Early 1990s crash of collector Porsche and Ferrari values...how did it happen?

No arguements, but lets also not be PC or ass kissers and call people who can meerly write a check for somethign desireable enthusiasts either. An enthusiast starts with the driving in my book, and passion for the machineary that has little to do with stats numbers brand or fanboi history. None of which means if you can write a check you are automaticaly not also an enthusiast, just as if you lament turboed price rises you are nothing more than a looser whiner, there are enough of either in both camps.

As you state I took opposite tack, I dont know how you are "aware" I am PC, thats a first accusation for me ever, must show it to the family as they think I am a ranting RW lunatic, well now they have watched the debates they know I am right,(no pun intended). I took the opposite tack here because it seems there were only two possible views allowed by some of the self anointed and each was derogatory of the other. The truth is there are many motivations as to why someone may or may not buy at certain prices and in certain markets. While some may be jealous, I did not and do not percieve that as the only reason for the lament of speculatory prices.

When your time comes to buy a boxer I hope they are not bid to 1 million and locked away as collectables, never to be driven as Enzo and Luca intended. The car being jointly done by these two. Would you drive a $1million boxer the same as a 100K one? Most wont and thats a lament.

I see far too few boxers being DRIVEN these days, and its mostly because of percieved "value" thats a shame and a consequence of reckognition, but also who is now buying and why, thats a lament, nothing to do with the wealth of the buyer, more the motivation.

Perhaps in these highly legislated and controlled times, the opportunity to use and appreciate any older ferrari on road is extremly limited as these cars are really appreciated once rolling at speed. So maybe they do belong to the investor concors crowd.

I would so love to crush a continent in a boxer or dyatona. Closest I came was
living in south africa a then land of great highways and few police, having a zr1 vette, then a CT, and then a lambo 350GT. Somehthing to be said for rolling along at 150 for 10-30 mins without worrying about slow traffic or the cabinari. Only some superbike riders in the uSa seem to experince this type of epic speed, I would rate them enthusiasts of the first order, even if they cant afford a fast car..


The good point about a boxer is it can play the twisties really well, giving it some relevance in USA road and traffic conditions, as here if you go 150 its breifly and you feel as though your personal liberty is very much at risk. Whereas in Sa in the 3 above mentioned cars hardley a weekend went by where they were not maxed out or attempted, and 120 felt slow. Even my wifes volvo 850 turbo was bounced off the speed limiter monthly.

Yeah I blame traffic laws for the decline of the true automotive enthusiast, coupled with unlimited checkbooks for turning too many cars old and new into wealth trinkets.

Fortunatly we now have lots of trackdays and tracks, but thats a different thing to rolling down the road fast in streetcar.

My opinion, boxers may well go down to 250kor less but ultimatly they will head towards parity with daytonas.

I regret not buying the boxer shell for sale a year ago for 40k, as I have NIB 512M motor to put in it and make a kickass BBLM style track car, yeah I hope prices soften a little again because to me a falling market is a trigger to buy and a overhyped one a suckers game. Plenty of really smart really really wealthy people were suckers in the Madoff scheme, just because someone knows their buinsess really well does not mean you cant get suckered by greed or ego.

Buy the cars you like and can afford. Its a cyclical market, sometimes it pays to wait, especialy if you have other cars to enjoy anyway, sometimes you miss the boat..

 

Great post. We need cnpapa24 in here. He said the same thing regarding that part about effort and what people choose to focus on.

 

Hey guys, just one question to get this thing back on the thread topic (Big Red and Sherpa)

What do you two think was the biggest factor in the crash in price last time?

 

why repeat myself, you won't read it anyway or believe it.

Here is another piece of info you won't read or acknowledge - the stock market will never go back down to 8,000.

 

Big Red and Sherpa, please feel free to admonish me for answering this, and please let me know if I put words in your mouth.
***
That's a rhetorical question Brad, the last dip was of course caused by the last economic meltdown of 09'

I don't think anybody denies or is oblivious to the fact that markets are cyclical. Prices go up and they go down. Of course we'll have flat and down periods, that's just how markets work. I think you would agree to that. Could we have a protracted depression of prices? Absolutely.

You have made it clear you have a passion, almost an obsession, for a price drop to happen and soon. I can only assume this runup has caused you some negative effect; afterall i think we gentlemen here would agree an extreme lack of character is exhibited if one is crticial due to envy.

