Current state of affairs from a prominent NY AD.

[fsprow]

Originally Posted by Golf&Watches

36 million unemployed. I have friends earning high six/seven figures, their jobs are gone, their fixed costs are $40k+ per month, there are tens of thousands like this in NYC, London etc. This has the potential to be depression matching, almost everyone shall be affected (those prospering via taxes). A truly devastating event.

Not “unemployed” in any traditional economic sense. Rather, they were told they could not physically return to work. As states reopen - most, perhaps not all right away, will have $$ coming in again. Hope many folks had some savings to draw on to cover this period. Far from devastating in my view.

[Bosscheto]

Originally Posted by padi56

Have to agree watches or when any manufacturer opens is far down my list of priorities at the moment, myself have been battling cancer for the last 3-4 years.So whats the most important thing for me on the subject of watches,is looking and seeing the time when I wake up in the morning.Now that fact proves I am still alive to face another day,as the most precious thing I have is life, yet it has absolutely no trade-in value not even for watches.

All the best in your treatment sir!

[Xenon]

One million people died worldwide from the Hong Kong Flu pandemic of 1969 yet kids still went to Woodstock and turned out just fine.

[htrap2294]

JcPenny just filed bankruptcy...that's one big name.

[Fleetlord]

As there are some viewpoints that the virus isn’t that bad “medically” and the media coverage is skewed towards fear mongering, there are some contrarian viewpoints on how severe the economic impacts will actually be....essentially it will be LESS than the 2008 financial crisis.

https://www.morningstar.com/articles...2008-recession

We might be seeing that in the bubbles that members of this forum and other luxury lifestylers exist in.

From what I have seen, for the strong brands, Rolex, Patek, AP, RM, there has been little to no impact on valuation or sales of those references.

The “other” brands are in a pickle. Their overproduction and inferior marketing are causing them to drift further away from buyers for who Covid-19 has been a non factor economically. Value retention will play a bigger role than ever as even unaffected people will seek passion assets to “hold” onto. That’s Rolex, not IWC..

To this point, I would not expect the big valuation drops that were seen in Rolex during the 2008 crisis. The demographic directly affected is different this go around. There won’t be any SS Daytona fire sales..etc. Back in 08, they got as low as $4k UNDER retail and it happened quickly.

Unfortunately it is the people who can least afford wage disruption with 40% of people making less than $40k per year currently unemployed. Hopefully, the economic impact contrarians are correct and as the virus is mitigated, that sector of the economy rebounds quickly.

[77T]

As we consider the financial impacts affecting Rolex, and any subsequent impacts to the secondary market, I believe Rolex was positioned differently this time around than back in 2008.

This time around, they had production halted by lockdowns. They won’t increase production numbers so that missing volume is baked into the model.

This should keep secondary values up and AD discounting non-existent (and a big caveat: “should” in the sense of classical economics model).


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[AJMarcus]

Originally Posted by Cossak

Well said, hope you get well soon Peter I enjoy your posts!

X2

Wishing you all the best Peter. Your wisdom and Rolex knowledge keeps us all on a better path.

[Rolexflex]

Originally Posted by Frank McKay

I spoke with an AD in NY yesterday who I have a solid relationship with for many years now. While the boutique(s) may be closed, the inquiries, calls and emails have increased. Those who were previously on the list or inquiring on the hot pieces are under the impression that due to the current economic conditions, the watches may be easier to source right now. AD stated that he doesn’t see anything changing in the near future in terms of wait times. He believes that it will only take longer to acquire sought after pieces. Rolex supply will take a while to ramp up with the closing of the facilities overseas.

This is really interesting man, thanks for sharing

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[timemaestro]

The hot models are still scarce. So??

[ragsk]

Plus people have saved a lot of money over the last two months. Nothing to spend it on!

