How will the art market meltdown affect collector Ferrari cars?

CNBC Feb 4th 2016: Art market meltdown?
Video found here: CNBC Video
How will the art market meltdown affect collector Ferrari cars?

 

Sorry about the video link not working. Try this one. If it doesn't work, if you google "CNBC Art Market Meltdown" you will see it under videos.

Art market meltdown?

 

I find this interesting. Not very often in the collector car world do we see the same car show up again and are able to judge if the value has changed. Apparently in this case the exact same painting showed up and sold for a lot less than it did the year before.

In the collector car world quality of the car can and does drastically effect the price and often two versions of the same car are nowhere similar in price for justifiable reasons. That makes it very hard to determine the direction of the market since if the car is of poor quality, then a lower price does not reflect a market downturn.

In both the art and the car world lots of folks were saying that the very high quality pieces would still bring big money and that could still be true. OTOH, here is an example of a very highly priced piece of art that went for a lot less than was expected and a lot less than it went for a year ago.

As with any auction it takes two bidders who want something badly to make a market. As we have seen in the past there were sometimes just two bidders for big ticket items and they both didn't care about price. Things are different now and if just one bidder is not there that day or doesn't feel like bidding the price can drastically change. Such is the auction market.

Classic cars are at this point no different than any other collectible. There are a lot of folks in this market who are involved because there is money to be made and not for any particular love of the cars for their place in history. There are "investment groups" that are pooling money from investors to buy classic cars that the investors will never see or even care about. When they perceive that there is not a large upside to the market they will unload their inventory and move on to something else.

I have no idea if the cars that these "investment groups" or a lot of "collectors" (and I use that term loosely) were top quality or if they were buying up "bargains" that needed work and are now unloading them, but there does seem to be a lot of cars that are not doing well at auction and this is being blamed on the quality rather than the market.

In time it will sort itself out.

 

All very true.

What happens now, after a speculative run-up, is a feeling out of the direction of the market in the year(s) to come. As more individuals see the signs (which are now flashing red, everywhere) they no longer fear prices rising next year, but rather anticipate them falling.

Then the thought process turns to not wanting to catch a falling knife and/or anticipating the ability to buy a nicer car, or more cars, if they wait just a few more months. The danger becomes everyone anticipating each others' moves, causing a cascade across potential buyers and sellers. So the clamoring to get in on the action, becomes a clamor to escape.

It will eventually create some great bargains for people that can act counter-cyclically, of course. The timing aspect is always the trickiest, but identifying the magnitude of it is pretty easy.

As you implied, time will tell.

 

Great post, I agree with your description of bubble market dynamics. Super_Dave, what car(s) do you plan to on acquiring if/when we see a significant correction?

 

I don't understand why you persist in thinking this is such a "gotcha."

 

I think this older article from Bloomberg on the saga of the record breaking Andrew Wool painting is a great illustration of this point:
http://www.ferrarichat.com/forum/143517854-post647.html

 

I do not know much about art however the broadcast on your link in the last seconds he said the Chinese were not at the auction so if the Chinese are out of the art market I believe they are big buyers of Art not so much with classic cars.. so the effect may not be the same.

 

Interesting piece.

The last buyer of the painting in question (hardly an old masterpiece) wanted it, had the means and bought it because he supposedly "wanted the best", which comes down to a ego thing..

Some guys want the biggest boat at the dock, the biggest mansion in their city, the most expensive car or piece of art, not for what it is, but for what they can say that it says about them. When there are two of them in the room and they want the same thing, rational valuations can go out the window.

When Ron Pratt was bidding on Carol Shelby's last and personal cobra, do you think for a minute that he wasn't going to win it? He had the means and wanted the piece and he was bound and determined to own it, and he did. A couple of years later it sold it for a bit less than it cost him, but he still didn't get hurt too badly (in the grand scheme of things). But wanting the "best" can be an expensive thing when egos get involved.

