0:00:02 > 0:00:05This is a film directed at you.
0:00:05 > 0:00:08Yes, you. Bankers of Britain.
0:00:08 > 0:00:09Now, ladies and gentlemen,
0:00:09 > 0:00:12you may have noticed that the art market
0:00:12 > 0:00:15has done pretty well in recent years.
0:00:15 > 0:00:18Sold, 887 at 450,000.
0:00:18 > 0:00:20Better than the stocks and shares,
0:00:20 > 0:00:23commodities and those complicated financial products
0:00:23 > 0:00:25that you trade in.
0:00:25 > 0:00:27BELL CLANGS
0:00:27 > 0:00:30If you go back ten years it was worth half of what it's worth today.
0:00:30 > 0:00:34It's worth about £40 billion today.
0:00:34 > 0:00:37The prices have just gone, in some cases, stupid.
0:00:37 > 0:00:4110, 20 times what one originally paid for them.
0:00:41 > 0:00:44A work of art is beautiful,
0:00:44 > 0:00:48but its...but its value is beyond comprehension.
0:00:48 > 0:00:50You shouldn't really be buying into art
0:00:50 > 0:00:54with less than, probably, 100,000, or 200,000.
0:00:54 > 0:00:55About £100,000.
0:00:55 > 0:00:58190, it's still going, ladies and gentlemen. Jump back in.
0:00:58 > 0:01:01190. 200,000. And ten I'll take.
0:01:01 > 0:01:04And you, dear bankers, are particularly fortunate.
0:01:04 > 0:01:08You are living in the gold-rush city of the art market.
0:01:08 > 0:01:12London has become an amazing art centre, and, really,
0:01:12 > 0:01:16outside of New York it's THE centre of the art world.
0:01:16 > 0:01:18And in some ways it's a more interesting centre of the art world,
0:01:18 > 0:01:21because it's a more international centre.
0:01:21 > 0:01:24Many of you are already buying art.
0:01:24 > 0:01:27That's one of the reasons the market's grown.
0:01:27 > 0:01:29But not all of you.
0:01:29 > 0:01:31Some of you are still shy about
0:01:31 > 0:01:35spending your strenuously earned millions on art.
0:01:35 > 0:01:37£2 million. £2 million.
0:01:37 > 0:01:39You are right to be cautious.
0:01:39 > 0:01:42Making money out of art is not as easy as it looks.
0:01:42 > 0:01:45Your bid. Don't bid against yourself,
0:01:45 > 0:01:48I'll take it once from you, 220, 230.
0:01:48 > 0:01:50It's interesting how many collectors regret
0:01:50 > 0:01:52their first two or three buys.
0:01:52 > 0:01:55The eight paintings of dogs playing poker in my basement
0:01:55 > 0:01:56are never going to re-sell!
0:01:58 > 0:02:02But there is a way to play and win in this market.
0:02:02 > 0:02:04Just like there is in the financial world.
0:02:06 > 0:02:10The business may have grown beyond all recognition
0:02:10 > 0:02:11in the last two decades,
0:02:11 > 0:02:15but the tricks of the trade are as old as time itself.
0:02:15 > 0:02:17Look at euros, at 76 million.
0:02:17 > 0:02:19- It's cheaper. - LAUGHTER
0:02:19 > 0:02:21Art follows money.
0:02:21 > 0:02:25Follow my advice and you too can make a fortune
0:02:25 > 0:02:28in the casino of culture.
0:02:28 > 0:02:30Being in the art world is like being in the Mafia,
0:02:30 > 0:02:32there are things that no-one will talk about.
0:02:32 > 0:02:35But I just feel compelled to share the information.
0:02:35 > 0:02:37It's a question of how much you have to play.
0:02:37 > 0:02:397,750,000. Eight million.
0:02:39 > 0:02:41Last chance, I'm selling it.
0:02:41 > 0:02:44You go to Las Vegas, you want to play at the 5 table,
0:02:44 > 0:02:50the 50 table or the...10,000 table, or the 20,000 table?
0:02:50 > 0:02:54I mean, what's your... pain threshold?
0:02:54 > 0:02:56Yes or no?
0:02:56 > 0:03:00Then, how close to the bone are you really going to cut this thing?
0:03:08 > 0:03:11I'm going to imagine that you have the basics -
0:03:11 > 0:03:16over £10 million in the bank, a yacht, luxury London apartment,
0:03:16 > 0:03:19a second home in Monaco, an offshore bank account,
0:03:19 > 0:03:23and if not a private jet then at least access to one.
0:03:23 > 0:03:27Good. Are you sitting comfortably in your designer Italian armchair?
0:03:27 > 0:03:29Then we can begin.
0:03:33 > 0:03:35The first rule is simple.
0:03:35 > 0:03:38Think of art as an asset class.
0:03:38 > 0:03:44An investment, like stocks and shares, gold and currency.
0:03:44 > 0:03:45Of course, it can be pretty.
0:03:45 > 0:03:49But art is better than a vase of flowers or a handbag.
0:03:50 > 0:03:51Anybody else now?
0:03:52 > 0:03:55At 1,600,000 and selling here.
0:03:55 > 0:03:58There are lots of investments you can make these days
0:03:58 > 0:04:00in luxury objects - boats, cars -
0:04:00 > 0:04:02where the value goes down.
0:04:02 > 0:04:05But there are some where you know the value can go up.
0:04:05 > 0:04:078.5, there it is.
0:04:07 > 0:04:092,500,000.
0:04:09 > 0:04:10Non? C'est non.
0:04:10 > 0:04:112,700,000. Thank you, sir.
0:04:11 > 0:04:13Do you want to come back in?
0:04:13 > 0:04:15Excellent.
0:04:17 > 0:04:20- Are you definitely out?- Are you done?- 2,300,000 is here, then.
0:04:22 > 0:04:27Catherine. Sold at 8,500,000, and your number's 881.
0:04:28 > 0:04:30Francis Outred is one of the masterminds
0:04:30 > 0:04:32of the rise of the art market.
0:04:32 > 0:04:34So these are our New York highlights.
0:04:34 > 0:04:37These are sort of masterpieces of minimalism.
0:04:37 > 0:04:40He cut his teeth promoting Young British Artists,
0:04:40 > 0:04:44before working at the big auction houses
0:04:44 > 0:04:46Sotheby's and then Christie's.
0:04:46 > 0:04:49Tonight we had 113 lots.
0:04:49 > 0:04:50Of which 99 sold.
0:04:50 > 0:04:54Just 14 were unsold, so about 92% overall.
0:04:54 > 0:04:57Really incredible. I think that shows the thirst for art,
0:04:57 > 0:04:59it shows the desire to collect art.
0:04:59 > 0:05:02The growth of value that we've seen over the last 15 years
0:05:02 > 0:05:05has encouraged more people to come into the marketplace...
0:05:05 > 0:05:08who want to invest in something they can enjoy.
0:05:08 > 0:05:12Let us not deny that many of the wealthiest people in the world
0:05:12 > 0:05:15buy art for the same reason that they date models.
0:05:15 > 0:05:20Because they can. Because they love how they - I mean it - looks.
0:05:20 > 0:05:23But there is an army of collectors who quite understandably
0:05:23 > 0:05:28expect their art to do more than please their eye and mind.
0:05:28 > 0:05:32I think you'll find that almost every major collector is looking at,
0:05:32 > 0:05:36"I've bought this great picture, and, by the way, what's it worth?"
0:05:36 > 0:05:40I know a lot of collectors now, in New York City particularly,
0:05:40 > 0:05:42and it's quite disturbing to me,
0:05:42 > 0:05:46they strictly look at the financial aspect.
0:05:46 > 0:05:48So they want, you know, sofa art,
0:05:48 > 0:05:51meaning if it can't hang over the sofa they won't buy it.
0:05:51 > 0:05:56And they want to buy what they think the bourgeoisie of tomorrow
0:05:56 > 0:06:00will want, so that they can buy it and sell it to them next year.
0:06:04 > 0:06:07You know, someone who buys a screwed-up...
0:06:07 > 0:06:09- you know...- Go on!
0:06:09 > 0:06:11- You know... - LAUGHTER
0:06:11 > 0:06:14That. Someone who's prepared to go into a gallery
0:06:14 > 0:06:17to buy that for ten grand, or 100 grand, let's be...
0:06:17 > 0:06:19- you know, let's be generous about it.- Yeah?
0:06:19 > 0:06:21£100,000 for a screwed-up piece of paper.
0:06:21 > 0:06:25Now, we're talking about the kind of person who won't spend 1p
0:06:25 > 0:06:29on anything without knowing they're going to make money back.
0:06:29 > 0:06:32Jake Chapman, one half of the British artistic duo
0:06:32 > 0:06:33the Chapman brothers,
0:06:33 > 0:06:38saw his work take off in critical acclaim - and financial value -
0:06:38 > 0:06:40in the '90s,
0:06:40 > 0:06:46as one of the new generation of British artists known as the YBAs.
0:06:46 > 0:06:49There has always been a convergence between the notion of
0:06:49 > 0:06:52a beautiful work of art and its speculative figure.
0:06:54 > 0:06:58But in today's world art is more useful than it ever was.
0:06:58 > 0:07:02It's a financial instrument in the sophisticated global economy.
0:07:03 > 0:07:06There are hedge funds investing in art,
0:07:06 > 0:07:08and finance companies lending money,
0:07:08 > 0:07:10taking the art you own as collateral.
0:07:12 > 0:07:15Philip Hoffman runs the world's largest business of this kind,
0:07:15 > 0:07:19with over £240 million in assets.
0:07:20 > 0:07:23This is an incredibly busy time of the year.
0:07:23 > 0:07:25We're involved in an 80 million transaction
0:07:25 > 0:07:27that sprung up about a week ago,
0:07:27 > 0:07:28we're signing off on deals
0:07:28 > 0:07:31of perhaps 10 million or 15 million this week,
0:07:31 > 0:07:35and we're arranging various transactions
0:07:35 > 0:07:37from low-end to high-end
0:07:37 > 0:07:40of many, many millions for clients in multiple countries.
0:07:40 > 0:07:45Price rises have been so steep that many veteran collectors
0:07:45 > 0:07:49have been priced, almost tragically, out of the market.
0:07:51 > 0:07:55I'll make a statement now concerning the buying of pictures
0:07:55 > 0:07:57which you have to think about for a few seconds.
0:07:57 > 0:08:00I can't afford my own pictures.
0:08:01 > 0:08:04If they came on the market, I couldn't afford to buy them.
0:08:04 > 0:08:08The prices have just gone, in some cases, stupid.
0:08:08 > 0:08:1110, 20 times what one originally paid for them.
0:08:17 > 0:08:19Until the 19th century,
0:08:19 > 0:08:22the art market was a trade that just trickled,
0:08:22 > 0:08:26where aristocrats bought antiquities and Renaissance masters.
0:08:27 > 0:08:30The exception was 17th-century Holland.
0:08:30 > 0:08:33There the urban middle class drove a bull market in art.
0:08:35 > 0:08:39But the European art market only really took off in the mid-1800s,
0:08:39 > 0:08:43when all the nouves, the wealthy new entrepreneurs and industrialists,
0:08:43 > 0:08:47caught the collecting bug for both Old Masters
0:08:47 > 0:08:49and what was then modern art.
0:08:50 > 0:08:52Art became a popular passion, too.
0:08:52 > 0:08:56Half a million people were attending the Paris Salon
0:08:56 > 0:08:58by the end of the century.
0:08:58 > 0:09:01Here are the country bumpkins, erm,
0:09:01 > 0:09:03amid the town sophisticates,
0:09:03 > 0:09:06creeping into the edge of the picture.
0:09:06 > 0:09:08This was real middle-class life,
0:09:08 > 0:09:13and it was loved and priced into the skies by middle-class people.
0:09:13 > 0:09:19It was the first really big price on the Victorian contemporary-art boom.
0:09:19 > 0:09:25£1,500 in 1858, which hadn't been seen for a living artist.
0:09:25 > 0:09:29The change to seeing art as a form of profit
0:09:29 > 0:09:32came in the middle of the 19th century
0:09:32 > 0:09:36when the art market fell into the hands of the middle class,
0:09:36 > 0:09:40into the new big industrial fortunes.
0:09:40 > 0:09:42And the great difference between a king, a prince
0:09:42 > 0:09:46and a landed aristo and the new middle-class merchants
0:09:46 > 0:09:51is that the former, by and large, bought art to keep,
0:09:51 > 0:09:55while the middle class has always kept an eye on a profit.
0:09:56 > 0:09:59At 1,450,000.
0:09:59 > 0:10:04Today's collectors and dealers tell you that art as an asset
0:10:04 > 0:10:05is a recent phenomenon.
0:10:05 > 0:10:08So, you might quite reasonably think
0:10:08 > 0:10:10this is a craze that will come and go.
0:10:10 > 0:10:12Anybody else now?
0:10:12 > 0:10:14But the smart guys in the room, across the Channel,
0:10:14 > 0:10:17saw the future over a century ago.
0:10:22 > 0:10:26Back in 1904, a group of collectors, under the direction, if you want,
0:10:26 > 0:10:30of a private collector called Mr Level,
0:10:30 > 0:10:33decided to put money in a big pot
0:10:33 > 0:10:35and buy works of contemporary artists
0:10:35 > 0:10:37during a period of ten years.
0:10:37 > 0:10:39And they had decided from the beginning
0:10:39 > 0:10:41that after that period of ten years
0:10:41 > 0:10:45they would sell the works at auction and hopefully making a profit.
