Credits: Article and images by Chris Malburg @ Quill & Pad. See the original article here - https://quillandpad.com/2023/07/13/how-to-and-not-to-buy-into-a-watch-bubble-reprise/
“Quick! I need an intervention,” my breathless voice pleaded. “The Rolex OP 41—”
“Let me guess,” watch buddy Andy’s reply was already bored, “it’s the one with the turquoise dial.”
“Ex-actly! It just hit $36K. It’s ready to skyrocket. I know it.”
“Steady there, friend.” Andy is a seasoned collector of expensive objects. “$36 large for a time-only, three-handed watch? Time for a reality check.” Then came the logic I didn’t want to hear. “Think of all the other watches you could buy with that sum. Failing that, hands off the computer and lay down until you realize this is just a pricing bubble.”
Andy’s counsel provided only temporary restraint.
In real life I run the municipal bond operations at an investment management firm. I know economic bubbles. I’ve seen three kinds: stock and bond market bubbles, credit bubbles, and commodity bubbles. It is the third type – commodities – we’re talking about here.
Tiffany & Co double-signed Patek Philippe Nautilus Reference 5711/1A-018
Bubble or not a bubble?
Patek Philippe’s Nautilus 5711/1A-018, co-signed by Tiffany with a dial in brilliant Tiffany blue, sold in the New York Tiffany boutique to just 170 of the retailer’s favorite customers for $52,635. This limited-edition piece was impossible to obtain for mere mortals. And one example was auctioned for charity, where it hammered for $6.5 million. On the rare occasions when they’re traded on the secondary market, these pieces are close to the mid-six figures. Is this watch in a bubble?
Similar yet distinct: Rolex Oyster Perpetual 41 in turquoise blue
Then there’s the aforementioned Rolex OP 41 in turquoise. Its original retail price at its introduction in September 2020 was $5,900 before being raised to $6,500. Finally, it was discontinued in March 2022 (but still exists in 39 and 36 mm sizes). The price for the 41 mm on the secondary market is all over the place but seems to have settled between $30,000 and $40,000. Is this watch in a bubble?
Some think that a rapidly soaring price is proof of a watch bubble. They could be right. Or not. Financial bubbles are tough to identify when they’re forming. They’re even more difficult to declare finished as prices collapse. Fair warning: everyone seems to have an opinion as to the definition of a bubble. None are wrong. You may disagree with my assessment. And I wouldn’t argue.
Watch bubbles add something else to the equation lacking in mere financial bubbles: passion, emotion, and the possibility of daily enjoyment. These outlier ingredients cloud the thinking of even the most rational of watch enthusiasts.
An unmistakable Bubble wristwatch by Corum
Historic bubbles
There have been loads of economic bubbles throughout recent history. During the painful dot-com bubble of 1999-2000 one friend quit his job, saying it cost him too much to work for a mere salary (about $150,000 annually at the time) when he made so much more from day trading. He later reentered the day-to-day workforce.
It took author Michael Lewis to document the 2006-2012 real estate bubble in The Big Short. People lost their homes and investors lost their shirts. Hollywood made a film of the same name about this seminal event in the chronicles of bubbles.
Remember the cannabis bubble of 2018-2021? Sundial Growers, Tilray, Aphria Aurora Cannabis, and HEXO were up 2,280%, 1,190%, 535%, 388%, and 341% respectively from February 2021 through the end of October 2021. This was a time when investors scratched around for anything promising outsized returns. Gallup’s national sentiment poll showed a record 68% of respondents favored legalizing marijuana. And the new senate majority leader, Chuck Schumer, promised to legalize marijuana in the United States. Pot seemed on the verge of becoming respectable. Why wouldn’t the pot stocks form a bubble? They did. And then the bubble burst.
The global pandemic created the COVID-19 bubble of 2020-2021. It seemed any biotech stock flogging a study that showed promise soared. Never mind that the FDA had not yet approved it or the study sample size proved statistically insignificant and unreliable.
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Credits: Article and images by Chris Malburg @ Quill & Pad. See the original article here - https://quillandpad.com/2023/07/13/how-to-and-not-to-buy-into-a-watch-bubble-reprise/
