I don't see that... I saw plenty of c quality 300l gullwings/roadsters selling for 1.4-1.5mln in 2013-2014 that would not sell for more than 1-1.1 at the hammer before paying a 10% seller fee today.....
This is sound analysis, though I would argue the impact is even less important. There will be no pull or change whatsoever from the allowance of importing the cars physically. In fact, it is the antithesis of the rationale for actually buying the cars in the first place, which is to keep assets out of China. Chinese wealthy have already setup the necessary legal structures overseas to make their investments, mostly real estate, of course. The investments are not what I would call "smart money"... they are simply finding areas to deploy capital out of the reach of the government. Many of the real estate entities have not been seeing additional capitalization (ie funds flowing in) as Chinese wealthy have had major net worth setbacks (and more on the horizon) from a rapidly weakening domestic real estate market and zero confidence stock market (propped up by the government out of desperation). If anything, the flow will be the divestment of some foreign assets as they start to repay loans held by banks against their real estate and stock investment holdings, and reduce their "investment" spending overseas generally. The clear global catalyst for asset devaluation is China's slowdown. This is happening real time.
Aren't you ignoring the possibility that in a country with 1.4 billion people there are folks who are both rich and who love classic cars, that would actually start buying them because they can now build a garage in their house, admire them, drive them and enjoy them every day like many of us do with our cars?
Notice that all of these statements are hypothetical arguments as to how an asset "should go up in value given x circumstances" These aren't even etched in stone and people are including them as reasons to which an asset should go up in value. None of these statements describe anything inherently valuable to the car itself. Which would be for example how the car drives/performs/looks in order for a buyer to want the car. Which by the way are only factors that a real motorhead cares about, not the day to day citizen. This is not gold we are talking about here. These are cars. If the world economy does slide off a mountain, (which looks like it may happen) do you really think people will accept a car as payment for anything? Or have any desire to go and buy it when they're near broke, or close to it, but just getting by? Especially when alot of people on the planet really don't care about them, they're simply transportation. "Hey John, I'd like to buy your four bed-room down in Florida, I don't want to use my money to buy it, but I do have a Ferrari I'll give you for it" "I don't really like cars, especially flashy ones, and the place i'm moving to doesn't even have a garage. Some cash or gold would be nice" The naivety is mind-boggling
I'm no economics major, but if 20% of the world's population are suddenly allowed to buy and import classic cars, that might increase demand which all things being equal (i.e. cars have no more inherent value than they have now) prices should rise. This is a thread about bubbles or lack thereof. I think a potential material increase in demand is relevant to the discussion and I'm not sure what is naïve about the thought process. Regarding your example about someone not taking a car in exchange for a house I'm not aware that that has ever happened so not sure it is very relevant. There is no doubt these are assets that no one needs and that it true of all collecibles and in a doomsday scenario that is true of almost all assets, including cash, gold and 4 bedroom houses in Florida.
Indeed, but only if they actually want them. Which nobody has any proof of or any way to show that a large part of the chinese population does in fact want them.
Absolutely, which is why I had written that it "might" increase demand. If no one in China loves classic cars (hard to imagine given the car culture I witnessed when I actually lived in Hong Kong) then agreed it would have no impact.
i dont think so because the uber wealthy already buy the cars and leave them overseas (London, NYC, Vancouver, LA). Even more important, many of those who bought will start liquidating as prices erode and as their own wealth declines. Same with other bubble assets that increased in value because of this same cash parking strategy. Look at Japan. Large nation (relative to global economy at its time, just as relevant) in the 1980s that saw tremendous value creation, and strengthening currency. Japanese "investors" flowed that money into other currencies and other assets, helping drive a number of bubbles. Those bubbles popped. Some badly. China, for all the talk of its dominant position, is not so dominant (though highly important). It has anywhere from a quarter to a third of the number of billionaires as the US. Expand to include millionaires, and US dwarfs it even further. Now take the number of recent billionaires with limited liquidity and questionable true wealth (tied up in companies and assets of highly uncertain value). Layer on a government hiding true growth figures and fearful of its populace should they not be able to generate enough new jobs... and you have a recipe for a much less stable base of wealth. The point is that ultra wealthy Chinese buyers that would want to buy to park cash have already done so, and changing rules for imports will have a tiny effect. The vast majority of Chinese buyers of this class of car would be for investment purposes anyways, not use, so having the cars at one of their foreign properties won't bother them much. For use, China's infrastructure and pollution is already so poor that any widespread use would be limited. So economic instability in China, collapse in Russian wealth due to oil prices, and in the USA a stock market that has been flat/down for months. Europe must be much bett... oh... As these auctions soften, at some point psychology will shift from anticipating $200k mondials in our future to wondering how low they will go.
