is the bubble due to burst?

It is a nice thought to think speculators don't move in at the wrong time. They do. Even "sophisticated" ones. There are clearly people buying to make a profit now (well, a few weeks ago).

You say only morons or people buying for the love of car / passion are buying... I probably agree with that entirely. I am guessing the ratio is 3:1 or 4:1 (or more) in favor of the former over the latter, however.

As for hindsight bias, I don't think that really makes sense here. The speculators were buying back then, AND clearly buying very recently. The ones who bought for the love of the car would not be changing buying patterns based on prices, and so they would have bought equally back then and now... yet the prices surged.

You can thus conclude that it is speculators that have helped push the prices up. Once those speculators start taking profits / getting out of the market before it tanks, then you will an unwind (and the car lovers will just continue to buy, though at lower prices).

Again, it is a nice thought that speculators only buy when prices are objectively reasonable. But they don't. Speculators are in it for the quick buck and momentum. Momentum up until very recently was strong. They ride that wave. They rode it when house prices were shooting higher, they rode it during the tech boom too. Some truly savvy ones get out to play another market, but many get burned.

Plenty of gamblers out there to fill their ranks for the next bubble -- most people tend towards the speculative than the rational mindset anyways.

 

Well let's look back on this thread in 18 months and see if the majority of people buying from here on out (Post Monterey 2015) are moron speculators and passionate enthusiasts (i.e. smart speculators are already priced out of the market). Then we can put our hindsight bias to the test.

I don't think that we will see a massive unwinding of high quality cars, however. I could be wrong but I just don't see it. A short lived 20% drop? Sure. Maybe a little more. But not the 60% or more that some of the more outspoken posters in this thread have predicted.

 

Unfortunately I think your statement isn't that accurate.

I have clients who are rushing into the market now. 308s and 550s and 355s and testarossas. I think they are nuts. But... they are rushing out and buying at these lofty numbers.

A guy on this site offered me a 550 for 150k and just raised his price to 170k.

I offered 130k for a 19k mile 308 GTB only to get turned down and not even get a counter offer.

These guys are really riding an edge here. If the market dumps these guys better like their cars... because I think they are going to own them for a while.

 

You're only proving my point. I said that the only speculators coming to the market now are complete amateurs (morons, even) as the gains to be had now are way out of line compared to the risk. To Dave's point, sure some people will be sucked into it but for the most part, the smart money in speculation is onto something else. A lot of the people buying now who are seasoned car people are actual enthusiasts.

 

I would still disagree I do not think speculators are the one paying these very high prices from some of the auctions but I do believe speculators are still buying and seeing the record pricing from the auctions as future values for their purchase and of course enthusiasts are always buying sometimes paying foolish prices to get their dream car which is money well spent assuming they have it..
The late model pricing is kinda crazy 700 for a 550 barchetta, 750 for a 599 GTO etc....
And 380 for a 575 manual...etc

 

Sheehan has always said that after the top of the market starts to slide buyers are very difficult to find for 3-4 years. I love the Barchetta but they moved up so fast in price that I can't recall any in the $300k-$400k asking range, they shot right over that

 

My friend,

Very nice and very true!
Ciao
Oscar

 

Larry, it's hard to understand what you're saying there as it's a single long sentence with some contradictions. For example, you start with "I would still disagree" but then you say that "I do not think that speculators are paying these very high prices" and "enthusiasts are always buying sometimes paying foolish prices to get their dream car which is money well spent assuming they have it," which is exactly what I'm saying. So I'm not sure how we disagree.

Again, anyone paying these prices as a speculator won't be around for long as most of the upside is gone from the market. Therefore, the majority of real speculation has left the venue and has for a while. The only guys I know paying top dollar are serious collectors and they are doing it for the cars, not any ethereal short term appreciation.

 

Really? What proof do you have of that? I'm not doubting you but it would be interesting to see some proof.

Here is what I see (and I've been seeing it since BJ Scottsdale back in the 80's).

What I see are auction houses using every tool to get new people into the market just to get them into the market. TV shows of auctions are all over the place now. It's their latest marketing tool. They are even pushing auctions in Car wax commercials now. The Monterey Historics has become the Monterey Exotic auctions -- and, oh ya... there's a vintage race there that weekend too.

Now, they're trying to open up China. "Prices will go through the roof! Yeah!" Great...some rich Chinese guy can park it in a garage in Texas for 4 years and then bring it up for auction again. Wow. How exciting for the rest of us.

Sure, some of these new bidders are enthusiasts. But many others are just buying what they think will go up just to buy it. Witness the craziness of Muscle cars a just few years ago.

As long as its in the advantage of auction houses to pimp sales, you will get more into the market who have zero understanding of what they are buying while inflating the prices in the market.

If I'm wrong, I'd be happy to see what would be the opposite in my presumption.

 

My proof is purely observational, as is yours. But I go to all the big auctions: Scottsdale, amelia, Monterey. I know who the real speculators are and I watch what they buy and how. There has been a serious backing off of the real players in the speculation game based on what I observe and the current market prices realized support that. It's not that are absolutely no more speculators. It's that the pros, the ones that are really good at it, have backed off and there are much fewer speculators now. Anyone buying now for short term appreciation is taking a real flyer and I only see a few complete amateurs attempting it. On the other hand, I see a ton of enthusiasts who now have the means to buy their dream cars buying them because they now have the money. People can make their own assumptions as to why they now have the money but those are my first hand observations - not hearsay or anything other than my own personal observations.

If you're at all the auctions as well and see something different, I would love to compare notes. Again, I think the benefit of hindsight bias will bear out my observations in time. But I watch closely with my own eyes.

