is the bubble due to burst?

I was waiting for your input on this one Jas! If anyone knows their currently under-appreciated cars, I'd say Jas is up there with the best of them.

 

Yes, please tell us about the XJR-15! That's a real motorsport inspired and based exotic.

 

I think the xj220 is due to rise. Just as the carrera gt did. Its underappreciated. Plus the guys around my age had one as a die cast car as a kiddo. I actually think it was my first die cast!

Concerning the market... as a person in the business trading in this every day... I think there is some bubble spots. But on the whole... I wouldn't outright call the entire thing a bubble.

The best cars will bring the best money. Always have always will, up market or down market the best always finds a buyer at a price over top current value.

The air cooled porsches... they will correct. They will not go down to where they were but there will be some correction. (930 turbos 993 turbos and the run of the mill late 70s and 80s cars) I think the standard 993s will fair pretty well. I think there are a group of guys such as myself who think the 993 is the best porsche ever built, and its very driveable and I think there will always be a good market for a good car.

Stick shift premiums... that **** is going to die. If it doesn't ill eat my hat. but for the most part... outrageous premiums for 3 pedal cars will die. Most of the rare 3 pedal cars are rare because they actually aren't as good as there 2 pedal counter part. 599 6 speed... eventually no one will care for 30 years... A 6 speed 430? You have got to be kidding me...these will adjust. They are nothing special and once the 430 becomes viewed as a 348 and no one will care. (nothing against 348s, its just they are flat in the fire of collectble cars as the moment) With each new v8 car the importance of the 430 will become less and less and what it is will be what it was and it will have out dated wizadry but it will still be a ferrari.

355s: My fav. but the current prices are ridiculous. I was offered one two days ago and I thought they were out of there minds... I looked at current asks and turns out the car was cheap by comparison. I don't believe in the current asks so I didn't buy anyways. I think the 355 GTB and series fiarono will be something specail. You can ask any guy from the age of 27-40 and they will all LOVE the 355. I think there is going to be a strong amount of buyer for that car for a long time... but I still think current prices are overcooked especially when you look in the maintenance logs.

There are cars that are bound to correct. But I think on the whole... cars will continue trending upwards as alternatives to cash, stock and real estate. With currency fluctuations they will go back and forth overseas and across our north border. A few years ago I did pretty well sending cars to canada... now I am buying back as many as I possibly can. Its as if money goes from the right pocket to the left pocket... they seem to go back and forth.

I know I brought this up before, but one of the reasons why I don't think we are truly in a bubble is... I am not quite sure whats going to pop it and send it plumeting. I can see for sure see some areas popping. I can see a slide backwards a few percent, but no bubble pop.

I am not an economist, I am just some guy with a key board in the bussiness and this is just my perspective.

PS I stay away from those stick cars, those ridiculous 911 deals because I don't believe in the pricing. I lost or rather haven't made as much money as many of my competitors due to this stance... but I guess we will have to see if they are stuck holding the bag and when they are... we will see if their ride to the top was worth it.

 

I haven't followed the stick shift premium enough to know whether it's overheated at the moment. There may very well be a short-term manual bubble now, but I expect the inherent value of stick shift to increase over the long term. It won't be long before there are no stick shift cars from any manufacturer. The automated systems are "better" (not my personal opinion, but objectively they perform better), so it doesn't make sense for any manufacturer to produce them. When all cars have F1 transmissions, the stick shift cars will become a major "real sports car" marking point in history and I think a lot more people will want manual transmission (and I would expect desire to start increasing not long after manuals have been completely phased out of all production cars). There are still some modern cars available with manual, but that will (for the most part) be gone in the very near future.

 

The problem is that the market is short-sighted and doesn't remember history. This sort of run up, without a major correction, is unprecedented. You don't need to call the why or the timing to know that it will pop.

The logic around stick shifters holding value over time... well, why don't we look at carbureted cars... there was nostalgia around them too. It won't take long to realize there are tons of stick shift cars around for people to choose from and the premiums will fade away back to more reasonable levels. Not to mention the obvious, that many people won't be able to drive stick shift cars, making the market for the cars absolutely miniscule, outside museum type collector pieces.

Right now, the $$ is in the hands of the 50+ age group that know how to drive stick. In 15 years the pool of buyers will shrink. So the long-term prospects for the vast, vast majority of these stick cars is actually quite poor...

The sentiment that compels people to outbid each other for the perceived value (value that apparently wasn't apparent 3 years ago) is the only real thing in the market that is propping up prices.

 

I don't see a parallel with carburetors. Carburetors don't really affect the way you physically drive the car. The earliest FI systems weren't great, so carbs could be better in specific instances, but it's not a given. For example, a 308 carb engine usually runs much better than a 308 (2-valve) FI engine, but I would argue that the 328 FI is better than both (opinions will vary on that a lot of course).

