I am hosting a few panels today at the Spark Disruptors Conference. We already did Politics & Markets panel (with George Will and Elle Hawkins), so now I can relax and get ready for something really amusing:
Are Cars a Good Investment or Just Plain Fun?
Ever since Jim Wiandt asked me to host this Q&A, with Rob Petrozzo of Rally Rd, I have been thinking about the idea behind it. Rally Rd came up with an intriguing business model of finding noteworthy items in private collections and turning them into “a company” via equity shares in an IPO. (Rob’s background creating brands and digital offerings for Kanye West, J&J, NFL, Roche, Ares, and Fortune 500 is pretty insane).
Here are my questions for Rob, starting with the title of this post:
1. “Cars for Driving, Sneakers are for Wearing” Explain why I would want to invest in “collectibles?”
2. How do you turn a collective car into an IPO? What is that process like?
3. Who are Rally road’s clients? Who backed the firm as an early stage investment.
4. How do you get past the issue of survivorship-bias – we see the successful auctions today, but those are the cars that have appreciated over the past 30 years. Do we have any idea what will be the cars that will appreciate over the next 30 years?
5. What about Art: Is it to make your walls pretty and to stimulate conversation during cocktail parties, or an investment class?
6. What are the regulatory hurdles you had to jump through for this? Was this like doing an IPO?
7. I am a fan of Horology, but some of the collectible one-off timepieces run $1/4 million dollars. Where is your focus with these?
8. What about authentication: Every time I see a signed baseball card or a pair of Michael Jordans I assume the signature is fake.
9. OK, lets talk cars: What is hot? Not? Undervalued?
10. if you could take home any car, what would it be ?
In prepping for this, I came to the conclusion that I don’t see myself assembling a “cars collection” as part of an alternative investment portfolio. Besides my daily drivers (back when we had those) the cars I have purchased for fun have mostly held their value. The sweet spot of maximum depreciation but minimum repair cost is my target.
But it is intimidating, expensive, and time consuming to manage a dozen cars. It would be a labor of love, but folks like Jay Leno or Billy Joel have turned them into a functioning business (not profitable, but tax savvy). My concern is I would be constantly forced to consider the financial ramifications of depreciation/appreciation anytime I wanted to drive.
Still, I made a list of cars I could imagine having in my garage — not as investments, but as machines I would happily take out for a spin, depreciation be damned.
1. 1957 Mercedes-Benz 300SL Gullwing
2. 1963 Aston Martin DB5
3. 1963 Corvette Stingray Split Window Coupe
4. 1967 Ferrari 275 GTB/4
5. 1972 Ferrari 246 Dino
6. 2003 BMW Z8
7. 2005 Ford GT
8. 2016 Bentley Continental GT V8-S
9. 2017 Ferrari California T 70th Anniversary
10. 2018 Mercedes-AMG GT R
1935 Auburn 851 SC Boattail Speedster
1949 Talbot-Lago T26 Record Cabriolet by Dubos
1957 BMW 507
1960 Ferrari 250 GT Pinin Farina Coupe
1962 Porsche 356B Twin Grille Roadster
1999 Ferrari 550 Maranello
1983 Ferrari BB 512i
2018 Ferrari 812 Superfast
That’s my fantasy garage . . .
UPDATE: Fun session, started late due to technology issues but an interesting chat. I learned early investors included Porsche, and if one offs or other limited editions come out, Rally Road gets an early bite. Smart relationship for both.
Hear @ritholtz & @OnRallyRd‘s @robpetrozzo on whether cars are ~ actually ~ a good investment at our #SparkDisruptors virtual event on 11/11. 🚗 RSVP for your free ticket here: https://t.co/QO26FQG6IJ pic.twitter.com/o6gNzxJ7KG
— Spark Network (@SparkNetwork5) November 9, 2020
The Hidden World of Failure (October 23, 2020)
Survivorship Bias on Wheels (August 14, 2018)
Survivorship Bias (& Compounding) in The Art World (May 16, 2019)