is the bubble due to burst?

I sure hope the bubble bust soon. I would love to have my 330GTC back at the same $60k I got it for years back.

 

What you have now are a lot of people buying cars not for the love of the car but because they believe it's a hedge against inflation or could make money.

At some point they realize that's not happening anymore and the dumping begins.

The more speculators in the market, the more risky the market becomes.

 

@parkerfe, good deal, a 330 GTC for 60$? What Chassis numer, when I can ask? Great car. For me they are still underrated...

 

I agree. Second homes and investments cars are the first to go

 

Do you really think so? I think its still love of the car first- at least what I see in this market.

 

I am not very plugged in to who is doing what, but I haven't met any speculators, only car lovers who want to own stuff that excites them and pay for it cash and keep it.
We are in a cycle now where currencies are being devalued. For non $ currencies, they are getting devalued vs the dollar, for the dollar itself, we are in this spiral of printing more and more money and keeping rates artificially low so something bad may happen. If you are worried about this, then hard assets the place to be, homes, cars, art, gold bars etc.

I'm actually not in the doomsday camp, I think we muddle through these high deficit times, eventually come to our senses, moderate spending, get some inflation going and get a period of high growth which allows us to eventually get back to square. If you are in this camp, equities will go up, so will collectibles. So is it a win win to own collectibles. Maybe.

 

I agree - I haven't seen the speculators come in - the people I know love the cars and want to own them....second homes first to go depending where they are...

 

if anyone has real evidence of speculators in the market I would love to hear about it. wld be interesting for guys like joe s and Roy to offer a perspective. me and roma live in the hedge fund/private equity capital of the world and I can say I have zero rich friends who weren't car guys playing in the sand box. the most speculative thing I've seen is some 25 year old trying to get a 458 spider and flip it for a premium.

 

One thing you do see is a massive swirl of brokers. I was shopping for a Lusso last year and was besieged with people I'd never met 'representing' cars with no formal relationship with the seller. But those guys aren't running up prices per se, just skimming a fee.

Probably speculation is happening at the margins, but as I've observed in other threads: when and if prices correct, it is the speculator who gets hurt. The long term collector does fine. Plenty of evidence for this over on the 'golden years' pricing thread.

 

I think that's very well said and consistent with what I see

 

Evidence of speculators ?

1. How about the rise of so-called collector car "funds" that are set up solely to buy and sell collectibles (primarily Ferrari's) for a profit ? A fund raises tens of millions (or much more) to either purchase a specific car or several cars. They may hold the car for 2-3 years, never driving her, but doing basic maintenance, and then sells it for a massive appreciated price (theoretically). When a deep pocketed fund buys a car they are no different than an institutional investor buying a very large piece of property. What happens is that someone who wants to buy a car for $500K is always outbid by the "big boys". I'm not saying that many special cars aren't purchased by high net worth individuals, but that these car funds add another layer of financial instability to the higher end F car marketplace.

2. How about anybody buying an extraordinarily appreciated F car ? How about you ? You are the person who spent $425K for the F40 in 2009. Would you have spent a million more (ie. $1.425M) or better yet $1.9M (according to you in a private sale) in 2014 for your exact same car ? Is the F40 so great that its really worth quadruple plus the price for the same car ? Not to pick on the F40, but NO car IMHO triples or quadruples in value in 5 years without a significant element of speculation. To think otherwise is a bit naive. I believe that the person that paid $425K is more likely to just enjoy that F40 than the person that paid $1M+ more than that figure. I'd respectfully submit that many/most buyers TODAY (as opposed to 5+ years ago) are much less likely to use their toys as "drivers". These newer owners that have paid super high prices are more likely to be speculators. Do they appreciate, respect and love their new classic cars ? I have no doubt the answer is a resounding yes. But ultimately they pay the crazy $$$ with the expectation that their expensive purchase will rise further in value.

Bottom line is that where there is massive appreciation, whether RE, stocks, art, whatever, there will always be speculators. We may not see it so much on Fchat, but its there and so long as classic F cars continue to rise in value you will see more garage queens, less drivers, and ultimately speculators enter the foray.

 

car funds haven't raised much money from what I've seen. I cld be wrong but I don't know anyone who has invested into one.

If u aren't a seller u are a buyer

Yes I wld be buying f40s at these prices if I didn't already have one

 

And btw most guys who don't drive their cars aren't speculators. They're busy - they have 15 to 30 cars or more, 3 or more houses, kids, boats, jets, kids, wife, kids etc

 

It might be just semantics but if there aren't speculators there are certainly lots of investors. The way many people view classic cars has definitely changed - there are indices meant to track the market, classic cars are now talked about as an "asset class"(hard asset no less). I am no expert and just a casual reader of ferrarichat but I think one can see plenty of signs of this change on this forum too - you have the old school car guys who keep posting about driving their cars and how it makes them feel (the sound, the smell, the handling, etc.) and you also have others who spring into action when the discusion is about values, auction results, investment potential. I don't know if this is good or bad, if it's a bubble or a sign of the car market reaching a new level of maturity and acceptance. I agree with ttforcefed that the vast majority of the buyers are car guys on some level. The fact that you are a car guy doesn't mean, though, that the decision to buy a car is not driven primarily by investment considerations (going back to the F40 example, I'd buy one at 600k just as a car guy; at 1.5mm being a car guy isn't enough, I'll need some confidence I'll make some return and probably won't drive it as much). The classic car world has turned from a hobby, with a bunch of hard core car guys who just hoped to indulge in their passion without losing their shirt, into a collectable market with many more participants who have appreciation for cars but also expect a good return. This pushes values up, creates better liquidity but also makes the market vulnerable. What happens if the price appreciation just stops. Would 20 or 30% of the players lose interest after a year or two and potentially move into the new hot market?

