"Overvalued"

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Ron LaDow
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"Overvalued"

#1 Post by Ron LaDow »

"Ron, you are implying that just because an asset is trading in the market therefore it can't be overvalued."
Yes. So long as there is an active market, the good being traded is not 'overvalued' AT THAT TIME. Parties engaged in free trades are both profiting. Even in tulip bulbs.

"I would suggest that a asset bubble is a classic example of overvalued (or shall we say mispriced) assets trading in an open market."
ALL goods are 'mispriced' in hindsight; too cheap or too expensive, but that's in hindsight. At the time of the trades, so long as there was a market, they were priced just right.
To presume otherwise suggests there is some objective, 'correct' price for a good.
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Neil Bardsley
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Re: "Overvalued"

#2 Post by Neil Bardsley »

Ron my point is that markets aren't 100% efficient/rational 100% of the time

http://www.economist.com/blogs/buttonwo ... ty-markets

In fact I think in the classic car market there are a lot more chances for over v under priced assets to trade. Taking two extreme examples a buyer that knows that a car is special model but the seller thinks of it as scrap metal in his barn or a seller that knows that his car is full of problems but the buyer doesn't know how to check.

I don't know if speedsters are overvalued v coupes I'm just saying it's possible for an asset to trade above/below it's fair value even in more efficient markets.

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Dennis ODonnell
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Re: "Overvalued"

#3 Post by Dennis ODonnell »

Neil, I subscribe and I can't open your link. What was the example? Securities have detailed, comparative statistics to use in valuation and the sample is large. Even swaps have underlying assets that can be priced.

Correct me if I'm wrong but collector cars are almost one-offs, closer to fine art in their individual pricing. So there is no fair value or Present Value. They can't be "overvalued" and only overpriced if unsold. Each sale changes the range of comparables but it's only a range.

Maybe it's a semantic thing. Are you using value & price interchangeably?

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Ron LaDow
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Re: "Overvalued"

#4 Post by Ron LaDow »

“Ron my point is that markets aren't 100% efficient/rational 100% of the time”
I agree and presume that 100% efficiency and rationality are academic conceits, such as ‘equilibrium’; no market is ever completely efficient or rational.
All markets are in a constant state of imbalance, with no exchange perfectly symmetrical. Every exchange has one party with superior knowledge and one party gaining more than the other party. Nothing can or should be done about that; to attempt to equalize it, as mentioned earlier, makes the presumption that a third party can establish some objective value. We all know where that leads.
So while we can look back on tulip bulbs as being ‘overvalued’, we can equally look back on, oh, Apl shares as ‘undervalued’. The difference is by degree rather than function and both traded freely at those values, the ‘mis-pricing’ only evident in hindsight.
The statement is this: Every market price is in flux, markets being always imperfect and to some degree irrational, and no third party can claim to know the ‘correct’ price at the time other than appealing to some, oh, labor theory of value. Absent fraud, the market price, established by trades at the time, is correct by definition.
Dennis, with regard to security values, there is a far larger sampling of opinion, but I'm pretty sure those tulip bulbs were what amounted to a commodity at the time. And just last month, that large sample of opinion took a bath.
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Dennis ODonnell
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Re: "Overvalued"

#5 Post by Dennis ODonnell »

Yep, they were a hotly traded commodity but without a history or recognition of comparative value, sort of like gold today: No ceiling, no floor, not pegged to anything but pretty.

You're thinking of the correction in mid August? Yep, even separate market seqments move together; the "opinion" changed. The twist these days is that algorithmic trading is even more nervous than the herd but the blocks are much larger so it happens very quickly. Doubt we'd see Speedster values drop 15-20% within a week.

Nice swipe at the "third party" fallacy. Or should we say hubris since we're only pricing wheels?

Neil should be waking up about now, hope he doesn't bring up "random walk."

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Ron LaDow
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Re: "Overvalued"

#6 Post by Ron LaDow »

"Nice swipe at the "third party" fallacy."
I could be accused of a swipe, but there's hardly any other 'theory' which claims to determine an objective price. And "random walk" is fine by me; I've beat the market once or twice by having some special (not 'inside') info, but probably lost the same amount at other times.
You're right, it was August. We bought some, presuming people were selling low and we could profit by the market returning to trend, maybe a bit of gain over a pure "random walk". Well see what happens next time.
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Dennis ODonnell
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Re: "Overvalued"

#7 Post by Dennis ODonnell »

Well, if you held after buying them you did OK this time. If prices trend over time the randomness can be tested by charting them and the walk anticipated to some extent. (Equities, not Rudges.)

