Hello, I'm Josh Baer and welcome to the Bear Fax podcast. For this episode, we will discuss the auctions. Now, we only ever hear about the auctions in the news when they set a record breaking price. But this record breaking competition between the houses doesn't always reflect their real profits. In fact, the profit margins may have been growing slimmer in recent years.
In this episode, we also talk in depth about guarantees, when to take them and when not, and buying and selling young artists at auction. When is it good for the artist? How do they feel about it? Nobody buys an artwork expecting it to go down in value, but is it still possible to buy low and sell high? Now my old clients, maybe 40 years ago, bought works for 5,000, turned it into 30 million. That's not gonna happen 80 times soon again, and on the other hand, you can buy high and sell low.
Particularly now there's a danger zone where young artist prices blow up sometimes too fast at auction. I have personally attended nearly a thousand auctions in the past 25 years. I know maybe sounds a bit pathetic. On the other hand, I've learned a thing or two about it. Now in this episode, we will talk to two very distinguished members of the art world who are coming at it from different perspectives.
Both have been great friends at the Bear Facts, and they talk about many auction topics that you don't usually get behind closed doors to hear. We are from Howard Rachofsky from Dallas, and Sophia Cohen from New York.
I actually bought three works with the proceeds from the sale of the balloon flower, and that was actually the only time to my recollection, that I ever had a guarantee on a work of art for sale.
I've bought artists years ago that, you know, I bought for a very low amount and then I look at auction and these people are going for in the millions, and that's only like three to four years later
as we gear up for the spring auction season in New York. We sat down with two of our friends to pull back the curtain on the secretive world of Auctions. Dallas-based collector Howard Barovsky and Sophia Cohen, a young collector and associate director at Gagosian Gallery, where she works as an artist liaison. First Howard tells the story of when he sold his Jeff Koons balloon flower at Christie's London in 2008 for $25 million.
I guess my most noteworthy sale was a transaction in, uh, I think believe, uh, this really dates me, but I think it was, uh, 2008 when I sold Jeff's Jeff Koon's balloon flower that we had bought in the late nineties, and the rationale for. Selling it, quite frankly was that I had the opportunity to acquire a, another work that was extraordinarily costly and I have and had at the time, finite resources and I felt like buying the work that I bought would be more additive to the collection.
And I actually bought three works with the proceeds from the sale of the balloon flower, and that was actually the only time. To my recollection that I ever had a guarantee on a work of art for sale
to convince collectors to sell very expensive works. Auction houses offer guarantee deals, which promise the seller a minimum payment, even if the work does not sell.
I was well advised, uh, working with Alan Schwartzman, uh, and at the time with Amy Cappellazzo at, uh, who, who was at Christie's at the time in shepherding the sale of that work in London. And the timing was, you know, was extraordinary and they were able to present it outside in a little park in London, which was sort of unheard of. It's the only time I ever sat in a, in one of those little private boxes at the auction. The auction was kind of a big let.
Down because there was a guarantee in place and it's, I think the work sold actually, you know, a little better than the guarantee. So I think no one lost any money on the transaction and I was more than pleased. But that was at a price level at at which I don't traffic with any regularity, but that was a one off in terms of a guarantee. I didn't really play the auction houses off against each other. This was really an idea that, That was precipitated by our desire to acquire something else.
What were
the other three things? If you can tell us that you acquired an A follow up or Carl to that is back in those days, you could use the 10 31 like kind exchange. Correct.
A 10 31 like kind exchange is a tax break in the US which allows investors to defer paying capital gains taxes on the sale of assets by reinvesting the proceeds in similar assets. Art collectors at the top of the market had used them frequently until Congress passed a law in 2018 that limited 10 31 exchanges to real estate. Their most common
use. And would you be less inclined to do that whole thing now because that tax break no longer
exists? Well, I probably would've done it anyway cuz the only I, I felt at the end of the day, you pay your taxes and you find a way to acquire the work. If you think what you're buying is ultimately more useful to the collection. And ultimately we would think to the museum. But we bought three works from that, the major.
Work that we bought was a suite of paintings by Sigma Polka that was made available to us because of a longstanding relationship with the gallery and with the artist particularly. And this is a, a body of work that wouldn't really was from his personal collection. It wasn't a work for sale through a, a gallery in a conventional exhibition, but it was a work. That was distinguished and one that we coveted particularly and felt like would really be significantly additive to the collection.