My perception of the market in the simplest of terms It's 1989 and I'm watching the San Francisco 49ers go on a tear. But here is the skinny. Jerry Rice and Joe Montana are both wearing dealer shirts underneath their jerseys, the cars are the footballs, and there is only one slow defender who isn't paying much attention to rice as he's catching 80 yard bombs at the 10 yard line, then marching in for the easiest of touchdowns. Only it gets better. Rice continues past the endzone to the wall as the fans celebrate. He then, in many instances, heaves the ball all the way back to Montana at the other endzone, and everybody, *cough, auctions* cheers. And the stats are being recorded for both throws, and both are being counted as touchdowns. The funny thing is that nobody is stopping for one second to ask the question. Can Jerry Rice really throw a football that far?
I think you make a good case and this is the traditional "the dealers and auction houses are pumping up the market" argument, but I don't think it's as simple as that. Maybe this holds true for muscle cars and you get your 30 seconds of fame from bidding on TV, but over the last weekend the reality is that some real people paid some big $$$ for real cars.
Its interesting reading posts in this thread as its been going on for the last 3 1/2 years. There are of course the guys in the "this bubble will definitely burst-I just don't know when or likely soon" and the other guys who say hang on a second " I don't think the prices will drop as there is a limited supply/number of good "classics" and the number of people/markets interested is growing. I have to confess that personally I've have been in the 1st camp since about 5 years ago. Despite my conviction and arguments that this bubble will burst, I am increasingly convinced that it won't happen. At least for significant, low volume "classics". Of course as someone has already stated, at lot of people in the last couple of years have been pushing prices on not so significant or low volume cars- and I think those may have a correction coming, although by what degree, haven't a clue. However true blue chip classics I am now convinced won't be affected. In the last 10 years I have met countless people/collectors who have from modest to significant collections, and the consensus is if prices on these blue chips go down, they will just buy more of them. I know I would and will. The classic car world has become such a lifestyle for many people with countless events, shows, races etc which frankly most of them love. So why give it up by dumping your collection? Furthermore many of these people have so much money that its irrelevant what the prices do, they will still accumulate and (occasionally) sell where necessary. I'm not saying that the trajectory is a vertically upward one on the prices for all cars, and there will be some up and down movement(mainly due to the inherent variety in condition of classic cars, as well as perhaps some fad or favouring of certain types of cars) but the graph will continue to tread gradually upwards over a period of many years for the blue chip cars. No one of course knows for sure, about anything in life, however that's my take at least for what its worth......
the example you give of somebody putting his entire net worth in a car with the game plan of then swapping that for a roof over his head is an example of very poor financial management and decisions. people make horrible financial decisions all of the time, however I am not sure how that is relevant to the car market past, current, or future. somehow I doubt your average buyer of a 250t swb cal spyder for $16mln finds himself in the circumstance you describe above. no offense but your example seems a bit goofy and off topic, I would just be a little less quick to be assuming all on this thread are naive as there are some fairly savvy collectors on here
I don't think it's goofy or off topic at all. I've heard people on here over and over saying that people are buying these things as investments/hedges against inflation, etc. Despite the fact an overwhelming percent of them are being passed back and forth between dealers. The very act of expressing this shows that for whatever reason, people will believe that these things are still going to be worth a boatload of money even if push comes to shove. Go back a few pages, it's everywhere. Another assumption being thrown around is that with the increasing amount of people in the world demand will go up. This is not a new insight, or an insight into anything inherent to the car itself, and I'm pretty sure most peopleon the planet are smart enough to know that our population continues to increase. And another assumption within that assumption is that with the increase of wealthy, there will be even more demand for classic cars. There are a great deal of wildly wealthy people that could care less about them, and just want the latest and greatest Mercedes, BMW, etc. In fact, this is probably the majority. I know families first hand with net worths of 10 million all they way up to 200 million and one in the billionaire bracket, and they've never owned a single one. They just drive their S classes and 7 series.
