The Finer Things – Investing in Watches – Part Two
Investment in collectibles has been soaring, whether it be classic cars, paintings, jewellery, or old watches.
Occasionally, an extraordinary deal makes headlines, such as last October’s auction sale for $17.8m of the Rolex Daytona chronograph (a Daytona, below) originally made for the late and legendary Hollywood actor, Paul Newman.
That sale, a world record for a watch, vaults old timepieces onto the same level as classic Italian sports-cars, where it takes a million dollars just to be invited to bid.
Nonetheless, one can still get involved even if your budget is only a few thousands, or even hundreds, rather than many millions. There are a few ‘health warnings’ to consider before spending even a cent, however.
This is a warning
The most important is that, if one wants to make a fast buck, vintage watches are not the place to start.
The rapid climb in prices over the past two decades might lead one to think otherwise, but that trend is the result of specific factors that are not likely to be sustained indefinitely.
The first has been the baby-boomer generation’s accumulated wealth, which has benefited massively from the exceptional bull markets in equities and real estate over the past 50 years.
The ‘boomers’ have been re-investing their fortunes in collectibles for some time, but they are not getting any younger and their buying will attenuate over the coming decade as they start to die off.
Pigs on the wing
Second, quantitative easing, the developed countries’ asset-buying response to the 2008 financial crisis, has pushed up the prices of bonds and equities to extended levels.
Not only has this increased the wealth of most asset owners, but, as the main markets have been boosted to exalted valuations, investors of every stripe – boomers, X and Y generationers, millennials – have sought alternative or hitherto-overlooked havens, including collectibles.
This progression is sometimes known as ‘piggyback’ investing, because the selected investment isn’t necessarily cheap of itself, but is deemed so in comparison with other, even more expensive, assets. It works well so long as the ‘pig’ – in this case, listed securities – doesn’t fall sick or die.
The long and winding road
Third, the market for old watches, as with most rare items, is inherently illiquid: unlike listed stocks and bonds, one cannot sell easily or quickly.
That illiquidity is also reflected in the ‘spread’ between buying and selling prices.
If you want to sell a recently-purchased watch, be prepared to suffer an immediate loss of up to 30%, possibly even more with commission and other charges added.
So, do not buy unless you intend to keep the watch for at least five years, preferably much longer.
Let there be love
If you’re still keen to get involved, there’s one more caveat and the most important.
This is not a market for the dilettante. It requires extensive research and good knowledge.
In other words, you need to become an enthusiast, a true lover of old watches.
Assuming you fit that profile and accept all of the health warnings, but still can’t afford a classic Rolex Daytona or Patek Philippe Calatrava (and we covered those marques in part one of this guide (https://alsanagroup.com/the-finer-things-investing-in-watches-part- one/)), you can start a collection much more cheaply among makes that are less well- known, but nonetheless beautiful, desirable, and of high quality.
The following list classifies several makers, using current values: Tier 1 examples are mostly under £1,000; Tier 2 ranges from £1,000 to £3,000; Tier 3 goes from £3,000 to
£5,000.
Examples can be seen here: https://www.chrono24.co.uk (https://www.chrono24.co.uk/). Moreover, all are Swiss, an important attribute for serious collectors.
| Tier 1 | Rado | Roamer | Rotary |
| Tier 2 | Eterna | Favre-Leuba | Longines |
| Tier 3 | Juvenia | Omega | Universal |
Only one flavour
To start, it’s best to concentrate on one make and learn all you can about it: history, signature designs (Movado’s Polyplan, Ermeto, and Museum models, for example, or the Oris ‘big crown’ series), and price trends.
Having decided the make, you could focus on a particular design and try to collect all of its variants.
Alternatively, you could stick to a particular decade or period, e.g., pre-1914.
The aim is to offset the modest individual values of each piece by owning a complete stock of that period or variant, which will be much more valuable to other collectors of that make.
To that end, it’s a good idea to join social media groups or other ‘bands of believers’ dedicated to your chosen horlogerie. You will glean useful information about the make and the collectors who favour it.
Condition critical
However, make is not the only, or even prime, consideration.
To be desirable, a watch should be rare, unusual, or have a ‘story’, such as that of the unique Paul Newman Rolex Daytona.
Even if it doesn’t have those advantages, it needs to be in the best possible condition.
Different dealers have different approaches to condition rankings, but here’s a good description of one series: http://www.ajtwatchco.com/watch-condition-grading-scale/ (http://www.ajtwatchco.com/watch-condition-grading-scale/).
Note the value added by having the original box in which the watch was first sold.
Provenance is also helpful.
Unlike vintage and classic cars, watches are not required to be government-registered in their country of sale, nor do they usually come with a documented service history.
Nonetheless, considerable value is added if the original sale receipt is available, or if the watch is authenticated by the manufacturer.
Can’t buy me love
Finally, until you became an expert, do not buy these lesser watch makes at auctions. Not only might you be tempted out of your budget, but you won’t find many bargains.
Instead, browse eBay and Amazon (but always contact the seller to establish their credibility, and only pay with a credit card).
On-line dealers are also good, but, being experts, they’re unlikely to underprice.
The best, and most enjoyable, approach is to scour estate sales and bricks-and-mortar antique dealers, looking for that rare but overlooked bargain.
Above all, get into watch-collecting for the love of it, not just to make money.
With patience, discernment, and all of that love, you just might make a killing – in spite of yourself.
Paul Connolly
Paul Connolly has been a journalist for more than 20 years, as a reporter and editor for Argus Media, Reuters, The Times, Associated Newspapers and The Guardian. He has covered Islamic Finance for Reuters in the 1990s. Paul has since helped launch three newspapers, as well as reported from Tokyo, Los Angeles and Stockholm.
