Can Classic Ferraris be a hedge against inflation?

[belfry]

I have been wondering how the truly wealthy will hedge against inflation at double digit rates.

The attached article from a decade ago points out that a traditional investment yielding 5% will actually become less attractive with inflation rates above that.

https://www.hagerty.com/media/buying-and-selling/t...

I don't know but I'm guessing that this will be a good place to ask this question.

[Drclarke]

This is a question I asked an ex colleague who now works for Europes most successful hedge fund, he responded pretty much the same as the article. In fact a lot of very wealthy and smart investors are buying up sports and collectible cars before they make another jump in value.

[Drl22]

I would have thought property would still be the place to start, if you are already doing that then sure, diversify what you’re doing with the right cars.

[hornbaek]

Cars are approaching a paradigm switch so what happened last time around does not apply for the future. The (very) high end of classics will probably appreciate like fine wine and art but the not so rare examples will be left in the shade and should be enjoyed for what they were intended for rather than wait for a miracle to happen. I cannot see that the past trend of appreciating car assets is continuing for very much longer.

[DevonPaul]

Ferraris (and other collector cars) can be hard to liquidate, and it is easy to get your fingers burnt, plus you need to cover auction fees, storage, etc. Remember Nigel Mansell's F40 going for a million quid (after a bit of an arguement) 32 years ago? 24 years later it fetched just over half that, and you can still get them for less than a million. A million quid house back then would have been a lot better return.

A barn full of late 70s/80s/early 90s Celicas, Sciroccos, Mantas, pretty much any Ford, or a bunch of erstwhile boring run of the mill 1980s motorcycles seems not a bad bit of diversification these days.

Sure, the high end stuff will probably appreciate amongst collectors, but the cheap old cars that avoided scrappage are now today's 50-something's cars of their youth, and there is a lot of demand for them. The real old stuff, 1930s/40s era, is hard work to keep going, but something you can just turn the key and go, with decent power, brakes, mod cons, comfort, and reliability, is very attractive.

[BorkBorkBork]

Drclarke said:

This is a question I asked an ex colleague who now works for Europes most successful hedge fund, he responded pretty much the same as the article. In fact a lot of very wealthy and smart investors are buying up sports and collectible cars before they make another jump in value.

Given what’s potentially on the horizon, it’s a brave man who predicts asset prices will increase significantly anytime soon. With QT and increasing interest rates, it might soon be a market with far fewer buyers.

[Drclarke]

BorkBorkBork said:

Given what’s potentially on the horizon, it’s a brave man who predicts asset prices will increase significantly anytime soon. With QT and increasing interest rates, it might soon be a market with far fewer buyers.

Maybe, but he is a lot smarter than the keyboard experts

[footsoldier]

Hedge against inflation, not hedge against recession
Too early to tell in next few years, but long term have proven to be a good bet.
I wouldn’t want to be relying on any average cars or high volume Porsche GT cars for my pension right now. Fair chance they are next in line to follow Rolexes downhill

Edited by footsoldier on Sunday 14th August 19:31

[BorkBorkBork]

Drclarke said:

BorkBorkBork said:

Given what’s potentially on the horizon, it’s a brave man who predicts asset prices will increase significantly anytime soon. With QT and increasing interest rates, it might soon be a market with far fewer buyers.

Maybe, but he is a lot smarter than the keyboard experts

I’ve no doubt.

[ZedLeg]

Only if you’re willing to chop them up and bury them in your garden.

[DeejRC]

Don’t forget, the truely wealthy won’t be suffering the same inflation as the rest of “us”. They aren’t locked in to any one economy, nor are they locked in to the same economic factors.

Now, perhaps, its because I’m more pessimistic than some of you or not as financial aggressive, but I always view situations like this as the Russian winter strategy. You prep your logistics and strategy, then you trade time for space. Ride out the trouble by giving ground then retaking it all on the upswing as most of your resources are intact, whilst the other side have been ravaged.

[rog007]

hornbaek said:

Cars are approaching a paradigm switch so what happened last time around does not apply for the future. The (very) high end of classics will probably appreciate like fine wine and art but the not so rare examples will be left in the shade and should be enjoyed for what they were intended for rather than wait for a miracle to happen. I cannot see that the past trend of appreciating car assets is continuing for very much longer.

