The Groove 204 - How to Temper Art Collector's Myopia
Welcome to the 204th issue of The Groove.
I am Maria Brito, an art advisor, curator, and author based in New York City.
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HOW TO TEMPER ART COLLECTOR’S MYOPIA
In 2024, the most expensive artwork sold at auction was Jean-Michel Basquiat's Untitled (Elmar) from 1982, which fetched $46.5 million at Phillips in New York during their May sales.
There’s a term used in Wall Street for investors who miss opportunities due to overreacting to current macroeconomic conditions or panicking during market downturns: "short-term thinker" or "myopic investor." These folks tend to focus on immediate events and market fluctuations without considering long-term potential. This behavior can lead to missed opportunities as they overlook future market recovery or growth.
Contrary to what some people think, an art advisor isn’t a shrink for artists, nor someone who develops an artist’s career, although in some instances these roles may overlap. In my case, while I have worked with hundreds of artists in different capacities and become friends with a few dozen of them, my job is to help art collectors build collections they both love and cherish and that will retain or increase in value over time. And like any portfolio of assets, some things will do well over the years, some things will outperform, and some will underperform. But the strength of the overall collection is what I always aim for.
Last week, the article that created a lot of buzz in the art world was the very well researched piece in The Wall Street Journal entitled “The Art Market Is Tanking. Sotheby's Has Even Bigger Problems.”
While the title may sound alarmist, the art market is far from collapsing. Many galleries I work with have seen their September shows sell out, with prices in the high five figures to mid six figures. Although auction numbers are down from the peak of 2022, they are far from dire. The real story lies in the complexities surrounding Sotheby’s since it went private in 2019, amassing significant debt in the process. The article touches on this transition and the broader softening of the market in 2024, but the overall outlook remains more nuanced than catastrophic.
Here’s my take on this, coming from someone who has been doing this for a living since 2009, receives between 10 and 30 previews of art shows a day, and is daily offered something privately directly from collectors or other advisors. The art market is global and it’s really big. Recorded transactions in 2023 amounted to $65 billion. That really doesn’t account for private collector-to-collector or advisor-to-advisor deals worldwide. But let’s assume that the number is correct. That is quite a big figure - for comparison, the entire GDP of Luxembourg in 2023 was $66 billion.
Last year the art market was already suffering from a myriad of issues, stemming from high interest rates, horrific wars in Europe and the Middle East, China’s economic woes and the Russian oligarchs who are banned from doing business in the United States and most of Europe.
A lot of people bought art with loans. In 2021 and 2022, those loans carried an interest rate of 3- 5% annually; today that rate varies from 7- 10%. Low rates encouraged a wave of speculators, especially “art-bros” and “crypto-bros” who bought directly from galleries, flipping works at auction for quick, massive returns. This speculation distorted expectations, creating the false belief that such returns could be replicated for all artists indefinitely. In reality, this harmed young artists and destabilized the market.
The expansion of art fairs and galleries has significant implications for the market. As I mentioned two weeks ago, increasing the number of galleries and participating in numerous fairs each year saturates the market with art that may lack the quality seen when operations were more selective. Consequently, this dilution leads to a reduced number of buyers, as discerning collectors and advisors can easily distinguish between high-quality works and filler pieces. This shift not only affects the perception of value but also challenges the sustainability of emerging artists in an oversaturated environment.
Since 2018, I’ve pointed out that the base of serious collectors (excluding the crypto bros and similar dilettantes) hasn't kept pace with the rapid expansion of galleries, and that was even before the irrational post-pandemic exuberance hit the art world.
Meanwhile, auction houses not only host their major theatrical bidding events a few times a year but also conduct online auctions almost every day. This oversupply creates an excess inventory problem. Ultimately, this saturation leads to market cannibalization, undermining the value of artworks and the stability of the art ecosystem. The current imbalance between supply and serious demand is unsustainable.
The second most expensive artwork sold at auction in 2024 was Andy Warhol's Flowers (1964), which fetched $35.5 million at Christie's in May.
Hence “collector myopia,” which has developed in many serious art patrons who are overwhelmed with offerings and concerned with the value of what they have already purchased in the past. However, not everything can be put in the same category, and there are very good deals to be made out there. Shortsighted thinking, fueled by worries over the current art market's downturn, is causing many collectors to miss out on significant opportunities. The truth is that the market might be down, but that doesn't mean investing in art is a bad move. On the contrary, it's perhaps the perfect time to make smart acquisitions.
It's easy to panic when markets wobble, but this is where the collector's mindset should align more closely with the experienced investor: patience is key. Like stocks, the value of art fluctuates over time, but history shows that great works by important artists tend to appreciate in value in the long run.
One critical difference between art and financial investments is that, with art, you have the immediate benefit of enjoyment and cultural capital of owning a piece of history or a representation of current times. It's not just about monetary return; it's about living with something beautiful, impactful, and meaningful. And when the market rebounds (and it always does) those who bought wisely will be holding onto assets of significant value.
Some of the world’s most renowned collectors, like Peggy Guggenheim, David Rockefeller, and Eli Broad, strategically built their collections during challenging times, whether it was World War II, recessions, or stock market crashes. These moments of economic uncertainty allowed them to acquire significant works at more favorable prices, proving that adversity can offer unique opportunities for those with vision and a long-term perspective. They weren't worried about the momentary lulls in the market; they were focused on the long-term trajectory of the artists they loved. They saw beyond the short-term fluctuations and reaped the rewards.
This is precisely where today's collectors need to adjust their thinking. When the market is down, prices are often more favorable, and competition from other buyers diminishes. This environment can lead to remarkable acquisitions that wouldn't be possible during boom times.
Show of The Week
Shara Mays, the cool currents filling our palms, 2024. Oil on canvas
I saw the work of Shara Mays for the first time early this year at a group show in a gallery in Tribeca and was quite impressed with the strength shown in her canvases.
Now she has her first solo show in New York City at Hunter Dunbar Projects, called where we walked, who we remembered.
Originally from North Carolina and currently based in San Francisco, Mays masterfully fills her canvases with loose brushstrokes, crafting stunning abstract compositions that evoke flowers and landscapes. Her style resonates with the legacy of abstract expressionists like Joan Mitchell and Larry Poons, merging the organic with the expressive.
From The Archives
Albert Einstein used to say: “No problem can be solved from the same level of consciousness that created it”.
Tunnel vision is the loss of peripheral perspective and the person who suffers from it can only see a small part of the field. In business (and in life) this can happen for a variety of reasons: confirmation bias, fixation on one thing, physical and mental exhaustion, rigidity, and even being sensorially overwhelmed. Here are three ways to expand your field of vision.