This past week in Monterey, California, the Concours d'elegance car show rolled into town and staged its annual week long orgasm for antique car buyers. Collectors from around the world descend by the thousands each year in summer foggy Monterey Peninsula to buy, sell or luxuriate in the world of beautiful automobiles of the past.
As part of the week long car circus, auctions take place seemingly everywhere in town. Just down the street from me at the Hyatt Regency in Monterey, one of the auctioneers, Mecum Auctions who proclaim, "Nobody Sells More Than Mecum. Nobody.", set up their big tents on the fairways of Old Del Monte golf course which was closed all week for the show. Using a rotation of five adrenaline-addicted sugar-overloaded auctioneers sounding like old 78rpm records all day long, Mecum auctioned off more than 600 cars of the most beautiful variety over three hectic days. The two above are just a sampling of what was offered for sale. The top picture is of a 1949 Chrysler Town and Country Convertible which sold for $104,000. The bottom picture is of a 1953 Cadillac Eldorado Convertible which sold for $254,000. Business was brisk for car buying all over the Peninsula. Aren't times tough? Apparently not with this crowd.
Isn't there a disconnect here? Collectors buying cars for hundreds of thousands of dollars while the markets around the world and their personal fortunes are tanking. In context, here's a brief snapshot of the global economy: SP500 is down almost 11% this year, Asian markets are down on average 15%, Europe markets are down 20-25% and Brazil down 24%. In the USA, our Federal debt clock ticks off mind numbing numbers by the millisecond. The last time I checked it was at $14,639,132 and rest of the numbers were changing too fast to write down but it's in the trillions. That equates to $46,000 owed per person in the country. Inflation is rising to just under 4%. Wages are stagnant. Unemployment is still over 9% with over 15,000,000 people out of work and millions more who have given up the fight. There is little or no money in the federal and state coffers. And the topper is the gauge that measures fear volatility in the marketplace, the VIX factor, rising to 43. In 2008 the VIX was close to 90. In 2010 the VIX was in the 20's. Against this backdrop of sullen financial news, why, and more importantly, how are people buying these ridiculously expensive cars?
Investment. These buyers are cold-blooded investors. They like to deal in the tangibles of life. A car is tangible. It's something they can see, touch and ride. To them, something tactile has more value than a moth ball-laden stock certificate of BOA in a vault somewhere. And with BOA selling at $6 share and falling, a $250,000 vintage car is simply more appealing to the investor. A vintage car has sex appeal too! BOA has no appeal that pays a puny dividend and is hamstrung with endless court battles. A sexy old car appeals to one's vanity. A bank stock appeals to one's insanity.
In five years time, that $250k car may fetch $350k at the 2016 Mecom auction. $100K, not a bad gain in five years. On the other hand, BOA stock may still be mired below teens. And that's why the cash flowed at the car auctions and not to their stockbrokers window.
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