"I am ready to buy, is there any movement on price?"

This week started with an unusual number of enquiries that can be summed up with one statement: "I am ready to buy, is there any movement on price?"
Clearly, these requests are coming in from buyers who are new to watch collecting or those who are looking for bargains.Without being emotional about the current market demand for bargains, here are the fundamentals:

1. For watch prices to go down, the Australian dollar must appreciate significantly against the Swiss franc and US dollar. The Australian dollar has been heading in the wrong direction for the past eight years and it is going to decline even further.

2. From 2010 til around 2015, we benefited from a somehow better exchange on the Japanese yen, giving us access to Japans' stock of fine watches. That Japanese stock is now completely depleted, having been sucked up by eager Chinese buyers.

3. Global stock levels are low. After the GFC in 2008, almost all Swiss big brand watch manufacturers geared up for a move into vertical integration- meaning full ownership and control -from manufacturing to retail. This has resulted in a low output, exuberant prices, and a no discount policy.

4. Low production means no overstock to supply the grey market. In the past 3 years, the parallel market has collapsed. This is a global phenomenon.

5. Due to the current pandemic, Swiss manufacturers have closed their factories. Supply of new stock = zero. Furthermore, almost all retail outlets are closed so the supply and demand chain is broken. There is a strong possibility that shops will reopen in the near future, but it won't be business as usual. There won’t be any new models, just old ‘pre-pandemic’ stock.

6. The second hand market thrives when 'business is as usual' – a strong dollar, plenty of supply, a strong grey market and big Swiss brands offering discounts. This is when watch collectors are selling used watches to buy or import new ones. On better days, you could stop in Hong Kong on your way back from London, buy a new Submariner, and then sell your two Omegas on arrival to a second hand dealer. This scenario is highly unlikely until at least this time next year.

7. As I’ve said before: there are no distressed local sellers offloading watches in hurry. With the Government printing money and paying employees to sit at home; when almost all retail shops are closed; and when people are still in lock down, we have entered a period of collective hibernation. Of course, this too will change, but not overnight.

8. Watches are a poor investment class, but an asset nevertheless. In times of severe crisis, any asset is worth more than paper money. No watch dealer is going to rush to exchange a real asset for money that is losing its purchasing power. The bottom line is that we have been low on stock since 2015 and there is no logical reason to offer any discount either today, or in the foreseeable future.