 

Exactly. Any marketplace is defined by an intersection of supply and demand curves. What is interesting about art at the price levels we've seen, is the tiny area under that elite demand curve. I suspect that if 300 specific buyers dropped dead tomorrow, the high end of the market would adjust downward radically. What is interesting to me about the collector car marketplace is that while the big adjustment started in highest end of the marketplace, it rapidly spread downmarket to mass produced cars like XKEs and longhood 911s. In other words it wasn't just the elite club of GTO owners driving the party...

 

Extracts from Evo (a UK Magazine from Dennis Publishing), January 2016:

Market Analysis:

"I believe there will be a 20% deduction in prices in 2016"
Tom Hartley (Tom Harley.com)

"High end stuff really slowed down"
Rob Johnson of Classic and Sports Finance.com

"Soft above £500,000", "general price correction going on"
"Recent trend is one of caution"
Mark Donaldson.com Classiche F40 £625k retail anyone? not selling see website

"Interest dramatically down in nearly new and older cars"
Anon trader

 

thanks for the post. what cars do you currently own? are you considering selling them?

 

I'm in cash for now

 

when did you sell your cars? what did you sell?

 

Platini 289, the price sayes it all.. Probably high mileage and accident damaged..
One sold at Arizona for 1.1 million gbp, so make your mind up,Tom Hartley last week sold 2 very low mileage f40's for over the Arizona price, I'm in talks to buy a 1700 mile car for 1.15 gbp, also why not give Tom Hartley a call and ask if you can buy his delivery mileage enzo's for 20% less or maybe any of his stock, I can tell what the answer would be. If you follow their Twitter accounts you would see they are having record months. All smoke and mirror's, trying to scare people lets them buy stock.

 

MSN, You'd need to be pretty bullish to make £££ at that entry point, surely?

I heard people are buying on borrowed monies at 10% APR and hoping the figures will stack up..... not sure I'd be as confident...!

 

It depends on your time frame, I've been buying ferraris now for 20 years and at every point everyone sayes the same thing, you've paid too much, in ten years it will be irrelevant what price you paid today. I buy what I love and always and this is the important point, buy the best, lowest mileage, lowest owners and total originally. This has been proved over the last month, world records for the best cars, enzo's, Daytona's, f40, f50, 308's the list goes on. What might seem expensive now is always the one to buy and everything else is priced accordingly. The markets are maturing which is a good thing and educated buyers want the best. Take a look at the premier dealers, not the brokers that are trying to put deals together, look at the companies that buy there own stock, this speaks volumes, also restoration shops ( the quality ones ) are solidly booked for years in advance. As I said don't get caught in the smoke and mirrors follow the big players and look at the stock. We in the uk are having hoarding of The best cars, Ferrari, Porsche, I know people buying and locking away anything that is the best. This approach to me does not indicate a soft market, but this is only my view.

 

platini what ferraris have you owned in the past? when did u sell urs?

 

Maybe you and Paul Chua can post some clear guidelines on which cars ones has to have owned or sold in order to have a valid opinion on the Ferrari market. Mods could even sticky it to help make sure the riff raff stays out of the discussion.

 

stellar first and second posts?! is that you super_dave?

my question is beyond fair - what have you currently bought and sold, what do you plan on buying? how is that not relevant in a market thread? at least tell us about the art you have bought and sold.

 

or is that you platini?

platini joined sept 21 2015, 7 days after potato joined on sept 14 2015

coincidence?

 

No, I'm just another guy who's been following this forum and the market for the past couple years. You and Paul's new gimmick about "oh yeah, well which cars are you buying and selling, smart guy?" is pretty illogical, petty and tiring, and that you both seem to think it's some kind of "gotcha" to anyone who dares doubt the holy strength of the market is even more perplexing.

 

thanks for your contributions to the board. we are always happy to welcome new enthusiasts. what Ferraris do you have?

 

It was a legitimate question, meant : Do you have your skin in the game?
Having bought and sold collector cars (Ferraris in particular, especially on this forum), gives one credibility and opinions of such folks naturally would be more respected then from someone unknown with no personal experience in that market.

 

exactly. like why go onto a message board about stocks if you have never bought and never intend to buy stocks? its ok to be a bond guy, a cash guy, a commodity guy, a car guy, an art guy etc. just have some substance. otherwise its just trolling.