is the bubble due to burst?

Since tulip mania has been mentioned here I thought some of you may like to read about this from the original source.

The fascinating book, “Extraordinary Popular Delusions and the Madness of Crowds”, was written by the Scottish journalist Charles Mackay in 1841. It is still highly regarded by scholars today and is a mesmerizing tale of human behavior worth reading.

Extraordinary Popular Delusions and the Madness of Crowds
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I would argue that this time it is a little bit different. Since the GFC the world has been experiencing significant asset inflation. Driven by interest rates that are almost zero and a fear of the fiat currencies will collapse. Vintage cars are like all other exotic asset classes they represent a store of wealth Take a look at the following
The historic auto group int TOP index returned 21% pa annualized over 3 years
The Stanley gibbons rare coil index returned 13.2 % pa annualized over 3 years
Paintings by artist M Duchamp artwork has returned 98% pa annualized over 3 years
The lean hogs index has returned 11.5% pa annualized over 3 years

Conclusion. - all these alternative investments have done well. Any correction if it comes will be linked to rising interest rates and for the short to medium term there is little chance of that.

 

Oh, this thread is still existing? And, we are all waiting for next weeks Pebble Beach auctions. For me, the best and rare Cars are still growing...

 

100% correct.....

 

Huge respect for Henry's business acumen and if he is selling then 'Investors' should take note........From the photos I am very happy he has decided to retain his 1966 275 GTB...

 

The thing is I really don't think that Henry is doing this because he senses the peak. Maybe he wants or needs some cash for something he is doing. After all he is selling some very rare metal, which I don't care what anyone says, even with a correction, these will never, and I mean never, really drop maybe more than 10%-15% at most There is more than enough liquidity and interest in the world that there will always be more than enough ready and willing buyers to buy a Daytona Spider, a Bentley Blower, a low mileage F40 and F50, Muira. Its these types of cars that really will not suffer much in any sort of correction. Yes maybe these suffered last time, however history does not repeat itself in exactly the same manner , and so although I believe there will be a correction I believe there is also a greater enthusiast collector base these days who will be able to support and hold the prices fairly steadily on such cars. These are the Picassos, Kandinsky's and Warhols of the car world. Any of you seen a bargain basement Picasso in the last 20 years??
The harder hit ones will be the garden variety large volume produced cars like 70's Porsches, some 60's Ferraris, etc which have risen hugely and over a short period of time.

 

The immediate cause of the asset bubble may be slightly different than the last time, but when it realigns the results will be the same.

And, saying that "paintings by Marcel Duchamp" have had a particular return over the past 3 years is laughable. Each painting by Duchamp is very different from the next, and near as I can tell that figure you have cited is based on one particular work that sold in 2011 and was then resold for around twice the price. Let me assure you that, otherwise, this particular market is essentially dead. I despise the practice of describing the sales results for such items as though they were financial instruments with an "index." It simply doesn't work that way, and you can be sure that had you bought something by Duchamp 3 years ago it most certainly wouldn't be worth twice the value today. It is precisely when we begin to see this type of superficial analysis of luxury asset markets that we should know a collapse is imminent, not so unlike getting stock tips from your cabdriver!

Michael

 

In answer to your question: Yes, I saw bargain basement Picassos in 2009, when everything was on sale. When a correction occurs, everything suffers.

Michael

 

Can I ask what you mean by bargain basement Picasso's? I'd like to know which Picasso paintings were bargain basement in 2009???
And I presume you are talking about actual Picasso paintings because that is what I am talking about.

 

I am not an expert in art but I don't agree with you. None of those cars (except perhaps the Bentley Blower) are picassos of the car world. Ferrari 250 SWB. Aston Martin DB4 Zagato.
Ferrari 250 Cal Spyder LWB or SWB. A 250 TR Pontoon Fender. A 250 S1 Cabriolet. Perhaps a 300SL Gullwing (although they made too many). A Miura but only an SV version maybe. This maybe would qualify. I would even argue a 275 GTB (even though I own one and love it) would not make it in that league.

But F40? F50? A Daytona Spyder? A Miura (besides an SV)? No. This is standard stuff. Your insulting Picasso and Warhol (even though Warhol was a printing factory in the end).

 

Picasso painted over 50,000 pieces of art in his lifetime. Yet there is pretty much always a buyer for his works.
The same applies to the examples I mentioned.

 

No sir. He produced 50'000 works. Not paintings. Most of it is garbage though. Alot of pots, porcelain and other drawings that are not valuable nor in demand. When you talk about Picasso and Warhol like you did we are talking about the high end pieces that are produced in few pieces and are sought after.

