Ferrari Mailing List: Re: 512TR and 308 values in general...

[Erik Nielsen (judge4re]

I’ve had some coffee this morning, so maybe I can string some logical thoughts together.

Let’s go back to economics, we have a balance between supply and demand is where we get a transaction price.

The used Ferrari market, thrives on lack of transparency.  Clyde has been arguing this point for as long as I’ve known him (God bless him for that).  The art market is worse (see:  http://www.bloomberg.com/news/articles/2015-04-27/a-186-million-rothko-pits-russian-tycoon-against-art-merchant for this week’s example).  

Any pricing premium comes out on the emotional side, not the rational side.  Proof of this is in NSX pricing, brilliant car, no one gives a shit.  While Rick (L.) argues that cars are a personal choice, it really becomes a matter of how to justify it internally (Freud characterized this as the pull between the id, the ego and the super ego, but I really agree with him that funf is what comes between fear and sex, but I digress...).

So, getting back to the used car market, the market makers (dealers, auction houses, crack smokers on Craigslist, whatever) really are in a bind to try and create a retail environment for something that they don’t have the means of control over production (unless they’re stamping out replicas and we all know how that story ends).  So they have to build what ever hype they can for what they have available to sell (provenance is just “dignified story telling”).  Let’s face it, there are better things to sell with much better retail margins that automobiles (I learned the shmata business from friends and a senior vp of operations for a major clothing distributor, still get pissed anytime my wife pays anything close to retail).  

Then we have the depreciation/appreciation curve.  Cars are notorious for dropping in value, so you have the disposable money crowd that doesn’t want to deal with deferred maintenance and non warranty items going out and buying new (and I remember the days that you could get a discount on a new Ferrari sitting on a showroom floor).  Then as that crowd chases the next new shiny bauble, it moves down the pecking order of buyers until they get to the bottom.  Those cars end up in two camps, enthusiast owned or complete studies in deferred maintenance.  The bad cars start getting scare as they rust away or disintegrate as a parts car, then everyone sees the occasional unicorn, I mean well preserved long term enthusiast owned example, sell at an “oh my god did you see that” price, then the hunt to bring back the bad cars comes flying back.  Usually coinciding with the midlife crisis events of increase of disposable income along with that feeling that I may not be around forever, resulting in a powerful impact on decision making abilities.  So demand gets goosed, supply is down from where it was originally and bubbles are created until the demand dies off (in this case literally, anyone seen a brass era car sell at a premium lately?) and we move on to the next generation of cars except for the true 0.00001% of the cars produced that have timeless appeal.   Unfortunately, the Mondial 8 didn’t make that list.

So what does this have to do with prices?  It is in almost everyone’s interest except the actual end buyer to keep the supply side information secret.  No one wants to know that there are 12k+ 308s in various forms and 7k+ Testarossas, 2200+ 512TRs and 501 F512Ms out there that can come out of the woodwork for sale if the price keeps moving up.  No one wants to catch a falling knife.  While the market moves with its invisible hand, its middle finger is almost always extended to an uninformed buyer.

Your mileage may vary.

Erik

On May 2, 2015, at 7:41 AM, Rick Lindsay <richardolindsay [at] gmail.com> wrote:

There are more reasons, and valid reasons, to own a Ferrari or Dino, than, "...drive the wheels off of it..."

First of all, 'why' one owns the car is personal and it doesn't matter one bit why. If I want to spend every day on the track at redline, that's my business. If I want a blue blazer at Pebble Beach, that's my business. This justification attitude smacks of the complaints about 'one-percenters'. That's just envy. Who should give a damn about what others have or why they own this Ferrari or that, or why they own it?!

I own two Ferraris and rarely drive either one of them. They still have wheels on them, and I enjoy them very much...driving or sitting pretty in the garage. 

Second, what one pays for a Ferrari, or even what one sells one for, is also personal. Assuming otherwise is price fixing! These cars are bought and sold with discretionary money, not grocery money. BTW, just HAVING discretionary money is a sin to socialists (and anyone having two cents less than you). Greed and envy are ugly things but unfortunately, they drive the free market. Greed says, "I want it all...", and envy says, "...and I don't want you to have any." Yea, capitalism is ugly...but its the only system that works. And it works because its based upon Natural Selection.

So I own 10 cars, including two Ferraris, because I want to own them, including the two Ferraris. Why is of no concern to others. The fact that prices are climbing is not a Ferrari thing. Its a sports car thing, especially older sports cars. Take a look at TR3s or E-Types. All of these cars are a finite supply market and discretionary cash is increasing. (Not because of Obama but rather, in spite of him!)

So what's my 308GTB worth, or my Testarossa, or E-Type, or... Who knows?! But they are worth far more today than I paid for them. Then again, I think there is something to what Erik says. His point is that the cars are not worth more, the dollar is worth less. In reality, neither end-member is completely correct. Its just a fickle market driven by emotion rather than rational thought. Drive the wheels off it, or polish it in the living room, doesn't matter. They're wonderful either way.

Whew! Goofy morning.

-rick

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