is the bubble due to burst?

I know a very very wealthy chap who was interested in a car JD had for sale recently, it was overpriced but he was still keen, as money was not an issue, he rang them a number of times, they were short with him each time and said they would ring him back, they never did. its a story I hear quite a lot about the classic dealers, times must be good

 

I have been collecting for more than 30 years and bought cars from dealers, from brokers, from individual and at auction ( including Gooding 2, Bonhams and Brooks before 3, RM ( bought and sold) and Artcurial). At the end you have to educate yourself, some dealers or brokers you get along, some you don't. Some are very professional , some less but let's face it not everyone is equal. If your name is Bamford, likely people will pay attention. If your name is Smith, even if mega rich, they won't be as attentive. You also have to know there are so many wine tasters ( time wasters) in this industry that people don't know anymore who is serious and who is not. It takes for me 5 minutes to buy a car if this is the condition, the price and the model is what I want. Same for selling cars. So I am not defending anyone here, but clearly experience and your reputation is key to be properly treated. But to take another example our friend Jim does not have to leave his phone number. They will call him back in case they have not called him the minute they got a car if they think he is interestedin. And you don't need to know everyone, if you are on first name with Simon, David(s) , Peter, Robert, Rob, Max, etc etc and have diner with them from time to time and see them at events, and they say hello to you, believe me other in the trade will notice . And if they don't , no worry, there are enough cars around to deal only with people you like! And guess what, there are few people in the trade I don't like, based on experience, and I don't need to deal with them.

 

I don't know about the bubble for classic cars generally (bubbles bursting are notoriously difficult to predict) but I do wonder if on a relative basis Ferrari has run as far ahead of the rest as it will go.

I've just been flicking through old magazines and in the steady state period '95 -'05 (20-10 years ago) porsche 904s (A gorgeous, historically significant, historically competitive from a collectable manufacturer, by most peoples judgement, I think, certainly 2.7 RSs have gone crazy!) were about 250k GBP v.s. a 250 TDF at 400k, a SWB at 500k or a Lusso at 100k GBP.

I'd guess a Lusso (also gorgeous, significant etc) is now approx the same price as a 904 GTS but a 2.5x outperformance, in addition to the market shift in my mind (as a buyer) has run it's distance and there are other cars out there at similar price points that excite me much more - even as a huge ferrari fan (so I'm not selling any Ferraris just yet)

I think there is a good chance the gap will close, one way or the other

 

And you've chosen an example where the porsche has still seen appreciation. American special interest cars: Shelby mustangs, Yenko Chevy, various Hemis, corvettes all plunged at the '08 financial crisis and have recovered barely at all.



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Fair point, although I would say they are almost another asset class. A bit like pop art v.s. impressionist. Pop art has gone crazy, impressionist not so much. I would still put Ferrari and Porsche in the Pop art category - If I haven't gone too far off piste

 

All seemed a bit sad somehow.[/QUOTE]

I find this entire market very sad.....We all know that in any Classic car boom that Ferrari is the most over hyped and traded marque but in my opinion this time around it has reached ridiculous levels. History, provenance and even due diligence have become archaic factors in the purchase of any Ferrari today it seems. The only criteria is investment potential........I have sold these cars for over 40 years and will always give my time and advice for all its worth to any enthusiast even if I am unable to sell them a car but all I hear today is......What do I think it will be worth in a few months time ?

Any dealer is in this business to make money, after all its our source of income but we presumably chose this career as we loved the cars and enjoyed selling them. Today the fun element has gone and the experience and knowledge we have accumulated over the years is wasted. I have given up trying to predict the future but may I publically state that I hope that this present market decimates........total collapse as in 1990. It would rid us of the 'overnight' Ferrari specialists, the mindless morons who have more money than sense and maybe the element of greed will find pastures anew.

 

I find this entire market very sad.....We all know that in any Classic car boom that Ferrari is the most over hyped and traded marque but in my opinion this time around it has reached ridiculous levels. History, provenance and even due diligence have become archaic factors in the purchase of any Ferrari today it seems. The only criteria is investment potential........I have sold these cars for over 40 years and will always give my time and advice for all its worth to any enthusiast even if I am unable to sell them a car but all I hear today is......What do I think it will be worth in a few months time ?