0:10:45 > 0:10:49In the end he acquired - they acquired -
0:10:49 > 0:10:52145 pictures, drawings, watercolours.
0:10:52 > 0:10:58The total of their purchase comes up to almost 27,000 French francs.
0:10:58 > 0:11:01Among the works Level bought was a legendary Picasso.
0:11:02 > 0:11:06Level had to negotiate to buy it for 1,000 francs with Picasso.
0:11:06 > 0:11:10Picasso was not easy to convince to sell at this price.
0:11:10 > 0:11:13But Level gave him an advance,
0:11:13 > 0:11:14300 francs,
0:11:14 > 0:11:17and he caught him like that because Picasso spent the money
0:11:17 > 0:11:20and then he had to give him the picture!
0:11:22 > 0:11:29It's huge. It's two metres 35 by two metres...40 or something.
0:11:29 > 0:11:31It's a very large painting.
0:11:31 > 0:11:34In fact, it is so large that...
0:11:34 > 0:11:38they never were able to hang it anywhere, so it was...
0:11:38 > 0:11:40it always stayed rolled up!
0:11:40 > 0:11:43Er, Level bought it in 1908,
0:11:43 > 0:11:47and they never really enjoyed this painting,
0:11:47 > 0:11:50it was kept stored somewhere.
0:11:50 > 0:11:52Because it was too big.
0:11:52 > 0:11:58In 1914, Level sent his 145 works of art off to be auctioned,
0:11:58 > 0:12:00the Picasso included.
0:12:00 > 0:12:04The Picasso is here, Picasso, Les Bateleurs.
0:12:04 > 0:12:06It's the first time it comes up for auction
0:12:06 > 0:12:08so there is a lot of tension in the room.
0:12:08 > 0:12:10People have come to look at that.
0:12:10 > 0:12:13There is a battle between two dealers,
0:12:13 > 0:12:18and finally a German dealer buys the picture for more than 11,000 francs.
0:12:18 > 0:12:21People start clapping their hands and they are so happy.
0:12:21 > 0:12:25There was a person there who writes in the paper the next day
0:12:25 > 0:12:28that he felt so happy he felt like singing.
0:12:28 > 0:12:33In total Level's collection was sold for almost 100,000 francs,
0:12:33 > 0:12:36four times what he paid for it.
0:12:36 > 0:12:39That was the gratifyingly profitable dawn of art
0:12:39 > 0:12:41you bankers could bank on.
0:12:42 > 0:12:45If you look at some of the wealthiest families in the world,
0:12:45 > 0:12:47the Mellon, the Rothschilds,
0:12:47 > 0:12:50the Rockefellers, Steve Cohen the hedge-fund manager,
0:12:50 > 0:12:54they have made more money, probably, out of their art investments
0:12:54 > 0:12:57over the long term than they ever did out of their businesses.
0:12:57 > 0:12:59But there is something new afoot.
0:12:59 > 0:13:03Now, you bankers don't just trade in one thing in one country,
0:13:03 > 0:13:05and you all lost a packet in the crash,
0:13:05 > 0:13:07so that's made art a more desirable,
0:13:07 > 0:13:11useful and profitable asset than anyone dreamt possible.
0:13:12 > 0:13:15Everybody burned their fingers back in 2008,
0:13:15 > 0:13:18where they had all their money in either stocks or in bank deposits
0:13:18 > 0:13:21or in bonds, and even real estate, and all of them collapsed.
0:13:21 > 0:13:24And people were scrambling around thinking, what the hell do I do?
0:13:24 > 0:13:27It's been another tumultuous morning on the markets.
0:13:27 > 0:13:29Some of Britain's biggest banks
0:13:29 > 0:13:31have seen their share prices plummet again.
0:13:31 > 0:13:35The Dow Jones average closed down more than 500 points this afternoon.
0:13:35 > 0:13:37Lehman Brothers is now officially...
0:13:37 > 0:13:40- GEORGE W BUSH:- The market is not functioning properly.
0:13:40 > 0:13:44Major sectors of America's financial system are at risk of shutting down.
0:13:44 > 0:13:50We are a minute from midnight in terms of outright catastrophe.
0:13:52 > 0:13:55And, actually, art didn't collapse.
0:13:55 > 0:13:57And there were some... and a year later, in 2009,
0:13:57 > 0:13:59there were some world-record prices paid for...
0:13:59 > 0:14:02Giacometti, Walking Man, that made over 100 million,
0:14:02 > 0:14:04new world-record price.
0:14:04 > 0:14:07This angular piece was inspired by Giacometti's belief
0:14:07 > 0:14:10that the stride symbolised life force.
0:14:10 > 0:14:12So what I said is, look back at history
0:14:12 > 0:14:14and see in economic downturns
0:14:14 > 0:14:18what happens to all the other asset classes, and what happens to art.
0:14:18 > 0:14:20Since the financial crisis,
0:14:20 > 0:14:25governments have printed trillions of dollars and pounds and euros,
0:14:25 > 0:14:27wondering where some of it went.
0:14:30 > 0:14:32Is that a bid? 73 million.
0:14:34 > 0:14:35Here it is.
0:14:35 > 0:14:37Sold at 350. 910.
0:14:37 > 0:14:39You've got a situation
0:14:39 > 0:14:42where I think art does better during times of income inequality.
0:14:42 > 0:14:44We've seen studies on that.
0:14:44 > 0:14:46Not just general economic activity.
0:14:46 > 0:14:48So that when the rich are getting richer,
0:14:48 > 0:14:52you know, after you've bought your three homes and five Ferraris,
0:14:52 > 0:14:56art seems to be a natural place to put the rest of your excess cash
0:14:56 > 0:14:59looted from your... central-African country.
0:14:59 > 0:15:00So...
0:15:03 > 0:15:06So, now you know how to think about art,
0:15:06 > 0:15:10it's time to turn your attention to what art to buy.
0:15:19 > 0:15:22Today many of the world's most influential collectors
0:15:22 > 0:15:26have come here to Frieze, one of the world's most important art fairs.
0:15:27 > 0:15:30Nowadays, most art is bought at fairs like this,
0:15:30 > 0:15:33where galleries from all over the world rent booths
0:15:33 > 0:15:37and show a selection of work by the artists they represent.
0:15:46 > 0:15:48It's actually quite funny.
0:15:49 > 0:15:52If you ask dealers, gallery owners and collectors
0:15:52 > 0:15:56what art you should buy, they will always initially say...
0:15:56 > 0:16:00It sounds like a cliche, but collect what you like.
0:16:00 > 0:16:02Collect because it looks good on your wall,
0:16:02 > 0:16:04that every day you walk by it you smile.
0:16:06 > 0:16:09These works are all about a kind of fictional archaeology.
0:16:09 > 0:16:12Something that appears like it's from now,
0:16:12 > 0:16:14right, this figure is wearing Nike shoes.
0:16:14 > 0:16:17So this one is made of ash, volcanic ash,
0:16:17 > 0:16:19- and steel.- I have one of his pieces on my desk.
0:16:19 > 0:16:23It's a different type of history, forward-looking, looking back now.
0:16:23 > 0:16:24I think it's fantastic.
0:16:27 > 0:16:32Jim Chanos, estimated net worth 1.5 billion,
0:16:32 > 0:16:35is one of the world's most successful hedge-funders,
0:16:35 > 0:16:37famous for shorting the market.
0:16:37 > 0:16:41Don't do this for the money, it's a bit of a mug's game if you do that.
0:16:45 > 0:16:50I think the people who have done the best in terms of collecting or...
0:16:50 > 0:16:51are people who actually...
0:16:51 > 0:16:53they are the believers, they actually love something,
0:16:53 > 0:16:55they're enthusiastic about something.
0:16:55 > 0:16:58They believe in it, it excites them, it wakes them up
0:16:58 > 0:17:01in the middle of the night, or they're like, "I really want that!"
0:17:01 > 0:17:03And then they get it and they feel so good about it.
0:17:03 > 0:17:08Adam Lindemann is the son of a multi-billionaire entrepreneur
0:17:08 > 0:17:11and is one of the world's most successful collectors.
0:17:11 > 0:17:13You know, I have a terrible case of FOMO.
0:17:13 > 0:17:15You know what FOMO is?
0:17:15 > 0:17:18Fear of missing out. I have the worst FOMO in the world.
0:17:18 > 0:17:21So if you don't show up you don't know.
0:17:21 > 0:17:26He was an early buyer of YBAs Damien Hirst, Chris Ofili
0:17:26 > 0:17:30and Japanese pop artist Takashi Murakami.
0:17:30 > 0:17:33And having established himself as a collector and then a dealer,
0:17:33 > 0:17:35he went on to open his own art gallery.
0:17:37 > 0:17:40From the gallery perspective, from the collector perspective, I mean,
0:17:40 > 0:17:43if you don't show up you don't really see what others are doing,
0:17:43 > 0:17:46what others are showing, what others are selling or buying.
0:17:46 > 0:17:49Market knowledge, and also, there's always something to find.
0:17:49 > 0:17:52I mean, this is like a treasure hunt.
0:17:52 > 0:17:55If you don't love it, don't think the next person will.
0:17:56 > 0:18:00It is true that many of the world's wealthiest people
0:18:00 > 0:18:03do buy art because they love it.
0:18:03 > 0:18:06But, dear bankers and novice collectors,
0:18:06 > 0:18:08that is a terrible idea
0:18:08 > 0:18:12if you wish to make a proper return on your equity.
0:18:12 > 0:18:14And, whatever they may say at first,
0:18:14 > 0:18:18billionaire collectors know it can be a road to ruin.
0:18:20 > 0:18:25Any collector's journey will always transform as they buy.
0:18:25 > 0:18:28I think it's interesting how many collectors
0:18:28 > 0:18:30regret their first two or three buys
0:18:30 > 0:18:32but, actually, in the end, come back and say,
0:18:32 > 0:18:36"I'd like to keep that, it's part of my history."
0:18:36 > 0:18:40When someone tells you, "I buy what I like," that's the kiss of death.
0:18:42 > 0:18:45The thing is, you like what you know.
0:18:45 > 0:18:49So if you've only had fish and chips
0:18:49 > 0:18:52and someone puts a piece of sushi in front of you,
0:18:52 > 0:18:53you're not going to like it.
0:18:53 > 0:18:57But if you try sushi, and then you get used to it, suddenly,
0:18:57 > 0:19:00you feel good, you love sushi.
0:19:00 > 0:19:03You love Japanese restaurants, "I can't wait to go to Tokyo!"
0:19:03 > 0:19:07But you're the same person who two years ago loved fish and chips.
0:19:08 > 0:19:11The more you learn, it's going to change.
0:19:11 > 0:19:14The more times you go to the Tate, the more times
0:19:14 > 0:19:17you see the galleries, your taste is going to change.
0:19:17 > 0:19:193 million. 3,100,000.
0:19:19 > 0:19:23If you wish your art to pay dividends then you need to focus on
0:19:23 > 0:19:27the art where other collectors compete to own works.
0:19:27 > 0:19:28Thank you, sir.
0:19:28 > 0:19:31Because that is where prices rise.
0:19:31 > 0:19:342,300,000, paddle 827, the Richter.
0:19:34 > 0:19:41Richter, Warhol, Hirst, Basquiat and Koons,
0:19:41 > 0:19:44all the big-name artists have shot up
0:19:44 > 0:19:49because their work has been chased by millionaires and billionaires
0:19:49 > 0:19:51from Europe, Russia and Asia.
0:19:51 > 0:19:54There is a herd mentality
0:19:54 > 0:19:58among a certain 0.0.1% of people,
0:19:58 > 0:20:00I think they're called the plutocrats,
0:20:00 > 0:20:03who don't really come from any particular country,
0:20:03 > 0:20:06who fly about in aeroplanes, and they all know each other,
0:20:06 > 0:20:09they all want the same interior designer,
0:20:09 > 0:20:12they all have the same dentist, they all want the same art.
0:20:12 > 0:20:18Trends in contemporary art are set by a few very influential
0:20:18 > 0:20:22and affluent collectors, as Charles Saatchi once did.
0:20:22 > 0:20:26He established a new movement in art in the 1990s
0:20:26 > 0:20:30by heavily collecting a generation of Young British Artists,
0:20:30 > 0:20:34whose art scandalised a nation and enthralled the art market.
0:20:34 > 0:20:37Saatchi's like Ronald, isn't he? He's the universal pariah.
0:20:37 > 0:20:39He's never going to be allowed to be a person
0:20:39 > 0:20:41who had any positive influence on the art world.
0:20:41 > 0:20:44Every single time I hear, if someone says, "What about Saatchi?",
0:20:44 > 0:20:47there's this kind of notion that somehow there's this
0:20:47 > 0:20:50malevolent behind-the-scenes character who put together something
0:20:50 > 0:20:53which we shouldn't believe is a thing, and that's kind of...
0:20:53 > 0:20:56That's quite weird. Because it also sort of presents the notion that,
0:20:56 > 0:20:58if you think about the YBA Sensation thing,
0:20:58 > 0:21:00that somehow there was someone manipulating things,
0:21:00 > 0:21:04which is not to say there's not, but the question is to say,
0:21:04 > 0:21:06when are people not manipulating things?
0:21:06 > 0:21:08I think there's no doubt
0:21:08 > 0:21:11that there's a sort of billionaires' battle going on here.
