August 23, 2011

Recession Fears Fuel Art Sales

Sellers discount asking prices to get liquid before slowdown

High-end art owners are looking to unload, sometimes settling for deep discounts on works from masters such as Pablo Picasso, Roy Lichtenstein and Robert Rauschenberg.

“I think there’s a big fear factor out there,” New York art dealer Asher Edelma, a former Wall Street investor and the founder of art-financing company Art Assure Ltd., told Bloomberg on Monday. “People are afraid of what’s going on in the world and they want to take some cash out of their art.”

Fueling this fear, according to the news service, are the wild gyrations of the stock market this month, including the Dow Jones Industrial Average alternating between gains and losses of more than 400 points for four days in a row, which was the longest streak yet seen.

“Whenever you have stock price declines, you do get a lot of margin calls, and people look for any form of liquidity that they can find,” added Brian Jacobsen, chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wis.

Bloomberg notes “some art owners try to sell privately and avoid the risk of having the work flop at auction. Others are looking for a financial guarantee by a third party before putting art on the auction block. Many are using their collections to obtain credit lines."

“In the last three months, we’ve seen an increase in new clients who want to use art as collateral for loans,” according to Suzanne Gyorgy, director of art advisory and finance services at Citibank’s private-banking unit. “They anticipate market volatility and want to have liquidity available for investment opportunities.”

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