After a dismal 2009, there is hope for the art auction segment. There was reason for optimism at in the past quarter, as the major houses started to move impressive pieces again, and momentum continued through the beginning of this year. Now, we're getting ready to move into the busy months of May and June. Unlike last year, auctioneers, collectors and dealers seem to be ready to play.

May 2008 was essentially the last hurrah of an art market rally that had lasted several years and created incredible amounts of paper canvas and bronze wealth. It was at this point that Sotheby's (BID) sold a fairly late triptych by artist Francis Bacon for an incredible $86 million to Russian billionaire Roman Abramovich, a transaction that has become the poster child for the excesses of the art market.

Art Capital Group and Annie Leibovitz have moved on from each other. Last week, the photographer found something of an angel in private equity firm Colony Capital LLC.

Leibovitz owed $24 million to the art investment bank last September, when she restructured her debt for terms that were not disclosed. The private equity firm, which worked with Michael Jackson in the past, settled the debt to Art Capital Group on March 8, 2010, and announced a "new partnership" with Leibovitz. None of the terms are being disclosed ... as usual.

The art market spent a year and a half circling the drain. Signs of life at the end of 2009, however, have become a reality, with recent auctions at Sotheby's (BID) and Christie's (CRUPF) exceeding expectations and showing triple-digit growth from comparable auctions last year.

Overall, art prices last year were off around 50%, with the contemporary art sector suffering even more severe declines of up to 70%. With prices this low and a recovery taking shape, it's time for investors to get in, and it looks like we'll see an art rally this year.

Christie's and Sotheby's (BID) were only able to pull in a combined $482.3 million on five high-profile art evening auctions in New York and London this year -- down 75% from 2008. Last year, the same collection of flagship auctions was good for $1.97 billion, which was off from the $2.4 billion record set in 2007. This year's performance still lags 2006's $1.1 billion aggregate tally.

From 2003 through 2007, the contemporary art market grew by a factor of eight, according to data from ArtPrice, yet the fun came to an abrupt halt in the fourth quarter of last year, thanks to the collapse of Lehman Brothers and the near-collapse of American International Group (AIG), which Sotheby's losing $50 million and Christie's $40 million, as pieces were unable to reach the prices guaranteed to sellers by the auction houses (a practice which has since been abandoned).

Sotheby's (NYSE: BID) had a great night this week, tripling the performance of competitor Christie's (OTC: CRUPF). But, it didn't come soon enough to help the company's third quarter results.

The auction house suffered from the art market slump that was exacerbated by the global financial crisis, posting a net loss of $57.8 million (89 cents a share). This is worse than the $47 million loss (73 cents a share) it delivered a year earlier. Three analysts that Bloomberg surveyed expected a loss of 29 cents a share. Revenue was off 41% to $44.9 million for the quarter.

An embittered Sotheby's (NYSE: BID) has turned in its first quarterly profit in a year, showing signs that the worst of the art market slump may be over. The company, which has seen contemporary art auction prices fall 76.2% from May 2008 to today, reported a decline of 87% in earnings for the second quarter, but company CFO William Sheridan says that the worst of this market is behind us. Sell-through rates are up, with more inventory moving likely to help with sagging revenues.

But commission revenue seems to be headed in the wrong direction. For Q2, Sotheby's reported commission revenues at 21.3%, up from 41% year-over-year. Unfortunately, this isn't the measure you want to go up. Lower-priced pieces tend to have higher commission rates, meaning that the auction house's Q2 performance was dragged down by less desirable inventory.

Damien Hirst has gotten to the point where the sound of his own voice isn't good enough – now he needs a record of his thoughts for the ages. He and fellow artist Richard Prince (who actually has some talent) discuss the pains of the art market in Requiem II, which is scheduled to be published by Other Criteria this fall. Of course, Hirst is one of the publishing house's founders, making one wonder if this is the only most effective way for him to get a book published.

If a recent interview with ArtNews is any indication, Requiem II will contain the insights you'd come to expect from an artist of Hirst's caliber. My personal favorite: "Yeah, we ain't gonna sell as much art, art shows are gonna get better now the focus shifts away from money."

Brilliant.

Picasso's Le Reve, which a casino mogul accidentally elbowed a hole in earlier this
year.

The art market has been heating up of late, and according to Elizabeth von Habsburg, "Art is being looked at as the newest asset class." Should retail investors be taking notice? Probably not.

In collecting art, the carrying costs are often extremely high. Insurance premium run about $1.20 for every thousand dollars in value, and the market has been so volatile that an increasing number of collectors are having their work reappraised for insurance coverage twice a year. But with an increasing number of wealthy collectors from the Far East, hedge fund managers, and entrepreneurs from the recently market-based economy in Russia all buying art, there may be a number of catalysts for escalating art prices.

How can ordinary investors make money from this trend? I think our best bet may be to look for publicly traded companies that will benefit from a strong art market. The most obvious choice is Sotheby's (NYSE:BID), the largest auctioneer in the world. While not an art stock per se, Escala Group (NASDAQ:ESCL) is a major player in the collectibles market, which tends to move in the same cycles. Of course, do look into the scandal surrounding the company. The shares are up big after the board announced that they had found no fraud, but the Motley Fool has a more pessimistic take on that.

Of course, owning art has its own pleasures. But rather than looking at it as an investment, consider buying some nice prints from allposters.com. And leave art as an investment to the big-money collectors.