Was there a car(s) have you been priced out of from the recent run up? Or do you have some exotic (excuse the pun) financial instrument that allows you to profit from a crash, a (pseudo short) if you will. I know you've called some purchasers pigs for trying to engage to profit from the runup...was there a specific model that has become unattainble to you in the last 5 years that you were planning to obtain?

Just trying understand your desire for a crash

 

Yeh pretty sure there aren't any strippers who have 5 loans on ferraris, especially ones that are backed by freddie and frannie - just sayin

 

Was referring to the 89-90 boom and bust (title of thread) not 09.

I don't believe many are envious, as Boxerman stated before, this seems to be becoming a myth on here.

Cheers

 

I think that's been answered as well, pop of Japanese bubble, early 90s recession. For what it's worth, there was about a 25% dip in hagerty's Ferrari blue chip index for the 09' so not sure why that did shouldn't be in scope.

I don't think your envious at all, I've found the overwhelming number of Ferrari owners to be very secure individuals. How sad it must be for somebody to constantly put down other Ferrari owners with no reason other then to cause distress. Hence why I asked what car(s) you were priced out of due to the recent run up or if you have some unorthodox short, and left the door open perhaps another reason. I was hoping you would expound, but was sad to see you gave no reason...perhaps you will in your reply to this post?

I think Jackson Pollock are overpriced, but I wouldn't go to a Jackson Pollock forum and call the investors 'pigs' unless I perhaps keep on getting outbid by speculators at Sotheby's (even then I probably wouldn't do it) but I would sort of understand somebody that was in that position and is now bitter. Perhaps they had a life long dream to own a Pollock and keep getting denied by 'pig' speculators.

Again just trying to understand your passion for others to lose equity here on this forum. (And not being facetious; there could be a good reason I didn't think about)

I got no skin in the game, my car has zero appreciation so this is a unbiased observation.

 

The crash of 89-90 was a bubble of speculation driven by hype false scarcity and excess liquidity for cars. Everybody had to have more, it was so crazy that new mercedes sl's were selling on order spots for a premium. The buyers were mostly not "enthusiasts". I remember new 25 anniv countaches comming out the wrapper and crossing the block for big money, boxers were hitting 500K, it was a speculative balloon floating on credit, nobody wanted to be left out of the run, just like dot com and subprime. When it popped everything came down really quickly.

The current theory is that the boom of 89 was driven by excess credit, that the mini rcesseion of 90-91 pulled the plug, and that now its more enthiusiasts with money so they wont be so quick to liquidate.

I think if you want a comparison to what happening now, the runup in american muscle to the last recession is a good example. When the music stopped prices there seem to have dropped around 30% and never really recovered, the new game now being the runup in european sportscars. My best guess is that many good euro sportscars wont drop 30% and also that the price once the correction happens will be flat for a long time as the speculative money will move on once gains are no longer there to make. 10 years later it will be game on again.

Still if you look at restoration costs, things like restored aircooled 911's or pristine 308s are inexpensive. Even a TR at 120K is great value when you considder what it woudl cost to put a poor one back to prisitine shape.

 

Great post Sean,

What is your viewpoint on why some folks that desire a crash? I think the most obvious reason was a person had a eye on a particular car(s) and was hoping for a more attractive price point. Do you know of any unorthodox financial instrument perhaps that would allow one to profit from a crash in Ferrari prices? Perhaps there is another reason I didn't even think of.

Thanks Sean

 

I cant think of any financial instrument, that would benefit someone on a car price crash.

As to why people would look for a crash. Well how do you define crash. If a BBI was 500K in 89, and 308s were 120K, yet two years later a BBI was 90K and a 308 45K a crash of that magnitude was something like 50-80%. We are still not seeing those peaks yet in basic dollar terms let alone inflation. F40s and GT0s are well past their 89 peaks so its not an apples to apples comparison.

My guess is that some people here think some other people want to see some rich people suffer. But probably most people lament cars being priced out of range, and being priced out by people who maybe do not appreciate the car in the same way they do. The imagery of pigs feeding at a trough could be supported by say Barret Jackson televion famous for 5 mins as the biggest bidder, or it could be one of jealousy. Sometimes you do get the impression that people are at the auctions for the sport, to add enetrtainment to their lives, to give them soemthign to do, and the car is really just the necessary goal not somehtign unto itself.

There are also people such as myself, who see a market potential decendign into a crazed frenzy which usualy ends in tears for cars. I also see people enetring who have no real appreciation for the thing and are all about what it repesents or its value, that means cars dont go to good homes where they get used, and those who use them may be locked out.

The ills of the investor class, poorly restored cars just for resale, and a crash when they jump out.