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Adam Wright
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Re: "Overvalued"

#8 Post by Adam Wright »

Wheels are always a hot seller, because even the nicest most restored car could always use a set of wheels. I sell lot of date matched sets to guys who buy restored high end 356's and want to do something to it, so they take off the fake chrome wheels and put on date matched originals. There aren't a lot of things you can do to a fully restored car, but it is very easy to swap out the wheels, unlike the interior or paint.
Rudges are the highest end of this wheel market. And just like the date matched wheels, you can't do it unless you track down original equipment, and Rudges are the holy grail of this. Take it from a guy who has 1 wheel, 2 drums, and 1 spinner, finding Rudge pieces is very very hard. When I used the real Rudge spinners on Da Spoodster, it took every trick I had in the book to track down 4 real spinners, it wasn't easy.
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Dennis ODonnell
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Re: "Overvalued"

#9 Post by Dennis ODonnell »

A, the Mercedes museum has W grand prix cars finished in a silver that's almost pearlescent. It would put that car over the top.

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Adam Wright
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Re: "Overvalued"

#10 Post by Adam Wright »

Can't do anything now, the car is a world away in Australia.
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Neil Bardsley
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Re: "Overvalued"

#11 Post by Neil Bardsley »

Dennis ODonnell wrote:Neil, I subscribe and I can't open your link. What was the example? Securities have detailed, comparative statistics to use in valuation and the sample is large. Even swaps have underlying assets that can be priced.

Correct me if I'm wrong but collector cars are almost one-offs, closer to fine art in their individual pricing. So there is no fair value or Present Value. They can't be "overvalued" and only overpriced if unsold. Each sale changes the range of comparables but it's only a range.

Maybe it's a semantic thing. Are you using value & price interchangeably?
You make a good point which I agree with. I guess I just making the point that because a car trades in the market it isn't always correct. This assumes that the seller/buyer have the same information.

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Dennis ODonnell
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Re: "Overvalued"

#12 Post by Dennis ODonnell »

One example being the uninformed but excitable buyers at the January AZ auctions. But what's correct?

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Neil Bardsley
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Re: "Overvalued"

#13 Post by Neil Bardsley »

Dennis ODonnell wrote:One example being the uninformed but excitable buyers at the January AZ auctions. But what's correct?
What is why I'm very willing to admit I'm not the one to say that is the fair value for a 356. The entire market is quite confusing. For example, lets say I decided to price/build a car from all it's parts and I bought them all individually from a well known registry vendor then asked another trusted 356 restorer to put it all together for me. I would have a super car that would of cost when in excess of what I could sell my A for however because it doesn't have a VIN it would probably be worth less then my A (unless I put an outlaw badge on it but that's another discussion!). Which is what the original question was about. Ron's reply is that it's worth what someone will pay for it. My point is that often buyers, especially with cars, don't act rationally and sometimes sellers too. As for what the fair value I will let someone with much more experience then me comment on that.

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Dennis ODonnell
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Re: "Overvalued"

#14 Post by Dennis ODonnell »

Ahh. As in the notorious "irrational exuberance" crack by Greenspan. Agreed that it's possible for something to trade outside its currently accepted price. But pricing your perfectly assembled collection of parts without VIN vs. your A might be apples to oranges.

Ron's idea is economic, worth= whatever kind of value is derived by the buyer: Therefore that collection of parts is worth what he paid, the price is correct. Your A is irrelevant & the buyer's information is private.

Your idea is strictly monetary, worth =comparative value: Therefore the buyer paying the same amount for that collection of parts pays an incorrect price. It's not worth as much as your A & both sides share that information.

Not much else you can do with shares than monetize them so it's easier to value them. Old cars can be used for other reasons, equally rewarding, so it's much harder to say one's overvalued.

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Peter Silten
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Re: "Overvalued"

#15 Post by Peter Silten »

Here's an example of an item being overvalued. A key fob for $2750:

https://porsche356registry.org/classifieds/8722

That's obscene. Let the fur fly!

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