Art market

Experienced art dealers advise on how to survive during a time of economic confusion

Survival hints (just in case)


The Russian economy has collapsed amid world fears over the safety of her cache of nuclear arms. South East Asia is in economic crisis and South America also threatens to enter a period of negative economic growth. The government of America hangs on a thread and billions has been wiped off stock markets world wide, at its worse the FT 100 index dropped by 25% last month. There is a real danger that we could enter a global recession.

Just as the art market has recovered its buoyancy—is it about to go spiralling downwards as it did in 1992? Last time many dealers were caught off their guard with large bank loans and over inflated stock which halved in value over night.

The Art Newspaper interviewed some of the leading international dealers who have come through the bad times before. We asked them what they had learnt from the last recession and what survival tips they could offer to ride out the current economic confusion.

All the dealers questioned were remarkably upbeat, no one has noticed any down turn in the market yet. All seemed confident that the very rich were completely unaffected and demand for top quality works was insatiable. Supply was the only problem and in a weak financial market collectors prefer to hold onto their works of art.

Heinz Berggruen

Collector and formerly of the Berggruen Gallery, Paris

“Don’t buy unless you can afford it; take a long term view; be more circumspect and buy very carefully.”

I have seen several periods when the market has been in trouble but I have always survived because I was not indebted to any one. The dollar may be down and the stock market 25% lower, but I am not the slightest bit worried. I bought a small, beautiful Klee at Christie’s in July for £1.1 million. I can’t worry that the market may have fallen because I have a superb painting which will give me enormous pleasure for ever.

The only people who should worry are those who buy purely for speculation. I would, however, be far more circumspect in the current market; where I might have bought three things in the summer sales, now I would only buy one. There is some superb Picasso material coming up in the estate of Dora Maar sale this month (see p.50) and I think that in the current market prices will not be what they would have been a few months ago and I will be much more careful what I pay.

André Emmerich

André Emmerich Gallery, New York

“Cut back on all unnecessary expenses; keep on trading even if you have to take a loss; take a long term view and ride it out.”

The art market has had a big boom in the last couple of years; the big question is, with the stock market down so much, will it continue? The stock market had a big set-back in 1987 but it didn’t hit the art market until 1990. In the 1990-97 recession the only thing do to was to sit it out. Some dealers went out of business and some had to merge. However, my decision to merge with Sotheby’s was for personal rather than financial reasons. I had no one to take on the business and at seventy-eight I no longer wanted the responsibility of running it on my own.

We cut back on catalogues and advertising and any avoidable expenses and sold art often at a loss. A lot of art bought in 1988-89 was over-inflated and we had to either hang on to it or sell it at a loss. Sunny weather comes to an end but so do storms; you must take a long-term view and keep on trading.

The problem with the 1992 recession was that it went on for so long; normally art market recessions only last for a couple of years. If you have the means you can buy very well, but if you are not selling this becomes difficult. Borrowing is very expensive and the meter runs all the time.

It’s not just that prices get cheaper, things just don’t sell. One useful tip: if someone sees a painting and says, “I wish I could afford that”, it means they can easily afford it, but they don’t want to buy it for other reasons. People who can’t afford things never say so. In a recession people like to go bottom fishing; they will offer absurd prices.

Simon de Pury

de Pury and Luxembourg Art, Geneva

“Continue to be very selective; be bold and go against the general mood; never buy anything that you don’t feel passionate about.”

I think it is a little premature to say what the impact of the stock market will be. In terms of collectors buying at the top end, there is no reason to think they have been affected in any way. However, often it is not a question of means but of psychology. Back in the early 1990s, even collectors who had the means and knew exactly what they were looking for were still afraid to be bold and go against the general mood.

The demand for really fine things is stronger than ever and the real key right now is to get the best things. The forthcoming auctions will be a much better indicator of what the overall mood is going to be like. The Dora Maar sale is causing enormous excitement among the top collectors and I don’t think the financial markets will affect it. However, whether you are an optimist or a pessimist, at the end of the day you are always right—you just have to wait long enough.

There is a greater resistance to selling at the moment as people feel it is better to have their money in works of art. And of course you do need first-rate things at the top end to set the mood for the overall market. What happens at the top level influences all the rest. It is a pyramid effect.

Be extremely selective; focus entirely on works of quality. If you can upgrade your collection, you should do so. The collectors who do best financially are the ones who do not think primarily of the financial aspect and the investment angle. Those who are always watching the market and thinking now is or isn’t the time to sell, at the end of the day don’t make good investments. There is justice in the art market, as those who buy with passion, knowledge and flair are those who do best financially.

In 1989, a collector whom I respect enormously wanted desperately to own a drawing. At the height of the market he offered a substantial price for it and the owner said he didn’t want to sell. In 1992, the financial situation changed drastically. The owner needed to sell; he offered it to him for much less, but, because the market was so bad, he did not have the guts to buy it. He was too influenced by the general mood.