Is a 700k 599 stick a sign of checklist buying by cluelss driving things crazy, or is it a anomolous auction result where there was one car and two bidders.. My sense is things are/were getting a little out of hand. I say were gettign out of hand because latest auction prices for many a blue chip like a carrera RS and 60s ferraris are off 10% so maybe we have a sanity plateu or a sanity breather. On the other hand any market that climbs 300% quickly is one that was either grossly undervalued, or out of hand.

Maybe in 3 years what we consider out of hand now will seem sane, or maybe like all markets that rise too fast and not on fundementals, once people hop out they crash. The new ferrari market was once isnane with 6 month flippers, between the shrinking of china and the growing of production its now more logical.

Classic cars also grow in supply. 10 years ago in top end euro sportscars it was all ferrari and maybe some porche. Then astons caught on, then lamborghinis and now massers are hot, thats an expansion of supply, not counting all the newer cars from say ferrari that have some quasi future classic staus and TRs and 308s becoming collectable along with nearly all air cooled porche.

So this overall price rise and sustainability needs more people entering the field all the time to sustain. My sense tells me that short of cars really being a sought after alternative asett overall rises are not sustainable and to the extent they continue the correction will be bigger.

What I hope is we dont see hype prices climbing into the stratosphere, becasue that inevitably ends in tears. If prices flatten or correct at some point 10-20% thats a sign of a healthy market. Even in flat market some cars will rise in price. Case in point a maserati 3500Gt, these were 100K cars when astons were 500K cars, which makes no sense. So the rise of these massers in the current market is logical. 2.7 carrera RS can rise too, because its THE porche and porche has a big following.

I can say the same about miuras , these cars are pure art in the way that equivalent period ferrari daytona are not. Yet they used to be priced at 1/3 a daytona. So yes the market is getting smarter. early 911s at 150k, well try restore one properly for less, but is a regular 993 at worth it 120K? so some sanity and maybe some crazy..

My guess is we will have a 10-20% correction and the crazies will exit the market to go play a game somewhere else. Most people who bough classics in the past few years will have done Ok and in theory are enthusiats so current sale prices not relevant. Some will see their dream car come back into possibility and a lot of ropey cars will have been saved/restored.

If prices rise another 50-100% the correction will be larger.

Meanwhile for little old me, I feel much happier putting 5-10K per year into a 300K boxer than a 90k one, so the price rise more logicaly justifies the expense of a passion.
I am also much happier having 7 cars of different flavors than say one F40 which I wouldnt then use on track. So if a car is too valuable it becomes self limiting unless you are mega wealthy.

To the extent one sees a long term trend line of rising prices for many cars, one feels more comfortable buying more, because like art its both a pleasure and an investment. But buyer beware, cars take care and feeding they dont sit for free even if static.

Wow i just talked myself into getting something new.

 

Sean, I hear what you're saying and there are a lot of good points there. That said, I'll add a couple of things.

If you're not planning on selling a car, its value remains as its cost to you. I have tracked my F40 a few times - I would say to 7/10ths as that's the fun point for me - as I think about it in terms of what I paid for it years ago and the uses that I bought it for. The only time its current value would be relevant to you if you're not selling it is in terms of how comfortable you feel paying to maintain it. I sure feel better doing an $8k service on a $200k car than a $50k car, although I wouldn't not do the service just because the car's worth less. For someone to say that they can't use their car because it's worth too much means they're concerned about selling it and cashing out of it and that's where their priorities lie. By your own words, you would classify that person as a not a true enthusiast.

I don't go to Barrett Jackson but I do go to what I consider to be auctions for true collectors and enthusiasts - RM, Gooding, Bonhams, Fine (that was Keno), Coy's, etc. - and the bidders generally don't want attention. At an RM sale last year, I watched a guy sitting next to me in the second row place his bids on his cell; he was calling the phone desk. He didn't want anyone to know he was bidding. That's not uncommon. Most people are there for the cars, not the attention. And again, the guy who bought the manual 599 was a couple of rows behind me. I don't know him but the guy he was bidding against is a serious vintage racer and enthusiast. I know he wasn't buying from a list.

And my last point, once again, is this isn't some tree that is going to grow to the clouds. Yes, there is more money in the world and cars have now been around long enough that people appreciate them for what they are. The people buying now were kids in the hey day of motorsport, something that you couldn't necessarily say before. However, it's a free market and when all the people buying have the cars they want, the inventory will pile up until prices correct and a supply/demand equilibrium is reached. It's super simple and just inevitable. Just don't be surprised when great cars simply level off and the good cars don't drop dramatically (like not even close to the 50% as others here have called for).

