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Thread: Collector Car Market – The Beginning of The End?

  1. #1

    Collector Car Market – The Beginning of The End?

    Interesting article published by Sports Car Digest once again speculating on the speculating. . .
    Collector Car Market – The Beginning of The End?
    August 5, 2014 by Rick Carey 6 Comments

    By Rick Carey, Auction Editor

    The collector car market cratered in 1989-90.

    What were the significant events that preceded the collapse?

    1. Auction companies popped up everywhere trying to get a piece of a rapidly growing number of transactions, increasing prices and resulting commissions;
    2. Cars sold to speculators, not collectors;
    3. Individuals like Hans Thulin took on huge bets on the collector car market’s continued rise; Thulin eventually failed to consummate his purchase of GTO 3607 at Monaco in 1990 for $10.7 million and a year later it was sold for a reported $6.9 million to cover the gap;
    4. Prices inflated by significant percentages in periods measured in weeks, not years;
    5. The same, identical, cars turned over again and again, sometimes in months;
    6. Promoters (auction companies, dealers, brokers, speculators, ‘investors’) argued, “Buy now, it will cost more next month”;
    7. Cars crawled out of the woodwork and were sold quickly, with little serious research, to new money buyers who relied upon superficial descriptions and prior transactions to support their valuations;
    8. New money was everywhere;
    9. The popular press touted “investment values”;
    10. High end Italian cars were taking off in price, leaving pre-war Classics in their dust.

    Take those ten points and apply them to 2014. Most, if not all, of them are being repeated.

    If that isn’t the prescription for a bubble, a boom, and an impending bust it’s hard to describe what it would be.

    We’ve seen new auction companies debuting every quarter. Currently, another new auction company is seeking backing, including from an asset-liquidation specialist company [floorplanning collector cars for re-sale? That's about as insane as it gets.]

    Finance/leasing companies are approaching collectors with mega-dollar cars offering loans at bargain basement rates.

    Opportunists are everywhere. Uninformed new money is flooding the market. They don’t know what they’re buying (seven-figure GTCs, half-million dollar Dinos?) and are only following fashion – like sheep behind the Judas Goat headed for the slaughter house.

    This summer’s reading list could include tomes like Boombustology, Kindleberger and Aliber’s updated Manias, Panics and Crashes, Chancellor’s Devil Take the Hindmost and of course good, old Tulipomania. They’re all recounting the same story of unsustainable, leverage-fueled excess.

    The RKMotors auction in Charlotte last Fall was an example of hedge fund money deployed in pursuit of hot profits. When the sale fell on its face the whole auction organization was dismantled nearly instantaneously. Money guys have no patience. Their presence in the world of collector cars is anathema to long term value. If the market turns they will crowd the turnstiles getting out, taking any money available in the rush for the exit.

    The Monterey auctions, with their new formats and many recycled cars, could be a watershed moment.

    The best thing that could happen in Monterey is that the no-reserve Ferrari 250 GTO sells for $35 million, re-setting expectations to more reasonable levels. It’s the one thing that might scrape the froth off the frenzy and return expectations to less exuberant levels. Don’t expect it to happen, though. If it sells big the hot money buyers will see it as the vindication of their exuberance and head into the salons of Bonhams, RM, Gooding, Mecum, Rick Cole and Russo and Steele with their paddles held into the air in sky’s the limit bidding.

    A Gullwing, GTB/4 or XKE isn’t a pool of mortgages on dwellings where people live and pay every month to keep a roof over their families’ heads. It isn’t a corporate debenture backed by earnings generated by utility to consumers (assuming they have money to acquire that utility.) It’s a dormant, inanimate thing that costs money to own and maintain. It achieves value only through its owner’s enthusiasm and participation in events, even events as mundane as a Saturday afternoon drive. There is no inherent value in a Dino, particularly a half-million dollar Dino.

    The Classic market is, thankfully, the exception. The collectors of classic Packards, Bentleys, Stutzes, Lincolns and Cadillacs migrate from the cars they knew as kids into new experiences and friendships among Classic owners and events. They have gained perspective. They don’t follow fads and fashion, they’ve been inoculated for that through hard experience.