There are over 200k people in the USA alone with net worth of more than 40 million bucks. And that's just in the US and I'm not talking about the "lesser" rich who can also have significantly elevated purchasing powers to buy things like classic cars. If only a tiny percentage of these people, say 2% decide they want some nostalgia and want to buy a nice classic that makes 4000 people. Do you think they will even blink if they decide they want to buy a 4-5 million buck car? And remember this number is only in the US and I'm not counting the lesser "rich" as I said. How many pre Enzo cars in total did Ferrari make? And how many do you think are "available" in any year for sale? Pretty small number comparatively to potential buyers around the planet. In fact don't assume that there are That many blue chip motors of all makes still around and available compared to the buying power of the world..But you'll probably tell me this is too simplistic maybe...
Not at all. All I'll say to that is that you are assuming that everyone in that pool wants an Enzo era car. Which may or may not be true. The real secret to the 90 degree increase in price is 0 percent interest rates from the fed IMO. Jerry Rice, Montana, and the cheerleaders are just the sideshow to boot. Once they're gone, so is the market . But wait, there are usually a few of the dealers that are greedy enough to stay until the end, bag in hand Carry on..
It is too simplistic. Remember for every million dollar car there is a counterpart in fine art, and a counterpart in real estate, and yet another in aircraft, yachts, etc etc. Remember also thst "net worth" is often very, very highly levered to both debt and lifestyle. Someone with $200mm in assets and $160mm in liabilities will be given credit as having a net worth of $40mm. Problem is that asset values can swing tremendously while your liabilities hold relatively fixed. Thin about how many of those $40mm+ net worth individuals are athletes, actors, and entrepreneurs. Think about how many hundreds of thousands or millions of individuals in China, for example, had their assets erode, likely causing at least some to now be net worth negative. Most of the "wealth" creation in China over the past few years has been due to domestic stock market gains. Now that their central government is intervening lets see how that growth trajectory plays out. 2007 and 2006 had millions of people in the US gain millionaire and multi-millionaire status on the back of property values. Debt fueled the "wealth" and spending but it isn't good fundamentals. Many $40mm+ property developers and banking entrepreneurs were completely wiped out. Supply and demand a few years ago is no different for these markets than now (I am speaking pre-crisis). Russia and Europe are worse off, the US is net neutral, and China is now decelerating. So what, other than speculative forces (which we see discussed ad nauseum in other threads where people talk about getting in before prices go up further, and about how the XXXX model is next) is driving such incredible growth? I am relatively new to this thread (going back months). Bubbles always last longer than anticipated but doesn't make them less real. Pointing to how old this thread is as evidence of no major bubble, is like people in the middle ages saying the earth is flat and arguing no proof was forthcoming that it was otherwise. During the tech bubble there were traders who called it too early. Same with subprime. Doesn't make them less right or their warnings less valuable.