As to what caused the crash, I don't know. I was a kid then and barely moved to the US. I had my hands full just learning how to make friends in a new place and new language. I do know that 1990 was the height of the S&L crisis, the Iraq war, and a whole host of other things that caused all kinds of things to crash precipitously, not just cars. It would take someone a lot smarter and older than me to review the key points historically and sketch out a proper cause and effect timeline.

A couple of things that I feel about now: I think that we are not recovered from 2008 and while I know that people are trying to save, how can your savings grow in a zero interest environment? Therefore, people have had to look for alternative methods of "saving," and while lots of people chose the stock market, some chose cars as a safe place to park money. I'm sure that they felt that if there was any appreciation, that would be good but in the meantime, you usually don't walk out to your garage and find half a Ferrari sitting there (try that with your Scottrade account). And if the poop really hits the fan, at least you have a Ferrari. You don't think that lots of car guys and girls lost so much money in 2008 and said that they should have just bought cars instead because they would still have great cars, regardless of their value? I know that happened to me. I kept waiting to buy dream cars and after series of mishaps, I realized that I just need to stop waiting and do what I've always wanted to do. The worst that can happen is that you have awesome cars worth less than you paid. BFD.

Regardless, the market fixes all and in time, water finds its own level. Remember that in a free market, things are always hunting for an equilibrium.

 

BINGO !

 

I think we are in broad agreement, just sometimes making points from different perspectives in the spectrum.

On the F40, great you take it to the track on ocasion. To me if one tracks really hard, why burn up a 1.5 mill, thats where the value and historic nature of the car comes into play and holds back use. I know if I paid 1.5 mill for an F40 (now), unless I was worth 200+mill my value equation would mean I wouldnt risk crashing it at 10/10ths. Of course I know myself so would go 10/10 anyway, conclusion I own what I dont mind/can afford crashing on track.

Part of the whole fast car thing for me nowdays is going to the track, it just seems increasingly pointless to me to have a really fast car that cant track, the BBi is the exception, although its been to the track too. The BBi is my old classic because one still does go fast on the road and its supremly entertainign there without the insane velocity of say a MP12, although the vermont judge had a different view of sanity..

Not to say someone elses choices are wrong, but within my means the fast expensive cars have to be trackable and not so expensive that I dont mind too badly walking away from a smoking heap. That also measn they need to cost under 1k per day to run on track, although the Gt40 is multiples above that number so far but its getting there, maybe. While I get the whole Miata thing, I also like fast and by extension expensve cars on track, like to see what they can do, what I can do, and love a great motor, which usualy comes at a price.

As to service costs its an interesting thing. Some people understand maintanance and some dont. I have seen defered maintanace on a 500k car, Paul Walkers 9 yo tires on the carerra Gt come to mind, and I know I dont scrimp on tires or anythign even for my daily chevy, let alone the ferrari.

A ferrari costs to keep running properly what it costs and does not vary too much by model, many people seem not to understand that. To the extent one has the passion and appreciation, the cost is the cost and should be factored in as an understanding when you buy.

In 22 years if memory servs correctly my BBI has cost on average 5k per year in maintance, some years way more some less. So at 300k I cant say I am financialy ahead, nor do I care because I spent the mbulk of the money for the entertainment and pleasure the car gives me long before it was worth any type of serious money as now. On the math maintanace included for decades i was behind. But yeah it does feel different spending 15k on somehting worth 300k, thats just human nature.

While i still drive the BBi as I always did, I noticed newer owners drive theirs very differetly, thats because they spent much more I suppose and to them a boxer is somehting different. So $value and historic value does change the use equation for many.

Meanwhile my very non investment potential GT40 can absorb tripple what the ferrari does
but I dont mind because it just seems worth it to me for the entertainment and skill value to run it all out on track, not to mention the personal safety implicit in something perfectly maintained.

I think many people underestimate what it takes to keep car running in top shape, and that while many classics run, they run at 70% of what they should, maybe most cant tell the difference or care as it runs well enough to get onto the concors lawn or to the cars and coffe. My advice to anybody buying an older ferrari is if you start with a good one, be prepared to spend 10-30K on maintanace when you buy it just to make it run great.

So yes while zero percent interest and the stock market are not great places to put your money, if you are buying a car below 500K the yearly costs can absorb any reasonable price rise, which means it should be more of a passion than an investment. When the market flattens, some people who parked their money in cars are in for a shock when they liquidate and do the final math.

