In 2004, art market watchers gasped when a classic Picasso painting, "Boy with a Pipe," soared to a record price of $102 million, becoming the most expensive painting ever sold at auction.

But just a few years later, $100 million works of art aren't all that unusual. Recently, collectors flush with cash have ponied up between $130 million and $140 million for works by Gustav Klimt, Jackson Pollock and Wilhelm de Kooning.

Even contemporary artists -- who don't normally command stratospheric prices, mostly because their work hasn't been tested over time -- are edging into unknown territory. A painting titled "White Canoe" by Scottish-born Peter Doig, 48, fetched $10 million this year at a Sotheby's auction. The previous high for a Doig was $2.1 million, earlier in the year. See an auction

So as the art market continues its bullish run, many collectors are wondering how prices got so insane -- and how high they can go. Slide show: 10 most expensive paintings

Great paintings by celebrated artists have always drawn high prices -- frequently from experienced collectors looking for that one special piece to complete a collection. The recent run-up, however, has been driven not so much by the established collectors as by globalization of the business world and the torrents of cash that have been raining down on Wall Street.

There's simply a vast amount of newly created wealth out there. And a lot of it is in the hands of hedge-fund honchos like Steve Cohen, who reportedly bought de Kooning's "Woman III" for $137.5 million. Also important are emerging-market billionaires from Moscow, Mumbai and Beijing. Wherever they are, the ultra-rich are spending -- on homes, cars, yachts, luxury goods -- and now, on trophy art to match.

"A billionaire thinks on a different level," says Jack Tilton, a New York gallerist. "If he thinks a painting is a cultural icon, $100 million is not a bad price."

Tilton points out that fine art doesn't just decorate the walls. It suggests cultural sophistication. Particularly for newly minted billionaires, he says, a signature painting is a status buy: "A big flat-screen television doesn't quite do it."

With so many new collectors clamoring for the best pieces, there's a scarcity of prized work by artists who have already been crowned as masters (think Pablo Picasso or Mark Rothko). So, when something special does comes on the market -- like the gold-flecked Klimt that sold last year to cosmetics magnate Ronald Lauder -- collectors with deep pockets start circling.

The Klimt in question -- a 1907 painting titled "Adele Bloch-Bauer I" -- had been the focus of a lengthy

legal battle between the Austrian government and a niece of the original owner of the work, who claimed the painting was seized by the Nazis during World War II.

Lauder wound up paying $135 million.

But it's not just the high end that's booming. Collectors have also been jumping into the market at lower price points. Abigail Asher, of New York art consultants Guggenheim Asher Associates, says the soaring prices have convinced a lot of people that "art is an investment vehicle like any other." Would you buy art?

Another factor: There are simply more places to see and buy art than ever before, from the galleries to art fairs. And with relatively low barriers to entry, the action has been humming.

One manifestation of the art market's broad appeal: increased visibility on the Internet. One site, run by British mega-collector Charles Saatchi, lets artists show and sell their work for free; the site has attracted more than 65,000 artists and reportedly gets up to 900,000 unique visitors a month.

Meanwhile, high-profile art fairs have taken root in New York, London, Shanghai and other big cities. Trendy gallery districts are proliferating. Public auctions have become dramatic spectacles frequented by mysterious anonymous bidders -- a Russian industrialist, perhaps, or a Middle Eastern sheikh -- and are receiving widespread media attention.

"That has all trickled down" to popularize art and drive up prices, Asher says: "It has had a spiraling effect."

For those already in the game, the influx of new money has prompted a rethinking of strategy. Craig Robins, a wealthy Miami real-estate developer and major collector -- with more than 1,000 works -- says the buoyant market has "slowed down" his collecting. He's still buying, but instead of splurging on overhyped artists, Robins advises, "it is a time to be much more careful, cautious and selective." See Robins' collection

Some observers may prefer to wait for the art market to lose steam. That has happened before, when the Japanese economy foundered in the 1980s and again when the dot-com boom went bust. Now many experts are again suggesting that the art market is just too frothy and that an adjustment is overdue.

Tilton suspects that the decline in home prices and the subprime-mortgage fallout on Wall Street may signal the end of "exuberant liquidity" in the art market as well. He suggests that "there will be a settling down" after years of frenzied buying and selling and extreme price rises. Chart: Should you buy stocks . . . or art?

"In the past, if Saatchi paid a certain amount for an artist, then boom-boom-boom, everybody paid that amount," Tilton says about the influence of the British collector. "It might not be the same anymore."

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Published Jan. 18, 2008