Collector Cars as a Market Indicator
Before you think I’ve lost my mind, read what follows and then I’ll comment.
In the midst of last Wednesday’s market plunge numerous financial websites weighed in on whether it was time to “buy the dip” or “throw in the towel”.
One writer, Wolf Richter (editor-in-chief of the Wolf Street Blog), advised readers that according to one indicator they would strongly want to consider the latter.
The Hagerty Market Index tracks the prices of cars— not just any cars, but very expensive classic collectible cars. Hagerty is the leading insurer of classic collectible cars and is thus intimately knowledgeable of their values.
According to Richter, the reason the Hagerty Index is important is that classic car prices often move similarly to – and sometimes lead – prices of other assets such as equities and real estate. Richter writes “The global asset class of collector cars … is quietly but persistently and very un-enjoyably experiencing a downturn that parallels and in some aspects already exceeds the one during the financial crisis.”
The Hagerty index peaked and then dropped in April 2008, a few months before U.S. stocks suffered the biggest crash in decades, suggesting it could be an early indicator of what may be in store for other asset classes.
At the present time, the Hagerty Index is down about 10% over the last year and about 15% from its peak in September 2015.
So, did you read it?
While it paints an interesting picture of classic car values, to compare it to what happened in 2008 is stretching things quite a bit too far.
In 2008 there was a lot more going on than simply declining car values. Let’s not forget the whole sub-prime mortgage debacle.
Take this comparison with a grain of salt.
Coincidence is not a premonition.