KEY POINTS:
First, some facts. Every February Sotheby's, Christie's and, to a lesser extent, Phillips, hold art sales. New York is the centre of the art world and traditionally the London sales are where the houses sell fewer works of inferior quality to smaller numbers of people.
But no more.
Last week, London broke all records, selling more paintings at higher prices to more people than ever before.
It made headlines all week. A portrait of Pope Innocent X by Francis Bacon sold for £14 million ($40 million), almost double the price of any previous Bacon painting sold at auction.
A landscape by Peter Doig inspired by the film Friday the 13th went for £5.7 million, making it the most expensive work ever sold by a European living artist and very nearly the most expensive by any living artist. A photographic diptych of an American supermarket by Andreas Gursky became, at £1.7 million, the world's most expensive photograph.
Forty-three artists sold at higher prices than they'd ever sold before. In all, more than £360 million (just over $1 billion) was spent on art in a single week.
It's another world, of course. And these art-collecting-dealing-agenting-owning folk are not like most regular folk. But I can't believe none of them remembers 1980s, when the art market went crazy, crazy, crazy, then crashed and burned.
Still, it's fun to watch. Particularly as a rank outsider. At the first auction I go to, the Impressionism and Modern sale at Sotheby's on Monday, the room is crammed. There are seats for around 350 buyers, and another couple of hundred are standing at the back.
Opposite, ranks of Sotheby's staff man the telephones. There is a lot of floppy hair around and slightly overbred chins; it's what a call centre would be like if it was manned by Etonians, which, of course, is exactly what it is.
I lose my cool very early on. Lot 3, a sculpture by Wilhelm Lehmbruck, starts at £150,000, sails past the lower estimate of £250,000, past the higher estimate of £350,000 and keeps on going. When it reaches a million, I gasp. As the week progresses, I see lot after lot go for twice, three times, four times the estimate.
But I'd met the owner of the Lehmbruck, a nervous Canadian lecturer whose family had owned it in the 1930s. They had a house in the Sudetenland until the Gestapo occupied it and the sculpture vanished. No one knew where it was until last year when someone saw it on display in the Moravian Museum in Brno and the family reclaimed it through the courts.
"What I wonder," he told me, "is, how much of the other stuff here is looted?" It's a fair question. And how much is authentic is another good question.
Art agent Hector Paterson suggests the answer is "not as much as you might think". "Provenance is a grey, grey area."
I watch lot after lot but only rarely manage to catch sight of a bidder. There's a camouflage backdrop of pinstripes and expensively coiffured blond hair against which I can't see a thing. I have to rely on a running commentary from people around me, who can spot a slight twitch from a couple of hundred metres, and when a painting by Chaim Soutine goes up and up and up, away past its guide price of £3.55 million, it's like watching imaginary tennis as they crane left, crane right, crane left again.
The hammer comes down at £7.8 million and there's a collective sigh of relief. Even for a spectator, it's grippingly tense - art as adrenaline sport.
And it's then that I start having my 80s flashbacks, although this process is aided by a chat to Helena Newman, a senior director at Sotheby's. The evening, she says, had surpassed anything she saw back then.
"I joined the department in 1989 when it was the absolute peak. It was incredible, and then about nine months later it started to go down - it was something to do with Japanese interest rates - and from May to June, the market tumbled.
"This is a peak beyond anything we've ever seen. There isn't any sense that it's slowing down. There's an enormous amount of wealth around - we have Russians, South-East Asians, Middle Easterners buying here."
Two nights later, the head of Sotheby's contemporary department, Cheyenne Westphal, puts it even more plainly: "People are not just making money these days. They're making fortunes of a type that the world hasn't seen before."
But still, you do have to wonder what's going on when you watch a Peter Doig painting sell for £5.7 million.
Ivor Braka, a collector and dealer who I happen to be standing next to, shakes his head when the bidding passes £3 million on its way to £4 million.
"That," he says, "makes a mockery of everything. What's a Turner worth then?"
It's the kind of returns that make the property market look sober and well-regulated. You can buy an Auerbach today and potentially make a million pounds on it by June. Who can resist those sorts of returns? Not the City boys loitering at the back with their Sloaney girlfriends. Or the art investment funds.
It's a different crowd at the contemporary sale. It's younger, with fewer pinstripes, and a smattering of funny haircuts and difficult glasses clinging to the outer fringes. "All contemporary art is very fashionable at the moment, and the very most fashionable of all is Chinese contemporary," says Georgina Adam of the Art Newspaper.
"Everybody's buying on the assumption that the Chinese will have so much money and they'll want to buy back their own art. It's a very speculative, dangerous market in my opinion."
"Speculative" is not a word that Sotheby's or Christie's want to hear. They issue press releases calling their clients "informed, considered private buyers". It's a boom, they say, but not a bubble.
On the last evening sale of the week I stand behind a man who keeps saying "Suckers!" under his breath.
It turns out he's William Cash, the editor of Spear's Wealth Management Survey.
"It's clearly a bubble. Look! All the dealers are leaving. It's identical to the 80s, except there's a new generation of suckers. And the new generation of suckers are the Russians. They're interior decorators, not collectors."
The fact is that paintings are now worth more than they were at the height of the 80s boom, so the collectors who hung on to them have done well.
It's the ones who had to cut and run who suffered. David Kusin of Kusin & Company, a Dallas economic research company that analyses the art market, says "the present mania makes the 80s look like a conservative garden party - and it's clearly not sustainable".
But people have been saying that about the property market for yonks. While there's money to be made, no one cares.
Silly Money
Dec 5, 1766 - first sale in Pall Mall, London, by James Christie, founder of Christie's.
US$104,168,000 - Record sale at a fine art auction, for Picasso's Garcon a la Pipe, May 2004, Sotheby's, New York.
£186,645,960 - Value of sales last week at Sotheby's, London.
40 - Record number of days for an auction sale (for Duke of Buckingham's collection at Stowe House, by Christie's in 1848).
£2.51 billion - Total arts sales by Christie's last year. 85Number of works sold for more than £1 million last week at Sotheby's and Christie's, London.
£1.7m - Record auction price for a photograph (Andreas Gursky's 99 Cents II diptych, sold last week at Sotheby's, London).
£70.4m - Total revenue from Christie's post-war and contemporary art sale last Wednesday. This broke the record set by Sotheby's 24 hours earlier for a contemporary art auction in Europe
- OBSERVER
