7 ms·

I'm amazed that the article doesn't discuss the end of ZIRP. The bursting of the art market bubble in mid 2022 coincides exactly with when interest rates start

I'm amazed that the article doesn't discuss the end of ZIRP. The bursting of the art market bubble in mid 2022 coincides exactly with when interest rates started rising following the 'transitory' inflation caused by pandemic relief measures. This was also the same time that we started seeing hiring freezes in tech, the bursting of the luxury watch bubble, etc. It's all tied together, and has the same root cause: It stopped being cheap to borrow money, and it started being lucrative to lend it out for guaranteed returns (e.g. by buying Treasuries) rather than speculating on artworks, or NFTs, or whatever.

jfengel 1y ago
The US stock market and cryptocurrencies are both going gangbusters. You don't need ZIRP to be awash in cash. Money can print itself when rich people are optimistic. I don't know what causes bubbles to pop, but I don't think it's directly related to US monetary policy. I suspect that the bubble just moved elsewhere.
- echelon 1y ago
  It might be that anyone can generate "art" now. While canvas, sculpture, and other media are far removed from jpegs, the scarcity of adjacent digital forms going away may have reduced the interest in the market for "shaped aesthetic things". The attention, and thus money, has moved elsewhere.
  - csomar 1y ago
    Pretty much every country is in conflict at their border. However, resolutions can happen peacefully. Nations are essentially pillaging structures and thus want to always expand their borders.
    - red-iron-pine 1y ago
      what does this have to do with the above points?
monero-xmr 1y ago
If I was going to buy art as an investment I would only buy the absolute best - old master, Picasso, ancient artifacts with absolutely no question to their authenticity or provenance that would restrict its resale. Collectibles are very tricky. You want to buy something that isn't a fad. Like a movie prop, you'd want to buy the 100% most legendary movie that is timeless, like something from Casablanca, that has been appreciated decade-after-decade as worthwhile and valuable across many generations and fads. I wouldn't buy an expensive sports or trading card. Something related to Western culture is much safer, like the Magna Carta, or a founding US-related historical document. It's very hard to predict what will remain valuable decades or centuries out, so if something is still valuable now after centuries, it is likely to remain valuable
- cortesoft 1y ago
  The problem with your strategy is that the items you listed have very little upside; yes, the prices won't collapse, but they also wont go up a ton. Their prices have reached somewhat of an equilibrium. A lot of collectors are trying to find something they can buy for cheap and then sell when it goes up in price by a lot. If you want that, you have to pick something that hasn't had its price hit an equilibrium yet. You need to take a risk on something new.
  - monero-xmr 1y ago
    Collectibles have a lot of friction, and being physical they have a lot of middlemen and questions. If I want to speculate on an investment, even property would be far more liquid, let alone something disambiguated like company stock. I think investing in physical collectibles for a quick flip is pretty dumb. Why not buy domains related to the same subject? Far easier
    - cortesoft 1y ago
      Ok, then I guess I don't understand your point in your first comment. You seemed to be explaining what approach you would take to invest in collectible in your first comment, by saying you would only buy something that has established value. I agree that trying to make money from collectibles is not the best way to make money. But then if you aren't buying collectibles for money, your first comment doesn't follow; you should collect things you want to collect yourself, which means it shouldn't matter their ability to hold value.
anonymars 1y ago
Yes and no - 2022 also drastically changed taxation of software development https://www.resourcefulfinancepro.com/news/irs-section-174-changes-tech-firms-face-huge-tax-bills-layoffs-are-surging/ https://www.resourcefulfinancepro.com/news/irs-section-174-c...
- qaq 1y ago
  Tech firms lobbied this change because they care about EBITA it makes their numbers look better
  - e40 1y ago
    My tax accountant said every one of his clients was freaking out about it. So, I have to disagree.
  - throw__away7391 1y ago
    This change has zero effect on your EBITA.
  - deleted 1y ago
    [deleted]
  - anonymars 1y ago
    How would that make EBITA look better? (Even if you meant EBITDA, same question)
    - qaq 1y ago
      You are right reporting is via GAAP rules this only affects tax accounting
  - nerdponx 1y ago
    If there was any lobbying incentive, it would be anticompetitive suppression of smaller companies that can't afford the tax increase.
EGreg 1y ago
2022 is also when the wars in Ukraine and Gaza started in earnest When wars are going on, most people in affected countries are thinking about heavier things than going to an art exhibit and boosting their collections. 2020 and 2021 was when the pandemic happened. Businesses started feeling the crunch all over the world from the lockdowns. Supply chains got bullwhipped. People weren’t exactly interested in going to buy artworks after their one-time UBI checks and PPP funds ran out. And other countries didn’t send those out at all. Oh yeah, and AI has now sent a supply shock to the whole art industry. But we can’t say that on HN, there will always be someone popping out of the woodwork claiming AI is a non-factor and saying things were always like that.
- doctorpangloss 1y ago
  The public is not conscious of how big of a deal the war in Ukraine is.
  - randmeerkat 1y ago
    > The public is not conscious of how big of a deal the war in Ukraine is. My sincerest desire is that there’s a peaceful resolution to this conflict before they’re forced to realize it.
    - YeahThisIsMe 1y ago
      It's not a "conflict" and there will not be a peaceful resolution of it.
      - khazhoux 1y ago
        Of course it's a conflict. Every war is a conflict.