Stick shift is a whole different thing -- it makes the car much more engaging to drive. For a daily driver, manual transmission is not that important and may be a deficit. For a weekend car that you drive simply to enjoy, manual makes a huge difference to many today, and that will only become more true (IMO obviously) when manual is a rarity. When the general public does not know how to drive a manual, it will become even cooler (for those who care about being cool) and more special to drive a manual.

 

Supply and demand requires the demand part of the equation -- the supply here will not change materially. When the vast, vast majority of Americans who have the resources to buy these cars (generally age 50+) don't have the ability to drive them, then the values will drop. Consider that the vast, vast majority of 30-35 year olds in the US today cannot drive stick. Right now, the majority of buyers (i.e., people over 50) have the ability to drive these cars. Of course for the extremely high end of the market, that doesn't matter, since they will be more and more museum type pieces. For the vast majority of the cars that have appreciated because they are manual in the past 24 months (again, the recent phenomenon of the price rise suggests it is all psychological with no rational aforethought) there will be very few people who can drive these cars.

The nostalgia factor also won't be present in the future cohort of buyers. And that future cohort is not 30+ years away... it is 10-15 years away from being the primary buying pool for most of these cars (again, excluding the ultra high end part of the market). When I look at things that have no ability to generate income, appreciating dramatically in price, I need to understand what the future driver of demand may be... and if you see the demographics, and the "reasons" being cited for these price increases... it suggests that the demand will fall off a cliff in <15 years. Of course that will at some point actually be realized by the market, and the values will fall off a cliff (though I am guessing they will fall for myriad other reasons much sooner).

 

I don't see manual as "nostalgia" at all. Something like carburetor versus FI I would classify as "nostalgia" (shades of gray differences being made into something more than shades of gray). For anyone that actually wants to drive their cars, the physical difference between a manual and automated manual is huge in terms of driver involvement with the car. When I drive a new car, I want it to have modern creature comforts. When I drive a vintage car -- I want it to be a "vintage" experience where I feel connected to the car. For people that actually drive them, I believe the manual premium will remain very strong. For those that don't drive their collectors cars, the manual distinction may be less important -- but even non-driving collectors tend to seek out and pay a premium for the options that are most desirable for driving.

I don't see the future lack of mainstream manual driving skills being a factor at all. I view things like hand-hammering aluminum into body panels as the types of skills that are lost over generations, but anyone can learn to drive manual in an afternoon. The real question is whether, in the future, they will have a stronger or weaker desire to have a stick shift over an automated manual. I suspect that the desire for manual in collector cars will become stronger as manuals become unavailable on production cars.

On the other hand, the only other automotive technology change I can think of that radically affected the driving experience was the automatic transmission (introduced around 1940). For most collector car models, automatic transmissions don't have a huge value deficit, so that would be a pretty powerful argument against my opinion. That said, for Ferraris specifically, I think driver involvement will always be of utmost importance, so I'll stick to my belief that Ferrari manuals will maintain a value premium. Only time will tell for sure.

 

Let me put this all in context. I drive stick, when the car offers a stick option. I learned stick when I was 12. I agree it is more engaging and interesting.

These are separate from my bigger points. The number of people who will look back and remember just how engaging stick is will be a much, much, much smaller percentage of the people with the $$ to buy these cars. That is simply reality because of sales trends and more recently because of DCT.

The result is the pool of demand will shrink. This bodes terribly for the vast majority of manual cars in terms of retaining some big premium.

Belief in something is fine, but the data suggest that the supply/demand equation is going to skew dramatically in favor of supply in about 15 years. The fact the current group of car buyers with financial resources are a group that used to drive stick growing up, helps explain why the demand is well supported currently.

Again, I'm a driver who enjoys rev matching and heel toe ... it is more interesting than leaving the transmission of a DCT in auto or even clicking through flappy paddles. I just recognize that A) I'm a rarity amongst my age group already and B) the up-and-coming cohorts of buyers will be even less familiar with it.

As you rightly point out, only time will tell. I'm keeping my manual transmission cars but I don't hold my breath for their value to be particularly supported vs. their DCT equivalents.

 

I agree with your logic 100% for choosing a daily driver, but when it comes to buying a collector car (let's say, buying a "vintage" Ferrari 360 30 years from now), the thought process is usually not that rational and collectors tend to buy the cars they are emotionally attached to. In 30 years, time, I will be far more biased towards stick shift because manual transmissions will be far less available in production cars and that engaged shifting experience is exactly what I will be seeking to recreate by buying a vintage car.

To me, the manual premium is very marque-specific. It is hugely important to me for a Ferrari, but it's not as important for most other cars that have a far less visceral driving experience.

 

Precisely. The demand for manual transmissions will remain for "sports cars". Should a Millennial chose to purchase a vintage 360 30 years from now, he/she could easily learn how to drive it in a day if they don't know how to drive a manual already. It isn't a skill that requires years of education and practice.

The classic car market will always be rooted in enthusiasm, and enthusiasts will drive the market into the future. Speculators/investors will always be in the shadows, but the love and appreciation of these vehicles will remain true to their intent. Owned for the love of the driving experience. And this love is not as strong when the machine does all of the work for you.

