"...carried a pre-sale estimate of over $70 million..."
"...the artwork came to the market without a minimum price guarantee from the auction house..."
"Oliver Barker, the evening’s auctioneer, began the bidding for the bust at $59 million. But his bids stalled at $64.25 million. Three minutes passed as he hunched low over the rostrum, hunting for bidders, Nosferatu-like, until announcing that the lot was a pass."
Can someone explain how these things relate? If the pre-sale estimate was $70m, there was no minimum price guarantee (a reserve?) and a bid of $64.25 million (90% of the estimate) why didn't it sell?
The article goes on to say:
"“No one who is an informed buyer who is serious in this market — billionaire or not — is going to pay what essentially amounts to a 50 percent premium on something that sold in recent memory,” said Todd Levin, an adviser in New York."
Someone was willing to pay $64.25 million, a 30% premium on the last sale, $70 million is only 40%. Where does 50% come from? Why is $64.25 million bad but $70 million is good.
If I had to guess it would be something to do with this part:
"Solow, auction experts said, had a history of not seeking guarantees, choosing to negotiate for a portion of the buyer’s fees instead. Last night that strategy proved fateful."
The vendor and the auctioneer have some private agreement, which meant the sale probably ended below an acceptable price.
The auctioneer will not specifically identify bids placed on behalf of the seller. The auctioneer may further bid on behalf of the seller, up to the amount of the reserve, by placing successive or consecutive bids for a lot or by placing bids in response to other bidders.
Of course people close to the process know which part of it is a game.
"We disclosed our nonsense in the terms and conditions, it's your fault if you don't catch on" is a fine way to do business if that is how you want to be seen doing business.
So what seems to have happened here is that the seller set a de facto minimum of $70M before their deal with Sothebys would take effect, and, seeing that there was no interest, pulled the sale.
More details here: $70 Million Giacometti Flops at Sotheby’s, as Demand for Trophy Art Softens
https://news.artnet.com/market/70-million-giacometti-flops-a...
When items like this go up for auction, sellers often set a "minimum" price. If that isn't met, the item isn't sold and remains the property of the original owner.
As you've highlighted, the reserve price doesn't have to be guaranteed by the auction house. So if this price isn't met, nobody gets the item (unlike the standard which is that the auction house will buy the item for the reserve price).
The 50% is probably the guy rounding the estimate to make a point.
As for why 64.25 wasn't enough but 70 would have been, I don't know. My understanding is that a lot of pieces sell for above their high estimate, so I'd guess that the seller was expecting/hoping for that? I do also think that 35% versus 40% matters a lot more when that difference is 6 million dollars in absolute terms.
$70M bust busts.
Imagine that it is the equivalent of 7 millions McDonalds meals, or 1000 years of an average US worker salary. All of that just for a decoration object that you will put on top of a chimney. And it is not even like that the original author is rewarded for his own work!
If you’re worried that more income is being consumed by necessities, real disposable income is also on a steady upward trend:
So there is a disconnect between those real/disposable income numbers and the actual market realities, no?
Most of the middle class that “vanished” became part of the upper classes, at least as they would have been defined in real economic terms a few decades ago. Look at college graduation rates, or # of workers above $100k comp (real, not nominal), or the net worth of retirees, or …
America is vastly richer than it was even in 1990. Those riches may be modestly less evenly distributed—though there are demographic forces at work there as well as raw economic ones—but the median American along any number of axes is much, much better off.
That is not correct.
>...Smith's first maxim of taxation, from Wealth of Nations, is that the "subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state."
>Taxation in proportion to revenue is not progressive taxation. It is proportional taxation—in modern terminology, a flat tax.
https://reason.com/2023/06/04/adam-smith-wasnt-a-progressive...
In terms of Mill, I think he advocated for inheritance taxes, but in terms of "steeply progressive taxes" he wrote:
>...To tax the larger incomes at a higher percentage than the smaller is to lay a tax on industry and economy; to impose a penalty on people for having worked harder and saved more than their neighbours.
https://oll.libertyfund.org/titles/mill-principles-of-politi...
Must be nice to live in a time when this either was true or when people genuinely thought this was true.
> The fear within the auction world is that the bust’s flop could now taint casual perceptions of the overall health of the art market, when it was Sotheby’s, and the seller, who agreed to expose an object of economic importance to the risks of an unpredictable market.
In other words: Sotheby's decided not to sell, and now people are considering that paying $70 million for a piece of art might be a crazy idea. Maybe next time a piece of art is being sold for an outrageous price, buyer will instead think: "Wait, what I am doing? Am I really going to get $70M worth of satisfaction from this? And if not, will I at least be able to resell for the same price to next person?"
aurizon•8mo ago
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