Funny watch stories from my everyday life that are most certainly not factual
(Disclaimer: Nothing in this tale should be considered financial advice or even factual. As far as anyone ought to be concerned, this is the product of my fevered, COVID addled imagination.)
For the past decade, I've run a (very) modestly successful investment fund here in the Bay Area. I started out managing money for foundations and university endowments but more recently our business mix has evolved more towards sophisticated private clients.
As such, while I myself live a comfortable and unexceptional life, I often have rather financially intimate conversations with people who are substantially wealthier than I am, people with watches that even @JaeBust might covet. (j/k of course, no one has collection better than @JaeBust's). And sometimes the stories from those interactions are very funny.
Just a couple of days ago, on a quarterly check in over Zoom, I noticed that one of my clients was a looking a little down. We'll call him Steve-O.
We've managed Steve-O's money for just about two years now (and done quite well if I might talk my own book) and I've known him, through our interactions, to be a thoughtful business person and sharp investor and great overall person.
Being the empathetic sort of guy that I am, I asked him if anything was wrong.
"Edge168n, I have a problem."
There's nothing that strikes the heart of a terminally insecure person like myself more than someone you like and trust telling you that they have a problem. Could it be me? Did we screw up the relationship somewhere? Was he dissatisfied with the (excellent) performance?
And then, Steve-O relayed a story of woe so ludicrous that I couldn't help but share it. I have checked in with him to see if he would mind me sharing this story (he's fine with it as long as his name isn't involved) but obviously most of the details are completely anonymized (if this story were even true to begin with. Reference the disclaimer).
You see, Steve-O is a somewhat recently extremely wealthy individual due to the recent sale of his businessand we had been instrumental to executing his investment diversification strategy post the sale event.
Knowing my interest in watches, he asked my opinion on the state of the watch market, given some investments he's made.
My mind flashed back to Q3 2020, when he proudly exclaimed that he was making his first foray into alternative investments: an investment in my fund and some "appreciating assets" with his nephew, whom he considered like a son (henceforth referred to as Steve-O Jr).
In line with many of the conversations we've been having here on WatchCrunch, I noted that there did seem to be a bit of a bubble and that I personally was holding off on buying any depreciating assets in the meantime until financial markets recovered. All of my excess money was going directly into the stock market and co-invested beside my partners.
Steve-O then told me about the "appreciating assets" Steve-O Jr was buying.
A small aside. My fund is about as vanilla as an alternative investment gets. Anyone who happens to study Warren Buffett knows precisely what we do. We find great companies that spit out tons of cash, buy them and wait. On the scale of get-rich-quick to keep-you-rich, we index extremely heavily towards the latter. We invest boring and like keep it that way.
Steve-O Jr.'s scheme....not so much. You see, Junior's strategy was to give the money to a grey market dealer he knew to buy Rolex Daytonas and hold them until appreciation and sale. And in the mean-time, he also wore them. Sometimes he Schwarzkopfed them.
Steve-O, a watch wearer but not collector, asked me what I thought of that.
Trying to be even handed, I told him that while I thought the Daytona was a great watch, I did feel as though it was a speculative asset class at best and it really did matter the exact price he bought them for. Condition would also matter a lot (flawless box and paper models would go for a premium to used models).
Steve-O, then dropped the bomb that I'll be thinking about for months. His nephew had purchased 26 used steel ceramic daytonas (116500s, 2020-2022 model years) for just around $1.1M (or $42K a piece) of his uncle's money. Steve-O had been reading the news on the crypto collapse and its impact on Rolex valuations and Junior had gone oddly radio silent on the matter. He openly wondered whether or not he should be concerned.
"Well, Steve-O, I don't really have great news to give you. Yes, the listings on Chrono24 suggest you might not be too far in the red on these watches, but the problem is that the prices 1) don't reflect actual transactions, 2) represent stale pricing anyway.
If you ended up dumping 26 Daytonas on Chrono24, I think the actual transacted price could be anywhere from 7-12K lower than you paid for, especially if you wanted to exit them quickly. I'm pretty sure dealer pricing for block sales like that is going to be even lower."
Rolex Daytona 116500LN pricing. Whoops.
"Oh. Well that's not so good is it? Junior and I are going to need to have a chat about restructuring our investment."
*click*
I haven't heard anything since and I can only imagine the uncomfortable conversations that have been had since then.
So, ladies and gentlemen, there you have it, evidence of a speculative bubble bursting. If I could draw any lessons from this sorry episode, it would be the following.
1. Evaluate your investment advisors well. Try not to hire family, especially when investing in esoteric assets.
2. Don't invest in watches. Seriously.
If this is anything close to representative of outside investors at grey market dealers, I suspect there's going to be some real opportunities in hype watch models in the near term.
Now if I could just convince him to part with a Daytona at retail.....
