Rolex Prices Keep on Ticking

Dear Rich Lifer,

I was at a Super Bowl party this past weekend, and the first thing my friend wanted to talk about was the recent Antiques Roadshow “shocker”… where a man finds out that his vintage 1974 Rolex is now worth as much as $700,000.

If you haven’t seen the clip yet, it’s worth – ahem – watching.

Of course, beyond the sheer entertainment value, there are several important lessons to be learned from the episode.

See, my friend and I both wear Rolexes ourselves. And we both avidly follow the market for collector watches so neither of us were all that surprised by the discovery or the appraisal.

Indeed, what shocked me the most was that this man might have truly had no idea how much his watch was worth!

The back story is that the man bought the Rolex brand new for $345 back in 1974, an amount of money that represented a full month’s salary at the time. Then, after becoming too afraid to actually use it, he tucked the watch away for safe keeping.

As it turns out, the specific model he purchased – a rare version of the so-called “Paul Newman” Cosmograph – is one of the most collectible wristwatches on the planet. An example in pristine, unused condition is a massive treasure.

Of course, a two-minute web search could have given him a pretty good idea of all this.

Look, it always pays to understand what you own… whether we’re talking about stocks or a Rolex you bought and forgot.

Can you imagine what might have happened if someone had offered that man $10,000 or $20,000 before he discovered it was actually worth $700,000?

Which brings me to the first big point …

Know the Value of Your Investments

While the man could have easily found out what the watch was worth, most people know absolutely nothing about collector watch values… how to tell real ones from fake ones… or what differentiates an extremely valuable one from a just-mildly-valuable one.

That’s the beauty of wearing something like a Rolex.

Conceivably, this man could have been walking around with hundreds of thousands of dollars wrapped around his wrist and only a trained expert would have had any idea.

The Rolex owner could have gotten onto an airplane, left the country, landed in just about any major foreign city, and quickly started a brand-new life.

That’s precisely why many wealthy people invest some of their wealth in tangible assets like watches or diamonds!

Okay, James Bond aspirations aside, the other major point here is that Rolex prices have continued to climb rapidly over the last several years.

I got my daily driver – a 1998 GMT Master – new for roughly $2,500.

When I first wrote about it in these pages little more than two years ago, it had already risen in value past the $7,000 mark.

Right now, I could sell it to a dealer for $10,000 in a matter of minutes.

If I sold it to an end buyer, I’d probably get $12,000 or more.

That amounts to four or five times the original purchase price of an item I’ve worn and used for two decades!

And just for some perspective, here’s a chart of the S&P 500 from the day I got my Rolex through the end of last week …

S&P500 From the day i got my rolex

As you can see, the market is up about 150% since I got my Rolex back in May of 1999.

That means a fairly mundane wristwatch has beaten big U.S. stocks over the last two decades by a rather wide margin.

The Lesson Behind the $700,000 Rolex

Am I saying the same will happen going forward? Of course not.

If anything, prices continue to feel more and more bubble like in the collector watch space.

For example, a few years back I actually tried to buy a Rolex Daytona Cosmograph at a Sotheby’s auction. My high bid was $13,500 and I considered that pretty generous at the time. So I was shocked when another bidder ended up winning the item closer to $18,000.

That particular piece – with an “inverted 6” dial, in unworn condition, and including box and papers – would probably go north of $30,000 right now (maybe way north).

The same type of frenzy is happening in other collector markets, too – whether you’re talking about art, wine, or cars.

Depending on your perspective, that could make this a good time to sell into the strength or to get involved and hope for more upside from here.

I’ve actually entertained the idea of trading my watch for something else like a vintage archtop guitar or several more collectible surfboards.

For now, however, I continue to wear it whenever the mood strikes.

To a richer life,

Nilus Mattive

Nilus Mattive

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Nilus is the editor for the daily e-letter The Rich Life Roadmap and a Paradigm Press analyst.

Nilus began his professional career at Jono Steinberg’s Individual Investor Group, where he published his original research through a regular investment column. Later, he worked for a private equity business and spent five years editing Standard and Poor’s...

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