Take, for example, the two lone records set prior to 1999 that still stand: ’s Portrait of Dr. Gachet
(1890) and ’s Au moulin de la Galette
(1876). The pair sold in one week in 1990 for $82.5 million and $78.1 million at Christie’s and Sotheby’s, respectively. They remained the two most expensive works sold at auction until the 2006 sale of ’s Portrait of Adele Bloch-Bauer II
(1912) for $88 million. They are undeniably two of ’s
most iconic works, each one currently hanging in the Musée d’Orsay
But there’s more to the prices they achieved and their long tenure at the top of the market than meets the eye. Versions of both paintings were purchased by one Japanese businessman, Ryoei Saito. The collector paid nearly double the low estimate for each of the works, causing grumblings about an overheated market rife with speculation. Today, those read nearly indistinguishably from similar grumblings one year ago. Saito was no stranger to speculation. At the time of his purchases, his business, Japan’s second-largest paper company, was plummeting into extreme debt. It was not alone. Japan’s industrial sector had ground the country into an irrecoverable debt/GDP ratio. This led to the so-called Lost Decade of the country’s economy, which began one year after Saito’s art buying spree. Two years after that, the businessman too was under arrest.
Art, at this very tip-top of the market is in some sense the ultimate luxury good. And to the extent that it is an asset, it is a relatively illiquid one. The traditional laws of the auction market mean that a fresh- or rare-to-market work (meaning that it has never come to auction or has not in a significant amount of time) sold for $100 million today would rarely if ever achieve $100 million or more tomorrow. It’s in this way that the upper tip of the market plays just out of the reach of reason, to some extent. It is reliant on buyers going beyond what pundits and auction house experts say a work should fetch. This is, after all, why consignors are willing to let go of pieces in times other than the three Ds: death, divorce, and debt.
Buyers are generally most willing to do this when money is cheap and returns on capital astounding: The art market in the eight-figure range therefore generally follows in step with (and sometimes just one step ahead of) the upper reaches of capital and equity markets more broadly. Thus, we see Japan-bubble-like concentrations of artist records crop up once again during the Dot-Com Boom. And we see more still during the housing bubble of the last decade. By far the highest prices ever achieved took place from 2012 to 2015. Cheap money flooded the private markets to spur everything from Biotech to the App Economy. It also blossomed the bank accounts of innumerable hedgefunders hungry for uncommonly rare works.