Nicholas Norton

S.J.Phillips, London

“Don’t owe any money; buy the best things; give incomparable service; be prepared to do a deal.”

We don’t really have clients who are collectors in the old sense of the word. They are extremely rich people who want to furnish their houses with beautiful things. In a recession it is always easier to sell the more expensive things. If you have two similar objects one priced at £200,000 and one at £100,000, it is the best one which will go. We don’t go actively looking for new clients; we never “cold call”, but we work hard at keeping in touch with our existing clients. Above all we look after our customers: we attend to their every whim, if they need a new butler, S.J. Phillips will find them one.

Martin Zimet

French and co., New York

“Buy when other people are hurt by the market; keep your irreplaceable inventory but sell off decorative stock; if you haven’t got liquidity, be resourceful and work out a deal with someone who has.”

Unlike the 1990s recession, we now have a situation where there is more money floating around than there are fine paintings. In the 70s and 80s you could get as many good pictures as you wanted; there is now a shortage of works of art and a wealth of clients. Although world stock markets are down, a lot of people have made a great deal of money and taken it off the table. Last time the stock market crashed in 1987 we had an art market boom. There is huge demand for works at the top end of the market; it is the middle and lower ends which are affected.

You have to buy always when you least want to. If other people have been hurt by the market this is a marvellous opportunity to acquire things they would not otherwise have sold. I don’t recommend borrowing money but you can always make a deal with another dealer. If you can’t afford it find a buyer who will give you a commission. Big money is only made in bad times. This is a marvellous opportunity to upgrade your inventory. Hang on to your king and queen but jettison your pawns.

Leslie Waddington

Waddington Galleries, London

“Look very seriously at your stock valuation; make sure you have liquidity and can keep trading; sit it out; have a broad client base.”

The last time the stock market was in serious trouble was Black Monday in 1987 when the market fell 500 points in two days. Within six months we had an art-market boom because the very rich anticipate these things and therefore have much greater liquidity. If you took 0.5% by value out of world stock markets, you would flood the entire luxury goods market. I don’t believe we are in danger of an international art market crash. Russia is unimportant to the art market; I don’t believe Clinton will go, and American share prices will now rise steeply. The only real danger is the economic situation in South America.

However, I do think there could be problems in the internal market due to the gross idiocy of the Bank of England. Two years ago I could sell a Nicholson to Germany for £200,000; now because of the rise in the exchange rate it would cost £300,000. If we want to make England richer, we should close down the Bank of England.

In the last recession I had problems due to owing money to the banks. Most businesses in this country are run on money borrowed from the bank, but you must have liquidity. In the last recession my buying was seriously curtailed, but I wrote down the value of my stock nearly two years ago as the pound was becoming too strong and so I am liquid. If there is a recession in the art market I will be able to buy works cheaply but I do not expect trouble. Most dealers are too proud to write down their stock value and are afraid of the banks from whom they are borrowing, saying that they will be making a paper loss. In the last recession the very rich disappeared first. They tend to have a greater commitment to money than to art.

Hervé Aaron

Didier Aaron, Paris

“Hang onto your best merchandise; off load anything you have paid too much for and take the loss; take advantage of a weak market to buy as much as you can.”

I don’t think an economic collapse on the scale of 1929 will happen. The American and European economies are very healthy; the only big worry is Japan and, of course, the instability of the political situation in America. However, we have had five very good years and we are coming to the end of these and will probably now enter another down cycle.

If you can afford to, hang onto your top merchandise. You should, otherwise, lower it a bit to the cost prices of the last two years. Be very cautious with your overheads and do not make any inflationary purchases. If you don’t carry on buying you are not a dealer any more. In the last two years, even among the professionals we have seen some very inflated prices and that will all cool down now. It is important to unload things which were purchased too highly even if it means taking a loss.

So far there has been no sign that people are cutting back, but the Paris Biennale will be an important indicator. Everyone is there with very tough prices due to the strong market of the last few years. The very rare pieces will be sold to rich individuals and institutions; below that level I think it will be much harder to sell. In our field the middle and lower range has never really come back from the last recession.

Lanto Syng

Mallett and son, London

“Have a superb stock; give the best possible service to your clients; keep your house in good order; be flexible.”

Mallett’s has been going 135 years. With the possibility of a shortfall in business looming we take the view that it is business as usual and we try to look at the broader canvas, taking the good times with the bad. You must keep your feet firmly on the ground but never compromise, continue to choose your stock as carefully as ever and above all keep on buying. If you allow your stock to weaken you will never build it up again. Most important of all look after your clients and make sure you have their confidence. We were not too grand to supply the loo paper on one occasion.

Originally appeared in The Art Newspaper as 'Survival hints (just in case)'