0:21:11 > 0:21:13The desire to have the best works of art,
0:21:13 > 0:21:16the most difficult to obtain, the fact that
0:21:16 > 0:21:19it is actually quite difficult to get your hands on
0:21:19 > 0:21:22a really prime Jeff Koons, in fact virtually impossible,
0:21:22 > 0:21:26I think that adds to this sort of... this competition
0:21:26 > 0:21:28and this is one of the reasons why
0:21:28 > 0:21:32very rich people are vying to bag the best trophies.
0:21:32 > 0:21:35But once again, permit me to repeat myself,
0:21:35 > 0:21:38don't think that this is a newfangled fad.
0:21:39 > 0:21:41In the 19th century,
0:21:41 > 0:21:43industrialists in Britain and America
0:21:43 > 0:21:47competed to buy the big-name artists of the day.
0:21:47 > 0:21:51Just then as now, you had sudden, dramatic,
0:21:51 > 0:21:54explosive rises in price.
0:21:54 > 0:21:56The best example of all
0:21:56 > 0:22:00is the picture known in those days as The Grand Canal,
0:22:00 > 0:22:06which changed hands ten times between 1859 and 1885.
0:22:06 > 0:22:13And it moved from £2,600 to £20,000 in those 23 years.
0:22:13 > 0:22:18But Landseer went up like a rocket, Millais, Holman Hunt.
0:22:18 > 0:22:23Then you had the sexy painters of ancient Greece and Rome
0:22:23 > 0:22:26who got the nude back into the Victorian household
0:22:26 > 0:22:28in the 1870s and '80s.
0:22:28 > 0:22:32Anything which looked muddy and dark and oily,
0:22:32 > 0:22:37they shot into the sky and stayed high until 1908, 1909, 1910.
0:22:40 > 0:22:43Ladies and gentlemen, follow the money,
0:22:43 > 0:22:47buy the art liked by people more important than you.
0:22:47 > 0:22:50I have absolutely no idea what this is.
0:22:50 > 0:22:55So, let's see what our important collectors are looking at today.
0:22:57 > 0:23:02- Como esta?- Voy a hacer un interview en tu booth.- Adelante.
0:23:02 > 0:23:05- Please.- BBC.- Excellent. Go ahead.
0:23:05 > 0:23:07Any press is good press!
0:23:08 > 0:23:13Jimmie Durham is an American-Indian artist.
0:23:13 > 0:23:15He's different. He's conceptual.
0:23:15 > 0:23:17I think the works are aesthetic and beautiful.
0:23:17 > 0:23:21I like the pathos, I like the sadness of it.
0:23:21 > 0:23:25You know? It's very poor, but it...
0:23:25 > 0:23:28You put that Venetian luxury in it
0:23:28 > 0:23:31and there's some sort of a poetic energy in it.
0:23:31 > 0:23:34I'm dreaming of doing a show of Jimmie Durham,
0:23:34 > 0:23:37because I think he's incredibly timely
0:23:37 > 0:23:39and he won't show in the United States.
0:23:39 > 0:23:42Maybe I like this one better. Yeah, I like this one better.
0:23:42 > 0:23:44I would take this one over that one.
0:23:44 > 0:23:48I think that tall thing, that might break or whatever,
0:23:48 > 0:23:49but that's a good piece, too.
0:23:49 > 0:23:51Let's try and buy this.
0:23:51 > 0:23:54It's not that expensive either. That's the other thing.
0:23:54 > 0:23:57It's like...I think it's a good deal.
0:24:00 > 0:24:04Well, Theaster Gates is a Chicago-based artist and I think
0:24:04 > 0:24:08he actually embodies the passionate side of contemporary art.
0:24:08 > 0:24:10One of the few artists I think right now
0:24:10 > 0:24:13that is sort of saying something beyond his art.
0:24:14 > 0:24:17His work really focuses on civil rights in the United States
0:24:17 > 0:24:20and the black experience in the South.
0:24:20 > 0:24:23His father was a roofer in Mississippi, worked in tar.
0:24:23 > 0:24:26And he uses things like tar.
0:24:27 > 0:24:31I have a tapestry of his in Miami that's made of fire hoses
0:24:31 > 0:24:35from the period of which the demonstrators were hosed down.
0:24:35 > 0:24:39I think he's an important artist. I have a number of his works.
0:24:40 > 0:24:43So can I buy this one?
0:24:43 > 0:24:45I believe he's on hold, but I can check. I can double-check.
0:24:45 > 0:24:48Would you let me? I've been wanting to buy a Jimmie Durham for,
0:24:48 > 0:24:51- like, two years from you guys! - I know.- Why won't you sell me one?
0:24:51 > 0:24:53I will. I will sell you one.
0:24:53 > 0:24:55No, but tell me why?
0:24:55 > 0:24:58- You don't like me?- Don't say that.
0:25:00 > 0:25:02Now, perhaps you are still holding out,
0:25:02 > 0:25:05one of those obstinate new collectors who say,
0:25:05 > 0:25:09"I am going to buy the art I like, just like Adam Lindemann."
0:25:11 > 0:25:15Well, you may find that simply impossible.
0:25:17 > 0:25:19As a new collector, to get into the mega galleries,
0:25:19 > 0:25:21they're difficult to enter,
0:25:21 > 0:25:25and some of the galleries have hot artists they can sell everywhere
0:25:25 > 0:25:29and they don't need new collectors for that.
0:25:29 > 0:25:32But they also have artists which are not that popular
0:25:32 > 0:25:36and in order for you to build a relationship with the gallery
0:25:36 > 0:25:39it means that you have to buy some things you don't want
0:25:39 > 0:25:42in your collection, but they need to get rid of.
0:25:42 > 0:25:44So, who to turn to?
0:25:44 > 0:25:48Well, you pay top dollar for advice on the best healthcare,
0:25:48 > 0:25:51childcare, interior design -
0:25:51 > 0:25:53so too, art.
0:26:03 > 0:26:06Even billionaires like Jim Chanos
0:26:06 > 0:26:10don't just buy the art they or their friends like.
0:26:10 > 0:26:14Oh, no. They hire experts whose job is to identify
0:26:14 > 0:26:17the art and artists that are on the up.
0:26:17 > 0:26:19We've gotten into this environment
0:26:19 > 0:26:22where the advisers are in the middle,
0:26:22 > 0:26:25so we're now in this sophisticated art environment
0:26:25 > 0:26:29where you don't just buy your art, you buy your adviser
0:26:29 > 0:26:32and then your adviser tells you what to do.
0:26:32 > 0:26:35When young people come and say, "Where should I start, Jeffrey?"
0:26:35 > 0:26:38I say, "For heaven's sake, get a good adviser who you trust."
0:26:38 > 0:26:40I got invited as an amateur
0:26:40 > 0:26:46to judge the Royal Watercolour Society competition and...
0:26:46 > 0:26:50met for the first time - this was 30 years ago - Dr Christopher Beetles,
0:26:50 > 0:26:51and we became friends.
0:26:51 > 0:26:55And I realised that I knew nothing about art once I'd met him
0:26:55 > 0:26:57and he guided me very carefully
0:26:57 > 0:27:01and taught me to look more carefully and taught to me how to look.
0:27:03 > 0:27:06Somewhat of an irony that the picture I chose
0:27:06 > 0:27:10for the winning prize was dismissed by Dr Beetles
0:27:10 > 0:27:13and the rest of the snooty people on the panel
0:27:13 > 0:27:15and won the People's Prize.
0:27:15 > 0:27:19So I suspect I've always had... the people's view,
0:27:19 > 0:27:21but he was able to refine that.
0:27:25 > 0:27:31Lisa Schiff is an art adviser whose clients include Leonardo DiCaprio.
0:27:31 > 0:27:34As there is more product and more supply,
0:27:34 > 0:27:37it's also ever more complicated and ever more important,
0:27:37 > 0:27:40if you're thinking of things as asset allocation,
0:27:40 > 0:27:44to be very selective about the artists that you're looking at,
0:27:44 > 0:27:49and the works by those artists that you're looking at.
0:27:49 > 0:27:53This is a female painter named Elizabeth Peyton.
0:27:53 > 0:27:58She's really a portrait painter but also someone who depicts the people
0:27:58 > 0:28:00and friends around her.
0:28:00 > 0:28:04This is a drawing of Phoebe Philo, who's an English designer
0:28:04 > 0:28:06I believe works for Celine,
0:28:06 > 0:28:09and one of the things I love about Elizabeth
0:28:09 > 0:28:12is her ability to capture the soul through the eyes.
0:28:12 > 0:28:15I mean, she has an unbelievable ability to depict that.
0:28:16 > 0:28:21Elizabeth Peyton has been one of the most commercially successful female
0:28:21 > 0:28:23artists since the '90s.
0:28:23 > 0:28:27Back then, you could buy a painting by her for around 70,000.
0:28:27 > 0:28:30Now, they could set you back half a million.
0:28:30 > 0:28:35Like this contemplative portrait of Leonardo DiCaprio.
0:28:35 > 0:28:40I will make sure that I can disclose what I think the market...
0:28:40 > 0:28:43future probability is of any work of art that we're going to buy,
0:28:43 > 0:28:46just so there are no surprises.
0:28:46 > 0:28:48And I could be completely wrong, by the way.
0:28:48 > 0:28:52I'm not a magician, but I can say this is what I SEE happening,
0:28:52 > 0:28:54here's the POTENTIAL.
0:28:54 > 0:28:56And maybe there's no potential.
0:29:00 > 0:29:04Of course, great wealth is not always acquired
0:29:04 > 0:29:05by the most elegant means
0:29:05 > 0:29:10or made in the most democratic environment or fairest society.
0:29:10 > 0:29:13You might have made your fortune mining potash
0:29:13 > 0:29:16or betting on the collapse of the property market.
0:29:16 > 0:29:20But an art adviser can help you transform your home
0:29:20 > 0:29:23into an oasis of culture.
0:29:23 > 0:29:28Malek Sukkar runs a waste-management company based in the Middle East.
0:29:28 > 0:29:31In London, he and his wife have been collecting art for over a decade,
0:29:31 > 0:29:34listening carefully to their art adviser.
0:29:34 > 0:29:36She's Viennese. She's sadly since died.
0:29:36 > 0:29:40She was actually one of the OWAs, the Older Women Artists
0:29:40 > 0:29:44that suddenly trended a couple of years ago.
0:29:44 > 0:29:48Prue O'Day has run a consultancy since the 1990s.
0:29:48 > 0:29:54Among her clients, accountants Ernst and Young, multinational Unilever,
0:29:54 > 0:29:56and the British Treasury.
0:29:56 > 0:29:59When I was originally recommended to them,
0:29:59 > 0:30:03they really just wanted to fill the house with lovely things.
0:30:03 > 0:30:05They were very curious,
0:30:05 > 0:30:08but sort of quite apprehensive about the art world.
0:30:08 > 0:30:11This corner brings a smile to everyone's face.
0:30:11 > 0:30:13That's the quirky side of the collection, right?
0:30:13 > 0:30:16It's where we began to have a bit of fun with installing
0:30:16 > 0:30:18in a very different way.
0:30:18 > 0:30:20'We started off quite gradually,'
0:30:20 > 0:30:25and then they really got the bug and could see the huge feedback
0:30:25 > 0:30:29they were getting in their personal lives.
0:30:29 > 0:30:32Collecting in depth makes you follow the trajectory of the artist,
0:30:32 > 0:30:36and you become more acquainted with their work
0:30:36 > 0:30:40and...they become your friends, so to speak.
0:30:40 > 0:30:42I think what's really interesting is
0:30:42 > 0:30:45they're a very engaging couple, they're very well liked.
0:30:45 > 0:30:47'And they have a lot of fun.'
0:30:47 > 0:30:51This piece is actually part of the naughty side of the collection
0:30:51 > 0:30:54that no-one knows about. It's a little teaser.
0:30:54 > 0:30:56A beautiful bum painting in the smallest room in the house!
0:30:56 > 0:30:58And so appropriate.
0:30:58 > 0:31:02But Malek really carries in his soul
0:31:02 > 0:31:06all of the troubles that have happened in Lebanon,
0:31:06 > 0:31:10which he was directly affected by, and he's quite honest about this
0:31:10 > 0:31:14visceral thing that really, really moves him.
0:31:14 > 0:31:17Do you remember when we saw that piece the first time?
0:31:17 > 0:31:18I'll never forget.
0:31:18 > 0:31:21Because this was our first time together.
0:31:21 > 0:31:26And within a couple of minutes, Malek said, "I want it."
0:31:26 > 0:31:29A lot of people are shocked when they look at it.
0:31:29 > 0:31:33I've learnt to love it, to live with it, to appreciate it,
0:31:33 > 0:31:37and every single day I discover a little bit more humanity
0:31:37 > 0:31:39in that painting.
0:31:41 > 0:31:44Here we've got the Pawel Althamer,
0:31:44 > 0:31:49which we found at Frieze in about 2011.
0:31:49 > 0:31:52- He's quite a spooky artist, I think. - Yeah.
0:31:52 > 0:31:55'I was very impressed from the outset about...
0:31:55 > 0:31:57'their bravery, really.'
0:31:57 > 0:31:59Because if everyone is saying to you,
0:31:59 > 0:32:03"Oh, this is just the most extraordinary work and this is the best one!"
0:32:03 > 0:32:05you tend to believe everybody else.
0:32:05 > 0:32:09I think it's a step forward in the collection history,
0:32:09 > 0:32:12again with this idea of decay and decomposition.
0:32:12 > 0:32:17In the end, it's all subjective and no-one knows for sure.
0:32:19 > 0:32:23Someone asked me once, "Your house is on fire,
0:32:23 > 0:32:25"which piece do you grab and run away with?"
