is the bubble due to burst?

Easy: Tastes change. Not every collectible sector goes up forever. At some point a thin market becomes too thin too sustain and values plateau or decline.

Yes, the whole world is in a cycle where the rewards for being the best* are increasing far faster than any of the rest. This shows in earnings, commissions, salaries, equities, real estate and collectibles. If this doesn't change many things will change.

*don't care to argue what the best is; the people who make the market have decided what they value as the best. In 1900 the rich of the US wanted an Adirondack Great Camp; now there are still many wealthy in NYC but a Great Camp is nowhere near as popular. Tastes changed.

 

There are many pockets of bubbles. And the equity market has been in a bull phase for a while now. It came off a severe trough. During the trough period, many in the market (and media) focused on the potential that there would be no real recovery in stock prices for x, y, and z reasons. Bunch of other things that market participants speculated on (such as FX, r rates, housing) were also based on that near-term trend and "what is happening today" logic.

We virtually always see a reversion to mean on price patterns / valuations over time. I don't see the collector car market bubble popping with everything intact. What I do see are global rates correcting higher from their near-all-time lows, and knock on effects on stock prices, certain housing markets, and certain asset classes.

The two very clear bubbles (outside regional real estate markets) are cars and technology companies / VC. I'll just point to Mark Cuban as an advocate of the VC bubble, rather than explain my own logic there. For cars, I'll point to the rampant speculation and the behavior of market participants as easy evidence of the bubble existing here, as well as the rate of price increase.

The bubble just indicates the magnitude of the decline when the market corrects. During the dot come bubble (not "boom") in late 90s/early noughts, the market correction was heavily concentrated in technology. The overall market declined, yes, but it was a massive destruction of non-existing value in technology sector and adjacencies that bore the brunt.

I would anticipate something similar here. I don't think we're in for another crisis, in part because the participants in this bubble are concentrated more in areas that can weather a big hit to value (VC fund investors have $$$, subprime borrowers by definition do not).

I personally benefit far more from a continued boom market than any bust (of any magnitude) but that doesn't change my long-view that market cycles are real, market cycles always happen (regardless of reasoning of why they wont "today") and better to have eyes wide open than shut.

 

I have a very simple question for you; do my posts come off as "spouting off"?

I gave very full disclosure a few times and have no hidden agenda. I never claim to be some billionaire investor, and I admit to not owning a single Ferrari. Would I like to buy an F40 for $500k? Absolutely. Do I anticipate it returning to that price point? Who knows; maybe it corrects to $600 or $700k and maybe, because it is so iconic, it hardly corrects at all.

I do know that the vast, vast majority of my personal wealth is tied up in real estate, in a bubble market (as I see it). I'm much better off with a boom continuing, but that just won't happen.

I think emotion clouds people's judgment, or people start to build in analytical bias. I've seen it in the past, and it will never go away. The thread topic on whether the bubble will burst... needs those who share divergent viewpoints. The market is a reflection of those divergent viewpoints too.

I can say that, overall, I hold no market bias here. My personal income and assets are much better off with an up market. I do take steps and make decisions, based on my view that we are at an overall market peak, particularly in a few asset classes. I have no insights into these other than what I'm saying on here, and my own applied logic.

I think this is a healthy debate, but let's keep strong emotions or pleas for people to shut up, out of this... it actually does more to suggest those who are suggesting prices are out of whack, are correct, since in the typical bubble this is the kind of behavior we'd expect to see...

 

Not now but at some point in the near future I think we will have driverless cars. I think it is not beyond the realms of possibility that some-time-after the majority of cars are driverless (or have this as an option) and it becomes obvious that all passengers are safer and all journeys more efficient if all cars are driverless (cars car communicate with each other at near light speed, congestion can be eased dramatically - cars with drivers are involved in almost, if not every impact). Obviously banning driver cars, wouldn't be popular with a car loving minority so it would be put to a vote, but the majority, who just want to get where they are going quickly and safely, win and historic cars are banned other than for special events.

Obviously this isn't going to happen in the next decade (possibly even 2 decades) but people would only need to get a sense that this could be a possibility and values and interest in old cars may be impacted.

 

Aside from all of our opinions, can we just look QUIETLY at the graphs shown on the price increase of these vintage cars? I know most have us looked at them at this point. Look at the astonishing rate of growth over the short period of time. Do those graphs look indicative of natural and sustainable growth? It looks like a penny stock on steroids for god's sake.

