#20 - Boris, Brexit & Bugatti's
I write this musing as we enter a rather significant week for Great Britain, the British people and the cogency of our political system. I remember vividly waking up on the morning of the 24th June 2016 to a cacophony of alerts informing me that we as a country had voted to leave the European Union….a result I think even surprised the people who voted in favour of it. Over the following three and half years, we have sat hopelessly as spectators watching our legal and political systems handle the monumental task of trying to remove us from the single market. In many ways, it has been three and half years that we have lost floundering in a zero growth environment while businesses and consumers sit on their hands waiting for some kind of clarity all the while unable to expand, invest or consume. Meanwhile, billions of £ in tax payers money is spent on Brexit administration.
What’s more, as we head to the poles, the sentiment of voters seems more focused on achieving a Brexit solution (for better or worse) than it is on the fundamental party manifesto’s and agenda’s. The tragic reality is however that we the British public want our lives back. So while Remainers find themselves willing on a blonde haired buffoon who spear headed the Brexit movement, Brexiters underwhelmed by the reality of their anti EU decision seek guidance from new and upcoming parties to help remedy the headache we now find ourselves in.
So what are the implications beyond this for alternative assets and particularly automobiles? Looking yonder, the global macro backdrop has been underwhelming for a while now with lacklustre growth in China and ongoing trade wars throwing fuel on the fire. It’s definitely not a bullish picture. For automobiles, this has been further compounded by the consistent out performance of classic cars as an investment class over the last 15 years buoyed on by an increasing number of speculators entering the market keen to capitalise on the rampant appetite for all things with an engine. It had to take a breather at some stage and the global slowdown has acted as the perfect catalyst to facilitate this.
The most tangible example of the current state of the automobile market (particularly in the UK) was the recent Bonham’s Bond Street Sale held on December 7th. Of the 36 lots up for sale, only 10 ended up trading. This to me was not a function of inappropriate cars or unrealistic prices…..far from it. For investors, the FOGI (fear of getting involved) seems to far outweigh the FOMO (fear of missing out) at the moment. No one wants to catch the falling knife and that is exactly the buying paralysis we now find ourselves in.
So what will change the downward trajectory? Brexit clarity will go a long way to resolving this in my opinion. Once people know what the outlook for the UK is going to look like moving forward, they can plan and more importantly have the confidence to start spending. Be it property, cars, wine or art, more participants will likely return to the market at the beginning of next year with clarity over Brexit and in my view, that is likely achieved through a Tory majority. Anything else and we will continue to tread water indefinitely. Regardless of the Brexit outcome however, prices are likely to remain soft for some time to come until we see a meaningful pick up in global growth.
Whichever way you look at it, now is an incredibly interesting time to be considering the car market from an investment perspective. The dumb speculative money has been and gone leaving with it a wall of supply at attractive prices. Fortune most definitely favours the brave in this market and as an entry point; I feel strongly that the beginning of 2020 will provide a very appealing time to step in and start buying.
Happy Motoring,
Greg