Watches as investment: An 8,000 word dissertation, heavy on the finance and economics wonkery


Okay, I know this topic comes up all the time, and it’s all the rage on watch forums, etc., etc.  I’m going to approach this topic as a pure autist, and answer using very wonky economic jargon.  If I were to post something like this in the traditional watch forums, or Reddit, or whatever, flame wars would immediately break out, because all anyone wants to do on those platforms is score Internet points.  I’m hoping that we can have this kind of reasoned discussion here on WatchCrunch, without the usual Internet a$$-hattery.

Here goes!

Ever since the Instagram Effect took hold starting in 2016, prices for luxury watches have skyrocketed, for both new and used, especially for very particular Instagram darlings.  And, in lockstep, the question is now always, “Are watches good investments?”  

Before we can answer the question, we need to lay out our definitions.

What is an asset?

  • The definition of a financial asset is "a liquid asset that gets its value from a contractual right or ownership claim”  
  • Some examples of financial assets would be annuities, real estate, stocks, and bonds.  And in all those cases, your ownership claim entitles you to the stream of income (a yield) that those assets produce - annual fixed payments until you die, rents, dividends, and coupon payments, respectively  
  • And what’s amazing about the yield on these assets is that the yield enables you to calculate the value of the asset using the famous “discounted cash flow” (DCF) analysis
  • Now, in the real world, we might use DCF to calculate what we should pay for an annuity, for example.  It’s a very straight-forward calculation.  But, it becomes more difficult when applied to something even as simple as bonds, and near impossible when it comes to stocks.  Because we humans aren’t very good at predicting / estimating all the precise numbers to input into the DCF - many of the variables aren’t things you can directly measure, and they’re subject to change over time, etc., etc.  If we had a semi-omniscient super computer, we could pull it off
  • But, the good news is that we do have a semi-omniscient, distributed super computer!  And it’s called “the market.”  The market is continuously doing that discounted cash flow (DCF) analysis for us, via trades and transactions in different exchanges and marketplaces, in a process called “price discovery.”  So, when we see that Google stock is trading for $2,814 per share, implying a market capitalization for the company of $1.895T, the distributed super computer called the market is saying, “When we calculate the expected free cash flows, discounted by systemic risk, idiosyncratic risk, inflation, etc., and taking into account growth of the company and its free cash flows, out to infinity, based on all currently available information, the net present value of all the discounted free cash flows (profits distributed to shareholders) is $1.895T
  • Nonetheless, the DCF equation is a very powerful framework for understanding the valuation of financial assets, in the same way that F = ma is a very powerful framework in physics for understanding the fundamentals of all motion in the universe

What about assets that don’t produce yields?

  • Now, the clever observer will note, “Wait a minute!  There are assets that don’t produce yields!  For example, a dollar bill is a financial asset, but it doesn’t produce a yield.  So, how does a dollar bill have the value it has?” 
  • That’s an astute observation.  In fact, given inflation, if we use DCF, we find that a dollar bill has a fundamental long-term value of zero, not $1!  In the long-term, due to inflation, the value of your dollar bill will approach zero
  • WTF???  Why would anyone hold an asset that has a fundamental value of zero???
  • Well, it turns out that cash does produce a yield of sorts.  It’s called “convenience yield.”  I have to pay the babysitter in cash, so I’ll go to the ATM and withdraw $60 in cash.  But, the key insight is that cash provides you with convenience.  And we’re willing to forgo whatever yield an interest-bearing bank account or a money market account or any other yield-producing asset would provide on that $60, for the convenience that the $60 in cash provides instead (ability to pay the babysitter).  But, by the same token, the cash that anyone holds is a tiny, tiny, tiny fraction of their overall portfolio.  I'm willing to hold $60 in cash for a day or two, knowing I gotta pay the babysitter.  Nobody in their right mind says, “I’ve got $1M.  Instead of putting this money into an asset that will produce a yield, I will instead just hold all $1M in cash for the rest of my life.”  Why?  Well, because over time, inflation will ensure that you end up with the fundamental value of the cash, which is zero
  • There are lots of assets with a fundamental value of zero that we humans hold, in order to have convenience yield.  Cash is one, gold is another, jewelry, Bitcoin is another example.  Why do Chinese people own so much gold and jewelry?  Because on a frighteningly regular basis, throughout the history of the Chinese empire, some revolution or disaster always seems to take place wherein some ungodly proportion of the population is killed off, either directly or through the resulting famine and chaos (e.g., The First Sichuan Massacre, The Second Sichuan Massacre, The Taiping Rebellion, The Great Leap Forward, etc., etc.)  So, Chinese people have a lot of gold and jewelry, because these are stores of value that they can transport on their own bodies, when they need to escape, when the S&^% hits the fan.  These things provide great convenience, even when their fundamental value is zero.  Think of Bitcoin.  If I believe that my government is coming after me, I can buy a bunch of Bitcoin, and get my money out of the country, even though in the long-term the fundamental value of Bitcoin is zero

