I agree. Also consider back then there were basically 2-3 true geographic markets for these cars: Europe, USA, Japan. Today, how many? Many many more. And the number of people who can afford these cars is going up. And they ain't making any more either.
I think this is an excellent post from a informed member, based on your car collection I assume you are fairly good with finance and economics. However the deflation chart over the last decade in Japan in regard to the MKT and RE I fear could be a precursor to the USA. I think you can make a case that deflation hits and all assets aren't multiples higher in decades from now. I think you can make a case that in 10 years RE is worth the same as is the SP 500, I think you can make a case that in 20 years things are flat also. I have no idea what is going to happen, but I'm nervous.
But I think that's the whole point: there are ups and downs within every long term rise. Over time, the nominal value of these assets will rise but there will be peaks and valleys. How you do on a long term average over other asset classes DOES depend on timing the peaks and the valleys of specific sell and buy times, respectively. I don't know what's going to happen either but I don't see people abandoning classic car purchases any time soon. That doesn't mean that we won't see a leveling off or anything like that; only that it's an established asset class with a growing number of buyers. Supply and demand will set individual prices but it doesn't look like there will be a lack of qualified buyers for the foreseeable future.
If you look at the macro picture, 83% of the global equity market cap is currently supported by zero interest policies, over half of all the world's government bonds have yields of 1% or less, there is now $7.3 trillion of negatively yielding government debt in the Eurozone, Switzerland and Japan and 1.4 billion people are experiencing negative real interest rates around the world. There is a huge lust for yield. Buying a collectible Ferrari that might go up 5 or 10% a year = huge home run.
All those points are the reason I feel collectibles will have a serious correction. I also feel if more then half the people are buying these cars strictly for return we will see a serious correction. As to your point the world seemingly is entering a deflationary period ( they last for long periods of time) IMHO and how can cars go up any more in this horrid financial landscape?
bubbles pop when the perceived riskless asset becomes risky - no question the bubble is in fixed income and treasuries - which bodes well for hard assets. also many of us forget but a bubble is something that pops and NEVER comes back - like tulips. I don't see collector car prices going back to 2003 levels and staying there. so if anything most of you who are calling a bubble are really saying we say me more price volatility. I find it hard to believe more than half of people are buying these cars for price appreciation. Can you say where you got that from? amongst my immediate network 90 percent of the cars being bought are buy enthusiasts who intended to keep them.
And if I understood correctly, with growing global wealth and a finite supply of collector ferraris over the long run prices can only but increas, even if there are short etrm corrections. The danger is of course buying at a peak and then waiting 10 years or more to coem back to purchase price, plus maintanance. But if you buy good stuff(not necessarily the current favorite "investment models") then you should always do well long term. Fact is a clean 328 is going to be a 150k car and then 300K just a function of when, and the cost to get there. Whereas a 360 may be the modial of the era. But then look at GT4 prices. Probably when cars are computer driven, all past and current ferraris will eb appreciating assets.
I get that, but if unappealing assets get more unappealing and deflation starts to grip the global economies it will have a serious negative impact on hard assets. If the Franc continues to be negative, if the EU does and then the US follows I can almost guarantee that prices of collectable F cars will correct. I'm a bit bearish on these cars, but what the heck to I know?
Well, to me the problem (anyway to the lucky owners of these beauties) if you sell what the heck are you going to do with the money? Putting it on a bank is as useless as buying a similar car back. Real estate? Too risky as it is a local and not moveable asset. Anyway to me the fun in owning is driving them and the idea that they won't depreciate that much makes it even more fun. I bought my 275 some 12 years ago for 1/10th of the current value.....driving it was 10/1 worth the fun. Ciao Oscar
looks like the NHTSA is looking to mandate automatic braking / crash avoidance nannies...... pick up a car that YOU actually drive while you can
And this is the point. When/if the bubble corrects, brokers or anyone who bought with a 'trader' mentality are the ones who get burned. True enthusiast/collector/connoisseur who will own the car a long time will do fine. The data is black-and-white over on the 'prices from the golden years' thread: even if you bought at one of the peaks, the economics push into the black over time.
Yes, I think this is the crux of it. As I said a few posts ago, I don't know if the next 25% is up or down, but over a decade or several decades the prices are going to much much higher. I don't think we are going to enter a deflationary period as the central banks will do whatever necessary to keep inflation high, including continuing to print money, which makes hard assets more desirable so we have come full circle.
clean CS are materially above sticker prices and the car is only 10 yrs old! im def a bad person to take advice from - ive bought 14 Ferraris in 10 yrs and I still own 13 of them. I will never need to sell nor will I ever want to sell them. Hopefully my great grandkids can enjoy them in 70 years or whatever. I do think hard assets will continue to serve a healthy utility function in portfolios for the next decades. zero volatility doesn't exist anywhere.
I think you're confused about the concept of "yield." A vintage Ferrari has a negative yield, because it costs money to maintain, store and insure it, and it pays you no income. It may gain in value, but it has a negative current income. Interestingly enough, I agree that there is a huge desire for yield among investors, but obviously cars aren't the way to get it.
Luxury automobiles beyond 2025 will be nearly autonomous (self-driving). Mandates will be global for Vehicle to Vehicle (V2V) comms and GPS guiding for "safety and emissions" purposes. Buyers will demand more computer control with plenty of apps. I think those owning the classics could open museums and charge folks to see them!
You're both right, Roma is thinking along the lines of Yield to Maturity (or ultimate disposal as the case may be), while Donv is thinking Current Yield. Just semantics...
Oh no. Damn, I thought I had this figured out. I'll call on my friends on Wall Street tomorrow and tell them their zero coupon treasury bonds have no yield.
The best Yield is the satisfaction of a perfectly executed downshift. (sorry could not resist). Fascinating discussion. Thank you all for your informed perspectives.
yield implies a return of some kind within a period of time, whether it be positive (gain ) or negative ( loss ) ref to zero coupon bonds... can be equated to buying a F car with the difference being the bond has a contract attached to it specifying the purchase price and surrender price (sale) at maturity... like the F car there is no money exchanged while each are held... the bond contract specifies a surrender price which is higher than the purchase price... the difference ( gain ) can be expressed as a Yield or percentage return for the time held ...while the car's sell price and time held are open until liquidated... estimated yields can be calculated based on current market conditions on both the zero coupon bond or F car while no actual money has been exchanged...
inverted yield implies negative return, if one looks close enough it may be possible to find that prices have declined in a particular slice in time... buying new is probably the best example of negative yield / depreciation... go to Hagerty valuation tools, the do a good job of showing price over time