I guess the best way to sum it up is this. We care about what these cars deliver and are passionate about them. THE MARKET DOES NOT. All the market cares about is people showing up with the money to pay and averaging the dollar cost of what is paid. It doesn't have a brain, and it doesn't follow trends. It just holds a mirror up to what is taking place, leaving it up to us to decipher what is going on. Right now, the mirror is showing a DISTORTED picture due to over-speculation. It doesn't take a genius to see. If the values were here to stay, then why is the uptrend THIS VIOLENT AND RAPID? Can anyone answer that one? I'm not going to let my emotions/passion cloud my logic.

 

What about when the network gets hacked for these self-driving cars and the hacker/s create havoc? This is something that I have thought about regarding this technology which is going to be a major problem from a safety perspective. I do not see the solution to this as being easy. If the government, with all of its resources, cannot prevent hacking into their own secure networks, self-communicating cars are going to be a major opportunity for those intending to create chaos and disaster.

 

Anyone know of any other markets with these type of gains? Please share if you do.
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sp500, biotech, high div stocks, bonds and cash ARENT in bubbles but cars and nasdaq are? and

 

sp500 over the same period and bonds for the past 30 yrs look exactly like the first graph. tulips we can leave aside since the slope of that graph looks nothing like the car graph

housing in LDN, Miami, nyc, hamptons, LA also look like that

 

https://www.hagerty.com/valuationtools/HVT/VehicleSearch/Report?vbe=12118

How about this one?

 

sp500 is up 3 fold no?

 

That chart ie interesting and will likely go sideways for many years - car was undervalued and caught up IMHO.

Ferrari's are so rare, they are becoming cars for the wealthy - just as was intended. It's a bummer for the average enthusiast but I think it's not going to change.

 

And at that point driven cars become horses. Still legal but a pain. Slowly most people forget and never care to learn the skills.

 

In the past 1 year alone??

 

We all know what the SP 500 has done over the last year.

The Flat 12 F cars had been so grossly undervalued for so long they shot up to real value - it was dramatic and interesting to see.

 

no. sp500 went down 37% in 2008 and the 512m pretty much held value.

anyways im opting out of all the value threads going forward....good luck to everyone

 

512M is a dealer hype driven bubble, easy enough to do with only 75 cars and worldwide prod low. Question si whetehr a daytona is priced right at 700K?probably, wjhereas Dinos seem overpriced.

 

I think there are really 2 separate categories of cars. Older more established cars in terms of market prices like the vintage cars which have peaked about 1 year ago and been going sideways to down small since which is very normal very healthy. These cars tend to sell often at public auction and have many data points that can be verified. I think this market is healthy, we likely won't see new highs of any substance for 5 years or more but still a very healthy market considering where we have come from. I think most cars in this category have an established range and will stay in them. Dinos 300-600, daytonas 650-1mln, 300l cars 850k-1.6mln... etc etc. The spread and ranges amongst these cars itself makes these debates hard to have. The spread between bid/ask and between great quality to not great quality can be 50% amongst the same model. Therefore these discussion are very tricky to articulate because 1 guy sees one dino sell for 600k then the other guy sees one for 350 k and they think the market went down or up or vice versa when it is really a difference of quality, history, documentation etc on a particular car. I think all sellers were spoiled past 2 years where buyers were snapping up everything regardless of quality but now I think we have clearly fallen into certain ranges on particular models depending on the quality , history and documentation of that said car. and this is exactly how it should be.
Category 2 is the semi modern stuff like 512M, 550B, super america, air cooled p cars from the 80's-90's, Carrera gt etc etc. All this stuff is totally different. Very few concrete data points on real sales prices. These cars tend to go to auction way less. Or the go to action and we get 1 crazy event like a 300k car that sells for 600k then every seller think s that is the new "official market". More often than not , these cars go from dealer to dealer to dealer with the asking prices going up 50-100k each time. But very rarely do we really see any factual sales. (a dealer telling you he just sold a CGT for $1mln or a super america for 500k is not factual !) I think there is quite a bit of smoke and mirrors amongst this semi modern market and you need to be very careful. This market is really game of 3 card monte right now, and while I don't want to use the term bubble, I do think this is a market place where one is more like to take a big loss if they care not careful and go spend 600k on a 512m or something and need to sell it over the next 12 months to buy something else. If you notice 70+% of the cars in this category are not owned by dealers many are consignment. There is a very clear reason for this, these dealers are not willing to pay anyplace near asking prices for them. I don't think many dealer are willing to write a check for $500k for a 512 and then ask 550k, but at the same time they know they will piss off the customer if they offer $300k and ask $550k so you are seeing way more consignment deals on all this semi modern stuff. Again, I hate to use the term bubble, but if there is anything even close to a short term type of bubble its in this semi modern stuff. I think the vintage market is way more stable, even though I don't expect any gains for a while more just sideways consolidation of the gains we have had for the past 5 + years. If I am correct regarding the vintage market not only is this healthy but this is wonderful news for all us enthusiasts as we can be patient and hunt for the exact right cars we want , in the best condition, documentation etc and find what we want. No longer will you just have to go buy the first xyz model you find out of fear that by the time you find a good one the market will be 30% higher. Again sideways to down for a while is healthy considering where we have come from, and I am fairly confident not only is this the future for the next year + it has already been going on for 12+ months.

