Issue #148  9/28/2008
On The Economy

By Alex Novak

I know many of our readers have been confronting distressing headlines and news on the economy, whether you reside in the very popular (these days) Main Street, USA, New York City, L.A., Chicago, Atlanta, Paris or London. These appear to be serious times, but I am hopeful that the U.S. Congress and other governments will step up and do the right thing to unplug the credit freeze and allow our economies to at least recover enough to avoid a serious and long-term recession or worse. No one likes the idea of "bailing" out greedy Wall Street financiers, but that isn't what this plan is about--especially with the new safeguards put in place by Congressional leaders. It is about stopping a crisis of confidence in our global credit and financial systems that is crucial if we are to avoid a depression (yes, I used the "d" word), or a lengthy and deep recession. There are still some longer (only slightly longer) term urgent bank solvency problems that I think may be unresolved by the current plan from the Bush Administration and U.S. Congress which are a concern to some economists, but they will only be worsened if this measure does not pass quickly.

The implications for the photography and art markets may seem trivial beside these greater impacts, but certainly they are still important to our readers (and, especially, for those who make a living in this market).

At least until now, there has been fortunately little impact on the photography marketplace. We and other photography dealers that I have talked to have seen little to no drop off in business--in fact, we and many others report an excellent year to date. During what was one of the great drops in the world's stock markets, Damien Hurst was selling over $200 million worth of art at Sotheby's London with few items passing without winning bids. While I think that is a little obscene personally, it does represent a bit of the current strength of the art market, which focuses on hard assets, as opposed to the more transitory financial instruments.

That does not mean that we will get a pass here. No matter how markets react to what is being euphemistically being called a "bailout", the economy has been too stretched and battered not to react. While I am only a student of the economy and not an "economist", it looks to me and many of those more professional brethren that we are in for an economic downturn. The only questions are: How long? How deep?

I do think that the more speculative side of the contemporary art market will take a strong hit over the next few years, but photography in general will probably ride out most of the storm in terms of pricing, if not in terms of sale turnover times and buy-ins at auction. Both auction houses (especially) and even dealers/galleries may be in for a tougher time over the next few years than they've had more recently, but collectors will not be, especially those that can afford to hold for a reasonable time period. Collectors may even benefit from such a slower period. As collector Michael Mattis told me in 2001, "As a collector in it for the long haul, I like down markets just fine: there is less frenzied competition for fine pieces, and more time to contemplate and finance a purchase--and the dealers are less ornery about time payments!"

Back in March I wrote about the possible downturn in the economy and photography art market. I must admit that I have had little change of heart since then, and I think my advice to collectors has been right on target. If you haven't read it or don't recall its details, might I suggest that you go to http://www.iphotocentral.com/news/article_view.php/150/141/824 . If we are facing, as I currently expect, a recession of two to six years, I think what I predicted then holds up very well indeed.