        nine_k 1y ago
        Roman Empire, or Genghis Khan, or Nazi Germany did not have a "conflict" with neighbors, some kind of quarrel that can end in a compromise. They had a desire to conquer, subdue, and consume the neighbors. There could be no resolution beside a complete capitulation and becoming annexed. Russia is currently acting in this mode. There can be no "resolution", only a devastating military defeat of one of the sides.
non_aligned 1y ago
> I'm amazed that the article doesn't discuss the end of ZIRP. I'm not sure this particular phenomenon can be explained this way. For example, antiques auctions are doing quite well, with prices rising quite briskly year after year. There's still plenty of money chasing the kinds of long-term investments you can hold in your hand, put on a shelf, and show to your friends. Jewelry sales are doing fine too. There are other reasons why going to a fancy gallery in London to buy some decor for your mansion just isn't as enticing as it used to be a decade or two decades ago.
- boston_clone 1y ago
  I do wonder if one of those reasons is that the general sentiment of the public is moving beyond contempt and towards sharp objects not dissimilar to how friends across the channel tended to handle things.
  - incone123 1y ago
    I doubt wealthy people are afraid to shop at London galleries or auctions. There are street robberies but they target watches and phones, not so much antiques.
    - boston_clone 1y ago
      Maybe my comment didn't capture the zeitgeist - it's not that they're afraid of robberies per se, but rather simply living as a wealthy individual in a society with massive inequalities of income has much more social pushback than say, twenty-five years ago.
      - incone123 1y ago
        What do you think the social pushback would look like from the wealthy person's point of view? If you get chauffeured from your London home to your country house and all your social circle are in the same bracket then you won't encounter much of it. And their children might be following activists on social media but they'll still join the family heli-skiing trip to Canada.
cyberax 1y ago
> I'm amazed that the article doesn't discuss the end of ZIRP. There's a bigger culprit: NFTs. They sucked away a huge portion of art spending, with a promise of a fungible growth asset that you can just sell as needed. Art has always been considered a safe long-term investment (along with a means of conspicuous consumption), but it has always been non-liquid.
- Terr_ 1y ago
  I think that art-to-NFT flow is not really about storing value long-term, but about money laundering. To be more specific, the main purpose of the "object" is to provide plausible-deniability for one half of an exchange where the other half can't be shown because it's illicit.
  - brazzy 1y ago
    A popular hot take, but if that were the case, the art market should have collapsed when NFTs were booming, and recovered after they disappeared. Unless you can give a credible alternative that has eclipsed both.
    - Terr_ 1y ago
      > the art market How would one measure "the art market" in a way that can be graphed? > should have collapsed Through what mechanism would it "collapse? Laundering tricks don't involve bidding wars or high volumes of items. Consider this scenario: 1. Alice wants to transfer $5m to Bob in exchange for something off the books. 2. Bob goes and buys anything he can find that seems to have a consistent ~50m price point. Since Bob's task doesn't require any specific item, he doesn't get into bidding wars to drive up prices. 3. Bob privately sells it to Alice, who deliberately pays a higher amount of $55m. No auction, no bidding wars. 4. Alice can either resell the item to unrelated people for probably ~$50m, or keep it around for a bit to provide either plausible-deniability or a future tool for an inbound cloaked transaction with someone else. How would that kind of activity charge up "the art market" in a way that is easy to measure? > when NFTs were booming Most of that boom was other speculation. My point is that an NFT by cyber-Rembrandt is a lot more convenient than certificate a real Rembrandt held in a freeport as its ownership shifts. The trick is getting something where the generally-accepted value is high enough that transactions can plausibly be hidden as noise in the signal.
djtango 1y ago
Someone in the space told me that China were big buyers of art but suddenly they stopped. This could be because of capital controls, financial stress or increasing sense of national pride - take your pick
- cluckindan 1y ago
  These aren’t limited to China: - fewer people can afford a home, let alone multiple = less wall space for premium art - it’s way easier and cheaper to launder money through cryptocurrency casinos than art auctions
  - djtango 1y ago
    I'm not convinced that the first point has necessarily affected the premium art space unless you're referring to the spill in effects. TFA talks about a space in Art Basel costing 100k - the target clientele for all intents and purposes are completely unaffected by the recent economic problems. Some have gotten even richer if anything
  - throwawayq3423 1y ago
    > it’s way easier and cheaper to launder money through cryptocurrency casinos than art auctions Art was always a favorite way to launder money. This is a good point.
  - solomonb 1y ago
    > - it’s way easier and cheaper to launder money through cryptocurrency casinos than art auctions Sure art sales can be used to launder money, but that can't be the majority of sales. Doesn't laundering rely on being masked by a larger legitimate cash flow? I think a much more significant portion of the art market is people speculating on prices and people collecting to look cool. Both of which are highly sensitive to changes in mood and sentiment as described in the section of the article talking about Beth Rudin DeWoody .
- csomar 1y ago
  Not only China and they didn't stop because of national pride (wouldn't have bought them in the first place). The reason is that they were using them as financial instruments and now they have less confidence on the West. So they are moving to other things.