EDIT: by the way, I've yet to have anyone from the three big auction companies mention anything about the Chinese or the Chinese market to me. Not saying it doesn't happen but I'm pretty plugged in and have never personally observed that. But again, a lot of things that people on here say happens at auction I've never witnessed, despite buying and selling a few cars at big auctions, including Monterey.

 

I think if anybody is not comfortable with the current price of the old car they are looking at then don't buy it. If you are buying for speculation to flip it then a very likely scenario is it will either be worth more or less when you sell it. This thread needs to die !

 

let me break it out..
1. i do not believe the record prices being paid are speculators . I do believe that speculators will use those numbers as bench mark of why they should pay a somewhat lower price(but still historically high) for a similar car thinking they can then sell it for a higher price similar to the record price seen at the auction.

2.Now an enthusiast may pay crazy money for the car of his dreams. In that case more power to him, I assume he is willing to take a hit if he sells it in the future..

3. The ultra high prices on late models is crazy but maybe being pushed by people trying to make money for example two years ago you could by a 550 barchetta for under 300 now look and see many are asking 600 or more ...crazy... etc....

if we are saying then same thing then I guess we agree but I thought you were saying speculators were out of the market I believe they are still in the market and probably the main reason the prices are crazy high....(keep in mind dealers are speculators also)

 

We are saying more or less the same thing with the exception that I am saying that the majority of the speculators are out of the market. There is no more room on most of these to appreciate considerably for the speculators' short time horizons. We agree on the rest and yes, I count dealers solely as speculators. Remember also that if a dealer is paying well below market for their inventory and not asking ridiculous prices, then aren't fueling the record high prices, asking or otherwise.

 

I watch the auction prices but certainly do not consider them to be market correct. When I buy or attempt to buy a car at auction I have to consider that I may have the chance to buy a great car at a fair price or if I am not careful I could be the guy that just paid more money then virtually anyone else in the world was willing to pay... what I mean is you need to know when to fold.. ..to many get caught up in the action...
then a new record price is fueled...crazy..

 

Sometimes I see a subpar car go for crazy money - more than a little - but usually the insane prices are for something unique. For example, the 550B that went for $740k or whatever it went for was a 155 mile car. If you want one that's that new, good luck finding another. You have to pay what it takes. FWIW, I looked at that car and the interior was terrible.

 

I'm sorry but I believe you're wrong. I believe some of these cars are a big shell game, being bought and pushed around the country or overseas by speculators / businesses driving up prices. Some of these are car dealers not individuals.

I also believe that there are forces in the "industry" of car re-selling that has an incentive to widen the market as big as possible. The more people in the market, the higher it rises. As I said, the marketing of car auctions is at an all time high today. Who is driving these efforts? Ummm.... Car auctions. What a shock.

When the top cars move up, the cheaper cuts move up with it.

Is every sale to a speculator? No. But many people are buying now with the FEAR that prices are rising so now is the time to buy. Sound like Real Estate in 2005? You bet.

Let me just finish with this. There is NO WAY ON EARTH that "enthusiasts" suddenly woke up one day realized that some mass produced 1980 era car is what they "really wanted" and they all rushed in to buy one in the last year, making prices double.

There is no way that suddenly "enthusiasts" woke up and had twice the disposable income and decided at once they really wanted a 20 year old Ferrari (but not a Maserati or Lambo)

No Freakin' way.

The only way this could happen is fear of a rising market or speculation or both.

My proof is ridiculously high prices for ultra mileage cars. What enthusiast would want that? You can't drive it or it's value is immediately lost. The only person who wants this is a speculator / collector who wants to keep it, not drive it, and truck it to another auction to reap in the benefit of doing nothing but locking the car away.

Show me otherwise and I'll gladly change my mind. In the meantime, the hype continues and the people would love to own these cars are priced out of the market for no other reason than people are buying them not for love, but for profit.

They can do that. It's a free market. But we don't have to like it.

 

Interesting datapoint. My exotic car dealer in Manhattan sent around an invite for exotic car auction participation "private live auction". This is a big dealer and for as long as I have dealt with them this is the first time I have seen this.

This is a high volume exotics dealer and it looks like they are trying to get in on the action in a different way from previously. Just an interesting thing I saw that perhaps others have witnessed with their local dealers too?

 

BTW Mayor, I have been arguing the exact same thing and same logic.

Sherpa, I don't think we fundamentally disagree but the degree of participation now between enthusiasts and speculators is a key area of disagreement.

I do think if I had an F40 in my garage like you do I would not bother even debating this very much and would be driving that beauty instead!

 

Interesting: Keno Brothers announce November ?Rolling Sculpture? auction | Hemmings Daily

 

Bob,

Always enjoy your commentary and agreed on the sales end. But I think you should also consider those sellers as subsequent buyers too.

When car guys see profits they sell in this market, but I'll bet most turn right around with that cash and buy another car of a lower value, pocketing some wind fall profit too. So the sellers are looking for lower cost cars and the '80s-90's cars fit the bill.

Scott

 

I can't find anything relating to the China ban on the web. I assume it was just a rumour and the discussion never really happened?

 

Thats a good point as well.

 

Car pulled as No Sale
Cars We Sold - Page 12

 

As a UK resident I have never previously heard of the Keno brothers....... Who are they and have they been around a long time ? Heard nothing bad about them but suddenly there are double page adds in the motoring magazines over here with photographic portraits of said brothers.......... Just curious........

 

Apparently they are antique and art dealers who have decided to move into the car market.

No sign of a bubble there...