What is a watch?

  • This finally brings us to watches.  What is a watch?  Well, it’s not a financial asset.  Watches don’t produce a yield like stocks or bonds.  Watches don’t have much in the way of convenience yield, as they’re not commonly used as a medium of exchange, like cash.  They’re not good stores of value, like gold, because they depreciate over time via usage / consumption
  • Watches are like refrigerators and toaster ovens.  They’re durable consumer goods.  People buy them, people use them (consume them), and they depreciate over time due to the usage
  • Durable consumer goods do not go up in value.  They have value X when they’re bought, and then over time, via usage (consumption) their values fall, until they’re fully consumed and the value eventually reaches zero
  • “Aha!  Now I got you, Omeganut!  You’re wrong!  Watches are not durable consumer goods, because I have evidence that certain luxury watches’ values have gone up!” one might say
  • Well, yes, the Instagram darlings’ prices, both used and new, have gone up since 2016.  Charitably, we would say, “Yes, prices for collectibles can go up...  and down.”  The fundamental value of a collectible is again zero.  The only reason people buy collectibles for more than zero is because of what is called "consensual illusion,” which is just another way of saying, “I’ll pretend this thing has value, because everyone else is pretending it has value.”  In some cases, you can make lots of money via consensual illusion, such as buying Jackson Pollock’s painting, Number 17A, back in 1949 and then selling it for $200M in 2016.  But, by the same token, you can lose a lot of money on consensual illusion - just ask all the Elvis memorabilia collectors who paid hundreds of thousands of dollars for stuff like the King’s rhinestone belt, only to years later find nobody’s interested in buying it, because nobody gives a F&^% about Elvis anymore, now that we have Taylor Swift.  And that Jackson Pollock that somebody paid $200M for in 2016?  I don’t know.  One day, Martians will come visit us, give us mind-blowing new technology and art, and suddenly, that Jackson Pollock Number 17A will be worth 2 cents, because our consensual illusion is now fixated on Zeta Prime 3’s mind-blowing virtual reality art installations / dream machines / space-time warping exhibitions
  • Watches are durable consumer goods, and some watches are “collectibles,” but fundamentally, their long-term value is zero

But, why aren’t watches good investments if I can make money off of them?

  • I guess, here, the question is, “Can you reliably make money off of them?”  If you buy a Rolex off the grey market, hoping that it will appreciate and then sell for a profit, you are engaged in speculation
  • There is a term we use for when we humans put sums of money at risk, knowing we can either make money or lose money, based on speculation.  That term is:  “gambling”
  • And, hey, I don’t mean to knock gambling.  Gambling is AWESOME.  It’s a ton of fun.  But, let’s not kid ourselves that when we go to the race track and put $100 on Laughing Boy to show in the 3rd race at the Curlin Florida Derby that we’re making an investment.  We’re not.  We’re gambling!  Why?  Because gambling is fun!
  • If you bought a Rolex at market price and then sold it a year later and made a profit, you were gambling.  You might have sold it a year later, and lost money.  You were gambling.  “Gambling” is not a synonym for “investing"  

But, what if I buy it at MSRP from an AD?

