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I seem to come across threads about price increases and others that show the not-so-long-ago prices of certain watches which would make a lot of them very affordable (yep I used the "a" word).

Like Nomos Tangente for literally half the current price, Omegas for a good $1500 less, Rolex's in the $5k range.

I would like to hear from someone who has been a WIS for many many years. Is this normal or did prices recently (within 5 years) start sky rocketing?
 

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prices are constantlly rising
 

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i did the math once... might be in the rolex forum somewhere...

the rolex explorer was $165 40 years ago... 8.3% year to year increase like clockwork.
 

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How do we not know he is on the boat? OP, can you hear a fog horn?
LOL.....The inflation in watches seems to be directly tied to the demand by brand....and as some become too pricey for many...the next in line start to go up.


Plus, you showed up at the wrong pier.
 

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i did the math once... might be in the rolex forum somewhere...

the rolex explorer was $165 40 years ago... 8.3% year to year increase like clockwork.
Maybe I'm doing something wrong, but I just did calculated $165 with 8.3% growth over 40 years and only got to $4,000. That's pretty far beneath the current Explorer 1 list price as far as I can tell - even on the grey market, it's priced above $5k.
 

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And also the decline of the perceived value of 'fiat' currency.
How do we not know he is on the boat? OP, can you hear a fog horn?
LOL.....The inflation in watches seems to be directly tied to the demand by brand....and as some become too pricey for many...the next in line start to go up.
 

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You also missed the boat on McDonalds too. You used to get a hamburger, fries, and a shake for a quarter!
The price of everything is always going up. As a goofy example I recently sold a 1967 Ford Mustang for 30k. If you bought the car in 1967 it costs you about $2,692. Adjusted for inflation that's about 18.5k. A new V8 Mustang today will cost over 30k. A 2013 Mustang it completely different and improved from the old model and I think it justifies the additional 11.5k. Some watch companies, like Omega, are rolling out new models that cost more but are superior to the old models which I believe justify the increased price. Some companies just uplift the price, presumably for inflation and because they can, without significant changes to their watches. Maybe in 5-10 years people will think the prices we're paying now are a steal.
 

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Maybe I'm doing something wrong, but I just did calculated $165 with 8.3% growth over 40 years and only got to $4,000. That's pretty far beneath the current Explorer 1 list price as far as I can tell - even on the grey market, it's priced above $5k.
I put it into excel and came up with $4,005.18. Gray market price appears to be around 5.7k+ on the Explorer I
 

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You also missed the boat on McDonalds too. You used to get a hamburger, fries, and a shake for a quarter!
The price of everything is always going up. As a goofy example I recently sold a 1967 Ford Mustang for 30k. If you bought the car in 1967 it costs you about $2,692. Adjusted for inflation that's about 18.5k. A new V8 Mustang today will cost over 30k. A 2013 Mustang it completely different and improved from the old model and I think it justifies the additional 11.5k. Some watch companies, like Omega, are rolling out new models that cost more but are superior to the old models which I believe justify the increased price. Some companies just uplift the price, presumably for inflation and because they can, without significant changes to their watches. Maybe in 5-10 years people will think the prices we're paying now are a steal.
This is a simplistic way of analyzing the problem, and the bolded statement in particular is very wrong.

Core price inflation typically averages around 3%, with wage inflation slightly higher (because American workers are more productive now than they were decades ago).

So if something has increased in price by roughly 3%, then it costs about as much relative to the products in the core "basket" as it did in the past. Since wages have increased more quickly, though, that means on average it's easier to buy than it was in the past. So to use your example, because Americans are on average wealthier than they were in the days of 25c McDonald's meals, fast food is actually more affordable than it used to be as a percentage of the average wage than it was back then.

Disproving your bolded statement, some important products are dramatically cheaper than they were in the past. Computers cost FAR less in plain dollars (not adjusting for inflation) than they did in 1980, and they're far more powerful. Effective substitutes have also arisen, so for many purposes, I can get more out of a $600 iPhone with no contract than I could have out of a $5000 PC in 1980.

Watches and other luxury items are affected by completely different drivers, however. Technological change does not really render the luxury watch obsolete--there were better alternatives already in the 1970s from a sheer accuracy of timekeeping perspective. On top of that, the world has gotten richer overall since the days of the $165 Rolex Explorer--the economic pie has grown significantly. So there are wealthy and middle class consumers in China, South Korea, India, Vietnam, etc. who are in the market now. That increases demand, increasing price.

Supply is another part of the story, but Rolex et al. are smart and know part of the allure of their products is exclusivity. So while supply has increased somewhat, they've kept growth low enough to continue demanding a large premium for their watches in the face of robust demand.

Maybe we'll all look back and think today's prices were a steal. But price increases won't go on forever automatically. If high-end players can keep up demand and if the global middle class keeps growing, they'll probably be able to continue raising prices well above inflation. If competition from microbrands gets more intense, or economic growth stalls, or consumers look to another category for luxury consumption, price growth in luxury watches might stall or even reverse. It's impossible to predict.
 
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WOW! It sounds like you really know your stuff. Can you suggest any good economics books?

This is a simplistic way of analyzing the problem, and the bolded statement in particular is very wrong.

