It seems the market has really changed

Excellent article. I've seen that parallel as I'm sure many here have.

What's interesting is the addition of the modern artists to the group of the elite. ...just as I see the cars I grew up with....Countach, Diablo, Testarossa as modern art.
I can appreciate the lines of a 250 GTO but it just doesn't speak to me or evoke any passion as would staring at the crazy lines of fully decked out white on white Countach.

Shamile
Freeze. ..Miami Vice!

 

Yeah, "This time it REALLY is different." Uh-huh...

One should never extrapolate one market to be this similar to another market, either.

 

Very interesting article Bastuna thank you for sharing.
Shamile, I love your analogy of modern ( as opposed to contemporary or classical) art with the cars we love from the 80s and 90s. Thought provoking. There seem to be so many forces going on in both the art and the car worlds which make things hard to analyse and predict and result in the heated discussions we see here. But what art and cars have in common is that they're being chased by £££ on a global scale we have never seen before. That £££ is about self verification; a Giacometti says the right thing about you while an old master doesn't. (Personally I'd take a Brueghel and I don't really get paying millions for a slashed canvas but I don't count.)
Is it the same with the cars we love? How far does this analogy go?
None of us know. But I do know the end of the art market 'bubble' has been called for the last 12 years. The £££ has proved that wrong, and it's real £££, not finance.

 

True. And Bordeaux first growths. And antiques. And Persian carpets. All flat or vanished.
I am not smart enough to try to predict which side is right on the car bubble debate. But it's interesting.

 

You can use the information however you want but do you really think that Sotheby's, the 900lb gorilla in the art auction space, would buy a controlling interest in RM Auctions, the 900lb gorilla in the car auction space, if they thought that the clientele had no overlap or the markets bore no similarities?

Something to think about.

 

Thanks for the article but once you get into that art stuff I get bored so I didn't really read it. I think your post above says is really well and I bet it applies for art too... of course, for me cars are art.

 

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Hi all,
this morning i went to my dealer and he told me that apparently the bubble market is decreasing speed .... also of little bit
is true? Anyone have listen the same?

 

Bingo. While sherpa23 has a very good(and interesting point), if I remember correctly, RM Auctions was still owned by the founder(or, family?), where Sotheby's is more of a corporate entity. Could be RM was looking for an exit point, due to age and being no dummy, he jumped at an offer while the car biz is at a high point. If so, sounds to me like he probably got a hell of a deal.

Sotheby's may have had a wad of cash to burn and was looking around at other auction venues and just decided to burn the wad up a bit. Doesn't mean they're gonna be right, but if'n they wanted in the car biz, RM may have been the only viable candidate up for sale, at -this- point in time.


Once again, don't overlay -one- situation on top of -another-, figuring they'll fit. Often times they don't.

 

I don't know how many companies that you have sold in your lifetime but I have sold a couple and I can tell you first hand that there are a lot of reasons involved in the decision to sell that many times include valid and significant personal reasons.

Pertinent to your question is the sale of 51% percent to a newcomer as opposed to selling the whole company. Usually, if someone sells controlling interest but not the whole company (i.e. they retain a large equity stake) it's because they see the buyer/new partner as someone who can grow the company significantly.

If you think that the hot market is ending or the world is self destructing, you take all the money and sell all of the company and run. You don't move over the passenger seat and buckle in for the ride. You only do that if you see substantial upside because if not, it's business suicide.

And while I don't know the numbers involved for certain, I am sure that it was one of those offers very hard to refuse from a numbers perspective.

 

In a word, no, though the USD will continue to be viewed as the only "secure" currency -- relatively speaking, of course (which is nearly all that matters).

I don't see some massive unwind, but China's stock market isn't exactly something we can point to and call secure or well-founded in fundamentals. So an unwind there is not surprising. The effects, despite the relatively small size of that market, is a combo of psychological (far reaching) and on wealth. Some paper-rich folks there who have been going on spending sprees will curtail some of that spending. Part of that was to diversify OUT of those types of Chinese markets, but now they will be imbalanced towards foreign assets. Some of those funds will be reclaimed / repatriated out of necessity.

The Chinese as marginal buyers of all hard assets will be scaled back severely by any sentiment or actual wealth shift in China. This is what will cause some of the bubble real estate and collector markets to come down over the next 12-18 months.

Well, replace "will" with a strong "may"...

We shall see.

 

There is a middle-ground, too. When the personal reason(s) and the market match-up nicely. Also, there is logic in hedging your bets by selling a large chunk and keeping some amount as well. Or, there may (in some cases) be logic to keeping ownership around if there is a need to manage too -- so that incentives are aligned adequately.

 

So you'd give up a controlling interest in your a company with a great future to broaden your base? That Buffet guy might question that assertion.

 

Sorry, that was my mistake. I was projecting the next round of buying by Sotheby's. I expect there to be an additional purchase to 51% (although it could be 49%) announced in the next 18 months and forgot that it's only 25% for the time being. My apologies.

However, that only further illustrates my point: you insinuated that RM is selling because they feel the good times are over while I maintain that if they felt that, they would have sold the entire company, not a piece (and certainly not only 25%). Furthermore, Sotheby's wouldn't be interested in buying any of RM if they didn't feel there was an overlap in markets or clients.

At the end of the day, it's important to note that RM has operated successfully in several down markets and I wouldn't think that they would be afraid to do so in another one, nor would Sotheby's.

 

Not incredibly bullish US... my point is purely a relative one. The Euro failed (miserably) in taking over from the USD as the global reserve currency. The major resources continue to be quoted in USD and not Euros, and the heterogeneity of the European market (fiscal prudence, taxation controls etc, and of course different sorts of economies and cultures) has underlined how it is not really like the USA (though the US suffers similar issues, it is under a more unified populace... again, relatively speaking).

The USD strength rests on the weakness of other currencies and if I had to choose a currency to hold (and I have made this choice, though I have some diversification) I choose to hold USD.

As for Ferraris, I don't own a single Ferrari though the market isn't the cause (though I might not be a buyer at this moment because of the market). I was seriously considering an "entry level" car (360 CS or F430) about a year or so ago but opted for a 911 instead for practicality reasons. I am not a car investor though if F40s dropped below $500-$600k again I would buy one in a heartbeat... most of my assets are in highly overvalued real estate that I just can't transact... so despite my rather bearish market views overall, I would like these bubbles to continue unabated!

 

The rising powers are almost always overstated. The problem with China is that it is nearly impossible to distinguish real from fake wealth... it is a problem in any country but magnified 100 fold there. Stock market values there are virtually meaningless due to limited oversight and limited market sophistication. It is likely that a very, very high percentage of Chinese ultra wealthy are not truly ultra wealthy... in the sense that their net worth is backed up by shares of companies that may be readily exposed as not truly valuable at all. They might get financing backed by that paper wealth and buy expensive things, but much like many americans in 2007, who financed extravagant purchases off great real estate "wealth" that was illusory, when the rooster crows it can all come crashing down.

The US has pockets of this, but I would not be surprised if in China it is a very sizable percentage...

I (and most in a crisis) would want the relatively better known quantity and that is the USD. Again, it is a relative view and not that I think the US has much to grow in the near term...