Watches and investments
In previous article we discussed the question of how to shelter your savings during a financial storm thanks to safe haven assets such as watches.
Here, we will see how investing in watches can be not only a choice aimed at preserving wealth, but also a way to increase it, even in times of crisis.
The value of watches: supply and demand
Like all goods, luxury watches have a price that depends on the match between supply and demand. It is therefore necessary, to evaluate the possible trend of this market, to weigh both variables.
The offer
On the supply side, it can be stated that the main watch companies have no intention of repeating the mistakes of the past: production numbers, especially for the most prestigious houses, will presumably remain at low levels.
Rolex, for example, in recent years it has pursued a policy of progressive containment of production, in order to preserve the market value of its watches: this, together with the strong demand from emerging countries, is one of the reasons for the price increases seen in recent years in the Rolex range. Demand has currently contracted, due to the ongoing crisis, but it is reasonable to expect a further strengthening in the future, as soon as the situation returns to normal.
Tiffany
A perhaps niche area, but one with great potential, is that of watches made by large houses such as Patek Philippe or Rolex in collaboration with the well-known jewelery chain Tiffany. The latter, last November, was taken over by the LVMH group for a value of 16 billion dollars. The LVMH group is active in the watchmaking sector with the brands Bulgari, Hublot, Tag Heuer and Zenith. It is reasonable to hypothesize that, among the reasons that pushed the luxury multinational to acquire Tiffany, there was that of developing synergies between its subsidiaries. Even if there have not yet been any official announcements in this sense, several operators in the sector do not rule out a cessation of existing collaborations between Tiffany and watch brands outside the LVMH group, in favor of "allied" maisons.
The natural consequence of such a probable cessation of cooperation between Tiffany and various watchmakers would be a reduction in the availability of Tiffany-branded watches. Models made by prestigious houses such as Rolex and Patek Philippe they would therefore see an immediate increase in their collectible value, precisely due to the rarefaction of the availability of these models on the market.
The question
As regards the question, the discussion is complex, and leaves ample room for cautious optimism.
There is no point in denying that the coronavirus crisis has a profound impact on our lives and on our economy. However, it is equally useless, if not harmful, to adopt an apocalyptic attitude. The world will recover from this crisis as it has before. Anyone who wants to look to the future cannot let themselves be overwhelmed by the difficulty of the moment, nor give in to the temptation of cupio dissolve.
There are numerous good signs in the watchmaking field.
First of all, multiple positive news comes from the world of auctions. A clarification: in luxury watchmaking, auctions serve as indicators of the state of health of the market. If the watches are sold, it means there is demand. Well, a quick look at the main websites in the sector confirms that not only is the market holding up, but some models are selling well above the estimated price. This is especially true for two major brands, Rolex and Patek Philippe.
The good health of the watch market is also demonstrated by the existence of investment funds dedicated to it. In fact, there are financial vehicles that allow you to take advantage of the excellent price performance of watches. It is no surprise that a 25 billion euro market, of which a fifth is made up of just five brands (Patek Philippe, Rolex, Omega, Audemars Piguet, Cartier). These funds have a 15% annual return: this shows us how the prices of prestige watches continue to grow.
The monetary and fiscal measures currently in place
We must also not lose sight of the macroeconomic picture. The recent monetary stimulus measures launched by central banks around the world, amounting in total to trillions of dollars, will, as happened in the past, largely be directed towards financial returns. This means that the subjects already wealthy they will benefit more than the general population. We apologize here for the crude cynicism of our discourse, but the current economic structure of the West is this: finance first, then the real economy. The subjects who will therefore benefit most from the stimuli, as we were saying, are extremely wealthy people and who for this very reason often figure among the buyers of fine watches. It is therefore reasonable to assume that in the future the demand for prestige watches will remain strong, while there may be drops in demand for the "less elite" models. It is clear to everyone how this can affect prices on the watch market.
If, on the other hand, we were to witness a return of Keynesian fiscal stimuli, as well as purely monetary ones, then we could see a generalized appreciation of all clocks, a consequence of the rise in the standard of living of the entire population. Unfortunately, this does not appear to be as likely a path as the previous one.
Conclusions
In summary, those interested in investing in watches would do well to keep the prices of highly prestigious brands and models under control, waiting to understand if and when the medium and medium-high level market will recover from the crisis.
Finally, let us remember that it is not just Italy that exists: China intends to show the world its strength in overcoming the crisis, and will not fail to stimulate its internal market, in order to become more autonomous from the American consumer market, the main recipient of exports. Chinese until now. Germany, Britain and America are launching unprecedented economic stimulus. The luxury watch market is, and will remain, global.
Disclaimer
This article is written for informational purposes only and is not intended to provide financial or investment advice. Always contact competent subjects for your investments. We decline any responsibility for the investment advice that the reader may wish to draw from this article. The information contained herein should not be considered a solicitation to the public for savings or the promotion of any form of investment, nor personalized recommendations pursuant to the Consolidated Law on Finance, since it is only standardized information addressed to the indistinct public.
