{"id":59294,"date":"2014-08-26T06:18:17","date_gmt":"2014-08-26T10:18:17","guid":{"rendered":"http:\/\/countingpips.com\/?p=59294"},"modified":"2014-08-26T07:45:25","modified_gmt":"2014-08-26T11:45:25","slug":"why-were-pitting-stocks-against-vintage-cars","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2014\/08\/why-were-pitting-stocks-against-vintage-cars\/","title":{"rendered":"Why We\u2019re Pitting Stocks Against Vintage Cars"},"content":{"rendered":"
August 26, 2014<\/div>
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By WallStreetDaily.com<\/span><\/a> \"Luxury-Vintage<\/p>\n

By Robert Williams<\/a>, Founder<\/em><\/p>\n

Automotive history was made last week when a 1962 Ferrari 250 GTE sold for $38,115,000 at the Bonhams Quail Lodge Auction.<\/p>\n

It was the most expensive car ever sold in an auction-style format.<\/p>\n

The car is famous for a fatal accident during a race at Montlh\u00e9ry, France in 1962 that killed French Olympic ski champion, Henri Oreiller.<\/p>\n

After the accident, the car was rebuilt by the Ferrari factory.<\/p>

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Now, since the S&P 500 also sits in record-setting territory, I went back to 1971 and pitted the stock market against the luxury-vintage car market.<\/p>\n

The results were nothing short of spectacular.<\/p>\n

During my research, however, I discovered something even more fascinating. That is, a rare market anomaly with the potential to make you a fortune in the weeks ahead.<\/p>\n

First, let\u2019s review the results from my research\u2026<\/p>\n

As it turns out, the stock market doesn\u2019t even come close to measuring up.<\/p>\n

Below is a list of the top 14 car auction sales of all time, beginning in 1971 with the sale of a Bugatti Type 57SC Atlantic Coupe.<\/p>\n

Over the last 43 years, sale prices in the high-end luxury-vintage car market have expanded by nearly 11,000%. The S&P 500 has only appreciated by 1,834% over the same period.<\/p>\n

\"Luxury-Vintage<\/p>\n

I suspect it would\u2019ve been much closer had I used the returns of the financial markets\u2019 best-performing asset class, rather than just the benchmark for U.S. stocks.<\/p>\n

Nonetheless, stocks alone were no match for Ferraris, Alfa Romeos, Mercedes, and Bugattis. And the vintage-luxury car market continues to explode.<\/p>\n

Values of collectible Ferraris shot up 62% in 2013 alone, and the value of all high-end collector cars has jumped 47%.<\/p>\n

What\u2019s interesting to note, however, is that shares of high-end auction house Sotheby\u2019s<\/b> (BID<\/a>) are in decline. (Even though Sotheby\u2019s specializes in fine art and jewelry, this market typically shares a strong correlation with the luxury-vintage car market.)<\/p>\n

As it turns out, Sotheby\u2019s has been publicly feuding with activist investor Daniel Loeb, which hasn\u2019t been good for business.<\/p>\n

As one industry insider describes, \u201cThe uncertainty around the future management and direction of Sotheby\u2019s has very likely caused some hesitation for clients.\u2019\u2019<\/p>\n

Loeb and Sotheby\u2019s have since tabled their seven-month feud, however, they have made an agreement to add board seats for Loeb and two of his allies.<\/p>\n

How to Play a Convergence<\/h2>\n

The fact that Sotheby\u2019s has settled its feud with Loeb puts a fantastic investment opportunity on the table.\u00a0 That is, since the high-end auction market is otherwise quite robust.<\/p>\n

It\u2019s a perfect situation for what\u2019s called a \u201cpairs trade<\/a>.\u201d<\/p>\n

A pairs trade seeks to profit from a temporary disconnect in two historically correlated securities.<\/p>\n

The trade is executed by shorting the outperformer (the high-end luxury market) and going long the underperformer (Sotheby\u2019s), betting that the \u201cspread\u201d between the two will converge.<\/p>\n

All we need to execute this trade effectively is an outperforming stock to use as a proxy for the high-end luxury market.<\/p>\n

That stock is Tiffany & Co.<\/b> (TIF<\/a>).<\/p>\n

The beauty of a pairs trading strategy is that it\u2019s market-neutral. Whether the stock market goes up, down, or sideways over the next few weeks, the convergence of Sotheby\u2019s and Tiffany should put a nice premium in your pocket.<\/p>\n

Just take note, though\u2026 shorting stock does require that you open a margin account.<\/p>\n

Onward and Upward,<\/p>\n

Robert Williams<\/a><\/p>\n

Founder, Wall Street Daily<\/i><\/p>\n

The post Why We\u2019re Pitting Stocks Against Vintage Cars<\/a> appeared first on Wall Street Daily<\/a>.<\/p>\n

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By WallStreetDaily.com By Robert Williams, Founder Automotive history was made last week when a 1962 Ferrari 250 GTE sold for $38,115,000 at the Bonhams Quail Lodge Auction. It was the most expensive car ever sold in an auction-style format. The car is famous for a fatal accident during a race at Montlh\u00e9ry, France in 1962 […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-59294","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/59294","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=59294"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/59294\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=59294"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=59294"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=59294"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}