Lessons of Trading Never Cease
My Blog tomorrow will be about being happy with a 10% but unhappy at the same time because mistakes were made in the process! Buying an oil painting for £7500 in 1986 was a major investment and progress but what lessons came out it? This is a small part of my Book Rags or Riches!
Edward Seago an investment I will never regret nor forget!
29th March 2015
From San Francisco to London
February 1986, Butterfields, San Francisco
It was a long wait for the catalogue from San Francisco in March 1986. Would there be a bargain for me once more? The sale of the Lawrence and the successful trade of the Lebasque made me believe that the auction always had a small bargain destined for me. Flicking impatiently through the catalogue many were the possibles, but only one stood out in my eyes, which sent me into a frenzy of research and study.
(English, [1910-1974] Modern British artist with a good following in England, Canada and the USA. Auction price range £3,000 to £80,000)
All of a sudden I had thousands of pounds in the account. It was so much cash in my pockets for the first time in my life that my brains were blown away. I could not handle such amounts of money. The poor boy, poor teacher, the penniless student and adult all of a sudden had riches he only dreamed of. The riches had to be invested quickly in order to multiply. That was how I saw it. It was crystal clear – it was one plus one makes two!
Easy young man! Easy! Patience is golden!
Butterfields’ catalogue was the one catalogue I waited in agony for every four months. There was always something for me in every sale and the sale of March 1986 was no exception. The Edward Seago painting of the Regatta at Henley was the only one for me. Love at first sight. Profits in the painting were obvious. According to the expert at Butterfields it was of superb quality. I knew that the painting would be extremely desirable to wealthy English high society and the two together strengthened my desire to invest in it.
Seago was a very good mid-twentieth century English artist with a great following and auction prices of an ascending order. Notable English, American and Canadian galleries were collecting and trading his work. He was a name I had marked in red letters to invest in, if the opportunity arose.
I was already informed that competition might be stiff. I respected English dealers, already known to me as fierce, determined and stubborn to destruction. That put me off somewhat, but I had the money burning in my pocket. No chance to keep it there. I felt there was a bargain to be had, as long as I did not get involved in a bidding war.
The painting was not only a very pretty view of the Thames Regatta at Henley but also a good size and provenanced by a reputable Canadian Gallery. It was the perfect subject for English high society and perfect to make a substantial sum of money. The trusted expert at Butterfields assured me that the painting was of supreme quality and that with a bid of about $9000 (around £7200) I should be able to buy it. That sum was easily double the amount of any earlier investment I had made. I wanted the painting very much, but I was afraid I might do something silly with so much money in my pocket. I could see a lot of interest in Seago from London, but I hoped that it was from small investors, like myself.
London 2:00am, 27th February. Unable to sleep, daydreaming of a bargain I am up and ready for the bidding war ahead, usual for me when buying in San Francisco. No need to sleep in those days. I was a nightbird looking for prey. Patiently, I waited until the phone rang and I picked it up quickly.
“Mr. Constant? The Seago is coming up in three lots.” Everything was a rush! Lord, they were in as much hurry as me, and yet I had all the time in the world to do the right thing. Was it the right thing to invest so much money in one painting?
The bidding war I expected soon started. From six thousand the price climbed steadily, but at $9000 the hammer came down and rescued me from further agony and worries. The fierce bidding was over, the battle was bloody, but was it a winning battle? The painting ended up costing me $9900 (£7500) inclusive of commissions. I was happy enough, but I wish I had bought it for less. I had learned the hard way already about bidding wars in auction rooms; they are never good for buyers!
Do not push prices up! Do not get into bidding wars!
All my money was tied up now and I was worried that if a good opportunity appeared to invest in another promising painting, I had no funds available. Therefore, I instructed Butterfields and Butterfields to ship my purchase to Sotheby’s, London immediately. I would have just enough time to make the deadline for the Modern British Paintings sale of May 1986. It was imperative to sell quickly in order to invest again before the summer. I was hungry and greedy for success and more profits. My calculations were simple. Invest my cash twice in the year in order to double it.
Rude awakening! Who and what you are is terribly important in art!
April 1986, Sotheby’s, London
Time was of extreme essence. By the time the money was sent to San Francisco and the painting was shipped to me it was April and the pressure was mounting. As soon as the painting arrived at Sotheby’s, I rushed there to discuss details of the sale. This was the most expensive painting I had ever invested in at that time and understandably I was worried about the whole issue. Did it arrive in one piece? What would be the view of Sotheby’s experts? Would there be a return on such a big investment?
It has never been easy to buy and it has always been harder to sell, either privately or at auction. This being the most expensive purchase to date was also accompanied by a rollercoaster of emotions. Would I make the deadline to consign the painting or would I miss the boat and thus have £7,500 sitting at Sotheby’s for seven months until their next important sale in November? I was not ready for such a luxury, not yet.
