How to spot the trends of emerging artists

 

Art Market Today

How to spot the trends of emerging artists

 Emerging artists are tricky because they can represent a walk into the unknown. Their Artist Market Values (“AMVs”) surge into rarified air and can seemingly reverse sharply, without warning.  Because they do not have much auction performance data – and what is available may be inflated - understanding established patterns of behavior is paramount.  There are many examples of emerging artist AMV performance, and they provide a basis that will enable you to translate today’s AMV into tomorrow’s ones.

AMVs are built on what we term Key Performance Metrics (“KPMs”) and taken together they provide a picture of why AMV is what it is. The typical emerging artist profile at auction will look something like this:

• Sale prices significantly higher than presale estimates.
• Sale of all offered lots.
• Outperforming similar emerging artists.  
• Relative scarcity of lots offered at auction.

For an emerging artist, you should expect one of the following trajectories.

Type 1: The Typical Case

This is the most common trajectory for an emerging artist- a rapid ascent to a one, no more than two, Auction Cycle peak, followed by a sharp correction, and consistency thereafter.

• Downside risk at the peak is the norm not the exception.  
• Type 1 artists are vulnerable to a sharp and deep correction.
• Correcting into a cold market is common and climbing out by no means assured, likely ushering in what could be a new normal.

Type 2: The Suddenly Arrived Case

A new trajectory has emerged. It applies to artists with no previous auction track records who suddenly arrive on the auction market. This is the characteristic of many artists born in the early 1990s.  In these cases, what you see is no Type 1 buildup, but sudden, frenzied performance followed by a gradual decrease. 

• The out-of-nowhere surge is accompanied by higher than Type 1 AMVs. 
• This is a high impact artist with landing spot too early to call. Even with a Type 1 pronounced dip, there is a real possibility of a bounce-back.

Type 3: The Best Case

In the rarest of occasions, an emerging artist defies convention with an overheated AMV trajectory that holds up far longer.

While there is always a risk that an emerging artist will go from “next big thing” to “disappeared from the scene” quickly, holding AMV for over a year is a very good sign.

• In this case, the overheated AMV persists over multiple periods.
• Auction Cycle to Auction Cycle changes are relatively more gradual and drops do not signal entry cold market territory.

Emerging artists represent the art market’s high risk/high reward bet. When making long-term decisions, avoid the hype. The art market is littered with the remains of the next “big” artist who was destined to become the next Warhol. Be wary, and always know where that artist is in the likely trajectory.

If you have questions on a particular emerging artist, please get in touch.  

The Post-War & Contemporary Art Market – Strong and Steady in May

 

Art Market Today

The Post-War & Contemporary Art Market – Strong and Steady in May

The major New York auctions were held in May, so it was a big month on the auction calendar. And the news was good.  Artist Market Values (“AMVs”) held steady and there are no signs of a softening market - or a correction - in the near term.

The market tracked to form:

• Index indicators - The AAA 100, AAA Blue-Chip 35 and AAA Conceptual 32 behaved slightly differently, with the AAA 100 holding; the AAA Blue-Chip 35 bumping up a point; and the AAA Conceptual 32 dipping two points.  All within the norm.
• Bellwether Artist Indicators – These four highly traded blue-chip artists stayed within established AMV ranges.

We expect more of the same in June with the big end of month London auctions, followed in early July by the usual summer auction hibernation.

Index Indicators - Observations

• The art market in May.  Near-term stability is a good sign.
• A flattening out of the AAA 100 and AAA Blue-Chip 35 is not a bad thing. Consistency and some incremental growth mean staying power.
• AAA Conceptual 32 decrease was no surprise.  Conceptual artists have slightly underperformed and we do not see this changing any time soon.

