Watch Investment

“What watch to invest?” I was asked this question countless of times. Although I have flipped enough watches in the recently past. Yet never once I can answer this question with any full conviction.

Why is it so hard? First we must understand the intend is to “invest”. Many people (who asked this question) just want justification to buy a watch to wear, but they are hoping it’ll worth more in future too. Factoring headwinds like deterioration of watch condition and servicing cost, it is indeed a challenging question to answer. This is almost the same question as “which company shares shall I invest?” These watch buyers want to buy the next FAANG of Geneva……

Patek Phillipe 5070R with Lemania based Caliber CH 27-70

It is impossible to predict the trends of the future. Some of the watches that became a real collectable like Rolex Paul Newman Daytona, Patek Phillipe Nautilus, Audemars Piguet Royal Oak etc. weren’t born a celebrity. In fact they are not popular at launch and it difficult to sell them in the 1970s and 1980s. Because they didn’t sell exactly that well, number made were limited, hence making them a rarity. Once considered as a “funky” the exotic dial Paul Newman suddenly became a hot property as taste changed.  But we shouldn’t be choosing to buy “ugly” unpopular watches now, but rather, we shall put the focus on choosing the timepiece that will still be love by collectors in future. How can we start choosing a watch out of the thousands of design? First we need to ask yourselves, why do we need a beautiful hand crafted mechanical wrist watch?:

  1. Hobby 
  2. Asset
  3. Discreet
  4. Easy storage and transport
  5. Watch as buddy follow where you go, part of your life; your legacy
  6. Pass it down to the next generation
  7. Investment for Monetary and Value appreciation

The main motivation behind having a watch collection + investment is the journey and joy of doing it. Before we part our hard earn cash, we need to how to protect our investment and to ensure choice of watches will not fall off the trends and value plummets in future.

Fundamentals that make any watch a great investment:

  1. Craftsmanship
  2. Design that’s Iconic and evergreen
  3. Watch brands that is not so market driven (or not driving by profits and take a wrong path that will harm future valuations)
  4. Choose the correct metals (steel is evergreen and yet subtle, Platinum in some cases for rarity)
  5. Watch models that are discontinued (we can estimate its production numbers)
  6. Watch size about 38-42mm (human don’t changing wrist size)
  7. Provenance: watches with “good” ownership history, ie. owned by famous watch connoisseur will fetch a premium

A good list for beginners on “investment watches”: http://www.watchpricetrend.com/cost/ 

*Don’t get too excited about limited edition (LE). Too many of LE watches out there are just marketing gimmick. Often manufacturers create a LE by changing the dial colors, hands and accompany it with a special box.  Unless it strictly a LE with a unique case/bracelet design or a watch that is build around an entirely new movement (for example: Harry Winston Opus series).

Rolex Sea-Dweller 4000 ref.116600 with short production of 3years

Previously I talked about some basic fundamentals and principles on watch selection. Choosing a watch for collection is just the first step. Next phase is perhaps the most fun and exciting for collectors: Hunting.

SEEK & ACQUISITION:
1) buying used watch for collection is OK, but we it is important to scrutinized its condition. Whether was it unpolished or still having the original factory parts such as (dial or hands). Factors such as this may not affect the price a lot now, but it will determine whether it fetches a premium price years down the road.
2) Network: Build a strong network with fellow collectors and watch dealers. Do look out for opportunity to trade among the circle of collectors. Sometimes we do need to sell or trade before more acquisitions can come along. You definitely need a trusted avenue for both buying, selling or trade. Also good piece tends to be offer to someone we know since collectors are often remorseful when letting go of watches. We prefer to sell it to someone we know; who knows we may want it back someday?
3) Get compete set, with Box & Paper. It is important  to try and get a complete set, ie. box, warranty card, tags and instruction booklet. It is often more desirable to collectors when a watch comes as a complete set. A complete is easier to sell and of course it commands a higher price too.e know; who knows we may want it back someday?
4) Budget. It is important to invest within one’s budget; similar to all other forms of investment, we only do it with surplus cash.

Keep watches with the compete set: Audemars Piguet Royal Oak 15408BA

Wearing, maintaining and reviewing:

Wearing: I often encourage people to wear watches and enjoy. However, we must be clear which are watches in your collection that are the most precious or fragile and limiting their usage will goes a long way of keeping it pristine.

Brand New condition watches my collection will not be worn, for one simple practical reason: Since most of them are still with the original factory seals; wearing it will immediately reduce its status from “NEW” to “USED”. Hence,  I must keep them in the same showroom condition, however if I like it so much, I’ll purchase an Used piece of the same model for wearing.

Fragile or precious ones like vintages watches, should see more limited usage. it is almost inevitable that we will knock our watches against the something as we wear it, so it necessary to choose the  correct watch to suit that day’s activity. 

Daily Beaters, I know it may sound contradictory to have daily beaters as investment watches. Sport watches’ greatest virtue is they can take some punishment without resulting big penalty in valuations, hence it is possible that a daily watch that will appreciate over time, despite for its usage and deterioration of condition. Owners of modern Rolex submariners and GMT will understand this very well. 

