Let’s jump right in and address the elephant in the room:
What is happening with this market sell-off? (Written April 2022)
Simply put…
There is a significant amount of FEAR in the market.
People are dumping their watches…
Some of the massive jewelers taking huge price cuts…
Some of the consumers just dumping a lot of their Rolex “grails”…
To learn more about the current state of the market, let’s take a look at some of the events that lead to this.
One of the things that have happened is Crypto Crash. This ties into the Ukrainian War.
What has that to do with the Watch Market?
Well, a LOT of the money went from crypto straight into watches.
This means that a lot of Rolexes, APs, Pateks, and RMs were bought…
Prices were going through the roof…
Global currency kept going up (cause the people were buying all around the world)…
As a result of that, supply chains were once again depleted, driving the price up.
This is NEW money, NOT money from long-time investors who make an informed, educated decision.
The market rise is due to the impulsive and uneducated decisions of the new wave of buyers.
BUT
As happens in every market, adjustments come based on market resistance.
While hundreds of models have reached a new “floor” where they won’t dip below a new, higher price index….
Prices can’t stay high on *everything* forever…
And their true value of the trash watches that benefitted from a “rising tide raising all ships” will start to show off soon enough…
You see, one of the differences between the jewelry business and the stock market is this:
In the stock market, you can clearly see the price of the stock (the actual price).
In the watch market, you see a very inflated number that is usually listed in the forums, Chrono24, or eBay.
Those list prices often aren’t close to what the model actually trades hands for.
There is a significant margin built in the watch market because it’s essentially unregulated and run by opportunistic jewelers.
That margin is what people miss when they are not making an informed decision.
The new, completely untrained “investors” are basically buying the retail price…
Which leads to even HIGHER listed prices because, remember, jewelers don’t delete old listings – they either bump the prices up or bait-and-switch you into a higher price…
And the cycle continues until the market reaches a point of correction.
Now – What is affecting this MORE than the number of new investors (markets that moved in)…
Is this:
A lot of buyers that just “moved in” realized something at the beginning of this year:
- The stimulus money is gone
- Mortgage payments and student loan payments are back
This means the disposable money is significantly lower.
That’s why the majority of investments that are going to be most hurt are your steel Rolex investments.
The $15k – $40k range is going to get weaker.
We’ve already seen a 10%+ drop on the famed Panda Daytona.
In addition to these, we’re also seeing the rage of buying in the market slowing down, which is NORMAL.
In fact, it’s good!
We want this to happen because it creates a more stable market where our arbitrage as traders is predictable.
The final concept we should be paying attention to is this:
Every market is cyclical.
The watch market was BOOMING over the past two years.
We saw a SPECTACULAR growth across the board.
If you were holding watches, you made a killing in the last 2 years.
And if you were smart enough to join WTA 5-6 years ago, then you made a proper fortune in the last 2 years alone.
Anyway, what you need to keep in mind is that markets have cycles.
And the next cycle is going to be a hold market.
My simple advice for maximum profits is this:
Buy rarer, better, and harder-to-get pieces.
Wear them while protecting your money.
And keep this in mind:
Whenever there are wars, inflationary hedges aren’t gold, because gold has no utility.
But watches, on the other hand, have…
- Have HIGH MOBILITY
- Lower Cost of Entry
- High Utility
These reasons will continue to make watches a strong hedge against inflation (we expect to see inflation up through 2023).
Even if the watches are now in a settling period, they are not in a crushing free fall.
The market is simply adjusting.
That’s all for today.
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