We see this during many bubbles. There are pockets of bubbles everywhere now. People are now starting to pay attention. In the past, once people start discussing bubbles, they pop. Question of timing, however, is different. Usually they last longer than expected. I will put a guess out there for June 2016 Cheers!
Following the sale in New York of a Picasso for $160+Million,the media here in Europe are saying that.....There is so much money swilling around the world,partly to do with QE that investment in classic art,and classic cars will continue unabated.(quoteBBC money). I believe that is the case,and if the Chinese come on board soon,then I can see another massive hike in values,as there will be so many chasing so few,for so much.(To paraphase Winston !)
All the same sort of hoopla, references, and justification that were made during prior bubbles. I never quite get how people can't see it or stand outside the situation objectively, but I guess that is what makes great investors great. People were calling Buffet passe in 2007... 12-18 months later and everyone was clamoring for him and others to bail them out. History repeats because humans find a way to justify anything they can't quite understand. It is human nature. There are clearly multiple bubbles across multiple asset classes. Timing their demise is difficult, but it will happen and it will be pretty severe. In the case of the "used car market" (since it goes well beyond classic and vintage cars) this bubble is evidenced most clearly by people clamoring to acquire vehicles as prices rise. There is a sense of catching the wave before it gets too high (waves crash too). All the flipping going on, again akin to bubbles. New market entrants (Chinese investors, other investors not usually found in the automotive market) is another piece of evidence of a bubble. People discussing the bubble... another evidence of the bubble. I could go on but won't. Still doesn't change the fact these are beautiful cars and I think most buyers can easily afford to take the paper loss in this market.
actually neither art nor cars have ever responded to an interest rate regime like we've seen so far...if you look at charts that are available the asset classes actually display rather linear moves upward overtime. Its also very possible than things go up another 100% or more before it really feels speculative - go back and look at when the press starts referring to bubbles - its typically before the real moves....that and a quarter - just sayin
I would. I suspect the percentage of that deal against his net worth is considerably smaller than mine.
Is this thread still going? Guys go find some car or index to invest in as you are causing brain damage. This is painful.
I disagree because interest rate regimes are time limited. And forward rates are awful predictors of future spot rates. The result is that valuing assets off today's rates (or even off forward curve rates) makes little sense. Better to value off historical normalized rates, so those rates will prevail over time. Unless of course someone is okay buying high and selling low. We won't see a further big spike in value in certain asset classes because of real limitations on ability to transact (real estate and equity markets). For real estate the limitation is that values get dragged both up (from the high priced segments being comp'd vs. lower) and down (from the reverse). The lower end of many markets still struggle with affordability, and lending practices will no longer become as lax as pre-crisis, so there is less room to stretch. Luckily, the current RE market is pretty localized / regionalized (or at least within certain categories; global cities, regional markets, etc). Real estate localization in 07 was a fallacy because of the effects values had through CDOs and their ilk. Equity markets have some limits due to actual corporate performance and multiples. Multiples can be stretched but eventually get taken down w/real performance, except for when investors look past any quantifiable financial metrics (dot com bubble). That is happening now for some pockets (tech-related / app-related). Look, we can discuss "bubble or not" all day long and not come to an agreement. I worked on the side of "bubble now" back in 06 and 07 and I had the same view, just not in a professional context, in 00. My personal track record in identifying this stuff is good enough that I put my own money where my mouth is and happily so. The bigger point is, however, that most of the people here speculating on these cars and paying $600k for previously $250k cars, have sufficient financial resources to not be harmed from a mistake. This is different from the tech bubble bursting, when many retail (i.e., middle class) buyers were just jumping into that market... and got burned... and from the real estate crash in 08, where many people who should not have speculated in RE and had no expertise or business doing so, also got crushed. For those owners buying up these cars thinking prices will keep rising, they likely won't be in that much pain losing a few hundred grand or even a million or two, if they're buying high six figure / seven figure cars... Either way, they have some damn nice cars!!!