Any dealer is in this business to make money, after all its our source of income but we presumably chose this career as we loved the cars and enjoyed selling them. Today the fun element has gone and the experience and knowledge we have accumulated over the years is wasted. I have given up trying to predict the future but may I publically state that I hope that this present market decimates........total collapse as in 1990. It would rid us of the 'overnight' Ferrari specialists, the mindless morons who have more money than sense and maybe the element of greed will find pastures anew.[/QUOTE]


Even down here in our tiny market what you describe is so prevalent, I cant speak for other parts of the world but here its really becoming a case of those who really love the cars are getting slowly squeezed out by those whose sole purpose appears to be investing, this applies to all exotics not just Ferrari's.

There seems to be a "buy anything irrespective of price" mentality that does along with "buy now everything is going to grow in value".

Forgetting vintage Ferrari's for a minute the values of all Ferrari's up till around 355's have been massively increased by this "buy anything" mentality.

 

when does the first auction start in Scottsdale this week?

 

The bubble is dflating, or flattening. The classic car market is primarily driven by Europe and USA with a little bit of Japan thrown in. Witht he euro dropping in value there is not the same pull on that side of the pond. yes cars are an asett class, but avery obloque one, so many buyers just buy "names" and when a certain marque and indded a certain model within a marque becomes a name it reindexes to high value.

Most calssic car buyers today, like most art buyers dont really haver an inner sense and taste, they buy "names"

Many people who are not enthusisasts and buy names and want to own a "cool" car have entered the classic market. This has been the ethos thta has fuelled a lot of the last boom more so than "entusiasts" You see this in a plethora of concors featuring cars bearely driven and with questionable ability to really drive. TRhe motivation of these buyers and pleasure thyed erive is from the possetion and the showing, the being part of the club, as opposed to the hard driving.

You see this collector class also in new cars. How mnay new ferraris are bought by people who can really drive, or care to. A 458 is deigned to be amongst otehr things a highly stylised runabout, asking little of its owner/driver. In fact how many new ferraris are built "for the drive" Maybe the speciale was and most of those have gone to "collectors" Dont forget that there isa whole class of "instant collectables" in new cars, look at the rpemiums onm P1's and Laferraris. Enough rich people convinved to buy a limited thing creates a market.

But yes no market can grow endlessly. As to the price of Dinnos Lussos etc. People and markets come to reckognise things for what they are, and in this case these are objectively classic and classicaly beuatiful ferraris of which more are not being created. These cars reindex to their real values.

Now we see some 308(glass) and Boxers reindexing to a new collector value. Will they fall with a falling market, yes, but they will not fall to the relative price points where they were because they are now in a new "class"

Likewide we see older maseratis going up huge. Poeple and collecteors rightly realise thata 3500 or Ghibli to name two are close to or every bit the equal of a period aston or ferrari, theyse cars are now reckognised and going up, they are reindexing up the staus ladder as they should.

Alafa Giulettas maybe are way too expensive and overhyped at 75-100k. But try restore one to a condition we woudl really like, ie superlative and that is the price.

Booms in classic car prices save a lot of cars though value increases/restoration. As car lover I think its great that market forces save cars. Those glass 308's fetching big numbers, a few years ago they were tatty cars, now they a re redone and perform betetr than showroom, thts great.

So my prediction is this auction season we will see some cars fetching higher prices, they are reindexing to a new place. The big names SWBs etc are in the strtosphere and will stay there, a lot of otehr stuff, well the balloon is deflating and will fetch 5-15% less than last years peaks.

As to crappy cars sold by dealers with shiney paint, well thats what happens when peopel buy cars on name and not to drive. If you know what youa re doing there are plenty of gems out there, and there are still plenty of objectively great calssic cars to buy that are still not yet "names"

 

You make some good points:

Dislike:

-Having to pay more for cars I love
-Not being about to afford cars I could have easily bought a few years ago (when I had other priorities such as buying a family house etc)
-Worrying about prices falling (not something I even thought about when I bought my Dino in 1998 for 37k GBP!)

Like:

Many cars are in much better condition now when you see them. Lots of cars that were 40k 15 years ago might be 150k now but have had proper money (50-100k) spent on them to put them right and it's nice to see 40 year old cars looking like new and with original bits back on (additional spoilers and alloy wheels are mostly gone). I remember when I used to go to auctions you used to get a lot of dross which could cost you more than the car was worth to put right but wouldn't materially increase it's value. You see beautiful Fiat Dinos and Jensens now, where as often these were rust buckets back then

 

the guess is the car markets are in a pause for a while, with all the stuff going on in the world of currencies and commodities ( eg oil selling at 60% below its' highs ) the aggressive bidding should show a slow down

 

We've been talking about this bubble for almost 2 years. So when is it not a bubble anymore?

