Are we in a Rolex price bubble

[mic6]

This is the only case that the words "Rolex" and "bubble" make sense together

[Marcjvr]

The people who are saying “no” and “absolutely not”, does that mean they think entry level OPs going for almost double retail is completely reasonable and sustainable...

[mic6]

Originally Posted by Marcjvr

The people who are saying “no” and “absolutely not”, does that mean they think entry level OPs going for almost double retail is completely reasonable and sustainable...

No. All we say is that you will never see them cheaper.

[liberalclown]

Originally Posted by Chester01

I am in the clear minority but the market is not a healthy one. The average consumer that walks in and gets stone walled on a bait and switch (do you have any subs, uh no, we have a two tone date just) and then laughed at when they try to get a SS watch is poor customer experience. Rolex is making plenty as their watches MSRP go up, but other than celebs and some WIS when folks are turned away at the AD they will likely not come back, and are not going to go to a gray dealer to pay triple.


People equate the inst hype with demand, but the gray is playing a large role in that demand and people never ask why the gray market exists? The gray market exists because AD does not move enough stock in a consistent basis, so the gray comes in takes dibs on the few hot models and buys up the less desirable models. Not healthy and for most Rolex buyers (one off buyers) they will move on and move onto Apple watches that will get better and better. Rolex and the lux models will raise their prices as they sell less watches but want to make the same revenue.

I agree, what will happen when recession hits? or what will happen in 10 years when the target market is the millennials? if Rolex cannot lure the millennials and Gen Z and fulfill their demand, I don't think many will come back and try their luck again.

There was an article the other day about the dying watch industry and rise of the wearables. I think Rolex will not die anytime soon, but the AD experience for young buyers definitely taints the desire and will impact the future demand.

[Oxfordian]

I am very privileged to have my Rolex watches, I never ever expected to own one let alone two, and managing to pick one up for my wife as well has been a dream come true.

Rolex is here to stay, it is one of if not the most aspirational brand to own in the world, the situation is unlikely to change in the short term, maybe not even in the medium to long term.

People moan about the lack of watches in store to see or try and that’s valid, it’s not helpful to be unable to see what you want to buy but I am unsure how Rolex gets round that issue given the demand that people have for the brand.

AD’s come in for a lot of stick but they are dammed if they do and dammed if they don’t, every watch I own has come via an AD, no grey dealers involved, just time spent building an AD relationship, this has got me the watches I want.

Put in the effort and you can get them and oh boy are they great.

[Escobardee]

This bubble is not a bubble anymore and hasn’t been for years !!! Yes it’s gone extreme in lockdown as the brand has been more sought after in certain models ! But this not going to change if anything Rolex is going to become more and more for the very wealthy .

[rollex4me]

Not a bubble!

[Dirt]

Originally Posted by Innocenti

Does this turn anyone else off Rolex?

For those of us who have all that we want and are happily contented, it gets a little tiresome.
Especially if there is no intention of ever getting another Rolex as we have had our fill.

If only I had kept all of my old ones which I have had over the years

[Dirt]

Originally Posted by mic6

This is the only case that the words "Rolex" and "bubble" make sense together

Good point.
Nice honest watches back then

[Driver8]

Originally Posted by AK797

I think many knew the Dotcom bubble was primed to burst and were ready to sell as I was once the market turned, in fact many thought the old Y2K bug was going to crash that bubble and the world economy, remember the fear on Millenium night? As for the Housing boom, well anyone looking slightly into how subprimes were being sold to No income No job losers could see this was unsustainable, and a few films have been made on people shorting that market. Crypto everyone knows is a seesaw and highly risky, no one thinks that market is going to rise in a sustained and stable way.

The point is bubble's burst because people have options to sell and buy other stocks or investments or just sell and keep the cash.

