Art: Landscape With Ascending Figures

Hard to believe, but French Impressionist paintings were once deemed almost worthless. A neighbor even used a bunch of Pierre-Auguste Renoir's canvases to build a rabbit hutch, ruining the works in the process. On another occasion, in 1894, when painter Gustave Caillebotte died and left some 65 Impressionist paintings to the Luxembourg Museum in Paris, curators reluctantly accepted only half of them--after a celebrated painter described the lot as "filth." The works it took are now at the Musee d'Orsay. The rest were sold off on the cheap, mainly to Americans.

As often happens, taste has changed dramatically with time. Today, French Impressionists' works--along with those of Pablo Picasso--are leading a revival in the art market. With strapped Japanese speculators doing some of the key selling, prices for major works sold at the annual November art auctions in New York and London were sometimes eye-popping, although generally short of the wild levels hit in 1989 and 1990. Sous-Bois, a Vincent van Gogh forest scene that Sotheby's had estimated at a high of $10 million, went for $27 million. At Christie's International PLC, Picasso's Le Miroir was gaveled down at $20 million. "There's a general feeling of cautious optimism," says David A. Tyler, a top executive at Christie's. "When people see major players spending millions, that has a trickle-down effect on the market as a whole."

"VERY ATTRACTIVE." Signs of improvement abound. The auction houses and many dealers say they are having their best year since 1990. Plus, a lot of dealers are buying at auction--something Sotheby's CEO Diana D. Brooks calls "a sign of confidence in the market." In the glum years of 1990-93, dealers more often stayed away, focusing instead on private sales. Moreover, when key works failed to sell at auction this November, the private market sometimes picked up the slack. For instance, when a Jackson Pollock drip painting, Number 1, 1952, didn't meet its Christie's estimate of $4 million to $6 million, New York dealer Robert Mnuchin, a former partner at Goldman, Sachs & Co., quickly snapped it up privately. Mnuchin says he paid "slightly under $4 million" for it, a price he calls "very, very attractive."

All told, the world art market may be achieving its own version of a soft landing. Its hallmark is a steady price appreciation for many categories, without the overheating and wild speculative buying of six years ago, when the Japanese were major players. According to the Daily Telegraph Art 100 Index, a figure calculated by London analyst Robin Duthy using auction results for the works of 100 top artists, prices bottomed out in October, 1994, when the index hit 3,793. Over 14 months, it has gone up 11%, to 4,207, with most of the rise coming since June. "Great pieces by great artists are getting pretty damned good prices," says Boston investor Thomas H. Lee, who paid $4 million for Arshile Gorky's painting Scent of Apricots on the Fields at a Sotheby's auction. "But weak pieces aren't necessarily selling."

Not every sector of the market is shining. Since the end of last year, Duthy's indexes of French Impressionist and Modern European art (which includes Picasso's work) were up 17% and 24%, respectively. Latin American art was also up, by 13%. But the figure for Old Masters was off 14%. And modern U.S. paintings--which had risen in value early in the year--were down 8%, largely because of a relatively poor showing at auction by painters such as Josef Albers and Frank Stella.

Still, there's a good chance that prices of painting and sculpture in general will continue to climb in 1996. For one thing, the art market tends to follow trends in the economy and stock market. So the economic recovery in Europe will help, too, although the effect may not be immediate. Americans have been doing the strongest buying, and that is likely to keep up, especially if the booms in stocks and initial public offerings continue. "Many people have made so much money that I think prices could go a lot higher," says Brooks of Sotheby's.

Which is not to say fate won't smudge the canvas somewhere along the line. The art market does best when fresh batches of exciting works become available, usually through estate sales. That happened in spades in 1995, when the estates of such major collectors as film producer Joseph H. Hazen and TV producer Mark Goodson came on the market, but there's no guarantee of a repeat in 1996. And fallout from Japan's financial restructuring could still swamp the market for Impressionist and modern paintings as hard-pressed collectors unload their holdings.

Some key collectors see opportunities, even as prices rise. If shipping magnate Sammy Ofer was the buyer of Picasso's Le Miroir, as is rumored, he no doubt thinks he got a good price: He paid 24% less than the $26.4 million a Japanese bidder shelled out in 1989. Scott M. Black, chairman of Boston's Delphi Management Inc., thinks he "stole" a painting by Henri-Edmond Cross by paying $475,000 for it. One reason: A Japanese speculator paid 60% more for it during the boom years.

COLOR-FIELD TRIP. The best values, however, may be in contemporary U.S. art. SunAmerica Inc. Chairman Eli Broad, a longtime collector, notes that the price falloff in this category "was very, very severe--with some works selling at one-third of what they should" in the post-1990 slump. But the turmoil may be over. "The market has found a floor and stabilized," he says. The Los Angeles executive recently bought works by Robert Rauschenberg, Andy Warhol, and Alexander Calder.

The daring may want to jump in and buy out-of-favor works. One possibility: color-field paintings by such artists as Frank Stella and Jules Olitski. Or you could try 1980s artists, such as Jeff Koons. The risk is that the work you buy may never come back into vogue.

Smaller buyers don't have to miss out on the action. Sotheby's and Christie's hold auctions year-round, and the vast majority of items go for less than $5,000. An Olitski can be had for as little as $2,000. Prints and drawings, usually far cheaper than paintings, are a good bet, too. Surveying his current stock, for instance, New York dealer Larry Gagosian recommends a $4,500 combination mezzotint and photogravure by Vija Celmins, a Latvian-born artist living in New York. Another possibility is Latin American art. Good pieces can be found for about $5,000.

If you want to try to uncover the next Willem de Kooning or Roy Lichtenstein, the Big Apple is still the best place to look. Start haunting the smaller dealers in lower SoHo--such as Tz'Art & Co. (28 Wooster St.), Jack Tilton Gallery (49 Greene St.), and other galleries within a block or two. In some, you may see wild video installations and "found art"--amid more conventional works. Prices are quite reasonable, ranging from $1,000 to $8,000.

Just remember the main caveat of art collecting: Buy only works you really like, because you may be stuck with them if the market tanks. But don't be too conservative. What seems outre today could be all the rage in a decade.

Before it's here, it's on the Bloomberg Terminal.