Tuesday, May 8, 2012

Sotheby's: A Sign of the Times

Sotheby's, the venerable art auction house, is a reliable barometer in two ways:  for monetary conditions and the stock market.  When monetary policy is loose, cash finds its way to the art market, and prices get bid to astounding levels.

Sotheby's recently set a record for the most expensive artwork ever sold at auction, as Edvard Munch's "The Scream" sold for $119.9 million at a Sotheby's auction.  With monetary policies in many countries extraordinarily loose, such news is consistent with historical precedent.

Sotheby's stock also is a good barometer of broader conditions, as it tends to peak with the market and trough with the market as well, though to greater extremes.  It peaked near $60 a share in 2007 and above $50 in early 2011.  It troughed below $10 in 2009 and in the $20's in 2010 and 2011.  At today's price of $36, it is somewhat elevated--just like the broad stock market.

With Sotheby's stock--and the S & P 50--below record highs but well above trough levels of recent years, it is consistent with my view that now is not the time to take large positions in markets but to hold some cash in reserve for better buying opportunities.

Steve Lehman

S & P 500:  1363

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