The watch market and Rolex's position in it is very different to these liquid and competitive markets, and will be unchanged unless Social media disappears to cool demand, or a new brand emerges to rival Rolex's monopoly in the 5-20K watch bracket, or a rival status luxury good emerges to replace watches in this price bracket, thus the market will continue to be pretty buoyant - the above black swans will need to happen to crash this market in a stockmarket style, and even then most likely it will just be a slow fade down to pre '16 normality, as cartel greys will not slash prices like marketmakers in an efficient market.

All valid enough points, but it's also a fact that the economic definition of a bubble is, "A situation where the price for something, be that an individual stock, a financial asset, or an entire sector, market, or asset class, exceeds its fundamental value by a large margin." Rolex watches (and especially the sports models) currently fit that description to a tee.

According to economists Charles Kindleberger and Hyman Minsky, there are 5 stages of an economic bubble - 1) Displacement, 2) Boom, 3) Euphoria, 4) Distress, 5) Panic - I'd say we're still somewhere at the start of the Euphoria stage. Obviously their work is geared towards the markets, but the principles are exactly the same for the current Rolex situation, albeit with much less pronounced swings.

I'm paraphrasing/cribbing this part in italics from the net as it's quicker than me typing it from their books -

During the Boom phase, prices rise slowly at first, but then gain momentum as more and more participants enter the market. During this phase, the asset in question attracts widespread media coverage. Fear of missing out on what could be a once-in-a-lifetime opportunity spurs more speculation, drawing an increasing number of investors and traders into the fold.

During Euphoria, caution is thrown to the wind, as asset prices skyrocket. Valuations reach extreme levels during this phase as new valuation measures and metrics are touted to justify the relentless rise, and the "greater fool" theory - the idea that no matter how prices go, there will always be a market of buyers willing to pay more - plays out everywhere.

There's no set timelines for a bubble, or for individual phases of it, so people saying "it's not a bubble as it's been like this for years now" doesn't mean anything ; bubbles can last days, months or years. Likewise, where people say this is, "the new normal" is a classic part of the process....

That said, every case is different, and I'm the first to admit that economics is often a lot of guesswork (and I should know as I have a Masters in it! ), so things don't always play out as per the textbook examples.

[Daytonaman799]

It’s an everything asset inflation bubble spurred by central banks that is causing a lift in everything. Those that have assets have enjoyed the ride and we now live in a world where money has no value. 12k watches being traded for 40k. Purview of the asset holders. Meanwhile those that sell their labor are left behind and that’s why we have so,many in food stamps and a real,radicalization of the general populace. It’s scary and some day it comes to an end as it has in 2008, 2000, 1974, 1964, 1929, 1919, 1907, 1874, and one down the line all the way back to tulips and the south sea bubble. As Jesse Livermore said...nothing new ever happens in the field of speculation. We just don’t evolve that way.

[jagwap]

Originally Posted by Computantis

I agree with the fundamentals of your post. I thought the same thing would happen when Covid shut down the world. Boy was I wrong.

Me too. However it has been postponed by printing money. 35% of the USD in circulation was added last lear. So some of the high prices we will see in the future are going to be USD devaluation, and therefore any bubble will look like it is going a bit longer than reality.

[teck21]

And in every crisis, Rolex has simply come back stronger.

Evolved, more exclusive. Even more desirable, even less obtainable.

Sure the pricing is in bubble territory now.

And the only thing as certain as grey prices coming down (msrp is never coming down obviously) at some point, possibly from even much higher price points, is this:

Almost anyone focusing on how over priced Rolex watches now are rather than focusing on getting one, and waiting for the bubble to pop before buying one will invariably be too clever to pull the trigger when the opportunity arises until it is gone again.

It is after all simply the same cleverness that is stopping them from buying now.


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[Boaters]

Originally Posted by Mystro

Maybe, because it’s not about the actual watch. The watch itself is almost immaterial and nothing more than a chess piece to play a game with. The problem is the game is not about horological significance but about making money and wallet flexing. The Daytona specifically is taking on a pseudo/negative reputation of being the $50 McDonald’s BigMac.

Great analogy Mystro sadly so true.

[NeedMoreCoffee]

Not sure, but we are definitely in a "same threads over and over" bubble.