  • If you buy a Rolex at MSRP from an AD, and then sell it for a profit, kudos to you, my friend!  The AD literally just handed you thousands of dollars of free money!  (I, myself, have purchased a watch from a boutique at MSRP, even though the market price was many thousands of dollars more!)
  • But, how likely are you to walk into an AD, off the street, never having spoken to them before, and say, “Hey, I’d like a Submariner.  Chop-chop.  I’m waiting here, buddy,” and get handed your Submariner at MSRP?  Not bloody likely, is it?
  • Instead, we always hear, “Ah, you have to get on the waitlist, and develop a relationship.  If you just wait long enough, visit often enough, develop deep enough of a relationship, you’ll get your Submariner at MSRP, and then you can sell it for a profit.  Which makes it a good investment”
  • Really?  If the AD is not charging you the market price for the watch, you’re still paying for it in other ways.  The cost of purchasing the watch from the AD is MSRP + non-pecuniary costs = market price.  What does "non-pecuniary cost" mean?  Just go to and you will see precisely what the non-pecuniary costs are.  To this day, r/WatchesCirclejerk Redditors are still dining out on the post that some r/Rolex member put up talking about how he went into his AD every week and brought his home-cured prosciutto to give to the AD.  Every.  Single.  Week.  For.  A.  Year.  And he finally got the call!  That, my friends, is “non-pecuniary costs”

So, no, watches are not investments.  They are not financial assets, but instead are durable consumer goods.  And, if you think that watches make good investments, I got some refrigerators and toaster ovens to sell ya.

As a final note, I will say that Rolex finds itself in a very, very tough bind, in terms of long-term brand equity.  Here’s why:

  • Think back to the home-cured prosciutto guy.  He paid for his Rolex in MSRP + non-pecuniary costs.  Now, do we admire home-cured prosciutto guy?  Do we look at his example and say, “Wow.  That is one dude I want to emulate.  That is one truly admirable man”?  No, of course not!  He’s been the #1 laughing stock on Reddit’s r/WatchesCirclejerk for like a year now!
  • The problem with AD’s allocating watches to folks willing to pay the non-pecuniary costs is that you get self-selection.  The type of people who are willing to “develop a relationship with the AD," people willing to bring home-cured prosciutto to the AD every week, end up being the ones allocated a Rolex at MSRP.  One charitable way to describe home-cured prosciutto guy is that he was persistent.  Another way to describe his behavior is “groveling.”  The Rolex AD allocation process selects specifically for people willing to grovel!  Everyone else with a shred of dignity either says, "F&^% it, I'll just go buy another brand," or "F&^% it, I got so much money, I'll just buy it off the grey market, but I sure as S&^% ain't groveling"
  • When your customer base becomes self-selected grovelers, others notice, and it tarnishes your brand in the long-term.  Think of all the WatchCrunch members who have openly said, “I love Rolex watches.  I am a long-time collector and lover of Rolex, but I won’t play the AD game,” or, “I don’t wear my Rolexes out in public, because I don’t want to deal with all the social connotations,” or, “I don’t wear my Rolexes, because I don’t want to be mistaken for a meat-head Flex Bro.”  THAT is the problem that the Rolex brand faces in the long-term, and it is a monster of their own making.  If they simply auctioned their watches off, buyers would pay market price, and you wouldn’t have groveling involved that selected for grovelers that ultimately get associated with and tarnish their brand and destroy their long-term brand equity.  An analogue is Cristal Champagne.  Cristal became entwined with hip-hop culture, and self-selection took place, and next thing you know, the only people buying Cristal were hip-hop fans!  And, even though I know nothing whatsoever about Champagne, were I ever to buy Champagne, I sure as S*&^ wouldn't ever buy Cristal, because I ain’t a hip-hop fan!