0:32:25 > 0:32:28And I think it's this piece by Louise Bourgeois.
0:32:28 > 0:32:34It's very minimalistic but has a lot of meaning.
0:32:34 > 0:32:38So, you've started your collection, you've got an adviser.
0:32:38 > 0:32:41Now it's time to venture out into the wider world.
0:32:52 > 0:32:56In the art business, a sales pitch can be all smoke and mirrors.
0:32:58 > 0:33:01The dealers will always tell you, like, you know,
0:33:01 > 0:33:03three seconds after the doors open, that everything's sold.
0:33:05 > 0:33:08But of course what that means is that people have reserved the works.
0:33:08 > 0:33:12You know, the art consultants and advisers go through and they go,
0:33:12 > 0:33:14"My client's interested in that, that, that and that,"
0:33:14 > 0:33:16and thus the work is reserved,
0:33:16 > 0:33:20and if you ask about it a day later, they'll say, "Well, it's sold."
0:33:20 > 0:33:21But in fact of the matter,
0:33:21 > 0:33:26no cash has yet changed hands and may never change hands and so works
0:33:26 > 0:33:30that are reserved or taken off the market or off the walls at Frieze
0:33:30 > 0:33:33may in fact be back on the market within weeks.
0:33:34 > 0:33:38In the world of high finance, as you traders will know,
0:33:38 > 0:33:40there are burdensome regulations.
0:33:40 > 0:33:42You have to do the best by your clients,
0:33:42 > 0:33:44whether you are buying or selling.
0:33:44 > 0:33:49If you don't, you can get a hefty and irritating fine.
0:33:49 > 0:33:50In the art world,
0:33:50 > 0:33:54you'll be pleased to hear that almost none of this applies.
0:33:54 > 0:33:58There are frequent instances where conflict of interest could arise
0:33:58 > 0:34:03which wouldn't be necessarily the case in other industries.
0:34:03 > 0:34:08Kenny Schachter collects, deals and writes about the art market.
0:34:08 > 0:34:11If I'm selling a painting for 20 million or 30 million,
0:34:11 > 0:34:15which I've done, the fees are typically 2-4%.
0:34:15 > 0:34:19But the law is pretty much whatever you can get away with,
0:34:19 > 0:34:20for all intents and purposes.
0:34:20 > 0:34:22780,000?
0:34:24 > 0:34:25Still going at 780,000.
0:34:25 > 0:34:28Lady's bid, centre right still, Louis.
0:34:28 > 0:34:32Last chance, I'm selling it at £780,000.
0:34:32 > 0:34:35The issue is this. If you're a collector,
0:34:35 > 0:34:38you're newly wealthy and you'd like to join this private club
0:34:38 > 0:34:40that's exclusive and storied
0:34:40 > 0:34:42but you're not a member of it yet,
0:34:42 > 0:34:46there is a natural tendency not to want to rock the boat
0:34:46 > 0:34:49and to want to play by the club's rules.
0:34:49 > 0:34:51But the club's rules go like this -
0:34:51 > 0:34:54I will tell you how much an object is worth,
0:34:54 > 0:34:57I will tell you what is authentic and what isn't
0:34:57 > 0:35:01and you will pay however much I tell you this is worth.
0:35:01 > 0:35:04You have it, 826 at 300,000.
0:35:04 > 0:35:07Unless you have a specific contract for the purpose,
0:35:07 > 0:35:11the art dealer will be working in his own interests, naturally.
0:35:11 > 0:35:13950 is here.
0:35:13 > 0:35:17As one Russian oligarch recently found out to his cost.
0:35:19 > 0:35:24For ten years, Dmitry Rybolovlev, the owner of Monaco Football Club,
0:35:24 > 0:35:27bought art from this man, Yves Bouvier,
0:35:27 > 0:35:32an art dealer who runs the storage facility the Geneva Freeport.
0:35:32 > 0:35:36So, Bouvier is in this position of knowing what everybody is storing
0:35:36 > 0:35:39in Freeport, which gives him really an upper hand,
0:35:39 > 0:35:42and then he turns around and sells it
0:35:42 > 0:35:46for extortionate prices to this unsuspecting Russian.
0:35:46 > 0:35:50Bouvier was essentially working as an agent on behalf
0:35:50 > 0:35:53of this wealthy collector, and was guiding him on what to buy
0:35:53 > 0:35:57and also able to acquire things that weren't for sale.
0:35:57 > 0:36:00So he felt they had a really symbiotic relationship
0:36:00 > 0:36:02and he understood he would take a cut. That's normal,
0:36:02 > 0:36:05but a cut that might be a few percentage points
0:36:05 > 0:36:08instead of something like 50%.
0:36:09 > 0:36:14Bouvier sold Rybolovlev 2 billion worth of art.
0:36:14 > 0:36:19What Rybolovlev didn't know was how much Bouvier had marked up his prices.
0:36:22 > 0:36:27Bouvier bought a Gustav Klimt for 127.5 million
0:36:27 > 0:36:31and sold it to the Russian for 187 million,
0:36:31 > 0:36:33making a profit of 60 million.
0:36:35 > 0:36:39Bouvier bought Leonardo da Vinci's Salvatore Mundi
0:36:39 > 0:36:41for under 80 million
0:36:41 > 0:36:45and sold it for a profit of 47 million.
0:36:45 > 0:36:48He also made a massive profit on a Modigliani
0:36:48 > 0:36:52he bought from the hedge-funder Steve Cohen.
0:36:52 > 0:36:56Then one day the Russian oligarch found himself chatting
0:36:56 > 0:36:58to Steve Cohen's art adviser.
0:37:00 > 0:37:03A friend of mine called Sandy Heller was at a dinner
0:37:03 > 0:37:07sitting next to a Russian fellow called Rybolovlev,
0:37:07 > 0:37:09as they are prone to be called.
0:37:09 > 0:37:13And Sandy Heller said to Rybolovlev, "What's the last thing you bought?",
0:37:13 > 0:37:15which is a conversation which typically transpires
0:37:15 > 0:37:19amongst collectors and dealers, and it was a Modigliani painting.
0:37:19 > 0:37:24And then Rybolovlev asked Sandy, "What was the last painting you sold?"
0:37:24 > 0:37:25and it was also a Modigliani,
0:37:25 > 0:37:28which turned out to be the very same painting, so of course,
0:37:28 > 0:37:31you don't have to be a detective to figure out
0:37:31 > 0:37:34what the next question was, and the Russian, Rybolovlev, asked,
0:37:34 > 0:37:36"How much did you sell the painting for?"
0:37:41 > 0:37:46The wealthy collector may have no idea what the value of a work should be.
0:37:46 > 0:37:49They know they want in, they know they want famous names.
0:37:49 > 0:37:51They actually like, to a certain extent,
0:37:51 > 0:37:54the high price tag that they're expected to pay,
0:37:54 > 0:37:56but they also don't want to be screwed over.
0:37:56 > 0:38:00Rybolovlev is now suing Bouvier for fraud,
0:38:00 > 0:38:04but in a world which runs on word of mouth rather than paperwork,
0:38:04 > 0:38:07he is not thought to have a very strong case.
0:38:07 > 0:38:11At one point, Rybolovlev turned around to Bouvier and he said,
0:38:11 > 0:38:14"You've charged me... Your fee is the price of a Boeing!"
0:38:17 > 0:38:21In terms of the collectors and the dealers, this is a rich man's game,
0:38:21 > 0:38:24so it's not like eradicating child labour.
0:38:24 > 0:38:261,490 is here.
0:38:26 > 0:38:29£1,490,000.
0:38:29 > 0:38:32And so there isn't a real moral imperative
0:38:32 > 0:38:34to clean this business up, you know?
0:38:34 > 0:38:37If a billionaire gets ripped off slightly, there aren't going to be
0:38:37 > 0:38:40many people crying about it over their cornflakes.
0:38:40 > 0:38:42£1,500,000.
0:38:42 > 0:38:44Last chance, selling at...
0:38:44 > 0:38:48And it is indeed a murky old game.
0:38:48 > 0:38:50We start the bidding at 1.5.
0:38:50 > 0:38:521.6, 1.7 already. 1,700,000.
0:38:52 > 0:38:57So, here's my next paradoxical piece of advice.
0:38:57 > 0:38:59At 2 million, then, are we all done?
0:39:05 > 0:39:08The art that goes up in value
0:39:08 > 0:39:11is produced by a small group of artists.
0:39:11 > 0:39:15Collectors compete to own them, and so prices rise.
0:39:17 > 0:39:18This is a big one.
0:39:18 > 0:39:21We have three auctions taking place this week alone.
0:39:21 > 0:39:24The Peter Doig is sort of the marquee painting of the week.
0:39:24 > 0:39:28It's the one that really defines the kinds of things we're trying to do.
0:39:28 > 0:39:31Now, the principle here is the opposite to that which you would
0:39:31 > 0:39:34normally follow in capitalism.
0:39:34 > 0:39:36Don't look for the bargain.
0:39:36 > 0:39:40It often pays to pay over the odds.
0:39:40 > 0:39:43The market today where works are most in demand
0:39:43 > 0:39:47and where price rises are highest is the so-called trophy market.
0:39:47 > 0:39:49This is a big investment at £9 million,
0:39:49 > 0:39:52but I personally believe that is a great investment,
0:39:52 > 0:39:57because Peter Doig is an artist who is now firmly established in art history.
0:39:57 > 0:39:59He's somebody who I think defines his time.
0:39:59 > 0:40:04Peter Doig is a great example of how you can go
0:40:04 > 0:40:09from being a 1,000 artist to an 11 million artist.
0:40:09 > 0:40:13It's completely abstract up close, but when you come further back,
0:40:13 > 0:40:14the view comes into reality.
0:40:16 > 0:40:19In the past 25 years, he...you know,
0:40:19 > 0:40:24getting a good US dealer, having Charles Saatchi interested in him,
0:40:24 > 0:40:28selling a work to the Museum of Modern Art in New York,
0:40:28 > 0:40:30being in the Whitney Biennial...
0:40:30 > 0:40:32I was completely drawn to this.
0:40:32 > 0:40:35This one little area of blue here.
0:40:35 > 0:40:38The apotheosis of Peter Doig was selling at an auction
0:40:38 > 0:40:40full of Russians in 2006,
0:40:40 > 0:40:43when the Russians were very much a part of the market,
0:40:43 > 0:40:46and suddenly he's worth, you know, 11 million.
0:40:46 > 0:40:49Little bits of gloss,
0:40:49 > 0:40:51which is created by a medium.
0:40:51 > 0:40:54A medium in the paint. Which comes across like the sap in the tree.
0:40:54 > 0:40:58I always think it's best to buy quality over quantity.
0:40:58 > 0:41:02So if you've got a budget of, say, £15 million,
0:41:02 > 0:41:06I'd rather buy two amazing paintings than buy 15 average paintings.
0:41:06 > 0:41:10And here, you know you're buying one of the best there is.
0:41:20 > 0:41:22The wealth in the world is just beyond our...
0:41:22 > 0:41:26I mean, I'm personally not in the league, but I advise people who are.
0:41:34 > 0:41:36Would you care for a glass of Champagne, sir?
0:41:36 > 0:41:40I mean, I remember somebody in Russia and he said to me, he said,
0:41:40 > 0:41:43"Philip, come and have a look in my drawing room,
0:41:43 > 0:41:46"I'd like to show you my room," and he said,
0:41:46 > 0:41:49"Over there there's a five, a ten, a 20, a five and a three."
0:41:49 > 0:41:54And he went, "Look around the room," and I wondered what on earth we were talking about.
0:41:54 > 0:41:58And suddenly you are then trying to work out whether it was thousands,
0:41:58 > 0:41:59hundreds of thousands or millions.
0:41:59 > 0:42:03And then I realised that he liked to describe his pictures by millions.
0:42:03 > 0:42:07"That's a five million, that's a 20 million, that's a three million."
0:42:07 > 0:42:09And people are buying art because of ego,
0:42:09 > 0:42:13because they see their biggest competitor buying art
0:42:13 > 0:42:16and they want to spend more and show that they can be more macho.
0:42:16 > 0:42:20And that's one of the reasons why some world-record prices are paid.
0:42:20 > 0:42:23We will always see that power play come in.
0:42:23 > 0:42:27There's been a lot of talk in recent years about how daftly expensive
0:42:27 > 0:42:30contemporary art is.
0:42:30 > 0:42:33"You can buy a masterpiece from the past for half the price
0:42:33 > 0:42:34"of a Basquiat," they say.
0:42:34 > 0:42:38"That proves how inflated the market is, rah, rah, rah."
0:42:38 > 0:42:42Nonsense. Contemporary art, rest assured,
0:42:42 > 0:42:46has been daftly expensive at certain times before.
0:42:46 > 0:42:50In their own day, Turners cost as much as Titians.
0:42:50 > 0:42:55What he's painting is the Thames at Richmond, from Richmond Hill,
0:42:55 > 0:42:57dressed up as a French landscape
0:42:57 > 0:43:01with a few dancing figures in the middle ground.
0:43:01 > 0:43:05He put a price of 300 guineas on this when it was offered for sale
0:43:05 > 0:43:08at the Royal Academy.
0:43:08 > 0:43:12Around the same time, the Titian Noli Me Tangere
0:43:12 > 0:43:15was sold at auction for 330 guineas,
0:43:15 > 0:43:19so the level that Turner seemed to be pricing himself on
0:43:19 > 0:43:23is at the level of a huge masterpiece.
0:43:23 > 0:43:24Quite extraordinary.
