No. 224 ~ Coronavirus and the watch market, Part 4

Hello!

This is Kaneko from Commit Ginza.

This blog contains my personal opinions, so I hope you will view it as a piece of reading material.
We have also received a sudden increase in inquiries about watches, and we apologize for the inconvenience caused by keeping you waiting.
If you call us before coming, we will guide you smoothly.

In the previous article , we mentioned that the strength of the US dollar has become evident during the recent economic turmoil.
Since expensive watches are dollar-denominated assets, they can also be interpreted as representing a role as a safe haven asset even in today's climate.

Today, I would like to examine the changes in the value of real assets since Lehman Brothers.

As you know, after the Lehman Shock, stock prices crashed worldwide.
And to make up for that financial downturn, real estate and many other real assets were dumped, causing many real assets to fall in value.

This trend has been seen approximately every 10 years, with the collapse of the bubble in the early 1990s, the collapse of the IT bubble around 2000, the Lehman Shock in 2008, and the coronavirus shock in 2020, and although there is a difference in the timing of each of these stock market collapses, there has been a linked decline in real assets.

In fact, it was around 2013-2014 that the wristwatch market began to mature and see an increase in high-value transactions as seen recently, and it seems that there was a shift in the perception and position of watches from being just hobby watches to being part of real assets.

In the wristwatch auction market, with the exception of extremely rare pieces or those with historical significance, no watch had ever reached the 100 million yen mark for many years, but it seems that the vintage Rolex boom was ignited by "CHRISTIE'S DAYTONA LESSON 1" in 2013, organized by Aurel Bacs ( now Phillips) .

In the international art market, the key is for an artist to value their work at 100 million yen, the highest price possible, and once it touches that number, the price jumps up dramatically.

It can also be said that there are many wealthy people who set a minimum investment threshold of $1 million.
Since a watch was sold for over US$1 million at an auction in 2013, the highest prices have skyrocketed to 200 million, 300 million, 500 million, and 1.7 billion yen.

And now, luxury models from Patek Philippe, Audemars Piguet, and Rolex, as well as over 10 million watches, are being sold and circulated in a regular manner.

Around 2000, a watch that cost around 3 million yen was still on the high end of the price range, and models with dials covered in diamonds, which are no longer uncommon in recent years, feel like ornaments in flagship store shows.

However, since the collapse of the bubble economy in 1990, there have been crises every 10 years, with the last crisis being the Lehman Shock of 2009, so I feel that the current mature luxury watch market does not have a history of facing a global stock market decline.

So, I would like to analyze the art market, which has a long history and is well-established.
Art, vintage coins, etc. have been charting an upward trend for many years.
Amazingly, whether you look at the 10-year, 20-year, 30-year, or 50-year charts, each one is on an upward trend.
Looking at it on a spot basis, there have been crashes, but they have recovered within a few years and are back on an upward trajectory.

For example, in 1987 Yasuda Life Insurance acquired Van Gogh's "Sunflowers" at Christie's London for 5.3 billion yen, a new record at the time.

When they bought, they were ridiculed as Japan money buying at an excessive price, and then, when the bubble burst in 1990, there was a lot of backlash and people suffered huge losses.

"Himawari," which is said to have fallen to less than half its value due to allegations of counterfeiting and the collapse of the bubble economy, is now said to be worth 30-40 billion yen.

I think art is also a real asset, and it's the kind of extremely expensive collection that people with money end up with.
If the bubble bursts and the market falls, prices will naturally fall in tandem.

After that, it gradually returned to its original value over the course of a few years, then rose further, only to fall again with the collapse of the IT bubble.
It will go back down and rise again. The same thing happened with the Lehman Shock. Art dealers and watch dealers agree that "good things don't go down."

By "good quality" we are not referring to models that cost tens of millions of yen, but rather the condition of each individual piece, accessories, and type will vary even within the same Rolex.

We'll talk more about that when you come to our store! We expect the watch to follow the same chart.
It will drop for a while, but I predict that it will bounce back starting with the good ones.

Economic shocks cause prices to fall, but there are people who buy at the lower price.
It's all about supply and demand. And once the price drops, the price starts to rise.

The current model is being manufactured daily and the number of units is increasing, so it is impossible to grasp the total number and there is a risk that production may suddenly increase in the future, causing the value to fluctuate.
On the other hand, since there are only a certain number of discontinued watches left in the world, it is impossible for even the manufacturer to turn back time and increase production.

There are many people who want to buy such watches, and even in times of economic downturn, they are not only assets but also collections as hobbies. Each watch has its own story and manufacturing secrets, and watches contain a lot of value that cannot be expressed in a single word.

I think it's a great product that combines the joy of wearing it with the asset value of a dollar deposit .

We are always happy to explain anything to you. We look forward to seeing you!