With the Labor Day holiday, we had the day off and took a short driving trip to a couple of the California missions nearby that, I hate to admit, native Californians that we are, we’d never seen before. I guess, like a lot of other people, we think ‘culture’ is something the emanates from elsewhere, and couldn’t possibly be in our own back yard.

As well, it occurred to us that the California missions are not as frequently visited generally as they once were, since the notion of a foreign religious zealot coming to proselytize and alter the native traditions of an indigenous people is, in the 21st century, about as far away from anyone’s idea of political correctness as it is possible to get. I won’t even try to discuss how anachronistic this point of view is, other than to say that, from the time of the discovery of the new world until only the last 50 years or so, colonialism thrived. Further, what I can gather about the historical figure of Fra Junipero Serra, the founder of the chain of missions in California, makes him seem about as far away from a self-aggrandizing colonial opportunist as it would be possible to be. His motivation was one of honestly felt religious conviction that lead him, at age 56, begin work that finished only with his death, from snakebite, at age 70.

We visited Mission San Antonio de Padua, founded in 1771, and certainly among the earliest survivals of California’s built environment. Cleverly built, too, using simple, locally produced materials- adobe mud bricks, and beams made from locally felled redwood trees- to produce magnificent, trabeated structures. the mission church would certainly inspire an attitude of devotion, with its dim interior, soaring ceiling, and focus on the decoration of the alter- certainly a wonderful setting for the panoply of religion. Environmental impact? There is none, really, as the building was constructed simply of ample local materials and, once derelict, the structure will decompose naturally and eventually be one with the elements from which it arose.

The artwork within the chapel at San Antonio, although ostensibly what one would expect within a Roman Catholic place of worship, bears, it seems to be, greater examination than it, or any of the other mission churches, have received. One wonders to what extent the iconography contained within the illustrations of the stations of the cross were changed slightly to give them resonance with the native worshippers. Certainly, a number of paintings survive from the founding of the missions, and I would venture to say that it would not have been automatic for these neophytes to achieve an attitude of devotion by looking at precisely the same imagery as would have been considered inspirational by a late 18th century European Spaniard.

We also tried to visit the nearby Mission San Miguel Arcangel, sadly closed due to earthquake damage, the Achilles heal of most masonry structures, suffered in 2003. Still, a run of over 200 years isn’t bad for a simply constructed building. Even so, the damage is being repaired and I would encourage my readers to send a donation for the conservation of this precious building to

Friends of Mission San Miguel
PO Box 69
San Miguel, California    93451

An antiques and fine art dealer from Santa Barbara rang me up yesterday, to discuss our mutual plans for the upcoming Merchandise Mart Antiques Show in Chicago in mid October. This is should be a wonderful event, a terrific venue, with the Mart pulling out all the stops to promote the show.

My dealer friend is actually in Montecito, a small community adjacent to the south side of Santa Barbara and, if you can believe it, even tonier. Montecito’s best known new arrival, Oprah Winfrey, struggles by within her 40,000 square foot home. No, the digits didn’t stick on my keyboard- 40,000 square feet.

We were discussing business, as dealers are wont to do, chatting about traffic through the galleries. Both of us have had the same experience for the month of August. Specifically, gallery traffic is way up over last year, although sales for both of us are up only marginally, with concerns about the US housing market, and its spillover into the world’s financial markets, creating a sense of unease amongst antiques and fine art buyers. Even so, with the amount of interest and gallery traffic we’ve had, I would opine that, when financial markets resume straight and level flight, we will reap the benefit of pent up demand for our material.

When people buy in our business, it is less about real income and more about perception of wealth. As with any first time home buyer, our clients, too, tend to make purchases when the economic mood is upbeat. Some time ago, I read one prediction that, an inadvertent result of the electronic information age, economic cycles would tend to be quicker, and more extreme in their brief tenure. Certainly, as people formerly read so frequently of the impending bursting of a bubble in residential housing prices, sure enough, demand cooled, and, more of a sputtering than a bursting, prices have moderated. Not everywhere, though- don’t expect to find too many distressed properties up for grabs in Montecito. The knock on effect has been felt in world financial markets, as we’ve seen over the last month. Here, of course, there have been some rich pickings, with Hank Greenberg and Warren Buffet making acquisitions in the billions. What do they know that everyone else seems to have forgot? Simply that fear, not fundamentals, have been lately ruling the financial markets. In terms of the underlying residential housing market, fear has, for the moment, suspended demand amongst home buyers, but hasn’t replaced it.

