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Watch Market Update December 27, 2008

by Trent Crowley

As 2008 comes to an end I think most of us quite frankly are glad it's ending. The last 4 months have been quite a ride and have brought many changes to the global collectible watch market and our lives in general. It's been over 5 months since I last wrote and after the September financial crisis I found myself perplexed like most. I certainly didn't want to write another update again until I felt as though I had a handle on what was happening. I am way to pragmatic for my own good sometimes. After spending 29 years in the collectible watch business even I have been moved by the events that have taken place in the last few months. After speaking to many clients and colleagues over the last few months and listening to their concerns I believe it's important for us to gather our thoughts and make decisions that will pay dividends in the years ahead.

Yes, many collectors were trading watches prior to this time but it was certainly during this period that watches had their "coming out" party. The party began with Patek Philippe kicking off their 150th anniversary with their first set of limited edition watches. The Ref 3960 Campaign officers or the Ref 3969 Jump Hour. Both of these immediately demanded premiums over their list price and the frenzy began. Actually this marked the very first Patek Philippe frenzy in history...until then it was "status quo". Now, with Patek introducing limited editions collectors worldwide took note and decided this was a brand worth buying. We all know the 90's produced some of the finest and most collectible timepieces ever produced. The Ref 3970 perpetual chrono was an icon in the 90's and every elitist in the world had to have one. The 3970 is and will always be an icon to the Patek Philippe brand and in my opinion is the one of the best investment's anyone can make in the Patek collectible market....no collection is complete without this model....prices are trading well below where they should be today but offer a great buying opportunity for the long term value collector.

The most classic perpetual ever produced came from the same period. The Ref 3940 perpetual. I guess the fact that the president of Patek Philippe Mr. Philippe Stern wears this watch daily makes the statement that it was probably Patek's finest HOUR when this piece was introduced. Then there's the Ref 5050 which has grown today as the most symmetrical "eye" appealing classic perpetual ever produced by Patek Philippe. I can go on and on with the classic's of the 90's but suffice it to say that this decade represented a period where Patek Philippe became known as the "world's most treasured collectible timepiece".

The new millennium brought about a change that none of us could have ever expected. New watch brands starting popping up everywhere making names for themselves and many of these I cannot pronounce today. One name in particular that has made it's presence known is FP Journe. In my opinion he has enlisted a unique following of collectors and has all the makings of a brand that can compete in the collectible market in the years ahead. Auction results over the last few years have validated this opinion alongside his very limited production.

Patek Philippe continued to execute it's brand to the elite collector demanding premiums on almost the entire line of production. We saw production of the 5970 and 5070 become two of the most sought after Patek collectibles ever produced. From the moment this Lemania based movement was born it was a huge success. It had all the right ingredients.... a sporty looking wristwatch and classic design with larger case. The market in general had been moving to larger cases since the late 90's and this model while keeping it's classic dial and movement moved into a larger case. This movement is the exact same movement as the 3970 except a larger case. I do believe we have reached a limit in size with the 42mm case size. We all know that technical movements are much more demanding in smaller cases than larger ones so I would think we've reached a peak in terms of case size for now especially in the grand complications. I believe the Sky Moon Ref 5002 represents the largest case size of any Patek Philippe wristwatch ever produced and very likely could be for a long time to come. I do believe this watch is a great investment today for the long term collector who wants to put one away for the next generation. It certainly represents the ultimate craftsmanship of Patek Philippe even though they produced more than they stated in their original press release back in 2001.

Anytime you have collectors and speculators dabbling in the same market you already know the market is peaking and start looking for the downturn. Actually I have been looking for this current downturn for some time now. Prices had spiked across the board to levels that seemed to be out of line especially in current production models . Two collectible sectors that seemed to be overrun with speculators were vintage Rolex and modern Patek Philippe. As my friend Warren Buffett says " be fearful when others are greedy and greedy when others are fearful". I was certainly fearful the vintage Rolex market would tumble and when it did I was not surprised. Honestly none of us could have predicted the Sept 08 financial crisis that resulted in changes to our financial system that are still not fully understood and will probably be some time before we get a handle on the long term repercussions. Again after being in the market since 1980 and thinking I had seen it all only reminds me of one thing. " I have not seen it all ".

Where do we go from here is the biggest question I am asked on a daily basis. I get calls and emails from many of you asking me where do we park our money in this kind of economic climate. Here's my answer and I will be as brief as possible (which all of you know is seemingly impossible).Today you must look to discontinued modern and vintage Patek Philippe models for safe harbor in these challenging times. I have been very impressed with values on the 5070's,5970's and 5004's. All of these are now discontinued in most metals and have done very well in this downturn. Most collectors continue to seek these out for their collections and I like most of you believe the production numbers are low enough that these will rise significantly whenever we get a solid economic rebound.

All in all you could not find a better time to make significant investments in the collectible watch market. We have not seen opportunities like we are seeing today in over 19 years. Buying Patek Philippe wristwatches is one of the best hedges you can make in this new global market. I have been saying for some time that collecting is like running a marathon and not a sprint. For those of you today with good liquidity and don't want to venture into the abyss of the global stock markets then you will not find a better opportunity than now to go forward with collecting high end discontinued and vintage timepieces.