While some news reports have focused on the fact that the total value of the recent June 2009 evening sales of Impressionist & Modern art was about one-third the value of the same sales, last year, we think that it is more informative to look inside the sales data.  First of all, art auctions are about what is offered for sale: no more can be sold than is offered, and, therefore, the sales, first, reflect that only one third the value of art was offered for sale at these auctions, this year versus last.  Moreover, auctions are a specialty end of the market: wholesale-institutional.  An appropriate analogy is in the markets for money, in which retail markets are for the average person, while the wholesale markets involve packages with minimums in the $20 million plus range.  Another analogy is the real estate markets: you can sell a house by calling a real estate agent and listing your house, or you can sell it at auction.  If you use the latter route, you will likely get a higher price, but it may take a year to sell.  On the other hand, if you sell at auction, you will sell (provided that you do not put too high a limit on the sale) on the auction date.  In the world of high priced art, in the range of $10 to $100 million, it may be impractical to try to sell art, in a gallery: auction might be the only practical venue for sale.

In looking at the gross results, it is easy to understand that people might want to offer pricey works for sale in a hot market, just as professionals, in securities would be sellers going into a peak of a bull stock market, which is what seems to be the case in the 2008 Impressionist and Modern Art London June evening auction sales at both Christies and Sotheby’s.  At Christies, the most expensive piece had a price tag of $80 million; several other of the 56 lots were in the $10 million range; and eight world auction record sale prices were achieved for a number of artists.

In the 2009 Christie’s auction, the high offering was only $10 million.  That lot was a Monet, Au Parc Monceau, which had sold only one other time at auction, in 2001.  The price, realized at this year’s auction, represented a compound annual return on investment of about 7%.  More encouraging was the sale of the second most expensive piece, L’Homme et Epee by Picasso, which sold for over $9 million, and represented a compound annual return on investment of 21% over its four year holding period since 2005.  At Sotheby’s, results were similar.  Another L’Homme a l’Epee by Picasso brought the high price, over $11 million, followed by another Picasso and a Monet, which brought prices of around $7 million.  At both auction houses, sell trough rates were around 90%.

Thus, while we have seen news reports lamenting the results, we believe that they have missed the point.  There was no panic dumping of art but only selected sales at a rate that comports with a recovering market. In addition, the price ranges of the works were not in the gargantuan range of some of those offered a year earlier.  Thus, the dollar volume was necessarily lower than a year ago around a market peak.  However, the prices achieved were respectable and represented, not losses, but reasonable returns on investment.  We believe that, all in all, these results add to other confirmation that the art market is making a good recovery.