As 2022 draws to a close, I figured that a good way for myself and D-Timepieces to sign off the year would be to pen down some thoughts on one of the most volatile years for both the watch and financial markets in recent memory. To everyone who has taken the time to read this, I’m grateful to you for stopping by and to everyone that I have done business with this year, know that your support has come a long way.

*A pair of memorable skeletons that passed through*

On Modern Watches

It’s no secret that the watch market has experienced a dislocation, particularly after Q1 of 2022. Prices have corrected and deservedly so, with some more significant than others such as the modern sports models. At time of posting, these have seen a correction of 20% (or more) since their heydays at the start of 2022 with more price weakness expected in 2023. Yet not all is doom and gloom. The newfound interest in horology has also brought in a large number of new collectors, whether for monetary reasons or otherwise, all of which aren’t necessarily mutually exclusive. This, among other things, drove the demand of watches to heights that we haven’t seen before until the recent correction.

To understand the correction, one must first understand the boom, which came during a perfect storm of macroeconomic events. Fiscal stimulus coupled with lack of avenues for expenditure drove not just the watch market but also the stock market to record highs until they both concurrently corrected. The cryptocurrency boom and mainstream news (and influencers) promoting watches as investible assets drove the market to record highs, which was understandable given that watches are the most tangible asset and hence, the most attractive. After all, cars and real estate are not particularly portable and stock portfolios can’t be worn on the wrist.

Modern watches also enjoyed a run up in prices due to the lack of supply, or rather, lack of immediate gratification caused by supply chain disruptions, or in some cases, artificial scarcity in the form of waitlists. Bear in mind that this phenomenon also included watches from brands that have never traded over retail. As the supply chain regularises with buyers more willing to wait due to economic uncertainty, I expect the prices of modern offerings outside the big 3 (Rolex, Patek Philippe and Audemars Piguet) to drop below discounted retail, where they were before the pandemic. Of course, there's Richard Mille but that's not a space that I can give an informed opinion on. And while the sports watches from the aforementioned trio will continue trading over retail as their list prices are largely irrelevant, I foresee both the grey market prices falling and the retail prices increasing to form a convergence towards a smaller differential.

On Vintage, Neo-Vintage and Independents

The aforementioned price volatility can’t be said of vintage watches, which experienced its own renaissance earlier in a different cycle. Adam Golden, vintage specialist and owner of Menta Watches, knows more than most given that he's been through several of such cycles. “While the modern market has seen a major correction, especially for the watches still in production, vintage has remained a lot more stable,” he explains. Amidst the swings in prices of modern watches, vintage has held relatively steady, with some rare and important references breaking new records in the most recent auction season. Even for vintage watches that are iconic but fairly common such as vintage Rolex Day-Dates, the deviance in prices from the year prior remain within a small margin and is fairly predictable. My expectation is that this stability will remain for the foreseeable future, with more records being set at auctions as greater examples come to light.

The argument for vintage has always been that these watches are no longer produced and hence, supply is finite. This point, however, only holds true to a certain extent as we’ve seen vintage have their own trends and price fluctuations, such as the Heuer craze a few years ago. Yet with less appreciation rightfully comes less correction and in a market like this, stability is key and vintage pieces have proven to be the true “blue chips” in this cycle.

What the recent market dislocation has also shown is that vintage watches will continuously be sought after regardless of cycles since each carries a different history and no two examples are identical. From there, the prices increase exponentially depending on condition, provenance and rarity. This point is succinctly captured by Adam. “With vintage, the price of a watch depends on the condition, how rare it is, as well as other factors,” he says. “No two vintage watches are equal, which tends to allow for more stability, and not just who has the cheapest example on Chrono24.” The same cannot be said of modern watches which have little to no variance besides accessories.

Other less hype but no less popular watches were also affected, with brands such as A Lange & Sohne and Cartier seeing a dip in both auctions and actual transacted pricing. Same goes for the ones from the neo-vintage era - a group of watches between vintage and modern that exploded in popularity and price. Perhaps it was a spillover effect from modern pieces becoming unattainable or an increase in horological awareness and interest. Either way, as they say, any publicity is good publicity.

That being said, neo-vintage is on the rise for good reason. One must remember that these references were produced during a period when many Swiss brands were in transition just after the Quartz crisis with innovation being key to survival. Fuelled by a necessity to remain relevant, this is the period that oversaw production of several seminal movements and references where brands were also being highly experimental with both movements and designs. It is also especially notable that we see so many modern re-issues of watches from this time period.

Ben Dunn, founder of UK-based neo-vintage specialist Watch Brothers London, is hopeful on the staying power of neo-vintage and sees further opportunities for growth. “I think 2023 will see more and more collectors enter the neo vintage space and I really hope for the right reasons,” he says, “There is huge potential for a more diverse collecting landscape, full of passion and enthusiasm, to discover and to learn. Add to this inclusive scholarship and I can see a very healthy and rewarding community continue to grow around this space.” He has a good point. Neo-vintage forces the collector to at least learn about the watch or the brand and some of the relevant history. Unlike modern watches where information is well-catalogued, heavily-serialized and easily accessible, most neo-vintage pieces require some form of selective study to both understand the reference and decide which piece belongs in which collection. Ben himself has contributed a fair share in collecting, collating and sharing information on important references from the era.

