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
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
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
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
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.