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S2: Hello and welcome to the cause. Edition of Sleep. Money Swag.
S3: The final episode of this mini series about all of the collectible things that people may or may not be able to buy as an investment, even though they have absolutely no cash flows associated with them. This week we are talking all about cars with Hannah Elliott of Bloomberg. Welcome. Thank you. Tell me a little bit about yourself. Who are you and how did you wind up becoming a petrol head?
S4: Well, I live in New York, in the east village of New York, and I work for Bloomberg for six years now. Before that, I was at Forbes covering cars. You know, I always say I get to cover the fun things. While most people at Bloomberg write about how to make money. I write about how to spend money.
S3: I feel like you’re the only person in the East Village who owns a car.
S5: You know, I do own a car, but my car is in Los Angeles, so I’m only half, half and half. And it is an old car.
S6: It’s a 1988 560 assalam Mercedes. Black on black. That was given as a gift to me for my birthday very recently from my boyfriend, who is ladies. Get him to give you a card. Great.
S3: So you hope your boyfriend is here next to Jessamine Molly in the studio? Yeah, he. He is going to come up in this episode because he owns more cars than you do. Oh, yes. We are going to talk about the cars that he owns. We’re going to talk about the cars that sell for 20 million dollars. The cars itself, a $5000. What makes a car investible? How much money you need to spend in order to buy an investable car? Why? Cars go up in value, whether cars go up in value and all manner of other gnarly details about cars as an asset class. Coming up on sleep. Money swag. So cause cars. I hear that cars can sell for millions of dollars. Yes. Which is kind of amazing because you can get a perfectly good car for. How much do you need to spend for a perfectly good car? It seems to me that a perfectly good car is getting cheaper and cheaper these days.
S4: Do you mean a modern car or a vintage car like a car you would collect?
S3: No. I mean, like a running drive on run a running driving car. You can buy one for $2000. For $2000. Of course. So there is no real utility value to investment cars because the utility of a car you can buy for a couple thousand bucks.
S4: Of course, if you’re getting from A to B. Yes, I will say this. Cars do drive differently than, you know, the two different cars will both get you from A to B. Yes. But it is also true that the one that costs $2000 may not be as fun as the one that costs $50000. And that is true.
S3: OK. So and that’s why people spend $50000 on the car rather than to usher in a car. Sure. But that helps explain why people spend five million dollars in the car rather than $50000. That’s right. So the utility thing like do I want to get this car driving me car? Do I want this kind of driving? Do I want this kind of computer? Do I want this kind of handling or speed or whatever that all happens in the kind of sub hundred thousand dollar range? That’s right. And then cars as an investment is an entirely other thing. But presumably all of the cars which people buy is an investment at some point in history where just utility, they were bought for their utility and people said, oh, that’s a good car. I want to buy it. And then somehow over the decades, they rose in value.
S4: I would say yes with a qualifier, because most of the cars that are truly investment grade cars, blue chip cars were never just a car. And that indeed is why they’re collectible. And that is why they’re so expensive and special, because they were never just a car, even when they first were new and they came off the line. They were never just a car. They meant much more than that.
S3: So. It’s really obvious which cause a just cause and which cause more than just occur.
S4: Yes. And it is true. And this is not kind to say, but not all cars are created equal. There are cars that are much more special that are better than other cars. And we would never say that about people. But we can’t say that about cars. And that’s true. And that’s why, you know, certain cars are worth 10 million dollars in certain cars are worth fifty thousand.
S3: So tell me what it is. What is it about a car which makes it more than just a car? Is it a artificial supply constraint thing? Is it all about limited editions and that kind of thing? Or is it more about the design and the features?
S4: That’s a great question. There are several factors that go into making a car special. Number one probably is rarity. If you think of, say, the McLaren F1 supercar from nineteen ninety four, that’s a relatively modern car, but that car’s worth $20 million. So for a car to be built in 94 and it’s already worth 20 million dollars is quite a big.
S3: How much did it cost when it was a million. So it was an expensive car when you and it’s clear you get more expensive crazily more.
