Investing in Watches (Part 1 of 2)

Speaking about watches as an investment is a tricky subject, mostly because very few if any can predict which watches have potential to fall into this category. Most watches lose a good chunk of their value after purchase. Polite party and retail conversation focuses on more tangible and friendly topics such as nifty functions, finish and style. But, the truth is, when we spend our hard earned cash on a watch, we want to know how to get the best value, and, if possible, pick something that at least has the chance of giving fair return on capital. Nobody wants to look down at his or her wrist and feel ripped off.

I’ve brought in a very special guest to tackle this tricky area. Wife of respected watch collector and enthusiast Bernard Cheong (who wrote a fabulous article on minute repeaters), Dolly Cheong is a collector and expert in her own right. She takes the subject of watch investment head on, explaining how brands sometimes use history as a crutch, collectors don’t know what to buy, and the ridiculousness of prefacing watches with the term luxury.

MG: How do you usually go about picking out an investment piece?

DC: I have been an accountant all my life, for Ernst and Whinney in the 1980s, for a mulit-national corporation and also for a global firm, with now some 25 years of working experience. I am inclined to speak and see things as a financial person. The modern world of this new art form has an element of corporate business. Sadly, it makes the wristwatch appear as an item of jewelry akin to a handbag.

MG: So how should someone approach the purchase of a timepiece?

DC: One must have an eye to see it differently to even regard it as an investment—like the early buyers of wine (who viewed it not just as a good drink) and paintings (who looked beyond a good decorative piece for the wall).

For the wealthy, it is an instrument of investment, such as those who look upon paintings, classic cars, old buildings and vintage aircraft. It comes from that world. It needs the same channels of exchange as the world of antiquities. For the average person, including me, it is less articulate as a financial tool. My husband lives in that world, and yet, he would find it challenging.

The wristwatch is a schizophrenic item of precise micro engineered machine on one side, with art and handwork on the other. Yet this micro machine depends solely on marketing, fashion and celebrity endorsements, when it assaults the ladies market.

MG: Is there a difference between ladies and men’s watches?

DC: The ladies watch is very unique. You see, there aren’t any men’s watches after 1999, possibly the last were made in 2006. Watches today are simply “watches”. Brave companies allow a small segment of their budget to make “ladies watches,” meaning watches that only women could wear.
The economics of building a trade on high profit margins based on low cost product is totally at odds with itself. It simply translates into very expensive to buy, but very cheap to make and sell. A product you won’t sell to your best customers.

However, the wristwatch is without argument a product that one associates with memories and value, as a valued gift to one’s parents and children. The huge profit margin should not be true for the watches that belong to investment pieces. It should be a segment of the watch industry that is delineated with the least margins. In the history of the present times, art and culture, this is where investment lies. Knowing this, one proceeds to learn the difference between collectables and valuables. Henceforth the famous saying that watches are not for investment. Because the public insists on buying the wrong watches.

MG: That’s a very interesting distinction. How do you know the difference between collectables and valuables?

DC: The mass of collectors are confused between the two. Collectibles are only of limited value within circumscribed groups. Therefore, it’s important to understand that limited editions are different from limited production. The piece must have relevance to current historical and technical developments in watch making. It must have a right to exist, at the expense of watchmakers working on more important projects, which excludes such base parameters as “market demand”. The most important of which is that it contributes to new perspectives, such as in engineering and the interpretation of what is beautiful.

Furthermore, it means that complex, derivative copies (even if from the company’s own portfolios of the distant past) and “hot rod” compilations of machines stuck together and passed off as complications are not included. Ditto cheap, small diamonds, used by even the best brands, are not included. Notice how sadly these perform on resale!

MG: How do you go about making a purchase for yourself?

DC: I always buy what represents “me” or “what moves me”. Please note, this is not good advice for the average woman. Let me be the first to admit my own weaknesses as they are! I have insecurities and a need for items (whether physical or emotional) to validate me. From another perspective, I say that watches will always be good investments. I’ve learned so much from owning them, receiving them as gifts, looking at them through the years, giving them to my children. Other things, even memories of big events change, but my watches never do. Within them are emotions. One thing I do emphasize is don’t buy cheap inexpensive watches! These will prove to be the most wasteful of your time and leave nothing for you and your kids. Buy something used, if your budget is not enough.

MG: If you’re looking at buying your first luxury watch and you have a relatively modest budget of about $4000, what are some features that you should look out for?

DC: $4000 is an absolute challenge, for the very savvy collector. You have chosen a good benchmark. It is said among the best, most experienced collectors that it is easy to find an icon for 200k, but to find one at 4k? The first segment to look into is used! All art and antique collectors look at existing examples on the market. We don’t look at used or new as parameters. What we want is good condition and genuine. The market today is wide open to buyers of top end pieces, used.

MG: What about choosing between men’s and women’s watches.

DC: Buy men’s or watches that can be worn by men.

MG: Case metal can significantly increase the price bracket of a watch. Is it better to start with stainless models?

DC: When buying used, go for solid gold or platinum. The margins are better, between steel and gold, at used prices!

MG: Are there any watches on your radar that you’d recommend that meet your criteria?

DC: If you feel very sure of your self image, and know your eye is good, you must absolutely look at the Grand Seiko collection of 2009-2010. They may be masculine, but hey, you may need to give a present! However, the Grand Seiko is a seriously under priced asset to own now. I have personally been to the workshops in two rural mountain villages where 5 to 10 workers assemble, polish, bend the springs, all by hand. This is not the “made by hand” as in the West, but honest Shinto beliefs in purity. That is they really make everything, as far as possible, in house by hand!

It may be “just” a Seiko, but seriously, it rivals the very best. Begin by looking at only the dial and hands! You will immediately understand that this watch should not cost so little.

MG: How do you view the second-hand luxury watch market?

DC: The second hand market is absolutely an important channel for the industry. What valuable antiquities are really not second hand? Think about Rembrandts, Renoirs, Picassos and so on.

I have not had the need or the fortune to locate a used piece for my collection, but I would not hesitate. The market for women used to be so intensely neglected, that fresh new pieces of art works were/are not taken. Watches are not like cars. They don’t combust fuel and wear out, very unlikely. They don’t rust away. They don’t sit on 50sq feet of land. If they are damaged, it is because some wheels became misaligned, it can be fixed. Exceptions are rare. If you know your way around, you will not be “conned”.

Tune in Sunday when Dolly tells you why Einstein’s homework is silly and meaningless and also reveals her list of criteria for identifying investment watches.