Bellwether Artists - Observations

• Consistency into June conveys sustainability.  That any changes to AMVs through May were modest indicates that the market will maintainable its stride going into the fall auctions.
• Nothing is amiss. Nothing right now suggests stormy weather ahead.  
• Despite a slight dip, Kusama’s AMV is remains at the high end of her range.  A dip of this sort should come as no surprise because blue-chip artists tend to revert to normal. We do expect her AMV to remain at the higher end of her range.     

Our next art market update will be in early July to wrap up the 1^st Half of 2021. In the meantime, we have a bunch of indexes available. Just ask; if it is not in our stable, we could develop one for you. 

NFTs: We don't think clicks will drive sustainable value in the art market

 

Art Market Today

NFTs: We don't think clicks will drive sustainable value in the art market

I’m still an NFT skeptic. I don’t see equating sales values derived in an unstructured and unregulated NFT marketplace with the staying power of art values derived in an established, organized market. Quite simply, the NFT model is right now fueled by social media-driven “in the moment” popularity; but these kinds of bullish markets built on euphoria rarely last very long (again, the “few early winners and lots of losers” problem). To get a better handle on the NFT phenomenon we will compare a recent art sale in the established art auction market, to a recent NFT transaction. 

Let’s first consider the drivers of value in the traditional art market

We’ll use the recent $562,000 Christie’s sale of Jean-Michel Basquiat’s ‘Bad Foot’, as an example of a traditional auction sale. The key drivers of value are:

1. Only one person or entity can own and decide who sees it, where it resides, how it is maintained and what to do with it.
2. There is a relative scarcity of works. Only one Bad Foot exists, even a perfect copy of the work would be of little value because it is not the original.
3. Basquiat has a long, proven market track record; pre-sale estimates and sale prices are readily available not only for his works, but similar artists working in an expressionist genre, in the city of New York, during the 1980s, as comparison.  
4. Basquiat has an established place in the canon. If you don’t agree with this, consider the $93 million sale of Basquiat’s ‘In This Case’ (an acrylic and oilstick on canvas sold at auction in 2021)

It is easy to understand how the value of Bad Foot was reached; its value can be tied to established drivers, which is why I believe the value will be sustained.

Now let’s consider what drives the value of NFTs

Let’s take ‘Nyan Cat’, an NFT that sold for around $580,000. This meme of a cat with a Pop-Tart body propelled through space by seemingly farting rainbows, resembles a character in a mid-1980s gaming system.  Quite the opposite of the established art market model, NFT sales are driven by clicks, copies and downloads. Juxtaposing Nyan Cat to what drove the value of Bad Foot, we see:

1. NFTs convey something akin to quasi-ownership at best. What the collector is really buying is the authentic version of a readily available digital artwork; the more people who have it, the more the owner can boast to friends, acquaintances, and anyone on the street about being in possession of the authentic version.
2. Nyan Cat is readily available. I can get it, as I have here.
3. No NFT has an established sales record; the high demand seems partially based on being one of the first to own.
4. Hype trumps artistic genius. This is why “name brands” and social media influencers are rushing to leverage their celebrity and cash in on NFTs in a way even QVC must admire.  

So where do we go from here

NFTs are a fragile proposition right now. I still come back to why would someone pay such a high pricefor the one authentic copy of Nyan Cat that has been clicked, copied, downloaded hundreds of thousands of times?  And, what happens when the owner tries to sell it when the clicks fall off?

Here is the very insightful 5 ½ minute video by the Wall Street Journal on NFTs starring Nyan Cat:

The Post-War & Contemporary Art Market - Poised for a healthy May

 

Art Market Today

The Post-War & Contemporary Art Market - Poised for a healthy May

As we head into the defining New York auctions this week, we can safely say that through April the market has been buoyant, and we expect it to stay that way. Artist Market Values (“AMVs”) have been strong and should remain so through the Post-War & Contemporary Art auctions. We see little downside risk in the near-term.  