By day, investor and father. By night, Seiko nut. #justgooutsideandtouchgrass
This is precisely why I only invest in top grade assets, like...
I love a feelgood story like this.
Nice and interesting story, @Edge168n. I genuinely feel for your client. By the way, I have only shown about one-tenth of my collection, and no, they are not an investment, just a part of my discretionary income! 😉😊
Okay, in all seriousness, this sort of behavior is just absolutely baffling to me.
So, I don't know what to conclude. Maybe the key insight is that "the world is a complicated place, and our brains simply aren't designed to properly get at epistemic truth, and the best we can do is to be 'less wrong' than we were yesterday."
But, I'm waiting for the pain to really, really hit. Hopefully, the market gets flooded with Daytonas, and then everyone spends all their money getting their "grail" Rolexes, meaning there's no money to spend on GS. And then... I get my SLGA015 for 40% of MSRP!
Nice and interesting story, @Edge168n. I genuinely feel for your client. By the way, I have only shown about one-tenth of my collection, and no, they are not an investment, just a part of my discretionary income! 😉😊
I knew you were holding out on us!✨😊
In all seriousness, I have been having these types of conversations more and more with partners. This one was watch related but I've had others on crypto, crazy real estate deals....I think this is the long hangover from years of excess.
This story made me smile. My wife and children will tell you that I don't do sympathy and in this case they would be spot on.
My watch collecting ambitions are so far removed from all this high end investment and flipping world as to be in a seperate universe.
A great post none the less and one of the many reasons I love watchcrunch and its members!
I knew you were holding out on us!✨😊
In all seriousness, I have been having these types of conversations more and more with partners. This one was watch related but I've had others on crypto, crazy real estate deals....I think this is the long hangover from years of excess.
There is definitely a lesson somewhere in your story! I just can't put my finger on it, so I might as well put my foot in it! 🤷🏽♂️🤪
Okay, in all seriousness, this sort of behavior is just absolutely baffling to me.
So, I don't know what to conclude. Maybe the key insight is that "the world is a complicated place, and our brains simply aren't designed to properly get at epistemic truth, and the best we can do is to be 'less wrong' than we were yesterday."
But, I'm waiting for the pain to really, really hit. Hopefully, the market gets flooded with Daytonas, and then everyone spends all their money getting their "grail" Rolexes, meaning there's no money to spend on GS. And then... I get my SLGA015 for 40% of MSRP!
Galaxy brain moves!
42k a piece?! Ouch.
I too am fortunate enough to work with people with a lot of money. As you know @Edge168n just because one does very well in their profession, does not always make them fiscally wise and often times they are preyed upon by friends and family members for get rich quick schemes.
One should not invest in watches. If they want to treat it as a speculative investment with expendable cash, have at it, but starting with greys is always a suspect way to start.
All that said, if one can get certain pieces at retail, it’s a solid place to park expendable cash. I have a hard time turning down sport Rolexes at MSRP all the time, but ultimately, I’m not a flipper nor am I speculating, which I imagine which helps me to get regular calls with watches.
🙃 pʅɹoʍ ǝɥʇ ǝǝs ǝʅdoǝd ǝɯos ʎɐʍ ǝɥꓕ
Ouch! I always wanted a rich uncle to give me $1.1M to invest in assets that I certainly appreciate. Is he looking to adopt? Did you turn him onto watchcharts.com? The unrealized loss he's looking at right now is the very definition of a bear market.
There is definitely a lesson somewhere in your story! I just can't put my finger on it, so I might as well put my foot in it! 🤷🏽♂️🤪
I think the lesson is the simple and painful one. If you're going to subsidize your family's hobby, don't pretend its an investment.
At Steve-O's net worth, it's not the spending or gifts that's going to get him into trouble. It's pretending that buying his nephew 26 Daytonas is anything but subsidizing a hobby.
You've actually inspired me to follow up with him. I think there's probably some more framing conversations that need to be had.
Steve-O jr better hope that Rolex discontinues the 116500LN next year to introduce a new steel Daytona for the model's 60th Anniversary.
42k a piece?! Ouch.
This is the most mystifying part of it. He basically bought dealer size lots of Daytonas at retail prices (and top ticked retail prices). It's raised some suspicions frankly.
How long its gonna take you to put those together? or you already did?
Put them together? Good lord man, they’re an investment!
Ha! Yeah, my family is annoying. Like, if you spend 2 hours hanging out with them, the entire next week you'll be muttering angrily to yourself, replaying every conversation, arguing with them in your head. But, we don't try to steal money from one another.
We do emotional damage to one another, not financial.
Who gives somebody $1.1M to invest without getting a business case? WTF
Trust but verify as the greatest President of the USA once said.