0:43:25 > 0:43:28It happened in late Georgian England,
0:43:28 > 0:43:32when Benjamin West was priced above Leonardo.
0:43:32 > 0:43:36It happened in Victorian London and Victorian Paris.
0:43:36 > 0:43:39In Paris, by 1890, Millais and Meissonier
0:43:39 > 0:43:45had been priced up to the level of ten Michelangelos,
0:43:45 > 0:43:47taking the base price there,
0:43:47 > 0:43:52the £2,000 that was paid by the National Gallery in 1868
0:43:52 > 0:43:55for Michelangelo's Entombment.
0:43:55 > 0:43:57You get what you pay for.
0:43:57 > 0:43:59Don't be a cheapskate!
0:44:02 > 0:44:03Now, listening to this,
0:44:03 > 0:44:07you might think that if you should pay a lot for trophy works of art,
0:44:07 > 0:44:11that would mean buying the rarest of masterpieces.
0:44:11 > 0:44:15But that is not quite how the art market works.
0:44:22 > 0:44:27This is a work of art by the Chinese contemporary artist Ai Weiwei,
0:44:27 > 0:44:30perhaps the most famous artist in the world.
0:44:30 > 0:44:34It consists of millions of handmade porcelain sunflower seeds
0:44:34 > 0:44:39and has been described as a work about craft and individualism.
0:44:40 > 0:44:44For this auction, we've tried to bring together a group of Ai Weiweis
0:44:44 > 0:44:47and we have a watermelon ceramic,
0:44:47 > 0:44:49we have a Coca-Cola vase...
0:44:49 > 0:44:51Next, the Coca-Cola vase.
0:44:51 > 0:44:52200,000.
0:44:52 > 0:44:53Somebody jumping in here?
0:44:53 > 0:44:55And we have this, the Grapes.
0:44:55 > 0:44:59The price point here is £350,000 to £450,000.
0:44:59 > 0:45:03£350,000 for the Ai Weiwei stools, 350,000 I'm selling.
0:45:03 > 0:45:04380 will be next.
0:45:04 > 0:45:10Ai Weiwei makes what the art world calls "series of works".
0:45:10 > 0:45:14These watermelons follow the Chinese tradition
0:45:14 > 0:45:16of mimicking organic forms.
0:45:16 > 0:45:18The bicycles nostalgically celebrate
0:45:18 > 0:45:20the popular form of transport under communism.
0:45:22 > 0:45:25Here, he applies principles of geometry and abstraction
0:45:25 > 0:45:28to traditional vases and stools.
0:45:29 > 0:45:32He has made different kinds of amalgamations of different kinds of
0:45:32 > 0:45:35historical furniture and there are four or five pieces in the Royal
0:45:35 > 0:45:38Academy show. One that's not dissimilar to this.
0:45:38 > 0:45:43Ironically, another one is up the road at Sotheby's.
0:45:43 > 0:45:47When Francis says he has "made", that's slightly misleading.
0:45:47 > 0:45:50Like other contemporary artists who make series of works,
0:45:50 > 0:45:54Ai Weiwei has a large studio with scores of assistants
0:45:54 > 0:45:58and sometimes hundreds of craftsmen who make the art for him.
0:46:00 > 0:46:03It is an interesting thing, it's sort of the Andy Warhol question,
0:46:03 > 0:46:06you know? People always said, so many works, how can they hold their value?
0:46:06 > 0:46:09And actually, it's the fact these works have been spread
0:46:09 > 0:46:10all over the world now
0:46:10 > 0:46:12and collectors can see them everywhere
0:46:12 > 0:46:15and in their friends' homes, that's actually made them more valuable.
0:46:17 > 0:46:21One misconception you may have about collecting is that you should buy
0:46:21 > 0:46:25something unique that has been made by the artist's hand.
0:46:26 > 0:46:29Isn't that what makes art so valuable?
0:46:30 > 0:46:35Well, art collectors and market analysts say...not necessarily.
0:46:36 > 0:46:39One of the strengths of Damien Hirst's series
0:46:39 > 0:46:41of dots and spin paintings
0:46:41 > 0:46:46is that most self-respecting collectors would expect to hold
0:46:46 > 0:46:49at least one of those works in their vestibule
0:46:49 > 0:46:51or in their living room, and it would be
0:46:51 > 0:46:54almost a rite of passage into the contemporary art world.
0:46:56 > 0:47:00Some market analysts foolishly suggest that the repetitive artist
0:47:00 > 0:47:05whose assistants make the work is a new and temporary phenomenon.
0:47:05 > 0:47:08But once again, plus ca change.
0:47:10 > 0:47:15Canaletto set up practice here in Britain in 1746
0:47:15 > 0:47:20and was as successful as he had been in his many years at Venice.
0:47:20 > 0:47:23It's astonishing how well planned,
0:47:23 > 0:47:29what a clever businessman Canaletto was and how popular he was.
0:47:30 > 0:47:33During his stay in Britain, Canaletto was very active
0:47:33 > 0:47:36and very prolific, coming on to nearly 100 pictures
0:47:36 > 0:47:40painted over nine years, which, you know, some of those canvases
0:47:40 > 0:47:42are pretty big things.
0:47:44 > 0:47:49It was to some extent almost an assembly-line attitude.
0:47:49 > 0:47:54Yes, you have a master, in our case, Canaletto, who has the vision,
0:47:54 > 0:47:57who creates the ideas behind the picture,
0:47:57 > 0:48:00and there is an agenda in every Canaletto picture,
0:48:00 > 0:48:02they are not just pretty views.
0:48:02 > 0:48:04But to achieve this,
0:48:04 > 0:48:07particularly to achieve the vast numbers of canvases that Canaletto
0:48:07 > 0:48:10created, of course, you need a studio behind you.
0:48:10 > 0:48:14And the same had happened for the past two centuries going back before.
0:48:16 > 0:48:20A lot of the characters we see from canvas to canvas
0:48:20 > 0:48:22are actually the same people.
0:48:22 > 0:48:26He has a stock cast of characters he re-employs in lots of his pictures.
0:48:26 > 0:48:31It's not the Hollywood depiction of the great tortured artist
0:48:31 > 0:48:34who is creating everything on his or her own.
0:48:34 > 0:48:37Really, art practice in the 18th and 19th century,
0:48:37 > 0:48:39particularly, say, in the mid 18th century,
0:48:39 > 0:48:42was a collaborative one.
0:48:42 > 0:48:46Oddly enough, I think we are in certain circumstances in the 20th
0:48:46 > 0:48:51and 21st centuries returning to that idea of 18th-century practice.
0:48:51 > 0:48:54So the workshops of people like Jeff Koons, Damien Hirst and so forth
0:48:54 > 0:48:57are very similar to the workshops of Canaletto.
0:48:59 > 0:49:03As a banker, you will recognise a potential problem
0:49:03 > 0:49:06with the market which favours production-line art.
0:49:06 > 0:49:10It's easy for mass production to become overproduction
0:49:10 > 0:49:14and then for supply to outstrip demand.
0:49:14 > 0:49:17How do you protect yourself against that?
0:49:29 > 0:49:33The advice you usually hear from the art world is to focus
0:49:33 > 0:49:37on just a few artists and buy their work in depth.
0:49:37 > 0:49:40Sometimes, one...
0:49:40 > 0:49:44can have a very big windfall in the sense there will be
0:49:44 > 0:49:47one particular artist you bought several years ago
0:49:47 > 0:49:50and suddenly the value rises considerably, and you are sitting on
0:49:50 > 0:49:53what would potentially be a big profit.
0:49:54 > 0:49:57David Roberts is a property developer,
0:49:57 > 0:50:00thought to be worth over £150 million.
0:50:00 > 0:50:03He has his own private museum in London.
0:50:05 > 0:50:10I collect primarily because I like the art and I love the art.
0:50:10 > 0:50:14And I very, very rarely sell anything.
0:50:14 > 0:50:18There's over 2,000 works of art in the collection.
0:50:18 > 0:50:22I can't imagine I've probably sold more than 15 or 20 things
0:50:22 > 0:50:24in my life, so it's not a big part of what I do.
0:50:26 > 0:50:29But buying art is not so very different
0:50:29 > 0:50:31from investing in stocks and shares.
0:50:31 > 0:50:35The art market is unpredictable and volatile.
0:50:37 > 0:50:40You know, I always tell collectors to figure out
0:50:40 > 0:50:41what their throwaway number is.
0:50:41 > 0:50:44One million and one, one million and two already...
0:50:44 > 0:50:47Is it 25,000, is it 10,000?
0:50:47 > 0:50:51At what point are you going to not care if nothing ever happens to it?
0:50:51 > 0:50:54For some people, it's 1 million.
0:50:54 > 0:50:58Three million, one. Three million, two.
0:50:58 > 0:50:59Three million, three.
0:50:59 > 0:51:02People look at these auction prices and say,
0:51:02 > 0:51:04"Well, if you bought a Picasso,
0:51:04 > 0:51:08"it compounded at 12% a year for 80 years."
0:51:08 > 0:51:13But if you bought five other paintings by people who are not Picasso,
0:51:13 > 0:51:16at that period in 1935,
0:51:16 > 0:51:20you wouldn't have earned 12% on the whole group of them.
0:51:20 > 0:51:22Only on the Picasso.
0:51:22 > 0:51:24Thank you.
0:51:24 > 0:51:27Listening to this, you might be thinking, right,
0:51:27 > 0:51:31so I have to make sure I buy the Picasso and not the other five guys.
0:51:31 > 0:51:33Or girls.
0:51:33 > 0:51:37Wrong! The answer is, don't stop at five.
0:51:40 > 0:51:44It's random, because I have bought works by many, many artists
0:51:44 > 0:51:47that were meant to be the next hot thing.
0:51:47 > 0:51:50Or artists who have become the hot thing
0:51:50 > 0:51:53and then it's tailed off and gone downhill slightly.
0:51:56 > 0:51:57Look, it's the psychology.
0:51:57 > 0:52:01If you buy a painting and instead of going
0:52:01 > 0:52:03to do something else with your life,
0:52:03 > 0:52:07you buy this picture and you hang it on the wall and you're checking the
0:52:07 > 0:52:09prices and you see them going down,
0:52:09 > 0:52:12going to be hard not to like it less and less.
0:52:12 > 0:52:15But as the price goes up, then, you're so smart, "Oh, I'm so great,
0:52:15 > 0:52:19"I have a great eye, I've figured it out, I'm so clever!"
0:52:19 > 0:52:227,750,000, 8 million.
0:52:22 > 0:52:248,250,000...
0:52:24 > 0:52:28Even the biggest and most experienced art dealers
0:52:28 > 0:52:29have lost money - a lot of money -
0:52:29 > 0:52:32on some of the work they have collected.
0:52:32 > 0:52:3415 million, five. 16 million.
0:52:34 > 0:52:39We've been in this market now for 15 years. Of all the deals we've done,
0:52:39 > 0:52:43we've made money on 97% of the art, we've lost money on 3%.
0:52:43 > 0:52:45To give you an idea of an artist we've lost money on,
0:52:45 > 0:52:49it was a Chinese contemporary artist where we thought we were being
0:52:49 > 0:52:54very clever and going in alongside two or three of the major
0:52:54 > 0:52:58US and UK and Chinese galleries into that particular artist.
0:52:58 > 0:53:03We invested into three works of art at around 200,000 each.
0:53:03 > 0:53:08One we sold for 220, the other sold for 180, so we lost 20,000,
0:53:08 > 0:53:12and the other we sold for 50,000, so we lost 75%.
0:53:12 > 0:53:14That is exactly the bid I wanted to see.
0:53:14 > 0:53:16And that's 642. Thank you.
0:53:16 > 0:53:19So, successful investors,
0:53:19 > 0:53:23instead of concentrating on a few artists, spread their risk.
0:53:23 > 0:53:27When I go forward in my collecting,
0:53:27 > 0:53:29I always try to swing very hard
0:53:29 > 0:53:32and I try to hit the ball out of the park.
0:53:32 > 0:53:35I might miss, but I have big eyes and big ambition.
0:53:35 > 0:53:37And that didn't make me right.
0:53:37 > 0:53:41I ended up buying a lot of things that no-one else wanted.
0:53:41 > 0:53:45But often in any collection that I've seen, including my own,
0:53:45 > 0:53:51of let's say, 50 things, two or three things shoot the moon.
0:53:51 > 0:53:54Ultimately that makes up for the rest.
0:54:02 > 0:54:08If you throw an enormous fishing net out and you catch everything,
0:54:08 > 0:54:11whether you are looking for the good stuff or not,
0:54:11 > 0:54:15it's going to be there and the rest you can just chuck back.
0:54:15 > 0:54:16It doesn't matter.
0:54:21 > 0:54:23Tonight, there is an opening at the Lisson,
0:54:23 > 0:54:26one of the world's most revered art galleries.
0:54:27 > 0:54:33In the 1970s, it pioneered the new work of minimalists and conceptualists.
0:54:33 > 0:54:37It has furthered the careers of million-dollar art stars,
0:54:37 > 0:54:42but it has also shown many others who are almost forgotten today.
0:54:42 > 0:54:44Some of it's worthless,
0:54:44 > 0:54:47some of it has just kept up with inflation
0:54:47 > 0:54:49and some of it's priceless.
0:54:49 > 0:54:53If you'd been collecting from the Lisson for 50 years and had spread
0:54:53 > 0:54:57your risk, you could have an impressive return.
0:54:57 > 0:55:01If you put the sum total of all the works the Lisson Gallery has sold
0:55:01 > 0:55:06over the last nearly five decades...
