negative wealth effect and watch prices

[chonlei]

Do you guys have experience on how high priced pateks react during stressed stock market or economic times? I didn't get into the watch hobby until 2013 or so and I was lucky to pick up some now hot SS Patek and Rolex pieces during 2015-2016 at list price.

I remember someone saying that 5070P was introduced in 2009 during the financial crisis? Was it "that" hard to get at that time? I am not talking about walk in, but was it that hard to get if you at least bought some watches and knew someone at AD? did it sell for significantly above MSRP at that time? I wonder what will happen to 5740 now, at an even higher price point and production run perceived to be much much longer than 5070P. I am inclined to think that the 5740 will only trade at best at a small premium (10-20%) to MSRP one year from now....

Do you guys think lower priced items like 5711/5712/116500 will be more immune to the stock market?

[tyler1980]

why people are so concerned with watch prices is beyond me. Be worried about being underwater on your mortgage or losing your job. During a true financial crisis what my watch is worth would be the last thing on my list of things that would be important.

[Ichiran]

Originally Posted by tyler1980

why people are so concerned with watch prices is beyond me. Be worried about being underwater on your mortgage or losing your job. During a true financial crisis what my watch is worth would be the last thing on my list of things that would be important.

I assume some watch buyers are treating watches as "buy-low-sell-high" commodities. Not surprising also given the above MSRP secondary prices of some of these watches presently.

[tyler1980]

Originally Posted by Ichiran

I assume some watch buyers are treating watches as "buy-low-sell-high" commodities. Not surprising also given the above MSRP secondary prices of some of these watches presently.

IMO it goes hand in hand with other factors and there is no real advantage. Getting a watch at retail or at a discount when your portfolio takes a 30 or 40 percent hit and your house has lost a ton of value is it really cheaper? I think not.

If you are spending more of your net worth to get a watch what price it is matters less.

If you can time the financial market then great, but the fact is almost no one can and if they do its luck as far as identifying a true top or bottom in advance. The market is good now so if i was selling i would do it now rather than wait to see if it crashes or goes up further as either option is probable.

[Passionata]

Originally Posted by chonlei

Do you guys have experience on how high priced pateks react during stressed stock market or economic times? I didn't get into the watch hobby until 2013 or so and I was lucky to pick up some now hot SS Patek and Rolex pieces during 2015-2016 at list price.



I remember someone saying that 5070P was introduced in 2009 during the financial crisis? Was it "that" hard to get at that time? I am not talking about walk in, but was it that hard to get if you at least bought some watches and knew someone at AD? did it sell for significantly above MSRP at that time? I wonder what will happen to 5740 now, at an even higher price point and production run perceived to be much much longer than 5070P. I am inclined to think that the 5740 will only trade at best at a small premium (10-20%) to MSRP one year from now....



Do you guys think lower priced items like 5711/5712/116500 will be more immune to the stock market?

What i remember for Daytonas the waitlist almost disappeared after 2008 however the legaue of Patek is different those super wealthies just got richer .

[Fat_ninja]

luxury goods are generally suppose to hold up better as wealthy can afford to buy. However it still goes down. aspirational buyers dry up. greys and people on waitlist dry up. Greys i doubt would want to carry as much inventory as they are concerned may decline in value. Additionally as for Chinese buyers, the govt is cracking down again on money outflows and customs tax...


Net net less buyers globally.


If you pull up stocks of luxry goods brands and chinese casinos etc, you see the stocks have been rolling already... not just these few days

[jrs146]

A segment of watch buyers will disappear. The remainder will continue to buy. I have no idea what the impact would be on prices but with this shortage I doubt much of anything.


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[jon_jon]

Back in 2009, the 5711/1A was selling at a significant discount on the secondary market. However it wasn't going through an "irrational exuberance" like it is going through today either. Patek was also producing a lot less watches at that time and a lot less Patek watch enthusiasts. The "millenium generation" were probably not old enough or affluent enough to afford Pateks in 2009 and less online "marketing" via social media or blogs.

[Donjo]

Maybe I'm cheap, but I have a long time horizon to collect nice watches. I'm not in a hurry. If a buying opportunity comes along (which it inevitably will with the next downturn in the economy) then I will use that time to acquire something nice at a discount. My house is paid for and my retirement is funded so I have no concerns there.

