California-based Wolf Richter is an excellent observer of the economy, and his blog should be bookmarked by anyone who wants excellent insights. He has been particularly good at following the intractable problems facing the U.S. auto industry, as well as commercial Real Estate. Today, as it happens, he posted on the decline in values of vintage automobiles, and I thought that vintage watch collectors might find it to be interesting.

To answer my own question posed in the header, not only do I believe that there will be a significant downturn in values of most vintage watches, but also that it began to happen some time ago. This is obscured by the fact that many of the most desirable models have continued to increase in value, but I have noticed persistent, downward pressure on other, large segments of the vintage market.

Here's the link to Wolf's post:

https://wolfstreet.com/2018/01/16/classic-collectors-cars-drops-more-than-during-financial-crisis/

 

Thanks for the link. I'm actually started reading Buffet's "The Intelligent Investor" great read thus far.

 

The credibility of the post is somewhat undermined by Wolf's misuse of the term 'Vintage.' Regarding what he's referring to - 'classic' cars - there tends to be an ongoing relatively short cyclical market character driven not only by general economic sentiment but also by fads created in the specialist media for certain types/models. The E-Type has been a good example over the last decade or so, with mundane examples rocketing up to £100,000 and then coming off, back down to values of about 60-80% of the peak. And as horology is also covered by a strong and diverse specialist media, similar phenomena may no doubt occur - take for example all the reporting late last year on Paul Newman Daytonas. Whether it be cars or watches, the volatility tends to affect the peripheral stuff of secondary quality/standing which is frothed up during booms. First class watches of real rarity, in top condition and with innate quality are always likely to shrug off 'collapses.'

 

Myself coming from a agricultural background I find export and import of food and agricultural products a better yard stick than the vintage car market in the US

Also only 10% of Northern Territory roads are sealed. So any data on 4x4s

 

First of all, Richter is obviously not presenting himself as an expert in vintage cars. Secondly, where is the misuse of the word? Are the Hagerty charts including, or heavily influenced by models that are, say, pre-1980?

Secondly, with regard to market cycles, who said that the two markets were perfectly analogous? Not I. And your last sentence could easily apply to vintage watches as well! In fact, the current vintage watch bubble has been driven largely by fashion, and not by any intrinsic superiority of this or that model.

I agree with your first point, but not the second. Even the very best Fine Art, cars, watches, etc. can and typically do sustain serious devaluations in the wake of economic crises. Over the long term, their values typically do recover, though.

 

I look at household debt levels. When people can no longer borrow, defaults tick up, then bubbles eventually burst.

In regards to watches, it will eventually happen. Typically it’s not a good indicator of sound asset appreciation when something that has historically appreciated in value more or less in-line with the inflation rate has increased in value by +100% or more in a few years.

 

Apologies Tony if I was being a touch pedantic, but there are established specific terms relevant here:

Veteran: up to 1905; Edwardian: 1905-18; Vintage: 1919-30; Post Vintage Throughbred: 1931-46.

I tend to question an author's credibility if they appear to be ignorant of the basic nomenclature of their subject matter. When you said: your last sentence could easily apply to vintage watches as well! that was exactly the point I was making, though I'd also say that I didn't think you were claiming that the two markets are analogous. I don't mean to be at odds with you at all and think this was an interesting subject on which to post and stimulate debate.

Your closing point is of course quite right, and, as with stock market investments, a long term view is needed in order to see returns in a meaningful perspective.

 

I think there are two factors ... boomer demographics and the cost of storing and owning these things. The ramp up in American Muscle has been absurd. Perhaps there is a correlation with watches but not so extreme I think.

 

I'd quite like to see a cooling of vintage watch prices.

 

It all starts with us. Don't bid high at auctions, don't pay high asking prices, and do not ask top dollar when you are selling. If everyone does this prices will come down

 

With vintage cars it is completely acceptable and or desirable to refurbish. Cars get rebuilt with new paint or new interiors without much of a hit in price that I can see. Watches lose value if given the same treatment.

 

Classic and vintage is doing what it’s always been doing some models go up, some go down. I don’t see the classic market doing anything abnormal. Yes big Healy’s and e types have gone down. 240z and 911’s are still rising. E9’s and 2002 are going up. 510’s are cooling down.

Many of the traditional “blue chip” cars like 57 Chevy’s are ageing out or becoming passé as age demographics change.

 

Not necessarily

 

That report seems to be for North America and it's very hard to read anything into it when it's not clear exactly what is being covered. There is a big difference between the vintage market and say, 1950s and 1960s, classic cars. I don't know if they are including cars from all periods in that chart as it wasn't completely obvious. I'd love a 1930s low chassis Invicta but I'm more interested in the later period so have no idea what's happening in the vintage/post vintage market however, I doubt they are seeing gains.

I'd also say that I don't see the trend in UK at all for 1960s classics such as the E-Type. In UK, classic cars are "wasting assets" so, there is no Capital Gains Tax to be paid on any profit made when buying and selling. When the banks are paying terrible interest rates, a car is a nice thing to have and, if it goes up then all well and good.

Reading across to watches is difficult as there is not such a daily hit as you get with a car for most people. If I had £10-15k to spend and no classic car, I'd probably buy a 1968 TR6 rather than a 1968 Speedmaster as it would give me a lot more smiley days. Most people collecting watches already have these other things they might like so, it's not an either/or choice. That was a long way of saying that I don't think you can read across from one market to another...

Cheers, Chris

 

yea and those frame off rebuilds rarely are recouped at sale.

 

Depends of the car and condition. A pile of italian rust will sell for more if restored. But a patinated classic 911 won't...

 

There are exceptions of course. The problem I am stating is watches and cars are two wholly different things and cannot be compared, except that maybe the demographics of the buyers may be similar. I doubt there are many 67 mustangs with original paint, if any. There are plenty of 67 Speedmasters with original dials though.

 

Thanks for the follow-up. I am sure that Richter's use of the word "vintage", which could have as easily been "classic", was meant to convey a message to his audience, which of course probably consists of a very small number of actual car collectors. Had he used anything more specific, it likely wouldn't have worked as a headline.

I would agree that the two markets are not closely analogous, though in some important respects I'd say that they are.

Finally, never apologize for being pedantic, as we pedants must stand strong!

Cheers,

Tony C.