Keeping your collection is great condition is also paramount to its future valuations. Below is a great article from the famous auction on how to keep our watches collection in great shape:

http://www.christies.com/features/How-to-store-and-maintain-your-watch-9342-1.aspx

Keeping a record: It is also important to keep track of cost, servicing history of individual watches. Ultimately we to know how much money was committed to each piece and we need it to know whether our investments are indeed profitable of not.

Review the composition of your collection every half a year or so.  We are easily affected by blogs & review. There is always temptations of better watches, but we must keep faith in why we make as a purchase in the first place. However, we do need to a periodically review of the collection and sell off less desirable pieces, because priorities, trend and taste may have being shifting gradually.

Watches such as Daytona 16520 can be very sensitive to over-polishing, careful considerations have to be taken during maintenance regime.

Selling and Profiting taking:

Perhaps the least talk about topic on the subject of Watch investing. For any form of investment there must be an exit. Avenues available to sell a watch can be:

  1. Network of collectors
  2. Trusted dealers who will either buy-in or do consignment of your watch
  3. Online platform such as eBay, Chrono24, Facebook marketplace or Carousell
  4. Some collector choose to build a profile over social media like Instagram and market their watches there themselves
  5. Auctions house

**My Thoughts: “As the monetary easing continues well into 2020s so the stubbornly low interest rates environment will persist, fiat currencies values will continue  to erodes. Holding physical asset such as watches might be an good hedge against it. So on a longer run I will continue to maintain a stable holding of Rolex & Patek Philippe. Pressure from near term COVID crisis may present some buying opportunities, in view of this, I’ll be looking to de-invest some holdings to free up some cash in anticipation.”

**Disclaimer: Past performance does not ensure future results, and there is no assurance from Les Precision that any investment objectives will be met solely base on the information in the above article. Investors should consider their investment objectives and risks before making an investment. Real world economy and financial markets do have a massive influence on the luxury resale market, so please exercise with caution.

Patek Philippe Nautilus 5712/1A with co-branding Tiffany & Co

Recession Proof watch?

Is there such thing as a Recession Proof watch?
It’s really been a kind of revaluation for some watch collectors/investors to see a price correction for some of the most sought after watches. I too eagerly watched the video on recession proof watches. (link below:)
https://www.youtube.com/watch?v=e-aOJ85cPME
unfortunately I may have to express a differ opinion in some of the things he mentioned:

1) Recommending to buy models the never appreciated recently:
There is a reason why these watches (he mentioned) never appreciated in value in the first place, and quite honestly I will feel my wrist deserves better than those “recession-proof” watches. They either not suited for my lifestyle or my age. For example the 36mm President are too small for my wrist.

2) Seriously… going back to AP offshore 42mm?
AP offshore is a massively and insanely popular watch up to a few years a ago. Quite naturally this trend dies off and price had fallen and remain stagnant lately. While it is not exactly a obsolete design like Cathode-Ray tube television, it definitely seem better days. The biggest risk I will run into, is having mocked by friends with slick Royal Oak 15202 on their wrist. Further more I doubt the value of Offshore will hold if there is a price onslaughts during a full blown financial market recession. For a stock that never rise in a boom market, how will you expect it to survive a downturn?

3) Datejust 41mm the worry of greater evil ahead
Nice to see the popularity and fortunes of Datejust Improving. We all know why: Sport Rolex models just simply too hard or expensive to obtain. We use to be able to buy a Datejust from ADs with some discount years ago, now they (Datejust) are flying off the shelf at RRP or being bundled deal with a sport model. Some people I know even purchased Datejust/Day-Date in order to build a relationship with the retailer, in hope of getting a sport Rolex allocation some time in future. In my opinion, to many people bought Datejust that they don’t need recently. When recession hits and there is a need to free up cash, trust me, people will offload the Datejust first. When that happens, secondary market may not have the ability to absorb them all and that make them an illiquid asset. What’s worse? Falling price for sports Rolex or illiquid dressy Rolex?

4) Gold President Day-Date
If there is one thing that’s as true as: “sun rises from the east” that will be Rolex President (“Rolex King” 1803, 18038) value will appreciated over the time. They are make of solid 18k gold and hence the value material provides a good hedge against inflation, as simple as that. Those Day-Date with extremely desirable dial like “Stellar” have prices already shot up into the stratosphere recently, so please be extremely careful.

SO? What shall we do then?
While we love to see the price of watches grow, too many of us simply neglected what other advantages a wrist-watch have: for example, giving us the style, the confident, the distraction of modern day stress, the projection of our personality , etc..
I’ll argue that NOW is even more crucial to have a “correct” watch wrist strapped on our wrist than any other time, since the invention of portable time-telling devices: We often don’t want to be spotted with an ugly watch or too expensive timepiece that too overwhelming for the occasions, etc.
So please choose the watches wisely. It is true price will fall during recession, so is other asset classes like shares and property. BUT isn’t it true that they will rebound after the recession?
We can hold back the expansion of our collection, and postponed the purchases. Maybe in time, lower prices or better opportunities may present itself. Just please don’t buy whatever (that’s presented in the video that I share) if you don’t like them, it is hard to liquidate them in future.