[rollex4me]

Hublot was a bubble but Rolex is not a bubble

[liljctl]

Originally Posted by NeedMoreCoffee

Not sure, but we are definitely in a "same threads over and over" bubble.

Some might say it's a bubble!

[Chester01]

Originally Posted by liberalclown

I agree, what will happen when recession hits? or what will happen in 10 years when the target market is the millennials? if Rolex cannot lure the millennials and Gen Z and fulfill their demand, I don't think many will come back and try their luck again.

There was an article the other day about the dying watch industry and rise of the wearables. I think Rolex will not die anytime soon, but the AD experience for young buyers definitely taints the desire and will impact the future demand.

Rolex and many lux good do tend to be unaffected by market down turns given the folks that buy lux products are always less impacted. But yes, younger folks are moving away from status items, engagement rings, jewelry, etc. and eschew things that smack of hierarchy and privilege. It will be interesting to see how things play out. I don’t have a horse in the race because I am a watch guy and have been for my entire life and the last Rolex I have was gifted to me by my deceased mother and will always have meaning. But I have no plans to buy another and it’s mostly due to the hype and frenzy and my increasing discomfort with the emphasis on wrist presence in their new models.


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[fsprow]

I firmly believe TRF posts about Rolex prices are in a bubble.

[drfrankenstein]

White Daytona gray prices definitely “greater fool theory” in action

I was watching Timepiece Gentleman today and saw them looking at a furniture store as their new base of operations - considering their current store looks like a 15 x 20 room I thought: “if this isn’t a sign of a bubble, I don’t know what is”

[ap1]

Welcome

[gerry100]

we'll just have to wait and see, wont we?

[johnorpheus]

Originally Posted by NachoNeal

If you want to have some fun, go back and read some of the 'rolex bubble' threads from March of last year. There are some really horribly bad predictions that are stated so matter of factly.

Yep, there were multiple threads daily of people salivating at the idea of scrapping up Rolex’s on the cheap.

[IR201]

For all those who complain about market/value talk on this forum these threads sure do take off quickly


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[CyFi]

Wow! I really didn’t anticipate this much feedback from such a classy bunch.. Thank you all for the astute points and opinions.

Ultimately I’ll have to just bite the bullet and go for it if I love it enough. Although subtle, I really appreciate the 2021 upgrades to the venerable sub. Hopefully that will get my Rolex collection off to a nice start.

[AK797]

Originally Posted by Driver8

All valid enough points, but it's also a fact that the economic definition of a bubble is, "A situation where the price for something, be that an individual stock, a financial asset, or an entire sector, market, or asset class, exceeds its fundamental value by a large margin." Rolex watches (and especially the sports models) currently fit that description to a tee.

According to economists Charles Kindleberger and Hyman Minsky, there are 5 stages of an economic bubble - 1) Displacement, 2) Boom, 3) Euphoria, 4) Distress, 5) Panic - I'd say we're still somewhere at the start of the Euphoria stage. Obviously their work is geared towards the markets, but the principles are exactly the same for the current Rolex situation, albeit with much less pronounced swings.

I'm paraphrasing/cribbing this part in italics from the net as it's quicker than me typing it from their books -

During the Boom phase, prices rise slowly at first, but then gain momentum as more and more participants enter the market. During this phase, the asset in question attracts widespread media coverage. Fear of missing out on what could be a once-in-a-lifetime opportunity spurs more speculation, drawing an increasing number of investors and traders into the fold.

During Euphoria, caution is thrown to the wind, as asset prices skyrocket. Valuations reach extreme levels during this phase as new valuation measures and metrics are touted to justify the relentless rise, and the "greater fool" theory - the idea that no matter how prices go, there will always be a market of buyers willing to pay more - plays out everywhere.

There's no set timelines for a bubble, or for individual phases of it, so people saying "it's not a bubble as it's been like this for years now" doesn't mean anything ; bubbles can last days, months or years. Likewise, where people say this is, "the new normal" is a classic part of the process....