Now, I want to be very clear:  This post in no way whatsoever is designed to impugn WatchCrunch members who love Rolex.  Every single WatchCrunch member I have ever had the pleasure of interacting with has been nothing if not gentlemanly / gentlewomanly, kind, thoughtful, and truly a lover of watches.  Every WatchCrunch member who has posted about Rolex and their love for Rolex has struck me as a genuine and admirable lover of Rolex watches.  There are a bunch of WatchCrunch members who have gotten their Rolexes at MSRP, who did not grovel, who did not play games, who were just genuinely, fantastically fortunate and their fortune was undoubtedly well-deserved.  I am simply making an earnest attempt to explain in the most autistic fashion possible why watches are not investments, and using Rolex as an example, because Rolex is the #1 choice for those who see “watches as investments."

In the end, it's exactly as everyone on WatchCrunch says, "Buy and wear what you like, because you like it."  Watches are not investments.  They are things to buy and wear, because you like wearing them.

Sorry for the 8,000 word dissertation.  But, as the Blaise Pascal quote goes, “I would have written a shorter letter, but I did not have the time."


After reading this, I am diversifying my portfolio to include crypto, watches, AND cars. It’s just so hard to post a well-lit crypto shot to Insta. 💎🙌🏻 🚗⌚️🚀 


Welcome to the Eveything Bubble! All WatchCrunch posts are part of the blockchain (not really, but they could be, oh wait maybe they are). All watches are little more than NFTs, a few are both, and fewer are all that plus as thin as prosciutto is usually sliced


Good piece.  The macro issue is low yields, overpriced equity markets (given the underlying DCF fundamentals) and consequently other "investable" assets are wildly overpriced.

  • Wine
  • Classic cars (FFS UK Ford performance models that were rather average in the 80's are now fetching serious money, >£15k for Mk1 VW Golf GTIs etc)
  • Property
  • Watches

I enjoyed this - it‘s a polarizing topic, but you’ve managed to describe and discuss the underlying mechanisms of investment vessels without inflaming it. Great read this morning over breakfast! 


This is just the long way of saying that everything I've accumulated my entire life is worth $0.00.  Sounds about right though.  LOL


Gona be honest.. I didn't read 95% of it, but gave you the heart for effort. Impressive amount of work went into this.


thx man, today i learn something


Nicely said. I think it’s really sad, that the whole investing and flipping thing has gotten so big in watches. for a lot of people it’s just a quick cash grab. And the more often it works the more often people are going to try and stand in line for hours on end to make a quick buck. 
although i understand these people (everyone wants to make money if they don’t have much) I really wish the hype would die down so a lot of us could afford the watches we want. 
Best example is a sub. I would love to own one and am perfectly willing to pay retail for it at an AD. I want to be the first owner of the watch. The second one will be a future kid of mine. But I ain’t payin 2 times the price for it. That would not set the example for my future kids that I want them to have. Hope this makes sense. 

thanks for the insight Mr. Nut. I wasn’t wrong in waiting with anticipation for your next post. 


Well, I am glad that issue is settled. We won't be having that argument again.

Thank you for the thorough analysis. When I was posting one of my snarky comments yesterday I had a picture of one of the old Electrolux vacuum cleaners ready to go as an example of an investment. I did some internet research to see if they had measurably appreciated as a collectable.  But, they were expensive in 1948 relative to inflation. (So, was grandfather's watch.) I could not make the comparison work.  As a durable good the Electrolux did not retain value, but was wildly overvalued at the start.

I was briefly in the wine industry and saw what happened to Cristal (and Tanqueray). The usual response by brands that get hot and are worried about getting pigeon holed is to raise their prices and create a barrier for entry.  I don't know if Rolex is consciously doing that.


I collect watches because I love them and use them; I am not a flipper. And I make extremely balanced and thoughtful decisions about every purchase, and I (and many others) can flatly state that watches are superior investments far surapssing anything else in the market except choice real estate if you know what you are doing. With all respect, and in spite of the economic background you supply in your article, you are wrong.

