It May Be Time to Unload That Warhol

Art prices are strong, but a correction may be near

At a tony art gallery in Manhattan recently, a collector was agonizing over an expensive work of contemporary art he coveted. Turning to gallery owner Ronald Feldman, he wondered: "Should I buy this, or should I buy GE at $24 a share?"

The joke sums up the zeitgeist in a contemporary art market that's so hot it may be burning itself out. The price of post-World War II art soared 16% in auctions in the first half of this year, vs. 6% for the overall fine-art market, says Paris-based, which tracks world auction results. And while stocks have plunged, art worth more than $100,000 has returned more than 12% annually since 1996, Artprice figures. Many investors again see art as an attractive alternative investment and contemporary works as the equivalent of NASDAQ stocks--risky but rewarding when they pay off.

Now, even if war with Iraq or some other calamitous event doesn't touch off a correction, most veteran collectors doubt the market can get through the next year without a slump. "In some ways, it's reminiscent of the market 12 years ago," says Los Angeles collector Eli Broad, chairman of financial-services giant SunAmerica. Back then, a plunge in Impressionist prices touched off an art market crash; bears fret that the same thing could happen now if contemporary art prices go south.

Several veteran collectors are selling. Such art market luminaries as France's François Pinault (who owns Christie's International), retired investment banker Kent Logan, Wellesley (Mass.) real estate investor Gerald Fineberg, and San Francisco investment banker Thomas Weisel all have important contemporary pieces for sale at the big New York auctions in November. It's hard not to conclude that these collectors--all savvy investors in their day jobs--are raising cash in anticipation of a market slump.

To gauge the market's health, watch the Weisel sale at Sotheby's Nov. 12 auction in New York, which is expected to fetch up to $60 million. The 21 works Weisel is selling, by such artists as Willem de Kooning and Franz Kline, are among the best to come on the market in recent years. A Weisel spokeswoman says the collector is unloading a fraction of the art he owns to redirect his collection by buying other works. But art market sources say he's selling the heart of his collection--and asking high prices.

Another bellwether, notes Laura Paulson, director of contemporary art at Sotheby's New York, will be what Andy Warhol pieces command. Warhol prices have tripled in recent years, leading collectors to sell important paintings--also for top dollar. An art market source says Fineberg (who didn't return calls) is the seller of a double Warhol self-portrait, estimated to fetch up to $3.5 million, that is part of Christie's Nov. 13 New York auction. Another major Warhol: Silver Liz, a portrait of Elizabeth Taylor at Phillips, de Pury & Luxembourg's New York sale. The auction house thinks it will go for up to $6 million. Warhol is hugely popular, but prices of his works soared and then tanked in the early 1990s, and it could happen again.

Insiders profess confidence. "The market can't go down now because there's so much quality work [on sale]," says Amy Cappellazzo, head of contemporary art at Christie's in New York. But a correction probably isn't far off. "It could be like the stock market, where people kept saying in '97, '98, and '99 that prices were too high," says New York collector Arthur Goldberg. "They were wrong, but when the bubble finally burst, there was hell to pay."

By Thane Peterson

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