is the bubble due to burst?

Despite him showing a total lack of leadership qualities there is a chance that "Red" Ed Milliband will be Prime Minister of the UK after next years' election.
His proposed "Mansion Tax" is apparently helping to cool London house prices for the first time in ages.
I wonder if falling Hose prices effect the collectors car market over here.
I guess it could be supportive by pushing investment out of property and into other asset classes or you could argue that it will be bearish as everybody with money will be a little poorer.
At the momonet I am just hoping it doesn't happen but if it does many things in The UK will change big time.

 

Most of the London house price boom is being fuelled by foreign investment, principally Russian, Chinese and Middle Eastern Money, so the question is will these groups look more at classic cars if London housing becomes less attractive as an investment?

 

I can confirm that many tycoons in Hong Kong have already purchased top of the range classic Ferrari's using US companies and are housing them in the US. I even heard that at least one 250 GTO is owned by one of the realestate families in Hong Kong.

 

For sure! Cheaper hoses makes that cars cheaper to run

 

This idea of "just print the stuff" and "no real value" is completely non sense and gets repeated over and over again.

That "stuff" has an extremely important use: namely, the other thing a country does: impose TAXES.

Ultimately that is the "real" reserve of any country, if you look at the gold holdings (for the gold bugs out there), say of Switzerland. Switzerland has just above 1000 tons of gold, as today's value, 1 tn = 30 M Euros, so around 30B.

Now compare that with the GDP, witch is at around 600B Euros, you can clearly see that the "tax revenue" (say between 30 and 40% of total GDP) makes the gold holdings look laughable - so in the end money has a very important intrinsic value which is to pay tax!

 

Sorry but that makes even less sense. A tax revenue can be 80 percent but if the purchase power is less then it still means nothing. Sorry but many good economists agree with me. Removing the link between a tangible product just creates a imaginary product that is short lived.

 

Can you please tell me the "tangible" value of gold? (industrial use is a small fraction)

 

I just think it comes down to what people ascribe value to. So if we could go back to the times when people bartered and gold probably was the only effective widely accepted currency, handing someone some paper with some guy's face on it probably wouldn't get you very far. Now we agree paper money has value because of what it represents. All money is simply work in another form.

So in the case of the govt collecting taxes, in aggregate its collecting a % of our hard work, which it can then turn around and use for a variety of purposes- of which we can debate if they are useful or not.

Gold can be a store of wealth too but its real claim to fame is either that it has an industrial use or the fact that its pretty rare.

In the end of the day, I think it simply comes down to what we want to ascribe value to as a medium to store the result of our work.

 

That's an awfully good, concise shorthand for the primary dynamic underlying this thread. The article linked in post #647 describes the elite world of contemporary art collectors. Ultimately there is a very small cohort of very wealthy painting aficionados who have chosen to ascribe astronomical $ value to a painting comprised of several black words on a white canvas. The ability of that painting to serve as a 'medium of storage' would evaporate with the sudden deaths of few hundred people on the planet, maybe a few tens.

Ultimately all currency is 'faith based,' and the unique value of gold is in the sheer number of people enduring over many centuries willing to 'ascribe value' to it.

 

ok...so when does the bubble actually burst? I just want to see what my plans are on that day.

better yet, let's just kill the thread so the bubble will not burst and I will not need to change me plans.

 

Yes very much so and not just that particular piece. This compliments the article you posted earlier. Billionaires and Art - The Unz Review

 

Here is an interesting article:

Oil, gold crash spell end of commodity 'Supercycle' - Yahoo Finance

 

Like the previous article says, the price of "stuff" may be coming down.

 

actually its not as text book as you might want it to be- rates in the US will stay low for a very long time - the fed cant afford to undo everything its done. As commodity prices go down, the cost of americans gassing up their cars goes down - you essentially get a huge tax break. Hard assets will move much higher. As the banks start lending to larger demographic you will see the low end of real estate firm up. Those people who have money already own stocks AND as much cash as they had during the crisis. What will they continue to buy? real estate, cars, art, hedge funds, private equity.....so "stuff" might get cheaper - but not high end hard assets.

 

well said.

 

this is accurate.

 

The last few posters are correct. So how does this end/ how do rates eventually rise? I can't imagine we will have low rates truly forever.

