An unsigned "insights" article published by Goldman Sachs is headlined "How to Overhaul the Tried-and-Tested Investment Portfolio When Inflation Soars." It reports, "Real assets could be more important in a cycle where inflation is higher than the world has been used to over the past two or three decades. Things like residential real estate can generate profits that exceed inflation. Precious metals and even fine art and classic cars can help protect purchasing power when consumer and commodity prices are climbing quickly."
"Classic cars" made me smile.
Whether "classic cars" will outperform stocks for investors over whatever time horizon the investor cares about is something I don't know for sure. I don't think Goldman knows for sure, either, which is why it uses carefully crafted cautious language such as "could be" and "can."
What I do suspect is that because classic cars are more thinly traded markets than stocks, most ordinary buyers will be at an information disadvantage relative to the car salesman. As a result, there's a lot more room for private bankers to make money providing advice and referrals to other services (appraisals, insurance, garaging/climate-controlled storage, loans using them as collateral, buyer's representative or consultant) to would-be classic-car buyers than to would-be stock buyers. A 2021 document from Goldman Private Wealth Management, headlined, "Mechanical Poetry in Motion," features a Goldman Sachs Private Wealth Adviser interviewing the managing director of a U.K.-based "private member's club for car enthusiasts," who advises, "Maximize your enjoyment of the cars and get as much out of them as possible, whether that is mentally or socially. I think the investment side of things should play second fiddle, especially with older cars."
One part of Goldman is telling potential buyers "the investment side of things should play second fiddle." Another part of Goldman is pushing the cars as part of the way "to overhaul the tried-and-tested investment portfolio when inflation soars." I predict that a few years down the road, this will be fertile ground for complaints by bank clients whose classic cars did not provide the social enjoyment or investment results they had been led to expect. That is one possible outcome.
Or maybe the other money managers, those who cater to the public-pension industrial complex, will start trying to invest public pension money in classic cars (why shouldn't state employees get the same returns available to Goldman clients, after all?). In that case, it'd be taxpayers on the hook when and if the returns disappoint. And the "enjoyment" won't have been there as a fallback consolation for the pensioners or the taxpayers.
