The market has doubled and in some cases doubled again, and when this happens, a readjustment is on the way

You can see it in the classified ads: This is a wild time. I can remember issues of Hemmings that didn't have a single 356 Speedster for sale, yet today, several appear. I have never seen so many Carrera RS and open 356 cars for sale in the European press. Sale records are frequently set with each new auction report. Recently, I was able to buy a few cars out of long-term collections that I'd had my eye on for years (a Carrera RS, a 356B Roadster, and a 356 Pre-A Speedster, each among the hottest Porsche merchandise); cars you'd never imagine wealthy and knowledgeable collectors would part with. But they figure they've had their fun, and it's time to turn their cars into money.

We have loads of cars changing hands, yet I get more email and phone calls from dejected buyers than ever before. Who benefits from this type of market? Do you have the credentials to wade into the firefight or should you wait for things to quiet down?

The two types of unhappy buyers I hear from are on opposite sides of the experience gradient. Newbies, primed and ready to buy their first vintage Porsche, are frightened by prices and worried about the detrimental effect their lack of knowledge may cause. They should be. On the other hand, experienced players used to finding cars cheap complain that it's too hard to do today. They are right.

It takes guts and knowledge to buy today

Buying cars in today's wild market takes guts and knowledge. The market has doubled and in some cases doubled again, and history tells us that when this happens, a readjustment-and occasionally a severe one-is on the way.

My favorite personal story to drive this home revolves around an absolutely gorgeous Ferrari 275 GTB short nose in Fly Yellow with black leather. It was mid-1989, I was flush from an initial public offering we engineered in Tokyo, and I wanted something tangible to enjoy for my years of trans-Pacific travel and travail.

The car was at a local (San Francisco Bay area) exotic car dealer. I would visit regularly and just stand there and stare at it, without moving a muscle, and let it take me away to another world. The dealer was one of the best independent vintage car shops around. He knew great cars, and this was one of them. The price had moved in the last few years from about $150,000 to $650,000 and was "on its way to a million." I had no reason to doubt that.

Although the idea of ever-increasing value for the 275 GTB was a pleasant one, that was not my motivation. The last thing I wanted to do was to think about selling. To me, this wasn't just a car, it was a symbol of accomplishment-Ferrari's as well as my own-and proof to the world (and to myself) that I had arrived, right along with the Ferrari. Why would I want to part with my success totem? The thought never entered my head of the money I would make, because you can only make money with a car (or a house, or a painting) if you sell it.

How much could it matter if the Japanese stopped buying?

Rather, I was concerned with other possibilities. I had no particular foresight of the crash in the Japanese stock market that would hit in early 1990, nor the way that faraway changes in fortune would impose such chaos on collector cars worlds away. The Japanese weren't the only people buying vintage cars; how much could it matter if they stopped?

I did know that other "bubbles" causing large run-ups in prices were caused by easy access to capital. The Japanese had the ability to borrow at very low interest rates, and when that stopped, so did their purchases. As leaders of the market, when they stopped buying, the market changed drastically.

Within a few years into the early 1990s, I could have bought all the 275 GTBs I wanted for $150,000. It has taken about 15 years for the 275 GTB market to retrace its steps to the level of 1989, so in a simple way, you can reason that the patient car investor can always recover. But a closer look skewers that analysis.

Put $650,000 in bonds instead of the GTB and manage a return of about 6%, and you'll have about $1.5 million 15 years later. Had I bought the GTB, I would have been seriously negative in real value for all of the 15 years. But the critical question isn't price; it's one of liquidity. Would I have kept my GTB long enough? How long can you live with tangible proof of a mistake of such grand proportions before you want it permanently removed from your life? Yet once you do that, all hope of regaining lost ground drives out the door with it.

Although the original idea of the 275 GTB had nothing to do with making money, losing 75% of the value-for 15 years-tends to take away the fun.

Tough time to buy, great time to sell

This is a tough time to buy a vintage Porsche, but it is an easy and wonderful time to sell one. The winners in this market are those folks who-like the long-term collectors who sold me the Roadster, Speedster, and Carrera RS-want to take some chips off the table. Dealers are also winners in a market like this. If you can't make a great living in these times, you need to turn in your dealer's license and find something else to do.

The market is the market. You can ignore it, but you can't fight it. So if these prices don't appeal to you, don't feel that everyone else is crazy and all these prices are lunacy. Just sit this one out and wait for better days.

I'm not the only one who can feel it, and that's why we have so many cars streaming onto the market. Word is out, cars are hot, and even owners located in the most obscure and isolated locations have heard the siren call. Yet opportunity awaits the buyer willing to risk that even when paying today's record prices, a still higher price awaits.

How long will this powerful upswing in prices continue? That is the great question, and a careful reading of history reveals the answer: One rarely knows. My closing advice? Never gamble with more than you can afford to lose. And don't be greedy-you don't want to be the one holding the parcel when the music stops.

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