Why not buy from an owner? I have a 1972 Euro 246 GTS in Rossa Corsa with electric windows and Tan Seats and Black Daytona inserts just coming out of fresh bare metal paint, fresh chrome, and new mousehair, etc ready in 3 weeks. Only 401 European 246 GTS were produced and they drive completely differently than US cars. Image Unavailable, Please Login Image Unavailable, Please Login Image Unavailable, Please Login
I think that your tech stock analogy has more bearing on the guys trying to jump into the game by buying 308s and 355s for speculation at this late stage in the game. The guys buying the Daytonas and 288s aren't going to get hurt.
Thanks, Great question. Power comes on sooner to the lighter weight Euro because of: - Lighter weight because the USA have extra structure inside to support that second bumper post at all 4 corners - Euro Cams - Euro Distributor - Euro Low BP exhaust - Euro has No air injection for emmisions - USA hs R1/R2 spark retard profile circuit Because of this The Dino Compendium (aka Bible) prices Euro cars at a 20% premium
I actually agree (to an extent) but "get hurt" is kinda my point... they won't get hurt because they can either a) ride out a drop and/or b) just take the loss. The nominal dollar losses on a 308 or 328 are pretty small. On a 288... well, those can be halved in value pretty quickly (and it has happened before, a couple of times). Same w/the F40 (though much higher volume car, also more iconic). And this is coming from someone who would absolutely want to own both of those cars, and consider them the pinnacle of "early modern" / "late enzo" era Ferraris.... But an F40 dropping from a $1.xmm car to a $600k car is absolutely not out of the question. In inflation-adjusted terms, much larger drops have happened with that car. Same w/the 288... and same with any iconic car (air cooled Porsches, classic Ferraris, etc). You can't time the market to a great degree of precision, but you can generally identify overall lows and highs. We are at a high point, and I have a view that we will return to the mean, so to speak. If I had $1bn ... I would likely ignore the trends and just do whatever my heart desired... but if I cared about the values, or if the amounts were meaningful, then I personally would now sit back and stay out of the market until it cooled. I recognize this is just my view, but I will point out that the types of rationale in defense of prices today, look very similar to any typical bubble. There are "inverse" bubbles too... or pockets where values are significantly negatively impacted by overly pessimistic market participants or lack of liquidity. Similar evidence... when people are overly dismal about prospects of prices ever rebounding, and anticipating a further decline in prices after an already substantial correction. It all goes back to human psychology, herd mentality, and fear of being left behind (in either direction). I have zero fear of being left behind by prices that will continue to skyrocket... Will I buy an F40 if/when it returns to $500k levels? Probably! $600k? Perhaps! And can it drop to $300k? Sure, I have no clue... but to me it is directional and big-picture. The question is how long will reversions occur and the degree of the market(s) correction(s).
I will tell you right now that if the price of a good F40 drops to $500k, I will add a second one to my stable happily. If 288 GTOs drop to $800k, I will most likely buy one of those too. And I agree wholeheartedly that it could happen. Honestly, the only time I care what my cars are worth is when I buy them. My F40 provides with me the same enjoyment at today's value or half that or 1/3 that. I would love it if some of these prices came back down to earth so that I could easily buy more keepers.
If that happens to these cars (It could) we would be in a depression. Would you spend 1 million dollars on a car in a depression when all other assets could be bought for pennies on the dollar? Easy to say that when things are good, but when you look at your brokerage account and it's halved, your RE is 40% vacant, and your business isn't making money it's hard to be thinking about Ferrari's. The only thing that is going to bring the prices of these cars down is a horrible economy, bad recession, or a depression. If that happens I will be working my but off to keep what I have and looking for distressed RE and stocks. If MKT's stay stable prices will continue to climb.
