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One of the things we talked about in today’s issue of The Elliott Wave Financial Forecast is the importance of measuring the results of a forecast against the context in which it was made. As far as we know, for instance, no one was paying millions for skull art when EWFF issued the comment above a little over a year ago. In fact, Hirst's mixture of "alive phase" diamonds with a skull is such a canny blending of the transition from a rising to a falling mood that we checked our records to see if he is a subscriber (at least not under his own name). The full quote from July 2006 is available in the Additional References below. For a picture of the skull see the June 4 entry here.

One interesting aspect is the continuation of the “flight from quality,” from Van Gogh at the peak in 1987 to the less well know Gustav Klimt in 2006 and finally to a living artist, Damien Hirst, in 2007. Nothing against Hirst, he’s very avant-garde. But there’s a difference between being a trendsetter and a genius – and when it comes to something as subjective as art it can take generations for this difference to be recognized. This is part of what we were driving at with our discussion of July 2006. Traditionally the very highest prices have gone to established works, i.e. those of long dead artists, because it takes at least the life of the artist to establish that a given piece supersedes the conventions of a given era.

Another factor is what studies call the “death effect,” which is a tendency for the prices of artists works to rise near their deaths. Some say it’s a nostalgia effect while others say it is a rational response to the fixation of supply. In any case, it’s appropriate that artists would only be recognized as the world’s greatest artists, with prices commensurate to those of the world’s greatest masterpieces, at the end of a huge, long advance in social mood. In addition to Hirst, living artists Jasper Johns, Bruce Nauman, Lucian Freud, Robert Rauschenberg, Cy Twombly, Jeff Koons and Gerhard Richter all now earn sums that equate to the great masters for single works.

If he gets the $100 million price for his latest work, Hirst will get the highest price ever for piece of art by a living artist. The irony of cheating the “death effect” with a skull probably isn’t lost on him. But the irony of having to pay part of the total probably is. As the critics suggest, it surely means “finding a buyer was proving problematic.” Hirst’s representatives say the sale will be completed, but, as EWFF has noted, this turn has a light switch quality to it. Don't be surprised to see if sale becomes a victim of the trend change foreshadowed by Hirst’s diamond covered symbol of death.

Of course, there is one problem with forecast offered above. Judging by a clear net gain in the major stock averages since July 2006, it’s certainly fair to say that there’s been no “re-ordering of financial values.” A close look at some unconventional market indicators suggests, however, that the ‘re-ordering” is, in fact, in place. It's been unfolding for much longer than most people realize. For an illustration of this “process,” check out the coverage of the gold/silver ratio in this months issue of The Elliott Wave Financial Forecast. It's on page 6.