Its been a while since my last post here and so I thought I'd whack something together which I was thinking about a topic that came up in an internet discussion. The topic was "will this watch make a good investment". Note: not this watch
but it sure is a nice watch.
Anyway, I see this being bantered around on various watch discussion sites where an amount of intellectual self delusion goes on (commonly I call this watch wanking).
A well known watch review site did an article (here) about the resale values of Rolex models and identified some pretty stand out models. I thought I'd discuss a the stand out model of the Daytona 116520 White.
Introduced in about 2000 its only been naround a few years. As you can see from their chart (which I've edited to remove distraction) that seems to have grown in price from around US$13,000 when new to nearly US$30,000 now.
A KingWang type would just leap on that and go WOW ... I can make a packet on a watch.
Lets just do a little more analysis depth than that simplistic wanking, hmm? So to be able to get that sort of growth you had to know in advance which watches would go up and which would not. Notice that the Cellini Time actually went down in cost over the time between release and used price researched for their article (2020).
Now the Daytona 116500 was made in 2000, which means that you'd have had to keep it not only in good order, but either proof of service or a recent service done if you wanted to get that money. Such things are not free. Financial people call this "cost of carry".
Now lets look at what would have happened if you'd put $13,000 down on something else, lets say good old fashioned gold. Now how much gold would you get in the year 2000?
Back in 2000 gold was about US$279 per oz, that $13,000 works out to be about 47oz of gold (people didn't buy fractions of an Oz ).
So now, if you'd put aside that gold, what would that be worth today? Well at US$2,424 per oz at the moment of writing means you would have US$112,946.23. Suddenly the less than US$30,000 seems like peanuts doesn't it. That is because gold has risen like this since even the 70's
So you could now go out and buy 4 Daytonas and still have change.
Amusingly gold isn't even considered a good investment ...
Watches as an investment? Laugh ... I nearly shat.
Financial boom bust cycles are interesting stuff (for those not entrapped in them), there is always speculation over what the next one will be and when it will pop. They seem to have a lot in common with Ponzi schemes, but of course everyone denies that till its 'hindsight'.
The article discusses the merits of this new 'financial instrument' and how its going to be going up financially speaking. They mention some interesting points including that the Chinese can now buy real estate with Bitcoin (see this reference).
Naturally there is all manner of weird-arsed comparisons between Bitcoin and gold (the metal) and justifications on how Bitcoin is undervalued compared to gold. Bitcoin proponents suggest that its a solid reliable private currency, and its got a great future.
Well what has all this got to do with Tulips?
Well Tulips have come to represent a major financial "bubble". Some time in the 1630's tulip prices went off the scale, it is reported on Wikipedia is this "By 1635, a
sale of 40 bulbs for 100,000 florins was recorded. By way of comparison a
skilled laborer might earn 150 florins a year".The crash for tulips came when sellers found that buyers weren't paying their desired prices (and it has been suggested that a change in the laws regarding tulip futures contracts had some effect).
It could be argued that Bitcoin is taking off as the international and electronic private currency. But unlike many other private currencies, bitcoin is not underwritten with anything. In a historical study of "unregulated banking systems in nine
different countries during the
nineteenth century: Australia, Canada, Colombia, China, France, Ireland,
Scotland, Switzerland, and the United States" things went well for private currencies. But a significant point in that historical examination of private currencies (see this reference) was that:
A competitive market compels unregulated banks to fix the value of their
deposit and note liabilities in terms of the economy’s basic money, by
offering redeemability at par (full face value) in basic money. In the
past, the basic money was gold or silver coins.
So it seems that people could trust these private currencies because they were backed by the financial institution and redeemable.My understanding is that bitcoin is not underwritten by anything or redeemable for anything except good and or services and trades on the free market. Its value is very much set by the market view of its worth.
Bitcoin is viewed as safe and the technology of it prevents fraud. Sounds good...
So my comparison between Bitcoin and Tulips starts with this post that BitCoin is Broken by a pair of IT academics who have identifed flaws in the security of Bitcoin. They outline a method where:
a minority group of miners can obtain revenues in excess of their fair share, and grow in number until they reach a majority. When this point is reached, the Bitcoin value-proposition collapses: the currency comes under the control of a single entity; it is no longer decentralized; the controlling entity can determine who participates in mining and which transactions are committed, and can even roll back transactions at will.
