Most investors/readers know about the stream of U.S. economic statistics originating from the U.S. Commerce and Labor Departments, and from other Washington agencies, that form the basis for 'taking the pulse' of the economy.But more experienced investors know about that group of 'unofficial statistics' that fill-in the economic landscape and frequently provide clues regarding future economic activity that the others do not. In this category, you'll find mall traffic levels, those infamous corrugated box orders, and package deliveries, as metrics of significance.
And another metric worth keeping an eye on, in the interpretation of stock exchange specialists? The demand and prices for fine art.
Fine art, antiques, and collectibles are the aesthetic knick-knacks of the gentry. Or as one New York Stock Exchange (NYSE: NYX) specialist put it, "A lot of the other metrics measure how the little guy is doing. Art demand measures how the big guys are doing."
The significance? "When the little guy is pulling back, that's a concern. But when the big guys are pulling back, now that's a problem," he said.
Art demand slowdown telegraphing global slump?
Moreover, a problem may be surfacing with the 'big guys.' Sotheby's, the world's largest, publicly-traded auction house has dropped about 20% in the past week on concern the global art market may be slowing, Bloomberg News reported. Sotheby's (NYSE: BID) shares declined 39 cents to $22.64 in Friday afternoon trading.
Sotheby's contemporary art auction on Wednesday was not a confidence builder. The sale totaled $10.4 million, well below the $14 million high estimate, will only 69% of lots selling, Bloomberg News reported. In comparison, during a similar sale a year ago, 81% of lots were purchased.
Economist Glen Langan argues that the fine art market is slowing, and this slowdown is further evidence of a secular pullback in investment. "The end of art's decade-long price boom is an indicator of the thoroughness of the pullback," Langan said. "Art and luxury homes, such as those in The Hamptons [on Long Island, New York], were the last safe guards. The fact that art and Hamptons home prices are declining now indicates that a period of caution, cost-cutting, and capital preservation is well underway." Langan added that he does not own shares of Sotheby's or any auction house.
If the above is telling, and Langan believes it is, business investment and hiring is not likely to increase in the immediate quarters ahead. Further, that slump underscores the need for the United States to find some engine of growth, some catalyst, to "get this economy moving again," he said.
"It can't be a small catalyst, because that won't be enough to get the train moving faster, given the U.S. economy's $14.3 trillion size," Langan said. "It has to be large, value-adding, long-term, and above all it has to be broad-based, capable of increasing median incomes like we saw during the successful 1990s economic expansion."
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Reader Comments (Page 1 of 1)
9-12-2008 @ 6:25PM
william lindblad said...
I have no bias and I have no financial interest in either the auction business, nor any fine art holdings however, I do collect.
The news that you are reporting is about a year out of date for this market has been dead for many months.
It will recover - it always does.
It is dead across the board and the stock that will suffer the most is ebay as the majority of the money is really at the low end.