Just as we think we’ve seen it all, the latest round of auction results leave us scraping our collective jaws off the floor.  In this wild and unpredictable market astonishing auction results seem to have become the norm. And in the midst of longest bull market in decades, one could be forgiven for buying into the current irrational exuberance of the watch market. But what goes up, must come down… Right?

Critics have speculated the existence of a growing market bubble fueled by the hyperbolic storytelling of the more popular Auction houses. Phillips in particular has borne the brunt of the criticism.  The argument is a simple one – once the hype has subsided and buyers put their emotions aside, prices will again return to some semblance of normalcy.

While on one hand this perspective seems to hold weight, it’s over generalization of the market is problematic for a couple of key reasons.

The first is simple supply and demand.  It wasn’t long ago that collecting vintage watches was considered “fringe”. Not so today. As the hobby attracts more collectors with increasingly deep pockets, demand for high quality examples of upper echelon and well regarded brands has continued to rise, pushing prices with it.  By their very nature vintage watches exist in fixed (even slightly declining) quantities.  While we still see first to market items, they’re all already out there somewhere.  

The second argument that excessive storytelling has propped up prices for what should be considered simple commodities has one glaring problem.  Vintage watches aren’t commodities like crude oil and iron ore, they’re value-added products with differentiating characteristics.  The fact is nobody needs a decades old assembly of cogs and springs strapped to their wrist to tell the time.  Atomically precise timekeeping is accessible to the multitudes via any number of wearable bits of technology. A vintage watch, not unlike art, is a personal expression of taste and style and is categorically unlike modern technology.

Should Bacs and his team be faulted for doing their jobs well?  After all, isn’t the goal of an auction to achieve a final bid that transcends all reason while accurately and honestly representing the lot?  What Bacs is undeniably good at is telling and selling the story, sharing the romance behind the smallest nuances of each individual watch.  Not much different than how a brand crafts a narrative, selling an identity to potential customers.  Let’s not pretend we wouldn’t be a little shocked to see the actual cost of goods sold of most top tier luxury brands.  But while Walmart can survive on a 1.5% margin, it’s safe to say Patek Philippe cannot.

But there’s nothing wrong with that.  A vintage watch appeals to our emotions, and that’s okay.  Whether it be an appreciation for design or mechanics, a love of history, or the feeling of owning something that most people won’t, the fact is it doesn’t make “sense” in the traditional sense of the word. A vintage watch means something different to each collector, so pretending we know the strength of the underlining emotions driving a specific collector to purchase is simply a delusion.  We can’t know.  But as members of the same crazy persuasion, we can respect it.

We’ve seen the very same appreciation in the vintage car market.  And while tastes change, the demand for quality examples of the most timeless brands only deepens.  

Alfredo Paramico (IG @alfredoparamico), former merchant banker, renown collector and creator of the Watch Fund, an investment vehicle based on the value of, you guessed it, blue chip vintage and modern watches, shares this sentiment.  In a 2017 interview with Luxury Society (catch the full interview here) he shares a bit of perspective gleaned from decades of buying and selling;

“You always hear people talking about ‘bubbles’ as soon as a market starts to grow rapidly. I’m very familiar with the term, having previously worked in the City’s merchant banking milieu… But you have to take a closer look: people think that the market for vintage watches as a whole has enjoyed non-stop growth these past few years. But the rapid rise in prices actually only concerns a small portion of the market – that of really rare watches over which people have gone ‘loco’. More standard watches are still as difficult to sell as ever…

Personally, I sometimes prefer a Longines chronograph to a Patek Philippe chronograph, depending on the condition and the model. You can find rare, excellently well-made watches that are likely to gain further value at Mido, Omega, or Audemars Piguet. But it’s very difficult today to buy this type of watch, because they either stay in private collections, or they’re already on the market at very high prices precisely because of their rarity and quality.“

So while the excitement may fade around some of the more common periphery, generally speaking, the outcome of increasing demand on a fixed supply is quite predictable.  

Happy hunting,

  • Featured Photo Credit: Watches by SJX (https://watchesbysjx.com/)