 

While all of this is utter speculation, rather than just speculate in over broad generic terms, how about some real World guidance ? Put your $$$ where your mouth is. In practical terms where are prices going ? Rather than look at %'s how about take a typical average "classic" Enzo era F car that has doubled in price over the last 5-6 years. Say a Daytona Coupe. If the average price 5-6 years ago was $350K-$500K and now prices are $700K-$1M+ (depending on condition). So what say you ? Will prices "burst" down to where they were 5-6 years ago ? Something else ? Can look at a more modern "classic" like an F40 (with similar production #'s) and ask the same thing; to wit 5-6 years ago an F40 was $450K-$600K and now prices are $900K-$1.2M. Will prices "burst" down to 08-09 levels on these relatively common (but highly sought after) cars ? What is a "burst" with respect to prices ? If prices stabilize at current levels for another 7-10 years (or until the next bull market) is that really a "burst" F car market ? Just wondering out loud as I am unfortunately one of the guys who got shut out of buying one of these cars as I was justa few years to late. Any more speculative thoughts ?

 

f40s will be 5m or higher in the next 20 years...stocks will go up and then lose 40 percent again and again and again....the next 2 generations will not make any real money by investing in bonds as the 2 most recent generations did....the US will continue to be the tallest midget in the room...emerging markets will always be high beta and never rule the world....Europe will continue to be stuck....global population is way too high and we need a huge purge for things to remain sustainable....the spread between the haves and have nots will continue to get bigger....the world will probably end because some crazy person pushed a button he shld have never had access to...there is probably a God. what else wld u like to know?

 

interest rates will stay low but interest rate vol will increase and rip peoples faces off like they've never seen before - rates can stay low way longer than any of us expect - I introduce you to a little place known as japan...forever is a tricky word - it can mean 100 years or 20 years....

 

and a 3200 mile f40 just traded for 1.9m after the seller unsolicited turned down 1.6 over and over

 

I'd think that $1.9M is an outlier and not the "new" average sell price of an F40. I'd think the average F40 with modest "driver" mileage (ie. 1K per year or so) sells for much much less. Didn't the ex-Rod Stewart F40 sell for under $1M in the past 12 months or so ? Again, not saying a very special example isn't worth $1.9M, but that there are more examples with more miles (and driver not concours condition) that will just trade for substantially less. The point is when and if there is a significant downturn (burst bubble) how low will the average example be reduced (if at all). I'd think that the best examples of the breed may never be reduced one penny even in a downturn as the owners just won't sell if they don't need to. So will the current value $1M US spec F40 driver level car with 25K-30+K miles on her take a beatdown if the market bursts ? Thats the query.

 

if markets fail, depression style like 2008 f40 can go back to 400k. if markets fall because of fundamentals f40s cld go down as much as the stock market. cple wild cards: the fed has caused all assets to appreciate. this is different that tulips, nasdaq 1999, real estate 2008. stocks, treasuries - both bubbles. it's not like the world stayed the same and only cars have appreciated. prior to 2008 people sold sold stock and bought bonds as their primary risk management tool. that no longer works and it won't for years and years. so I don't think it's fair to call cars a bubble in the historical sense of the word. I'm also of the opinion that the owner's of the cars post 2008 are stronger holders than the ones before. here's the kicker, wealthy people have 20 to 30 percent of their wealth in cash or cash like instruments. so is a guy who is worth 50M going to sell his f40 to raise cash? unlikely. one final kicker: there are only 3500 stocks in the wilshire 5000 and 50 percent of global stocks were in bear market territory going into october. so even there you can see its unfair to say stocks are a bubble.

in sum, if we go depression markets failing style scenario, everything will go down and a lot of it will be mark to market.

 

btw, goes without saying but what I just said and a quarter will get you a phone call if you can find a pay phone. I don't have a crystal ball and no one has a monopoly on intelligence. I'm one of the guys who bought a 3500 mile mint f40 in 2009 for 425k and I've said no to offers along the way from 600 to 1.5m. if they go back to 425k I will not have the slightest remorse. what I've described is what I think this board usually lacks "put your money where your mouth is".

and along the way I get to have fun and meet some nice people. I assure all of us in our last breaths we won't be thinking about oh man I really shld have sold that car earlier!

 

Right- but one of your last breaths might be " I wish I bought that car"...

As to the F40s, who knows but I hear 1.5m or so is right about where really nice collector ones trade. For any collectible there are the collectors and the drivers. You really can't just average the two. You can average collectors and average drivers.... I think average drivers are more like 950.

I also don't see this market "bursting" because I don't think its the traditional bubble, but I do think it can see a correction of around 20%.