A bubble in bad economic time

On April 1, 2012, the 60 Minutes show presented a story, "Even in tough times, contemporary art sells". Here is the open words from Morley Safer,

Even if contemporary art seems alien or odd to you, consider this: the market for this art has outperformed the Standard & Poor's list of 500 common stocks since 2003. Morley Safer is back on the art beat, attending the most important contemporary art fair in the world: Art Basel Miami Beach. It's a matter of taste whether the paintings, sculpture, and what-nots are good art, but as a good investment, art is indisputably hotter than ever. In fact, elite art buyers - many from Russia and China -- are so ravenous that the contemporary art market raked in over $5 billion in auction sales last year.

The $5 billion mark was actually the tip of the iceberg. It was only from the auction records, not included art show transactions. It is estimated to be another a few billion dollars. In these art shows, price tags such as $750,000 aren't rare. Some arts are "difficult". How they are sold in such time is a amazing. The follow dialog tells how the shows target not even the 1% but 0.001%:

Tim Blum: The real fundamental thing is we're here to sell a lot of art.

Tim Blum, a partner in Blum & Poe, a Los Angles gallery renowned for discovering the sharpest of cutting edge art.

Morley Safer: Some of the art that you sell could probably be described as difficult?

Tim Blum: Oh, absolutely. 100 percent. I mean, we kinda specialize in that.

Morley Safer: You have to explain to a potential buyer--

Tim Blum: Yes.

Morley Safer: --why he or she might learn to love this?

Tim Blum: Yeah, often you do. A lot of folks are just buying. It's more like, "We need one of these things because everybody's getting one."

Morley Safer: Status.

Tim Blum: It's a status symbol. It's a speculative op-- mechanism.

Morley Safer: Do you sometimes have to grit your teeth? Even when you're making a sale?

Tim Blum: Yeah. We're very good at that. We're from Hollywood. We're in the acting game. Yeah. It's theater. This is all theater.

And Blum knows all the A-list collectors.

Superriches always look for alternative investments, gold, real estate, art. But let's remember what Graham said in The Intelligent Investor:

Quite a few categories of valuable objects have had advances in market value over years --- such as diamonds, paintings by masters, first editions of books, rare stamps and coins, etc. But in many, perhaps most, of these cases there seems to be an element of the artificial or the precarious or even the unreal about the quoted prices. Somehow it is hard to think of paying $67,500 for a U.S. silver dollar dated 1804 (but not even minted that year) as an "investment operation." We acknowledge we are out of our depth in this area. Very few of our readers will find the swimming safe and easy there.

Graham maybe aghast on this news. Again, this is the game for very few of us.