And the second and third work were two works of Italian artists, one Lucci Fontana and the other Pierro Manzoni. You know, we were really. Rounding out our collection of post-war Italian work where we were relatively deep and, and these were works that had historical significance and were incredibly additive to the collection. And in fact, uh, they're both on exhibit at the warehouse, uh, right now. And, uh, the current exhibition that we have up. Well,
one of the things I would encourage our audience to do at some point is to go to the warehouse in Dallas, and it's probably the preeminent American collection of post-war Italian art that's been built over a long period of time. So just
how do you participate in an auction? In the old days, you had to raise your hand in the auction room to place a bid or send someone you trusted to bid for you. Nowadays, most bidding happens over the phone. With a client, either on the line with an art advisor sitting in the audience, or with an auction house employee standing in the raised platforms called the phone banks, or even bidding online. Listen, as Howard tells us the story of his first major purchase at auction.
You do raise the question, what is the most interesting work you've ever bought at auction? And I have bought more at auction significantly. I, my, my auction sales, you could probably count on a few fingers, but the most significant auction purchase is one that I probably would never have made, um, had I been in the room or had I been on the phone myself. This again goes back.
Uh, historically, a little bit, even earlier than the sale, it was the first time I really spent, for me major dollars on our major currency. It was also in London, uh, major pounds of a painting. I was in London, uh, just because we were on vacation and we were there and the auctions were to happen in the next week. And we previewed the works. And of course this is early when we had really begun to delve into the Italian post-war work, and I believe it was at. I'm gonna say it was at Sotheby's.
I'd have to fact check myself a little bit. We stumbled upon this major painting by Fontana, this Phite de Dio, which is one of his most significant bodies of work. And this was one in particularly good condition and vibrant and wonderful, and we got the condition report. We had a conversation about it. Um, and I used a friend to bid on it for me because we were literally going to be on a plane coming home at the time of the auction.
So I gave him some parameters and he was a dealer friend who was pretty savvy about the marketplace and very savvy about bidding at auction. So I gave him a limit. At X and I said, you can take, you know which one does, you can go one bid over X if, if you happen to land, you know, on an odd, odd number. And so I'm on the plane, we land and I get a voicemail that basically said, congratulations, you. One you won. You got this work. Uh, I had to pay a little bit more.
He actually paid three bids over. He just took the discretion to do it without asking me, and we bought it and, and it's one of the most fundamental and grounding pieces in our collection. I perpetually thank him for being aggressive enough. To make that leap to go the extra mile, cuz I could not replace it now. And it is at least for me, as good as it gets for, uh, for one of those works. And it is one of the cornerstones of the Italian collection.
After the break, we sit down with Sophia Cohen of Gagosian Gallery. Don't transact without the bare faxed. Subscribe to the Bear Fax newsletter to receive the key developments in the art world and op-eds from Josh Bear in your inbox each Thursday plus special auction editions direct from the sale room. The only report on who bought what and who tried to but didn't get it. Head to the Bear fax.com to learn more and check out our full range of content offerings.
Since Sophia Cohen both collects art and shapes the course of artist's careers in her role, managing their relationships with Gagosian Gallery, she has a unique perspective on how auctions affect the primary market. You see in the art world, there are two markets, the primary market for works that come directly from the artist studio via their gallery. And the secondary market for works that have been sold previously.
Lots of secondary market deals happen behind closed doors through galleries or private dealers, but at public auction, everyone knows how much the work sold for and sometimes even who bought or sold it. Sophia tells us about a time she and her father collector Steve Cohen, bought a work on the primary market that would now be worth millions at auction.
I try to collect under 30 K for myself. That's like my threshold. And so I've bought artists years ago that, you know, I bought for a very low amount, and obviously you can gauge what that amount is through my range. And then I look at auction and these people are going for in the millions, and that's only like three to four years later. I mean, there's so many examples of that. So
all your clients are saying, Hey, Sophie, can you do that for me? Like 25 to millions. Like, and you're thinking, oh, sure, I could do that for me or give it to you. So are they looking at that as like a guarantee for the
future? I think that I try to explain, and as I move a little bit more towards advising people, I try to explain to people that. I can't predict the future, but I would like to think that I can have a good enough eye to gauge if someone has a lot of depth.
And so for me, like when I buy these young artists, I kind of see either they're fitting into a trend and they're commercial, like in quotation or they have a lot of depth to them that I see them growing farther than just this one body of work. And like, I'll give you an example. When I was. 17 years old, I told my dad to buy Jonas Wood. I think they were 20 K or like something around like that, 40 k maybe. And I remember I was really young.
I obviously did not have access to cash yet, and I was thinking like, I should just get one for myself. Like why am I like not capitalizing on this moment? And then lo behold, those paintings ended up going for like three to 3 million in auction. So I think that. It's hard to just, like, there's plenty of misses, obviously, you know, that too, like plenty of opportunities that you could have had that didn't work out.