That said, every case is different, and I'm the first to admit that economics is often a lot of guesswork (and I should know as I have a Masters in it! ), so things don't always play out as per the textbook examples.

I'm not saying this watch grey market isn't overvalued, altho I think there is a strong argument to say the fundamentals of how we buy and value things has changed hugely in the last ten years with Social Media and all the new offshoots from our tech-dependent society, and thus the retail price of Rolexes is too low in this new world of ours, thus creating this imbalance. Now Rolex could raise prices significantly, as most young dynamic tech firms would to take the money on the grey's table, but Rolex ethos means we know they will not and thus they will not contribute to ending this bubble that way, - altho I prefer the word balloon as this market will not suddenly burst as I've said but will slowly deflate if a black swan truly does emerge from somewhere to take down the excesses of the watch market.

[AK797]

Originally Posted by jagwap

Me too. However it has been postponed by printing money. 35% of the USD in circulation was added last lear. So some of the high prices we will see in the future are going to be USD devaluation, and therefore any bubble will look like it is going a bit longer than reality.

We had bailouts for bankers and for too big to fail industries, and now we have bailouts for everyone when global catastrophes strike, and I don't think anyone now seriously considers the fiscal future and settling up debts, conservatism has given way to populism and electability today, which does line up with social media and the youth of today's mantra of everthing now, now now. In fact, ironically, only Rolex is still conservative now, as my above post alludes to, and it is working out very well for them.

[fsprow]

Originally Posted by AK797

I'm not saying this watch grey market isn't overvalued, altho I think there is a strong argument to say the fundamentals of how we buy and value things has changed hugely in the last ten years with Social Media and all the new offshoots from our tech-dependent society, and thus the retail price of Rolexes is too low in this new world of ours, thus creating this imbalance. Now Rolex could raise prices significantly, as most young dynamic tech firms would to take the money on the grey's table, but Rolex ethos means we know they will not and thus they will not contribute to ending this bubble that way, - altho I prefer the word balloon as this market will not suddenly burst as

I've said but will slowly deflate if a black swan truly does emerge from somewhere to take down the excesses of the watch market.

One man’s “excesses” are another’s opportunities. Same with many markets (eg stocks, commodities). Maybe we will begin buying and selling “puts and calls” on the watch market !!
Best, Frank

[Driver8]

Originally Posted by AK797

I'm not saying this watch grey market isn't overvalued, altho I think there is a strong argument to say the fundamentals of how we buy and value things has changed hugely in the last ten years with Social Media and all the new offshoots from our tech-dependent society, and thus the retail price of Rolexes is too low in this new world of ours, thus creating this imbalance. Now Rolex could raise prices significantly, as most young dynamic tech firms would to take the money on the grey's table, but Rolex ethos means we know they will not and thus they will not contribute to ending this bubble that way, - altho I prefer the word balloon as this market will not suddenly burst as I've said but will slowly deflate if a black swan truly does emerge from somewhere to take down the excesses of the watch market.

I tend to agree that in the absence of some other kind of global economic shock, it's more likely to be a balloon that will deflate somewhat as opposed to a bubble that will burst.

Prices will reach a ceiling at some point as there will come a time when people wake up and smell the coffee, and realise that paying PM money for mass-produced SS pieces is unsustainable. A look at Chrono24 reveals there is absolutely no shortage of Rolex models out there, so modern Rolex watches are in no way a scarce commodity. Once prices start to stagnate, some of the more casual "investors" who were looking to make a quick buck, will likely feel the pressure to offload. To do that they will need to drop their price a bit to undercut others for sale. Others will need to do the same, and as the heat is taken out of the market, prices in general will reduce.

Obviously the magnitude of that reduction is the unknown factor, and that's where I personally agree that it's more likely to be a deflation rather than a pop.

[rom33]

Could someone explain where all the gray market less desirable models are sold? They are not on the gray market websites.

On gray market seller's web sites I can see all the desirable watches.