S4: That car is rare. Only one hundred and six were made in. Only 64 of them were made for for the street, for production for consumers. So it’s very rare when it was built. It was the fastest car in the world. So it has a record attached to it, which is important. The design was incredibly influential for the rest of McLaren. Cars. I mean, yesterday I drove the McLaren that you could take some elements of this McLaren GTA Drive yesterday and trace it all the way back to the F1. So that car was influential. It was rare. It had a very good claim to fame the time as being the fastest car in the world. And it’s it’s beautiful and it is amazing to drive, too.
S3: So the first episode in this mini series we talked about art. And if I was a sculptor doing something really beautiful and I put a sculpture out in addition of 64, everyone would say that addition is enormous. And then if I said, oh, and then another 40 like autist proofs as well, I won’t go, that is huge. That’s not rare at all. What’s that? That’s like a commodity. And it’s I can’t imagine a work of art in addition of hundred going for 20 million dollars. And you’re saying that in the car world, an addition of 100 is actually really rare and makes it super special.
S7: Yes, it’s very rare when you consider that in a year, McLaren will sell about 6000 cars around the world. So if McLaren says we’re only going to make one hundred and six of this car, that’s rare. That is consider it. Now, there are several, you know, racing Ferrari. Racing for ours are the blue chip, you know, perennial best selling collector car you could ever buy. They sell for millions and millions of dollars. Some of those cars truly are, you know, one of one, one of three, one of 10. That’s extremely rare. There is a type 64 German made Porsche type car and that was offered for sale earlier this summer. That was a one of three planned, two that were actually made, one existing. So, you know, the money crash. Yeah, the other one was crash. And then the parts were kind of jumbled up and then they sort of reconfigured them into a replica using some of the original parts. So it it you know, it’s a grey area, but three of those cars were planned to were built. One exists. That is a supremely rare car. And how much was that worth? Well, that’s a great question. That was a very controversial car. Some people called it the first Porsche ever because it was built and engineered by Ferdinand Porsche. But he built it before he started his company about 10 years before he started it. And when at the time that you built it, he was building cars for everyone. Daimler, VW, he pulled in, you know, parts from all over. To answer your question, it was listed for $20 million. It didn’t sell.
S3: But that’s the same as like one of 100 McLaren firms. What do you mean? You’re saying in the McLaren F1 it’s worth 20 million and this like super one of a kind. Porsche from what, the 1930s? Yeah. It’s also worth 20 million. Yeah. So you would think. I mean, I don’t know me just not knowing anything. I would imagine that a super one of a kind Porsche from the 1930s would be worth more than one of 100 identical McLaren F1 from 1994. But yeah, it would be wrong.
S4: Yeah. Yeah, you can’t it’s not apples to apples comparison. You know, the fact that Porsche in general has yet to reach the heights of auction sale prices that some other brands. So that type 64 was kind of an aberration. Most Porsches are not selling for that high, whereas, you know, P1 McLaren’s also sell for multi-millions of dollars. So there’s a little bit of a precedent for McLaren to be pushing higher at the very high end of the auction market rather than a Porsche, which some people said that’s not even actually a Porsche. It’s a it’s a predecessor to the Porsche.
S3: So I guess what I’m taking from this is the. On some level, Porsches kind of on the borderline in terms of whether they’re even investment grade vehicles or not. Whereas if you buy a McLaren, you know that you’re buying something which has the potential for price appreciation.
S4: I don’t disagree with you, but certainly I would say Porsches are investment grade vehicles. Yes. Yes. Not in the level of millions of dollars. But for instance, if you look at the 9/11 Turbo’s from the 1970s, you know, Magnus sitting in in that room right there was buying them for $20000. You know, less than 10 years ago now, those same cars are selling for over $200000. So we’re not talking about million dollar sales of, you know, 1975, 9/11 turbos. But in terms of appreciation percentages, that’s a huge jump. A short time, short amount of time.
S3: Who was it? The guy who founded Instagram, who quit Facebook and said that he was going to go tend to his collection of air cooled Porsches? That’s investment grade, right? If he says ECKLE, I’m not entirely sure what Sheryl Porsche found is very clever, whether it’s Eric cool, coolin water cooled.
S7: And this is a very polarizing conversation within the Porsche world. The early cars were all air cooled. It meant the engine pulled an air over it to keep the car cool and running. Those are early cars. The later cars use oil, too. You know, speaking a very general terms, you keep the engine cool. Those are modern cars. The purists, of course, would say are the air cooled Porsche. That is really the perfect thing. You know, it’s a pick your poison type of thing. Paris air cold. Yeah, that’s old school.