But I mean, you look at young artists like Anna Wyatt having amazing success in her career. You look at, you know, Hillary Pecks doing very well as well.
Is it a danger zone for going too fast and too high at auction too soon?
I think that it is, I think auction records are very big indicators, but I also think that you should take them very lightly as well. I think people tend to wanna capitalize on a moment, and sometimes these prices are reflecting that more. So longevity, I don't wanna call it a red zone because I think that if you have the depth, you can keep up with it, but I think there comes a certain point where you know you need to.
Like find a middle ground where you can't raise your primary prices aggressively and you can't really do much about the
secondary. Are the artists that you're dealing with paying attention like auction night, oh my God, what did my thing do? Or are they just like it is what it is? Do you find? I
think every artist treats it very differently in my experience. I've had some artists that I'm friends with be really waiting on the computer, refreshing, seeing what's going on. I've seen other artists being like, if I spent my time thinking about this, then I'm just gonna go crazy. I
happen to not believe in artists resale royalties cuz I think they favor the artists, the very small percentage of artists who are already doing very well.
What Josh is referring to here is an idea that people have been suggesting for decades of creating a system where artists get a cut each time their work is resold. Since as of now they only receive profits from the primary market or the very first time their work sells.
Do you have an opinion on that since your generation is like, Jonas might be thinking, wow, I saw that for 20 and somebody made 5 million.
Yeah, I think, well, he's a very specific example. Um, but I don't know. I mean, I think about it a lot and obviously I have like a very big like moral and ethical code, but I think it's complicated and I, I think that. Trying to mold these things together and give royalties is just gonna make everything more complicated. And my fear in all of like the artists becoming a little bit more market oriented is that they're gonna lose that artist's edge.
And I think when artists care too much about money, they start making bad art. But I do think that there are ways to do it. So I think that I can speak generally for young artists that go to auction and blow up. Like it must be really complicated to comprehend that, you know, where do you find that middle ground and how do you price things to a place primary where you can grow, but also like, Make money while other people are making a lot of money off your work.
Like they must be really complicated, but
don't have, yeah. It's something that's happening to them, but it's not really happening. It's not really affecting them by them. Yeah. Or for them. Yeah. So it's not for them. Yeah. So it's like, it's
validating, but like also stressful at the same time because
they've seen what goes up, can come down. It
can come down or it, or it could stay or, you know, like it's, it seems, I mean, I wouldn't wanna be an artist. Like I've way, like my ego would be destroyed even if I was doing great. I'd be like, how do I stay here? I don't have a real example story, but I obviously no artist that, that has happened to recently and I'm close to some and it, I can't imagine that's like, you know, the most, the good news, the easy thing
too. Yes. It seems like. The, uh, period from one season to the other. It seems like people don't stay two seasons
in the auction world. There are sales happening every week all over the globe, but the major auctions happen in New York twice a year. The spring season starts in London, each February or March, followed by Hong Kong, and then the big May auctions in New York before they do it all over again for the fall season.
It's like, you know, lot one is the so-and-so and by six months later they're not in the sale and there's a new lot one, and then, yeah, there's a new lot. Once I think you just need
to remember as an artist, like you're not gonna be top dog the whole time. Even the best of the best. Are, you know, gonna have a bad auctioneer. They're gonna have one that slips through the cracks. They might have like way too much that's being on the resale market and like, that's not gonna help anything. And so, but like, no one's gonna argue that they're not great. And so I just think that you as an artist or you know, as a collector, I actually think those are really good opportunities.
If you really believe in an artist and they're having a low auction. Like, you know, season, like get in there, like support your artist and if you can't get primary, like go get 'em now. And trust me, if you believe in an artist and if you feel like you have a good enough eye and that artist has enough history with it, like you'll be fine
after the break. We continue our conversation with Howard Rosovsky as he tells us more about his first major purchase at auction and how to make the right choice as a buyer in the competitive atmosphere of the major evening sales. Don't transact without the bare faxed. Consider bundling your newsletter subscription with access to our auction database. The only platform that lets you know who bought what and who tried to but didn't get it. With over 12,000 data points going back to 1994.
Head to the bear fax.com to learn more.
The auction houses are often saying things like, This is gonna be your last chance. You'll never get a chance like that again. Do you hear that pitch? And in this case you were talking about it kind of was a one time chance. So do factor into sort of a limit of like, well, this is the right piece of the right price, but it's not. The Mona Lisa Ike, that they'll never come up again. Kind of is that in your
thinking? Well, at least in this particular situation, we had looked privately at a couple of other examples, really interesting stories. The only time I had been at, at one of these warehouses in Luo, Switzerland, where all the art is hidden. That's, you know, let's say being sheltered from taxation in various. Places, and we had actually seen and been offered, uh, work there, but we were given the opportunity to buy it actually at less, but we had to pay 'em in cash.