I agree with this. The supply side drivers will be materially influenced by how a downturn affects the overall assets of the classic car owner. The owners of the blue chip cars are wealthier and typically more diversified investors and are less likely to have to sell their classic cars in a downturn. Lesser classics are more likely to be owned by people with more exposure to their standard of living in a downturn. These people are more likely to have to sell a car (at the new lower market price) in order to minimize debt, pay private school tuition, keep their business afloat, etc. Sent from my iPhone using Tapatalk
Did you not see the amount of cars for sale at Monterey?? If the sentiment amongst owners is that the price will hold or go up, or they aren't interested in selling as you say. Then why is the supply of cars for sale continuing to increase? A Ferrari bubble? Here's a $415 million test
I wasn't suggesting that the owners of the blue chip cars aren't motivated to sell a car, in whole or in part because of value run up. If the broader markets turn sour these owners are less likely to be in a place of having to sell their car in what would be a softening or deflating market. Sent from my iPhone using Tapatalk
I think what you are missing is that not all collectors assume or think prices will go up. Many of these collectors even if they think prices are high and won't go up might still be buying. You might think that is counterintuitive but if you are building a collection over many years and plan to keep it for many generations you often buy not only based on pricing but also based on availability of particular models that you want in your collection. So if you are a serious collector and there are some super rare models that just come up for sale once a year or so many of these guys will buy when a great one of these rare models come up, even if they think overall prices could be down to flat for a few years. Do you really think Ralph Lauren, Jay Leno, Jerry Sienfeld are simply speculating on short term price movements and will be dumping their collection when the first 25% price drop happens and they can't trade in for the 4 bedroom FL condo ?. I can tell you I know more than one collector that has a collection in the over $100mln mark that already has provisions in their will set up to set aside money to basically create a museum to display their car collection after their death and to make sure the cars are never sold. I think most of your comments and thoughts are based on some of the newcomer speculators who maybe just starting buying some stuff in the past couple years assuming/hoping their is some easy money to be had, and sure I agree many of these people will likely find out nothing is ever that easy for long. Sure there will be losses, there likely are already losses despite the newspapers headlines of record new highs. However, the fact that there will be some speculators with losses is not the same conclusion to say there must be a massive car crash where the world ends and every collector gets out with massive losses. I think the reality of the car market is that it is fairly similar to many other asset markets. There are up and downs, highs and lows, period where cars move all together, period where they move in different directions, some smarter savvy value buyers, some clueless momentum buyers etc etc. Its fairly similar to many other markets and it will survive even during down periods which I think everybody knows will happen at some point. I mean if a 288 gto which was 700k in '08 and highs of 2.5-2.7mln 6 months ago, if a car like this which has seen huge appreciation trades for on average 1.7-1.8 mln for the next 6 yea period and then went to 4 mln in year 2022, would price movement like that if it were to happen mean a bubble burst? Sure the guy that bought the high at 2.9 and then needed cash and sold at 1.8 lost some cash but so what thats normal ebb and flow of any market...
Agreed, but that will not matter. Almost all of these high production cars are sitting at dealers, so the market softening or deflating will matter. They will either have to sell for what the actual value is or turn them over to the auction. Once those prices get recorded then that will reset the bar. Or they could hold the car for another 20-30 years for another price surge and pay the bank interest on hundreds of thousands of dollars or millions of dollars in loans. I don't think there pockets are that deep. These guys are not in it for a long haul
ok so you might have circumstances where some dealers loose some money on some of their inventory. this is generally not a new or unheard of phenomena in american capitalism or global business, how is this a long term predictor that a market needs to crash and burn and put every car collector on the streets begging and homeless ? I think there is some basis of truth little pieces of it behind many of your thoughts however how you put them together and get to a conclusion is not exactly making total sense, remind me very much of Peter Schiff.
Are blue chip cars sitting at dealers, owned by dealers? I think not. While that may occur in some instances, I think it is the exception. Blue chip cars may be sold by dealers but on consignment. I can see the dealer pinch impacting the lesser collectible market. Sent from my iPhone using Tapatalk
of course what you say is correct, the dealers that have check books to play in the very deep end of the ocean are very very savvy players... the talacrest of the world are very seasoned big boys, they were born at night but certainly not last night.... so Joe Smith highline shop in LI goes out of biz for buying too many 87 turbos and a few too many lamb contouch cars... again who cares and how is that a crystal ball into the stability or lack there of the high end collector market for the next 20 years ? I simply don't get the point he is trying to make...
