On Carroll Shelby, muscle cars and riding the collectibles hype wave

Muscle car pioneer Carroll Shelby, who designed (and drove) some of the best very fast cars America has ever made, died this past week after a long and fabulous life that included training bomber pilots, running a chicken farm, dating a former Miss Universe and starting the International Chili Cookoff (which, importantly, grew into an organization that has generated $1 billion in proceeds for charities).

I want to thank Shelby for all the wonderful cars he created (and for an amazing life very well lived), but also want to speculate about what his passing means for all those ardent collectors of the vehicles he created, those bad-ass big-boy toys led by the original muscle car, the Shelby Cobra.

Forced to stop racing because of a bad heart (he would go on to be one of the longest-surviving recipients of a heart transplant), Shelby in 1960 began to build his own dream car, dropping a thundering Ford V-8 engine into the relatively tiny body of a British A.C. Ace roadster.

Over time, those cars would sport a 427-cubic-inch monster of an engine, a veritable rocket sled on land that created the idea of muscle cars (the picture here is of a Cobra 427). Shelby would go on to design performance versions of the original Mustang and its more recent reboot, as well as the Viper and other Dodge sports cars, among much else.

So, with the founding genius behind these cars now gone, what will happen to the market for his creations? It's difficult to be definitive in something as emotion-driven as collectible muscle cars, but let's go through my rules of thumb to see what's likely (hint, it may not be the best time to buy, but it's a great time to sell):

1. The Shelby Cobra is pure muscle, which is to say it is cash-crazy catnip for Big Boys Who Love Their Toys. That means there's a substantial market for the product among people with money and interest to collect certain kinds of performance anything. In the days after Shelby's death, that market will be enhanced by all the talk (and lust-inducing photographs) of his creations. 
2. It's mega-expensive already. A two-of-a-kind (and the only surviving) Shelby Cobra 427 Super Snake prototype sold at auction for $5.5 million in 2007. Even replicas of these vehicles are selling for $50,000 to $100,000. Other Shelby vehicles, such as late-1960s Shelby Mustang GT350s, also are selling for low six figures (or way more, if they're unique and have direct ties to the great man himself).
3. The Shelby Cobra was really expensive when it was first made, so it started out with high value that has only grown with time.
4. That high original price meant few were made (less than 400 overall). Scarcity drives value, especially for something of great style and historic influence over an entire industry. 
5. The typical jump in prices when a famous creator dies. For instance, sticker prices on the Ferraris designed by company founder Enzo Ferrari jumped after his death in 1988, with collectors debating whether the quality of "post-Enzo" cars could measure up to the standard he created. 
6. That said, prices typically will moderate in time, as they did with Ferrari (collectors came to terms with post-Enzo cars pretty well). 

So, you'll see further speculation about what will happen with Shelby-connected cars in coming weeks. Some of that speculation will be well founded and prices are likely to spike for both original Shelby cars and the many replicas out there.

But here's the bottom line, which should matter to any passionate collector who also wants to gain value from a collection. A lot of the speculation around Shelby car prices will be hype. If you want one of these cars right now, and don't care what you pay, go for it, knowing you'll be paying a premium for your bad timing that you'll be unlikely to make back any time soon.

But because the price jumps on Shelby cars now are predictable, there's an opportunity for the savvy investor to make money, by buying something else. Rather than picking up a price-inflated Cobra, spend that money on the creations of some other aged genius (or for collectible creations with a major anniversary, say of a car's launch or similar event, coming up). This approach will allow you to buy at a relative lull in that market. Then, when the event hits and the hype wave builds, you can sell at a nice profit.

This kind of approach can be complicated when you're talking about cars that cost hundreds of thousands of dollars each, but the principles apply in any collectibles market. Take advantage of the cycle and you'll be smiling all the way to the bank.