Signs And Portents

Bloomberg mentioned that Jerry Seinfeld has decided to sell off his Porsche collection, while claiming:

“I’ve never bought a car as an investment, I don’t really even think of myself as a collector. I just love cars. And I still love these cars. But it’s time to send some of them back into the world for someone else to enjoy.”

Remember, he is a comedian. A rich comedian.

One of the TV channels I watch (I think it was Discovery) is announcing six days of continuous coverage of a car auction. The TV lineup is overflowing with shows about car flippers. There are mutual funds which allow punters to “invest” in portfolios of cars. Mercifully, no ETFs or high-speed traders yet, but can they be far behind?

We periodically stored our TR6 in a “Classic Car Storage” facility. The operator said that, other than the part rented out to the local Ferrari dealer, very few of the cars ever left the building except to be trailered to auctions. That says to me that these are trading herrings, not eating herrings.

Prices have ramped higher and higher – for example, Hagerty’s “Blue Chip” index is up 80% since May 2013. Naturally, supply has expanded as from my limited view it seems that almost any car that survives to be more than maybe ten years old is now “collectible.”

It looks to me that this is another bubble. I have a sneaking suspicion that a lot of older folks who were burned in one or another of the Fed’s stock market fiascoes simply abandoned that asset class and turned to trading something more tangible, comfortable and familiar – cars. So far, they have not been betrayed. However, Hagerty’s “Market Rating” for January says, inter alia:

The Hagerty Market Rating is down for the second month in a row, and has been down for seven of the last eight months. The 0.37 drop from December is the second largest month over month drop in the last year….

Auction activity experienced the biggest drop of any section, as the number of cars sold is at the lowest point of the last 20 months….

Private sales activity also decreased, and has done so for the fourth straight month. The average private sales price is also the lowest it’s been in the past year.

In speculative markets like this, volume collapses before price as owners simply withhold their cars from the market to avoid “giving it away” and await prices more to their liking. In market terms, liquidity is disappearing, market internals are poor while sentiment remains euphoric, supported by the media. Sound familiar?

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    • reality  On January 25, 2016 at 9:51 am

      Well he’s quite right of course, but none of that seems to be stopping the speculation. I confess to reading “Bring A Trailer” which is car auction porn, where I look in amazement as people pay large sums for pretty ordinary used cars and pieces of junk. For example, someone recently paid $60K for the body shell of an older Porsche 911 that had been in a serious fire.

      That is not to say that there are not “classic” cars that are beautiful works of design and craftsmanship that are well worth preserving and displaying.

      But at the end of the day, prices are determined by the amount of money people are willing to spend. And that can and does change abruptly.

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