 

Bob,

It took two year but Scottsdale seems to beshowing weak Dino sales
http://www.ferrarichat.com/forum/206-246/470730-dino-auctions-scottsdale-2015-a-4.html

 

there is no Ferrari bubble... the elements of a bubble are not present... there is more to a bubble than advancing prices... those addressing current market conditions as a "bubble" do not know the elements that a bubble must contain... there are more resources held in reserve than at any time before in history waiting for the new financial paradigm to materialize

prices have been advancing, there is cause and room for prices to pause or show being soft compared to previous years... it's only the flippers, speculators, and posers that are antsy
when they cannot immediately turn an instant profit

the world currency exchanges are getting hit hard, which can create temporary slow down
until economies, central banks and governments realign themselves to move forward again

 

What is the new financial paradigm people are expecting ?

 

Good question.



A new paradigm is a new logical framework for understanding a situation. In the financial markets, a new paradigm refers to the shift in the underlying economic rules and factors that affect the markets.


How it works/Example:


A new paradigm can apply to a shift in any framework or context: from technology to political order to economic systems. For example, since the mid-twentieth-century, the economic paradigm was characterized by readily accessible and affordable credit, fundamentally open markets, and the value of the US dollar as the first choice reserve currency around the world.

Indeed, debt has proven to be an efficient method for companies and individuals to leverage and improve the value of their assets. The strength of the US currency has dominated most debt and equity transactions. Utilizing fundamentally open market principles, the capital markets have been largely self-correcting, and, as a result, minimizing the need for restrictive regulations. The discipline of debt and the free open markets have yielded unprecedented sustained economic gains. From an economic perspective, most observers thought that this paradigm was good.

The possible new paradigm suggests that there is a lack of regulation, an overuse of debt, and a fall of the dollar as the dominant currency. Additionally, the precipitated economic instability, losses, and a restructuring of economic power across the globe suggest changes from the original paradigm.

Therefore, while it is still early to identify all of the characteristics of the new economic paradigm, it is clear that it the new paradigm will involve an expanded role of new international markets as the major players in the world economy, an increased role of government in the regulation of domestic and international commerce, and a more sober use of debt and equities in financial transactions, especially involving the securities markets

 

Great points.

I just have a simpler reaction to what I'm seeing as a bit of a breather in the appreciation: it speaks pretty well of the vintage and classic car market if we can have this much turmoil in the world and the worst this market experiences is a bit of a pause.

 

the market seems fine to me. whats everybody whining about?

 

I think there are many people wishing we could go back to 2003 pricing levels because then they could be the ones making big appreciation. I think we are not going back to those levels.

 

+1. A point that's been made before (at this juncture any fresh ideas in this thread will be rare!) but worth reaffirming: the current collector car bull market actually grew out of the darkest days of the '08-'09 financial crisis. Securities and real assets of all sorts were in disarray, but collector car prices merely softened, gathered strength, then soared.


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....thanks for the laughs Ladies and Gents, it's been a good read so far, informative and entertaining.

 

I can't tell you if the classic car market is going to go up or down tomorrow. I can't even tell you if the next 25% is up or down, what I can tell you is that decades from now, the stock market, your house and yes your cars, will be worth many multiples of what they are worth now.

One of my favorite books about one of the greatest Ferraris ever is "Ferrari 250GT SWB, the definitive road car" by Ken Gross. In his introductory remarks written in June 1985, on page 8 he writes "...in late October 1977 ... at that time SWBs were priced at the $20-25,000 level ... today prices for SWBs are five to six times higher ..."

My point is, that Ken at that time I'm guessing that Ken might never conceived of prices where they are now ($10m and up) and yes I know there was a period of significant inflation between then and now and yes I know we are probably in a protracted period of lower inflation, but the inevitable is that the trajectory is higher prices over a long period of time.

The other reality is that whether we like it or not, these cars are assets and are a store of value. Whatever pain we and others may or may not be feeling in the current economy, the truly rich are only getting richer and there is a finite supply of desirable things to buy. I guess what I'm saying is that time really will cure all purchases and that if you have the luxury of having a long enough view then you will make money (at least in nominal terms) in the long run.

Don't break the basic rules though, buy what you love and remember that these are things that no one needs, so don't borrow money against them or you may forced to sell at the next low, whenever that is.