jfengel 1y ago

The US stock market and cryptocurrencies are both going gangbusters. You don't need ZIRP to be awash in cash. Money can print itself when rich people are optimistic. I don't know what causes bubbles to pop, but I don't think it's directly related to US monetary policy. I suspect that the bubble just moved elsewhere.

echelon 1y ago
It might be that anyone can generate "art" now. While canvas, sculpture, and other media are far removed from jpegs, the scarcity of adjacent digital forms going away may have reduced the interest in the market for "shaped aesthetic things". The attention, and thus money, has moved elsewhere.
- csomar 1y ago
  Pretty much every country is in conflict at their border. However, resolutions can happen peacefully. Nations are essentially pillaging structures and thus want to always expand their borders.
  - red-iron-pine 1y ago
    what does this have to do with the above points?

monero-xmr 1y ago

If I was going to buy art as an investment I would only buy the absolute best - old master, Picasso, ancient artifacts with absolutely no question to their authenticity or provenance that would restrict its resale. Collectibles are very tricky. You want to buy something that isn't a fad. Like a movie prop, you'd want to buy the 100% most legendary movie that is timeless, like something from Casablanca, that has been appreciated decade-after-decade as worthwhile and valuable across many generations and fads. I wouldn't buy an expensive sports or trading card. Something related to Western culture is much safer, like the Magna Carta, or a founding US-related historical document. It's very hard to predict what will remain valuable decades or centuries out, so if something is still valuable now after centuries, it is likely to remain valuable

