Thursday Thoughts

David Banner (not his real name; glad you’re feeling better, Doc) sent me this link to an Esquire piece called, “Crypto Bros Spent $3 Million Thinking They Bought The Rights To Dune.” The subhead reads, “They Thought Wrong.”

OK, maybe I’m just an old fogy. Still, to me the whole Crypto/NFT space is the 21st century version of tulip bulb mania. Of course, if enough people continue to believe in the value of cryptocurrency, non-fungible tokens and the like, then their value will become a self-fulfilling prophecy.

Most, if not all, “stores of value” only have value because people believe they’re valuable. Apart from a few industrial applications, what can gold really do? While it’s true that sovereign fiat currency is “backed” by a government’s ability to tax and to borrow, if some severe economic/monetary crisis struck a given country you can be sure its currency could be rendered worthless.

One of my very smart friends who has been mentioned in the blog before and who has made oodles of money in the stock market also lost money “investing” in cryptocurrencies. (That reference is not about “David Banner.”) In the last year, Bitcoin has traded as low as $30,000 and as high as $67,500. How can something that volatile be used as a medium of exchange?

By contrast, in the last year the US Dollar Index (DXY) has traded between 89 and 97, give or take. That’s the trading range a currency, a medium of exchange, should have.

I don’t care how prevalent they become, but I will never invest in cryptocurrency, NFTs or anything else like them. My wonderful wife and I are doing quite well with our traditional investments.

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Given how much I write about Mecum Auctions some of you might think I work for them. Well, no matter how much I want to, I don’t.

Still, take a look at this:

 

 

That’s what appears on the main page of Mecum’s website. The company was rightfully proud of the fact that in 2021 it had two events that each grossed in excess of $100 million in sales, which was the first time that happened. As you can read in the picture, its first auction in 2022 (Kissimmee, Florida) exceeded $200 million and set a record for the highest amount ever at a single collector car auction.

Before 2021, Mecum auctions usually had a sell-through rate in the 60%-65% range. Remember that most of their lots are offered with a reserve. At Kissimmee, the sell-through rate was about 90%, continuing the trend started in 2021 when those rates were usually 80% or higher.

Of course, some view collector cars as a financial investment. Right now is a great time to own and to sell these “assets” if that’s your mindset. How long will the sellers market last? If I could ascertain the answers to questions like that, then our net worth would be orders of magnitude higher than it is and we would live in a giant house with a giant garage filled with a lot of cars.

As I have written many times, I believe cars are an investment in the enjoyment of life. I don’t want to own a de facto museum exhibit. Cars should be driven, even if it’s just 1,000-2,000 miles a year, which is how most collector cars are used.

As this topic has been discussed before I know that many of you feel the same way. Do any of you invest in collector cars for financial reasons? I don’t mean buying, fixing and flipping cars, but buying “investment grade” cars (however that’s defined) with the expectation of significant appreciation that will be realized sometime in the future.

 

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8 thoughts on “Thursday Thoughts

  1. I have been buying/building/collecting cars for approximately 50 years. Of the over 150 I have owned, there are a couple that I “invested” in because I thought they would appreciate over time. Not that I didn’t use them, although one did become a “trailer queen” given what it became worth. That one was a 1967 Plymouth GTX convertible that was a “2 tag” (2 fender tags listing the options) car. The only major option the car DIDN’T have was the Hemi engine, due to the original owner wanting air conditioning which wasn’t available with the Hemi. Due to low mileage the car won several awards at MOPAR shows and when I sold it, it sold for over 30 times what I had paid for it. Usually I build cars to my taste, as opposed to leaving them stock, and until recently those always sold for less than you had invested. These days restomods and hot rods are popular and often sell for more than a restored example. Exceptions would be seriously rare cars, Hemi ‘Cuda, Shelby Mustangs, L88 Corvettes, etc that will always command a premium.

    As I mentioned previously, I have decided to “cull my herd” a bit. I recently made a deal to sell my Ambassador project to a gent that is a hardcore AMC collector. I feel certain that inside of a year he will have the car on the road, where it should be. If I were to figure up all monies spent, I will probably make about $50 on the car. I also have had a couple “nibbles” on my Coronet D-500 from an old friend. I suspect that one will go for less than I have in it. The hard stuff will come later, when I try to decide which of my finished vehicles to sell. I’m pretty sure my Lark will go, as will my 84 Shelby Charger. Possibly I will, regretfully, sell S-Limeball my Valiant that I have kept as a memory to my young friend that passed away.

    If I was doing this to make a living, I would be getting mighty hungry.

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    1. Many thanks for sharing your amazing car history, DDM. A 30-bagger for your ’67 GTX is a great investment in any arena.

      This remark, “Usually I build cars to my taste, as opposed to leaving them stock, and until recently those always sold for less than you had invested,” is evidence that you also believe in cars as an investment in the enjoyment of life. Hey, if you can make money selling cars, I think that’s great. Too bad for me your Lark isn’t a Gran Turismo Hawk as I might have been an interested buyer.

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      1. The GTX was bought as an 11 year old used car, for less than 1/2 what the original price new was. It was pretty low mileage, just over 41K when I got it. I sold it in the middle of the first muscle car “bubble”, 1993. It went to a museum on the west coast. I know it was sold from there in the early 2000’s and I have since lost track of it (haven’t looked very hard for it).

        Another that turned out to be a good investment was a 1967 Chevy Nova. My wife’s (at the time) widowed aunt wanted to know if I could get her deceased husband’s car running so she could sell it. I went to see the car and discovered it was an L-79 (327/350 hp) 4 speed, red on red non SS Nova that he had bought new. She had never drove, or even had a license, and referred to the car as “Ed’s race car”. He had passed in 1975 and this was in 1979. I convinced her to sell me the car for $1,100, which was about where the market was at that time. It was also low mileage, under 30K. It also took several awards at shows for original and unrestored. In late 91 a fellow was determined to buy it and finally offered what I thought was foolish money, over $20K, for it. I still see the car on occasion at the Chevy shows in my area, now owned by the man’s son. And last I saw it it still had less than 50K miles on it, still unrestored.

        Either of those two would today sell for at least double what I sold them for. But those dollars aren’t worth what they were then, so I have no complaints. I had my enjoyment from owning them AND made what I felt was an excellent profit at the time. The key for me is the enjoyment of the car, not any financial gain. And given that I have lost money on many I have sold, I MIGHT be about even in the P and L column.

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  2. FOMO, fear of missing out, is the gasoline on top of the kindling that is the overheated investment market these days. And Robinhood hasn’t helped. I made a bet against peloton stock the other day and when they announced that they were putting making gear on hold due to a drop in demand, first Robinhood had my puts down 90%, then when I checked again my puts WERE UP 500%.
    Value is like pornography; I may not be able to define it, but I’ll know it when I see it…

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    1. Thanks, Doc. Very much agree with your view about FOMO being a huge factor in the investment inflation we have been seeing. Ironically, though, fear of faster Fed rate hikes is hurting tech stocks, some of whom are from companies that actually manufacture things and make money.

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      1. While not a tech stock, Moderna is an interesting stock that has lost significant value, despite being one of the success stories in this COVID mess. Down from the high $400s to the mid $100s.

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      2. Thanks, Doc. I bought a position in Moderna for my wonderful wife’s IRA at $120/share. I sold 10% of the position at $440 and later the rest at $270. I think it’s a very innovative company, but don’t think I will re-establish a position for her or for me.

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