May 22, 2008

So now we have the Art Bubble. When is ArtPANIC? And is EVERYTHING going to bubble now?

Man, these bubbles are EVERYWHERE.

Bubble in rice
Bubble in oil
Bubble in houses
Bubble in gold
Bubble in Euros
Bubble in art

I could go on and on...

These past few years have seen so many mis-allocations of resources, so many bubbles, and now such a massive wall of money worldwide chasing too few goods, combined with a collapse in the US dollar that makes dollar-denominated things skyrocket in price.

So when will it end? Or will it end? The housing bubble is over, but the other ones go on and on and on.

These past few days saw Roman Abramovich, one of the Russian oil guys (who also owns last night's loser Chelsea), drop $120 million on a couple of paintings, even though he's never been a collector in the past. Hmmm... And we also saw the Rothko painting above go for... wait for it... $50 million. Not bad for a few minutes of work I'd say.

Inflation folks is gonna get so out of control now that it'll make your head spin. It's not just rice, it's not just oil, it's not just art, it's... EVERYTHING. You've got a couple billion people in China and India who want basic things like cars and TV's and meat, and that changes everything. You've got countries and people printing money now with $135/bbl oil. And you've got a world who can't produce enough goods (or food) to meet demand.

So everything bubbles. Well, almost everything. Everything except for houses of course.

Get some popcorn and sit back. But you might want to stock up before the price goes up again.


Anonymous said...

Sit this one out. Inflation is the "taxi-driver tip" right now. Dollar holders should worry, but everyone else should be hanging on to their cash for higher rates and deflation.

Only the worst of suckers buys something with almost zero use value (art) in the hope of finding a greater fool. Really, if you buy a painting for $100m then the carry costs alone is the $4m you could've gotten in a normal savings account. You telling us you could get $11k of enjoyment every day out of having that painting hanging on your wall?

Better off with $11k of hookers and blow.


blogger said...

I've heard the reasons the Russian billionaires are buying things (outside of Russia) like art and homes in Chelsea is because they think the Russian government will end up trying to seize their assets and put them behind bars

So they don't live in Russia and they're keeping their holdings outside of Russia

Meanwhile, look for the trillions in new oil money to go into a mad scramble for assets

Inflation is about to spiral out of control

Anonymous said...

...You've got CONgreffs spending $300 billion every other day. Inflation wins! Told ya! :P

Anonymous said...

I wonder when the "hookers and blow" bubble is going to start. It makes about as much sense as an art bubble.

Anonymous said...


Its only a bubble if there is excess inventory. Where is the excess in oil, food and metals? Calling it a bubble when its not is unhelpful.

Anonymous said...

Sorry, Keith - I think you're wrong about a gold bubble. Gold is real money, and the dollar is becoming less so every day...

Anonymous said...

> I've heard the reasons the Russian billionaires are buying things (outside of Russia) like art and homes in Chelsea is because they think the Russian government will end up trying to seize their assets and put them behind bars

Right. And, politics aside, property rights are uncapitalistically weak here.

> Inflation is about to spiral out of control

Doesn't the spiral involve wage inflation? I know we have some but what's going on in the dollar's homeland? I'm seeing the same $40k-something mean annual income figures since the beginning of the decade.

Anonymous said...

100% behind you on that one Keith. This is why I have been buying gold since 2001. Its the only thing I know what to do to battle the powers that be and their intense inflationary programs.

Anonymous said...

I read a fascinating piece last week about bubbles. Basically, and this seems so obvious to me now, bears don't get to vote. In other words, if I don't like an asset class, like housing, unless I'm running a hedge fund I pretty much can't short the market. Even in the stock market where shorting is relatively easy, the risk is ignorantly higher on short side.

Therefore, the bears generally avoid the asset class, and you're left with just bulls. By definition, bulls love the asset class, and trade amongst themselves gaining confidence with each successive transaction moving the market higher. This of course attracts new naive investors (more bulls e.g. Kendra Todd) and valuations continue to spiral up. The blow-off finally occurs when liquidity dries up due to some exogenous event like the fed raising rates.

Anonymous said...

The Russian oligarchs are indeed wary, as they should be given the manner in which way they obtained their vast wealth in the early 90s. I have heard from an unverifiable source that Putin is now the richest man in Russia....not bad for a government worker.

I bought a very large original Peter Max oil of 'Better World' from a famous rock star in 2000...for pennies on the dollar. I cherish this painting and simply couldn't imagine my life without it. Peter is still painting(in his 70's), which is not so good from an investment point of view but I am happy for the joy he brings his clients. I hope to one day buy an oil of 'Without Borders' and 'Man in Reeds'.
For all the art critics, I realize that Max is considered a commercial artist with no integrity but I've never really cared what other people think and at my age, it is safe to assume it's too late to change. Some day Peter will either get too old to paint or pass on, and his work will appreciate in value, and he will be seen as the national treasure he is. I, personally would not buy his serigraphs or lithographs...I'd hold out for an original oil.

Anonymous said...

Should I hold pieces of paper with numbers on them or should I buy food, energy, and materials? Hard choices.

Anonymous said...

This isn't an art bubble -it is very smart rich people fleeing the dollar into assets that retain value.

This is dollar flight panic -not a bubble

blogger said...

I agree - this is a flight away from fiat currencies and into possessions

Interesting thing though is that in the middle of this, you have housing and real estate crashing

Anonymous said...

Keith, if you go back to threads where you asked what the next bubble will be, I called "art" more than once. I mean, look at that painting - it's a creampuff!