Back in October, hedge fund manager Dan Loeb sat down at his desk to pen a letter to auction house Sotheby’s, wherein he informed management that, among other things, they don’t know dick about contemporary art. The Third Point founder went on to list the many ways Sotheby’s had failed shareholders, including “egregious examples of waste,” like a lunch at Blue Hill that cost “multiple hundreds of thousands of dollars,” lost ground to rival Christie’s, its sliding operation margin, and, finally, the continued employment of CEO William Ruprecht, to whom the letter was addressed. Naturally, Loeb offered his services re: fixing the place, writing that he would be happy to join the board and help recruit a few other directors who would come with the requisite “experience increasing shareholder value” and would generally know what they hell they were doing, unlike some people (no names: Bill Ruprecht). Read more »
It’s Going To Take A Lot More Than A $325 Million Buyback For This Hedge Fund Manager To Start Taking Sotheby’s SeriouslyBy Bess Levin
Mr. Cohen is now parting with about $80 million worth of blue-chip art at the important auctions that begin next week at Sotheby’s and Christie’s. It is the largest single group of artworks he has sold at one time and includes top examples of paintings and sculptures by Brice Marden, Rudolf Stingel and Cy Twombly, along with previously reported Warhols and a Gerhard Richter. “We’re in a robust market, and we are actively managing the collection,” said Sandy Heller, his longtime art adviser…Lawyers for SAC and federal prosecutors are putting the final touches on a settlement that, in addition to the guilty plea, will include an agreement for the fund to stop managing money for clients as well as to pay penalties of about $1.2 billion. Combined with $616 million in government fines assessed this year in two related civil cases, SAC will have paid penalties of more than $1.8 billion. Because Mr. Cohen owns 100 percent of SAC, that money will effectively come out of his pocket. People close to Mr. Cohen, who were not authorized to speak, say that the art sales from his fabled collection are not an effort to raise money for his mounting fines and legal fees. Even after his fines are paid, Mr. Cohen will still have billions of dollars in the bank. [NYT]
Someday soon, the Manhattan U.S. Attorney may back the trucks up on Cummings Point Road and Crown Lane and Further Lane and seize some of the toys Steve Cohen has acquired with his allegedly illicit fortune. Perhaps Preet’s mind wandered to that day when he was signing a big chunk of Mark Dreier’s former art collection to a hedge fund Dreier screwed over. Perhaps it occurred to him that, since there’s no Heathfield Capital owed a pickled-shark-and-Picasso‘s worth of restitution, Stevie’s impressive private museum might just make a fitting monument to his own prosecutorial victories? Read more »
If you like or hate financial regulation you might take a quick look at today’s front-page New York Times article about how the art market is unregulated. Apparently this leads to terrible things like “chandelier bidding,” where auctioneers get the ball rolling by calling out a few fake bids, as well as conflicts of interest involved in third-party guarantees where someone writes the auction house a put on an artwork, is paid a variable commission for that put, and in some cases is allowed to credit that commission against his own bid for the artwork.1 One question you might ask is “why is that bad?”; the answer seems to be that some rich people who go to art auctions pay more for art than they would in the absence of these systems, and then feel vaguely uneasy about it. I think the whole thing disappears in the face of one more iteration of “well, why is that bad?,” but perhaps I am wrong.
There are places where you should think “customers should be protected from various sorts of sharp practices by dealers,” and there are places where you should not think that. I guess? Are there only the former?2 I come from a place that believes deeply in the separation between “sharp practices” and “illegal fraud” and works to keep them distinct. One thing the Times article mentions is that there is a law saying that stores have to display the price of their wares, and art dealers ignore that law, and this is bad for some reason. Try that law on derivatives dealers. One of the main driving forces behind financial innovation is finding novel places to hide fees.
The rest of the art-auctioneer tricks also seem pretty familiar. Imagine an M&A banker who couldn’t bluff, to the one serious bidder for an asset, that he had other bidders waiting in the wings. And of course the financial industry is very familiar with the creative use of options and guarantees to allocate value in ways beyond a headline purchase price. One flavor of that is “schmuck insurance.”3 Read more »
There is no denying that Jeffrey Gundlach is a hugely talented man whose IQ would rank among the highest in the world if he ever had it tested. “What’s it like having lunch with a genius,” he once asked a colleague, who presumably answered, “To be honest, it’s giving me an inferiority complex just breathing the same air as you, knowing that your brain is the standard for how intelligence will be measured from now until the end of eternity.” Until recently, however, the application of Gundlach’s brilliance was largely confined to bond management. According to a new profile by Bloomberg Markets, though, Gundlach’s intellectual prowess is just as if not more impressive when it comes to crime solving. Read more »
Geoffrey Raymond, Wall Street’s artist in-residence, who’s done everyone from Jimmy Cayne to Jamie Dimon to Lenny Dykstra to Ina Drew, put his paintbrush to the canvas over the weekend and came up with this: “Portrait of Mathew Martoma, In The Manner of Roy Lichtenstein,” which is apparently supposed to be an homage to “Drowning Girl.” As this one might become a collector’s item, and animals in formaldehyde aren’t going for what they used to, consider making him an offer tout de suite. Bidding starts at 10K.
Just a week after putting out an AMBER alert that several of his beloved pieces of art had gone missing during a heist on his home and a mere four days after an emotional press conference pleading with the public to help him find them, bond manager Jeffrey Gundlach’s most prized possessions, after his Sexy Slave KitTM, have been recovered. Read more »