Cars that sit in collections and are never or very rarely driven, as said, like their fine art or wine cousins, might do well amongst those who collect those types of cars. Cars that are kept at home even for irregular use may not do so well due to the rising cost of overheads and the paradigm mentioned too.

That paradigm could see ICE cars become harder and more expensive to maintain (skills and parts could become very scarce) and even become anti social. Some say this time it could be a proper gamble.

[WCZ]

rog007 said:

Cars that sit in collections and are never or very rarely driven, as said, like their fine art or wine cousins, might do well amongst those who collect those types of cars. Cars that are kept at home even for irregular use may not do so well due to the rising cost of overheads and the paradigm mentioned too.

That paradigm could see ICE cars become harder and more expensive to maintain (skills and parts could become very scarce) and even become anti social. Some say this time it could be a proper gamble.

this, very long term I think they are terrible outside of a few museum type cars

for most it's just a question of the right time to buy and sell between then

[belfry]

With inflation around 10% I’d fret about leaving cash in the bank to be eroded by inflation.

I’d be tempted to buy something like a 512BB instead. I get to use the asset and I don’t see these dropping over the next 5 years due to lack of supply and consistent demand.

[Fiammetta]

Yes .
Just choose a low vol modal , that’s already depreciated .

An easy maintenance going Fwds also helps when you kick them out at the back end .

86 LHD Testarossa import from CH , 1998 paid £24 k ( then 60K CHF ) sold with 50KKms for £40 K in 2009
2002 , 360 M F1 paid 42 K in Jan 2009 , sold 2018 for £56 K with 40 K miles ?

Currently own a 208 GT 4 bought at U.K. classic auction for £32 K in 2018 .
Enjoying driving it and witnessing the Bertone turn around in its desirability.

It’s been free motoring thus far for .25, y of F car ownership.
Probably not gonna cash this one in as ironically the GT 4 is the most involved to drive , the best so far and cheap to run easy DIT carbs etc no electrotwackery .

[stuthemong]

Can I buy a Diablo in my SIPP?

And if so, why haven’t I?

[Drclarke]

BorkBorkBork said:

Given what’s potentially on the horizon, it’s a brave man who predicts asset prices will increase significantly anytime soon. With QT and increasing interest rates, it might soon be a market with far fewer buyers.

Coming back to this, they are doing very well and are buying up more as a hedge against inflation.

[Drclarke]

belfry said:

With inflation around 10% I’d fret about leaving cash in the bank to be eroded by inflation.

I’d be tempted to buy something like a 512BB instead. I get to use the asset and I don’t see these dropping over the next 5 years due to lack of supply and consistent demand.

Yes, exactly this.

[indapendentlee]

Fiammetta said:

Currently own a 208 GT 4 bought at U.K. classic auction for £32 K in 2018 .
Enjoying driving it and witnessing the Bertone turn around in its desirability.

It's not baby blue metallic is it?!

[964Cup]

belfry said:

I have been wondering how the truly wealthy will hedge against inflation at double digit rates.

The attached article from a decade ago points out that a traditional investment yielding 5% will actually become less attractive with inflation rates above that.

https://www.hagerty.com/media/buying-and-selling/t...

I don't know but I'm guessing that this will be a good place to ask this question.

You did notice that the article in question is 10 years old, yes? I think we're now at the very top of an asset bubble inflated by cheap money. Not only will all the ordinary expensive metal go back to depreciating like a rock kicked off a cliff once interest rates increase - and they will overshoot some way before reverting to the long-run mean at around 5% base - but even the echelon above will suffer. Perhaps the real creme de la creme will be preserved, since these are the baubles of the immensely wealthy, who are probably insulated from what's to come, but even they have leverage and, as Archegos proves, are not immune from blowing up when things go against them.

So much of what our charming transatlantic cousins call the "collector car" market has been fuelled by stock market exuberance - and of course the happy ponzi scheme that is, or was, crypto - all of which is now thoroughly over. Bitcoin, NFTs, "meme stonks", HODL - thank heavens it's finally consigned to the dustbin of history, but sadly the flash boys overspending on mediocre metal in order to boost their insta flex have gone with it.

I say "sadly" but it does also mean that we may be able to go back to buying proper cars for sensible money and enjoying them - at least for as long as we're still allowed to. I bought a '96 993RS Touring in 1998 for £43k (left hooker); imagine if you could get a 991.2 GT3 Touring for £80k today. I sold that RS in 2002 for £26k, mind you, so as a hedge against inflation...