Money matters were tightly connected with time schedules and timing of sales! This I was to find out in May 1986 and in October 1987 just before the Stock Exchanges’ crash that same month. Timing was the most important aspect of dealing in anything, not just art! It was to prove even more important in later years, but more on those events later in the book.
It was early April 1986, just before Easter. Spring brought about unexpected and bizarre events, which were destined to influence the business dramatically. They were first time happenings and thus sitting high in my memory bank and notes. Unbelievable, yet they were happening to me, a new kid on the block of art dealing! Could that be you? Could such incredible events happen to you?
Was my life a fairy tale? I wonder, as at times it’s more fictional than fiction itself.
I already knew a few experts at Sotheby’s but nobody from the Modern British Paintings department. On arrival at Sotheby’s reception counter on George Street, I asked to speak to somebody from the Modern British Paintings department. Soon enough a lady in her fifties came down to the reception to see me. She was very stiff upper lip, very English and I was a foreigner. She was another new face in the world of art for me! So was I for her!
“I came to discuss terms with regards to the Edward Seago you have received from San Francisco,” I explained to her.
“Who are you?” she asked crisply.
“I am the owner of the painting, Peter Constant.”
“I don’t know you,” the expert stated stiffly, “and I do not know whether you are the owner of the Seago or not.”
She was polite, but cold and hostile. Her remarks shook me by the roots. In my judgement she was rude and I was her victim because my speech and looks did not fit her expectations. This was a new experience, a new territory, a new unexpected twist and learning curve. She was disputing my ownership of a painting that had cost me the earth, the painting I had entered into a bidding war for and which had consequently left me penniless.
I snapped back remarking in anger and frustration, “Do you receive many paintings by Seago from Butterfields, San Francisco? How on earth has a painting of £8000 arrived from that auction and I know about it? Can you explain that?”
I was fuming and beside myself. She was on the other side of the fence and she could not feel the anxiety and the pressure of £8000 being disputed. She did not know that I had put my last penny together in order to buy that painting. She was not under pressure. I was hanging from a thread staring into the abyss of failure, unless I made the sale and got that investment back quickly. I was furious and she was as calm as a cucumber, cool and composed.
“I am sorry sir,” she relented a little, noticing my extreme anger, “we have to make sure that the painting is yours and then we will discuss the issues related to reserve and illustration.” She was gone and I was left reeling, not so much about the inquiry she was going to make, but more about an expert who, in my eyes and judgement, behaved more or less in a prejudicial manner.
Who are you? Where and how did you get this? Such questions were an insult! I felt humiliated! I did not fit her image of clients expected to own such a painting! Such clients were indeed very English and I looked anything but English or upper class. I kept my cool but I was seething. I left Sotheby’s feeling down, dejected and rejected. Simply I did not fit the image, the looks and the accent. I felt sick!
Luckily, being thick-skinned helped! Yes, I was in the business to stay, but more importantly to make it in the business. I had to take it on the chin politely until they did their job. It was not long before the phone rang and the arrangements for the sale were made. With an estimate of £8,000-12,000 and only a cheap black and white illustration the Seago was for sale in May. I was confident the painting would sell well and way above the low estimate.
I had exhausted my resources and there was no more money to buy anything. The bank refused to raise the overdraft and so I had to find another way to finance possible new purchases, especially if they were bargains. Bargains never knock twice on anybody’s door. You take them as soon as they appear or somebody else will. I had a few good paintings in stock, but I had no cash and we all know that cash is king!
I never managed to have ready cash for long. It was always invested quickly and I was more often than not in trouble with my bankers. Barclays refused to raise my limit of ten thousand and I knew I was missing opportunities and chances. As soon as the Seago sale was over, I switched banks and Nat West, my new bankers, allowed me a twenty thousand pounds overdraft as soon as I opened an account with them. Now there was some cash to work with, but for how long for a very active art investor. No time to waste as opportunities were knocking on the door daily or so I thought.
Lessons in trading art- The Seago sale
May 1986, Sotheby’s London
May already. The sale at Sotheby’s was the best hope of making money for that spring/summer. Unfortunately, the sale had several Seagos on offer and that I knew detracted from the sale of my property. I had never had an expensive English painting before and that made me very nervous. I had already found out that English dealers were fearsome when wishing to buy something. They chased paintings very hard, thus not allowing much margin for error and indeed profit. Did I pay too much for the Seago? Did I bid to destruction or construction of my art venture when I bought in San Francisco?
