is the bubble due to burst?

Interest rates cannot rise. The US government has 17T of debt. If interest rose to 200 basis points to 5% for 10yr treasuries that would destroy the national budget. We are trapped now in a ever spiraling cycle of money printing and low interest rates. God save us.

 

+17,000,000,000,000 !!!

 

As a contrarian I have to agree. When Ferrari prices soar as they have in the past five years and Ferrari enthusiasts and financial professors of the market are saying we are in a new ( world) market economy which they support with financial statistics indicating that the Ferrari market is immune to world economic pressures a correction is coming. I believe as I did in 2008 (and two other market corrections before that) that again there is too much confidence in the car market. Gooding and Gooding Classic Car Auctions at Pebble Beach had two significant ( if not disturbing) no sales and a questionable sale. The 1966 365 P Berlinetta Speciale "Te Posti" that was heavily marketed was a no sale. A SWB was a no sale and the well known GTO was considered by many to be south of the market price. This raises questions as to the solidarity of the market. If the is so much investor money on hand I would invite rationale for the two no sales and the questionable sale of the GTO at G&G. If you own your Ferrari for the pleasure it provides my comments are irrelevant. However if your investment has increased 6 fold in 5 years it may be time to give your favorite car auction a call. In the end the market is not driven by statistics but confidence or lack there of.

 

The Buyers are getting pickier.

This article claims ~80% of these Ferraris are topped out and a pick in the C4 with room to grow still:
Will Prices of Vintage Ferraris Ever Stop Increasing?

 

So, the market cap for the 7000 Ferrari's would only be around $10B? In a global market, there seems to be a lot of upward potential......

 

The sellers are getting more difficult to please too. As I said on My Car Quest about the 1966 Ferrari 365 P Berlinetta Speciale “Tre Posti” at the Gooding auction in Monterey - "$22,500,000 should have been enough money to take this Ferrari home."

This Ferrari Should Have Sold In Pebble Beach

 

∆This∆

The value of collectibles will seem insignificant when the runaway train of ever increasing debt de-rails and crashes. Each of the previous declines were a result if a macro financial crisis. Bank failure, sovereign default, or some other event was the trigger. The number of vintage Ferrris or Picasso's will be irrelevant.

 

According to some experts, the next financial crisis may potentially be a currency crisis. Not only the US dollar but also other 'fiat' currencies, which is basically all the money in the world which was decoupled from gold in 1973 by Nixon. Historically Fiat currencies do not last more than 50 years. We are less than 10 years from this time. Money printing is so convenient that almost all governments in the past found it too tempting to suppress the urge to print money leading to hyper inflation and loss of confidence in the currency. When the collapse happens, money sitting in a bank will be worthless. Banks will collapse and they will seize the depositor's cash as it has already happened in places like Cyprus. We'll have to resort back to using gold or some other asset based currency to regain trust. While this somber prediction does not justify a limitless appreciation Classic Ferrari values it means that people should be holding on to portable and valuable assets such as fine art, jewelry, gold and of course Classic cars as well as income generating properties. The stock & bond markets will collapse with the currencies so keeping 100% of your savings in Wallstreet will not be the wisest thing to do. Why do I think the Classic Ferrari market will continue to rise? It's because most of Asia in particular Chinese barely know anything about these cars. They will soon enter the market along with other investors from the emerging markets.

 

Hard to argue with your points. I think the emerging markets are fast developing an appetite for high end luxury items. How can they not, it's a normal progression. The Chinese are now the top consumers of California Napa red wine. The ever growing rich Chinese are getting acquainted quite well with the finer things in life. Certain Asian countries and Brazil (6 months ago I would include Russia) are going to raise their interest eventually and warm up to the collector car hobby. Than watch out!

Geno

 

This post was started almost 2 years ago.

Seems like the bubble should have deflated or popped by now.

What am I not taking into account?

Is the "bubble" on a three year cycle of "being on the cusp of popping"? Four year? Five year? Six, or seven?

~Ciao and best!

 

you are being myopic, focusing only on a few models within a brand of cars, imposing the values that surround you, while ignoring the broad economic climate of the world we live in

 

Because if it is a bubble, bubble's always go on longer than most people would predict.

