Experienced investors look for data points that might provide clues that both the capacity and the willingness to deploy capital is increasing.

One such barometer is art, and recent auctions for impressionist, modern, and post-war paintings have provided more evidence for cautious optimism.

Amedeo Modigliani's Nu Assis Sur un Divan (La Belle Romaine) sold for a record $68.9 million -- almost $30 million higher than the painting's estimated worth -- at a Sotheby's (BID) auction last Tuesday, wnyc.org reported. It was also the highest price for a Modigliani work at an auction.

Analyst Upgrades

• Macquarie upgraded Intel (INTC) to outperform from neutral and Advanced Micro (AMD) to neutral from underperform.
• Pfizer (PFE) was upgraded to outperform from market perform at Bernstein.
• Capstead Mortgage (CMO) was upgraded to outperform from market perform at FBR Capital.
• Oppenheimer upgraded Halliburton (HAL) to outperform from perform.
• Gilead (GILD) was upgraded to outperform from sector perform at RBC Capital.
• Skilled Healthcare (SKH) was upgraded to outperform from market perform at JMP Securities.
• Citigroup upgraded CapitalSource (CSE) to buy from hold.

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.

The second largest cigarette maker in the world is making some waves in the art market. British American Tobacco (BTI) sold several paintings last night at a Sotheby's (BID) auction in the Netherlands, picking up $18.5 million last night. This contributed to a record night for the auction firm's Netherlands office.

Previously known as the Peter Stuyvesant Collection, the BATartventure Collection includes more than 1,400 pieces and doubled the upper end of its presale estimate, yet another sign that strength is returning to the art market this year – after a year and a half of agony.

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).

Analyst upgrades:

• FBR Capital upgraded Overseas Shipholding (NYSE: OSG) to Outperform from Market Perform following the Q3 results as it believes the worst quarters are behind the company. The firm raised its target on shares to $48 from $35.
• Deutsche Bank upgraded Corporate Executive Board (NASDAQ: EXBD) to Hold from Sell following the Q3 results to reflect the company's lower costs. The firm raised its target on shares to $22 from $18.
• RBC Capital upgraded Enbridge (NYSE: EEQ) to Sector Perform from Underperform after the company's partnership produced significantly higher than expected DCF. In addition, the firm raised its price target by $5 per unit to $46 to reflect an improved distribution schedule and more favorable debt leverage.
• Royal Dutch Shell (NYSE: RDS.A) was upgraded to Neutral from Underperform at Credit Suisse.
• BioForm Medical (NASDAQ: BFRM) was upgraded to Overweight from Neutral at Piper Jaffray.
• Alliance Data Systems (NYSE: ADS) was upgraded to Buy from Neutral at SunTrust.

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.

The era of the 'frugal consumer' is upon us, and it's extending all the way up the social/economic ladder.

• Picasso painting fails to sell – There was no buyer earlier this week for a 1971 Picasso painting, "Woman with Hat," estimated by Sotheby's (NYSE: BID) auction house to go at bid for $16-24 million. Further, an Alberto Giacometti 1951 bronze sculpture of a cat, also with a $16-24 million estimate, was withdrawn. Sotheby's said each fell below their reserve prices, The Associated Press reported.

There's a saying among the specialists and traders who do most of the living and breathing at the New York Stock Exchange that goes: "When the little guys are cutting back, that's an inconvenience. But when the big guys start cutting back, that's a problem."

Sotheby's auction house has abruptly withdrawn a Picasso Cubist painting that was set to be auctioned on November 3, The New York Times reported Monday.

This, as CNN's Larry King would say, is not good news.

1909 work is withdrawn

The painting, "Arlequin" (1909), was estimated at more than $30 million, and was one of the most expensive works in the fall art season. David Norman, a co-chairman of Sotheby's Impressionist and modern art department worldwide, told The Times the painting was withdrawn "for private reasons." Sotheby's (NYSE: BID) shares rose 20 cents to $7.85 in mid-day Tuesday trading.