The saleroom of Sotheby’s was packed to the rafters. No way was I to miss such a sale. Supply teaching could wait! Many well-heeled English collectors, gallery owners and investors I had seen before had gathered in the great rooms of Sotheby’s. Such an assembly guaranteed a good sale. It was high expectations. I was reasonably optimistic and expecting a good result. In spite of that, there was also a worry and an inexplicable uneasiness.
The sale started well with strong bidding and high prices, which inflamed my hopes and optimism about the Regatta of Seago. The room was full of buyers, not observers, and there was a buzz about the whole sale. The Seagos before my property sold well even though they were not as powerful and desirable as the one I had emptied the bank for. I kept guessing how much it would sell above the high estimate, something I had done many times before during that month. I kept looking around to see who was in the room. All the major dealers and gallery owners were there. I felt almost out of place just observing, but I was there to stay. I believed I had the intelligence, the desire and will to outsmart some of them at least. Ha! Ha! Rub your hands young amateur! Money is coming in an avalanche!
“Edward Seago, The Regatta At Henley,” announced the auctioneer.
“I have £8000. Any more bids, please?” The auctioneer looked around expectantly, but all was quiet in the room and only one hand went up for £8500. A telephone bidder made it £9,000.
“Nine thousand on the phone against you all. Nine thousand. No more? Nine thousand and I’m selling, sold on the phone for £9000.” Down came the gavel dispersing all hopes of a mega-buck sale filling me with misery and disappointment.
Downcast, depressed, but also relieved the painting had sold and at no loss, I looked forward to the future. My profit was negligible from such a good investment, much less than reasonably expected, but I had to accept it and carry on. Better 10% profit, than a loss, which is always a possibility in any trade.
Nevertheless the events in the saleroom baffled me. Puzzling! Why had such a beautiful and meaningful Seago sold so low? There was something strange about the Seago sale, but what was it? Why had all those dealers gone quiet when my property was being sold? Why did Ricahrd Green remain quiet in the saleroom, since he collected Seago’s work? It was done and dusted, but I had the questions sitting at the back of my mind. Why had such a good painting failed to even come close to expectations? Why had a better painting than others made less money? It was a puzzle I wish I had the answer to. Being so busy all these questions were pushed to the back of my mind and I gradually forgot all about it.
Cleverer, experienced foxes in the game! Lessons learned!
The Seago sale was a distant, sad memory. I did not know what happened and why it happened until a year or two later. I was walking past Richard Green Fine Art Gallery in central London on my way to Christie’s King Street in London. Staring at me in Richard Green’s window were all the answers to the multiple questions about that unfortunate Seago sale. The Seago I had sold at Sotheby’s was the front cover illustration of an Edward Seago selling exhibition at Richard Green Fine Art. Yes, the biggest gallery and dealership in the United Kingdom had bought it. Yes, it was the front cover illustration of their exhibition and my goodness!
The painting looked amazing in colour! It decorated the front page of an exhibition worth probably millions. I was devastated! I felt sick! I honestly did! I walked by and I stopped, leaning on the wall of the shop next door in New Bond Street. The world was spinning and I was throwing up, literally! How many more such sales was I to make? I had made so many serious mistakes in that sale, but I was still learning the business! There were excuses, there was room to improve and be better and smarter!
The master, Mr Green, (any relationship to Janet Green the Sotheby’s expert?), gave the apprentice a good lesson in buying art at auction and selling it properly and correctly! It was a minor setback that fortunately cost no money!
It did not take me long to add one to one and work out how the biggest and cleverest fox in English art had outsmarted and outwitted me as well as everybody else in the saleroom of Sotheby’s. I was gutted! I cursed and cursed. Richard Green had acquired the painting on the phone. He was in the room buying other paintings, but he never bid in person on the Seago I owned. How unlucky was I? Obviously he feared a bidding war in the room. Other dealers, out of envy, would have tried to push up the price if they saw him bidding, and so he bought the painting on the phone without anybody knowing what he was doing. Crafty dealer and smart! Very smart!
Why didn’t I offer the painting directly to Mr Green after I bought it, since I knew he was buying Seago’s work? The milk was spilled and I was completely deflated. Life goes on and so did my education in art! Lessons had to be learned and they were many and significant:
· Know the trade business better and sell directly to the big galleries, if the price is right.
· A painting not fresh on the market is unlikely to achieve its real market value in the auction room.
· The reserve you set before a sale is absolutely necessary.
· San Francisco was a great source of buying good paintings that yielded good profits. Keep the secret close to your heart.
Was there compensation for that hasty sale of Seago? Were the proceeds invested quickly to make up for the huge disappointment? If ever I had a serious complaint to make about the business, it was not about the opportunities offered but about the lack of funds on my part to exploit those opportunities. It has been so frustrating, but I am sure this is the case in any business, lack of funds and finance.