Yes the market does find a stais point or equilibrium, its rule of nature. I think we are getting there now. However markets that overshoot and overheat see far more disruption when they head to equilibrum. The question is whether car markets are overheated. My impression is some items have overshot badly, some have a ways to go, on average we may see a 10-20% correction and a more sober growth pattern after that, at least untill the chinese who whoever else gets the pile of liquidity jumps in.

Meranwhile as you say, we get to enjoy our cars. My words to those who have not jumped in yet, "if not now then when", and if you keep any great car long enough you will get your money back if you need it(less maintance, but thats an entertainment cost).

Hmm once again I talked myself into another car, where to keep it? I am thinking Viper acr, good for the track, sure to be classic one day ?
But then I am trying to get ford to sell me a new ford Gt so keeping the powder dry, I guess that means I can handle the idea of crashing a 400k car, such is the illogic of passion, and for some of us cars clearly are an unwavering passion, and for others a "smart buy"...The market is driven by two types of buyers, and some cross pollination is all I am saying.

Great you went with your heart on car choices.

 

Just to put things into perspective:

$500,000 of 1989 dollars would be worth: $967,117.99 in 2015

According to: Inflation Calculator 2016 (or you can use whatever other inflation calculator available online).

So, are Boxers going for $1M today? As much as there have been a quick run-up in prices within recent years, it seems we haven't surpassed what happened back then (and this can be said for many examples).

 

Neither do I, nor my friends in finance (some well versed in exotic instruments as well)

It would be a rare and sad sight indeed if this was the case, and would scream volumes about the character of the poster.

That's the only scenario that makes sense to me, I've given my Jackson Pollock analogy to support this viewpoint.

Perhaps somebody had a lifelong dream of owning a 308 GT4, and the 250% appreciation we've seen in the last 5 years has priced out somebody from that life long dream. There was a time (not too long ago) when it was difficult to give these things away, but now they have skyrocketed. Perhaps some bitterness is due to these sorts of scenarios.

Unfortunately, from what I've seen, when questioned about what car(s) have the malcontents have been priced out of, the sound of crickets seem to be the only answer. One is forced to assume the rare and dishonourable former scenario for these rabble rousers...sad, but thus is the world we live in. Some people focus on bettering themselves, others focus on tearing others down.

 

Brilliant last few posts. Should be in Fortune magazine or something.

 

True,

Therfore we may see a correction but not a percipetous fall, on the other hand some cars are way past their 89 peak, is it that they are viewed differently now, or something else or a combination.

I do think boxers are undervalued and should be on par with Daytonas, somewhere in the next cycle or two this will be the case.

 

NOOO, I need them to stay where they are, just outside of my grasp so I keep focused. If they go to the moon I may as well go on the dole!

 

Well, one important note is that I am immensely, immensely attached to all of my cars but especially my F40. The times I do track it, I do it when there's not many people around and just so that I can run at 7/10 in a safe environment where I can enjoy the car. I will be the first to say that I don't track it very hard and it's no harder than people driving their cars in a spirited manner on back roads but I get to enjoy it. I feel like that regardless of value.

My car is extremely special me, regardless of what I paid for it or what it's worth. Consequently, I don't use any of my cars hard enough (like track hard) where it degrades them any more than proper drives in the country.

 

I get it, thats why I built a GT40 recreation to "degrade" on track and still have that raw viceral classic drive. As long a you dont mind a repaint every 5-10 years(or a wrap) and keep up on all the mechanicals there is no other real degradatiion, unless you shunt.

The lotus still goes to the track, but less and less its earned its life of relative leisure, and keeping things nice(and other options) is probably why I drive the boxer less, at 12k miles if it survived this far as built its my duty to keep it "origional" However when its driven on road, there is little holding back.

If i had somethign else that had been restored, going tot he track with it would be no issue, but if its origional, then there is always the tension between use "degradation" and keeping it nice.
So value and history do affect use.

 

I understand the sentiment. But money invested doesn't not necessarily equate to value perceived.

 

I think that one should buy a car that you want to keep and not for investment purpose alone. I collect many things and collectors usually do better than most investors because it usually takes time for the value to increase. I have friends with large numbers of collector cars and could sell them for a good profit, but an empty garage or warehouse is not their goal in life. I was told that their children will probably sell all of their cars and parts, but who will buy them.

 

True

 

Lets see what happens on the stock market and the car market.

If cars really a solid alternative asett we will see prices rise.