Depressed asset values: what effect on Monterey auctions? | Page 3 | FerrariChat

Depressed asset values: what effect on Monterey auctions?

Discussion in 'Vintage Ferrari Market' started by Jack-the-lad, Aug 9, 2007.

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  1. Chaos

    Chaos Formula 3

    Sep 29, 2004
    2,346
    Cardiff. UK
    Full Name:
    Nick.
  2. 410SA

    410SA F1 Veteran

    Nov 2, 2003
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    Here's the issue that most people who comment in these kinds of threads don't understand, primarily because they are not a part of the group that actually participates at the highest level. Every year there are several auctions, worldwide, where a total of perhaps 20 siginificant cars are offered. These cars are are special because of their provenance, rarity, experience, beauty, whatever and they are always going to be that way.
    The planet has some 6 billion people on it and there are at least 950 billionaires with literally thousands of centimillionaires, all of whom can buy cars, even the $18 million GTO, without any signicant effect on their cash net worth. The demand push side of this equation is unbelievably high and sub-prime woes or rising 10 year bond rates or unemployment concerns do not affect this group at all. It takes just 2 out of the many thousands in the group to decide they both want the same car and we're off to the races!
    It's the reason why several sales of over $30 miliion private homes are still ocuring in S. Cal today. I doubt that Frank McCourt (owner of the LA Dodgers) applied for a mortgage when he bought a beach home in Malibu for $33 million, just 15 miles from his LA home. He wanted it and he bought it. That's how simple it is. High end cars will always sell well because they are offered in an econony that is not subject to the same rules as most of the world.
    So to answer the premise of the thread, for what my opinion is worth, great cars will continue to fetch high and increasing prices and the crap will fall by the wayside.
     
  3. xs10shl

    xs10shl Formula 3

    Dec 17, 2003
    2,037
    San Francisco
    1.5 Million? Lets call it $600K for the car, and a $900,000 McQueen premium? That's an awful lot to pay. If the reserve is in the 1.2 million range, I think it'll be a no sale.
     
  4. Ferrari 360 CS

    Ferrari 360 CS F1 Veteran

    Dec 4, 2004
    6,707
    Cape Town,SA
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    Jacques
    Agree with this sentiment, market forces dont effect those of such a high net worth, again its simple economics, demand and supply. I think there are very few of us that wouldnt want one of those super rare, super exotic cars but for me the sad thing is that these cars arent really cars aymore in the sense that they arent driven anymore, all are put on trailers and the like....
     
  5. mdw3

    mdw3 Karting

    Jan 2, 2005
    194
    Los Angeles, CA
    Full Name:
    Michael
    I am a dealer in post-war and contemporary art, so I see how ultra-rich buyers can drive the prices of unique high-end collectibles at auction all the time. Based on the quality of this particular car, coupled with the importance and well-documented nature of its one-of-a-kind provenance, I see the final result edging towards $2M, or beyond. It just isn't that much money in today's world anymore (there were 3 paintings that sold in the major art sales of this past May beyond the $50M mark, and about 200 paintings that sold over $1M).

    Michael
     
  6. Tspringer

    Tspringer F1 Veteran

    Apr 11, 2002
    6,155



    I own a mortgage company and am very familiar with all the issues going on currently. It is going to get much, much worse before it gets any better. Until real estate values once again reach equilibrium with buyers ability to obtain financing for them using traditional full income documentation type loan programs real estate values will fall. Everyone seems to focus on this as a mortgage or credit issue, but the truth is its a real estate asset bubble issue that has merely been promoted and heightened by extremely loose credit standards.

    The median home price in areas like Southern California is over $400K yet median income is still under $100K. The debt to income ratios do not add up, people cannot make the payments and they no longer have the ability to easily access supposed "equity" resulting in delinquencies and defaults. I agree with Cramer that up to 50% of mortgage loans funded in the last half of 2005 and 2006 may ultimately default, perhaps a much higher percentage in some regions of the country (California, Florida, DC region...). This is not to say subprime mortgages.... but ALL mortgages. People killing themselves to make a payment on an $800K mortgage when their realtor tells them the home is worth $500K and going down are going to rent an apartment and mail the house keys to the lender.

