Tracking A Rollercoaster: Sotheby's Offers Clues About Survival Of Tech Bubble

Transcript

ROBERT SIEGEL, HOST:

If you're looking for signs of a bubble, usually there's no better place to look than elite auction houses and the market for high-end art. That's where the really rich spend their money. But when it comes to the tech billionaires out there today, their interests may be a little different. Steve Henn of our PLANET MONEY podcast explains.

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STEVE HENN, BYLINE: Vikram Mansharamani has made an art of finding unusual economic indicators that can predict a bubble before it pops.

VIKRAM MANSHARAMANI: I tend to look at Sotheby's Common Stock price as a wonderful bubble indicator. Let's just bluntly describe the actual stock price in a chart format.

HENN: I know nothing makes great radio like describing a chart, but stick with us for a second. Sotheby's stock price has a certain sense of drama to it.

MANSHARAMANI: Right - almost as a rollercoaster.

HENN: This ride begins in the '80s.

MANSHARAMANI: The rollercoaster is at ground-level in 1988 when Sotheby's goes public. And shortly thereafter, it goes up in a vertical ascent.

HENN: By late 1989, Sotheby's stock hits an all-time high. So what was driving it up?

MANSHARAMANI: It was driven to those levels by buying pressure that was unexpected from newfound wealth in Japan.

HENN: But then, three or four months before the Japanese stock market peaked, Japanese investors started getting nervous. They stopped buying art. Sotheby's stock price collapses.

UNIDENTIFIED MAN: (Yelling) Wow.

HENN: This pattern has been repeated with every bubble since. So you might expect, with hundreds of new billion-dollar companies and thousands of new multi-millionaires kicking around San Francisco and the global tech economy, that Sotheby's stock would be pushing to new and dizzying heights. But it's not.

MANSHARAMANI: Well, it's interesting. I mean, I think the phrase that geeks don't buy yachts is one that I've heard many times.

HENN: And it seems geeks don't really buy art either. We checked around, talking to gallery owners, museum curators, and while we were poking around this world, we did find one part of Sotheby's business that's setting new records.

Every August, there is this rare car auction in Monterey, Ca. This year, Sotheby's sold $170 million of cars that weekend. Total sales at Monterey topped half a billion dollars. A rare Ferrari could sell for 40 million. These are art market prices for machines. And tech money is driving it. David Swig is an automotive specialist at Sotheby's.

DAVID SWIG: There are more and more wealthy millionaires every single day. But there's only a finite number of really important sports and GT cars.

HENN: This August, Swig helped sell a beautiful old racing Jaguar. It was one of the first cars ever to use disk brakes. He said that made it especially appealing to techies.

SWIG: Yes, it's definitely a car that has an appeal to someone whose an engineer or, you know, a technological innovator because even though the technology now is 60-years-old, you look at it through the lens of time.

HENN: The car sold for $13 million. This December, Sotheby's is planning another car auction aimed explicitly at techies. They're calling it Driven By Disruption. One car on the block - Janis Joplin's old Porsche. You know, today, collectors sometimes talk about these cars as assets. Now, when David Swig got into cars, he was doing it with his dad. These cars were projects. They were toys. They were fun.

SWIG: There's a lot of talk about investments and diversifying your portfolio with cars. And frankly, if my father heard any of that type of language being used about these cars, it'd probably make him throw up a little bit.

HENN: Today, rare cars, sports cars, are so valuable, they may even be economic indicators. Who knows? If the price of Janis Joplin's old Porsche plummets, it could be time to run for the hills. Steve Henn, NPR News. Transcript provided by NPR, Copyright NPR.