For what its worth here is my outlook for 2015. Classic car market: Outlook for 2015 » Le Monde Edmond
[QUOTE Very valid points made. Selling his entire collection......has this been mentioned here on Fchat anywhere? Maybe the End Is Near? Recall he sold his housing business (350M) right before the crash. Savvy/smart/ill/divorce or just bored? Not many European pieces, but my gawd, what a collection. Thoughts? Jack
For me the whole market thing is only important in that I would be able to afford more if it comes down. My three classics are part of the family and get driven and will be so until I am too old to drive. I just one more Enzo era Ferrari and then would be happy but prices have out priced a successful neurosurgeon
That is a scary thought and development. 'Out-priced a successful neurosurgeon'. Another data point that has me thinking this price momentum is in no way sustainable.
For those interested in Ferrari and how they fare to economic cycles- one of the best articles is from Mark Shehaan written in 2013 January. Revisiting Ferrari?s Cycle of Booms and Busts
The only thing Michael Sheehan left out was, more money around the world means more wealthy people chasing a fixed number of Enzo Era cars. Demand out strips supply, prices rise.
Fair enough. But you know this can work against the market one day too. Do you how the demand side is financed? I bet you there is leverage being used. And a lot of leverage. The problem is that nobody also know what exactly the demand side is in terms of owners. Collectors? Investors? Speculator? Funds? Bankers? This is what worries me. The demand side is full of people that are not collectors. When IR rise down the road and prices turn you have the reverse being created. A huge supply with the market being hit with cars being sold - Enzo era cars. I can see this happening - a kind of 'grey' swan event that is not being forecasted by anybody right now.
The recent oil price crash may start to take a toll on impulse buyers. It will be interesting to see if this factor begins to manifest itself at the auctions after the holidays.
Can someone please name one "fund" that is investing in collector cars? I know from experience that typical private or institutional equity players won't look at anything with less than a $10MM equity investment on the extremely low end and have investment committees to whom they must answer that want to know how they will achieve their IRR. At a minimum they look for 1.5 x their money. I just don't see how they would sell a vintage car to those that sit on their investment committees; this sounds like country club stories to me. Could anyone also tell me what purchases they are seeing financed other than possibly the very low end of the market where buyers require financing to make their dream purchase? True there are speculators in the market, as there are with any rapidly appreciating market, but I don't think they are dominating the market. While I don't see the market continuing its double digit and stronger growth, I do believe that current pricing on quality and desirable examples are sustainable. The supply side is finite and the demand side is clearly growing. I know of many of my contemporaries that love cars and are coming / have come to they age where they have the means to make substantial purchases and believe many cars of their youth have been underpriced for quite some time. Please let me know if anyone has any evidence to the contrary.
cnpapa24, you say it well also. The demand side this time around is far more complex than prior cycles. It doesn't mean the cycle can't happen, it does mean its more nuanced. Like with most things in life, generalizations are probably dangerous.
If the market is truly dominated by speculators that have no interest in keeping their cars long term, a correction will occur. In a market like real estate, when demand and values increase, supply increases and overbuilding occurs. Even at these elevated prices, we have not seen a rush for long term car enthusiasts owners to cash out, which is the only way supply can increase as they are of course no longer making these cars. As long as the demand and supply side remain in check, the market should stay stable. If a global economic market event occurs, cars and other assets will likely adjust accordingly as people will be hesitant to spend.
The high end of art has outpriced us all for a very long time. The real enzo cars + supercars + a few other collectible models are now in a different asset class.
Or when the Saudis finish playing with Putin we may see a swing in oil pricing, an inflation uptick and tangibles more valuable than paper
i dont think there is that much leverage being used to buy classic cars. i think that there are a lot of people with enough money, who like to buy things - wine, art, cars, real estate, etc that are NOT financial instruments. they look at the various stock markets and wonder if THAT is a bubble, and then they say to themselves that at least with these other categories, the market can drop but at least they still have something. i only agree partially with edmond. the supercars will rise. but i also think the slightly 'lesser' cars will also rise. the reason being simply that most people cannot afford a 250swb or the like, but may have always had an interest in something vintage, so those buyers will cascade down the value ladder and land on a daytona, or a 512bbi, and maybe ultimately on a 512tr. each was built more than 1000 times but that is still rare enough that you dont see them every day, and interesting enough to attract buyers of automotive talisman. their prices may not soar, but they will hold their own, and might continue to rise 5-10% per year - which still beats the hell out of most fund performances this year. as much as i would like to have a repeat of the 90-92 tumble, i just dont see it the same way this time.
