Boom or Bomb?
Hi Friends!
Earlier this week, somebody forwarded me an article from the New York Post that had some interesting predictions for the next few months regarding the classic car and luxury collectibles marketplaces.
Normally, I tend to look past stories like this as more often than not, they are usually 30,000 ft flyover type pieces with salacious headlines (hypothetical example: Barrett-Jackson down $2 million in Scottsdale: Entire collector car market in shambles!) versus really anything that’s actually useful and factual (example: 1950s Americana down, but 964 Porsches skyrocket in Monterey). A lot of the more mainstream news pieces I see also tend to overly focus in on whoever their expert is and don’t do the research when those in question do nothing but try and beef up their own inventories in pieces like this as well. Point is, mainstream media generally doesn’t do a great job here.
By all intents and purposes, this article doesn’t appear to be a whole lot different. This said, some basic points are brought up here that I think do have some relevance:
The general gist of the piece basically breaks down to the assumption that the resale market for luxury items like Rolex, Ferrari, Wine, etc is likely to boom due to current United States policy regarding tariffs and taxes. The article also insinuates that supply chain issues and a lack of tariffs on vintage cars may make them more attractive collectibles in the near future too. Additionally, as the stock market continues to provide investors with one wild ride after another, the stability of a tangible item with a more established cost and easier to predict profit potential will likely make them even more attractive as well.
I think the likelihood this winds up being correct is pretty high, but as usual, there are significant factors being left by the side of the road here too.
First, there’s going to be a very large number of small business owners in this country that are going to take a lot of damage because of this. Considering small business creates such a significant portion of wealth in this country, that’s probably going to remove buyers from the marketplace. On the flip, it will increase sellers, but it’s likely to decrease values on certain segments of vehicles (I’m specifically thinking that muscle cars aren’t going to do great here). Also, the average hobbyist with one driver quality collector car that they maintain themselves (which is a whole lot of us) are also more likely to be in a situation where selling that vehicle may have to become a reality. This means more on the market at the same time and better opportunities for people at the top to scoop these assets for cheap. This is certainly good news for a small segment, but for the rest of the marketplace, this probably decreases values overall and makes life more unpleasant for the majority of the people that make up this hobby for sure and that’s definitely not so good.
I’ll be the first to admit, although I was definitely a student, I was not directly involved in this business in 2008, so I don’t know what late 2007-ish area looked like. Of course, I’ve done the research and I do see some similarities and some differences alike to what happened at the beginning of that market. If we look at the beginning of that situation specifically, they were really defined events (Bear Stearns, the obvious incoming subprime mortgage debacle, etc for example), that gave people a pretty immediate idea of what was getting ready to happen and in which direction to go. I think there’s very little clarity here from both the perspective of the government and how the government is being interpreted and that uncertainty is making people move slower. This doesn’t appear to be well thought out policy and therefore nobody really knows what’s included and what’s not. That’s likely keeping people on the sidelines and waiting to get in the game.
Also, we have kind of been here before with the supply chain issues. Obviously, we all remember how crazy things got in this marketplace during the pandemic. There’s a high likelihood we could see something similar here, but we have to factor in that people aren’t locked down and they do have other things to do now, which they didn’t have the luxury of enjoying during COVID.
Another issue to consider is that the outgoing generation of investors and collectors had far more available cash than the current one. There’s certainly people out there that are younger that are playing in this market and there’s more every day coming in, but they don’t seem to be as well-equipped or as motivated. I think this also breaks down to the availability of things like crypto and alternative investments which younger people may find sexier.
All of this said, as we know, 2008 to 2014 was likely the best years this marketplace ever experienced and when the stock market and the general economy are challenging, this market tends to do well. Are we headed in that direction again? I definitely think there’s a lot of things floating around out there that could contribute to a boom in this marketplace, but we’re being cautious. Although, I’m certainly hopeful that these winds blowing our direction, I still worry about the greater group as a whole. I will say that it seemed like we did have quite a bit of momentum coming out of the Florida auctions and we got really busy for a short time, but as soon as the tariff thing began to approach, everything shut off like a light and clients begin backing out of contracts almost immediately. Our phones are not ringing right now and it seems like if we were at the beginning of a boom, they certainly would be.
That’s it for this week……
Darin Roberge