    But will this effect a global collector car market for blue chip quality cars? Maybe not. I hope not, even though I do not own such a car. It does however make me wonder what Daytona values are likely to do?



    Terry
     
  7. msdesignltd

    msdesignltd F1 World Champ
    Rossa Subscribed

    Nov 17, 2003
    17,763
    NYC. / E. Hampton
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    Michael
    Is The 288 GTO considered Top Shelf.....
    just waiting to hear the crash of all that cash.
    Then I'll swoop right in..........
     
  8. Napolis

    Napolis Three Time F1 World Champ
    Honorary Owner

    Oct 23, 2002
    32,118
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    Jim Glickenhaus
    #58 Napolis, Aug 11, 2007
    Last edited by a moderator: Sep 7, 2017
    "the sad thing is that these cars arent really cars aymore in the sense that they arent driven anymore, all are put on trailers and the like...."

    Mais non.
    Image Unavailable, Please Login
     
  9. Crawler

    Crawler F1 Veteran

    Jul 2, 2006
    5,018
    Gawd! A Mark IV! I'd be shi##ing bricks driving that thing in traffic!!
     
  10. nerd

    nerd F1 Rookie

    Oct 12, 2003
    2,535
    Coronado, CA
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    RSK
    You may or may not know Guy Kawasaki, but he crafted lists of the top 10 lies told by entrepreneurs and venture capitalists. One of my favorites which seems fitting:

    Lie: “Oracle is too big/dumb/slow to be a threat.” Larry Ellison has his own jet. He can keep the San Jose Airport open for his late night landings. His boat is so big that it can barely get under the Golden Gate Bridge. Meanwhile, entrepreneurs are flying on Southwest out of Oakland and stealing the free peanuts. There's a reason why Larry is where he is, and entrepreneurs are where they are, and it's not that he's big, dumb, and slow. Competing with Oracle, Microsoft, and other large companies is a very difficult task. Entrepreneurs who utter this lie look at best naive. You think it's bravado, but venture capitalists think it's stupidity.
     
  11. bighitter2

    bighitter2 Formula Junior

    May 7, 2005
    486
    virginia usa
    Full Name:
    chuck coli
    Marcel, i'm with you on McQueen's lusso $1.2 or north, you forgot to mention the Garrrison daytona spyder( last one built, 78 miles from new, first time ever on the market!! Marcel, TERRY, any ideas on this one? how much north of $1.9? see you guys in monterey..Chuck Coli daytona 12883
     
  12. richardowen

    richardowen Formula Junior

    Apr 2, 2004
    841
    Montreal, Canada
    Value of the USD means a lot of foreign money might bring in higher than normal values.
     
  13. regaliaconcours

    regaliaconcours Formula Junior

    Jul 6, 2006
    310
    Sun Valley
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    MICHAEL REGALIA
    Hello Fellow Fchaters, I've been watching your posts of late as to how current market issues will affect the upcoming Monterey auctions. Without sounding to self serving here a couple of points are abundantly clear to me . (1) I'ts fun to speculate, but that's really all it is. There's been valid points made, both pro and con to the effect current issues may have on the sales, but none of us has that magical crystal ball, were all best guessing, at best. (2) I can tell you personally there has been a tremendous amount of interest from every corner of this planet on my McQueen Lusso, but what that will mean come auction day I have absolutely no clue. I can also tell you that the interest is not just car collectors. This car has an appeal that even the mighty 250 GTO does not possess. Now, I am in no way shape or form comparing a Lusso, even my Lusso to a GTO in terms of a car, but I am saying it does have the ability to atract various types of collectors that most cars even the GTO cannot do. (3) The Steve McQueen factor cannot be quantified accurately, only guessed at. Lastly, to all of those who have seen my Lusso in person and have commented on it's quality, I Thankyou, it truely was a labor of love restoring that car and I could not be more pleased with the reaction it receives wherever it goes. Now on to Monterey, and we'll see who's crystal ball was more accurate!
    Best Regards to All, Mike Regalia, Regalia Concours Restorations
     
  14. dbw

    dbw Formula Junior

    Apr 3, 2005
    897
    palo alto ca
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    dave
    i'm speechless.....
     
