Bubble finally deflating?

[jsoderbe]

The mortgage fraud was about greed, like bubbles always are. Normal people get greedy, wanting a piece of the pie without any knowledge or common sense. Then bank people get even greedier and start to bend their own rules. Normal people are not smart enough to make good financial desicions, and the bank people does not help, in many cases they do the opposite.

The bubble normally start when people begin to purchase stuff with the intention to make money, not to use it. Then prices climb and suddenly everyone think this will go on forever. But it never does.

My biggest warning sign for the current Porsche 911 bubble (yes it is a bubble!) is when people without car interest start to buy them. These are called "collectors" in this thread, but they are not collectors, they buy only with the intention to make money.

For these people our Porsches could be stock, land, real estate, gold, art; they just buy with the intention to re-sell for a profit down the line. The Mecum/B-J-xxxx auctions are a playground for these, like the stock exchange for Big Finance.

I have no problem with that, I could easily pay of my mortgage by selling off my Porsches, and I might actually do that. My problem is that it usually is the enthusiast that looses, especially the rich enthusiast who has people around them giving crappy advice. Like having people around them saying that this is no bubble, the prices will continue to rise 20 % per year forever. Then they overpay, market correct itself or even crashes, and they suffer.

By then the people playing the market has moved on a long time ago, making new money on horses, lake houses, antique bicycles, whatever. History is full with great examples of this, and there will be infinately more examples down the line.


Regards,

Johan

[cover]

Bubble?...... not many (if any) examples in the past, of classic Porsche prices suddenly coming back down. Even when things apprared bubbly as hell.

[jsoderbe]

Not sure how old you are and where you live, but overe here we had a bubble in the 90ies when Porsche prices corrected themselves pretty harshly.

We have also had one real estate crash 10 years before the US one, and we are in the final stages of a new real estate bubble right now. And we had a "fine art" bubble at the same time as the Porsche bubble in e 90ies.

It was actually kind of funny, when I bought my house in SFL (short sale) in 2010 I told the PO about our bubble, and he asked how long it took to rebound. I told him 10 years but I could tell that was too long for him, he would rather damage his credit rating for life....

Porsche prices might just flat out, there might not be a crash, but I believe there will be. And the prices will rebound eventually, creating a new bubble, and the story continues.

I think it is interesting that these bubbles often is about something new that no-one thought about as special before....


Regards,

Johan

[cover]

The 90's bubble was a classic car bubble as far as I know...right? - and fueled by investor frenzy.

I think (and I might be terribly wrong) that the current Porsche situation is some what different.
It seems that a lot of it is people trying to get one (to keep) before it becomes unobtainium to them.

It is a different mechanism, compared to investor frenzy.
And it is a different kind of money (not risky finanses) when you buy something for yourself to keep.

Those people will not likely dump their newly aquired treasure, and object of childhood fantasies, back onto the market anytime soon.

[Matt Monson]

Originally Posted by cover

The 90's bubble was a classic car bubble as far as I know...right? - and fueled by investor frenzy.

I think (and I might be terribly wrong) that the current Porsche situation is some what different.
It seems that a lot it is people trying to get one (to keep) before it becomes unobtainium to them.

It is a different mechanism, compared to investor frenzy.
And it is a different kind of money (not risky finanses) when you buy something for yourself to keep.

Those people will not likely dump their newly aquired treasure, and object of childhood fantasies, back onto the market anytime soon.

This. It holds true even with the collector grade cars at the top of the market.

We need to ignore the dealers engaging in speculation. Every market will always have them. But they aren't a significant percentage of the real market they are just a highly visible small percentage. They are not market makers. They are just churn and burn profit takers. Real value will be determined by the perception of the end users, whom I feel largely fall into the analysis cover provided.

[Nachtfalter]

Clean drivers are 30k, and perfect ones are 40-50k....that's hardly "bubble" money. That's SUV money. Everyone needs to calm down.

[msark]

I've read the thread with great interest and finally offer a comment...

The majority of the car's under discussion are between 20k and 50k. The sum isn't as great as a house or artwork.

I believe the amount put's it squarely in the "recreation" category... Very in-line with a private country club membership, time-share, boat, etc. The time in the garage cleaning and tinkering, cars & coffee and the occasional organized event all are part of the ownership experience. It's an alternative use of capital, not a capital investment.... It's more fun that seeing a balance in the money market and is justified with a history of rising value.

[ohenryinatlanta]

Originally Posted by Nachtfalter

Clean drivers are 30k, and perfect ones are 40-50k....that's hardly "bubble" money. That's SUV money. Everyone needs to calm down.

or 1/2 escalade $$$$$$$$

[brianvb]

Fellas, bank interest rates are ZERO. I have $ in the bank , it insults me so I buy a Porsche. I don't think I'm the only one . Not IF, but WHEN INTEREST RATES RISE, many many assets will drop in value probably Porsche too. Is Bonham going to get 34 million for a Ferarri when rates are 10%, I doubt it !
That being said - I friggin love old Porsches and will alway own one or more of them.

[ohenryinatlanta]

is that before or after the bank runs and depositor haircuts (ala greece) ?

[brianvb]

No bank runs in Canada.

[Matt Monson]

Does anyone want C$?

[COLB]

Originally Posted by brianvb

Fellas, bank interest rates are ZERO. I have $ in the bank , it insults me so I buy a Porsche. I don't think I'm the only one . Not IF, but WHEN INTEREST RATES RISE, many many assets will drop in value probably Porsche too. Is Bonham going to get 34 million for a Ferarri when rates are 10%, I doubt it !
That being said - I friggin love old Porsches and will alway own one or more of them.