    But the divergence between Classic values and more recent cars is a key indicator of frenzy, a transition from collecting to speculating.

    Monterey is a celebration of automobiles, but the celebration has been overwhelmed by speculation. It isn’t the Pebble Beach Concours or The Quail or the Concours on the Avenue that gets headlines. It’s the auctions and the eye-popping prices the cars bring that are in the bold print.

    Car collecting has lost track of its reason for being, the cars, and been supplanted by speculation.

    It can’t continue, and Monterey may be the beginning of The End.
    Doug Dill

    1973 911E Coupe
    PCA #1987109761
    Early 911S Registry #548

  2. #2
    Senior Member
    Join Date
    Jul 2003
    Vienna, St. Gallen, Stuttgart
    Some things are similar, others not. New markets have opened bringing new buyers e.g. from Asia. These may not buy vintage cars but other assets, driving other investors into vintage cars in turn.
    Assets are strong due to low interest rates (to finance state debt) and the experiences from the 2008 crisis.
    So yes, the stupid and ill informed will get stung. But this happens at any price, not only at inflated ones.

    And those who buy to drive their cars will always be able to argue that some of a potential value differential between buying and selling was joy! ;-)
    Keep up the speed!


    '68 911S coupe
    '92 964 RS NGT
    '09 987S Boxster

  3. #3
    Join Date
    Nov 2004
    Scottsdale, AZ
    Automotive journalists have to write about something.

    I'm waiting for North Korea to nuke the U.S. so things get back to normal.

  4. #4
    Senior Member
    Join Date
    Dec 2008
    Woodland Hills, CA
    This wouldn't be the first time that Sports Car Digest has been off the mark. Back in January they wrote in article completely underestimating the Porsche market...

  5. #5
    Senior Member BrentF's Avatar
    Join Date
    Sep 2012
    Re: "A Gullwing, GTB/4 or XKE isn’t a pool of mortgages on dwellings where people live and pay every month to keep a roof over their families’ heads."

    I guess this guy wasn't around for the mortgage backed securities meltdown of 2008, or the real estate bust that followed?

  6. #6
    Senior Member
    Join Date
    Jun 2011
    Western US.
    fair amount of hyperbole.

  7. #7
    This is one REPORTER'S opinion. OPINION being the key word. Amazing how some people react to the written word, as if everything written is GOSPEL.
    The deal is this: The FED has created an environment of easy money with super low interest rates. And those with cash....have nowhere to put it to earn a reasonable return. So, put it in a savings account that earns .1%? OR, invest it in equities or collectables. There is still a TON of cash waiting to be invested.
    The rich keep getting richer and want toys. I think we are in a completely different environment now than 1989. New territory....who knows how it will play out once the fed turns the spigot off?
    Bahia Red '72 911S
    Meerblau PTS 2019 Speedster
    GP Silver, 2018 GT2RS WP....the BEAST
    Daytona Gray 2021 RS6 Avant....BEAST #2...Best daily EVER

    ES #333

    GONE...MANY, many great ones....

  8. #8
    Senior Member RennTyp's Avatar
    Join Date
    Apr 2006
    Oxford, UK
    The big difference between the market of today and that of the late 80s is leverage. Most classics are still being bought with cash. These owners can afford to sit on their "investment" (if that's how they see it) and watch the market go sideways or even downwards for a while. This could change but I don't see too many lenders queuing up to throw money recklessly at over exuberant speculators.

    It's interesting to see how many cars are coming out of long term ownership at this year's Monterey auctions. Higher prices seem to be generating more supply which should in turn cool the market. Will be fascinating to see what happens.
    Early 911S Registry #888

  9. #9
    Who cares either way?

    I am not selling mine if the market goes up or down.



  10. #10
    Senior Member 67er911S's Avatar
    Join Date
    Dec 2012
    Interesting to follow...

    In 10 days we know more.
    911 S 1967 and ...

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