  15. 400 gts

    400 gts Karting

    Apr 4, 2007
    58
    West Palm Beach, FL
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    B.I.
    Why worry!!! The market goes up and down. Ask the person who sold his shares in October in 1987 what the shares are worth now. Good Ferraris are not affected as real estate. We know the whole Ferrari market was out of control a few years ago, but is now stabilized and increasing in value on a regular bases. A friend of mine in Toronto told me years ago he could have purchased a 250 GTO for $15,000 in the late 60's, but is was burning oil. He did not buy it. I looked at one in California in the early 70's for $300,000. Too much money then. So why worry? Hold on to your cars, have fun taking them for a spin, and one day you can get a great return.

    400 GTS
     
  16. elads

    elads Formula Junior

    Dec 29, 2004
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    israel
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    elad
    hi all,
    i trade credit derivatives for a living, and can attest to the sorry shape of the fin markets over the past 1 month.
    if i had to guesstimate where we are re the car collecting cycle, i would have to say at the absolute top!

    the only supporting fact is the record low value of the usd vs. the euro and the GBP. the yen does not play a factor in the collecting world anymore.

    so why the top? well even if you are a centimillioner as someone stated, the value of your portfolio has taken about 10% HIT, just by virtue of the fact that you held stocks, hedge funds, and bonds, if you are a real estate guy, you are down 30%. not sure why would anyone then proceed to pay through the nose for a car that was 1/3 the price 4 years ago. prices would have to retrace about 20% before value is observed. pls note, if the cycle turns this week, the % of non-sales will be larger then average and the sales will still be high (as te reserves are high, and there are always 3 fools around), but the non-sellers will return to the market with reduced expectations in 3 months.

    it is important to note, that if one keeps the value of the usd stable (2 year ago rates) agnst the euro and the gbp, car values in europe have been flat for the past 2 years... so if the latest hit to the markets does not knock out the wind of the collector boom, ill be surprised.

    the Mcaffe car, although great restoration, is in the WRONG color and will be another non-sale (after 2 yrs ago at the Sothabies at ferrari no sale for this car)...
    allot of money, tons! but what a lovely car.

    i would think that at 1.8 mio usd this will be a world record for a 4 cyl sports ferrari (non dino)?

    anyhow, just my thoughts

    elad
     
  17. 410SA

    410SA F1 Veteran

    Nov 2, 2003
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    I don't think you could be more wrong on any of your points regarding valuation of very collectible cars. We are a ways away from the top yet. There is so much liquidity running around looking for assets and the rarer the better.
    This is a market where the demand for these very expensive cars from potential acquirers with real cash to use, so far outstrips supply that prices will inevitably and inexorably continue to rise. In the same period where financial markets have been in turmoil, collector item markets such as very expensive art and very rare cars, have been soaring in relative value. This is happening because the players in these markets have no financial concerns even if they have taken a 10% hit financially. Your 30% real estate hit is puzzling. What real estate exactly is is that has tanked other than middle class housing that will cause a hiccup in the high end collectible market? When I last looked prime real esate in Manhattan was solid, very high end luxury homes in the Hamptons on the east coast and S. California on the west coast are finding buyers at unprecedented levels. I think you are too much of a broad market generalist in your outlook. These markets are miniscule, at nano particle size relative the general economy, and like quantum physics they have their own set of rules.The number of participants is so small as to be be a very exclusive club where everyone knows everyone else. There are not more than one or two of them on this forum so the opinions rendered here are really not being heard by anyone in the market for these very high priced cars.

    The car market that will tank and has been doing so already in line with general financial markets is the Barrett-Jackson created faux market in American Muscle cars. There are so many of those cars out there and the buyers of those cars are nostalgic baby boomers trying to relive their first sexual experience on the vinyl covered back seat of some crappy old Dodge or Ford. Those guys have less money today than last year and they will not be able to justify a buying decision that requires at least one year's worth of income.