[beshannon]

Originally Posted by chonlei

Do you guys have experience on how high priced pateks react during stressed stock market or economic times? I didn't get into the watch hobby until 2013 or so and I was lucky to pick up some now hot SS Patek and Rolex pieces during 2015-2016 at list price.

I remember someone saying that 5070P was introduced in 2009 during the financial crisis? Was it "that" hard to get at that time? I am not talking about walk in, but was it that hard to get if you at least bought some watches and knew someone at AD? did it sell for significantly above MSRP at that time? I wonder what will happen to 5740 now, at an even higher price point and production run perceived to be much much longer than 5070P. I am inclined to think that the 5740 will only trade at best at a small premium (10-20%) to MSRP one year from now....

Do you guys think lower priced items like 5711/5712/116500 will be more immune to the stock market?

I have never stopped to worry or even think about it.

Watches are just that . . .

[Murcielagoboy2]

Originally Posted by tyler1980

why people are so concerned with watch prices is beyond me. Be worried about being underwater on your mortgage or losing your job. During a true financial crisis what my watch is worth would be the last thing on my list of things that would be important.

Tyler, your comment makes sense in many ways. I'm not arguing.

Thing is it just really stings (I think sting is the right word) when you spend £90,000 on a watch for it to be worth £30k a year later. Whether you can afford it or not.

It's a discretionary purchase in a way that a house isn't and depending of the financial resources available to an individual, the reaction to that scenario varies between catastrophe to mild irritation..

Especially when PP have been selling their collectors the "store of value" story for the last 25 years!

Can you see what I'm getting at here? (not meant to be confrontational post).

[1688]

I believe it is all a function of supply and demand. With the market down in recent days, this will not affect the luxury watch market until we see sustained downturn and more people holding onto their cash due to fear of market collapse. Then we will see more supply versus demand and eventual stabilization of market prices for the "hot" and "in demand" models such as the Nautilus and Aquanaut. Until then, I do no foresee any near term hits on the market prices for these watches. There will always be buyers out there looking for the "bargain" pricing and purchase when available.

[onemany]

It'd be interesting if the admins had metrics on # of posts, frequency of posts, # of FS posts and they could be tracked against global financial outlook.

I mean it'd have absolutely no value other than for curiosity and I'm sure it'd take a ton of work but interesting nonetheless.

[np2016]

I would be a lot more concerned of my stock values and how much of a hit my portfolio is taking versus the values of any of my timepieces. I think some individuals buy a timepiece as an investment which is never a good idea unless it's a limited edition piece.

[AK797]

Originally Posted by jon_jon

Back in 2009, the 5711/1A was selling at a significant discount on the secondary market. However it wasn't going through an "irrational exuberance" like it is going through today either. Patek was also producing a lot less watches at that time and a lot less Patek watch enthusiasts. The "millenium generation" were probably not old enough or affluent enough to afford Pateks in 2009 and less online "marketing" via social media or blogs.

Irrational exuberance is a nice way of putting it, usually I would say that high luxury goods are most immune to downturns as the disposable wealth and spending power of the under 1 percenters is often not afflicted or barely, but in this super heady market there must be a lot of buyers buttressing such high prices whose spending levels are not so inoculated and they will inevitably cash in.

[beshannon]

Originally Posted by Murcielagoboy2

Thing is it just really stings (I think sting is the right word) when you spend £90,000 on a watch for it to be worth £30k a year later.

Unless you are buying to resell then this does not matter at all.

[RussW]

Originally Posted by beshannon

Unless you are buying to resell then this does not matter at all.

It matters to me and I don’t buy to re-sell. It mattered to a lot of people when Patek reduced their prices a few years ago, and all of a sudden their collection had depreciated. It matters to someone who might want to sell a watch to help their kids with a deposit on a house.

[martinr]

Originally Posted by RussW

It matters to me and I don’t buy to re-sell. It mattered to a lot of people when Patek reduced their prices a few years ago, and all of a sudden their collection had depreciated. It matters to someone who might want to sell a watch to help their kids with a deposit on a house.

Agree 100% and if you say it doesn’t matter you’re really not being honest about the subject. Didn’t somebody like Thomas just post on here about there being twelve 5207’s for sale. So even if you can afford one I’m sure the hit you take on resale isn’t pleasant regardless. Nobody likes losing money even if you’re loss isn’t affecting your lifestyle.