While we can’t live without a roof over our head, neither do we want to lose the comfort and luxury having beautiful timepieces. Every unhappy day is a waste, as our time on this planet is finite. So is every day that has passed by without a good watch on our wrist. Believe me, value isn’t everything…..

#It’sMyLife #rolex #patek

Watch Market Review fall/winter 2019

There’s certainly a cloud of uncertainties going to the final months of 2019. The 2 biggest economics are locked in a long and sustained treat of trade war; while the biggest watch market, Hong Kong is deeply embroiled in unrest. After a strong showing in the H1 2019. The sustainability of the price growth was severely tested in the Q3. Weakness in price for popular modern Rolex models such as Daytona, Hulk, GMT. Prices have dropped about 15-30% in some of these models. Patek Nautilus too are fell 10-25%. Though the correction was after an unprecedented pricing boom, many investors who have faith still pretty much sit on a large paper profit. For example if you bought a new Hulk in 2014 it is still worth about S$4000 more than what you has paid for.

We do find some stability in the resale prices lately, although the sale volume is predictably low. Nevertheless the price crash which we worried didn’t happened. This could be due to the fact the there’s still a long line of people on the waiting list for some other these models. The price drop on the secondary market is inconsequential to those the wait list, because are they (the wait list people) will not want to pay the premium prices to get hold of these Rolex or Patek; they continue to soak up the new stocks and not spilling it to resale market yet. Thus the supply continues to be tight.

Silver lining:
1. Investing for the future?
A Patek Philippe watch recently smashed the world record for the most expensive watch ever sold. What so surprising is that, unlike the previous record holders, this watch is just newly created as a unique piece for a charity auction. No history, no provenance, just the most complicated Patek Philippe wrist watch movement housed in a stainless steel case. This we observed it as a sign of new investment mindset that’s prevailing in today’s financial world: people are buying into future prices. They are willing to risk paying higher price premium on an investment now and wait for it to mature to realized the full price potential many years down the road: Likes of Uber or Netflix are good example. Rolex Hulk are another good example: investors and collectors alike bought the prices up in anticipation of the discontinuation of ref. 116610LV. Surely it is matter of time Rolex will stop making the 3135 Calibre. This is phenomenal is mainly due to the very stable and prolong low interest rate environment. Fixed income yield are getting scarcer, investors don’t mind parking cash on investment that will eventually yield years down the road. Some countries where there’s negative interest rates, the people have to pay interest just for keeping the money in the banks. Why not invest in watches instead?
2. Omega moonwatch,
is doing particularly well. The white snoopy has hit S$30k, great accomplishment. For a modern Omega, of course partially have to thanks to 50th Anniversary of the Apollo landing. Just when the overall market is dull, this looks like a light beacon in the stormy coast.
3. Watch Safe haven?
Amid the uncertainty else where around the globe, people are exiting from investment that’s hit by the trade wars. Like physical gold, value of a Rolex will not plummet to zero in value. This could well be an alternative hedge as compare to bonds, the latter yield is at all time low as result of many factors (which I am not able to cover in the write-up. Of course choosing the correct watch model is paramount. But important to remember safe haven don’t means profit. It’s just like one’s having to decide gold to meet his hedging needs, he will not expect gold trade to make money, rather it is purely for value or capital protection. In troubled time when asset value vaporizing and crashing, having protected his capital, one’s able buy more asset simply with this same amount of capital, isn’t that a form of profit?

Les Precision: how we reacted
Remember last quarter (Q3) I mentioned we are looking to lower inventories and free up cash. That pays off somewhat, we liquidated some of holdings such as the 116710LN, 16600 and 116520. That enables us to hit the cash target, at the same time avoiding losses due to the falling prices of 116710LN prices.
Of course we still have a sizable holding of 116710LN, but we expect the price to stabilize as the ADs by now have cleared the last of the 116710LN stocks. We are now 40 – 60 of Cash vs Rolex/Patek. All the watch held are discontinued models, where we have greater clarity of its production numbers etc.
We also not expect any strong price surge as the trade war had clipped the wings of many deep pockets Chinese buyers and dampen mood of other collectors. Neither will we expect a price crash as the linger low interests environment will continue to encourage people to spend.


What’s next for us?
As the monetary easing continues, fiat currencies values will erodes again physical asset. So on a longer run we will continue a stable holding of Rolex/Patek. Near term we might seek to de-invest some Rolex pieces and prepare the cash for better opportunities. This might means realizes loses on 116710LN and etc. As the market enters a lull, good pieces may be easier to obtain as seller is more patience with offers and negotiations.

https://www.facebook.com/LesPrecision/posts/2701502979870546?__tn__=K-R

Disclaimer: This is solely a personal interpretation of the current situation and macroeconomic. I am not liable for any losses resulting from any misinterpretation, copycat investment or what so ever.
If you are thinking of making an investment into watches, do understand the risk involved. My article are solely based on current outlook and it does not guarantee situation will remain as described in (near) future. Real world economy and financial markets do have a massive influence on the luxury resale market, so please exercise with caution.