is the bubble due to burst?

Someone more knowledgeable than I on the fine painting art market which has been around longer than car speculation might find some clues. Has that market experienced huge bubbles and then deep corrections?

I think the blue chip Ferraris are no longer cars but fine art investments, the lesser cars such as 275GTBs that sold for $120K in the late 9os are just being brought up because few can afford multimillion dollar car purchases.

They will be the first to fall in value, Tulips.

 

I am always impressed with the immense knowledge level that the contibuters and members of this site spread when it comes to value, future and prices. Aardy, El Wayne, Boudewijn and Kare amongst other real knowledge contributers wisely keep their mouth shut in these threads.....

Ciao
Oscar

 

If I read you correctly, you are saying that things are sold and not brought, right? Moreover, the things currently being sold are the early Enzo cars? Meanwhile, the later Enzo cars, say up to 1974, are being sucked into the updraft, but are destined to fall back to earth because they not currently being "sold."

Dale

 

"Aardy, El Wayne, Boudewijn and Kare amongst other real knowledge contributers wisely keep their mouth shut in these threads....."

great comment.

 

There will always be a run up in prices because of speculation among people who never owned a Ferrari and now recognize it. There is also the re-valuation of objects deemed under valued. Both these things are happening now. A real bubble is when asset prices deviate from intrinsic values and the crowds rush in. But really, there are no crowds buying Ferrari's – it’s a fairly careful market that is not a frenzy. It's selected purchasing at known market valuations and these valuations have seen an increase for 20 years. The true ‘’investors’’ of Ferrari cars are having fun with the ownership , some are upgrading. These Ferraris are such a small percentage of their wealth that it doesn’t matter if the tires go flat and it’s stored for children like a Patek Philippe . What causes a bubble to burst is a run on the market by the crowds. As we all have seen what the banksters have done with our money and assets – a good Ferrari seems a good bet for protection of currency valuation and at the least a fun choice for an asset converted from cash. This is no Tulip Mania, it is a real market driving the prices of real historical artifacts of an era we love. The Ferrari car is currently under a gained recognition with a strong image, a library of cataloged reference books to support shared knowedge, along with resident experts and a social network of like-thinking people – and for a guy there is no better Trophy than a great car in your garage. End of ! That is my weekend rant ! I have nothing for sale by the way .

 

Seems a bit harsh ... These members mentioned all provide fantastic factual information which has been valuable to all us owners. You will never get a factual answer to a subjective question which was what this thread is about. Everyone here is just stating opinion and this forum is for discussion. I personally don't care if my cars go up or down they are not for sale anytime in the next 30+ years but I don't see why some care so much if others discuss value. I would love prices to go down so I could add a few models to be honest...but alway open to others opinion

 

^^^^^^The true enthusiast will reveal himself by making the comment that he wishes prices would go down so he could buy more. If you want the prices of your cars to go up, you might want to re-examine your reasons for placing your money in a collection of special automobiles They are certainly more fun than a stock portfolio, but they are also an expense to keep insured and maintained. Would I sell my cars if the value doubled tomorrow? Nope.

 

Tulips skyrocketed because of speculation in tulip futures among people who never saw the bulbs. Many men made and lost fortunes overnight, to the consternation of Calvinist elites who abhorred this artificial frenzy that denied the virtues of moderation, discretion and genuine work.

God forbid the discussion of value. Can you imagine?

25 years ago on the green at the breakers I rolled into a Ferrari meet. Loads of nice rare models. I drove an 8c2300. I was invited there. My car, a fabric in the Ferrari history. I was never asked to open the bonnet. I was asked only two questions 10 times ; What is the car worth? and What do you do for a living? I never did get around to joining the club. I am still today looking for a job - just in case your reading mom.

 

There is so much talk about so-called 'investors' buying cars as asset diversification plays, but isn't the reality that a relatively small percentage of new buyers are entering the market on that basis (although those using those arguments to justify a purchase to their wives might be a different story). I think most are buying because they have always had a passion for cars and that they now aspire to own what they perceive as the ultimate of the type.

Also we know that bubbles are notoriously difficult to call, generally they don't occur when many of the perceived experts in the field believe they might be forming, normally they occur when most think prices can only rise.

Now I really don't have a clue but on one hand this could be a general re-pricing to bring base prices up from a massively undervalued level. On the other hand, it could be a bubble but even that doesn't mean an immediate crash. Prices could continue to rocket by a crazy multiple before reversing.

My only strong call is that irrispective of direction, price performance of the ultra-rare and historically important cars will dramatically outperform some of the cars that have been pushed higher recently such as Dino's and GTE's.

