State of the Market Spring 2018

Like many a well enjoyed collectable, Speedmasters have attracted those with a profit motive. Now a collector has to compete with an investor or dealer, and has few options to acquire from  private sources anymore. So we are left to buy from dealers, collectors or auctions.

The Speedmaster was, for a long while, an enthusiasts watch, or with the later vintages, a chance to buy an inexpensive version of a current model – as the 2006 version was only slightly different to the 1978 version. The c1994 version with the tritium dial was even closer to the 1978. When I first bought a Speedmaster they were around $1000 to $1500 and hardly anyone knew the difference between the models – often dealers would only differentiate between the movements, and the price range was considerably less. A symptom of this was that very few people understood a 105003 and for a long while these traded at $2500. Hardly anyone had seen a 2915 let alone traded one.

Sources of all my early watches were ebay, pawn shops, the odd watch show and charity shops. The watches were almost all from private people and wide ranging in quality price and value. Frankly eBay was by far and away the most bountiful source. The choice was incomparable.

105.012 from the Salvation Army. This was a one owner watch that while not perfect, had the aura of honesty. As a result I paid about 10 – 20 % over what the market thought was the price. This photo is post service, and as you can see I have preserved the appearance completely. This is the kind of watch a “fund” will ignore, a dealer will “Improve” and a collector will simple enjoy and value unchanged.

On eBay things started to wake up, and when Speedmasters started going for more than $1500 we saw eBay carrying four to ten private Speedmasters every week. These watches were owners watches, or their beneficiaries, and often I was buying a watch that was unopened and sometimes I never knew what I was going to get. Here is a 105.012-63, sold as a “1970’s Speedmaster”. I paid $1650 for it, and I did not know what I had – to this day it is one of my favorite watches.

105.012-63. One of my earliest purchases, for $1650 from Ebay, There were three photographs, and described as a “1970’s Speedmaster”. At the time I might have slightly overpaid for an 861, but this was an all time bargain. This is not something I think will be repeated anymore.

There were many watches, and many buyers. Most were private buyers too, but the rising market was attracting flippers, or perhaps we can call them gentleman traders. Any fool seemed to be able to make a couple of hundred buying a poorly photo’d watch from a dark corner of the countryside, cleaning it and re presenting it.

This rise in values has coincided with an economy where the money in the bank devalues as you look at it, and men (it is nearly always men) began to buy and sell watches outside of their primary occupation, and do well. They (I?) would rather see money in watches than stagnating in the bank . Many people have now decided to become watch dealers – though I wonder how well they do, and how much of their personal moral code they have had to leave behind.

What I am pointing out is that the source of Speedmasters has changed from private individuals, to dealers and collectors selling on watches that have often been tidied up, restored or prepared in some way and so lack the originality of an owned watch. As a result, true one owner watches are attracting a premium, a premium that is hard to justify in the cold light of a commercial analysis.  These watches have borrowed the term Barn Find from the vintage car market, perhaps as so many of us collectors have connections to vintage cars too.

145.012 Owned by a Vietnam Verteran, sold to me by his surviving brother. A true barn find, in spite of a changed bezel, this watch is in original one owner condition. This watch currently does not run, but I feel no urgency to touch it. See the story of it here

Recently another Barn Find sold strongly on Ebay….except it was not really a Barn Find. (Which is my point, even in this condition they are coming through traders):

105.012 Sold on Ebay for just under $5,000 with 1039 bracelet. While on first glance this could be a barn find, (the pushers look original) this watch is offered by someone who knows how to dismantle a watch – not many real owners can do that. Still I think it was a good buy even with the dial issues, which are not as bad as some. Photo from listing.

Auction houses too, have increased activity and turnover. We now have major auction houses scheduling two or three important auctions a year, as well as several minor houses with regular auctions. Unfortunately, like the dealers who prop up the auctions, they don’t really have the depth of knowledge that a motivated collector in this field has. They might develop this knowledge to a certain extent, as they have in the art and jewelry market, but as yet the watch market is nascent by comparison. The jewelry auction business has seen great shake ups as the wider world discovered about Ruby origins and heat treatments as well as Emerald oiling and resin to name just two cataclysms that rocked the market. A lot of people bought stones that cannot be sold for 20% of what those charmers in the Auctions sold them for. I believe we are in a similar (pre – cataclysm) time with watches and so we see high profile sales of re lumes, lasered cases, and even down right fakes. Remember, auction staff work only for the benefit of the Auction house, not you, the buyer, and the only reason the seller benefits is as the Auction houses best interests are aligned with those sellers….and just watch how quickly a seller is abandoned to the sea of contract law if the buyer fails to complete.