In the wake of the collapse and bankruptcy of Lehman Br Holdings (OTC: LEHMQ), chairman and CEO Dick Fuld and his wife Kathy have begun selling off their prized collection of modern art.

The couple has been consigning parts of their collection to Christie's, the renowned auction house. 16 post-war drawings have been consigned with a pre-sale estimate of $15-$20 million. At its peak, Fuld's stake in Lehman was worth just under $1 billion, but those shares are now virtually worthless.

What does all this have to do with Lehman, the proposed bailout of the banking industry, and the economy? Nothing really. But at least it's now clear that the insiders will be suffering alongside taxpayers and foreclosed homeowners: Fuld has to part with $15 million worth of post-war drawings!

Who's going to buy that art, you ask? Perhaps hedge fund manager David Einhorn, who was one of the few people calling Lehman's bluff a few months ago, will drop a few bucks to redecorate his office.

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.

The choppy/consolidating (or perhaps worse) market conditions sometimes give the impression that growth plays do not exist, but that is not the case, and one growth company worth reviewing is Sotheby's.

Sotheby's (NYSE: BID) is the world's second-largest auctioneer of fine arts, antiques and collectibles, offering property in numerous collecting categories, including paintings, jewelry, decorative arts, and books.

Analysts expect Sotheby's to register strong revenue growth in 2008, with an improving financial position, and modest debt. Furthermore, costs remain reasonable. The Reuters F2008/F2009 EPS consensus estimates for the company are $2.82/$3.14.

Yesterday I wrote about the popularity of dumpster diving in Germany, and also told you alll a little about my less-than-glorious foray into the world of snagging other people's cast-offs.

Today's New York Times reports on one woman's extremely lucrative trash-picking adventure. Elizabeth Gibson was on her way to get coffee when she pulled a 38x51 inch painting out of someone else's trash. It turned out to be a piece by Rufino Tamayo that had been stolen 20 years ago, valued at about $1 million.

Amazingly, the widow of the man who purchased the painting has elected to put it up for sale and given Ms. Gibson a reward of just $15 thousand. Sotheby's, the auction house that will be selling the painting, is also paying her a small finder's fee.

While $15 thousand is hardly chump change, it looks like Gibson will mostly be gaining a great story to tell her grandchildren. You'd think the widow could have been more generous, given that the painting was 20 minutes away from landing at the dump.

With the news this morning that Madonna is potentially leaving Warner Music Group (NYSE: WMG) for tour promoter Live Nation (NYSE: LYV), the future of the record industry is again being questioned. In the wake of English band Radiohead's self-release online of its seventh album, any move away from the record industry is demanding notice. A move to a tour promoter with album and merchandise opportunities only gives artists more control over their product, as opposed to making numerous deals with separate entities.

The Wall Street Journal's article cites that "a range of players in the music business -- labels, concert promoters and even managers and ticketing companies -- are eager to make broad deals that give them a larger piece of the pie by participating in revenue streams such as endorsement deals between artists and advertisers, as well as the sales of concert tickets and merchandise." That very sentiment spells doom for the record industry as the "newer" entities that enter the album-making business make offers that are often better than the deals the record labels offer.

The possibility of Madonna moving from Warner Music is only the most recent in a long line this year of successful artists moving from the big labels, but so far the question has revolved around embracing new technologies like the digital market. Paul McCartney shook up everything back in March when he moved from the Terra Firma-held EMI to Starbucks' (NASDAQ: SBUX) Hear Music, seizing on a market that had primarily been used for selling compilation CDs. McCartney's Memory Almost Full sold extremely well and catapulted him into the digital world. Radiohead's In Rainbows is this year's other strong case, though exact sales numbers are not available yet (however, the album's download site did get overloaded yesterday).

But the problems that face label groups like Warner and EMI are not limited to those companies. The entire business model for the music industry is being redrawn and recreated, but not by the labels. As the cases of Madonna, McCartney, and Radiohead illustrate, the artist is taking control of an industry that has long abused its power.