My friend and frequent client, Los Angeles based interior designer Joe Nye, e-mailed yesterday to tell me he had forwarded my last blog entry about Christies premium rates to a number of his clients. Joe has always been a big booster of Chappell & McCullar, which we appreciate. Joe is one of those designers that antiques dealers love. When he’s shopping, he means business, and frequently has his clients in tow. He’s pretty specific about what he’s after and always has a budget. Not from Joe any of this ‘price isn’t an issue’ malarkey. I must say, as often as I’ve heard this from other designers, what it always signals to me is that the designer hasn’t had the guts to have a pricing discussion with their client, and expects me to.

Pricing is always an issue, and making certain to get your money’s worth. With his better heeled clients, I have often seen Joe discussing a range of pieces with them, carefully explaining that quality costs money, and, while the client might think the differences between best quality and run of the mill are pretty subtle, quality will always stand on its own, and declare itself time and again. Purchasing the best quality always represents the best value in the long run.

Interestingly, yesterday I also had an e-mail from another Los Angeles based interior designer, declining interest in a piece we had offered, as he thought it was pricier than what he was after. He cited auction sales prices of a lot less for pieces he considered similar. My experience to date has always been that, when a client, either collector or designer, says they can get the same thing for less somewhere else, either from another dealer or at auction, when I have an opportunity to see the purported ‘same thing’, it never is. Better quality? It never is that, either.

For anybody that will listen to us, Keith McCullar and I always say we treat our inventory as a fungible commodity. We price it according to what the same type of piece of the same quality has sold for, either at a dealer’s show room or at auction. Our pricing is never ‘keystoned’- automatically marked up based on some arbitrary multiple of what our acquisition cost is. Consequently, we price items to sell, and sell within two years. Nearly all of them do.

Price means nothing if what you are offering isn’t accurately described. We are maniacal about that, and nearly obsessive in trying to find exemplary quality. Not always flashy, but always good quality.

None of the above, however, universally describes the business models employed by a number of our fellow dealers or the auction houses. Have you read the disclaimers and rules of trading printed inside the front and back covers of nearly all auction house catalogs? And you still want to buy at auction? Yes, if the auction house makes some egregious error, they claim they’ll make things right for both buyer and seller. And perhaps they will, but not automatically. In fact, for any of the problems I have had over the years- items damaged by the auction house after purchase, items mis-catalogued- the list goes on and on- I have never, and I mean never received any financial redress from any auction house, even when they admitted they were at fault!

Unfortunately, some of our dealer fellas make matters much worse by what they do, and have had the effect of driving buyers to auction houses as a supposed safe harbor. One local San Francisco dealer, in business for a number of years and now retired, did an extensive business in ‘period’ English furniture. How many of his pieces have I seen, in mutual clients’ homes, or offered for sale to us by a client who no longer wanted the piece, and I have never, and I mean never seen one that was accurately described.

So, the question is begged- who do you trust? The auction houses? Perhaps within limits, but don’t assume automatically that you are getting value for money. If the piece is not as represented or is damaged, good luck in getting the auction house to make it right. Accurately described? Possibly, but only possibly.

Antiques dealers? Yes, within limits, but shop around and expect to get what you pay for. If one dealer’s Georgian table is $25,000 and the dealer around the corner is asking $50,000 for something similar, don’t assume the less expensive table represents better value. You might find the less expensive ‘Georgian’ table has significant alterations that make it barely a period piece of furniture at all. The table may in fact be worthless.

So, who do you trust? We’ve just put a links page on our website to answer that questions. To use the old aphorism, birds of a feather tend to flock together. An honest dealer will affiliate with and refer only other honest dealers. The auction houses? Their marketing budgets are large enough- they don’t need referrals from our website.

Christie’s has announced that its buyer’s premium will increase to 25% for the less expensive lots in its sales. This applies to all classes of goods, from contemporary furniture to antiquities. Of course, the premium charged on the hammer price is not all inclusive. In London, for instance, the auction house charges 17.5% value added tax on the premium, quickly bringing the buyer’s premium to an upcharge of around 30% over the hammer price.