cortesoft 1y ago
The problem with your strategy is that the items you listed have very little upside; yes, the prices won't collapse, but they also wont go up a ton. Their prices have reached somewhat of an equilibrium. A lot of collectors are trying to find something they can buy for cheap and then sell when it goes up in price by a lot. If you want that, you have to pick something that hasn't had its price hit an equilibrium yet. You need to take a risk on something new.
- monero-xmr 1y ago
  Collectibles have a lot of friction, and being physical they have a lot of middlemen and questions. If I want to speculate on an investment, even property would be far more liquid, let alone something disambiguated like company stock. I think investing in physical collectibles for a quick flip is pretty dumb. Why not buy domains related to the same subject? Far easier
  - cortesoft 1y ago
    Ok, then I guess I don't understand your point in your first comment. You seemed to be explaining what approach you would take to invest in collectible in your first comment, by saying you would only buy something that has established value. I agree that trying to make money from collectibles is not the best way to make money. But then if you aren't buying collectibles for money, your first comment doesn't follow; you should collect things you want to collect yourself, which means it shouldn't matter their ability to hold value.

anonymars 1y ago

Yes and no - 2022 also drastically changed taxation of software development https://www.resourcefulfinancepro.com/news/irs-section-174-changes-tech-firms-face-huge-tax-bills-layoffs-are-surging/ https://www.resourcefulfinancepro.com/news/irs-section-174-c...

qaq 1y ago
Tech firms lobbied this change because they care about EBITA it makes their numbers look better
- e40 1y ago
  My tax accountant said every one of his clients was freaking out about it. So, I have to disagree.
- throw__away7391 1y ago
  This change has zero effect on your EBITA.
- deleted 1y ago
  [deleted]
- anonymars 1y ago
  How would that make EBITA look better? (Even if you meant EBITDA, same question)
  - qaq 1y ago
    You are right reporting is via GAAP rules this only affects tax accounting
- nerdponx 1y ago
  If there was any lobbying incentive, it would be anticompetitive suppression of smaller companies that can't afford the tax increase.

EGreg 1y ago

2022 is also when the wars in Ukraine and Gaza started in earnest When wars are going on, most people in affected countries are thinking about heavier things than going to an art exhibit and boosting their collections. 2020 and 2021 was when the pandemic happened. Businesses started feeling the crunch all over the world from the lockdowns. Supply chains got bullwhipped. People weren’t exactly interested in going to buy artworks after their one-time UBI checks and PPP funds ran out. And other countries didn’t send those out at all. Oh yeah, and AI has now sent a supply shock to the whole art industry. But we can’t say that on HN, there will always be someone popping out of the woodwork claiming AI is a non-factor and saying things were always like that.

doctorpangloss 1y ago
The public is not conscious of how big of a deal the war in Ukraine is.
- randmeerkat 1y ago
  > The public is not conscious of how big of a deal the war in Ukraine is. My sincerest desire is that there’s a peaceful resolution to this conflict before they’re forced to realize it.
  - YeahThisIsMe 1y ago
    It's not a "conflict" and there will not be a peaceful resolution of it.
    - khazhoux 1y ago
      Of course it's a conflict. Every war is a conflict.
      - nine_k 1y ago
        Roman Empire, or Genghis Khan, or Nazi Germany did not have a "conflict" with neighbors, some kind of quarrel that can end in a compromise. They had a desire to conquer, subdue, and consume the neighbors. There could be no resolution beside a complete capitulation and becoming annexed. Russia is currently acting in this mode. There can be no "resolution", only a devastating military defeat of one of the sides.

non_aligned 1y ago

> I'm amazed that the article doesn't discuss the end of ZIRP. I'm not sure this particular phenomenon can be explained this way. For example, antiques auctions are doing quite well, with prices rising quite briskly year after year. There's still plenty of money chasing the kinds of long-term investments you can hold in your hand, put on a shelf, and show to your friends. Jewelry sales are doing fine too. There are other reasons why going to a fancy gallery in London to buy some decor for your mansion just isn't as enticing as it used to be a decade or two decades ago.