S3: So if I was buying I mean, McGinniss’s is sitting right here, but you can speak for him since he’s not in the studio when he was buying Porsches 10 years ago. Was that as an investment? Was that like explicitly on the expectation and understanding that those cars would hold their value and quite possibly increase in value?
S4: No, not at all. I can say the true enthusiasts never buys a car because he thinks it will appreciate in value. He buys it because he believes it will bring him joy and he buys it because that was the car that he had on the poster in his bedroom when he was growing up and that he loved or that he remembers driving with his dad or his uncle. And it makes him feel good. The true enthusiasts would never at least admit to buying a car because he thinks it will be a good return on investment.
S3: On the other hand, if you are spending more than one hundred thousand dollars on a car, you want to feel like on some level you’re not just throwing that away and the car will be able to at least retain some of that. But absolutely.
S4: I mean, it certainly, of course, and that is where all of the due diligence comes. And, you know, these people who are buying investment grade cars, collectible cars, classic cars, do so much due diligence to really know and understand, you know, that this car is going to hold its value and even gain a little bit. Of course. These are assets.
S3: OK. So, again, this is the meat of the conversation. And what what kind of due diligence does that involve? And we we had a little e-mail exchange before you came into the studio today. I was like, there’s no car in the world that gets better with age. It’s not like wine car. People may disagree with you on that. Cars, like they fall apart and things go wrong with them. What is the mechanism by which a car retains its value or increases in value over time?
S4: That’s a great question. Yes. Things fall apart. That’s true. But also, cars are made to be driven and you can leave your car sitting in a garage and it will also deteriorate. You know, cars need to be driven over time in order to maintain their running capability. To your point, it depends on the car. Not every car is collectible. You know, a Prius is probably not a collectible car. Even some modern Ferrari is probably not collectible cars. But there are some cars that are collectible. And the things that would make them collectible, unlike we’ve touched on before, our rarity provenance. Do they come from a very old established brand that is known for having high sales at the auctions? You know, these are the thoroughbreds of the car world, Ferrari, Aston Martin, Porsche, Mercedes, Jaguar are you know, if you’re buying into one of these philosophies of car making, that helps, of course, design racing history. You know, if a car has been raced and done well or driven by prominent famous drivers, that can certainly help it gain in value and become desirable. But then you also have random weird things that for whatever reason, will gain the imagination of a group of really like collectors and enthusiasts. And that will really increase in value just because people are buying them. I mean, it’s like any other thing that you would sell on the market demand makes. Prices go high. So a car like the Toyota Supra, which was not a special car at all, I mean, it’s the small car from the 90s has a cult following, that car might be collectible. It’s not going to be an expensive car, but it will certainly hold its value over the years because there is a devoted following of enthusiasts who love how it looks. Love how it drives, loves what it meant to the Toyota company. And that sort of passion for a particular model is valid and will absolutely make that particular model of car valuable.
S3: So how much would it cost me to buy a Toyota Supra today?
S7: Well, if you buy one from the 90s, you can get one for like five thousand dollars.
S3: So a collectible investment grade car can be as cheap as $5000? Oh, yes, certainly. And conversely, I could probably spend one hundred and fifty thousand dollars on a new Mercedes, which wouldn’t be collectible or investment rated. That’s right. So it’s not a question of price. It’s not like it’s not like when we were having a conversation about art that like art starts becoming investment grade, that half a million dollars. You know, you can’t judge on price. You have to judge on, I guess, the depths of enthusiasm in the collector community.
S4: Yes. And I think it is fair to say, too, that Instagram and a Web site called Bring a Trailer have both really contributed to these little pockets of crazy enthusiasts for a very obscure random models of cars. I mean, there is this type of racing class called Group B Racing Series, which was in the 1980s, and it was basically no holds barred. The automakers just had to make 200 of any odd car they could. They put him in this World Racing Series off road rally style. There has been an obsession with Group B cars from the 1980s. So that would be like a Lancey, a delta that if you saw that car on the street, you would think it’s kind of ugly.