 

What a black and white point of view. Not all of us are made of money. I have put a huge percentage of my equity in Ferraris. I am very lucky to own a 330GTC. But if the value goes through $1 million, when that represents more than half a decade of work for me, am I now suddenly a villain for selling my car? Go sit on a roof mister. I am a fanatical enthousiast but that doesn't mean I can be flippant about the money that I have scraped together. I want to keep my GTC forever, but if I would need to sell my car in 5 years time for half the price, I would be devastated. So I don't care whether I make your grade. I know the dedication I've put into this hobby, and if I decide it is a good time to sell for me, I don't need to answer to anybody. Unless you forget - if people don't sell, enthousiasts can't buy. So stop being so judgemental.

There are plenty of real enthousiasts that have to sell. It does not make them bad people.


Onno

 

What I mean is look for people to put up on Auction a car that has fresh paint but otherwise is crap underneath to make a quick buck.

When that happens enough times or people pay over just to get a "cheap one" because they are going more and more in value, that's when to worry.

There is no question that Dino's are overpriced now. They are not that rare and not that special. If you look at the pricing now vs other cars of a similar era, you'll see a lot of it is speculation.

When the bubble comes, it will appear first in Dino prices.

BTW: Not the first time this has happened.

It's unfortunate that speculators and auction houses drive up the prices on cars so that real enthusiasts cannot afford them anymore.

 

I would beg to differ that a Dino is not so special. In my time I have been fortunate enough to own a Dino & a Lusso. I always found the Dino to be so much more rewarding to drive and thankfully they did make thousands of them. Had they only made 500 a 246 would now be an unaffordable $1.5m car to most true enthusiasts.

 

a car is only overpriced when one's budget is exceeded...

value can only be measured by desire...

those with resources and desire are not concerned about bubbles

 

Nothing against the named experts here but no one has a crystal ball when it comes to these cars, otherwise they could have made and flipped the appreciative special models many times over the last decades and they all would be driving 250GTOs.


Several years ago this forum had a post about when the housing bubble was going to happen, many thought at the time it was soon around the corner, they were correct but a little early, sure enough about 2 years later the big bust happened in the housing market though none at the time predicted how bad a melt down it would be.

This is a valid question here about these cars, maybe again a few years off bubble will bust. Sort of a big boys version of hot potato only with Ferraris lol.

 

Due to me having only a minor in Economics, this could be all wrong! But I'll give it a shot.

The housing bubble being associated with the today's possible bubble associated with rare automobiles is a poor comparison. There were many factors effecting the housing bubble. We don't need to bore each other with the fundamentals of why that occurred. The fast rising prices of real estate during that time contributed to people over spending and indulging in many things including the purchases of collector cars such as muscle cars and off course Ferraris. The wealth effect was at play, big time! Easily accessible debt will do that. As the bubble burst in late 2008 and in 2009, prices of collectibles, specifically cars, had to be effected. Just like with the sell off of any given stock, the sell off of the cars that one has a short term love affair with either because they were true enthusiasts or were just in it as investors/speculators made prices plummet. However that primarily happened with muscle cars and your 430's and 599's that were a dime a dozen (that way now BTW). One factor to remember, the Enzo era cars did not suffer as much as many predicted. Certain smart people who we all know on this forum predicted 275 GTBs @ $350-$500K and Lusso back to $100-$150K. The world was coming to an end they said. Well it did not happen. Owners did not dump their rare vintage Ferraris for a song. Yes prices dipped, but fared much better than many expected.
The recent run up in pricing is due to a few factors that do not worry my much. Folks looking for tangible assets due to fear of inflation or for the sake of diversification are all solid reasons for the supply and demand having it's elementary effects on pricing. If, as some people say, more people are entering the arena and buying vintage Ferraris, than great. That too is a reasonable explanation. Today there is not enough inventory (especially of certain vintage Fcars) to feed the demand. Than there will always be those stagnant models that have not been recognized as very special cars that leads to a rise in their value once people figure it out. (All variants of the 330s & the GTEs) This is party because certain models, we're all fans off, get away from us in terms of valuation (Lusso & Dino). The focus shifts to the cars that can still be had with in reason. That's my take on this issue.

Geno

 

The market will fall when the people who know enough about these cars are dead. Nobody I know who was born in the 90's even knows what a 250 GTO is. Are they the next folks to pay 30+ million for one? I think not. Most of these cars will end up as museum pieces, worth only what sombody is willing to pay. I think we are witnessing the heyday of the collector car market. Once this ( our generation) is done buying.. The market is going to take a dump.

 

There are a few 1974 cars that I wouldn't mind "sucking" straight up into my garage.

 

I hear this opinion all the time and can't understand the reasoning behind it. If that's really the case than I should be able to pick up a Bugatti Atlantic or a Rolls Royce Silver Ghost for next to nothing? Or are buyers who are willing to pay $40MM for an Atlantic were born around the time they produced these classics? There has been at least three generations of about 75 years since the Bugatti was made and more than four generations since the RR was produced. In your example of the 250 GTO, people born 25 years later in 1990 could not care less about the car and therefore would not see value in such a collectable automobile. Makes no sense to me. Art transcends generations as vintage Ferraris should.

