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A classic long term investment

21 May 2021

Cars versus Gold

By Shae Russell
Friday 21st May 2021

What’s the better long term investment?

Over the weekend – after the morning coffee but before the household chores – I picked up my phone to delay my responsibilities. Afterall those weekend papers wouldn’t read themselves.

Much like the week that preceded it, inflationary fears and commodity commentary filtered its way into the digital ink space.

Copper continues to trade at multi decade highs. Even though the friendship between China and Australia is frosty, iron ore is still dancing around US$205 (AU$264) per tonne.

Talk of US Treasury bonds rising was among the papers. As was what the Federal Reserve Bank will do to save us from this monetary policy they’ve unleashed. It goes without saying that Aussie house prices got a mention.

Then my eyes landed on an unexpected gold story…

Cars more popular than gold


Today was meant to be a chat about all things commodities. We were going to dig into what or if their price rises tell us about the inflation story. We’ll have to chew on that next week.

See, amongst all those pages I was flicking through, something caught my eye. I had to start playing with the data to see what it would reveal for investors.

The Australian Financial Review ran an article on collectible cars and the prices rises in this sector. Or more specifically, how the growth here is outpacing gold.

Lofty markets, loose monetary policy and investors looking to diversify are treating collectible cars like art. With the AFR writing:

Prices for rare classic cars are rising “faster than gold” as collectors compete for head-turning dream machines whose names, style and provenance are a beacon for sophisticated investors.

“There is no difference between classic cars and classic art,” said Mr Huggins, an investment banker who keeps his collection divided between the US and Australia.

[…]

“There are so few,” Mr Selby said. “The market is limited, money is cheap, people are not travelling overseas but still want to enjoy life.”

Specialists warn that collecting vintage cars is a sophisticated hobby, or investment strategy, that requires research and knowledge, such as identifying the originality of main components, the chain of previous owners, how many times a car has been restored and by whom.


This isn’t the first time I’ve seen this sentiment. A decade ago classic cars were touted as the new ‘art’ or the alternative wealth asset.

What caught my attention however, wasn’t that ‘prices for rare classic cars are rising faster than gold’ right now….but how the classic car market is performing against gold.

The Hagerty’s Classic Car Index began in 2007, and it’s comprised of the values of all the crowd favourites. In it you’ll find a mix of American muscle cars, blue chip classics, British racing beasts and some hard to find European numbers.

Frankly the sort of cars in the index are probably out of reach for you and I. But the rising and falling values of them gives us mere mortals an indication how true classics can be an alternative investment.

What I wanted to know though, is what’s historically been a better long term investment: gold or a classic vehicle?

Luckily, Nick Frappell and I are both data nerds. We had a tinker with Bloomberg and check out what we discovered…
 

Gold v Haggerty Collectors Index V ASX 200



Source: Data from Bloomberg; ABC Bullion

To my surprise, over the past 14 years, the Hagerty’s Classic Car Index (orange line) has actually outperformed the S&P/ASX200 (grey line).

But gold (red line) in the same period has performed exceedingly well in the same period.

The short version? Money might be finding it’s way to the classic car market for now…but the old yellow metal is an enduring store of wealth in the long term.

Until next time,

Shae Russell,
Group Communications Manager, for ABC Bullion