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.
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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