Van Gogh: The latest sub-prime victim

It's hard to avoid the contagion metaphor when writing about the the mortgage crisis. But its polluting effects are creating surprising casualties.

Sotheby's art auction house had no luck unloading Van Gogh's "The Fields (Wheat Fields)," pictured here, valued between $28 million and $35 million. One likely reason: the turmoil in the credit markets, according to a report from Bloomberg News.

Last night's New York auction took in $269.7 million, one-third less than the low estimate of $401 million with commissions. Sotheby's stock plunged 35% today.

"The sale's lackluster performance suggests that key fears related to subprime/credit/housing issues may be playing out in the U.S,'' analyst Dana Cohen of Banc of America wrote to clients.

Call it the "trickle up" theory.

Photo credit: Sotheby's via Bloomberg News

-- Posted by guest blogger Annette Haddad

Comments

[Tombstone Realty]

I'll rent a room out to Sotheby's and the painting can stay with me until the real estate and credit markets bottom out next April (coughcough).

[Dominic Smith]

Annette, before Peter gets back I want to thank you for keeping the blog going while he's been gone. You've done a fine job.
Thank you as well for no orange man or Brittany photos. The Van Gogh is much easier on the eyes.

[xtine]

For a story about an idiot...see here

http://www.nytimes.com/2007/11/09/us/09speculate.html

He was a speculator who thought it would last forever. And we're supposed to feel sorry for him. I think we should sue him.

[Rich]

This would be an appropriate place while peacefully contemplating Van Gogh's splendid landscape to meditate on where we are.

This week to me seemed like such a rerun of the late 80's, with different details but overall the same types of events. Back then real estate crashed because Savings and Loans were the primary sources of mortgage loans and had been playing fast and loose with the rules, resulting in a long couple of years of news about various banks being bought up by national players with the blessing of the feds in order to save the system. In hindsight, the fussy banking rules that tripped up the s&l's seem quaint compared with the widespread fraud that fueled this market.

The stock market crashed in '87 on computerized program trading, but recovered shortly after until a genuine recession closed the decade; this week program trading is driving the volatility, though market ciruit breakers instituted since '87 keep us from crashing.

In the mid-'80's tax rules allowed IRA investing in tangible goods like coins or art and there were lots of articles in the financial mags about how to manage those types of investments. I believe collections are no longer allowed for these types of accounts and art is once again a hobby for the rich rather than another neat investment for the ambitious.

In real estate the trend among the up-and-coming upper-middle class was to seek out trophy homes as status symbols. "This old house" on PBS was pretty much the only home program on tv at that time and their selection tended toward New England and historic, so it became fashionable among that class in New England to buy historic homes, especially colonial-era homes, and restore them to authentic perfection. In the recent bubble the national trend was toward buying investment homes and equipping them with the most luxurious appointments, like marble counter-tops, to enhance future value. (colonial homes in New England are out of favor today as the current generation seeks comfort rather than validation).

And for the first time in a generation the pronouncements of the fed chairman and treasury secretary take center stage ahead of the politicians...

[MyLessThanPrimeBeef]

Sotheby's shares only dropped like 28% on Thursday.

[Ben Brown]

I can't understand why these RE speculators don't sock money away for the inevitable slowdown or crash. If the guy in the NY Times article had taken 1/3 of his profit every year and stashed it into U.S. Treasuries (1-3 yr.) he would've been able to weather the storm. To just keep expanding, adding debt and increasing exposure to a downturn is plain stupid. Obviously his community college schooling wasn't enough.

[Brother Joe]

Mr. Mozilo's comments are pathetic!

Lenders created all these stupid loan programs.

They should all be in prison...(The ones who made the 1% interest rate loans)

He made his millions(Which should be taken away) because of what they did...

They screwed our industry! and most of us did not participate in the mess, but we have to pay the price...