0:55:09 > 0:55:13..it probably runs to 1 billion or more,
0:55:13 > 0:55:18and if you put that all together,
0:55:18 > 0:55:23hypothetically, and there was the mother of auctions, of all of it,
0:55:23 > 0:55:27you would see probably about 20 or 30 billion back.
0:55:29 > 0:55:32One of the newest trends in the art world is the emergence
0:55:32 > 0:55:36of a new generation of abstract artists.
0:55:36 > 0:55:38Like many other dealers and collectors,
0:55:38 > 0:55:40Kenny Schachter has bought into some of them.
0:55:43 > 0:55:46I have these paintings by Lucien Smith
0:55:46 > 0:55:49and I very much stand behind them and like them as art.
0:55:49 > 0:55:52He must have been around 23 or 24 when he was creating
0:55:52 > 0:55:54this series of works called Rain Paintings,
0:55:54 > 0:55:57of which these two paintings are part of.
0:55:57 > 0:56:00What he did was find the way to compress paint
0:56:00 > 0:56:03into a fire extinguisher and then literally squirt them out
0:56:03 > 0:56:04over canvases.
0:56:04 > 0:56:07These are two small iterations of the works.
0:56:07 > 0:56:11But let's say he has made about 300 of them of various sizes.
0:56:11 > 0:56:15Sometimes the colours vary only slightly to blue, yellow or black,
0:56:15 > 0:56:19and his first paintings that came to auction when he was in his 20s
0:56:19 > 0:56:22zoomed right up to 400,000.
0:56:22 > 0:56:25Since then they've taken a rather precipitous drop
0:56:25 > 0:56:28along with many of the other practitioners of this kind of work.
0:56:28 > 0:56:31I mean, I think these are attractive.
0:56:31 > 0:56:35They pleasantly fit in between these curtains in my house.
0:56:35 > 0:56:37I bought them about two years ago.
0:56:37 > 0:56:40I paid 130,000 for the pair of these paintings.
0:56:40 > 0:56:44And today I would say they are worth around...
0:56:44 > 0:56:468,000-10,000 a painting.
0:56:46 > 0:56:48You can't win them all.
0:56:49 > 0:56:53But wisely, Lucien Smith was not the only new abstract painter
0:56:53 > 0:56:55that Schachter had been buying.
0:56:58 > 0:57:02This is a work of a 42-year-old American artist, Joe Bradley.
0:57:02 > 0:57:06I began working with him in around 2001-2002,
0:57:06 > 0:57:09an abstract painter and he also did some performance work.
0:57:09 > 0:57:11He had a band called Cheeseburger,
0:57:11 > 0:57:15in which he was as sloppy at singing as this painting looks.
0:57:15 > 0:57:19So I can understand as a layperson, or someone not involved
0:57:19 > 0:57:22in the day-to-day goings-on of the art world,
0:57:22 > 0:57:25and you come and you see a painting like this and it's not even
0:57:25 > 0:57:28a situation of someone to say, "Oh, my kid could do a better job than this."
0:57:28 > 0:57:30This is worse.
0:57:30 > 0:57:33You have to remember, artists constantly have to wrestle
0:57:33 > 0:57:36with these issues, how do you address a white canvas?
0:57:36 > 0:57:40And how do you do something new that hasn't been done before?
0:57:40 > 0:57:43The marks are exquisite, the way the surface of the canvas,
0:57:43 > 0:57:45all of these little creases
0:57:45 > 0:57:47and the way they are not stretched perfectly,
0:57:47 > 0:57:51it's sort of striving for imperfection and finding the beauty
0:57:51 > 0:57:54in the ugly-fication of painting.
0:57:54 > 0:57:57I remember first seeing his paintings and I was drawn to
0:57:57 > 0:57:59what I call "good bad art".
0:57:59 > 0:58:03There was something so wrong about them that I felt compelled
0:58:03 > 0:58:05to get involved with this artist.
0:58:05 > 0:58:09What lurks behind the canvas is something entirely different.
0:58:09 > 0:58:11The paintings were all between 1,000-2,000
0:58:11 > 0:58:14and I was the only buyer of any of the paintings.
0:58:14 > 0:58:17In fact, I bought all of the paintings and still have them.
0:58:17 > 0:58:19Over the course of 12 years,
0:58:19 > 0:58:23the last major painting of Joe's to come at auction sold for 3 million.
0:58:25 > 0:58:29If you are neither a lover or a gambler, carry on.
0:58:29 > 0:58:31It's not for you.
0:58:33 > 0:58:37Now, let me assume a few things again.
0:58:37 > 0:58:40You have become an established collector
0:58:40 > 0:58:43with over 50 works of art in your collection.
0:58:43 > 0:58:46People know you in the art world and auction rooms.
0:58:46 > 0:58:50You have your own storage facility for all the stuff you have bought
0:58:50 > 0:58:55that doesn't fit into your luxury penthouse or on your yacht.
0:58:55 > 0:58:58It's now time to learn how to minimise the cost
0:58:58 > 0:59:00of the art you have bought so far.
0:59:07 > 0:59:09£8 million.
0:59:09 > 0:59:11At £8 million.
0:59:11 > 0:59:15There are certain aspects of today's art market which are new.
0:59:15 > 0:59:2050 years ago, the world did not have a global network of tax havens
0:59:20 > 0:59:25and collectors could not take advantage of the benefits they offered.
0:59:25 > 0:59:26In those early days,
0:59:26 > 0:59:30it was difficult to avoid the many ways art is taxed.
0:59:30 > 0:59:35Living with art costs money and that price can be anywhere from 7% or 8%
0:59:35 > 0:59:39to 50% in South America for value added tax.
0:59:39 > 0:59:42So, if you want to import art into your home,
0:59:42 > 0:59:44you either pay VAT or, in America,
0:59:44 > 0:59:47you are responsible for paying sales tax.
0:59:47 > 0:59:50But with the correct offshore financial planning,
0:59:50 > 0:59:54you can optimise the tax position of your art collection.
0:59:54 > 0:59:57You should begin by moving your art abroad,
0:59:57 > 0:59:59to special tax-free lock-ups
0:59:59 > 1:00:04known as free ports, located in Geneva, Luxembourg or Singapore.
1:00:05 > 1:00:08Free port is a kind of nether world.
1:00:08 > 1:00:11It's not really part of any country,
1:00:11 > 1:00:15so if you dispatch some art to a free port in Switzerland
1:00:15 > 1:00:19or Luxembourg, it hasn't really arrived in those countries,
1:00:19 > 1:00:23so import duties and that kind of tax aren't payable.
1:00:23 > 1:00:26If you go to the free port in Luxembourg, for example,
1:00:26 > 1:00:28it looks like a massive high security prison.
1:00:29 > 1:00:32It happens that the back door, or maybe the front door,
1:00:32 > 1:00:38is actually in the grounds of the airport, so when goods pass into it,
1:00:38 > 1:00:41they don't count as having arrived in the country itself,
1:00:41 > 1:00:43so there are no import duties payable,
1:00:43 > 1:00:46and it suits a lot of people to keep
1:00:46 > 1:00:49their art there for quite a long time.
1:00:49 > 1:00:52There is another tax advantage to offshoring your art,
1:00:52 > 1:00:55this time when it comes to selling.
1:00:55 > 1:00:58To benefit from it, you first need to set up
1:00:58 > 1:01:00an offshore shell company or trust.
1:01:00 > 1:01:02If you were to sell it to a third party,
1:01:02 > 1:01:04you might have a tax bill.
1:01:04 > 1:01:07You probably would have a big tax bill to pay on it.
1:01:07 > 1:01:11But if you sold it to your shell company
1:01:11 > 1:01:13at the price you paid for it,
1:01:13 > 1:01:16you could tell the tax authority that you haven't actually made
1:01:16 > 1:01:20any money, and then when the shell company sells it on...
1:01:20 > 1:01:22erm, it would make the gain
1:01:22 > 1:01:24and it wouldn't have to tell the tax authority.
1:01:24 > 1:01:28Now, that wouldn't...be legal...
1:01:28 > 1:01:30but it would be up to you to choose what you reported
1:01:30 > 1:01:32to the tax authority.
1:01:32 > 1:01:35Zero taxes aren't the only upside.
1:01:35 > 1:01:38Holding your art offshore in a free port
1:01:38 > 1:01:41means your wealth is highly portable.
1:01:41 > 1:01:45The benefits of this rarely come to light, because they're all based on
1:01:45 > 1:01:49privacy, but occasionally the attempts of law enforcement officers
1:01:49 > 1:01:54to stop these activities shine a light on how it is done.
1:01:54 > 1:01:56I mean, there's the man who just put the Picasso on his yacht
1:01:56 > 1:01:58and floated away from Spain.
1:02:00 > 1:02:04The Spanish police took the Picasso to Madrid under armed guard.
1:02:04 > 1:02:06REPORTER SPEAKS SPANISH
1:02:08 > 1:02:12It had been found on a yacht belonging to Jaime Botin,
1:02:12 > 1:02:15scion of the Spanish Santander banking dynasty.
1:02:19 > 1:02:23The police say Botin was trying to smuggle the picture out of Spain.
1:02:23 > 1:02:26Botin says he only owned it indirectly
1:02:26 > 1:02:31through a company located in the tax haven of Panama.
1:02:31 > 1:02:34It seems to me like he's in his right, but they're trying to bring
1:02:34 > 1:02:38it back, so the Picasso was worth, I guess,
1:02:38 > 1:02:42according to the art newspaper, 30 million. Maybe more.
1:02:42 > 1:02:43It's worth more than the boat.
1:02:44 > 1:02:49The little thing that's hanging on this 150-foot yacht is worth more
1:02:49 > 1:02:51than the boat and all the people on it.
1:02:52 > 1:02:55Kind of funny. And he's trying to get the hell out of Spain
1:02:55 > 1:02:57and they're trying to bring him back.
1:02:59 > 1:03:01So...what was the question?
1:03:01 > 1:03:05I daresay that if the authorities clamped down on money laundering
1:03:05 > 1:03:07or elusive capital flows,
1:03:07 > 1:03:09that would have as big an impact on the art market
1:03:09 > 1:03:11as the stock market crash.
1:03:11 > 1:03:13At 76 million.
1:03:13 > 1:03:18Minimising the tax exposure of your collection is one side of the coin.
1:03:18 > 1:03:22The other is maximising its resale value.
1:03:22 > 1:03:25At 77 million. Thank you.
1:03:25 > 1:03:26APPLAUSE
1:03:34 > 1:03:38MUSIC: The Blue Danube by Johann Strauss II
1:03:45 > 1:03:47There's a pass, so we'll break for just two minutes,
1:03:47 > 1:03:48ladies and gentlemen.
1:03:48 > 1:03:52The key to making your art worth totally implausible sums
1:03:52 > 1:03:55is the art market's absence of rules.
1:03:57 > 1:04:02There has always been a code of silence and a gentleman's agreement
1:04:02 > 1:04:06within the art trade and it actually has a cultural history dating back
1:04:06 > 1:04:09to the 18th century.
1:04:09 > 1:04:10The feudal system was over.
1:04:10 > 1:04:13The aristocracy had to figure out how to make a living,
1:04:13 > 1:04:17so they started to sell off their art collections, titles and castles.
1:04:17 > 1:04:21But they didn't want to make public their financial strengths,
1:04:21 > 1:04:24so Christie's and Sotheby's developed a system in which
1:04:24 > 1:04:27they would list a work of art as property of a lady
1:04:27 > 1:04:33or property of a gentleman, but that code of secrecy was important
1:04:33 > 1:04:35early on and is still maintained to this day.
1:04:44 > 1:04:46Here it is. Lady's bid, she has it now.
1:04:46 > 1:04:48Would you like to come in, sir?
1:04:48 > 1:04:50Are you sure? Thank you for the bidding. 360 is here.
1:04:50 > 1:04:54The first lot of tonight's sale, selling, then, at 360.
1:04:54 > 1:04:58It is, for me, the last of the, sort of, unregulated markets out there.
1:04:58 > 1:05:01In a way, it's what makes the industry exciting.
1:05:01 > 1:05:04This is an industry that attracts the good, the bad and the ugly.
1:05:05 > 1:05:12'I think the art market is the most opaque market of all.'
1:05:12 > 1:05:15I think it suits a lot of people to keep it opaque.
1:05:15 > 1:05:19I think a lot of money has been made in the art market because one person
1:05:19 > 1:05:21knows something that someone else doesn't know.
1:05:23 > 1:05:28We'll start the bidding at 500. 550 already. 550. 600,000 is bid.
1:05:28 > 1:05:33650 in the room. That's 650 already. That's 700,000. 750.
1:05:33 > 1:05:36£800,000. 850.
1:05:36 > 1:05:38At 950,000.
1:05:38 > 1:05:39At one million already.
1:05:39 > 1:05:41APPLAUSE
1:05:47 > 1:05:50You would not be able to use many of the techniques I will teach you here
1:05:50 > 1:05:54on your trading floors without risking ending up in court.
1:05:56 > 1:06:00But in the art market, they're common practice,
1:06:00 > 1:06:03and their invention can be traced back to a handful of art dealers
1:06:03 > 1:06:05of the 19th century.
1:06:05 > 1:06:07Among them, Paul Durand-Ruel,
1:06:07 > 1:06:10who invented the market in Impressionism.
1:06:12 > 1:06:18This is Paul Durand-Ruel, who was my great-grandfather.
