Baby boomers and classic cars
Discussion
Let me share a theory of mine.
Classic car prices have maintained a trajectory, normally associated with economic boom and wealth creation since 2008. A trend of course, that has surprised me and I'm sure a number of you, given the state of the economy and especially considering rising costs associated to running older cars.
My theory is this:
Baby boomers (those born between 1943 and 1960ish) are retiring, or nearing retirement.
They own something in the region of 80% of this countries wealth (unsubstantiated but its a significant chunk)
As the retire, these people are liquidating assets (perhaps a company they owned, or withdrawing from their pension). As they do so they are looking for something to give them enjoyment in their (not quite old age) perhaps sparking a passion they had when they were younger and now have the time to enjoy and work on classic cars.
So what I ask is this: are baby boomers driving the classic car market upwards? Does anyone have first hand evidence of this?
I realise that markets, like any other, have many drivers but this stood out as a reason. Another being quantitative easing which seems to be supporting all luxury end assets (wine, lux property, art etc).
Thoughts welcome,
PM
Classic car prices have maintained a trajectory, normally associated with economic boom and wealth creation since 2008. A trend of course, that has surprised me and I'm sure a number of you, given the state of the economy and especially considering rising costs associated to running older cars.
My theory is this:
Baby boomers (those born between 1943 and 1960ish) are retiring, or nearing retirement.
They own something in the region of 80% of this countries wealth (unsubstantiated but its a significant chunk)
As the retire, these people are liquidating assets (perhaps a company they owned, or withdrawing from their pension). As they do so they are looking for something to give them enjoyment in their (not quite old age) perhaps sparking a passion they had when they were younger and now have the time to enjoy and work on classic cars.
So what I ask is this: are baby boomers driving the classic car market upwards? Does anyone have first hand evidence of this?
I realise that markets, like any other, have many drivers but this stood out as a reason. Another being quantitative easing which seems to be supporting all luxury end assets (wine, lux property, art etc).
Thoughts welcome,
PM
Some good points raised all round. I don't think we'll ever solve the eternal question (what makes a classic car classic?). Classics are just classics, but there certainly is a disconnect between the Triumph Spitfires and the Aston DB4s price movements in the last few years.
I don't think I expected a clear answer, but I am glad to see some first hand evidence of people from the baby boomer era having spare cash and enjoying it, rather than investing it, and getting a return on their capital at the same time.
I did wonder what I would do if I retired (ok I'm looking at another 30 years I guess) and it really shocked me that my Dad (semi-petrol head and early baby-boomer) when he "retired" didn't go out and buy the Austin Healey he lusted after as a young man and tinker with it in the garage. He looked at one in his 50s but then went straight off and bought a new TVR. When he reached 60 and "retired" he SOLD the TVR
and just has his expensive barge to float around in. 7 years on he seems to be working harder than ever now and has lost all interest in anything petrol related. Even a modern DB9 he waves away 
. I can't understand it. Is he just a freak, or do you start to lose interest with age....it scares me and probably why I spend more money (that I should be saving for my old age) on cars now.
So from my first hand evidence, baby boomers are not actually propping up the market, but please send more evidence to the contrary. We will solve this mystery yet.
Post Script: I think QE, as I understand it, could be doing more than we give it credit. The BoE buying gilts off us means than money has to go elsewhere. Broadly people that own gilts (that don't have to own gilts so not pension funds or insurance companies) are in the wealthy part of the spectrum and this money has to go into other assets, seeing as cash yields so little). Which is why, I suspect, that top end property, art, gold, wine and classic cars have been so buoyant. Is this just an illusion of wealth? Or is it natural asset appreciation that occurs when the money in your pocket devalues? So what happens when QE is unwound (if it is unwound)? These markets go pop? Or will we be in a flux of inflation that actually these assets continue to appreciate. Going a bit deep here, but something I think interesting.
I don't think I expected a clear answer, but I am glad to see some first hand evidence of people from the baby boomer era having spare cash and enjoying it, rather than investing it, and getting a return on their capital at the same time.
I did wonder what I would do if I retired (ok I'm looking at another 30 years I guess) and it really shocked me that my Dad (semi-petrol head and early baby-boomer) when he "retired" didn't go out and buy the Austin Healey he lusted after as a young man and tinker with it in the garage. He looked at one in his 50s but then went straight off and bought a new TVR. When he reached 60 and "retired" he SOLD the TVR
and just has his expensive barge to float around in. 7 years on he seems to be working harder than ever now and has lost all interest in anything petrol related. Even a modern DB9 he waves away . I can't understand it. Is he just a freak, or do you start to lose interest with age....it scares me and probably why I spend more money (that I should be saving for my old age) on cars now.So from my first hand evidence, baby boomers are not actually propping up the market, but please send more evidence to the contrary. We will solve this mystery yet.
Post Script: I think QE, as I understand it, could be doing more than we give it credit. The BoE buying gilts off us means than money has to go elsewhere. Broadly people that own gilts (that don't have to own gilts so not pension funds or insurance companies) are in the wealthy part of the spectrum and this money has to go into other assets, seeing as cash yields so little). Which is why, I suspect, that top end property, art, gold, wine and classic cars have been so buoyant. Is this just an illusion of wealth? Or is it natural asset appreciation that occurs when the money in your pocket devalues? So what happens when QE is unwound (if it is unwound)? These markets go pop? Or will we be in a flux of inflation that actually these assets continue to appreciate. Going a bit deep here, but something I think interesting.
lowdrag said:
I'm not sure we are in complete agreement, since IMHO it is silly to think of even buying gilts at the moment, even for the BoE - but then politicians are never in fron but behind the game. Why purchase an asset which has a negative redemption yield when you can (as a private investor) buy solid shares which have a positive yield (vis a vis inflation) such as BAT, Shell and many others?
I'm not suggesting buying gilts as an investment, I'm just pondering the impact of quantitative easing (in the form that the BoE take) on us as punters and if it really is driving up asset prices such as classic cars. The BoE is not buying gilts as an investment anyway (although they have made an unbelievable, unrealised, profit out of them). They are just using it as a conduit to put liquidity in the system.You raise some very sound points about pension issues that should have been sorted in the 80s are obviously coming home to roost. QE is indeed an extreme form of medicine (last time used after WW2, but accompanied with unprecedented population growth), but in my opinion a necessary one as the shrinkage in the money supply after 2008 would have been so great that we'd be looking at Japanese style deflation if it hadn't have been for QE. But nevermind the whys, it is happening and we have to deal with the consequences and plan for the future....
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