 

"...What happens if the price appreciation just stops. Would 20 or 30% of the players lose interest after a year or two and potentially move into the new hot market?..."


One can only hope......!

 

I would say these cars were actually undervalued quite a bit and the rapid rise is really the market trying to find fair value. I think this market is more akin to the art market now... And I'm not sure this change in mindset will revert. This means the financial side does play some role, but does it mean it is the only role? I say no- people still buy what they love. As long as that is the primary motivation I think we are ok. I think a top level F40 is probably worth where the market is on them- what is the market for the other Ferrari supercars? Where is the market for special edition Ferraris? Seems pretty strong.

I agree we will likely not see a doomsday scenario- BUT- anything is possible.

 

Has any one examined which cars have come to market?
Are they predominantly from owners looking to cash out due to age?
From owners who can no longer justify keeping what is now a disproportionate part if their net worth in a single asset?

If so the supply would seem to be quite limited at this point.

 

My casual observation is its a mix of both and other factors like the owner is looking to move into something else but doesn't want to allocate new dollars.

 

There are plenty of speculators in today's market anybody who thinks otherwise is plain kidding themselves. They might not be buying with the intention of selling 2 weeks from now at a higher price, however there are tons of new comers to the car world that are only buying today because they have convinced themselves that its so great tot be able to look at/drive a cool old car they love and watch it go up in price. They might be a car lover sure, but this same person was not buying a few buyers back because they were not convinced that they could watch it go up in value. These are forms of speculators ,i.e. people only buying because they assume prices can only rise. Don't kid yourselves, the easy money out here has played a huge part of the rise of vintage cars just as it has in vintage wine, watches, etc etc. I think much f this speculation is actually more visible in cars under 1 million $$ more so than cars above $$1 million. Probably most evident in air cooled p cars for the 80's-90's. Like always follow a simple rule. watch the dentists, when they start buying something you know you are close to a correction. The biggest issue is people have lost track of what is really rare. People forget how rare a vintage f car from the 50's really is compared to other cars today people assume can only go up. For sure really special rare cars with history will likely go higher over very long period of time but in a short time frame 2-3 years its no more than a coin toss if these same cars are worth 25% more or 25% less, and anybody who thinks the odds are any better than 50/50 is kidding themselves in that type of short time frame after the rise of the past 5 years. A 25% drop could easily be nothing more than a very normal correction in an ongoing rising asset class.

 

I agree in that currencies are been devalued and what most people do not realize that is a form of INFLATION. Therefore fixed assets are going to be worth more and therefore real estate in the right market is cheap and a good long term investment. As for classics cars and these price hikes it is a combination of been undervalued for a long time, globalization, devaluation of currencies and to some degree the " sheep mentality". The degree which the sheep mentality has driven up the prices is the degree in which prices will fall barring a world wide financial bust which call them to fall further. Therefore I believe prices will fall but less than most of us want.

 

It's a little more complicated than this.

The cars/ art collectibles are finite, new millionaires and billionaires are not finite globally.

Trends would lead to being flat rather than a decrease or crash.

A crash is always possible, but it would tend be more on a world scale for a crash, similar to 2008/2009

 

The odds of a crash are pretty low, however it is just comical how many people have convinced themselves that the sharp rate of appreciation we have seen over the past 10 years shall continue at the same pace. The odds of that are probably as low as a crash. Sure important rare cars are probably worth more in 25 years vs today, but that rate of the appreciation likely can't continue at the same pace, and of course with a shorter time frame 1-5 years of course there can potentially be down years, there would be nothing unusual with that. Way too many people have convinced themselves that there can simply never be a down tick and that is just not logical.

 

Classic cars best collectible investment in 2014.

What goes up can come down. But I don't think we are likely to see a major correction or crash for some time. I think its more likely we are in the earlier part of the game. And this is based purely on one person's intuition and gut feeling. That and $1.00 will get you a pack of gum.

 

https://www.youtube.com/watch?v=jHwIWFZKfKw&feature=youtu.be

 

Agree 100%. I have always believed that there is a correlation between the overall economy/stock market and the price of rare cars. The US economy/financial markets have pretty much exploded since the meltdown of 2008. I'd also add that some of these "newly minted" millionaires/billionaires have made their riches in the financial World (post 2008) where I think we are seeing some turmoil. I think that things will accelerate rapidly if and when oil hits a strategic "crash" point. Whats that number ? $50 per barrel. $40 per barrel ? $30 per barrel ? Will the stock markets correct by 10%, 20%, 30% more maybe ? If and when this does happen rest assured that rare car prices will drop precipitously. I'd think that 08-09 levels will easily be reached. This is probably as low as it will get, but really who the hell knows. Granted the potential reaction of the collectible car market is total speculation on my part. What isn't speculation is that oil has dropped 50% per barrel recently. If the stock market reacts to another massive oil price correction (think 3000 pts. as opposed to the 300 pt. drop in the DOW today) then all bets are off. For the many many F car owners (like me) that enjoy their driver and didn't buy their car as a pure investment does any of this really matter ? Personally I could care less about a correction in the stock market, commodities market, etc. However, I do think that those who bought their F cars anticipating/expecting their car values to rise forever will be sorely disappointed. Does the person who bought a 360 for $75K impact this conversation ? Not really. However, the person that paid $1.2M for an F40 or $2.3M for a 288GTO or $3M for an Enzo might not be happy if they believed the gravy train was going to last forever.