1:06:18 > 1:06:24He was the first dealer who bought paintings on a regular basis
1:06:24 > 1:06:27from the Impressionist painters,
1:06:27 > 1:06:34to an extent that he went nearly bankrupt twice in his life.
1:06:34 > 1:06:39And after his death, Monet said, "If he had not been there,
1:06:39 > 1:06:42"we, the Impressionists, would have starved to death."
1:06:45 > 1:06:48In the late 19th and early 20th centuries,
1:06:48 > 1:06:53Durand-Ruel bought and sold 12,000 works of art.
1:06:53 > 1:06:56His focus was on the young Impressionists,
1:06:56 > 1:06:59in whose work he wisely built up a semi-monopoly.
1:06:59 > 1:07:04And since this was art, not copper or oil, no-one objected.
1:07:04 > 1:07:10During his life, he purchased 2,000 paintings from Renoir,
1:07:10 > 1:07:141,000 from Monet, 400 from Pissarro,
1:07:14 > 1:07:20400 from Degas, 200 from Manet.
1:07:20 > 1:07:21He loved the Street Singer.
1:07:23 > 1:07:24Woman With A Parrot.
1:07:26 > 1:07:27The Fifer.
1:07:29 > 1:07:33And, slowly, he's going to try and bring the prices up
1:07:33 > 1:07:35and to find new collectors.
1:07:35 > 1:07:37The American James Sutton,
1:07:37 > 1:07:40director of the American Art Association in New York,
1:07:40 > 1:07:43asked him to organise the 1886 show in New York.
1:07:43 > 1:07:47Durand-Ruel comes with more than 300 works of art.
1:07:47 > 1:07:50American clients are going to finally pay good prices
1:07:50 > 1:07:53for Impressionist pictures, and Europeans are going to have
1:07:53 > 1:07:56a better look, or another look, on these artists
1:07:56 > 1:07:57they didn't really like at first.
1:07:57 > 1:08:01Pictures purchased by Durand-Ruel for a few hundred French francs
1:08:01 > 1:08:05from Renoir will be sold, for example, in 1924
1:08:05 > 1:08:07for more than 100,000.
1:08:09 > 1:08:12Durand-Ruel's massive stake in Impressionism
1:08:12 > 1:08:15allowed him to limit supply to the market
1:08:15 > 1:08:17and therefore influence prices.
1:08:18 > 1:08:20The economics are pretty basic -
1:08:20 > 1:08:23more demand, less supply, the price goes up.
1:08:25 > 1:08:28Paul Durand-Ruel really focused on a few principles,
1:08:28 > 1:08:30which were quite innovative at the time.
1:08:30 > 1:08:33First, he wanted to have the exclusivity of the productions
1:08:33 > 1:08:36of the artists. In exchange, he would give monthly payments
1:08:36 > 1:08:39so that the artists could create without the worry of finance,
1:08:39 > 1:08:42but would also give all their creation to the dealer.
1:08:43 > 1:08:48In that way, he was able to secure the selling prices by having
1:08:48 > 1:08:49the whole production.
1:08:51 > 1:08:55In today's vast art market, it would be extremely risky
1:08:55 > 1:08:59for a new collector to try to follow Durand-Ruel's example
1:08:59 > 1:09:04and stockpile new artists no-one else was interested in.
1:09:04 > 1:09:08So collectors today have found a safer way to play the game -
1:09:08 > 1:09:13by stockpiling already established artists.
1:09:13 > 1:09:14Now, there are collectors who...
1:09:16 > 1:09:17..are investors.
1:09:18 > 1:09:21The Mugrabi family in New York is the best-known example.
1:09:21 > 1:09:25They would bid up the price of a Warhol, or of half a dozen other
1:09:25 > 1:09:28artists that they have in bulk, to protect the value
1:09:28 > 1:09:31of what's in inventory. They're expected to do it.
1:09:33 > 1:09:36If you have a small Warhol flower painting...
1:09:37 > 1:09:40..it will go for about 1.5 million,
1:09:40 > 1:09:42because one of three or four collectors
1:09:42 > 1:09:46who have a number of them will bid it up to that amount.
1:09:46 > 1:09:50If you own a lot of stuff, it behoves you to keep the prices up
1:09:50 > 1:09:53or to support the market that you are so vested in,
1:09:53 > 1:09:56so I don't think there's anything wrong with that.
1:09:56 > 1:10:00At 720,000. 750 is next.
1:10:00 > 1:10:022 million. 2 million, 1.
1:10:02 > 1:10:04Who shouts? Who'd like to bid back there?
1:10:04 > 1:10:05Now, before we move on,
1:10:05 > 1:10:09there's time for some advanced bidding-up techniques.
1:10:09 > 1:10:108 million, 5. 9 million. 9 million, 5.
1:10:10 > 1:10:1210 million. 10 million, 5.
1:10:12 > 1:10:1411 million.
1:10:14 > 1:10:18Why not try to form alliances - let's not say the word "collude" -
1:10:18 > 1:10:21with collectors who are buying the same artist as yourself?
1:10:21 > 1:10:25Lady's bid 300,000. Give me 320.
1:10:25 > 1:10:27'If a piece is coming up at auction, it's easy enough,
1:10:27 > 1:10:29'if I'm selling a painting,'
1:10:29 > 1:10:31to have two of my friends in the audience,
1:10:31 > 1:10:35bidding up the price of the painting to an artificially high number,
1:10:35 > 1:10:37and once you've hit the number of 400,
1:10:37 > 1:10:40and if I hold 20 or 30 rain paintings
1:10:40 > 1:10:42and the first one goes for 400,
1:10:42 > 1:10:45you can understand the notion that everyone piles in
1:10:45 > 1:10:47and chucks them into the market and then people participate
1:10:47 > 1:10:49on the prices going up.
1:10:49 > 1:10:52110 is here. 111. Jump in if you'd like it. 120, 130...
1:10:52 > 1:10:55You might not even have to spend your own money
1:10:55 > 1:10:58to maintain the value of your art.
1:10:58 > 1:11:03Cash doesn't always change hands in apparently expensive deals.
1:11:03 > 1:11:06When you have property, you have deed transfers.
1:11:06 > 1:11:09You actually have transactions that are set
1:11:09 > 1:11:11and you can see where the property traded at.
1:11:11 > 1:11:14Your shared transaction, of course, goes on the exchange
1:11:14 > 1:11:16and you see a price.
1:11:16 > 1:11:19In the art market, you, again, have to take what's told to you
1:11:19 > 1:11:22as transaction prices with a large grain of salt,
1:11:22 > 1:11:26because there can be financing terms, there can be swaps,
1:11:26 > 1:11:28there can be barter. I mean, lots of things can happen
1:11:28 > 1:11:31that actually make the economic value of the work
1:11:31 > 1:11:33much lower than what's reported.
1:11:33 > 1:11:36It's almost always, I can assure you, inflated
1:11:36 > 1:11:38to what the reality is.
1:11:39 > 1:11:43A market whose prices are inflated by such means is fragile.
1:11:44 > 1:11:49It relies on ever-increasing demand and huge confidence in the market.
1:11:49 > 1:11:52Neither of these things may last forever.
1:12:04 > 1:12:07'One thing I think that people forget
1:12:07 > 1:12:10'is that to make money out of art, you don't have to just buy it.
1:12:10 > 1:12:13'You have to sell it.'
1:12:13 > 1:12:17And that selling at the right time and for the right price
1:12:17 > 1:12:21is much, much harder than people believe.
1:12:21 > 1:12:25I have, I've...sat next to someone who was selling one of his works
1:12:25 > 1:12:29at auction, and he's a very grown-up, very sophisticated,
1:12:29 > 1:12:31smart investment banker.
1:12:31 > 1:12:33And when this work came up, honestly,
1:12:33 > 1:12:35I could almost hear his heart beating.
1:12:35 > 1:12:37It's incredibly nerve-racking.
1:12:37 > 1:12:42Never forget the risks of buying and selling art.
1:12:42 > 1:12:4448,000.
1:12:44 > 1:12:46Are you sure?
1:12:46 > 1:12:50Publicly, the art world says that a collector should never sell
1:12:50 > 1:12:51works of art they buy,
1:12:51 > 1:12:55and certainly not within a few years of acquiring them.
1:12:55 > 1:12:57Yes? No.
1:12:57 > 1:12:58320.
1:12:58 > 1:13:02There is a nasty word for this activity - flipping.
1:13:03 > 1:13:06'From the collector's point of view,'
1:13:06 > 1:13:10they fear to be called an art flipper...
1:13:10 > 1:13:12erm, or to be blacklisted.
1:13:12 > 1:13:17Selling at £370,000...
1:13:17 > 1:13:19- BANGS HAMMER - Sold.
1:13:19 > 1:13:23'Not only art collector, art buyer or art speculator'
1:13:23 > 1:13:26buys something in the belief that it's going to double in value.
1:13:26 > 1:13:28Young artist, double in value in six months,
1:13:28 > 1:13:30and they flip it and double their money,
1:13:30 > 1:13:33and they think they can go on doing that again and again and again.
1:13:33 > 1:13:36From the point of view of a gallery or from the point of view of the
1:13:36 > 1:13:38artist, you get to know those people very fast
1:13:38 > 1:13:41and they just go on your blacklist.
1:13:41 > 1:13:44'It's not done to talk about it, but everybody sells,'
1:13:44 > 1:13:47and I know that as a matter of fact, because I buy from those collections
1:13:47 > 1:13:49who publicly say they are not selling.
1:13:51 > 1:13:55Even collectors, who sometimes sell the work they have bought,
1:13:55 > 1:13:57will say that you should never do it.
1:13:58 > 1:14:03You know, a lot of the people who have done the best are not necessarily
1:14:03 > 1:14:08going to the parties, not necessarily living the life,
1:14:08 > 1:14:12but actually love what they collect,
1:14:12 > 1:14:18they keep it for a lifetime and those are the things that are valued by others.
1:14:18 > 1:14:21And if you look at the auction market, more and more,
1:14:21 > 1:14:27those pieces that have been in private collections for decades,
1:14:27 > 1:14:29the fresh material, is what sells the best.
1:14:30 > 1:14:31Well...
1:14:31 > 1:14:33not quite...
1:14:33 > 1:14:37Adam Lindemann is responsible for two of the greatest coups
1:14:37 > 1:14:39in the history of the art market.
1:14:39 > 1:14:44In 2007, he auctioned this Jeff Koons sculpture
1:14:44 > 1:14:47for which he had just paid around 4,000,000.
1:14:48 > 1:14:50It sold for 23.
1:14:52 > 1:14:55This year, he consigned this Basquiat painting to auction.
1:14:55 > 1:15:01He bought it for a record price of 4.5 million in 2004.
1:15:01 > 1:15:04It sold this year for 57.
1:15:05 > 1:15:09I'm someone who...
1:15:09 > 1:15:12You know, I keep some things, I move on with some things.
1:15:14 > 1:15:16It's a moving target all the time.
1:15:16 > 1:15:186,500,000.
1:15:18 > 1:15:206,750,000.
1:15:20 > 1:15:25Actually, there's no need to be ashamed as a collector of selling art for a profit.
1:15:25 > 1:15:277,000,000.
1:15:27 > 1:15:30It is another time-honoured practice.
1:15:30 > 1:15:33Even great dealers, like Durand-Ruel,
1:15:33 > 1:15:37sold to collectors who they knew might resell the work to someone else.
1:15:39 > 1:15:43In 1868, the famous British art critic, John Ruskin,
1:15:43 > 1:15:47bought a painting of Napoleon for 1,000 Guineas
1:15:47 > 1:15:51and then sold it 14 years later for six times the price.
1:15:52 > 1:15:55Today, flipping is just faster...
1:15:55 > 1:15:57Jump in if you want it, 260.
1:15:57 > 1:16:00And there's more of it, as you might expect,
1:16:00 > 1:16:01considering the growth of the market.
1:16:03 > 1:16:07We bought a Peter Doig in 2005 for 880,000.
1:16:07 > 1:16:09We sold it one year later for 2,000,000.
1:16:09 > 1:16:12Fantastic result, doubled our money, a sort of Apple stock result.
1:16:12 > 1:16:17I mean, today, you will maybe find 1% of historic collectors that have
1:16:17 > 1:16:20never resold a piece of work.
1:16:20 > 1:16:22I mean, the traditional sense of a collector,
1:16:22 > 1:16:25someone like that belongs in a vitrine in the Natural History Museum,
1:16:25 > 1:16:29they don't exist any more, really, because, I mean,
1:16:29 > 1:16:33people get seduced that are selling the things that they've always sworn
1:16:33 > 1:16:36would be left from generation to generation.
1:16:37 > 1:16:40A few collectors are prepared to talk frankly
1:16:40 > 1:16:43about selling the arts they collect.
1:16:43 > 1:16:46Dutch businessman Bert Kreuk made a fortune
1:16:46 > 1:16:48supplying onboard services to airlines.
1:16:48 > 1:16:52He owns a collection of around 750 works of art,
1:16:52 > 1:16:55including a handful of Impressionist masterpieces.
1:16:58 > 1:17:00What you see here is basically 20 years of collecting,
1:17:00 > 1:17:04because you start off with a certain quality of works,
1:17:04 > 1:17:07also to do with the fact that you don't have the money to buy at first.
1:17:07 > 1:17:11The top quality. And then you move up and try to improve and refine
1:17:11 > 1:17:13your collection and improve the quality.
1:17:13 > 1:17:15And that's what happens with this piece.
1:17:15 > 1:17:19I had quite a few Pissarro paintings before I bought this.
