I'm a Bear, and Not Just Because I'm Big and Cuddly

I see huge overvaluation everywhere -- yes, even now, after the markets have fallen somewhat. Here are just a few examples: 

I believe that EV stocks, even after the crash so far, are greatly overvalued. The only way that TSLA was worth a trillion dollars is if you bought the dream that Tesla was going to dominate the worldwide automotive industry. At half a trillion or even 200 billion, it would still be ridiculously overvalued. 

 OEM's are transitioning to EV's, they always planned to do so, which means that the narrative about Tesla being unique and disruptive has always been fiction. 

I love EV's. I think the OEM's will make great EV's. 

Turning from EV stocks to cryptocurrency, we're going from overvalued assets, to assets which are very nearly literally worthless. Blockchain technology has a lot of applications. REAL applications. Encryption, managing smart grids, etc. It should be valued based on reality. 

EV's, cryptocurrency, wristwatches, automobiles in general, real estate -- there's an awful lot of things which are still hugely overvalued. I don't know where the rational bottom of this market is, but we're still far above it. 

Having said all of that: of course, the value of securities never needs to be rational. It could be that I'm being grossly irrational by emphasizing rational valuations. All I know for sure is nobody knows where the market will go, and nobody ever knows. Some of us sometimes guess well. That's the most anybody can hope for.

Should I Buy A Rolex as an Investment?

No! You should not buy any watches as investments. Watches are not a sound investment. Real estate and mutual funds are. The only sensible reason to buy a watch is because you want to have that watch. This is especially important if it's going to be the only watch you own, or if you're going to wear it almost every day. If there's something on your wrist between 8 and 24 hours a day which makes you happy every time you look at it, that's a very significant thing. Some people like very light watches, so light that you can barely feel it there on your wrist; some people, like me, go completely the other way, and think that heavier is better. The watch you wear should give YOU pleasure. If you got a certain watch because certain other people like it, but it's not the kind that YOU like, well, then, in my opinion, that's just sad. Life's too short to go around trying to impress air-headed fashion-mongers.

(I should certainly hope that it goes without saying that if you don't care about watches at all, the most sensible thing would be not to wear a watch, and to read things like this post because my writing style is gorgeous.)

True, Rolex tends to hold its value better than other brands, but that's only because of the Rolex snobs and the lack of knowledge about other brands. It was not so long ago that, if you asked many people in the US to name luxury watch brands, they'd say, "Rolex..." and then go completely blank. That's beginning to change.

Rolex makes fine watches, there's nothing at all wrong with them, but as the watch-buying public becomes better informed about Patek Philippe, Vacheron Constantin, Audemars Piguet, Jaeger-LeCoultre, A Laenge & Soehne, Omega, Breguet, MB&F, URWERK, Ulysse Nardin, IWC, Chopard, Blancpain, Panerai, Grand Seiko, Piaget, Girard Perregaux and the other high-quality brands which have been there all along, then most likely Rolex watches will no longer be unique in the way they hold their market value over time.

But there's no guarantee about that, either. Watch prices, like the prices of any other luxury goods, have to do above all with the psychology of the people who buy them. People's attitudes about watches, and the inherent quality of those watches, are two separate things.

If you listen to people who say that watches are a good investment, you're likely to hear some irrational statements. Like saying that some watches are "worth what I paid for them," when someone paid $5000 for a watch in 1960 which is worth $5000 today. (If he had spent that $5000 on a house in 1960, depending on its location, he might be able to rent it for 3 months for $5000 today.) Or that "some Rolex watches have risen spectacularly in value over time," ignoring the way that other Rolex watches have not. Not to mention the way that some non-Rolex models have risen spectacularly in value over time.

Still -- to repeat what I said above -- if you really, really want a Rolex, if wearing one makes you happy, and you can afford one -- buy it! Buy it, wear it and let it make you happy! Even if you're surrounded by non-Rolex snobs who wear Pateks or AP's and sneer at your Rolex. Screw them!

There probably are a few people out there who actually can make a living by buying and selling old watches. But they're about as rare as people who can make a good living playing poker. And, unfortunately, like the poker players, the watch dealers often depend on meeting a lot of suckers who think they're good at the game, when they're not.

Beware of People Telling You Watches Are a Good Investment

For example, Shreve & Co:

"For some, watches are purely functional. You look at them, the time is more-or-less correct, and you tuck it back under your sleeve."

That was 50 years ago. Today, those people don't have watches at all. If they need to know the time they look at their phones.

They go on to tell you that, judging from current auction activity, a high-quality watch, a watch which is much more than a timekeeper, could rise in value 30 to 40% over 10 years.

30 to 40% in 10 years, as a best-case scenario, is not a great investment. There are mutual funds that will just about guarantee that sort of return as a worst-case scenario.

Real estate is an investment. But fewer people care about watches than they did decades ago, whether as a purely functional timekeeper, or a neat gadget which is fun to have, or as a hand-crafted luxury item which is a thing of beauty, or any which way. And there's no indication that that trend is about to reverse, and that in the future more people will wear and/or collect watches. Fewer people being interested in watches in any way means fewer customers competing to buy them, which means that their prices are more liable to go down as they age, than up. And that's as true for a luxury watch you buy today, as for a cheap piece of junk.

You can rack your brains and study and study, and maybe you'll end up buying one of those watches which will rise 30 or 40% in the next 10 years. Or you can make a no-brainer decision on a mutual fund and beat 40% easy. Or you could buy a building or some land, take a risk and maybe some upkeep headaches as well, but there's a very good chance that you could clean up.

The only good reason to buy a watch is the voice in your headache that keeps screaming that you have to have it. Don't have such a voice in your head? Then don't let someone tell you watches are a good investment. If you do love watches, you should get the one you love -- not the one someone tells you is a good investment, and also not the one that someone else, who you're afraid is much cooler than you, tells you is the coolest one, but the one which you like the best.

Now, it's possible that your family have been manufacturing and selling fine watches for over 300 years, and that you know far more about watches than I could ever learn in 20 lifetimes, and that, besides watches themselves, knowledge of watch markets and booms and busts in those markets, and knowledge of the psychology of watch buyers, is in your very DNA. If all of that is true of you, then for you, quite possibly, watches, which you buy and hold onto for years or decades because you know their prices will skyrocket, could be a good investment. But if you're that person, you certainly didn't need the likes of me to tell you that for most people, a plan to amass wealth by buying Rolexes and Patek Phillippes, or antique watches of one brand or another, is just plain silly.