consignments of ``several hundred
million dollars'' of artworks for New York's November auctions are
running ahead of schedule.

                       Hirst's Diamond Skull

     Meanwhile, Damien Hirst's $100 million diamond skull is
taking longer to sell than the U.K. artist said he expected on
June 2. At Christie's in July, buyers spurned 40 percent of an old
master picture auction, and Charlie Chaplin's Bell & Howell Co.
movie camera went unsold, at a top estimate of 90,000 pounds
($178,119).
     Broad said earlier this year that the art market may be
heading for a crash resembling that of the 1990s, when values
halved.
     With a self-made fortune valued at $6 billion by Forbes
magazine, he'll join new investors putting $1 billion into
Goldman's fund after a 28 percent decline this month, the
securities firm said on Aug. 13. He is on ARTnews magazine's list
of the world's top 10 art buyers, with a foundation that owns
about 1,800 works, adding 50 a year.
     The $1.7 trillion hedge-fund industry, which includes top 10
art collectors Steven Cohen and Kenneth Griffin, has been roiled
by declines in the credit and equities markets during the past two
months. Investors from Europe to China and Taiwan have lost money
on stakes in U.S. private equity and hedge funds or the U.S.
mortgage investments that set off a credit crunch.
     ``Typically, when there are adjustments up or down in the art
market, it follows what happens in the securities and real-estate
market,'' Broad, a founder and former chief executive officer of
the homebuilder KB Home and insurer SunAmerica Inc., said in the
e-mail.

                          Market Upheaval

     The arrival of new buyers from the U.S. to Russia and Asia
has quadrupled prices for the most expensive contemporary art
since 1996, including a 50 percent gain this year, according to
index-maker Art Market Research. Mark Rothko and Warhol paintings
sold for more than $70 million apiece in May, and a pill cabinet
made by Hirst fetched 9.7 million pounds in June.
     ``If housing prices at the upper end start going down, that
might affect people's buying decisions, because that's personal,''
said California art dealer Patrick Painter. Meanwhile, the Rubells,
Miami collectors, bought five paintings at his gallery last month
and he recently sold eight pictures on the secondary market,
Painter said in a telephone interview on Aug. 15. ``It doesn't
seem to me like people are panicking.''

                          `Lots of Deals'

     After the 1990 art-market crash, even paintings by 20th-
century masters such as Pablo Picasso halved in value over five
years, according to Art Market Research. Young artists and
galleries disappeared. Auction volumes, which hit a high of $8.1
billion last year, were at $3.4 billion in 2003, Moody's Investors
Service, which rates Sotheby's debt, said this week.
     ``It's too early for us to tell what effects the destabilized
markets are having, but we've seen record levels of consigning,''
Christie's Dolman said in a telephone interview. ``We've spoken to
people in the trade, and lots of deals are being done.''
     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
York.''

                           London Sales

     London contemporary art auctions took in about $150 million
during last year's fair. In November, New York's impressionist to
contemporary art sales totaled $1.4 billion, as did the May
auctions.
     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.''

--With reporting by Jenny Strasburg. Editors: Ruane (fnn/mrb/adm).

To contact the reporter on this story:
Linda Sandler at [email protected].

Comments

[artmarketblog.com]

With most of the action taking place at the very top end of the art market I have my doubts as to whether any negative movements in the hedge fund arena will have much impact on the art market as a whole. I think people realise that the top end works are over valued and will be expecting a correction at the top

nicholas forrest
artmarketblog.com

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