S8: It’s like square and it looks like something from an 80s cartoon or like a sneaker or something. But that car is worth millions of dollars million. Yes. Wow. Yes. And a lot of that is because, yes, it does have the racing history. Yes, it is rare. So that is true. But it’s not a good looking car. And it’s made by Lanzetta, which at that is an old brand, but it’s not Ferrari. But there is a very devoted group of people who are obsessed with those cars. They grew up watching the races. They’re like kids from the 80s. You know, now they’re they’re older. They have the means to afford them. That market is making those cars really appreciate in value. So I always go back to saying, buy what you like and what you really care about, because I guarantee you you won’t be the only one. You know, there are going to be other people who like what you like to and that’s a great thing.
S3: And that also does create a little bit of a market, has the broad market. I mean, I’m sure there isn’t a index for collectible cars. But is it fair to say that the broad collectible car market has been going up over time, the cars are becoming more expensive over the past couple of decades.
S4: It’s very dependent on the brand Ferrari. Like I said, is sort of a perennial.
S3: Rory seems to be like the Chateau Le Ft.
S4: Yes. Yes, you could say that it’s the racing Ferrari is from the 1950s. You could even go into the 70s that for 250 California spiders, those Ferraris are always at the top, in fact. I was just looking at auction results from the Monterrey auctions in August at the Ahram auction alone, five of the top ten cars that sold in terms of value or Ferrari’s, you know, for the top four cars it sold at Goating where Ferraris. So they have always dominated and that’s been the same for years.
S3: And so maybe maybe Shatilla feet, maybe Andy Warhol. But the interesting thing about the feet and Warhol is they both had this dominance for a long time. And then at some point they both stopped going up and started going down. I mean, not everything can go in both directions. What would be the mechanism that caused the Ferrari bubble to burst?
S4: Good question. That’s what I ask everybody I talked to. Some of it is economics, base and market uncertainty. For instance, if people are feeling uneasy about international markets in general and they want to sink their cash in to something more solid, a car is probably a good option. If they’re feeling better about speculating with a non-tangible things than that could make the value or the price of the top sellers in the auctions go down a little bit just because people are putting their money elsewhere. I tend to think money never disappears. It just changes. So maybe save Ferrari is at the top and has been at the top for a long time. You’ll see maybe a Jaguar E-type, you know, bust through the bubble every now and then and you’ll see some Aston Martins get up there, get up in the top five sellers. I think there is a Ford cheaty that got up there, you know, from the 1960s. We’ve all just seen the movie Ford versus Ferrari. That’s a very collectible car, an American car. Honestly, it would take a lot to take Ferrari off of that throne in a very real significant way. And I don’t know what that would be. It’s been like that for so long. Certainly, you know, you’ve seen Porsches get up close to it. But I don’t I don’t know what it would take.
S3: I really don’t know all of the most expensive cars, it’s fair to say. Racing cars, sports cars. They’re designed to go super far. Yes. This might be a dumb question, but is I mean, is that just obvious or is there like a reason for that?
S6: Those cars, by their very nature, check a lot of the other boxes that we’ve already talked about. So the very fastest racing cars are, you know, peripherally rare. They’ve got racing history and heritage. They look interesting. They’re front well-known collectible brands.
S3: They are, you know, and they’re made in small quantities there, mate.
S6: Yeah. Exactly. So they kind of just embody naturally every other aspect of what could make a car collectable. You know, they’re already going to be famous cars that you hear about. I mean, any car that breaks a world record or as one Lamon or Daytona or Sebring, probably people will have heard about anyway. So it’s gonna be a famous car. So you’re really creating when you make a exceptional race car, you’re already creating the conditions that would otherwise make it collectible to. They they kind of happen naturally.
S3: The original Tesla Roadsters collectable have those valuable question.
S5: I think they’re basically hovering. But we’ll see.
S7: I think it’s too early to say. Usually, you know, cars go in sort of a 30 year cycle, 30 to 40 years. So there’s 1970s Porsche Turbo’s, you know, around their 40 year anniversary. That’s when they really took off again. They kind of go into 30 to 40 year cycle. And that’s because I think the kids that grew up with the cars on the posters in the room are finally old enough to afford them. So we don’t really have enough time yet to see what the early Tesla cars, the little roadsters will do. I know people are hoarding them because they think they will be collectible, which is in a very interesting thing. And they also were built on Lotus Chaz’s. Now, Lotus is an old brand, very well known, has a lot of collectible cars that’s going for it. You know, it’s. Too early to see some of the factors are there. It could happen.
