This is always my favorite week of the month. Going over what we saw in the government data regarding the CPI (Consumer Price Index). Not only this, but we will look at some recent auction results - as well as recent wholesale prices for luxury watches!
CPI Data Market Report
Let’s first start at a high level as we always do! The overall prices paid by consumers across all market sectors increased 0.5% in December. This brings us to a 12 month running total of 7.0%. To put it into perspective - this is the largest 12 month increase since June of 1982. The heaviest hitters in the last 12 months were the energy sector where we saw Gasoline go up 49.6%, as well as the Used car market - which I will dive into deeper below.
It has been a tough 12 months for us car enthusiasts. Gasoline up almost 50% has made the cost to run our cars go through the roof, and meanwhile, we have seen the prices for cars skyrocket. In December, as I predicted, the prices paid in the Used Car market were up 3.5% - bringing us to a 12 month running total of 37.3%.
In the New Car market, we have seen more movement as well. Seeing prices paid raise by 1.0%, and the 12 month total landing at 11.8%.
Not only are we paying more to use our cars in gasoline, oil, parts, ect.. Your dollar also doesn’t go nearly as far when trying to step into a new vehicle. When will this end?
I always like to look at the Manheim Used Vehicle Value Index as a leading indicator of where the market is going. If dealers are paying more at auction for inventory, those prices will be passed onto the consumer. In December, cars sold at auction for 1.6% higher than November, bringing the 12 month reading at auction to 46.6%.
While this is a lower increase than we saw in November, it’s still an increase, so more than likely, we will see a positive number in January’s CPI data for Used Cars, but maybe something lower than the 3.5% we saw this month.
Something worrisome to see was the prices being paid at the Mecum auction last week.
This picture has been making its way around the internet. 440k on a Mclaren 570S, 737k on a base model Lamborghini Aventador, and 330k for a 4 year old Lp580 Huracan (RWD Huracan’s have consistently gone for much less than AWD Huracan’s). This is some really staggering data that makes me question its legitimacy. One thing I notice is the “2017 Lamborghini Aventador LP700-4” is not actually a 2017. In 2017 the base model was the Aventador S which was a LP740-4 and also had a different front bumper. I’m hoping this isn’t the only flaw in data, but according to friends that were watching the auctions on TV, everything was going for insane prices.
Something that comes to mind with this is what Zillow did in the housing market. They were caught buying up houses prior to them hitting the market, stacking up 30+ houses in a neighborhood. They would then buy one for a price 100s of thousands higher than market, to drive up the prices of all the other homes they now owned in the neighborhood.
It could be the case that dealers have all this inventory (with prices as high as they are, things are starting to move slower), and they needed a catalyst to make the cars they are sitting on worth what they want for them.
We are crossing our fingers this is the hinting of a blowoff top for the car market, but as always, I will continue to watch and report on it!
Watch Market Report
I mentioned in a previous newsletter the effects of raising retail prices of luxury watches. Each time it happens, we see a multiplicative action in the secondary market. As expected, this is exactly what we saw.
Moda Watch Club - one of the best, if not the best, Facebook groups for wholesaling watches has a steady flow of watches come through every day. Being that I like to see the direction of where the market is going, wholesale is a great place to watch, because prices paid by these dealers once again are then pinned on the end consumer.
The last few weeks I’ve seen GMT Master II Batmans going for 24k (previously 17k new), GMT Pepsi’s going for 29k (previously 21-22k), Daytona Pandas going for 46k+ (previously 30-35k).
Remember, the price increase of MSRP was only on average 3.4%, with steel watches like submariners and GMTs in the 10-12% range. We are seeing these pieces move MUCH more than 10%, however. We are seeing the same price movement that we’ve seen in previous MSRP adjustments - where the secondary market sees a much more drastic movement!
Speaking with a few different dealers, they believe Rolex is at full production - which is believed to be around 800k watches a year. However, the demand is much greater than it has been in past years. Until we see a downturn at the macro level, a sharp decline in the stock/job market, I expect this demand to be the same or increase. So while I never recommend buying at this far over retail and supporting the secondary market, I do believe we will continue to see this move up as long as the economy is doing well.
Tuesday Turbo Talks Update
Moving forward I’m going to keep this all about the Car/Watch market. It might not be a weekly release due to no new data, but that is where a lot of my passion lies and I have another big project I’ve been working on that I would like to devote some more time to!
As always though, I love talking cars/watches, so feel free to reach out with anything related to those topics!
My 2020 Model Y is worth $9,000 more than I paid for it. It has 15,000 miles. Dealer lots are pretty empty.