Personally, I'm undecided if it's a bubble or the "new normal" but inclined toward bubble. When it pops, no one knows.

 

It's no bubble., it is the new normal in it's metamorphous . It's a market firming up. Real world value (Global) is re-formatting. According to a quite serious Zurich based economist , the euro will be totally swiped off it's feet. Italy alone is drifting off the continent in debt - and each and every bank in Italy is bankrupt. None of those banks have re-assessed their real estate valuations and they can not pay the upcoming debt. Germany doesn't have enough money to bail them. And that is JUST Italy.
The normal and routine ''cash'' economy is drying up - and the currencies will have no where to go for safety. Everyone wants to peg into a fixed asset, that is ''real'', liquid, moveable, enjoyable for bragging rights alone. Bank Products continue to be devices manufactured by wiz kids on computers and for the good of bankers. ''Push of the button'' liquidation factors will continue to be viewed as a Casino game. There are only , likely , 2000 great cars in the world which will seek out the new money harboring tangible safety. I met with a heavy supporter of the Lemans Classic - and they said '' You guys just don't trust banks do you?'' Look at what is considered a ''blue chip'' cars now. It's a car that the investor doesn't even know how to drive. Much like art....... you don't have to ''like'' or even have an ''eye'' to be a collector. You just need money and a formula of investing in it. With the great cars, there is a formula that makes sense.

We have a solid decade ahead of the re-invention of the world, and with a couple thousand important cars existing, all of those will be sucked into the investment strategy of ''long term'' holdings.

Think of all the cars that we don't have because we sold to soon......

 

It may well be the new normal, but if the euro collapses and we have another global financial crisis, I would predict a collapse in vintage car prices as well. People do say the kind of things you're talking about, but when they get stressed, the vintage cars are one of the first asset they sell.

 

the number of digits required ( in any currency ) to buy anything anywhere has been increasing, can be a primary source for concern especially to those not fully participating in the growth of their wealth. This discomfort is setting off mental alarms based on their past experiences. It is their failure or inability of keeping up with the global economic changes that turns into concern within their personal economic sphere. The elements of a global bubble are not present yet. Instead of a bubble, a more probable occurrence would be market corrections and re indexing with the currencies. There are cries for tying currencies again to hard tangibles ( precious metals etc ) in an effort to thwart continued baseless dilution of currencies by the printing presses running overtime. In re indexing value is not lost, as relative buying power remains except that smaller digits are used to express values.

 

I haven't heard that about the size of Picasso's body of work, interesting. I think you capture the important point here, though: have automobiles ascended to the realm of collector quality painting/sculpture/furniture/decorative art, or not?

All the issues discussed on this thread are also debated in the art world, eg, old masters values have been flat/in decline while Modern Art has gone through the roof. Sort of analogous to prewar 'full classics' vs. postwar sportscars.

 

I think it is the new normal. a correction should be embraced however...then we can be off the next round of races.

 

Interesting article from Automobile magazine
Will Prices of Vintage Ferraris Ever Stop Increasing?

 

Well said.

 

There is a lot of sales regret in these forums, this may prove true here too

 

It is beyond doubt that some of the finest & most closely held cars have been brought to market within the last 12 months. REALLY great cars and not few in number. Simply an observation.

Jack

 

some might opine that a Ferrari is the ultimate FIAT currency

 

Ba-dum-psssh!

Thank you everyone, he'll be here all night...

 

Anyone know how Ferrari prices relate to the stock market over the years?

Just curious if there if there is any correlation.

 

This definitely says something. It seems to me there are two possibilities where the owners of these cars think the market is historically high which leads them to conclude:

1- Its unreasonably high to the point that they are willing to overcome any emotional attachment and cash out, or

2- The market is pricing them out of owning these cars. For example, someone who bought a car for say $300k years ago and now that car is a $4m car, they might just not really be able to justify continuing owning the car even if they think the market is reasonable.

My guess is its a mix of both and there is no doubt the market is historically high. But my opinion is also that the market was unreasonably too low for a long time. You could say thats how the market is supposed to be. I just think people have shifted their thinking on these things. Time will prove it out...