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Comments on edward_ winkleman: Collecting the Crumbs





Updated: 2017-11-18T15:00:56.861-05:00

 



William 4:06 pm, "Let's get some fucking...

2010-02-04T12:02:09.559-05:00

William 4:06 pm,

"Let's get some fucking cake!"

would be a great motto, slogan, t-shirt text, etc.
Will there be a concession/souvenir shop at #class?



For the technically minded: What AE is doing is s...

2010-02-03T11:55:21.369-05:00

For the technically minded:

What AE is doing is selling the collector a Put option on their artwork.

This is a strategy which would be utilized in a market which is near a bottom.

1. Typically the Put contract would be in force for a defined period, in this case until the auction is completed.

2. If the artwork sells, AE keeps the fee (the put premium) PLUS any other fees he is entitled too on the sale.

3. If the artwork fails to sell, the collector exercises the PUT and sells the artwork to AE at the specified price (the put strike) -- Since AE specifies the 'buy in' (strike) price contractually, we must assume it is favorable to him, below the low estimate. SO...
a. He gets the artwork at a low ball price.
b. He keeps the 5%-10% premium fee.

This is a straight forward transaction which in itself does not seem to be either unethical or illegal. However the potential for later unethical or illegal behavior is enhanced.



If artworks were considered commodities this would...

2010-02-03T10:54:28.198-05:00

If artworks were considered commodities this would all be illegal; Edelman would be prohibited from acting as both principal and agent. The same "stalking horses" exist in real estate (like we even need to be reminded)... Caveat emptor!



But it was applied in a simplistic, credulous mann...

2010-02-03T08:00:11.592-05:00

But it was applied in a simplistic, credulous manner by brokers who didn't understand it, to create opaque financial products whose success hinged on centrally planned interest rates and implicit government guarantees that became explict when it all hit the fan.

That's a generous but fair assessment from what I've read as well. The parallel I've tried to draw isn't that offering guarantees to works that might not get the same sort of feverish interest as high-profile lots at auction is as hard to comprehend like the derivatives or other tools, but that they represent more of the same excess (too many guarantees) that led to the art bubble in the first place and therefore suggesting they're the path out of the current downturn is parallel to banks suggesting the path out of the global economic recessions is the same kind of "opaque financial products whose success hinged on centrally planned interest rates and implicit government guarantees." It's the colloquial definition of foolish.



William, I have no economics background either exc...

2010-02-02T18:26:30.090-05:00

William, I have no economics background either except what I've studied on my own. That said, mortgage-backed securities, CDOs, and derivatives are just financial instruments with an attendant risk attached to them. They're tools, and they're neutral in the way that tools are neutral. You could put together a reasonable, transparent CDO with obvious contents. And the math geniuses were not cranking out gibberish. (On the contrary, the first guys who figured out that something was wrong were the quants.) The math was brilliant, in a way: see the Wired article on David X. Li. But it was applied in a simplistic, credulous manner by brokers who didn't understand it, to create opaque financial products whose success hinged on centrally planned interest rates and implicit government guarantees that became explict when it all hit the fan. Jeffrey Miron up here at Harvard wrote a decent summary of the problems and how TARP is worsening them. Operating on the dollar is no great shakes if the dollar isn't worth anything. As for oversight, obviously there should be some, but we pay for it one way or another. For instance, regulations require insurance policies, which can be taken out on financial products against their failure, to keep cash in reserve to satisfy any potential claim. That's a relatively low-risk, low-return product, so to satisfy the demand for a higher-risk, higher-return product, the credit default swap was invented. I promise you that if you outlaw them, another baroque product will spring into existence. You're better off letting ventures fall to ruin when circumstances call for it. People avoid them naturally that way.

I agree with Anon 4:08 except that W chose to salvage what was left of his reputation than leave office with a string of bank failures. He deserves enormous derision for that cowardly act if not blame for the situation he was operating in.



Can we just return to the barter system?

2010-02-02T16:55:43.521-05:00

Can we just return to the barter system?



Franklin, "Nixon Shock" is the reason fo...

2010-02-02T16:08:29.923-05:00

Franklin, "Nixon Shock" is the reason for Monopoly money. Lots to blame on W for sure, but to connect him with this issue is just hammering too many nails in the coffin. Besides, W was functioning in a bad system that already allowed for deficit spending. A system that began in 1913 with the Federal Reserve Act.



Franklin, I don't have the background in fina...

2010-02-02T16:06:18.848-05:00

Franklin,

I don't have the background in finance and economics to get inot this, but at what point did letting mortgage-backed securities, CDO's, or derivatives run amok work? They failed miserably when it was clear even the financiers barely understood the mathematical gibberish their math geniuses were cranking out and as far as I can tell, if TARP wasn't implemented, our entire financial institution could have collapsed under the combined weight of the credit-default swaps on the failed mortgage-backed securities and derivatives. If Citibank and AIG were no longer with us, which I wish they weren't for other reasons, I don't think we'd still be operating on the dollar. In the end, there will be governmental oversight, just not from this continent.

Ed,

When you say that were aren't talking about real money, it makes me incredibly sad. While I poked fun at our materials budget for the show, the amounts of money that we deal with in our circle of the art market is far more real to me than Edelman's funny money. What is it about the way Edelman is throwing around his wealth that disturbs you more than say, Broad buying positions of power at major institutions and crowning himself the cultural captain of the US? Is Broad's purpose more 'pure' than making money off the trade of art? I think one has short term implications, while the other could last for generations.

Anyway, most of us in the art world deal with the crumbs, so instead of talking about the crumbs and crying over them, how about we get some fucking cake from the Edelman's of the world. That would require progressive thought.

Why don't we have a table discussion for #class about 'disgusting displays of wealth and other abuses of power'. Would it be hard to get participants for that one? What's Edelman's address?



We've been playing with Monopoly money ever si...

2010-02-02T13:13:08.968-05:00

We've been playing with Monopoly money ever since W initiated the first round of bank bailouts, if not since the Nixon Shock.

I know you're not a big fan of the auction houses but I'm unclear about what you think Edelman is doing wrong. We frequently pay third parties to assume risk for us. As for the potential lack of transparency behind auction sales, that normally solves itself as customers flee the uncertainty, hence the proliferation of no-haggle policies at car dealerships to stop that flight. This population at the auction houses, though, seems to have a huge appetetite for opacity and an unassailable tolerance for conflicts of interest (see also Deitch, J. and Jouannou, A.). That's their choice. And as Renold points out, at the end of the day Edelman could get his clock cleaned. It's his money.

What's going on in the rest of the financial world is a different story. There's nothing inherently wrong with mortgage-backed securities, CDOs, or even derivatives in themselves. But as soon as the government moves to offset losses when the bad ones start reflecting their real value (which is what all those bad actors who ruined the economy correctly predicted), it removes the fear that would normally check greed in the wild. If Citibank and AIG were no longer with us, people would run screaming at the mere mention of CDOs, not trying to repackage them as - what are they calling them? - "Re-Remics."



Smells like a smart ass. Cedric

2010-02-02T12:51:24.035-05:00

Smells like a smart ass.



Cedric