And so let's just say that was a transaction that I was not comfortable. Engaging in, I knew the work, it was a very good example, uh, but it was not as good as this one ultimately was. We really did know that this was a superb work, but it was a stretch. It was more than I'd ever paid for anything else, and it was, uh, very, very meaningful work ultimately for the collection. Do you think if
you'd been in the room, you would've. Kept going even further. I mean, there's a sense of auction fever that some people have and there's a sense that somebody else wants it, so it's really good. So I'm willing to spend more because somebody else wants it. Rather than being by your, on your own bid or just like, that's my number. I'm not deviating. Had you been there, would you have gone five bids further, do you think? Or would you have just stopped at your
number? I think I would've stopped. I'd have chickened out. I have no doubt I needed his gumption, quite frankly, because this was really a stretch. All of everything's a function of price points too. If you know this is your last best chance and you must have this work, then you are going to.
Go beyond whatever you think is a fair value, but if it's a work that you feel like there will be other opportunities, uh, particularly if it's a, a living artist or a younger living artist, unless your analysis is such that this is truly the gem of gems. There are always other opportunities and there are other works, other artists.
After the break, Josh and Howard continue their conversation about their experiences bidding at auction. Don't transact without the bare faxed. Consider bundling your subscription with our art advisory membership program offering on-demand access to our diverse team of international specialists for a low annual fee valued by both collectors. New to the market and experience players like galleries and even other advisors. Head to the bear fax.com to learn more.
Well, as someone who's bidding ad auction for clients, which I do, sometimes I have them on the phone, which they won't tell me what they're gonna do exactly. Sometimes they're, it's like, here's the number you can go one bid. Um, I have gone above it. And what I've said is like, okay, one above it. If you don't wanna pay me my fee, go ahead. And that freaks them out and they say, of course they'll pay me.
Now, I don't know, there's a lot of dealers bidding at auction for collectors that aren't necessarily being paid to do that. Do you have experience with that in this case? Were you paying that person to do it? Or They had the glamor of being seen by the bare facts and being in the newsletter for like raising their hand and buying this thing for X million dollars. And also the advantage of knowing where it is if you ever came to sell it. So would you pay people to bid
for you? No, I don't. You know, again, I don't bid that often at auction. You know, the things we tend to look at at auction are not the things on the. Top 10 list, the hot button list. They tend to be works that fill in a particular, uh, slot in our collection.
And I usually, I either bid through someone at the auction house or I bid through, uh, our art advisory firm, Alan Schwartzman, or in this one particular case I bid through, uh, This is a, a private dealer with whom I had done a fair amount of business with whom I had both bought and sold an occasional thing, but mostly bought work through. If there was, you know, visibility and some kind of perk associated with that, then whatever that psychic reward was is what he got paid. Well, I
don't know if you want to answer this question or not, but I remember, I think it was about two years ago that I came down. In fact, I sat next to you at the Benefit. Thank you, Howard, and there was a dealer who was trying to get to bid on one of the major works at. The auction and he was calling you? He was calling me. He was calling everybody. They won't let me bid what's going on? That happens occasionally,
doesn't it? It does, and actually in the fine print of our, uh, auction catalog, it gives the auctioneer or the dictator if you will be it, me the right. To not accept a bid from a particular party, and occasionally we've had to exercise that, right? Because it's really not going to what we think is an ultimate consumer that would be of benefit both to the artist and to the gallery. And a two by two.
Well, having been in maybe a thousand auctions, I have seen a few examples where I think the main issue was they're afraid that person's not able to pay at that level, and they got a paddle registering saying they'll bid up to a hundred thousand, and if suddenly they're bidding 50 million. Oh yeah, the auction auction house. A little freaked out.
That's why they've even created for like the Da Vinci and some other kinds of works that you need a special paddle to be even able to bid on like the 200 million Warhol and things like that. I think their big fear now is not the, uh, sanction list because they can sort of get out ahead of it. It's like, You know, how's Josh be gonna pay for that 300 million Van Gogh as opposed to, he said he was bidding on a $25,000.
Holy. So. Right. That's, I think, how that's probably in that action, but actually I'm bidding for Howard Rosovsky on that Van Gogh and just not telling anybody.
Well, Howard Rosovsky is not buying it either, so we're both in good in the same place.
We've gotten a bit of what the Bear Facts always says is our main point of our brand, both access and knowledge about the auction world. That's what we do. And next we will delve into the art fairs in advance of the big one, art Basel, which if you didn't know it is actually in Basel. See you next time.
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