Nice... of course mining bitcoins takes some serious computing investment (much as does commercial large scale mining in the ground), which is commonly in the realm of BIG governments (you know, like the Chinese or the USA or say a conglomerate of EU nations).
So is this a new Ponzi Scheme? After all Bitcoin is only worth what the market thinks its worth. If the market felt that a Government was in such a control position the market may just flee the system.
I reckon that there is money to be made in buying and selling Bitcoin (just as there is with FX trading) if you have the stomach for it, but ... don't get caught out with the digital equivalent of the Zimbabwe Dollar.
cos in my view, when the music stops you will want to have already sold you seat to someone else. Who knows how far Bitcoin will go up ... I'm no financial adviser, but here is some music to listen to while planning your Bitcoin investment
I was reading the paper again this morning (why do I keep doing that?) and came across this pearl, about the ANZ happily taking Australian Federal Government Funding with one hand while happily signing off the sacking of 500 staff (probably many of them IT workers) to have their jobs outsourced to Bangalore India.
Some of the more salient points:
So not only will the jobs go, but also the data and data handling techniques too. Its 'comforting' to see that the call center jobs (those which are the least skilled and most frustrating for the workers) will stay in Australia.
With so little to sell and to enhance our economy we seem content to set ourselves up as being nothing more than the front desk and house maid service providers.
Lovely ... thanks ANZ ... now I know why my family has closed all its accounts with you.
Is it any wonder that for centuries caricatures of bankers and the banking industry have been represented by pigs in the satire response to social events.
it seems that consumer confidence (aka willingness to spend more than you earn) is down in the wake of the financial crisis. It seems also that this is in turn hurting the economy (the lack of spending that is).
So, what would have happened if all the people advocating "sustainable development" (people like me) had been listened to? I mean if people did things like:
rode their bicycle to work instead of using the car for 4km
their kids rode their bicycles to school (instead of being dropped off in v8 and v6 fuel using cars non-town cars like Commodores, Falcons, Pajeros, Range Rovers ...)
people didn't buy the latest in fad fashions for no reason
we bought products which were built to last (like my grandmothers singer sewing machine) rather than buying another GMC power drill for $15 because the last one burnt out too
we made our cars truly repairable (rather than $50,000 items which depreciate to $3000 items in a few years and we then don't see the logic in replacing a spare part for $700 {which in all honesty is probably worth $15} so we ditch the car)
we followed our grand parents advices and didn't get into debt, invested our savings and bought wisely
I'm guessing that the "recovery" would probably take even longer.
Well if you did like the above you'll be in a good position to take advantage of the current crisis and pick up some bargains in stock market "fire sales" of quality but presently undervalued stocks (banks come to mind).
I think that if we had all followed this way then most of the "economic" growth which has bubbled and burst would not have happened, and that we'd be moving along comfortably but with out making anywhere near as much mess as we presently are.
So perhaps we'd have avoided this boom / bust cycle in the first place?
Sure, we might not have all the fancy stuff we have now, but just how crucial are your latest Telemark skis and Garmont boots to your happiness anyway? I'm still using 6 year old computing to write this essay and (since its not running the latest hottest bloat ware) its working fine thank you very much. {faster in fact than my friends newest thing with Vista holding it back}. I still use a film camera as well as a compact digital camera (which cost nearly $1000 when it was new in 2001).
Why? Well because I already had a 35mm camera (which still makes quite good images thank you very much) and I bought the compact to make my "snapshots" an easier thing and because I often email or need to send images quickly. In all honesty my 2001 5MPixel Coolpix camera is still way overkill for email and WWW needs and ultimately needs to be rescaled (like who wants to see just the corner of the image?). If I take "nice shots" which I want to print (like below) I'll still use film.
Perhaps the $1000 seems high but perhaps that's its real value when its not being "supported" by a rapid-turn-over consumer pays for on-the-fly research with subscribing to a new model every year one? Besides, how much would it cost (even now with DSLR cameras being dirt cheap compared to their real prices) to move my film outfit to comparable digital? Many more thousands.
but as has been said many times ... if history repeats itself so often what does this say about humanity's ability to learn? We're pretty stupid if you ask me.
