The collector car market is one that I have followed on a casual basis over the years.
I find that it is an interesting market in many respects. One of the more notable characteristics is its volatility.
Recently, there have been a variety of auction reports that I find very notable.
Specifically, here are some of the more notable recent auction results I have seen:
- $52 million for a 1963 Ferrari 250 GTO racer; Bloomberg, October 2, 2013: “Ferrari GTO Becomes Most Expensive Car at $52 Million“
- $9.4 million for a 1935 Alfa Romeo 8C-35 Grand Prix racer; Hemmings Daily, September 17, 2013: “Alfa Romeo 8C-35 Grand Prix racer sells for record-setting $9.4 million.”
- $3.2 million for a 1967 L-88 Corvette Convertible; Hemmings Daily, September 11, 2013: “Ex-drag racing Corvette L88 sells for record $3.2 million.”
- $269,500 for a 1970 Cutlass 442 W-30 Convertible; AutoWeek, August 5, 2013
- $140,000 for a 1958 Chevrolet Cameo Pickup Truck; Hemmings Daily, September 29, 2013; “Chevrolet Cameo pickup sells for $140,000 at Lambrecht Chevrolet auction.”
The Bloomberg Ferrari article has some notable commentary. A couple of excerpts include:
The HAGI F index of private and public sales of rare Ferraris was up 54.52 percent for the year, the London-based Historic Auto Group said in a report in August.
Hatlapa said that prices of the rarest Ferraris have risen at an average annual rate of 15 percent for more than 30 years.
Perhaps the main question is whether the collector car market is experiencing a “bubble.” Unlike stocks and bonds, the collector car market lacks a well-organized, standardized history of valuation measures, and as such, “proving” whether a bubble exists (or doesn’t exist) and its extent is difficult. How does one “value” rarity, styling, or nostalgia? Why are certain Ferrari models worth so much more than other models? Why are vintage Ferraris valued much more highly than other car brands? Much of the valuation in collector cars seems subjective and emotions-driven.
While I find many of these collector cars to be highly attractive and notable, like any other asset class bubbles can form. While one can argue whether the entire collector car asset class is currently experiencing a “bubble,” there certainly seems to be (at least) “froth” in various segments. As well, many “bubble” characteristics seem to be manifesting, including many frequent “record sales prices” achieved at auction and a rapid (upward) “revaluation” of various lower-priced cars. Overall, I would say that the asset class is experiencing a bubble, albeit one that is not as astounding as various other current and past asset bubbles.
Another question is whether other “alternative” asset classes are experiencing bubbles. While I have little familiarity with some of the other “alternative” asset classes such as art,horses, or yachts, I wouldn’t be surprised that some of these other alternative asset classes are also showing signs of “froth” or “bubbles.”
From a broader economic perspective, this collector car market and its “froth” / “bubble” status is an(other) example of how prevalent asset bubbles have become.
The Special Note summarizes my overall thoughts about our economic situation
SPX at 1656.40 as this post is written