X, Y, Z Generations Choose Rolex — opinion
Russian patriarch Kirill (Photo:REUTERS/Evgenia Novozhenina)
What is the reason?
At the recent Christie's division auction in Hong Kong, a watch called the "Sky Moon Tourbillon," manufactured by the famous Swiss firm Patek Philippe, was sold for a record $5.8 million to an anonymous buyer. This watch embodies all the best Swiss watchmakers have created over the hundreds of years. It's just a perfect piece of watchmaking that deserves to stay in a museum, and it's no wonder that someone paid an arm and a leg for it. But it is interesting that the lesser-known serial products of Swiss masters, used by Rolex, Audemars Piguet, Breguet, and others, which were bright symbols of success in Ukraine, are still in high demand. Someone could assume that something like the iWatch or Garmin, with their multifunctionality, sporty look, and bright straps, should dominate the market of classic expensive mechanical watches. But no! According to BCG, one of the world's largest and most famous consulting companies, the market for expensive pre-owned watches will grow by an average of 10% over the next few years.
According to BCG, that record-breaking auction in Hong Kong was not only attended by some older men who were dying to spend millions on the status symbols of their youth before they died. Instead, half of the buyers were millennials. Moreover, in a survey conducted by consultants, 54% of Generation Z and young Millennials admitted that they willingly invest in watches because it is profitable and straightforward. 50% of respondents plan to increase the volume of such investments in the next two years.
What is the reason?
The explanation for these trends does not lay in the Swiss watches’ functionality. Electronics is out of competition here. Prestige? Perhaps. A well-maintained Rolex manufactured thirty years ago, or even more, on your wrist still indicates success and status. The first iWatch model produced only eight years ago is unlikely to mean the same. But that's not the point either. As it turned out, high-quality watches do not lose value. On the contrary, when inflation reaches double digits, financial markets fall, and legendary banks become bankrupt over a weekend, the wealthy, young and old, feel the need to hide in the quiet haven of safer assets. According to BCG, over the past five years, prices for pre-owned Swiss watches from leading brands have grown by the average 20% per year, while the S&P 500 has only grown by 8%.
Unsurprisingly, such trends are visible not only in the market of expensive watches. The whole class of so-called alternative investments is on the rise. According to BCG, in 2021-22, prices for wine collections grew by an average of 18% per year, women's handbags by 17%, and art pieces by 14%. In the longer term, the advantage of alternative instruments over traditional investments in bonds is not so clear-cut. Still, a Liu Wei, Basquiat, or Kondo, bought at the right time, may have made even better returns than Amazon or Apple shares purchased at the beginning of the millennium.
Where are we, and where is the art and collectibles market? I'm afraid that a Van Gogh cannot be bought in Ukraine, even if there is money. But there are Ukrainian artists whose prices for paintings have increased tenfold over the past decades, and some have outperformed the S&P 500 in terms of profitability. Who knows, after the victory and thanks to such a dream economic recovery, we will witness a new wave of price growth?! And it applies not only to the known and famous ones. Many talented young Ukrainian artists sell their works for very reasonable prices. A Marchuk, Tistol, Kryvolap, Bludov, or Shereshevsky will cost not tens or even thousands of dollars.
Investments in such assets also have certain risks: the market for collectibles could be more liquid, there are no dividends or coupons, and storing works of art and valuable collections is also tricky. The critical skill required for investing in collectibles is experience. You need to be a real expert in art, wines, or watches to generate a high return on your invested money. And even well-known experts do not know everything and can still lose money.
But let me ask: Is it the same case as with securities? Don't you need to be an expert and have experience buying stocks and bonds? Are there investors who do not make mistakes and do not lose money? Of course not. During the last decade of cheap money and crazy growth, which limited the experience of many Ukrainian investors in securities, many people had the illusion that the market is continually growing and it was easy to succeed. Some of those who could not tell the difference between a stock and a bond a few years ago are now advising others "based on their own experience." Although, it must be said that the past year has sobered many of them and forced them to admit that the investment process is not such a simple matter. It's about the point that among the thousands of companies on the market, finding the right Amazon or Microsoft is not easier than finding a new Matis or even a Roitburd in the workshops of an art institute. So why not look for Ukrainian geniuses right now, while the NBU restrictions on investments abroad are in effect and international securities markets are only available for some?
I fully understand that such considerations about alternative investments sound unusual, but let's face it, five years ago, trading on the New York Stock Exchange seemed quite exotic to many. And if you are ready to take a risk investing in Ukrainian real estate, our Eurobonds or OVDP, prospective technology companies at the IPO stage, to choose from various cryptocurrencies or trade derivatives, then why not try collecting? After all, unlike unfinished apartments or some blockchain products that have completely lost their value, a Rolex will sparkle on your hand, a painting by your favorite artist will delight an eye on the wall, and a glass of a good collectible wine will always raise your self-esteem as a successful investor.
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