S3: And then when I think of no special cause, obviously you would include the zoom zoom low-slung sports cars. But I also think of like the grand Rolls Royces and that kind of thing. I feel like those that maybe like more out-of-favor and. Yes. Collectable these days. Yeah. Those like the the port wine her. Yeah.
S4: It’s really interesting. I mean when you see if you’re talking about Rolls Royces from the 30s or like Model TS or Packards or doosan Burgs, they are still selling for multimillion dollars. But it’s interesting, the people you see driving them and buying them are very elderly people. It’s almost like the generation that has been collecting them is dwindling and it is a topic of conversation. What will happen to those cars once their owners and their enthusiasts pass on? You know, Pebble Beach has taught the organization that runs the Pebble Beach concours, which is the side of probably the most important auctions of the year. I’ve spoken with them and they have talked about what will happen when the people who love those very much older cars pass away because the young kids, you know, and by young, I mean like 40.
S8: You know, those are the people who can afford to buy this stuff. They’re not interested in those. And they’re barely even interested in muscle cars from the 50s. They’re gonna be interested in the cars from the 70s and 80s, you know, the Porsches. So it’s certainly, you know, the Packers, the Delhaize, the old Rolls-Royces, the old Bentley is the glorious ones we see in the crown.
S6: You know, being used. Yeah, they’re they’re collectible. But I do not know what’s going to happen when the people who own and love them pass away. It’ll be very interesting to see. And really the only thing that makes a car valuables that someone will want to pay for it and own it. Right. I mean, just like a piece of art. The other thing, too, is I know you can get you know, I’ve seen in my own wanderings you can buy a very inexpensive Rolls Royce from the 80s, from the 90s, from the 70s. Same with Bentleys. They’re gonna be very expensive to repair and maintain.
S3: That’s true. Yeah.
S8: It’s got to completely you know, so it’s just there’s there’s really no hard and fast rule. I mean, if you want a Rolls Royce in the 80s, you could get one for like $10000. It’s going to take a lot to make it into running grade and maintain, but it’s probably more comfortable to drive around the streets than a Ferrari.
S4: Oh, absolutely. Absolutely. And probably a lot more reliable, too. We all love Italians, but some you know, they’re engineering.
S5: It’s eccentric for lack of a better word. You know, it’s a relationship, possibly dysfunctional relationship.
S6: But, you know, you go with it because the car looks amazing and it has personality and it’s got this great heritage.
S4: And you look cool and feel cool driving it. But yet, you know, part of their relationship with older cars is that, you know, they’re gonna break down and that’s that’s life.
S3: So tell me about the buyers. The collectors. I mean, obviously, the first qualification you need to spend millions of dollars on a car is that you have millions of dollars to spend on the car. No cuts, that potential buying universe down enormously. But how are they the same and how are they different from the people spending millions of dollars on art or on wine or watches alone, bitcoin or the other things that we’ve been talking about on this?
S4: You know, I have this Sarah there exactly the same. That’s what I am. Yes. And I certainly when I cover the auctions and when I write about collectible cars, I write as if I’m writing to the same person who might be buying a bottle of wine or an old watch or a piece of art. I truly believe it’s the collector mind. It’s not necessarily the car mind because cars are great. You know, they’re so relatable. I love them because you can talk to anyone. Anyone has a car store. Even if they don’t have a driver’s license, they probably have a car story. I think it’s the collector mind that is the person who is buying the cars. Of course, they love the cars, but it’s the same mentality of somebody who is buying art, buying wine. They obsess about engine variants. You know, numbers matching how authentic is. You know, that door handle was at the original door handle. They obsess about my new detail. Like somebody who’s evaluating a painting might obsess about, you know, it obviously, if it’s real. But also the story of where the painting came from, who owned it before them. What other people who I know might have one. You know, cars are status symbols, of course, just like a piece of art or a watch. There are a subtle way of saying, I’m very smart. I have a lot of money. I’m a discerning person of good taste. But I don’t have to say any of that because you can look at my car and know it immediate.
S3: What’s the most like gauche and bad taste?
