The stock market, the art market, the luxury goods market – all have been hit. I read a good article by Ben Lewis in The Times (UK) which thoroughly summarizes exactly what has been going on. Quoted from his article: “The prices were so high that they obliterated the meanings of the works, reducing them to symbols of excess and obscenity. I suspected that these prices were a sign that something was going dangerously wrong in the world economy and the human imagination.”
And this reflects across all the recessionary markets which faced inflated prices. At the end of the day, the behaviour of buyers is highly idiotic – they buy at a premium and sell to stay afloat at a low market. That is also what my father-in-law talks about, especially in his recent book that highlights the irrational behaviour of the buyers in the stock market.
It is not very different with art or luxury goods – it is also a severe case of herd mentality, when people buy because everyone else is buying, to make that quick buck bec they believe they will be left out, bec they are afraid of looking ‘uncool’ or ‘stupid’, or bec they just have a lot of money lying around. The worst is when people borrow to buy into goods at inflated prices, planning to cash in and make the big moolah. These people tend to slink away in misery when the markets are low, waiting for the markets to do well again, before investing! It makes no sense. The smart investor would buy when no one is buying and when the deals are available, right?
The other deal with inflated prices is that those aiming for statements of wealth are willing to part with more money, simply to appear ‘cooler’ – to have been able to afford a painting at an over-inflated price – a price that may never come around again until the next sucker turns up. These are people who are bound to be let down. This ability or willingness to part with a premium for something that may never be worth that much, denotes serious irrationality; and is one of the reasons that markets spiral out of control.
The question remains – how far is one willing to go to make that statement of wealth? to show that you have ‘arrived’ – how low are you willing to go, and how high a price are you willing to pay?