But we see this all the time don't we...Bernie Madoff...Allen Stanford...Enron...1MDB...WorldCom...Satyam...I could keep going. How did smart people get fooled by these scams? They wanted to believe them despite the countervailing factual information.
I guess we should remember that old saw of "If it looks like too good of a deal...it is"
To be perfectly honest, the underlying principle of an appreciating asset is inherently sound. The key point however is that you need to exit before the music stops, and preferably do so very quietly.
Who gives somebody $1.1M to invest without getting a business case? WTF
Trust but verify as the greatest President of the USA once said.
But we see this all the time don't we...Bernie Madoff...Allen Stanford...Enron...1MDB...WorldCom...Satyam...I could keep going. How did smart people get fooled by these scams? They wanted to believe them despite the countervailing factual information.
I guess we should remember that old saw of "If it looks like too good of a deal...it is"
I think there's a simple answer. People use social proof to make decisions, even ones that involve millions of dollars.
Sometimes that works pretty well. If your sister or best friend comes to you and says that their plumber/attorney/accountant/etc is awesome and that you should hire them should you need one, you're probably going to shortcut the diligence.
Sometimes it works poorly when said it's a nephew who thinks that liking watches makes him a big time watch investor and you mistake his enthusiasm for, you know, competence.
I don't even think it's a sophistication problem. A not insignificant portion of our own clients are actual professional investors (private equity fund GPs, CIOs of family offices, hedge funders) and even they came to us by word of mouth from folks they trusted (I'd like to think because we did great for them too). Even people who know better probably don't verify quite to the same level with personal stuff.
There's some deep seated human nature stuff you're running up against that's hard to shake because it actually works a lot of the time.
And when it doesn't.....40% loss I guess.
To be perfectly honest, the underlying principle of an appreciating asset is inherently sound. The key point however is that you need to exit before the music stops, and preferably do so very quietly.
Ever watch Margin Call?
https://youtu.be/UOYi4NzxlhE
Ever watch Margin Call?
https://youtu.be/UOYi4NzxlhE
Oh, that is a great one, and so relatable. I've literally turned off the lights at a place I used to work at.
I think there's a simple answer. People use social proof to make decisions, even ones that involve millions of dollars.
Sometimes that works pretty well. If your sister or best friend comes to you and says that their plumber/attorney/accountant/etc is awesome and that you should hire them should you need one, you're probably going to shortcut the diligence.
Sometimes it works poorly when said it's a nephew who thinks that liking watches makes him a big time watch investor and you mistake his enthusiasm for, you know, competence.
I don't even think it's a sophistication problem. A not insignificant portion of our own clients are actual professional investors (private equity fund GPs, CIOs of family offices, hedge funders) and even they came to us by word of mouth from folks they trusted (I'd like to think because we did great for them too). Even people who know better probably don't verify quite to the same level with personal stuff.
There's some deep seated human nature stuff you're running up against that's hard to shake because it actually works a lot of the time.
And when it doesn't.....40% loss I guess.
Excellent points - my guess is the higher the EQ, the more likely to shortcut the diligence.
Speaking as someone with low EQ, I need to use my IQ to make decisions. So I don't just take recommendations without doing my homework. Hard to understand others who don't take that same approach - thus, the low EQ. 😉
My reaction to seeing Rolex's prices fall
Excellent points - my guess is the higher the EQ, the more likely to shortcut the diligence.
Speaking as someone with low EQ, I need to use my IQ to make decisions. So I don't just take recommendations without doing my homework. Hard to understand others who don't take that same approach - thus, the low EQ. 😉
I've never really thought of it that way but you could be right.
I tend to think there's something we're all a little stupid about (who am I kidding, we're on a watch forum right now), it's just a matter of finding what it is.
My reaction to seeing Rolex's prices fall
It's mixed for me.
I love the fact that some hypeculture bad actors are going to get put out of business and lose their shirts.
I hate the fact that otherwise well meaning folks that I like and respect are caught up in it.
That said, I wouldn't feel too sorry for Steve-O (and I doubt he would want you to). He knew the risks and this will serve as a necessary, if painful reminder of why it pays to ask a few more questions before putting money down.
Any updates to this story?
Any updates to this story?
I aim to please.
https://www.watchcrunch.com/Edge168n/posts/funny-watch-stories-from-my-everyday-life-that-are-most-certainly-not-factual-part-2-23476
I aim to please.
https://www.watchcrunch.com/Edge168n/posts/funny-watch-stories-from-my-everyday-life-that-are-most-certainly-not-factual-part-2-23476
That was a great follow-up! Thank you, sir. BTW, I did scroll through your feed but apparently didn’t make it far enough. I’m new here.
That was a great follow-up! Thank you, sir. BTW, I did scroll through your feed but apparently didn’t make it far enough. I’m new here.
I write a lot, lol, and indexing is a touch haphazard here. Glad you enjoyed!