S5: Expensive car out there, huh? Well, of course, it depends on who you ask. I’m asking you. Yeah, I think for my own taste, I try to stay very neutral of things. You know, cars that tend to have massive spoilers on the back.
S8: You know, these huge wings that are just lifted up, you know, to feed off the back of the car and, you know, 22 inch rims on the wheels that are, you know, in very loud colors like purple or chrome with racing stripes down the side that make a lot of noise. I do. But there’s a there’s a way to do in the right way. You know, there are some people who really love that. That is not my taste. And the worst thing I think is regardless. You know, cars are great because you can make it reflect your personality. And that’s again, why people love collecting. They feel the car reflects something that they feel about themselves. But it’s also great when you drive responsibly. So when you’re talking about gauche or very moutray cars, the worst thing is, is the drivers themselves. Because when the car. That particular car is say he really loud through a neighborhood and the driver is only going like 20 miles an hour. But the cars just pop, pop, pop, pop roaring through a neighborhood. That’s when you really get your neighbors kind of hating you. You know, if you really want some crazy looking cars, I’d say, go look at Koenigsberg, go look at Pagani, go look at even Boogaard.
S6: He’s got some interesting, crazy cars out. These are modern cars, but they’re very low Bache vehicles that are really kind of outrageous looking at. They’re polarizing. A lot of people love them. A lot of people hate them.
S3: So there are art investment funds, there are wine investment firms. We know that even individual investors put a bunch of money into gold often. Is there a professionalized car investment community, asshole, or is that not yet exists? You think it might ever exist there?
S4: I did do one story on a company called Rally Road, which is a group of people who have purchased collectible and classic cars and are selling shares of the car like you would sell the share of.
S3: And we’re seeing this a lot. Yeah, yeah. Well, it’s an incredibly bad idea.
S4: Yeah. Anyone who has the voice of reason has told me that. But if you talk to these guys, it’s it’s Rally Road. They’re actually based here in New York. And so they are very optimistic about it. You know, they say millennials love cars. It’s just they can’t afford them. So, you know, they just want to be around them. And so they will be willing to buy a share of a car just to say they own part of it. I’m a little bit skeptical of that. So I don’t know if that answers your question. Really, there are a few. They’re not extremely popular.
S3: So if it’s the elderly people who are buying the Rolls Royces and then it’s the you know, the the tech growth who are buying the McLaren’s. And in general, if it’s if what we’re talking about here is this syndrome of people buying the cars whose posters they had on their wall when they were 17, I’m just going to come out and say that today’s 17 year olds don’t have posters on their walls of cars like cars and not, you know, sex objects in the way that they used to be in the 60s, 70s, 80s. Does that mean that at some point when today’s 17 year olds become tech billionaires, this whole asset class is going to basically wither and die?
S6: No, because I do agree that today’s teenagers don’t have cars on posters on their wall. However, they do have cars on their Instagram feeds and they do have cars in their Tick-Tock fields and on their YouTube channels. And it’s a different way of imbibing car culture and articulating car culture and obsessing about car culture. But they still like it. I mean, if you follow Kendall Jenner or the Cardassian family, they love cars. Their get their boyfriends are buying them, you know, Ferrari’s for presence and Boogaard is for present. Those are young people, you know, early 20s, basically teenagers who are getting very excited about their car. You don’t see it in posters on their wall, but you’ll see it on their Instagram, on their Tick-Tock feed. So I would argue the way to consume cars is different, but the appreciation for beautiful things that go fast and that might mean either personal expression or freedom, that’s a very innate human emotion. And I don’t see that ever changing.
S3: So if I want to make a long term bet on on a car right now, I should I should go long. Like Cardi B’s Lambo is based.
S5: Sir, I love Lever. He’s like, yeah, I really would.
S8: I would say is buy what you like. You will never be disappointed if you buy what you like, you know, and trust your instincts.
S4: So many people I think are really concerned about oh, I’m not sure I kind of like this. I don’t know if it’s good or I don’t know if it’s cool. You know what? If you like it, it’s good. It’s cool. You’ll never be disappointed if you buy what you really like and what you really want. And if it gains a little bit of value over the years to even better.
S9: Amazing. Hannah Elliott from Bloomberg. Thank you very much for coming in and joining us.
S10: Thanks for having us. Great.