I know you are just trying to make a point, but the $34m Ferrari is going to be COMPLETELY unaffected by interest rates, because the people buying those cars a billionaires, and it is more about prestige than about ROI.

But in a broader sense, I think you are right -- if rates ever DO return to 10%, that is going to have an affect on a lot of things.

However, 10% interest is not likely, and would certainly come with comparable levels of inflation -- and that can have strange effects on commodities and collectibles. People hedge with property when inflation outpaces interest rates -- which is what we are seeing now.

[pmax]

Originally Posted by ohenryinatlanta

or 1/2 escalade $$$$$$$$

The new 911 is about $100K. I have a difficult time spending that amount just for a weekend ride. Why not spend less and have more fun on .... the classic 911's ? Seems like a no brainer to me.

Still a bargain being able to buy a decent 3.2 or SC at today's sub $50K prices. I believe these were $100K cars in today's dollars.

[Matt Monson]

Originally Posted by pmax

The new 911 is about $100K. I have a difficult time spending that amount just for a weekend ride. Why not spend less and have more fun on .... the classic 911's ? Seems like a no brainer to me.

Still a bargain being able to buy a decent 3.2 or SC at today's sub $50K prices. I believe these were $100K cars in today's dollars.

Yep. And so is the Cayman GT4. A lot of those guys are putting 20 or 30% down and then financing them. Sure, current interest rates bordering on zero can make that attractive, but it is still a depreciating asset.

I'll buy an old 911 with the same $20-30k. But I don't view it as an investment. It is fully depreciated and fairly loss safe, but to treat it as an income earning asset? That's silly in my opinion.

People around here may have seen me post about hunting for both a 74 targa and a Boxster. The amount I am willing to spend on a Boxster is roughly half. Why? Because that's the price point where you find the fully depreciated ones. I don't need or want the newest fastest. Cars just aren't investments. They are something I look to lose as little value in return for my pleasure and use.

[NYNick]

Originally Posted by Matt Monson

Yep. And so is the Cayman GT4. A lot of those guys are putting 20 or 30% down and then financing them. Sure, current interest rates bordering on zero can make that attractive, but it is still a depreciating asset.

I'll buy an old 911 with the same $20-30k. But I don't view it as an investment. It is fully depreciated and fairly loss safe, but to treat it as an income earning asset? That's silly in my opinion.

People around here may have seen me post about hunting for both a 74 targa and a Boxster. The amount I am willing to spend on a Boxster is roughly half. Why? Because that's the price point where you find the fully depreciated ones. I don't need or want the newest fastest. Cars just aren't investments. They are something I look to lose as little value in return for my pleasure and use.

Bingo!

[Westy]

Originally Posted by Matt Monson

Cars just aren't investments. They are something I look to lose as little value in return for my pleasure and use.

'Zactly!

[Racerbvd]

Originally Posted by Matt Monson

Yep. And so is the Cayman GT4. A lot of those guys are putting 20 or 30% down and then financing them. Sure, current interest rates bordering on zero can make that attractive, but it is still a depreciating asset.

I'll buy an old 911 with the same $20-30k. But I don't view it as an investment. It is fully depreciated and fairly loss safe, but to treat it as an income earning asset? That's silly in my opinion.

People around here may have seen me post about hunting for both a 74 targa and a Boxster. The amount I am willing to spend on a Boxster is roughly half. Why? Because that's the price point where you find the fully depreciated ones. I don't need or want the newest fastest. Cars just aren't investments. They are something I look to lose as little value in return for my pleasure and use.

I remember a while back, a local pca Boxster leasing weenie suggested that i sell my old Porsches and one one new one. I replied that with what i spent on my 914-GT clone i could have bought one, it that was what I wanted, then there was the clown who told me i was crazy because i turned down trading my 88 Carrera for a 2002 996. I have sold the 911s that I'm willing to part with (for now) so other than increasing the value of the old 911 parts i have, it doesn't matter to me
But the 81 can be bought for $40K

[vracer]

Modern cars have two main problems -

#2: They depreciate

#1: They're too dam* good. You don't get the fun of pushing them until they are going insanely fast, and that is even true of some of the 'not-so-new' cars. A while ago I had the pleasure of driving a friend's 993TT for a day long 'back country road' drive. I know that this is the Holy Grail for many P-car people, but it was just too competent. No matter what I threw at it, it just said to me, "Aw come on; I can do a lot better than that".

Driving a car like that fast is the equivalent of stealing candy from a baby. I think it more fun to steal from a 15 year old.

[Matt Monson]

Originally Posted by vracer

Modern cars have two main problems -

#2: They depreciate

#1: They're too dam* good. You don't get the fun of pushing them until they are going insanely fast, and that is even true of some of the 'not-so-new' cars. A while ago I had the pleasure of driving a friend's 993TT for a day long 'back country road' drive. I know that this is the Holy Grail for many P-car people, but it was just too competent. No matter what I threw at it, it just said to me, "Aw come on; I can do a lot better than that".

Driving a car like that fast is the equivalent of stealing candy from a baby. I think it more fun to steal from a 15 year old.

Yep. Number 1 is another reason why I would be fine with a base 986 Boxster. 200 hp is fine for country roads. It's not a racecar. Add the top down piece and it feels faster than you are really going. It is right at home on a curvy country road without going all in for an S version 981 or a gt3.