A visit we made to Christies New York December 2015. On the right is a 2915-1 with a re cut case. This was offered as original by Christies, but acknowledged by staff at the sale as refinished. It was auctioned without any special mention for $125,000 and subsequently the sale was removed from any records by Christies, although I was assured the sale completed to a happy buyer.

This I have no doubt will change, but buying at any auction should be done without placing 100% confidence in what the experts at the houses say. Until the Auction Houses get caught red handed selling something expensive and miss described, they wont learn. Keep watching Orchi Palar on Instagram! He is calling out auctions and dealers, though I don’t know the Rolex market well enough to know if he is right. I do however enjoy the idea that someone is watching.

We are seeing the emergence of watch funds, and this is extremely dangerous for the market. Consortia are congealing, gathering investors into hegemonous groups that go into the market and buy watches for investment, with the idea of selling back into the market for a profit in 3 to 6 years. While this might sound like a good idea we have to go back to basics and identify the flaw.

Watch funds will always miss the truly special, like this, because they lack the confidence to stick their necks out:

Three unusual dials. These cannot be quantified or priced, as they are so rare the price depends only what two people are willing to pay for it on the day of an auction. As a result, Watch Funds could catch a serious cold buying these.

Who buys watches? Men, for the most part, who want to “own” them, for the pleasure of owning them. To give pleasure, the watch must have attraction, and give pleasure to this owner each time he sees it. The fact that it has two lines of red text, or a BASE1000 bezel, is a given, not the reason he (I?) like it.

Auction houses need the dealers. They set the floor in any market, scooping up anything that the private buyers do not want and preventing the auctions from holding  piles of unsold watches. They prevent that awful situation where there are no bids, and an item is returned unsold. An unsold item is bad for everyone, even if the houses usually manage to stiff the poor seller with unsold fees. The private buyer in the auction is where the action is, but the dealers are paying all the bills. That’s why when you go to an auction the auctioneer is always so cozy with the dealers, making private jokes from the podium. The auctioneers need the dealers to hold their trousers up.

So the market is set when two private buyers fight it out for a desirable piece. True, they may be only fighting themselves for a little while, but its still a price arrived at in the open. These private buyers fight for the watch because they like it. Perhaps it was flown to the space station, or owned by an astronaut. It could be that the dial is that attractive shade of brown that tickles the pleasure buds.

To be clear, two people do not fight to the financial death over a DO90 bezel, a brown dial, or even an Arab crest, just because of the bezel, the dial or the mark. They fight because they desperately want it because it touches them in a way a piece of modern art might. It does not have to make financial sense.

A dealer, or a fund, will look for items to fill the stock. “I need a couple of straight lugs” a dealer might say, or the fund might allocate a budget for 10 brown dials. Or twenty 1970’s speedmasters.

Do you see the difference? The privates are buying because of what it looks like, and the dealers and funds are buying based on how they can describe it on paper. These funds are audited.  When was the last time you met a watch collector who is an auditor? (not an accountant, and Auditor.)

Now we come to the second problem with funds. We all know when two crazy privates fight for a watch – the price goes up to the point where all but two people in the auction think it is crazy, and even when the hammer comes down, the winner often thinks he is still crazy. With the funds, they are not spending their own money. They think that the watch will appreciate 10% a year and so if they over pay 20% on a five-year investment they still come out 30% up. And anyway, its not their money. So funds actually push the price of “ordinary” watches higher, while not being brave enough to buy the really special pieces. Because they don’t have the balls to fly that high, always needing a consensus from committee, so that no one can be blamed in five years when they sell. So while the funds might push some, the really super special watches, like blue dials, or black racings, might just escape them.

So now imagine two funds in the auction. Neither are buying the watch because they like it, its because they have decided they see growth as a result of certain conditions being met, e.g. it is brown, has a BASE1000 bezel, it is a straight lug. So now instead of the private setting the top of the market, it is a fund, a group of people with no individual taste pushing a watch that is replaceable, but they need it because in order to pass the audit is has to come from auction, and we have now a situation  were the privates have dropped out because the do not like the watch, but because the watch fills a set of criteria, the funds think it is the perfect investment piece and while they pay more than another fund, they pay way more than a private would.

At the end of the day, the value must be set by the ultimate consumer, the collector. It is after all the collector who will buy the watch at the end of the fund’s investment period, unless the model is so successful that another fund comes along and buys it.

For the private buyer, like me, I am focusing on one owner watches, preferably with papers, and always with an extract. For that, I will pay a premium, one that is impossible to put in the chart.

There is an acute shortage of wonderful examples. Perhaps those of us who have some feel no pressure to sell. These are genuine rarities, and until there is a flamethrower at their backsides collectors wont sell.