[GoingPlaces]

The market for hot models is very deep, particularly SS Rolex. Even if a chunk of those on lists fall off there are many other that will replace them. Say an AD has a list 100 deep for a Daytona, even if 50 fall off there is still a list. Zero impact on demand. The grey's pushing the prices will feel a softening but nothing significant. Couple all this with Rolex shutting down production during this crisis and the problem of supply may actually get worse.

Also, there are more millionaires in the world today than there were last year, this trend will likely continue post pandemic. Sure some will fall off due to closing or losing their small business but they will be replaced by newer entrepreneurs.

[RyanO]

Originally Posted by Mystro

Yea, between State College and Williamsport. My wife is a district PostMaster and obviously has not closed any Post Offices. Employees have been working overtime 7 days a week. Many carriers have reported not feeling the best with a few days of fever and flu like symptoms and recovered at home and are now back on the job. Many of these carriers did get tested later and was confirmed of having Covid and recovered. It seems to have moved though her post offices in February. Totally normal attendance now with very few sick leave since April. These carriers were/are at a high risk of exposure and probably why it moved through so fast and early. The internal position is it probably has done this across the country with USPS carriers as well as UPS & FedEx. Aka herd immunity is now a possibility.

I too think many more people have had this, and recovered without serious complications, then expected. My mother works for the postal service, got sick for about a week in February and has been back on the job since, they have been slammed with parcel deliveries due to the surge in online shopping.

[RyanO]

BTW, this pharmaceutical company claims to have found a cure:

https://techcrunch.com/2020/05/15/so...b-experiments/

[az2598]

Originally Posted by RyanO

BTW, this pharmaceutical company claims to have found a cure:

Disinfectant and UV rays also kill coronavirus in-vitro, as pointed out by a very special someone.

[mailman]

Originally Posted by Mystro

Yea, between State College and Williamsport. My wife is a district PostMaster and obviously has not closed any Post Offices. Employees have been working overtime 7 days a week. Many carriers have reported not feeling the best with a few days of fever and flu like symptoms and recovered at home and are now back on the job. Many of these carriers did get tested later and was confirmed of having Covid and recovered. It seems to have moved though her post offices in February. Totally normal attendance now with very few sick leave since April. These carriers were/are at a high risk of exposure and probably why it moved through so fast and early. The internal position is it probably has done this across the country with USPS carriers as well as UPS & FedEx. Aka herd immunity is now a possibility.

Is your wife a POOM?

[Fedpete]

Originally Posted by Bigblu10

I couldn't disagree with you more. I am happy you and your spouse are financially flourishing during these hard times, but tens of millions aren't. It is delusional to think that staying home from a family vacation will equate to spending 10K on a luxury watch. I don't buy that for one second

Lmao. Bigblu10 is 100% right. Welcome to the cognoscenti micro world of the forum.

People are staying home from family vacations because they’re scared shitless for their careers, savings, and future etc.


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[Fedpete]

Originally Posted by superpop

Changes like this do not happen overnight, it takes time. Right now a lot of people in the USA are still hanging on. Give it another 60 days and things will get interesting. Right now most are covered by frozen house payments and other relief. Banks will go from friend to foe once the government isnt looking. All the over leveraged dummies that follow the adage of "I don't pay off anything, I want my money working for me" will be the first to go. As Buffett would say, we will see who is wearing swim trunks when the tide goes out. A lot of these youtube financial gurus who think over leveraging and flipping stuff is a source of sustainable income are going to get their bells rung.

^^

This is dead on.

The “I have my money work for me crowd” or translation, I have no liquidity is about a month away from getting their asses handed to them.


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[Ravel]

Forecasts may tell you a great deal about the forecaster.
- Warren Buffett

[Mystro]

Originally Posted by mailman

Is your wife a POOM?

Wow, you must also be a real USPS employee? I figured with the “mailman” name but no one knows what a POOM is outside the craft and even many carriers don’t know.

[77T]

Originally Posted by Fedpete

People are staying home from family vacations because they’re scared shitless for their careers, savings, and future etc.

