Going once…

“Well,” muttered Mr. Heffel after one single painting had been sold last night, “we’re off to quite the start.”

Indeed.

The little 18-inch watercolour called ‘Coastal Boats Near Sidney, BC’ painting by E.J.Hughes in 1948 had an auction estimate of $60,000 to $80,000. But when the hammer came down (after one minute of bidding), the buyer agreed to pay $169,250.

‘Coastal Boats Near Sidney’ is a Hughes watercolour painted in 1948, sold at auction last night in Toronto for $169,250, about a hundred thousand over the estimate.

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Minutes later a landscape with the same estimate by Takao Tanabe – this one in acrylic – sold for $451,250, or seven times the expected amount. It set a new record for that artist. In fact the auction in Toronto on Thursday night, complete with a packed audience and bidders stacked up on the phone and in an online digital salesroom, set new all-time highs for a number of Canadian painters.

The hits kept coming. An abstract by renown Quebec painter Jean Paul Riopelle, estimated at $125,000 to $175,000, changed hands for $661,250. Even a mere screenprint on paper – one of many copies – of Andy Warhol’s Marilyn Monroe fetched $205,250. That was three times more than expected.

What gives here? The Heffel live auction mirrored what’s been happening in New York and in Europe this spring, and at fabled houses such as Christie’s. Investors have been laying down eye-popping amounts of cash for works of art. Millions and millions for the old masters, impressionists and modernists, and now that tsunami of capital is washing over the Canadian market.

Art, of course, is portable. Unlike real estate. You can hang it in the living room and impress the hell out of your company, unlike shares in Nvidia or RBC. You can enjoy looking at it, touching it, living with it, unlike a B&D portfolio stuffed with lifeless ETFs. And investing in art, many wealthy people obviously believe, means owning an asset shuttered from the bright light of taxation (art pays no taxable interest or dividends), which is a proven inflation hedge, adds diversification to net worth, has returned outsized profits and shouts ‘culture’ when your BIL is bragging about appreciation on his Dodge Viper.

Yes, stock markets have hit a couple of dozen record highs this year. Real estate prices are, well, insane. The feds just goosed capital gains taxes, while the tax assault on property has augmented as never before. Trump and MAGA threaten disruption within our biggest trading partner while China is dealing with a housing meltdown. Wars in Ukraine and Gaza are both going badly. And AI is eating jobs while WFH has killed downtowns and Amazon decimates the malls.

It’s a world of change, much of it unwelcome, uncertain, destructive. So it seems people with means are choosing art as a storehouse of wealth, instead of buying another property, chasing the Mag 7 or offshoring capital. And you get to look at it.

This landscape by Takao Tanabe (27″x59″) was estimated at $60k-80k, and fetched $451,250, including the buyer’s fee.

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New encouragement to take money out of the system and put it on the wall comes from our non-financial finance minister this week. It seems Ottawa’s finances are, ahem, even worse than we thought.

Interest charges on the debt are increasing. So is the debt itself, since federal spending and capital requirements have increased. Last month the new budget told us it will cost $54 billion to finance the national debt for a year. This month the bill is apparently $56 billion. The reason: “higher projected interest rates and higher borrowing requirements.”

The debt cost taxpayers $20 billion a year to carry about the time Covid hit. This year it will, as stated, be $56 billion. In four years it’s estimated to top $60 billion. This is a disaster. Freeland wants to increase expenditures by another $20 billion (according to last month’s budget), and this year will be spending $40 billion more than the country collects in taxes.

Now that we know interest rates will be declining more slowly than anticipated, and over a longer period of time, debt charges could escalate more. Thus, the money sent off to bondholders will eclipse that spent on health care, or children, or the military. Mostly it means a massive unfunded liability is being passed to future generations of workers and taxpayers – at a time when work itself seems imperilled.

So, is it reasonable to expect taxation will focus more on assets than income? If so, in the crosshairs is the primary asset class in Canada (as in most of the world) – real estate. Already we’re seeing that with Chrystia’s increased capital gains inclusion rate (cottages, rec properties, investment condos, rentals), the anti-flip taxes nationally and in BC, spec taxes, empty home taxes and swelling property taxes. Given the inability of politicians to live within their means, is this just the tip of the ‘burg?

Maybe so. Perhaps it’s why more cash is chasing art. Unlike stocks (valued constantly) or houses (assessed routinely) art only has value ascribed to it when a sale occurs.

Quiet wealth. And you get to see it. She doesn’t.

About the picture: “Here’s a pic of Ziggy sunning herself after a brisk stick-fetching session in the waters of MacKenzie Bight on Vancouver Island on a beautiful spring day,” writes Llyod.  “She’s contemplating her cut of the family TFSA (B&D, of course) wondering if she should DRIP, stay or cash some out for a juicy steak.  Thanks for your continuing efforts (sometimes in vain it seems) to educate the masses.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.