The market is poised for a healthy May and this shows up in our Index Indicators and Bellwether Artist Indicators:

• Index indicators - The AAA 100, AAA Blue-Chip 35 and AAA Conceptual 32 all maintaining upward trajectories, with the AAA Conceptual 32 the more volatile of the three.
• Bellwether Artist Indicators - Four highly traded blue-chip artists, with three holding steady and one soaring in value

Index Indicators: Observations

• The art market is hitting its stride in time for May.  AMVs are trending upwards for all three indexes.
• Incremental gains exhibited by the AAA 100 and AAA Blue-Chip 35 are maintainable. Even though both are nearing historic highs their trends are smooth. Collectors are spending at all levels and we still seem to be in a high confidence/snap back from Covid mode.
• Do not be fooled by the sharp jump of the AAA Conceptual 32.  It is attributable to significant appreciation in the AMS’s of three artists, with several comparatively low AMV artists realizing incremental, but still lower than the median, appreciation.  Conceptual artists as a category are higher risk today, and the AAA Conceptual 32 could easily pivot.

Bellwether Artists: Observations

• Nothing in the bellwether artist trending hints at a downturn.  The AMVs of three artists held relatively steady while that of the fourth, Kusama, has skyrocketed.
• Steady recent trending bodes well for the market.   AMVs have realized comparatively little Auction Cycle-to-Auction Cycle volatility.  Buyers are not making rash decisions typical of surging or sluggish markets.
• Kusama’s AMV might swing back but her normal is still very good.  Today’s overheated market should be relatively short lived, and when it does normalize, it will stay within range. Demand for her work is strong and the market knows her value.     

Our next update will be in early June. In the meantime, we have several indexes we are tracking. Just ask; if it is not an Index we are tracking, we probably could cook it up.  

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Are NFT’s a technology in search of a market?

 

The Art Market Today

Are NFT’s a technology in search of a market?

Several people have asked me about the impact of NFTs (“Non-Fungible Tokens”) on the art market. I don’t buy the hype. Here’s why... 

Let me start by saying that I’m going to look at NFT transactions in digital art in the context of value. By this I mean sustainable value that a collector may feel is important but which for institutions – insurers, lenders, wealth managers – is essential.

So, the current question is whether the value of a piece of digital art transacted via an NFT will hold up. The easy answer is it is too early to tell. But you’re not reading this for non-answers. My take is, don’t be fooled by the speculative craze. We’ve seen this before and we’ll see it again. What I do know is that other market frenzies (say, internet stocks in 1999) habitually produce a few big winners and a ton of losers.

I don’t get the euphoria over NFTs let alone how value in these transactions will be sustained. Let me be clear, I understand NFTs as a platform for transacting in digital art. I understand how NFTs confer ownership of a piece of digital art despite said art being readily accessible to the masses. I understand the benefits of ownership security and usage rights. However, I don’t understand how this all translates into a collector’s willingness to pay exorbitant prices today and the risk being taken that the value is sustainable. 

Maybe it’s the first-to-own effect. I certainly don’t have millions to burn, but it still seems illogical to think that the value of these works, bought during a period of stratospheric demand, will hold up.  

Furthermore, it is difficult to determine what exactly is driving the art NFT craze. Right now, seems like the technology and the mode of delivery are much more important than the art itself. 

Here are a few red flags:

1. Assumptions about mainstream artist adoption are too simplistic – until now, digital art was a niche. Yes, a few mainstream artists are well positioned, but to expect painters and sculptors to suddenly start generating digital art devalues the creative effort.
2. Gallery investment in NFT platforms is capital intensive - to get in the game, galleries will need to build or buy, while also incurring the costs of augmenting how they do business; thus, they’ll need to see a level of market sustainability first.
3. NFT- collected royalties may not work as portrayed – To really matter, an artist’s secondary market would have to skyrocket, I can count on one hand how many times a year this happens. Plus, by bypassing dealers, the artist loses an established price point today and assumes the risk betting on a higher reward - royalty flow - tomorrow.
4. The benefits of NFTs are already being questioned – it’s early, but thanks to hackers, the media are already poking holes in their previously- championed invincibility. 

