Brückners Time Signals

Are Watch Investors Ticking Quite Right?<

If the stock market rates fall as low as the trust of the investors, if banks that were seen as solid collapse, and when even the editor in chief of a respected German financial newspaper recommends that the Central Bank print DM notes as a precaution, then it is surely time to ask a question which has worried the privileged class of humanity for centuries, in one way or another: Where to invest the money? Because colleagues from the financial press often ask me whether valuable watches might be a good investment against the march of time. We're always hearing about the record sums which are paid at auctions. So: Sell off your shares and junk loans, get rid of the bungled real estate deals with which your cottage has to be re-thatched after only twelve years.

Whoah! Watches are basically not an alternative form of investment. But often an additive form, so to speak: A ticking investment admixture. Watches are not produced so that you can speculate with them. Similarly, wine and whisky serve, as everybody knows, other purposes than as objects of investment. But having said that, there have been some noteworthy and valuable liquid price increases over the past few years. The same applies to watches. Those who buy them see their value in the mechanical refinements, the design or the brand. The question of value preservation, or even hope for a value increase, is a background consideration at most.

Those who approach this subject in a sober manner and are not anaesthetised by unrealistic yield expectations, can come to the conclusion that it might make sense to invest a manageable asset portion in old, or even contemporary watches. In my opinion, the most vehement objections can be disproved, and rather persuasively at that.

Objection: Some elegant watches lose between 60% to 70% of their value after just a few years. Can one say that that really is an investment? Of course, this can happen. If one purchases the wrong brand or model. But, as everybody knows, every form of investment includes a modicum of risk. Those who bought shares in Deutsche Telekom in 2000 to the tune of 100,000 euros only had 13,500 euros value from that investment in 2009. And even the apparently so respectable Blue chips like the Allianz share lost about 75% of their value during this period. Is anyone advising against buying shares?

Objection: Watch investors have to renounce running yields like interest and dividends. Indeed, this does apply; one does refrain from receipt of the emotional yield just the once. But even when purchasing gold bars or other precious metals, the investor has to forgo similar rewards. The buyer places his trust exclusively on a price increase. Is anyone out there advising against gold?

Objection: Watches are a typical sweetheart investment. Love is blind, as everybody knows. However, one should always deal with money with a cool head. No question; every watch purchase is an emotional decision. The same applies to the acquisition of real estate. Nobody falls in love with an engineer's certificate, but rather a dream location and successful architecture. Has anyone mentioned that we shouldn't buy real estate?

Objection: The fungibility of watches as an investment is rather limited. In plain English: It can take a long time until one can make money out of an elegant ticker. This is correct only to a certain extent; some brands or models are sold second hand at short notice, and for good prices. But fungibility is an issue. Over the past few years, big German real estate funds have been closed. The investors did not get their money for months. It took even longer for German investors to get their hands on their nest eggs, deposited at the insolvent Icelandic Kaupthing bank. Is anyone advising against real estate funds or savings accounts?

Objection: Watch collecting is connected with high running costs for revisions, insurance, rent for the bank safe, etc. This may be, but these costs are transparent. Some investors are surprised when they add up all the costs of a unit trust – from the issue surcharge to the management fee. And that's not to mention the tax you'll have to pay on the yields. Do you hear anyone recommending that we stop investing in funds?

There's nothing that says you shouldn't put a little bit of your savings into watches. With one exception: Those who have no personal affinity to these mechanical masterpieces should not attempt to speculate with them. A lack of emotional yield would preclude a successful outcome.