    The centimillionaires and billionaires, realy, truly, absolutely don't give a crap about the financial markets. I'm talking about those guys with real liquidity in the several hundred million dollars or more. A three million car car is just another toy to them, and certainly costs much less than their Gulfstream 550 or their beautiful little Monet they picked up at Sotheby's on a whim for $20 million.
     
  18. J.P.Sarti

    J.P.Sarti Guest

    May 23, 2005
    2,426
    Fact is $100,000 is not what it was 5 years ago, we have big inflation everywhere, some speculation but a lot is the Barret Jackson type guys looking for more opportunities and values keeping up with inflation
     
  19. elads

    elads Formula Junior

    Dec 29, 2004
    282
    israel
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    elad
    mmm, i guess we will know who is right in a few days...
    the issue i have with your analysis is that its simply a set of assertions such as "a 10% drop, they dont give a crap" are you saying this after conducting extensive interviews with those guys or simply as a centimilliioner yourself? look my friend, if you were correct then the prices of cars and other items would be 10 times higher then were they are today, simply by using your argument 3 years ago, 6 years ago etc...

    look at the market valuations of REITS, real estate companies, finance companies, Hedge funds and others - where much of the value (liquidity) has been created in the past 7 years - they are 60% off the top... allot of the valuation of assets was driven by those guys.
    any how, too bad you call me a generalist but use simple assertions to refute.

    as to prime real estate: commercial is off very aggresivly in teh past 6 weeks as the CMBS market has collapsed, hampton prices are 20% off - that will be clear post this summer , so allot of your observations are incorrect.
    you did not - however - refute the fact that prices in europe have been flat for 2 years, agree that very very very special cars that come to the market every 5 years will bring special prices, but its unclear if 2 years ago they would have brought more or less, they simply are not observable.

    lastly, everything is cyclical, so what every goes up must relax at some point, and all i was saying, is that now appears to be the most likely time to have a market retrace 20%, i could still be wrong.

    elad
     
  20. nerd

    nerd F1 Rookie

    Oct 12, 2003
    2,535
    Coronado, CA
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    RSK
    I grant that this credit mess will get worse before it gets better:

    http://www.economist.com/finance/displaystory.cfm?story_id=9640252

    The central banks have poured $370B (yes that's Billion) into the markets to shore-up liquidity in the past 2 business days, but to the point of this thread, will any of this have an impact on next weekend's auctions.......I say on the high end.....no impact.

    By the way, this is a nit, but have you ever considered using a spelling checker or the caps key?
     
  21. JCR

    JCR F1 Veteran
    Silver Subscribed

    Mar 14, 2005
    9,991
    H-Town, Tejas
    English is not his native language.
     
  22. jjmcd

    jjmcd Formula Junior

    Dec 3, 2004
    490
    Elads is right - the commercial real estate market is already taking a beating and it's only going to get worse. See


    REUTERS
    Lending woes hit commercial real estate market By Ilaina Jonas
    Sun Aug 12, 5:32 PM ET

    The havoc in the credit markets could reduce prices that office, industrial, apartment and shopping-center properties have commanded over the past few years.

    "The sale prices of assets are going to decrease," said Robert Horowitz, of Cooper-Horowitz Inc, which arranges financing. "Prices are a reflection of what people can borrow. The buyers can't get the level of financing that they were able to obtain six months ago."

    Additionally, commercial mortgage interest rates have gone up a minimum of half a percentage point, he said.

    Because of the turmoil in credit markets that started in the residential mortgage sector, commercial mortgage lenders are charging higher interest rates and lending lower portions of the purchase price -- despite lower vacancy rates and higher rental rates.

    During the past couple of years, cheap money and the demand for commercial real estate allowed buyers to finance their investments by borrowing as much as 95 percent of the purchases.

    About 40 percent of those mortgages were from the start headed for the commercial mortgage-backed securities market, usually the cheapest way to borrow money.

    In the commercial mortgage-backed securities process, fixed-rate senior mortgages are issued, sold and pooled to create a base on which sponsors issue the CMBS bonds. The pool sponsors, usually investment banks, make their money selling the bonds at a higher price than the price they pay for the mortgages.