 

for a bubble to be created there needs to be a massive following, which is impossible with the modest quantity of Enzo era survivors, where production was measured in single digits for some models while others only topped out in the hundreds... it's not saying price erosion cannot occur, but would be of little concern to most owners / collectors... the casual observation is that the resources of most of these collectors is well gounded... their desire to own exceeds the valuation of their cars...for a bubble to burst there must be a mass exodus at sale prices with no buyers, which again is highly improbable... as there always is an ample supply of buyers that have not been able to find a car to buy...

 

Quite simply... They just don't seem that interested. It's unfortunate. The total lack of interest in history and the people who made it, is very disturbing. I have kids in the shop all the time through co-op programs, the total disinterest in older cars is very real. I have a few older exotics in the corners of the shop at the moment. Testarosssa, countach, etc. they look and say they are cool, but when a new BMW m3 rolls in, their eyes bug out.

 

Well put cheesy.

start at 6.30 minutes to cut to the chase, and listen. This is for those who buy the wrong cars for the wrong reason.

You can quickly tell what passion is at any event, and who is ''there'' and who are the wannabees. The Ferrari car is such a fine tool, it is a joy in someone's life, a treasure. That is the basis.

My all time favorite scene , and my idiol at his best.

start at 6.30 minutes -

[ame=http://www.youtube.com/watch?v=mOxWtuIuR1g]"The Thomas Crown Affair" Part 1/10 - YouTube[/ame]

 

The bubble question
First regarding the housing bubble this was caused primarily by government meddling in the the real estate market creating more money available to buy homes then really existed (easy mortgage money to unqualified buyers.) this will not happen in collector cars.
I have a dino which I recently purchased for around 200K is it worth more maybe but what I know for sure the younger crowd loves the car I have been followed by many 20 somethings only to take a look at the car they know exactly what the car is and in most cases have never seen one. WHen this is what happens then you know there will be a future market for these cars . In fact the enthusiasm I see for that car reminds of my enthusiasm when I was their age for the same cars. What probably hurts the collector car market as much as anything is when people are buying strictly as a form of investment that is what tends to screw up real value .

 

The fuse was lit by government meddling in good lending practices. But there were also purely private sector factors with all the earmarks of a classic bubble. To me a bubble is when investors make an investment based on the expectation that a few months or a year later the price of the thing will have risen significantly. The purchase is not tied to the inherent value of the thing, it is tied to the expectation of a rising market. In housing in the mid-00's, the bubble was accelerated when millions of mom & pop level investors started daisy-chaining the purchase second and third and fourth properties, financed with the equity of their previous purchases. This caused prices to double in a year or two in some markets, e.g. Florida.

The other bubble factor was the advent of the collateralized debt obligation (CDO) and the synthetic CDO. These were instruments which were created entirely in order to feed an insatiable free market demand. Loan originators simply could not create enough home mortgages to meet that demand. So the investment banks and their ilk repackaged existing mortgage backed securities into CDOs (and in the process turned B-rated instruments into AAA! Thank you, Standard & Poors et al!) And they created derivatives of the credit default swaps -- insurance policies which backed up the mortgage backed securities and the CDOs, and which required annual premium payments, creating a flow of cash just as mortgages do -- to create *synthetic* CDOs. Again, these CDOs and synthetic CDOs were created, and traded, based on the expectation that a rising market would guarantee a profit for the trader, and not on the inherent value of the underlying mortgages. Again, all the earmarks of a classic bubble.

The same thing can happen with collector cars. When investors start buying cars based mainly on the expectation of a rising market, a bubble arises. And as with all bubbles, eventually the supply of new entrants into the market dries up, prices level off then fall, investment vehicles go underwater, and the bubble bursts. As sure as night follows day. I don't know if there is currently a bubble underway in collector cars, but this commodity most certainly is susceptible to a bubble.

 

Look, the Dino was a massed produced car. Say whatever you want but it was. In the grand scheme of things it's not that special or rare when you look at cars made at that era.

I owned one for 15 years. I know how they drive. Fun, sure. $250K of fun... no.

What you're getting now is auction houses pumping these things up to collectors and speculators who couldn't give a damn about how it drives. They just want to make a buck -- and the guy who really loves the car and can no longer afford one is left out in the cold.

I'm not knocking the Dino. I loved my Dino. But what I'm saying is that it's the most vulnerable to crashing because it is what it is.

When some clown on Ebay can ask for $750 for an old service tag from a dealer in Santa Monica, you know things are out of wack

The final stages of the bubble starts HERE:

Ferrari 246 Dino Dealer Automobile Tag Ferrari Automobile Modena Sefac | eBay

 

Think they call it a Ponzi scheme, named after Charles Ponzi, I am sure Madoff thought there would be no end as well.

The true collectors would not sell but times change some may need cash, the speculators maxed out with loans will eventually need to sell causing a free fall in price, limited buyers or not.