 

I disagree about the stick premium on things like 430. The stick premium on the 599 seems way too high. There will always be people who want stick. Analogies usually fail and they fail here too when you compare to carb cars.

Its no too hard to learn stick shift.

Heck, the premiums might go higher because those into cars are into something real, not virtual thats on their phones. They might like something even more interactive.

Who really knows?

 

You're too kind Chris. Picking a car you'll enjoy driving and looking at regardless of the market trends is always a good bet Your collection typifies that. I like how your latest add ended up on Octane cover the very next month

 

Nice knowledge on the Jaguars!!

 

I can't be the only one that has received an email advertising this report. If this has been posted previously, my apologies. Interesting times.


Order now: Classic Ferrari Investment Report | Red Blossoms


George

 

Wouldn't it be nice if all genuine Ferrari enthusiasts made a pact to avoid all discussion of prices throughout the Monterey week, limiting themselves to talk of the merits of various tipos, exchanging technical tips etc. Some hope, once the auctions start!

Reports such as this only serve to attract more investors and highten the risk of a bubble.

 

Didn't take long for this to spur a derivative article on CNBC:

Fleet of Ferraris lead $415 million car auctions

 

Their "analysis" is beyond laughable and contains errors and outright misrepresentations. Their "worst case" projections graph assumes no retrenchment -- just flat very briefly until mid-2016 before resuming the run-up at what they call the "normal" growth rate of 16.5%. In the right sidebar of the graph, they state that the "normal" growth rate is based on the period from 2004-2009, but the graph itself states that 16.5% is actually based upon the period from 2010 to 2015. Still, a 5/6-year period (2010-2015) may seem (on the surface) long enough to be a pretty good benchmark for "normal" until you consider that that time period for they used for determining "normal" includes the massive run-up from 2013-2015. The proper historical "normal" would obviously be the long period of time prior to 2013, which shows very modest growth even on their own graph. To extrapolate the curve to the left of 2013 in their graph to even their most conservative projection to the right of 2016 on their graph requires an extreme stretch of fantasy.

I wonder if Red Blossoms' goal is to make money by selling the report or if the report was commissioned by auction houses or other invested parties to drive up the market. I suspect it's the latter -- there isn't much money to be made with the former, but a lot to be made by the commissioners of the report with the latter. I don't really have a view as to whether there is a bubble currently or not, nor do I care, but a report as poorly done and misleading as this seems like a telltale sign of a bubble approaching soon if there isn't one already.


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I dont know about bubbles, but if you look at 308 asks vs the few actual sales there is a highly significant gap.

 

I agree with the "beyond laughable"...

In fact, it is so absurdly silly that it almost makes a parody of speculation in the market.

Then again, nothing new... always analysis to support Just like the embarrassment of otherwise highly regarded academics or wall street pros calling for further price increases from 2000 levels back during the tech bubble... I called that bubble quite nicely but remember arguing with friends about how you can't extrapolate recent trends indefinitely.

Easiest investment logic is to look for dislocation between different, but related, indicators. Whenever two factors tend to track together historically but then diverge, it becomes critical to identify strong reasons behind the divergence. Identifying the historical causal relationship isn't even important... since it isn't always discoverable... but I always ask for solid evidence of why things should diverge that historically did not, before being comfortable with a "new norm".

I promised to exit this bubble thread a while back but since some of the catalysts have started to emerge (China, Greece, more skepticism over valuations more broadly) and since I see so many threads touching on this subject, I can't help but re-enter.

 

The absolute, positively most telling sign of a bubble is this excerpt:

"McKeel Hagerty, the CEO of Hagerty, said he expects continued demand for collectible cars from wealthy buyers. He said that the quality of cars headed to auction just keeps getting better, and the sales results are more predictable. "

The quality of cars ... just keeps getting better ...

The implication is obvious so I won't spell it out too much... but when the best quality assets are put up for sale... Blackstone anyone?

 

These auction houses are just over glorified used car salesmen. It's pretty sickening.

When the market falls they get you again. Why not push the bubble?

 

I'd like to think he means the quality of restorations. Certainly cars bought at auction 10 years ago only a fraction were restored and even then mostly cosmetically so you didn't know what you were getting. If there is anything good to be said for the run up in prices it's that a lot of cars which for decades have been run on a budget have been sympathetically (at great expense) brought back up to a they left the factory condition.

 

Whatever happens it should be highly entertaining to watch it unfold and develop over the course of the weekend.

Watching the bidder sentiment evolve over a few days and the amount of house bids to get just under the reserve was highly enlightening last year.

 

This sounds like the old bidding by the chandelier ploy.

Another ploy I was unaware of that was mentioned on "Chasing Classic Cars" is where the auction house makes up the difference between the most recent genuine bid and the seller's reserve so that the seller receives at least their reserve price. This would seem to have the effect of the auction house cutting their commission slightly so as to maintain the illusion of a strong market.