Leaving the unending gray market discussion aside, Rolex will have no trouble in the present or the future market whatever they will do, despite the irritation (rightly) felt by consumers; this idea is imaginary and solely in the minds of collectors. Additionally, Rolex is so embedded around the globe that it has acquired the virtual status of a hard currency and is now widely used in countries with unstable or worthless currencies or during periods of turmoil like the present. Furthermore, Rolex (in their foundation) has so many extraordinary, high value worldwide assets on their books, they could stop producing watches tomorrow - and survive for centuries 😆. I love Rolex too, but they do not have to bother 2 cents about what the collectors think about them.


What a post. Respect to the time and effort that's gone into that.

I have never engaged with "watch investment" chat because it will very likely never apply to me (no one is going to want my well 'consumed' watches after I've worn them for a few years), but this was a great read to understand the arguments involved

Thank you. I feel schooled. 👍


Great article @Omeganut!  You make it hard to argue, but I'm going to offer one other perspective...

You absolutely have made many great points and I don't want to go head-to-head on them, ha!

However, the commonly accepted definition of investment is "putting money into an asset with the intention of earning a return."

You can absolutely put money into watches (Rolex, Patek, AP, etc) and have a high degree of probability that you're going to get a return.

I didn't see baseball cards or sports memorabilia on your list above, but many people have, and do, invest in them.  They would also be a non-traditional form of investment.

In regards to "watches not being assets" I'd have to disagree.  I think it's arguing over semantics if they are, or are not assets.  I do know for a fact though that financial institutions (yes, banks!) DO consider watches as assets.  I know a number of people who have their watch collections listed on their personal financial statements (myself included) and banks don't bat an eye at it.  If banks will accept watches listed under the asset column, I will too.

P.S. It's refreshing to be able to disagree with someone respectfully.


Correct, consumer products are generally not financial assets, in the sense that they produce a yield. Some may increase in value, but since there really isn't a natural scarcity when it comes to consumer products, they generally do not. One also has to take into concern the opportunity cost: How does the watch compare to a traditional investment, if the same funds would have been invested in an index fund, for example. 

It's also a small and largely unregulated market. Even just determining the true value of a watch is tricky, the transaction even more so. And you comparison with the Elvis memorabilia is correct: There is no guarantee that the market will exist in the future.


Nice review and discussion. My very short take - I make money on what I do well. I’ve been fortunate to do well enough that I now collect watches as a hobby, for fun! 😎

I doubt I’ll ever sell any, that will be the kids and grandkids problem when they inherit them! So - agree, durable goods, long term value - don’t care. 💸

I like this forum to discuss what I and what I may get in the future to contribute to my long term joy. That, we all need. 🤗


After reading this, I am diversifying my portfolio to include crypto, watches, AND cars. It’s just so hard to post a well-lit crypto shot to Insta. 💎🙌🏻 🚗⌚️🚀 

Too funny!  We could have a very, very long discussion about crypto.  Unfortunately, the initial promise of Bitcoin as a stable currency (serves as a good store of value and medium of exchange) has not borne fruit.  Government officials, fearing that their ability to put their jack boots on the necks of their citizenry might get eroded, have effectively regulated away Bitcoin's ability to serve as an alternate, independent currency.  Beyond that, Bitcoin isn't well suited to serve as a medium of exchange, due to the inherent limitations in its ability to process transactions quickly at scale.

But, I do hope that someone, somehow does figure out a way to create that independent, distributed currency - I worry deeply about jack-booted thuggery from government officials.

Here's the best read I've ever come across on how to think about Bitcoin and its price and volatility:

By the way, you definitely need to diversify your portfolio to include a SIM rig.  I mean, dude, ENDLESS hours upon hours upon hours of entertainment.  And read up on Assetto Corsa!  They literally laser scanned all those race tracks around the world to capture and simulate every single bump on the track!!!