I think your analogy is not correct and can be misunderstood the way you have phrased it.
Anyway your entitled to your opinion and I respect that. But I don't agree with you.

 

Of course everyone is entitled to their opinion. However common sense would dictate that as they only produced 122 Daytona Spyders this very low production number guarantees that there will very likely be 122 people somewhere in the world at any given time with the appropriate means and desire to own one and thus will. As to the F50 and any one of other so called "Ferrari supercars" the same applies. These are the respective blue chip art of the classic car world in the same way that "blue chip artists" paintings are. Yes values are different to such art pieces and I'm not suggesting the absolute values are comparative, the analogy is valid. I'm not saying also these cars are the only ones however these too are included. You may not want to agree with this, however this is fact by general consensus...

 

I was repeatedly offered Picasso (and Miro and Calder) works privately between October 2008 and late 2009 for something around half their peak 2007 values by motivated sellers who needed liquidity. I won't post photos or specific descriptions of the actual works in question out of respect for the sellers, buyers (and my colleagues, who i think would not appreciate such disclosure). But trust me, it happened, in a big way.

Michael

 

One auction house sold over US$7,000,000,000 during 2013 and sold $750,000,000 of contemporary art in one evening alone earlier this year.

If classic cars are to be truly percieved as a collectable in the same vein then present day prices and the quantum of sales is inconsequential. (300/400m at pebble between 5 auctions?)

There will be periods of ups and downs but long term classic cars have only just begun to get the attention they deserve.

They expect the 1st billion dollar painting in the next 5 years, why not a $250m GTO?

Many are complaining that new buyers are buying and that they don't really understand the cars they are buying but it is just the same in the art market.... all collectors need to begin somewhere.

Christies attributed the growth in art market to an "incendiary combination" of new buyers—in 2013, nearly one in every three was a first-time customer—

I see the classic car market just beginning its next phase of growth.

 

The Picasso "brand premium" is that a senseless scribble by Picasso is worth "X" times what it would be worth if it was created by a lesser known artist (where X is an very large number).

Ferrari had never achieved that premium IMO in the broader collector market, as witnessed by American muscle cars described as "1 of only 8,000..." selling on Barrett Jackson until recently for more than Ferraris that were produced in the 10's or hundreds. If the broader market (beyond car enthusiasts) has now caught on and elevated the Ferrari brand, then the market run-up may continue for a while even with increased cars being available from flipping.

If my math is correct on Carbon's serial number list, Ferrari produced fewer than 7,000 cars in total before 1970, so there is a limited supply of cars in total even though there are multiples of each model. As elevated as the Ferrari name is among car and non-car people, it could be argued that the brand was under-recognized by the broader collector market for years.

 

Maybe 'This Time Is Different' by Rogoff and Reinhart would be an additional useful title to digest

 

I have to presume you are referring to other works rather than paintings, but if indeed you were offered Picasso paintings for half price and you didn't buy these then you have to count yourself as having missed the deals of the century as a number of Picasso paintings have since brought some record prices from 2010 onwards.........

 

Paintings, works on paper and sculptures, yes. I am in the art trade and regularly see all of the above. And I didn't buy them because I didn't have the liquidity and conviction at the time (just as I'm sure you didn't buy that 250 SWB for $4,000,000 as you could have around that time). Not all Picasso paintings have brought record prices since 2010, either. You need to stop believing the sensationalism and fluff you read in the mass media about such things. The great majority of works by these blue-chip artists, while desirable, have continued to sell at modest increases for the past many years.

Michael

 

Fast forward nearly two years and the bubble has not burst ... but gotten bigger.
Does that mean things will escalate or completely deflate?

When the vintage Porsche market skyrockets and even 512 TRs soar (pushing $175k, really?)
then there something is way out of balance...

 

And a year later this would be priced at what?

 

Rare and desirable cars are up. Way up. It's the demand driving this. Even the TR is relatively rare versus other collector cars. When not much is left to buy the TR at $175k looks pretty good so prices will move up. A friend sold his LWB California for $3.5MM 3 yrs ago. It's a $15mm car today. Bubble?

Geno

 

I understand your point.

However, just for the record JH's ex-1959 250 GT Spider California LWB #1307 GT open headlight car with drum brakes and early-body details, is currently worth circa-$7-8 million in today's landscape, not $15 million!

 

So your point is that it only doubled in just two years?

 

There has been no run-up on this "bard find" model (Vintage Ideal Ferrari Model Car Junkyard Find | eBay), so perhaps the market has come to its senses