Art of the Day

“L’Odalisque, Harmonie Bleue,’
Matisse Painting Auctioned for $33.6 Million

Related;
The modern art of finance

AUCTIONS are getting riskier. For auctioneers, that is. The guaranteed prices they offer to sellers of particularly desirable paintings are reaching dizzying heights. At four big New York sales in the coming fortnight, Sotheby's and Christie's have guaranteed to pay their sellers a sum unofficially calculated—by me—at $645m, or £310m.

Guarantees are a profitable tactic in a rising market. If the hammer price exceeds the guarantee, the difference is shared between the auctioneer and the seller. The auction house gets a top slice of the sale proceeds as well as a commission.

If a painting fails to sell, on the other hand, a guarantee can cost the auction house dearly. They are a gamble. At Christie's, the gamble is with François Pinault's money. At Sotheby's, it is the shareholders'.

Since guarantees were first offered in the late 1980s the volume and the sums involved have been rising fast—as have the prices for top art at auction.

The sums involved in next week's impressionist and modern sales are breathtaking. No fewer than 57 of the 167 lots on sale have guarantees. The exact figures are a little secret between the seller and the auctioneer, but a rough and ready method of evaluating the guarantees is to make them equivalent to the lower estimated prices. For instance, the Christie's estimate for a moody portrait of Dora Maar by Picasso is $6.5m to $8.5m, which means you can guess a guarantee of $6.5m.

This method suggests that guarantees for this week's sales come to $330m. At the following week's post-war and contemporary sales, spurred on by two monumentally kitsch sculptures from Jeff Koons, and a very expensive Francis Bacon, the estimated guarantees come to $315m....

One explanation for rising numbers of guarantees could be that the sellers do not share the appearance of sublime optimism given off by the auction houses. But signals are becoming slightly more mixed. Last week's print sale at Christie's in New York was a promising bellwether, with 88% of the lots sold, for $16.36m, including the buyer's premium. But there were indications of a softer market at Sotheby's contemporary art sale in London on 12 October.