|
I could be wrong, but based on various TRF posts I break down Rolex shopper like this:
1) The very wealthy. They probably don't wear Rolex and certainly don't care what's going on in the Rolex market.
2) Whales. They're in this just for fun. The buying/flipping is entertaining but they'll likely quit when it becomes boring or difficult. Normal market conditions are boring, the current speculative period is exciting!
3) Greys. They overlap with Whales except this is their business. They buy from ADs and individual Flippers. They're in for the long haul and can make money under all market conditions.
4) Flippers. People who can afford to play and are granted supply by the AD but quit when the tide turns. They're merely opportunistic.
5) Collectors and Enthusiasts. They buy intentionally and flipping is just part of the process, a means to an end. They're not in this to make money.
6) The Unwashed Masses. Regular people who in normal times would buy a Rolex at retail. Watches are kept for a long time or they are purchased as gifts. Flipping seldom occurs.
On TRF I'd say we are mostly from group [5] - otherwise why even bother registering on a forum and discussing this stuff? The Greys are not the problem, it's groups [2] and [4]. When prices begin to tumble the Whales will stop because flipping becomes an inconvenience and the Flippers will stop because now they might now make money.
This is when the music stops:
R = Retail cost of piece
T = Tax (eg. 8%)
C = Transaction cost imposed by Grey (eg. 20%)
P = Profit remaining to Flipper
Imagine a long rectangle, this is how the pieces fit:
[ R ][T][ P ][ C ]
Retail cost and Tax are fixed. Transaction cost from Grey depends on market price but is likely a percentage under any conditions. When the profit seen by the Flipper approaches zero we will see stock return. Today one must sell the Flipped piece for about 30% profit just to break even because Greys aren't handing out free money. (Try it for yourself when selling a watch.)
|