And there is a fairly large retired cohort in US that is staying home because the resorts cancelled their reservations.

Baby Boomer Millionaires (at least in their IRA & net worth. About 76 Million BB’s nations wide - 1/3 are in the 7 digit net worth category after their IRA’s recovered from the 2008 financial crisis.

I believe they will be slow to come back into consumer discretionary spending. IRA’s are back down a good bit and Covid-19 is generally scaring them into the trenches.


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[peterpl]

Most the people buying Rolex in the last several years are NOT millionaires. They are many young people pretty much at the beginning of their career or many on minimum wage. Its the age of instagram flex - the oldies wouldnt know much about that. Too many ppl on TRF are closed off in this little forum bubble.

Trust me these days ppl would rather starve, live off 2 min noodles and use toilet paper so rough it scratches your ass when you wipe then not to own a Rolex.

The ppl who are mostly responsible for the flipping, hype etc....have been affected the the recent economic situation. They were mostly guys that really couldnt afford a $10k SS watch but stretched themselves anyway all for the instagram likes and fame. Trying to portray a life they really dont live. Now without a job or good prospects of maintaining their jobs the market has shrunk considerably.

As I said many times the market was already soft in Nov/Dec last year. This has made it even more soft. Pieces are moving but only at very good deal prices. BLROs are not moving at $15.5k or SS Daytona's are not moving at $22k. Asking price vs actual sold price is vastly different.

[L_S_SHOE]

It’s in the best interest of anyone selling a product to make buyers believe that demand is up and that the product is scarce, so any info they’re passing along is automatically unreliable.

I think the world economic fallout from this pandemic will continue for years. Incomes are down and will stay down for a long time. There will be smaller or no bonuses. Many people will remain unemployed. It follows that spending on luxury goods will decrease. The Swiss watch market, including Rolex, will absolutely take a hit.


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[rlx123]

Originally Posted by Bigblu10

I couldn't disagree with you more. I am happy you and your spouse are financially flourishing during these hard times, but tens of millions aren't. It is delusional to think that staying home from a family vacation will equate to spending 10K on a luxury watch. I don't buy that for one second

+1


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[Pimpsy]

USD watch prices (retail) will go up not down. RM is out in front of this and others will probably follow suit soon enough as US inflation sets in.

There will be fire sales and bargins for awhile, but I believe that hot items are going to bounce back quicker than many seem to think. I also think brands like PP will do quite well as they don't require a large volume of ~$10K buyers like Rolex. As a high end brand PP may even do better than ever because, while many will suffer economically, many fortunes will be made as well.

My $.02.

[avidflyer]

Originally Posted by Marcjvr

ADs don’t survive just on selling hot model Rolexes to WIS folk.

They survive selling datejusts, Pm pieces, omegas, Tudors, Tag Heuer, gold/diamond jewelry, etc. to non WIS folk. Those are the vast majority of their customers.

Those customers are drying up fast

say it isn't so.....

[makak]

It's interesting to read the comments around the world about how people are spending money during these times.

A couple of people mentioned would they expect business owners to admit to times being quiet. I recently walked into a local Landrover/Jaguar dealership to look at a trade value to upgrade my car. A local guy up the street from me works in the dealership and he does the prep for delivery of new cars. Late last month, between both dealers, he hadn't prepped a single car. Not a single new car sold. Knowing this I went in to the dealership and the receptionist was horrified. Clearly not coming from a sales background, she greeted me with "wow a customer, we haven't seen one for weeks". The look on the sales managers face was precious as he overheard. Similar experience at the Audi and Porsche dealers. Same stock advertised for the last month.

Flipside is I was talking to the local supermarket manager today and she advised that a typical week is around $130-150K in sales. For the last 2 months she tells me they've been doing over $250K each and every week. One week was over $300K which only happens the week before Christmas. Here in Australia our supermarket shelves haven't been empty of anything for weeks, so it's hardly a stockpiling mentality.

