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Buy the Painting, Hold the Painting, Sell the Painting

by Bill Hayes

In Buy the Painting, Hold the Painting, Sell the Painting, a feature story, Bloomberg Businessweek looks at the incredible boom in the art market.

Contemporary art sales at auction shot up 33 percent last year and 1,078 percent over the past decade, according to France-based (PRC:FP). And those figures don’t include private sales and gallery transactions, which dwarf auction sales.

The boom has made single works more expensive than the market values of more than 800 members of the Nasdaq Composite Index. The same $142.4 million spent on the Bacon triptych at Christie’s would have funded India’s entire Mars orbiter mission — twice. Koons’s Balloon Dog, a 10-foot-tall stainless-steel rendition of a child’s party favor, went for roughly the same amount the White House recently requested to develop an Ebola vaccine.

At these levels, art has become a significant slice of the net worth of some of the planet’s richest inhabitants, a portfolio-diversifying store of value for anyone who already has enough homes, bonds, stocks, or airplanes. Financier Ronald Perelman’s fortune includes $3 billion in art — more than a fifth of his $14.8 billion total — according to the Bloomberg Billionaires Index. Artwork valued at $2.3 billion is the single biggest chunk of music mogul David Geffen’s total $6.6 billion, and Los Angeles philanthropist Eli Broad’s $7 billion includes $2.2 billion of art. The Bloomberg index counts $1 billion of art each in the fortunes of hedge fund manager Steven Cohen, publishing baron Si Newhouse, and Pinault, who owns Christie’s.

The art market has reached similar dollar amounts (adjusted for inflation) before, notably when Asian buyers snatched up Impressionist artworks in the late 1980s and early 1990s. But it has never seen such extraordinary prices for contemporary art, when a 25-year-old word painting like Apocalypse Now goes to auction estimated at more than a 400-year-old work by a Dutch master, such as Jan Brueghel the Elder’s The Garden of Eden With the Fall of Man, which sold for $11.7 million in July.

“If you’re looking for something rational in the art market,” says art adviser Thea Westreich, “go fishing or go do something else instead.” [more]