NY Times: An Investment on Your Wrist

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NY Times: An Investment on Your Wrist

Post by gr8sw » Sun May 27, 2018 9:08 am

https://www.nytimes.com/2018/05/25/your ... ction.html

For decades, watches have been symbols of luxury, wealth and personal taste.

But their potential as investments is now more easily tracked and understood.

By PAUL SULLIVAN MAY 25, 2018

Like other men with a passion for watches, Cade Mlodinoff began his obsession by coveting one model. It was a Tag Heuer. It cost him $400 when he bought it at age 10.

“At the time, it was every dime I had,” said Mr. Mlodinoff, 33. “My obsession kind of grew from that.” For decades, watches have been symbols of luxury, wealth and personal taste. But their potential as investments is now more easily tracked and understood. You can credit technology for shining a light in dusty watch shops.

An auction for vintage and modern watches this week at Sotheby’s raised more than $9 million, while Christie’s plans to hold an auction of rare watches in Hong Kong on Monday. Last year, Paul Newman’s Rolex Daytona sold for $15.5 million, not including the auction premium.

But that’s rarefied air.

“Quality vintage watches can be bought for a few thousand dollars,” said John Reardon, the international head of the watches at Christie’s. And the market for watches that cost less than $10,000 “is one of the areas of most aggressive growth at the moment.”

Until recently, collectible or vintage watches were generally bought at watch shops or through auction houses. Mr. Mlodinoff, who lives in Chicago, said he remembered going shop to shop, trying to find what he was looking for.

“There was the Rolex guy, the Cartier guy, the Omega guy — that’s what you did back in the day,” he said. “I didn’t have the disposable income for five or 50 watches. I had the income for one, two or three watches, so if I wanted something new, I sold
something old.” He now has about 20 watches, but he is still selling as well as buying.

Websites like WatchBox and Hodinkee go beyond just selling watches and aim to create greater transparency for people who buy watches for thousands, not millions, of dollars. They want to increase visibility in a market that has often been opaque.

“We’re monetizing a wristwatch as if it’s an asset,” said Danny Govberg, the chief executive of WatchBox. “Watches have an underlying value, just like a diamond. You can take a diamond anywhere in the world and sell it. We’re creating a worldwide market for watches.”

Mr. Govberg, whose family has been in the jewelry business for three generations, said certain watches trade like the most liquid of stocks. A Rolex Submariner is popular in new and vintage styles, so its price range is tight, he said.
WatchBox recently had nine on offer, from $9,000 to $13,000.

But markets for brands like Audemars Piguet or Breguet are not as fluid. Those companies make fewer watches, but their brands also lack the easy association with luxury that Rolex has. Mr. Govberg said part of his hope was to make markets for these and lesser known watch brands. He wanted his site to serve as a platform to certify vintage watches, similar to the way a luxury automaker sells certified pre-owned models of its cars.

Its fee for doing this varies depending on the watch. But Mr. Govberg said if he bought a Rolex for $8,500, he’d sell it for about $10,000. “We’re basically saying we are going to value these timepieces and support the prices of them,” Mr. Govberg said. “But we’re also going to resell them at a high standard, not like it’s some flea market.”

When it comes to watches as investments, the market is dominated by two brands: Rolex and Patek Philippe. But that does not mean all of their watches are great investments.

Rolex watches span the gamut from affordable to exclusive, starting at less than $6,000 and soaring to limited-edition models that cost more than $300,000. It’s like the range of Mercedes cars between a basic C Class sedan, which has no rarity value, and a more coveted AMG Cabriolet that tops $300,000.

“Rolex has become a cultural symbol and a status symbol,” said Benjamin Clymer, founder and chief executive of Hodinkee. “The quality you receive in a Rolex is above most other watches at that price point.”

Patek has invested heavily in marketing campaigns that focus on its watches as heirlooms. But Mr. Clymer said the brand does not translate immediately into appreciation. He said that the company’s signature watch, the Calatrava, which costs about $20,000, is like any new car. “If you bought it and tried to sell it the next day, you’d take a bath,” he said. “They’re not always great investments, but there is a track record for them becoming great investments,” he said of the Patek Philippe timepieces.

Discerning the investment potential of watches can be as complex as the intricate machinery that runs them.

“Things can change very rapidly in the watch world, the way they can with other investments,” said Daryn Schnipper, chairwoman of Sotheby’s international watch.

“One of the things I suspect people should be tuned into is production quantities and trends of a company — is it a solid company or a new company?”

As with most investments, she said, supply drives watch prices. For instance, new Rolex Daytonas are not easy to find, so the price for vintage ones has ticked up. Watches that are known beyond aficionados have a tendency to increase in
value, Mr. Clymer said. Mr. Newman’s Rolex Daytona is one. The Omega Speedmaster, which astronauts wore on the Apollo 11 moon mission, is another. “That Speedmaster has a place in world history,” he said.

But sometimes the high prices that watches fetch have as much to do with luck as anything else. At a recent Sotheby’s auction in Geneva, Ms. Schnipper had a Rolex Daytona with a dial that had faded to a brownish color, an aging process that results in a rare “tropical dial.” The person who had consigned it paid less than $200 for it in the 1970s. Ms. Schnipper expected the watch to fetch $200,000 to $400,000; it went for $950,000 with the auction fee. A regular Daytona from that time would sell for around $150,000.

Dave Terry, a watch collector and chief executive of Hub International Insurance Brokers, tries not to get swayed by auction prices.

He said he focuses on collecting four brands: Rolex, Patek Philippe, Audemars Piguet and F. P. Journe, which he thinks will hold their value. He tracks the values of many models in different conditions on a variety of sites and at auction to get a sense of their worth, but he believes the value at auction is not always accurate. “You get a bunch of boys in a room with testosterone who’ve had a few drinks and they can bid up a watch,” he said.

As Mr. Mlodinoff bought and sold watches over the past decade, he experienced both the highs and lows of the investments.

On the plus side, he has an Audemars Piguet Royal Oak, a large sports watch that he bought three years ago for $23,000. He believes the model he has is worth about $30,000 because the demand for the watch has remained strong.

Yet seven years ago, he bought an IWC Big Pilot’s Watch for $40,000. He said it’s probably worth half that much today.

“If we’d had this conversation back then, I’d say it was a historical watch,” Mr. Mlodinoff said before listing his reasons for buying it: “It was a reissue in a precious metal, they only made 500 of them, it’s going to be super valuable.”

So what happened? He said the company had made too many of them. “They kept doing different limited editions, and that hurt the market for it,” he said. “It’s where I learned I’m not the smartest.”
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