 

Nice post NYC. The 1973 RS has also leveled off:
https://www.hagerty.com/valuationtools/HVT/VehicleSearch/Report?vbe=104029

As has the 300SL:
https://www.hagerty.com/valuationtools/HVT/VehicleSearch/Report?vbe=24909

And the Lusso:
https://www.hagerty.com/valuationtools/HVT/VehicleSearch/Report?vbe=83643

This is not the look of a bubble bursting. Maybe (rather, assuredly) the vintage market will go down at some point but not in the catastrophic way predicted here and not in isolation.

 

If you look at them in a relative sense, a Dino historically has been worth a little less than half of a Daytona. That would argue that if a Daytona is priced correctly at $700k, then a Dino is priced correctly at $300-350k.

 

the point is, Brad.... what are you trying to get across??
Are you suggesting that those of us that own these supposedly ovepriced models should liquidate as soon as possible before disaster looms...... or that those with piles of cash that might do better from putting their money somewhere else ?
who is your audience in all this and who is it trying to benefit??
BR,
Jez

 

I recall this being historically correct but the spanner-in-the-works is the restoration costs that prevent from adhering to this calculation.
Recall when paint jobs were $3000 two decades ago? They have risen in disproportion.

Unfortunately an all out restoration on a Dino will be ~$200k, the Daytona will be a bit more but not double. Having restoration costs consume over half of the claimed value is a big influence.

 

You can still do a cheap paint job on a Dino. I think causation runs the other way-- if you are restoring a $300k car, you are more likely to spend money on a super primo paint job than you might on a $50k car.

 

Not at all. If you don't have to sell and like your car, by all means keep it. I'm not trying to make a point, I'm just pointing out the obvious. If you are someone who hasn't pulled the trigger on your dream-car and are looking to do it in the near future, HOLD OFF. Do Not get pulled into this craze going on in which you are being convinced that you have to get it now before the price goes insane/even higher.

At the end of the day, not all Ferrari owners are Gazillionaires. We're mostly business owners/entrepreneurs. Some of us have an unlimited budget of many toys while some of us have a budget to accomodate 1 or two.

I know of one couple that has a Dino that falls into this category. They have openly told me that they are holding the car as a retirement vehicle. Meaning they do intend to sell it at some point. I suggested to them that they should, given what is going on. The Dino most likely will appreciate again, but who knows when that day will be. And the only direction it is headed in the near future is downward. So I do think the info I am sharing is beneficial to people who are considering selling and those who are considering buying.

It is not wise to become too attached to an asset. I'm probably the biggest Testarossa fan there is, I sold mine for financial reasons only for my business. I could have kept it, and it killed me to sell it. However, I had to slap myself in the face and say hey, you can always buy another one in the next few years when this BS ends. And therefore, I fell into the category of people considering selling. As much as I love the thing, why should I stress about selling it, when I know that the car will be able to be had for significantly less money in 3-24 months, along with the fact that I can sell it at a gain? It's a no brainer to me. Again, if you love the car and don't want to or have to part with it, then Yes, my advice is meaningless to you. Carry on, and enjoy the car

 

Absolutely correct.