    However, because of the volatile credit markets, issuers have had a difficult time selling the bonds at the prices they had baked in when they bought the loans. The bond prices are based on a rate above the benchmark swap rate. The spread has been widening, driving down the bond prices.

    "The spread widening is because the investors are just not there, so you have to offer a higher spread to induce people to buy the paper," said Dennis Irvin, senior managing director of CIT Commercial Real Estate. "It's not because suddenly you're seeing weakness in the office, retail or apartment sectors."

    "It's difficult to price the deal," said Wachovia senior analyst Brian Lancaster. "Nobody wants to make a loan that they're going to lose money on. Better not to make any loan. You're not sure you can sell it."

    Lancaster estimated that new loans in the CMBS pools have raised some borrowing costs 80 basis points to 180 basis points -- or as much as nearly 2 percentage points.

    It also could delay projects by large players such as Brookfield Properties (BPO.TO), experts said.

    Still, deals are getting done.

    "Any bank that I'm aware that has a loan under application, the banks are fulfilling their obligations and closing the loans," Horowitz said. "I think the banks are hesitant to issue new ones, and if they do they're not setting a price. They'll set a price a few days to closing so they don't misprice the deal."

    But borrowers with good histories looking to finance strong deals can still get loans, experts said.

    "There is still capital available for well-underwritten deals, said William Rudin, president Rudin Management Co., a New York real estate dynasty.

    "We're being told there is capital but it's more expensive than it was two or three months ago. For some people the window is closed," said Rudin, whose firm also is the joint-venture partner in the Reuters Building in Times Square.

    To make up for the amount the CMBS bank loans won't cover, borrowers are searching for other lenders in the business of making up the difference. Mezzanine financing as it is called, usually comes at a higher rate.

    "I've gotten five calls this morning on deals, each one of us getting 10 new calls a day, because people are saying you're not a CMBS lender," said Irvin, of CIT Commercial Real Estate, a unit of CIT Group Inc (CIT.N). CIT Commercial Real Estate plays in the mezzanine financing sector.

    "It's not a matter that deals are not getting done. It's that they're getting done in other shops," he said.

    (See www.reutersrealestate.com for the new global service for real estate professionals from Reuters)
     
  23. elads

    elads Formula Junior

    Dec 29, 2004
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    israel
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    elad
    Thanks gang... truly the hospitable bunch.. one guy accuses me of being simplistic, the other of being a bad speller. and its my first posting in this forum!!

    Anyhow, only time will tell, i dont think you are all correct, but i always leave room for some error in my own analysis. My point was - being close to the fin markets does help - that recent market volatility will effect asset prices, including top end collector cars.

    The downturn in collector car prices in the early 90's was very much related to two factors : 1) drying up of the Japanise demand due to a slower economy 2) real estate slump in North America.

    If you dissagree with that then...

    Did i pass the 'spilling bee' test? ;)

    elad
     
  24. M.James

    M.James F1 Rookie

    Jun 6, 2003
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    Michael.C.James
    Even I can tell that you and 410SA are talking about different people - the group 410SA is talking about, they don't BORROW any money. They pay CASH, and have an almost unlimited supply of it. These folks, as is my understanding, have such a diversified portfolio that their spending ability will not be hampered much - go ahead, ask Rupert Murdoch if he lost money last year....ask Warren Buffett..ask Berkshire Hathaway if they're hurting, or worried about US Real Estate. NOPE. You guys are talking apples to Diamond-Encrusted oranges.....
     
  25. BigTex

    BigTex Seven Time F1 World Champ
    Owner Rossa Subscribed

    Dec 6, 2002
    79,143
    Houston, Texas
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    Bubba
    Welcome to the site and as noted, there is more than one viewpoint on the current situation, but Armen is correct the "headliner cars" make their own rules...(Great nanoparticle comparison!! LOL!) and those buyers are for the most part well positioned to weather any storm.......

    As another poster noted, buying a $13M car doesn't change 'net worth' at all......you still have the money, as TSpringer has said and the 'buy, sell, hold' coin toss remains, as always....

    Of course it's good to remember you can only sleep in one house at a time, only drive one car at a time...;)
     

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