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Sotheby's, Global Wealth Remains in Play


There has always been a market for art, wine, rare coins and as the number of bidders for these items continues to grow it can only mean good things for the houses that auction them off.


"What makes a king out of a slave? Courage.
What makes the flag on the mast to wave? Courage.
...Whatta they got that I ain't got? Courage!"

(A quote from The Wizard of Oz, which is easily in my personal Top Five Movies of All Time: 1) The Godfather / Godfather II; 2) Jaws; 3) The Sting; 4) The Wizard Of Oz; 5) The Great Escape. I can see the outraged e-mails coming in now, but hey, it's just a list!)

As for the market - to get back into the game today it may take exactly what Burt Lahr was talking about way back in 1939: courage. But I think last week, much like a violent storm at sea, may have uncovered some hidden treasure.

Take a look at what has happened to Sotheby's (BID). After trading close to $53 on July 16 the stock has cratered down to the $43 level. And although the performance in this stock has been incredible since trading around the $14 level in June 2005 it has not been an uninterrupted meteor shot, as we have seen about five or so pullbacks of varying magnitude during that time period.

Back in January, Barron's discussed the trading opportunities created by the widening wealth gap.

Citigroup (C) assembled a basket of stocks that would benefit from the Plutonomy thesis or a global economy that is disproportionately propelled by the rich. Sotheby's was one of the stocks mentioned. And truth be told, the world is getting wealthier. With oil prices hitting historic highs the wealth creation in the Middle East as well as Russia is unparalleled.

Now, I cannot differentiate a Rothko from a Roethlisberger. Hey, I thought "White Center" was some new slang for Yodels snack cakes. But back in May, Rothko's "White Center" went for $72.84 mln at a Sotheby's auction.

That sale more than tripled the previous highest auction price for a Rothko - $22.41 mln for "Homage to Matisse" on November 8, 2005 at Christie's. Hey, I don't get it, but frankly I don't have to get it. There has always been a market for art, wine, rare coins and as the number of bidders for these items continues to grow it can only mean good things for the houses that auction them off.

Now the tape is going to remain a bit dicey for the time being as uncertainty still rules the day. Sotheby's is due to report on or about August 2 and I see no need to pile in before that. But Sotheby's should remain on my radar screen as the global wealth story is still very much alive.

In the meantime I am going to go back and check out "White Center" to figure out exactly what it is I am missing.

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No positions in stocks mentioned.

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