1:17:19 > 1:17:22But once you see a picture like that,
1:17:22 > 1:17:23you immediately know you have to buy it.
1:17:23 > 1:17:26This was made in 1897,
1:17:26 > 1:17:29when he was at his pinnacle of his ability to paint.
1:17:29 > 1:17:33And actually, you see that back then, they already had traffic jams,
1:17:33 > 1:17:35you know?
1:17:37 > 1:17:39He sells art as well as buying it,
1:17:39 > 1:17:44particularly when it comes to the young and emerging artists he collects.
1:17:44 > 1:17:49For most galleries, a good collector is a collector who doesn't sell and
1:17:49 > 1:17:51who keeps the art forever.
1:17:51 > 1:17:55But for me, a collection is not stagnant.
1:17:55 > 1:17:58I think selling is as much part
1:17:58 > 1:18:00of managing a collection as buying it.
1:18:01 > 1:18:07I'm simply not arrogant enough to say that every purchase I do is right.
1:18:07 > 1:18:10I make mistakes and I think I need to correct them.
1:18:11 > 1:18:16In the last three years, Bert has attempted to correct around 30 mistakes.
1:18:16 > 1:18:20Among them, some bought less than five years earlier.
1:18:20 > 1:18:23Some works sold for several times the price he had paid for them.
1:18:25 > 1:18:28You know, if you call me an art flipper because I'm open about selling,
1:18:28 > 1:18:30well, call me an art flipper.
1:18:30 > 1:18:33I don't care, honestly speaking, because, you know,
1:18:33 > 1:18:35I am in it for the passion.
1:18:35 > 1:18:37And if you don't want to sell me, don't sell me.
1:18:38 > 1:18:42I think people still have this notion that the art world is very romantic
1:18:42 > 1:18:46and that it's all about having a piece of art on the wall.
1:18:46 > 1:18:47It's a cut-throat business.
1:18:50 > 1:18:54Today, some collectors base their decisions on what to buy and when to
1:18:54 > 1:18:58sell on a sophisticated financial analysis of the market.
1:19:00 > 1:19:05And they might turn to a new kind of dealer, like Olyvia Kwok, for advice.
1:19:05 > 1:19:08Lots of people come to us
1:19:08 > 1:19:09to buy contemporary.
1:19:09 > 1:19:13They will actually use it as a financial instrument.
1:19:13 > 1:19:15They like to, as we call it, to play in that market,
1:19:15 > 1:19:20to have a bit of fun and to get a good return, a healthy return,
1:19:20 > 1:19:22I mean like a double-digit return.
1:19:22 > 1:19:25And for that to happen, timing is very important.
1:19:25 > 1:19:26And you have to do it quite fast.
1:19:28 > 1:19:31This is a fun thing that I bought.
1:19:31 > 1:19:34You know, exactly what it says on the tin, isn't it?
1:19:34 > 1:19:36Personally, I think happiness is very expensive!
1:19:40 > 1:19:42Before we buy something, well, actually,
1:19:42 > 1:19:45this sounds really bad but we do like almost like a stockpicking
1:19:45 > 1:19:46presentation to our client.
1:19:46 > 1:19:49And we'll give a reason. We'll say how many paintings this person has done.
1:19:49 > 1:19:51How many paintings per auction.
1:19:51 > 1:19:54And how many paintings have repeatedly been sold.
1:19:54 > 1:19:59And therefore, our verdict is that it's a safe thing for a period of time.
1:20:00 > 1:20:04Well, this is another sort of fun thing that I bought.
1:20:04 > 1:20:06I think that's what life is.
1:20:06 > 1:20:09The little platforms where you live, how you live, I guess.
1:20:09 > 1:20:13And constantly life has things thrown at you, like this dagger.
1:20:13 > 1:20:16You have to just find a way around.
1:20:16 > 1:20:17And hopefully don't have any mistakes.
1:20:20 > 1:20:23Lots of people compare investing in contemporary art as better than
1:20:23 > 1:20:24investing in properties.
1:20:24 > 1:20:28Because in properties, you have a lot of maintenance, and storage.
1:20:28 > 1:20:29In art, you don't.
1:20:30 > 1:20:33And you just leave it there and you pay the insurance and that's it.
1:20:33 > 1:20:36And when you want to sell it, obviously you would then market it
1:20:36 > 1:20:40and that's it, you know, so, nothing...too much fuss.
1:20:40 > 1:20:43My grandfather was a general in China.
1:20:43 > 1:20:45He was a very harsh man.
1:20:45 > 1:20:48I remember once he told me, he said, "Life is pain."
1:20:48 > 1:20:51But the earlier you understand that, the better you handle it.
1:20:55 > 1:20:59By now, you will understand that the markets for individual artists often
1:20:59 > 1:21:03rise and fall over a few years.
1:21:03 > 1:21:07But what about the entire market for the art of an era?
1:21:07 > 1:21:09For the taste of a generation?
1:21:09 > 1:21:12Can that crash?
1:21:12 > 1:21:13It doesn't happen very often.
1:21:13 > 1:21:17But the entire art market has tanked before.
1:21:18 > 1:21:22There's absolutely nothing different about the present contemporary art
1:21:22 > 1:21:25boom from four or five we've seen before.
1:21:27 > 1:21:31The second half of the 19th century witnessed the world's first
1:21:31 > 1:21:33contemporary art boom.
1:21:35 > 1:21:39At its apex was a canny British art dealer, William Agnew,
1:21:39 > 1:21:43selling to those new, wealthy industrialists in Britain and America.
1:21:45 > 1:21:49Agnew had spaces in London, Liverpool and Manchester,
1:21:49 > 1:21:54just as major galleries today have outposts in different cities across the world.
1:21:56 > 1:22:00He was the Gagosian of the art market
1:22:00 > 1:22:04in the 1880s and '90s.
1:22:04 > 1:22:06This was Sir William's office
1:22:06 > 1:22:10and this is part of the original decoration,
1:22:10 > 1:22:12the original fireplace.
1:22:16 > 1:22:23There is a marvellous description of him buying at a sale in Christie's,
1:22:23 > 1:22:30where he bought £50,000 worth of lots out of a total of
1:22:30 > 1:22:35£77,000 and there is a contemporary description,
1:22:35 > 1:22:39which says that he dominated the room
1:22:39 > 1:22:43and that every nod of his top hat,
1:22:43 > 1:22:46since everybody wore hats in the auction room in those days,
1:22:46 > 1:22:51every nod of his hat was worth another 1,000 Guineas.
1:22:53 > 1:22:58By the 1870s, boom turned to bust in the Victorian economy.
1:22:58 > 1:23:02Excepting one important luxury sector.
1:23:02 > 1:23:08In Victorian England, Victorian Paris and New York,
1:23:08 > 1:23:111870 to 1895,
1:23:11 > 1:23:13trade slowed to a trickle,
1:23:13 > 1:23:18companies couldn't be trusted, banks were folding,
1:23:18 > 1:23:21money fled the stock exchanges.
1:23:21 > 1:23:24But in the art market, at Christie's,
1:23:24 > 1:23:26there were queues round the block
1:23:26 > 1:23:29because of the storming returns,
1:23:29 > 1:23:32the prices were spiralling into the sky.
1:23:32 > 1:23:36Lot number 90, same artist...
1:23:36 > 1:23:43Art alone delivered sudden, quick and dramatic price rises.
1:23:43 > 1:23:44Sold! 200...
1:23:45 > 1:23:49The largest boom that there has ever been in the art market,
1:23:49 > 1:23:53and that includes today,
1:23:53 > 1:23:57was between 1870 and 1914.
1:23:59 > 1:24:03This was a market focused on a particular kind of art,
1:24:03 > 1:24:07known in its day as salon painting.
1:24:07 > 1:24:09And here is its mausoleum.
1:24:10 > 1:24:14All the paintings in this room were collected on a two-year buying spree
1:24:14 > 1:24:18in the 1880s by a pharmaceuticals entrepreneur,
1:24:18 > 1:24:19Thomas Holloway.
1:24:20 > 1:24:22In the early years of the 20th century,
1:24:22 > 1:24:26the market in this kind of art collapsed.
1:24:26 > 1:24:29And there is little demand for most of these artists today.
1:24:32 > 1:24:36In 1862, this painting, by Edwin Longsden Long,
1:24:36 > 1:24:41made a record price at auction of over £6,500.
1:24:41 > 1:24:43At least £4,000,000 in today's money.
1:24:44 > 1:24:51But by 1905, you could buy a big Edwin Longsden Long for under £150.
1:24:54 > 1:24:59The real collapse came after '99, and taste changed in a big way,
1:24:59 > 1:25:01in favour of Impressionism, Van Gogh,
1:25:01 > 1:25:03and the new world that we now live in.
1:25:04 > 1:25:08Collectors were beginning to die and the new,
1:25:08 > 1:25:11younger generation had put its money into a different sort of art.
1:25:11 > 1:25:13That was how it came to an end.
1:25:15 > 1:25:19Yet, despite this artistic Armageddon, art dealers,
1:25:19 > 1:25:24collectors and their acolytes do not think that history will repeat itself.
1:25:27 > 1:25:29The whole asset class was repriced.
1:25:29 > 1:25:30It's never going back.
1:25:30 > 1:25:34I mean, the journalists who like to say, "Oh, art market bubble bursting,
1:25:34 > 1:25:36"blah, blah, blah..." That's old stuff.
1:25:36 > 1:25:38This stuff is never going back.
1:25:39 > 1:25:41Is the art market going to have a tough time?
1:25:41 > 1:25:44I think this year's going to be harder than it was last year
1:25:44 > 1:25:46and much harder than it was two years ago.
1:25:46 > 1:25:49Is the market going to drop significantly? No.
1:25:49 > 1:25:51I don't think it will collapse.
1:25:51 > 1:25:55I think that certain artists will go down, particularly the younger,
1:25:55 > 1:25:57untried ones, who have perhaps been speculated on...
1:25:57 > 1:26:01A Picasso painting has been a Picasso painting, painted by Picasso,
1:26:01 > 1:26:04is going to be there, it will always be there.
1:26:04 > 1:26:09Whether that painting is ended in Russia or in China or in England, it's still a Picasso painting.
1:26:10 > 1:26:13And Lot 66, Andy Warhol...
1:26:13 > 1:26:17Is all this optimism just a sales pitch?
1:26:17 > 1:26:20Lot number 12 is Lucien Freud.
1:26:20 > 1:26:22- Perhaps not. - The Profit by Basquiat...
1:26:22 > 1:26:24The good news, my dear bankers,
1:26:24 > 1:26:28is that while we know that the art market can go south,
1:26:28 > 1:26:32it only seems to happen when a certain set of conditions arise -
1:26:32 > 1:26:34which have not yet arisen.
1:26:35 > 1:26:40But the way it works is that so long as the collectors are alive,
1:26:40 > 1:26:42the price stays high.
1:26:42 > 1:26:44Lot 82, the Damien Hirst.
1:26:44 > 1:26:49The Damien price will stay high for the next 30 years because those
1:26:49 > 1:26:55collectors have an interest in keeping the Damien Hirst currency strong.
1:26:55 > 1:26:59That seems to me to be how the living artist's magic works
1:26:59 > 1:27:03and how it delivers the financial return
1:27:03 > 1:27:07that in the past has created booms in living artists.
1:27:07 > 1:27:09Sold, the Warhol Flowers.
1:27:09 > 1:27:11Thank you, your number was?
1:27:11 > 1:27:14A bar of gold is a bar of gold is a bar of gold.
1:27:14 > 1:27:16This is all quite subjective.
1:27:16 > 1:27:21And whether or not it keeps its value will depend upon the whims of
1:27:21 > 1:27:25collectors, tens or twenties, years from now.
1:27:25 > 1:27:26And I think that that's problematic.
1:27:26 > 1:27:31And so we move on to Lot number 11, which is the wonderful Peter Doig.
1:27:31 > 1:27:33Cabin Essence, 93-94.
1:27:33 > 1:27:34And Lot 73.
1:27:37 > 1:27:39The second of tonight's abstract vectors.
1:27:40 > 1:27:47Works of art exist in a paradoxical place, where pork bellies do.
1:27:47 > 1:27:48In exactly the same place.
1:27:48 > 1:27:51In a kind of cartel of speculations.
1:27:51 > 1:27:54There's a degree to which you can tell yourself, when you're weeping,
1:27:54 > 1:27:58sobbing into your pillow, that it doesn't really matter.
1:27:58 > 1:28:01I think the problem is when you have things like our stuff and people want to buy it
1:28:01 > 1:28:03because they are somehow compelled morally.
1:28:03 > 1:28:07You know, "I love this because it's really kind of explaining these terrible things.
1:28:07 > 1:28:08"Here's 50 million quid."
1:28:08 > 1:28:12It's like, well, hang on, those two things are incompatible.
1:28:12 > 1:28:14So, you know, that's the paradox.
1:28:14 > 1:28:18I shall sell it then for 13,000,000.
1:28:18 > 1:28:20Thank you. 642...
1:28:20 > 1:28:23Finally, one last disclaimer.
1:28:23 > 1:28:27The makers of this programme cannot accept any responsibility if you do
1:28:27 > 1:28:31not maximise your profits by following these rules.
1:28:31 > 1:28:33If you do decide to sell part of your collection,
1:28:33 > 1:28:36as I did decide to sell some of my Warhols,
1:28:36 > 1:28:38it's never the right time.
1:28:38 > 1:28:41No sooner have you sold them and then there's an announcement that they've doubled.
1:28:41 > 1:28:46They never halve just after you've sold them. They only double just after you've sold them!