Christie’s and Sotheby’s have both made it very clear they wish to focus on the higher end of the auction market, with Sotheby’s in London, for instance, planning on closing their second tier salesroom at Olympia. Christie’s has likewise announced cut backs at its second tier South Kensington salesroom, discontinuing its collectibles sales. With the premium increases, doubtless other types of business will be driven away. With the premium increase, the major auction houses have moved away from their courtship of the private buyer whose business they so aggressively sought just a couple of years ago. How long will Sotheby’s ‘Arcade’ sales and Christie’s ‘Interiors’ sales continue? Not much longer, I bet.

Private buyers will find typical auction purchases to be more expensive than they had been, but has purchasing at auction ever really been a good deal for the occasional purchaser? Not really. Premium rates inclusive of local taxes and credit card fees have always made auction purchases expensive, always contributing at least 20% to the cost of any purchase. What’s more, the purchase is absolute- you buy it, you own it, in ‘as is’ condition. No returns, unless it’s consigned for resale, and the buyer who is dissatisfied with his auction purchase finds he has to pay another 20% plus to the salesroom for the privilege of having them sell it for him- for whatever they think its worth. If the buyer overpaid for the piece originally? Too bad.

It has astonished me that so many occasional collectors and interior designers over the course of the last few years chosen to make purchases at auction. Except for the excitement of raising your paddle, what’s it got them? Purchases that would have cost them exactly the same had they been acquired from a reputable dealer, which dealer would have allowed them to take the piece out on approval to see if it worked, and accepted it back gratis if it didn’t. The same dealer that, probably, would also take back the purchased piece years hence, if the client decided they didn’t want it.

Although the better art and antiques dealers have always offered a level of service the auction houses couldn’t, what’s apparent now is that the auction houses, for the buyer, aren’t even willing to be price competitive. Don’t worry, though- we offer service, and price, with a smile!

The consensus of opinion is that today’s stock market correction was due to continued worries about sub prime mortgages, particularly after Countrywide Financial, the nation’s largest mortgage loan broker, reported earnings significantly less than Wall Street expected, or the company itself had projected. It is important to bear in mind, though, that Countrywide is reporting earnings, not losses. Given that Countrywide’s primary source of revenue is origination fees on mortgage loans, that they are making as much money as they are strikes me as a good thing, and not in any way indicative of wide scale problems in either the mortgage industry or the housing industry generally. Presumably, if Countrywide is still reporting earnings, they are still originating, and remarketing, mortgage loans.

In fact, what people overlook is that so many sub prime mortgages, those ‘no qualifier’ and stated-income loans, were made to home buyers whose large size of loan and income stream makes mortgage loan underwriting difficult. The primary underwriting basis for many of these loans, simple as it sounds, is a significant cash down payment from the buyer, usually at least 30% of the purchase price of the property or  its appraisal value, whichever is more. Consequently, in spite of some contraction of real estate values in some markets, the almost all sub prime mortgages remain very well collateralized. Moreover, much of what we read about how sub prime mortgages are effecting financial markets has to do with hedge funds and derivative investments that are in some way composed of sub prime mortgages. Assuming some kind of Moody’s or Standard and Poor’s down grade to the fund, the par value declines- in spite of the fact that the underlying debt instruments may still be as money good as they ever were!

Further, home builders themselves do not have massive inventories of unsold homes. Home builders, however, have to build and sell homes to make money. Consequently, those companies that expanded in order to meet the unprecedented demand for new housing units over the last 6 years, are naturally showing a large amount of red ink while they contract their overheads to match reduced demand for their product. Did I say that home builders do not have massive inventories of unsold homes? It bears repeating, as the purchasing slowdown happened so quickly it is difficult to imagine that suddenly, all demand for new housing had been met. In fact, what home builders tell me, the pundits who predicted a slowdown for at least a year before the slowdown began late in 2005 began to influence buyers who began to think that, if they waited, housing prices would decline. Did demand slacken? No- what replaced demand amongst buyers was fear of overpaying. At some point in the not too distant future, buyers will cotton on to the fact that houses continue to be a safe investment, and, with pent up consumer demand  and no inventories of new housing, demand will quickly outstrip supply and prices will go through the roof.

‘Safe as houses’ as the old saying goes, certainly once consumer confidence overcomes fear in the financial markets. And sub prime mortgages? Safer than you’d think.