Core price inflation typically averages around 3%, with wage inflation slightly higher (because American workers are more productive now than they were decades ago).

So if something has increased in price by roughly 3%, then it costs about as much relative to the products in the core "basket" as it did in the past. Since wages have increased more quickly, though, that means on average it's easier to buy than it was in the past. So to use your example, because Americans are on average wealthier than they were in the days of 25c McDonald's meals, fast food is actually more affordable than it used to be as a percentage of the average wage than it was back then.

Disproving your bolded statement, some important products are dramatically cheaper than they were in the past. Computers cost FAR less in plain dollars (not adjusting for inflation) than they did in 1980, and they're far more powerful. Effective substitutes have also arisen, so for many purposes, I can get more out of a $600 iPhone with no contract than I could have out of a $5000 PC in 1980.

Watches and other luxury items are affected by completely different drivers, however. Technological change does not really render the luxury watch obsolete--there were better alternatives already in the 1970s from a sheer accuracy of timekeeping perspective. On top of that, the world has gotten richer overall since the days of the $165 Rolex Explorer--the economic pie has grown significantly. So there are wealthy and middle class consumers in China, South Korea, India, Vietnam, etc. who are in the market now. That increases demand, increasing price.

Supply is another part of the story, but Rolex et al. are smart and know part of the allure of their products is exclusivity. So while supply has increased somewhat, they've kept growth low enough to continue demanding a large premium for their watches in the face of robust demand.

Maybe we'll all look back and think today's prices were a steal. But price increases won't go on forever automatically. If high-end players can keep up demand and if the global middle class keeps growing, they'll probably be able to continue raising prices well above inflation. If competition from microbrands gets more intense, or economic growth stalls, or consumers look to another category for luxury consumption, price growth in luxury watches might stall or even reverse. It's impossible to predict.
 

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Paid $1756 for a GMT Master in 1992. Sold it a month ago for $5200. A new GMT Master II is several thousand more. Prices on high end watches have gone up significantly the last 5 years. Why? Rolex has had their best years ever the last couple of years as have the rest of the high end Swiss brands. Brisk sales often put upward pressure on prices.

Actually you missed the bus to the shore!
 

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This reminds me of the fountain pen market. Back in 2007 I could buy a Pelikan M200 fountain pen for $55-$65, today the same pen retails for $120. The Pelikan M400 could be had for $140, yet today the same pen retails for around $225. All wonderful and affordable high quality pens have all of the sudden jumped in price like crazy...and the overrated Montblanc has led the pack. Now the cheapest piece of junk produced by them will retail for a minimum of $600.
 

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WOW! It sounds like you really know your stuff. Can you suggest any good economics books?
For a good, broad look at the global economy, I'd recommend Charles Wheelan's Naked Economics: Undressing the Dismal Science. It's been updated since I read it a number of years ago, so hopefully it takes the global financial crisis and other occurrences into account.

A lot of the stuff in my response above is microeconomics--not sure I can recommend a good book on that, but perhaps others can. I think the key insight there, though, is that companies don't act in isolation. Price depends on supply, demand, and competitive response. The luxury watch market has grown a lot and prices have increased in past years, but it's an open question whether that can continue.
 

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Even having made my peace with buying into luxury watches in recent years - I do, for reasons of pure self interest lament the time when I became able to do so coinciding with rocketing prices. However, more profoundly, I do find it kind of disturbing that this has coincided with general diminishing of people's wealth and standard of living across the west. i get the mechanics of veblen goods, and I absolutely see why Rolex, Omega et al do it, but I do wonder what is underlying the surge in prices of luxury goods as more and more people find it difficult to make ends meet.

I thank skitalets for his knowledgable post, but am surprised to learn that wage inflation in the states is keeping ahead of inflation. In the UK it has not done for years.
 

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Well the market that these watches are targeting has NOT been suffering. The cause underlying the surge in prices, while more and more people are finding it difficult to make ends meet, is increasing wealth disparity in the developed/developing nations of the world. China for instance is now one of the biggest markets (if not the biggest) for luxury watches, luxury cars, luxury everything. This despite the fact that hundreds of millions of its people remain in abject poverty. Different story but same trend in the US -- lots of poor people (as Romney infamously made known, 47 percent now pay no federal income tax, although most of those still pay payroll tax and state and local taxes), but the rich have gotten dramatically richer.

Think about how this looks from Rolex's perspective. They were never selling to the 47 percent. It was always the top 1 percent that mattered to them, and that group's wealth increase has far outpaced inflation and the wealth increase of every other social class. So luxury goods' makers have no problem pegging massive price increases year after year. It's this way with luxury leather goods, high-end clothing, cars, etc.

Even having made my peace with buying into luxury watches in recent years - I do, for reasons of pure self interest lament the time when I became able to do so coinciding with rocketing prices. However, more profoundly, I do find it kind of disturbing that this has coincided with general diminishing of people's wealth and standard of living across the west. i get the mechanics of veblen goods, and I absolutely see why Rolex, Omega et al do it, but I do wonder what is underlying the surge in prices of luxury goods as more and more people find it difficult to make ends meet.

I thank skitalets for his knowledgable post, but am surprised to learn that wage inflation in the states is keeping ahead of inflation. In the UK it has not done for years.
 
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