I love everything about it: - the way I feel when I drive it - the nostalgic feeling of a different era I get when I sit inside - the excitement I get every time I remember that I own it and remembering how it felt as a kid growing up in Italy hoping that some day I would own a Ferrari - the incredible, fun, engaging and fast driving experience - the fact that it was hand built and no other car is like it - the fact that I am the temporary custodian of an incredible piece of history that I have restored back to the exact spec when it came out of the factory 57 years ago and that the work was done in Modena by men (now in their 70s) many of whom worked for Ferrari and Scaglietti in the 50s when the car was built. I could go on and on. Am I sounding like I need my head examining? Maybe, but that's why I love the car.
Totally with you. It's all relative to one's abilities. Buying a $10MM car to some one that has the means is no different than buying a pack or gum to many of us. Makes no difference to their financial standing. Even if it goes to zero value. QUOTE=ASK328;143816223]U know, I really don't think so - I think it is #1 more and more. I used to be in the large yacht repair business and yachts would come in worth 50 million and have a "major service" and spend 1 million. All while the entire 15 person crew and 5 star chef are put up in a water front mansion to have access to Newport RI for the summer. Monthly Bill for interior refit and @ anchor active stabilizers 500K, invoice reviewed by Captain - Money wired into our account that day. Perini Navi 150' in for work and new sails, 250K for new sails, and I was walking all over the boat I noticed the artwork....... I asked the Captain if it was all real Picasso's and Monet's - Yes he said, the value of the art is twice the value of the sailing yacht. I think at the time the boat cost 30-40 million new. The best was when they would tell me the avg owner uses the boat 2 weeks a year, that was my introduction to wealth in the United States. Then you have all the wealth in the world. Take your guy that is worth 250 Million, lets say he has everything in the world he wants - Fly's private, 3,4 homes, zero debt, and really has nothing to spend his 15 Million dollars in extra cash flow he has sitting around. He's in his sixties and wants a few of the "best" because why would he settle for anything less. A guy like that who starts collecting stuff, gets it all - and goes overboard. What about the same guy who is in his late sixties that is worth 1.5 billion? Same scenario, however has about 100 million a year in excess cash? These guys already have EVERYTHING they need. I talked to a friend of a recent GTO buyer that bought the green one for 50 million ish. Guy is late in life and makes 250-400 million each year, MKT has a great year and BAMB he makes a Billion in one year. So many people have so much money today that buying a car for 10 million later in life is like many of us buying a Bike.[/QUOTE]
I really agree with this statement. Even though there is an incredible amount of wealth being created around the world - I will let you in on a little secret: Even the super-wealthy don't like losing money. In fact they hate it. If they see their classic cars start declining in value - they will get rid of it quicker than you can say sell. NB:Ofcourse I am not talking about people building a collection for the long term. Some of those people still exist as well but it is the minority.
Truer words were never spoken. The only super-wealthy individuals that are indiscriminate with their money are the ones that didn't earn it (and their wealth is often fleeting anyway).
This is true, but this is not a homogeneous demographic. The same household that has a $100M car collection and other real assets eg 'occasional' homes in Aspen/SoHo/BVI also owns property with massive upkeep and depreciation expenses like planes and boats. Not to mention jewelry, designer gowns or furniture that really count as consumption, not balance sheet. Part of the incomprehension around this topic is captured by the memorable quote by F.Scott Fitzgerald, "The Rich are not like you and me..." Which tends to be quite true even when the 'you and me' in the conversation are well into the 1%...
I note that you do not deny it is a bubble, but you simply think that it will not burst for an extended time into the future. The problem with bubbles is that they often burst for something completely unrelated to their own doing. A war, a plane going down a technology glitch, a rogue nation lobbing a bomb into some populated area. The failure of a single hedge fund could do this . . . see LTCM. Maybe a Madoff could do it, with the right leverage. My sense is that we are much closer to a bursting than many think. I think it could be very close--maybe a supreme court case on Obamacare? Maybe another Snowden-like disclosure that shakes the administration. But something is afoot and we are on shaky ground.
there is NO bubble... a bubble needs several elements present to be a true bubble... those crying bubble do not know the elements that define a true bubble... they are basing their false opinions by using price appreciation only and have yet to show any of the other necessary elements are present... reversal from lofty values alone is only a market correction... one can't argue about current prices being lofty, but they alone do not form a bubble... any downside changes or weakness in prices is market forces at work... namely a correction
This whole thread is nothing but the sour grapes club who didn’t have the courage to step up to the plate and pay the price. Every time I bought a classic Ferrari it was the new high standard – it was uncomfortable but I did it anyway. Now I look back and realize what a great investment! Listening to people who “can’t wait” for the bubble to burst is nothing more than humans spewing regret. No guts no glory!