Neo-vintage also falls within a sweet spot for many collectors since modern watches are less storied while vintage is, to put it lightly, a minefield for the uninitiated. They are old enough to have meaning and modern enough for daily wear. Anthony Traina, current editor at Hodinkee and founder of the popular Rescapement newsletter, echoes that view. “I'm excited about all of the stuff I've learned and discovered from this era, and that's been driven by collectors and dealers digging deeper into this space,” he says. Like many others, Anthony was drawn in by Cartier’s Collection Privee. “Appreciation for this era is growing so much deeper and I'm excited to see what the next year holds,” he concludes. Depth, as he mentioned, is key. One thing I noticed during the recent resurgence was a lack of buyer differentiation between watches with varying degrees of collectibility due to an overemphasis on the period itself. Hence, my 2023 prediction is for neo-vintage to remain in demand but with a greater level of overall awareness as to what is collectible or otherwise. I also expect the earlier or lesser-produced references to display greater upward divergence in pricing. After all, as we draw nearer to the next decade, these are the watches that will slowly but surely become vintage.

The category of watches seemingly immune to the correction are the independents. The increase in awareness of mainstream watches inevitably leads to collectors striving for something different. With independents, it is a highly personal timepiece, almost like receiving a part of the watchmaker’s essence. Sean Song, founder of S.Song Watches, believes that the independents will grow from strength to strength in 2023. “Independents will continue to do well and sell in 2023 as they are mostly bought by collectors rather than speculators,” he says. As most independents produce only a handful of watches a year with all accounted for in advance, collectors tend to keep their independents when they finally get allocation. Furthermore, the number of such watches both produced and in circulation is so small that they enjoy a multiplier effect - a small increase in demand leads to an exponential increase in prices. As Sean mentions, “the most important thing is that there will be continued interest in this space, it is only just the beginning for independents”.

With all that said, there are caveats to the independent market. This has also been noticed by Sean, who says “I still do expect relative price corrections on more popular and less rare indies that saw big increases in 2021/2022.” Personally, I have started seeing independents such as De Bethune and F.P Journe offered at a wholesale level that I’ve not seen for a couple of years as well as weaker auction results since the turn in market sentiment. I also expect that current production models with open waitlists will no longer trade above retail due to consumers tightening their wallets and a reduced need for immediate gratification. In terms of limited editions where overdoing it can seem gimmicky, the manufacturer and collaborators will be more crucial than ever. I suspect brands will be also much more selective going forward with regards to who they decide to work with since not all limited editions are made equal. As popular as they are now, independents do not have the scale of production like the conglomerates and any slowdown in demand or shift in trends could severely hamper their growth.

Are the corrections in these “non-hype” watches warranted? Maybe not but lest we forget, these “other” watches too enjoyed a boom from the rise in market prices and rightfully moves tangentially on the way down. After all, with other markets such as stocks and properties experiencing price volatilities of their own, it’s not possible that the luxury market will be spared. Anyone who says otherwise is either in denial, lying or has no clue about how the financial ecosystem functions.

On Supply and Demand

From a business perspective, demand has clearly fallen while supply has increased with dealers moving product at losses for cashflow. Over the past two years, the price boom has led many to become complacent with buying and the recent correction is a valuable reminder that what goes up must come down - even if it takes awhile. Dealers moving product at lower prices will have an effect first at a wholesale level, then at a consumer level given that the wholesale ecosystem takes up a large fraction of the grey market. As with any other traded commodity, it is a simple issue of supply and demand that has caused price decline. With this huge bull cycle seemingly coming to an end, it remains to be seen when the next one is and my guess is not for a long while.

Even at a wholesale level, fewer dealers are willing to pay well to stock watches since they require substantial margin for fear that the market corrects further. Because of this, collectors are less likely to liquidate except those in urgent need (and in my humble opinion, really shouldn’t spend more than they can afford on watches), and with that, watches from end users are less likely to come to market, in turn leading to lower supply in circulation. When the dust blows over, I believe that this cycle will lead us to new equilibrium at more palatable price levels - even more so than today since finding a new equilibrium takes time.

For some context in numbers, a perfect encapsulation of this would be the Cartier Tank Basculante reference 2390, which I first sold in 2020 for $5000 and a year later, for double the price which even I found to be unsustainable. I’m glad to see that it has reached somewhat of an equilibrium at the $7500 mark with more supply coming to the market and rightfully so, since the 2390 is by no means a rare watch but unique enough to warrant a certain market value.