[mahefa]

Like many have stated, luxury item price sure is relative issue.

Some of my watches i have just bought to see do i like them or not, then obviously it is a good thing if decent aftermarket would exist. I have not sold any watch and i will not do so as i like them all. Anyway, fe. when buying Platinum DD40, i did actually pay more attention to ultimate feeling it gives, rather than price or resale value. Of course it helped that Rolex is stable brand with good quality.

Now i am thinking of getting Patek and i have to say i am not thinking my choice of reference based on resale value. I have not read that much resale value info nor am i aware of amount of years in waiting lists of some reference. Of course i am lucky that i propably can have the reference i want in short period of time.

In my opinion, if acquiring a important timepiece is affected by monetary investment considerations, it is highly unlikely it will be the important timepiece anymore. It becomes investment vehicle of some kind and you treat it like stocks, ready to sell when hype is good enough.

I will never sell my Platinum DD and the Patek(s) i acquire i won’t sell either. I think that careful process that aims to choosing the ultimate one(s) you like, has the highest value. I try to get pieces i like so much that i do not want to sell them - then i’m happy.

I can buy real estate, stocks or companies to have an investment. I kind of separate pure fun from making money i quess - balance.

[superdog]

Originally Posted by beshannon

Unless you are buying to resell then this does not matter at all.

Regardless of future plans.... of course it matters. I mean.....damn man...of course it matters.

[Calatrava r]

I think the PP complicated watch market is already very slow, not really noticed since allocations have been cut so severely. If the world stock markets continue their decline and home values decline due to higher interest rates, you can be assured demand for watches worldwide will drop from here for all models. Finally folks will be able to get Daytonas and Nautiluses at retail. Not really a pretty picture indeed.

[Calatrava r]

Originally Posted by mahefa

Like many have stated, luxury item price sure is relative issue.

Some of my watches i have just bought to see do i like them or not, then obviously it is a good thing if decent aftermarket would exist. I have not sold any watch and i will not do so as i like them all. Anyway, fe. when buying Platinum DD40, i did actually pay more attention to ultimate feeling it gives, rather than price or resale value. Of course it helped that Rolex is stable brand with good quality.

Now i am thinking of getting Patek and i have to say i am not thinking my choice of reference based on resale value. I have not read that much resale value info nor am i aware of amount of years in waiting lists of some reference. Of course i am lucky that i propably can have the reference i want in short period of time.

In my opinion, if acquiring a important timepiece is affected by monetary investment considerations, it is highly unlikely it will be the important timepiece anymore. It becomes investment vehicle of some kind and you treat it like stocks, ready to sell when hype is good enough.

I will never sell my Platinum DD and the Patek(s) i acquire i won’t sell either. I think that careful process that aims to choosing the ultimate one(s) you like, has the highest value. I try to get pieces i like so much that i do not want to sell them - then i’m happy.

I can buy real estate, stocks or companies to have an investment. I kind of separate pure fun from making money i quess - balance.

On watches over 10K, it makes no sense to buy something that has little or no resale value. There are reasons certain watches tank so bad on resale value and its too bad if you realize those reasons but are, at that point, stuck with the watch.

[DJ_Ambrose]

I'm glad I read all the responses to this question because it was nice to see there are a lot of other people besides me who don't automatically see dollar signs every time they see something associated with watches.

My spending or not spending on watches has absolutely nothing to do with my personal financial circumstances at any given time. Three years before I bought my first Rolex I got a big jar and put it in my bedroom closet. Every night before bed I would put whatever change and bills that were in my pocket in the jar.

About a week before my honeymoon I cashed the contents of the jar in and the total came to a little over 900 dollars. I bought my first Rolex while on my honeymoon, a medium frame Oyster Perpetual, from an AD for 900 dollars. Ever since then I have maintained a "Watch account" which is now a savings account where I put what I call found-money, example: I budgeted 900 dollars for oil for the upcoming winter. When the tank was filled and it was only 675 dollars I put 100 dollars into my watch account

My impression when reading a lot of posts from what appear to be younger forum members is that there are people out there maxing out three credit cards in order to be able to buy a Rolex, believing that they will be able to easily sell it at any time if they run into financial problems, and not only will they make their money back, they expect to make a profit as well.

