In the midst of Wednesday’s market plunge numerous financial websites weighed in on whether it was time to “buy the dip” or “throw in the towel”.
One writer, Wolf Richter (editor-in-chief of the Wolf Street Blog), advised readers that according to one indicator they would strongly want to consider the latter. His theory is based on The Hagerty Market Index that tracks the prices of cars— not just any cars, but very expensive classic collectible cars. Hagerty is the leading insurer of classic collectible cars, and is thus intimately knowledgeable of their values.
According to Richter, the reason the Hagerty Index is important is that classic car prices often move similarly to – and sometimes lead – prices of other assets such as equities and real estate.
Richter writes “The global asset class of collector cars … is quietly but persistently and very unenjoyably experiencing a downturn that parallels and in some aspects already exceeds the one during the financial crisis.”
The Hagerty index peaked and then dropped in April 2008, a few months before U.S. stocks suffered the biggest crash in decades, suggesting it could be an early indicator of what may be in store for other asset classes.
At the present time, the Hagerty Index is down about 10% over the last year and about 15% from its peak in September, 2015.
What do you think about Richter’s theory? Agree or not agree?