Watches have been a great investment over the past decade or so, according to guys like Kevin O’Leary at least. The money-making gambit has focused in particular on the modern hype watches from Rolex, etc. And if you look at auction results from the past week, it seems like the rocket ship is still flying irrationally close to the sun for some of these watches.
I could point to any number of lots, but the two most egregious examples are probably this “Tiffany Blue” Rolex Oyster Perpetual and this modern Rolex Daytona, both of which sold for CHF 69,300 at Christie’s; crazy numbers for watches that retail (past tense, in the case of the retired Oyster Perpetual) for around ten grand.
But now, people are starting to talk about a “market correction,” a term that must’ve been invented just for people to shout during CNBC segments.
I don’t follow the price of, say, the Hulk Submariner closely enough to know if there’s been a market correction in the past couple of weeks. But anyone who’s not clearly delusional knows that a graph that looks like this is about as sustainable as mining Bitcoin (Chrono24’s price graph for the Hulk):
weeeeeee 🚀🚀
I’m an enthusiast collector and not really an “investor,” but we all know these modern hype watches haven’t really traded on their fundamentals for a few years now. In fact, a working definition of “hype” that’s probably as good as any might be something like “the portion of a watch’s price which can’t logically be attributed to, well, anything.” Here’s a graph of modern Nautilus prices to illustrate:
it’s calculus, okay?
Now, if you knew calculus, you could use some derivatives to calculate the area under the curve, truly quantifying the hype. But the best quantification I’ve heard is this: in 2017, one-third of all Billboard Hot 100 songs mentioned Patek Philippe.
We’ve talked about this on our Significant Watches Podcast before — the Nautilus 5711 was produced for 15 years and Patek probably made tens of thousands of them. It makes absolutely no sense that an objectively not rare watch would sell for 10x its MSRP.
This brings me to my point. While these hype watches haven’t been trading on fundamentals, many watches, including some of the biggest results of the year so far (full article below) do trade on fundamentals. For example, the five biggest results are all vintage Patek Philippe Perpetual Calendar Chronographs.
While everyone’s been going crazy about modern this or that, vintage watches from Patek, Rolex, and others have kept slowly plodding along.
Take a look at the biggest result of the year so far: The Gobbi-signed Patek Philippe 2499 in pink gold, selling for ~$7.7m. The Gobbi 2499 set a world record for the reference, of which Patek only produced 349 examples. It’s an obscene amount of money for a watch, to be sure (but, less obscene than paying $70k for a modern Daytona, I’d argue).
The Gobbi 2499 sold by Sotheby’s for $7.7m
The collector who sold the Gobbi 2499 bought it back in 2007 for CHF 2.7m, also a record for the reference at the time. So sure, the “investment” nearly tripled, but over fifteen years. Not overnight (see the Hulk, above) — it’s more like an 8 percent annual return.
So sure, maybe there will be a “market correction” in some of the mass-produced modern watches that have seen ridiculous markups over the past few years. But that shouldn’t affect every watch.
Many watches have kept on trading on the fundamentals: rarity, condition, provenance. The things real collectors, not investors, care about.