Similarly at electronic stores, people are spending big time to make their work from home/stay at home time more comfortable with new tv's, computers, video games.

From what I can see, people are spending money very differently to 3 months ago, but they are still spending, just not on the big ticket items.

Personally if I got the call from the 2 dealers I've dealt with previously, and have had "expressions of interest" forms in the past 2 years, actually call me, I'd happily tell them to f**k off given the contempt they've shown all their non-whale customers over the past few years. I'd much rather buy from a grey dealer in the US when our dollar eventually improves and we are actually allowed to leave the country again.

Stay well all and lets enjoy what we currently have. The flip side is far worse.

[peterpl]

Originally Posted by makak

A couple of people mentioned would they expect business owners to admit to times being quiet. I recently walked into a local Landrover/Jaguar dealership to look at a trade value to upgrade my car. A local guy up the street from me works in the dealership and he does the prep for delivery of new cars. Late last month, between both dealers, he hadn't prepped a single car. Not a single new car sold. Knowing this I went in to the dealership and the receptionist was horrified. Clearly not coming from a sales background, she greeted me with "wow a customer, we haven't seen one for weeks". The look on the sales managers face was precious as he overheard. Similar experience at the Audi and Porsche dealers. Same stock advertised for the last month.

Funny you using that analogy. One of my best friends whom I grew up with since I was 12 years old is the national sales manager for Toyota/Lexus actually. He said the sales have dropped more than 60%-70% and that's not including the entire time we have been in lock down as the numbers are delayed 1 month.

He has sent home 80% of sales staff. No sales targets are being met at all by anyone and no commissions and bonuses for the foreseeable future.

No one is spending on big ticket items at all. Anything above a few grand the customer base is all dry. The only things flying in sales right now is toilet paper, netflix subscriptions and internet connections.

[Gaijin]

One thing I'd like to add is a regional perspective.

Where I live prior to this situation the famous greys in Tokyo that we have talked about on here before, Housekihoroba, Kame Kichi, Quark, Bic Camera, Jackroad etc were packed with cash carrying Chinese tourists. The stores all had Chinese speaking staff, sometimes several just to handle the huge volume of sales. Prices were high and were maintained by that volume of sales.

Those days are over. Will they ever return? Maybe. The only airport allowing incoming international flights is Narita. Used to be Narita, Haneda, Nagoya, Osaka, Fukuoka and in Okinawa Naha and maybe Sapporo. Now only Narita has incoming international flights. About 10 % of previous volume.

When you arrive ( and I know this because my friend from the States just did ) you are tested. Long swab up the nasal cavity. The people testing you are wearing quasi hazmat suits.

If you are a foreigner you are escorted to a bus and driven to one ( yes one ) hotel. The bus windows are covered with plastic and the operator is wearing protective gear. My buddy believes Japanese self defense force personnel were doing the testing and on the bus. He could not see their uniforms but they were in JSDF boots.

Once there you are placed in a room and you are not allowed to leave for 48 hours. Your meals are announced on a speaker in your room and delivered to your door. 3 times a day. You have no say in what you are given to eat unless you have allergies or are a vegetarian/vegan.

Once that 48 hours are up and your test results returned ( my friend tested negative ) you are allowed to change hotels. Within the area.

However you are not allowed to use public transportation for an additional 12 days. So no flights or bullet train to another city. No local trains, subway or bus use is allowed.

You can rent a car to go to another city but you still must quarantine once there. Renting a car and the tolls involved from say Narita to anywhere far would be pretty darn expensive.

What was driving the grey market prices here and keeping the ADs full of pretty much Datejusts is gone.

In my city today. There were 3 ADs. Now there are two. One closed forever. Of the greys that I know of ( 5 ) three were reopened. They were completely empty.

There used to be busloads of Chinese tourists here. They even had open roof double decker buses that catered to Chinese and Korean tourists. Those are gone.

So I think at least in Japan at least for some time that is not going to change. That influx of buyers are gone. The rest of Asia I can't speak for.