*The once-elusive but never rare Cartier Tank Basculante 2390*

On Auctions

The auction market paints a decidedly different picture from the grey market - one that is far less bleak. With records being set and white-glove sales achieved in the most recent season, one will hardly believe that there was any correction at all if the results are viewed without careful scrutiny. Truthfully, there's always more than what meets the eye when it comes to auction results. A great piece on SJX Watches sums up the most recent auction season - a season where the volume of sales seemingly never slowed down but were achieved through a disproportionately small group of buyers which included brand representatives and secondary dealers possibly taking advantage of the lower prices. This takes nothing away from the actual results however, as the overall buying sentiment at auctions remains strong, especially for the rare and the desirable.

While auction houses more than justify their premium for certain exclusive pieces, I've seen a convergence in pricing for more common watches and expect this to continue. Traditionally, auction results have not been the best indicator of watch prices (especially the heavily-traded ones) since we operate on different spectrums of the same plane. After all, does it really matter if a stainless steel Daytona comes from an auction house or a reputable secondary dealer at 25% less? And if the watch is widely available at a certain price point substantially below what it achieves at auction, is that truly the market price? For the more common pieces, the days of selling them at a huge premium over the grey market appears to have passed and justifiably so. For the upcoming auction season, I expect the gap in prices for these pieces to be even narrower than before and for the results to be a better reflection of the market.

For a better gauge of market prices, one can turn to online auctioneers Loupe This. Having a fixed $500 sellers’ fee and most importantly, no reserve regardless of estimate, allows them to foretell market trends in both directions as the first point of public information. This all culminated in the highest ever price seen at auction for a no-reserve Cartier London Crash without any of the theatrics traditionally associated with auctions - the ultimate proof of concept that the desirability (or otherwise) of a watch will be reflected in the price if left to the free market with no strings attached. While traditional auction houses have always taken advantage of this principle with low estimates, having no reserve and being non-seasonal ensures that their results accurately reflect the market in a time-sensitive manner.

*A military special RaSP Tudor Black Bay whose counterpart fetched GBP 44,000 at Sotheby’s.*

On Buyers, Sellers and Investments

After saying all of that, where does this leave buyers and sellers? From a seller’s perspective, watches are selling at a lower volume with thinner margins, especially with the large number of dealers that popped up during the recent bull run leading to more competition. Since most of them sell the same type of watches, I believe that they will slowly be weeded out if market sentiment stays weak. A buyer’s market with razor-thin price differences can only bode bad things for sellers unless they have access to infinite capital, which has become harder and more expensive.

For buyers, the correction is truly a blessing in my opinion. True value can be found at lower market prices, though value is subjective to every individual. A good illustration of this is the Audemars Piguet Quantieme Perpetual reference 25657. These can now be found if one looks hard enough for as low as $12000, the same price as some modern Rolex Datejusts. It is, in my opinion, a truly important reference that more than justifies its price at today’s levels. In a market like this, there is a fair share of similarly undervalued references if one knows where to look.

*No longer underappreciated - the Audemars Piguet Quantieme Perpetual 25657*

The problem with a correction in any market is that most casual buyers will play the waiting game as they expect prices to fall further. Lest we forget, the boom and correction came without warning and buyers who were waiting for prices to drop always have a new price floor once the actual correction begins. The best collectors are disciplined both ways, not only in a rising market and the ones without conviction will miss out regardless of market conditions. After all, no one has a crystal ball to predict the market and there really isn't a “right” time to buy. The best time was probably before the advent of social media which has long passed.

Finally, as I’ve said many times before, watches should never be looked at as an investment nor should it be bought with non-disposable income. The idea of watches as investments were propagated by mainstream media and certain dealers - the same ones who were calling the John Mayer Daytona “the safest place to put your money” at 100k. I would urge anyone who bought from these dealers to try to sell back and see if any profits can be realized. At best, watches when bought well have limited depreciation but to net a profit in the future would truly be a bonus. To buy a Daytona at retail and sell it on for a profit the next day is not a sign of a wise investor but a lucky one. Not to mention the unrealized losses from any form of required bundling. With that said, two things can be true. A watch can be an asset with instrinsic value and not an investment with expected return. But if the price volatility of your watches is causing you to lose sleep, you’re basically a speculator with too much invested in something too illiquid.

Parting Thoughts

Due to the weaker market, I’m pleased to share that I’ve been able to acquire inventory (albeit more selectively) at much better price points which I deem appealing to my specific clientele with an expectation that they may take longer to sell. The aim is to continue offering interesting and unique watches with the belief that watches sell themselves as long as the consumer is educated and empowered enough to make their own decisions. It is inevitable that watches have become commodities but I truly feel that they can become such without any loss of the love for horology.

As a watch enthusiast first and foremost, I choose to sell what excites me and with that, I’ve been fortunate enough to surround myself with buyers turned friends who share similar tastes and interests as the inventory aligns with my vision of the shop. Ultimately, I’m glad that I chose a different approach in curating the selection for my shop since this is a natural filter for the collectors that I'm fortunate enough to encounter. Indeed, some of the most memorable sales this year were not based on value but from the people they were sold to. As we leave the year and hopefully the uncertainties behind, I wish everyone a happy, healthy and better 2023.