boston_clone 1y ago
I do wonder if one of those reasons is that the general sentiment of the public is moving beyond contempt and towards sharp objects not dissimilar to how friends across the channel tended to handle things.
- incone123 1y ago
  I doubt wealthy people are afraid to shop at London galleries or auctions. There are street robberies but they target watches and phones, not so much antiques.
  - boston_clone 1y ago
    Maybe my comment didn't capture the zeitgeist - it's not that they're afraid of robberies per se, but rather simply living as a wealthy individual in a society with massive inequalities of income has much more social pushback than say, twenty-five years ago.
    - incone123 1y ago
      What do you think the social pushback would look like from the wealthy person's point of view? If you get chauffeured from your London home to your country house and all your social circle are in the same bracket then you won't encounter much of it. And their children might be following activists on social media but they'll still join the family heli-skiing trip to Canada.

cyberax 1y ago

> I'm amazed that the article doesn't discuss the end of ZIRP. There's a bigger culprit: NFTs. They sucked away a huge portion of art spending, with a promise of a fungible growth asset that you can just sell as needed. Art has always been considered a safe long-term investment (along with a means of conspicuous consumption), but it has always been non-liquid.

Terr_ 1y ago
I think that art-to-NFT flow is not really about storing value long-term, but about money laundering. To be more specific, the main purpose of the "object" is to provide plausible-deniability for one half of an exchange where the other half can't be shown because it's illicit.
- brazzy 1y ago
  A popular hot take, but if that were the case, the art market should have collapsed when NFTs were booming, and recovered after they disappeared. Unless you can give a credible alternative that has eclipsed both.
  - Terr_ 1y ago
    > the art market How would one measure "the art market" in a way that can be graphed? > should have collapsed Through what mechanism would it "collapse? Laundering tricks don't involve bidding wars or high volumes of items. Consider this scenario: 1. Alice wants to transfer $5m to Bob in exchange for something off the books. 2. Bob goes and buys anything he can find that seems to have a consistent ~50m price point. Since Bob's task doesn't require any specific item, he doesn't get into bidding wars to drive up prices. 3. Bob privately sells it to Alice, who deliberately pays a higher amount of $55m. No auction, no bidding wars. 4. Alice can either resell the item to unrelated people for probably ~$50m, or keep it around for a bit to provide either plausible-deniability or a future tool for an inbound cloaked transaction with someone else. How would that kind of activity charge up "the art market" in a way that is easy to measure? > when NFTs were booming Most of that boom was other speculation. My point is that an NFT by cyber-Rembrandt is a lot more convenient than certificate a real Rembrandt held in a freeport as its ownership shifts. The trick is getting something where the generally-accepted value is high enough that transactions can plausibly be hidden as noise in the signal.

djtango 1y ago

Someone in the space told me that China were big buyers of art but suddenly they stopped. This could be because of capital controls, financial stress or increasing sense of national pride - take your pick

cluckindan 1y ago
These aren’t limited to China: - fewer people can afford a home, let alone multiple = less wall space for premium art - it’s way easier and cheaper to launder money through cryptocurrency casinos than art auctions
- djtango 1y ago
  I'm not convinced that the first point has necessarily affected the premium art space unless you're referring to the spill in effects. TFA talks about a space in Art Basel costing 100k - the target clientele for all intents and purposes are completely unaffected by the recent economic problems. Some have gotten even richer if anything
- throwawayq3423 1y ago
  > it’s way easier and cheaper to launder money through cryptocurrency casinos than art auctions Art was always a favorite way to launder money. This is a good point.
- solomonb 1y ago
  > - it’s way easier and cheaper to launder money through cryptocurrency casinos than art auctions Sure art sales can be used to launder money, but that can't be the majority of sales. Doesn't laundering rely on being masked by a larger legitimate cash flow? I think a much more significant portion of the art market is people speculating on prices and people collecting to look cool. Both of which are highly sensitive to changes in mood and sentiment as described in the section of the article talking about Beth Rudin DeWoody .
csomar 1y ago
Not only China and they didn't stop because of national pride (wouldn't have bought them in the first place). The reason is that they were using them as financial instruments and now they have less confidence on the West. So they are moving to other things.