Will the remaining ADs start having some desirable pieces? Unlikely. As usual they will go straight to greys. Will the greys have reality set in and will this translate to price reductions? Yes I think so.

[Jpccarguy]

An impressive spectrum of locations, predictions and speculation.

I was in my AD yesterday, just a few days after they re-opened. The display cases were almost bare, and no offers of anything on my wish list from the safe. Given that US dealers stopped receiving shipments in March, I would be surprised if anyone was able to score a rare piece from an AD.

Just hoping when the shipments start again...

[marc2828]

Originally Posted by Gaijin

One thing I'd like to add is a regional perspective.

Where I live prior to this situation the famous greys in Tokyo that we have talked about on here before, Housekihoroba, Kame Kichi, Quark, Bic Camera, Jackroad etc were packed with cash carrying Chinese tourists. The stores all had Chinese speaking staff, sometimes several just to handle the huge volume of sales. Prices were high and were maintained by that volume of sales.

Those days are over. Will they ever return? Maybe. The only airport allowing incoming international flights is Narita. Used to be Narita, Haneda, Nagoya, Osaka, Fukuoka and in Okinawa Naha and maybe Sapporo. Now only Narita has incoming international flights. About 10 % of previous volume.

When you arrive ( and I know this because my friend from the States just did ) you are tested. Long swab up the nasal cavity. The people testing you are wearing quasi hazmat suits.

If you are a foreigner you are escorted to a bus and driven to one ( yes one ) hotel. The bus windows are covered with plastic and the operator is wearing protective gear. My buddy believes Japanese self defense force personnel were doing the testing and on the bus. He could not see their uniforms but they were in JSDF boots.

Once there you are placed in a room and you are not allowed to leave for 48 hours. Your meals are announced on a speaker in your room and delivered to your door. 3 times a day. You have no say in what you are given to eat unless you have allergies or are a vegetarian/vegan.

Once that 48 hours are up and your test results returned ( my friend tested negative ) you are allowed to change hotels. Within the area.

However you are not allowed to use public transportation for an additional 12 days. So no flights or bullet train to another city. No local trains, subway or bus use is allowed.

You can rent a car to go to another city but you still must quarantine once there. Renting a car and the tolls involved from say Narita to anywhere far would be pretty darn expensive.

What was driving the grey market prices here and keeping the ADs full of pretty much Datejusts is gone.

In my city today. There were 3 ADs. Now there are two. One closed forever. Of the greys that I know of ( 5 ) three were reopened. They were completely empty.

There used to be busloads of Chinese tourists here. They even had open roof double decker buses that catered to Chinese and Korean tourists. Those are gone.

So I think at least in Japan at least for some time that is not going to change. That influx of buyers are gone. The rest of Asia I can't speak for.

Will the remaining ADs start having some desirable pieces? Unlikely. As usual they will go straight to greys. Will the greys have reality set in and will this translate to price reductions? Yes I think so.

Thanks for this information, good to hear other perspectives/locations. I live in NJ, work in NYC. My opinion is the gray dealers on 47th are in trouble. Too much inventory to carry and expensive retail overhead when there is zero foot traffic. They have been closed and when allowed to reopen, there will be no tourists. No Broadway shows, no great NYC restaurants to dine, hotels empty. I would imagine the big urban cities across the world will have the same experience.

In the financial markets, when you have a margin call, you sell what you can. That is why gold and US Treasuries sometimes get hit when they should be rallying. Luxury high end watches are no different. Gray dealers will drop prices dramatically on highly sought after pieces to raise cash to survive. Hoping, praying and waiting is not a business strategy.

Lastly, I had dinner outside my wife's friend's house on Friday night. Her husband is a successful allergist. His business is down 80% during allergy season. The other husband owns a commercial design firm. He said they are doing zero work on existing contracts and nothing in the pipeline. Both have extensive watch collections...AP, Patek, Panerai. I doubt they are buying anything in the near future.