There’s an old British financial saying: “safe as houses”. It means that a financial endeavor is risk free, or nearly so. Of course, anyone who lived through the 2008-2009 housing crisis in the U.S. might take issue with this wisdom. Before that debacle, U.S. housing prices hadn’t declined on a nationwide basis since the Great Depression in the 1930s.
It sort of makes it tough to take the adage seriously.
But maybe we don’t need to abandon the maxim, so much as update it for the modern age. After all, houses are tangible assets, and I strongly suspect that assets you can touch, hold and keep in your physical possession will do surprisingly well in the years to come. But if houses, which have shown vulnerability in the face of widespread property bubbles, aren’t the tangible asset to own, then what is?
Here’s my working theory. Maybe vintage watches are the place to stow a bit of your hard-earned money instead of a stodgy old savings account.
Many people might be surprised by this bit of unconventional investment wisdom. After all, a savings account has traditionally been one of the safest places a person can keep his excess cash. So why in the world would I think that vintage watches would be better?
Well, financial risk can come in many different dimensions. For example, with a savings account there is the risk that your bank will go bust and be unable to pay back your deposit. In these instances, a national bank insurance fund (like the FDIC in the U.S.) will usually pick up the slack, making good on deposits up until a predetermined monetary limit.
So no, I don’t expect many people to lose money in failing banks. After the 2008-2009 financial crisis, regulators demanded that banks in the U.S. maintain far higher reserve levels than they had previously. So even in another financial crisis, I find it unlikely that many U.S. banks would fail.
No promises if you live in Europe, though, where your banks are levered to the moon! In this instance, you might well find yourself relying on the tender mercies of your financial regulators or politicians to ensure that you are made whole.
However, there is another major risk when you place your money in a savings account – inflation. Inflation gradually erodes the purchasing power of any cash or deposits, including savings accounts. Now under most circumstances, your bank will pay you interest to offset this inflationary loss, along with just a little bit more so that your account gains value in real (inflation-adjusted) terms.
Unfortunately, we don’t live in normal times. Instead, we live in an era of financial repression, where bank regulators use depositors as a tool to recapitalize the national banking system. This comes in the form of bank deposit rates on your savings account that are below the prevailing rate of inflation.
Every month your money stays on deposit in your savings account, you lose just a little bit of purchasing power. This lost purchasing power is happily vacuumed up by your local bank so that it can keep on doing whatever it is that banks do (which seems to be crashing the global economy about once every ten years, as far as I can tell).
But vintage wristwatches give you a safe, tangible asset that you can hold in your hands (or wear on your wrist)! The market for vintage watches has been going from strength to strength over the past decade, and I believe this trend is likely to continue. The possibility of loss is very low, assuming you choose high quality watches and pay a fair price for them.
So the question then becomes: can carefully selected vintage wristwatches outperform the return you expect to get on your savings account?
Now, I will admit I am a bit of a pessimist when it comes to bank deposit rates. In most developed nations, short-term interest rates (like the kind banks pay on deposits) are embarrassingly low right now.
For instance, the European Central Bank is keeping short-term rates pegged at 0.25%, the Bank of England is holding them at 0.75% and the Bank of Japan is satisfied with a miserly -0.1%. Only the U.S. Federal Reserve has managed to decisively move off the zero bound with a current range of 2.25% to 2.50%.
These rates are unlikely to get too much higher before we enter another synchronized global recession. Central banks will react to this development by driving short-term interest rates down to zero (or possibly below). At that point, even a lowly 1.0% annual interest rate on your savings account will seem like a sweet, distant dream.
But let’s generously assume, for the sake of argument, that you can score an average 1.0% return on your savings account over the next 10 years. This means that if you park $10,000 in your bank today, it would grow to $11,046 over the next decade.
I’m going to be blunt here. The vintage watches I list below will almost certainly beat this return, and most likely handily. I think these 3 categories of vintage watches could easily achieve an annual appreciation of 2.5% to 5.0% over the same timeframe. This would transmute your $10,000 stash into anywhere between $12,801 and $16,289 over 10 years – an increase over our theoretical low-interest savings account of $1,395 to $4,883.
And who couldn’t use an extra $2,000 or $3,000?
So what are these magical, better than savings account watches? I have a few unusual choices in mind.
1) Vintage Rolex Oysterquartz Watches
Everyone has heard of Rolex watches – even people who don’t know anything about vintage wristwatches. Rolex makes beautiful, robust and thoroughly desirable luxury watches.
But did you know that there is a Rolex watch that nobody talks about? Yes, it’s true! Shockingly, there is a type of vintage Rolex that is completely overlooked in today’s secondary market. I’m speaking about the Rolex Oysterquartz series, which was produced from 1977 until 2001.
Many collectors ignore these horological treasures because, as the name implies, they have quartz movements. But an Oysterquartz is no ordinary quartz movement. It is an in-house, high-end, super-accurate quartz movement that Rolex laboriously developed over many years of research and testing. Better yet, it is estimated that only 25,000 of these unique quartz movements were ever created, making them far rarer than many other Rolex calibers.
Although I don’t believe that most vintage quartz wristwatches make good investments, Rolex Oysterquartz watches are a clear exception to this rule.
I think it is inevitable that the long neglected Oysterquartz will one day be recognized for the gem it is, driving prices up. But until then, you can get Rolex Oysterquartz wristwatches in stainless steel or two-tone cases for just $3,000 to $5,000. This is substantially less than what similar Rolexes with mechanical movements go for.
2) 14K & 18K Solid Gold Dress Watches from the 1960s and 1970s
I also like vintage, solid 14 and 18 karat gold dress watches from the 1960 and 1970s. These classic timepieces were produced by the leading Swiss watch companies of the time, such as Audemars Piguet, Omega, IWC, Longines and Vacheron Constantin.
Vintage gold dress watches simply drip with aesthetic flair and Mad Men zeitgeist. And, of course, they all sport finely finished, fully jeweled mechanical movements that are works of art in their own right.
Yet prices are still unbelievably low for these enchanting vintage watches, probably because gold dress watches are out of style right now. Some of the rarer models from the most esteemed makers might run you $3,000 or $4,000. Slightly more common, but still desirable specimens can be found as low as $2,000, or even a bit less! That represents a remarkably good alternative for your extra cash compared to parking it in a low-interest savings account.
I recently featured a stunning 18K gold IWC men’s watch from the 1960s in one of my Spotlight posts. It was unbelievably inexpensive at only $1,720, and sold quite quickly. But there are many other bargains to be had in this segment of the vintage watch market.
3) Vintage Must de Cartier Tank Watches
Cartier is famous for their iconic, rectangular tank wristwatches. But the prices for these covetable luxury timepieces can be mind-numbingly high.
Luckily, Cartier produced a line of elegant, entry-level luxury tank watches between 1977 and the mid 2000s under the Must de Cartier nameplate. They were made from vermeil, which is solid sterling silver coated in a generous, 20 micron thick layer of gold. In addition, the discerning watch enthusiast can choose between high quality manual wind or quartz movements.
Stylish Must de Cartier tank wristwatches perfectly straddle the fine line between avant-garde fashion watch and traditional luxury timepiece.
But the best thing about these perennially popular watches is their price. Specimens in good-to-mint condition can generally be found in the $800 to $1,800 range, meaning that even a horological aficionado with a beer budget can afford to own a genuine Cartier Tank.
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