Well, my investments are my investments but my cars and my cars. I don't spend money on any fun things other than my cars. I guess I would have to see what investable assets go down to and whether I want to forgo buying a 288GTO for my collection in order to purchase an investment. I think that one of the differences as well is that I own and operate a profitable company that makes makes money for me. I don't rely on assets for that. I know that's not the case for everyone, especially those that are called investment managers and such. There are a lot of reasons that I own high quality, valuable assets (I guess you could consider cars as those) and I am perfectly good with their value going up and down. Now, if I used those assets as investments in order to generate free cash flow, either through a liquidity event or ongoing distributions, I might have a different opinion on that.
Yes if MKS stay stable going up and interest rates stay same. But in 90 there was a big price correction in cars, prices dropped 50-70% for things like countachs and even more for F40's. The triggers may have been a weak economy, a mild recssion but the cause was deeper. We saw then as we see now, an investor class entering the car market and drivign prices, these are peopel who take a scientific view and have little intrinsic car knowledge.. Huge premiumns paid for all types of cars that did not make sense but made a market then, out he box 25 aniv countaches then, stick 599's now. We also saw in the early 2ks a huge ramp up in american muscle prices, the money was cheap and suddenly they becake a thing with "collectors". The runup in prices in both instances was also due to rarity of entire product categories. I coudl argue that analog cars today are no longer produced. Eventualy a market bubbles over, once the investment "collectors" start to bail, well its like banks auctioning houses in 09, too many sellers not enough buyers. Sure Dinos F40s 993TT's etc are great cars, but if too many come on the market too quickly the price crashes while enthusiasts aborb the inventory. Then over time the cycle starts again. Against this crash scenario is the movement of cars into a new asett class called motive art, that will slow any crash, althouh it may only be applicable to very specific cars. The other thing we saw in the 70's and 80's is that there were very few real prformance cars mde, so the older ones and the few new ones were a rare asett class. I could argue that the advent of the Tr spelt then end of huge daytona prices because once again you could buy a new car which offered that elvel of performance, and once enough Trs were built the market started to satiate again a small recssion as atipping point and voila. American miscle, yes those werte hot too. GM ford and CHrysler started offering serious new mucle, also satiated the market, plus muscle so easy to clone. Whats hot these days, charismatic euro cars. ie cars designed with a shape not dictated by legislation, cars that make a great sound, are lightish and mostly cars that are raw by todays standards and anologue. Thats why we see 997 Gt3s sellign for such a huge premium whereas a regular 997 is a used car. In time maybe manufactirers will catch on and offer stylish charismatic analogue cars, this will take price pressure of the older cars. Right now fuel economy regs, legislation and stubborness has manufacturers focused elsewhere. We know just from looking at a 458 that its possible to create a truly stunning seminal shape in legislative times, whats msiing is th r4est of the formula.. But if Ferrari offers a 4c tub with a F70 slylised body and say a masser V6 and a stick it eventualy going to affetc dino and 308 prices, add the TT and its pretty much a f40. So two things will make carsh, investor class gettign bored, seeing prices not rise a small recession to trigger things off and concurrently new product in the mold of the old. Happened before and can happen again. If the market were rational and driven by knowkedgea d enthusiats, then for example Ghibli prices would be far higher than they are and 3500 gts woudl have risen to their curren highs long ago. So yes the investor calss is pushign things, take them out of the eqution and a 600k F40 is certainly possible. V12 etypes woudl not be languishing below 100k. So far I see more investors piling in, no recssion and adearth of newe anlogue cars esp on the high end.
for the avoidance of doubt, I have been in this thread for quite some time. my position has remained...granted you are welcome to beat a dead horse as long as you please.
Yes,Ferrari Pete,I have followed this too. At some points, I begin to glaze over with Super Petes assesment of the marketplace,as I dont understand his convoluted ,personal theories.. I am sure he is a wize guy,but way over my head. All I can say is that here in Europe/UK .,and particularly RHD cars, today,not historically,not 80's or 90's (I was there and did it) I see no way that the market will be in decline for the next five years at least,excepting some major movements in global interest rates which seems unlikely in the short/medium term. There is no interest provided by the banks. There appears to be 20% increase in many classic cars,not just Ferraris,so ,no contest.It looks like a no-brainer.