To make matters worse, everything is happening at warp speed so and what I typed in this first paragraph could be obsolete by the time I type my last word.

In the meantime, here are some very insightful resources:

• A comprehensive article by Artnet that details the impact of NFTs:

https://news.artnet.com/market/nft-revolution-four-factors-1950645

• If you are a bit of a natural skeptic like me and are looking for an explanation a bit more sardonic, check out:

https://www.theverge.com/22310188/nft-explainer-what-is-blockchain-crypto-art-faq

• A short video talking about the impacts of NFTs for digital artists:

https://www.cnn.com/videos/business/2021/03/30/nft-crypto-js-orig.cnn/video/playlists/top-news-videos/

If you would like me to drill into any of the concepts from above, get in touch.

An Intro to Artist Benchmarking

 

Art Market Today

An Intro to Artist Benchmarking

Previously, we described the power of Artist Market Value (“AMV”) and then introduced the AAA 100 as the S&P 500 of the art market.  Institutions and high-end collectors will want to know two things: How did I do? and How did I do against the market?  Here, we are focusing on the second question and comparing the performance of our unnamed blue-chip artist’s AMV to that of the AAA 100. Benchmarking has many uses, but it’s best at bringing matters of risk and return into focus.

How does benchmarking work and what it tells us

In this case, the results are surprising, even counterintuitive. You would think that a blue-chip artist’s performance would closely align with that of the AAA 100 Index and not exhibit much volatility.  That is not the case here; instead, we get the performance profile more typical of emerging, less established artists.

The chart highlights the blue-chip artist’s riskiness:

• A pattern of below-market performance, with AMV at a 12% discount to the AAA 100 at the end of 2020.
• Volatility atypical of an established, blue-chip artist.
• Little, if any, correlated movement with the market. 

Next up, using sub-indexes to provide more direct comparisons and add color. In the meantime, if there are any artists, indexes, or topics you want to see, let us know.

So, we designed the AAA 100 to be the S&P 500 of the art market

 

Art Market Today

So, we designed the AAA 100 to be the S&P 500 of the art market

 In Bringing Clarity to the Art Market, we described Artist Market Value (“AMV”) as the cornerstone of a market-based approach to evaluating art.  Building on that, we are now introducing the AAA 100 Index. Why?  Market indexes like the S&P 500 are easily digestible benchmarks. If they are so widely used for stocks and bonds, and even frozen concentrated juices, why not the art market? Plus, with the Auction market really picking up steam, without access to an index, you might as well be flying blind.

How the AAA 100 Index and other indexes work and what they tell us today 

The AAA 100 is built on AMV, a comprehensive measure that factors in Key Performance Metrics that drive performance and value. It can easily be plotted over time, monitored and used to frame expectations.   It is an unweighted index of 100 leading Post War & Contemporary artists’ AMVs spanning different movements, career points and geographies. Weighted indexes are often dominated by a small number of stocks. On the other hand, an unweighted index provides a snapshot of performance across all its components, irrespective of size.  

The AAA 100 is akin to a value stock index and for context, we have included two additional indexes, one on conceptual artists, the other on blue-chip artists.

 

Trending is pretty revealing and provides a good basis for framing expectations (Note: Any 1^st Half 2020 dips are likely Covid – related.). Through the 1^st Half 2021, expect:

• The appetite for art is still heavy and the general upswing in the AMV 100 should continue.
• Beware of Conceptual-based art – it has been cooling and comparatively volatile for some time.
• Blue-chip artists again continue to track the AAA 100, reflecting a general preference for stability.

Stay tuned! We’ll be periodically providing updates on the AAA 100 Index and introducing additional ones over the next few months. If there is a type of index you would like to see or another topic you find interesting, let us know.