I believe that there is a bubble. In economic terms there is only really one element of a bubble, and that is a series of trades that is substantially out of line with intrinsic values. That is really the only thing one needs to know about a bubble. We most often see bubbles in financial instruments because we are able to have some benchmark for investments. This is usually referred to as the Risk Free Rate of return, which is basically a matched maturity US Treasury bill, note or bond. Once you have a benchmark Treasury, you need to add only market risk and liquidity risk spreads to the treasury to get a reasonable rate of return. (For example, when interest rates fall, cap rates on real estate fall in lock step--the liquidity and market risk spreads are still present, but the Risk Free Rate--treasuries--have declined.) The reason I see a bubble in vintage cars is that values have far outpaced other indicators which measure growth. Measure the GDP (not just of the US, but of the world), measure productivity, production, tech utilization and adoption, commodities prices, etc, etc. By any measure, the price of cars has grown at rates far in excess of those indicators. Take the 250 LM. There were less than 35 of these made. I know a guy who has one. He bought it for $1 million, and two years ago, he turned down $5 million for it. He thought it was an insane price at $5 million, but he liked driving the thing. Recently, he told me he was pushed to bring it to auction with a $10 million reserve. He simply does not want to sell, even though he recognizes that this price is incredible. But, I know this guy . . . he is a commodities trader. If he got in trouble and needed the money right away, he'd sell the car at a 25% discount to the $10 million if he (1) needed cash and (2) could get cash immediately. If it didn't sell at a 25% discount in a couple of days, he would drop the price dramatically until it sold. That's a bubble. I disagree. I am happy to point to the times where I didn't pay the price and then the price went higher. It is a learning experience. Instead of calling people names, perhaps you should take to heart what they write. Prices have disconnected from economic reality. There is no market -- not diamonds, not oil, not real estate, not commodities, not race horses, not stem cells, not carbon offsets -- where growth in prices has happened this dramatically. If you want to call cars consumer items and not investments, then the point is even more dramatically made. I do not have the money to buy a 250 GTO. Even when the GTOs were $15 million, I could not spend that kind of money on a car. So it is not sour grapes when I say that $50+ million for a GTO is both amazing and bubbling. ++++++ I don't know how old you guys are, but we have been through this before. Everybody says that "this time it is different." No, it is not. In 1988, I had a deposit on a 328, with a delivery price of $74,000. Before my car was delivered, a guy offered me several thousand dollars to take my contract, so I sold it. By 1989, the same car was over $130K and the DuPont Registry had a delivery miles 328 listed for $210,000 (it also had a Mondial at $220,00). By 1991, you could buy that car for $45K.
Your post ignores the (strong) possibility that the market was way undervalued prior to the uptick in pricing. Also, your LM example is only one guy. A trader no less. Most wouldn't act the same. Also, the late 80s happened much more quickly. Now, is there some frothiness in the market now? Possibly. I just don't see anything happening however until interest rates rise and liquidity is reduced across the world. Which is impossible to predict but I don't think that's happening in the near/mid term at all. If collector cars crash, then real estate, art and other tangible assets will crash as well. Where do you hide if that happens?
you need to learn the definition of a bubble... your examples are meaningless with respect to a bubble, all you have shown is price change...
The same can be said for all new Ferraris, if you are not able to get an early car you end up paying more than sticker. You are completely missing the point...this nothing to do with the price of classic Ferraris! Supply and Demand is the simple fact...there are a finite amount of classic Ferraris. Like the finite amount of Picassos or van Gogh etc paintings. You may not be able to afford a GTO but there are people who can and will pay whatever it takes to get one.
This isn't the symptom of a bubble. This is a symptom of the end of a bubble. Bubbles are psychological as well as economic. The general, overriding characteristic is that during a significant bubble, there is strong denial of its existence. The other trait, is that when a bubble is identified and "called out" it usually is sustained for longer than those who call out a bubble, forecast it can be sustained for. They are self-perpetuating as well. The reason I say we are in a bubble now is because of the pace of the increase in prices, the source of the increase, and the general complacency of the bubble existing. The overriding mode of operation now is to buy cars when available for fear of prices going up higher. The time to buy is when everyone is saying that despite prices being "low" they will go lower... the time to sell is when the opposite is occurring. Today, noone at all is saying prices are low and will go lower -- in virtually any asset class. During the heyday of the credit crisis, all the commentary was about how long the crisis could last, whether markets would "ever" recover, and doom and gloom across the board. The key to being a great (not good / avg) investor is to simply do the opposite of what everyone else is doing at the extreme points. The markets do tend to trend higher over time, and you can't call the bottoms or tops precisely, but I sure as heck wouldn't want to be a buyer in the classic car market right now unless money meant absolutely nothing to me and it was purely for my own enjoyment (which is perfectly fine!)
who is interested if there is a bubble or not ? the private collectors or people who want make money ? perhaps this can change your opinion about the bubble or not.
True on supply/demand. But there is still variation in how much someone is willing to pay. ~10 years ago, the supply of those assets (non income generating btw) were almost precisely what they are today. Demand is the only part that could have changed. At the ultra extreme, there are more potential buyers, so you would expect prices to shift up. The amount they've gone up, however, looks more indicative of an asset class bubble (on top of other bubbles going on at the same time). It becomes a virtuous and then vicious cycle, however. Other asset classes rising will amplify the wealth -- when those decline, the effect on the classic car market will be amplified, since the buyer market is narrower (I can show the math but decline to). The effect is that the swings will be greater.
there are several events ( elements ) that must occur/ be met for a bubble to form. High price is an element, and that is the only thing that is being used to call a bubble... price alone is not enough... there has not been a single post or poster that has presented all the elements to qualify a bubble... all posters are only arguing price and market fluctuations and show concern for a potential market correction. nothing has been presented that would define a bubble... it's not hard, just fill in ALL the blanks... only one problem to calling a bubble... too many blank spaces, to define a bubble condition... ignorance is bliss for those calling for a bubble...