When I buy a watch I have no plans or intentions regarding selling it. Everything always just seems to work itself out, partly because I limit my collection to eight watches (eight hi end watches, I still have a 58 dollar Seiko and and a few similar watches for when I'm working on the car, etc.)

As for how economic conditions affect watch collecting, If you are planning to buy a Rolex with the same money you use to cover your rent, car payment, insurance, groceries, credit card bills, etc. you better be pretty certain you're not going to need new tires for your car soon, and ready for any other unexpected expense you might possibly face.

Remember, you're not buying a "Rolex" you're buying a watch, a watch that does basically the same thing any 15 dollar Walmart watch can do. If you're fascinated by the fact that it takes a year to make each watch, if you love the idea that, unlike nearly everything else these days, the watch and all its intricate, tiny gears and springs are transformed by human hands, going from a pile of tiny parts into a very small, complex machine whose function if to tell time, and that it does so in an almost freakishly amazing, and accurate way, then you're ready for a Rolex. Good luck, peace, David.

.

[mahefa]

Originally Posted by Calatrava r

On watches over 10K, it makes no sense to buy something that has little or no resale value. There are reasons certain watches tank so bad on resale value and its too bad if you realize those reasons but are, at that point, stuck with the watch.

I really do understand that it is not comfortable situation to be. But how likely it is that, if Patek has been chosen with care, picked the one you absolute love, there would actually be a situation like that.

Of course if there is intent to flip, resale value is important. And what comes to original issue of having economical downtime and affecting to watch prices, it quite clearly correlates with practice of buying power. During downtimes, values and profits from assets are likely lower and you pay less for luxury items as demand gets lower. Percentually speaking it propably has about the same affect on total assets.

[GB-man]

Watch prices will dive hard if we see another 1987, 2000, 2008. I was born in the late 80s so I did not witness earlier markets but the current market feels at least as frothy as 1999 or 2007 to me. On top of that I see more geopolitical risks which we cannot and will not discuss here.

[Chadridv]

Originally Posted by beshannon

Unless you are buying to resell then this does not matter at all.

Sorry but that's laughable to me. If it truly doesn't matter to you, congratulations (seriously), that's awesome. You're doing well!

[steeevvvooo]

Price is just a function of supply and demand. Are Patek going to make many less watches in a downturn? Not sure. Are less people going to be able to, drop large chunks of cash on a luxury item? Definitely at the margin.

That would suggest prices go down in a major recession but back to list price or lower and minimal waitlist? I would normally say Patek would be less susceptible to this dynamic being an ultra high end brand but the aspirational buyers would likely disappear.

[chonlei]

I don't buy watches to flip or for investment (much better alternatives exist), I treat the amount spent as hobby money. But I care about resale because in the long run, it is good to have the option to sell off simple pieces to get more complicated pieces. In the process the total amount spent on the hobby should increase.

To achieve the above in the current environment, either you buy some selected sport models (PP/Rolex), or buy at huge discount second hand for more complicated ones ($50k+ ones). Not the best situation since I already have enough sports watches. I have never bought second hand watches but maybe this is the way to go....

[superdog]

I buy watches because I like them.

But I also flip watches if I want to buy something else and I don’t want to dip into savings. Of course, I care about what I can get for what I’m potentially going to sell.

I just bought a 5726. Not planning to ever sell it. But it’s nice to know I can, if the need arises. After much deliberation I planned to keep my other watches too.

That all said, the wife and I just found a nice house. We’ve been looking for a year. I’ll need aboit 100k to make it the way I want it, and cover moving expenses.

I can sell 4 watches and come pretty damned close to 50%. And that’s just awesome.

The Patek is staying. But I’ll certainly be looking at my current stable and debating what’s leaving.

I care very much about the value of what I buy. But it’s not the driving factor either.

[superdog]

Originally Posted by beshannon

I have never stopped to worry or even think about it.

Watches are just that . . .

If I recall, you just had a wonderful thread about getting bored of watches. You wanted to sell off some and use the money for more important things in life. After all, they were no longer bringing you joy and you were bored of the “scene”. Please forgive my paraphrasing.

But I can very much relate that sentiment.

Myself, along with many others, wholeheartedly agreed with you.

Can you hoesntly say you did not care about what you could sell them for?