#6 Wulf Schütz - Vintage Watches

The Nalu Finance Podcast

In this episode of Nalu Finance, we sit down with Wulf Schütz, Chairman of Rare and Fine Vintage Watches, to explore the world of high-end watch investing.

Wulf unpacks how to invest in collectable timepieces, including:

• Why vintage watches can offer stability in volatile markets

• The difference between commercial and collector-grade watches

• How provenance and condition drive value

• The risks of Frankenstein watches and how to spot fakes

• Why due diligence and trust are critical in the watch world
  

He also shares how to store, insure, and maintain a portfolio of watches and why paying a premium for authenticity can save you much more in the long run.

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🎙️ Transcript:

Intro: 00:00

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Stefan Wagner: 00:29 I'm here with Wolf Schütz, Chairman of Rare and Fine Vintage Watches. Rare and Fine handles all aspects and details of collecting and investing into vintage watches. So my first question is, how do you invest in watches? What do you buy? How do you manage your portfolio? Is it diversified? Is it focused? What would you advise? And how do you do it yourself?

Wulf Schütz: 00:55 I would differentiate on how we do it or how I do it and what I would advise someone because the individual situation might be very different from what we do and what you might want. It's really depending on your investment horizon, your budget, what you want. I mean, in general, watches are not a typical investment asset, but given the fact that we are currently facing high uncertainty in the market for years now, high volatility, they are a nice asset where you have basically almost no volatility and you could also make a nice profit on it. So what we do basically is we focus, we have a portfolio which is, I would say, 50% is more, follows a long only strategy where we have very rare watches which develop over time, which are more difficult to find, which are less liquid, so to say.

And I would say half of the watches we have are, let's call it, more commercial type of watches, which have a high liquidity, which are more demanded, but with a different margin, of course. We only buy vintage watches. I think the average age of a watch we have is around 50 years old. So we don't trade any modern watches, this is a completely different market. Even though it might be an attractive market, but this is just not our focus. We don't want to compete with the huge grey market all over the world and with the retail market.

What we focus on is real collector pieces. And we try to focus on that niche, even though in the watch world itself it's a quite big market, but we try to focus only and invest strictly in vintage watches. So if you would ask me to find me a new Rolex, And I receive these questions every day. Actually, today I received that question for Christmas. Now Christmas is coming. I always have to say, sorry, I can't really help you. Go to your dealer on the Bahnhofstrasse or wherever.

Stefan Wagner: 03:30 Now, you said 50% really old collectibles and 50% more, you call them commercial, but also still old watches. Is it mainly focused on specific brands? Because I presume there's the obvious brands, Rolex, Patek. Or is there also other interesting ones in there, outside that one, that are more micro-brand?

Wulf Schütz: 03:53 Personally, I like all the watches. The way we do it, we don't invest or buy watches which we only like or which I only like. I try to separate this from my personal taste. So I would say 95% of the watches we have are either Rolex or Patek Philippe. And we also have some Audemars Piguet and Vacheron Constantin. But the main core is Rolex and Patek Philippe. And when you look at that, I would say the value of the average watch is around 200,000 Swiss francs. And this is clearly driven by Patek Philippe, because Patek Philippe is usually, at least the Patek Philippe's we have, are usually higher value watches. Whereas the Rolex watches, we have some Rolex which are whatever. 1 million. But the more commercial watches we have are Rolex. They're also 40, 50 years old, but there are maybe 30,000, 50,000 Swiss francs, et cetera. And they just trade in a very different speed than a complicated 2499 of Patek Philippe.

Stefan Wagner: 05:09 Now, that leads a little bit to my next question. Where does the price come from in the watch? I mean, I think the Paul Newman watch, Daytona, was sold for 17 million. That probably has to do with the provenance of the thing, but is it also unique features? Is it special dials? There seems to be suddenly a tenfold, nearly the same watch for a novice like me.

Wulf Schütz: 05:36 In general, the prices are made by supply and demand, I have to say. It sounds very simple, but again, the example I just gave you about the Patek Philippe Nautilus in production, the watch costs around, has a list price I think around 26,000, 27,000 Swiss francs. If you go to a shop, they will either tell you to leave the shop immediately or will tell you can come back in seven years if they put you on a kind of waiting list, etc. And if you're a good client, you maybe get it in three years. That leads to the fact that the grey market prices, and you can find these watches. It's not difficult to find. You just Google it and find whatever 100 offers right away. are traded around 75,000, 80,000 Swiss francs.

So there is a huge demand and a limited supply. So I always say this because this is the underlying thing of finding a price. And then the watch-specific parts comes. For example, take the Paul Newman of Paul Newman. There is only one Paul Newman of Paul Newman. There is the provenance of Paul Newman, of course, which was a key driver. But there are a lot of watches with provenance, but this specific watch, basically, or him wearing this watch, basically was one of the key drivers for vintage Daytona and vintage Rolex.

So the Italians, they started this 30 years ago, they were calling this Watches Paul Newman. They didn't say this is a Rolex Daytona. They said this is a Paul Newman because he was featured in some in magazine wearing that etc. and when this watch this was what was always a mystery and When did this watch finally came to the market? That watch fetched an insane price I mean insane in a way that you can find a better condition than Similar watch maybe with two digits away in terms of the case number. So the same production year, maybe in better condition, you might find it 470, 200,000. I think maybe a little bit more. It's the current market price. But here the provenance was the differentiating factor. And of course, it's just only one. So the supply is one piece, super provenance, big demand. On the other hand, in general, what is a key driver for the price in vintage watches is the condition.

So you can have similar watches, they're almost the same, they're made in the same year, they look the same, but you have prices differentiated by factor 10, depending on condition. So the condition is really a key driver. And in contrast to the car market or to the art market, restoration or new parts, I mean, you take any classic cars, I mean, a lot of parts are just had to be restored, had to be replaced, the car wouldn't work like that. if not. In watches, that is still a discounting factor. It devalues the watch. So if you have a reprinted dial made by Patek Philippe on a great Patek Philippe, you might struggle to sell the watch at all. People want originality and people want top condition.

Stefan Wagner: 09:17 Now, actually, next question on that one is, how do you value, or in this case, how do you value your portfolio? What prices do you use? Is it an auction result? Is it a dealer bid? An expert valuation? Is it the insurance value? And, you know, do you have to assume a bid offer for liquidity or for

Wulf Schütz: 09:42 I mean, a couple of years ago, the market was really intransparent and not really efficient. But now it changed a lot because I think with all the auction house being online, publishing all the results online, you have several platforms where watches are traded and offered, Chrono24, et cetera, even though that's not the watches we have traded there. But you kind of figure out where the market is. We have a lot of discussion with other dealers, with collectors, etc. So you see the trends. And I think a key driver are the auctions still. So if I hear people saying, we don't need the auctions anymore, everything is going electronic, etc. I argue against it and say, listen, they are setting a price point and if you have five auctions in a row and five of whatever kind of similar watches are sold 20% below everyone is asking, maybe the price It tells you something. It tells you something.

But at the end of the day, I think this is a lot based on experience and there is another factor which is completely different to security. If you buy a share of Volkswagen, the price is the same if you buy it with Bank A or Bank C. If you buy a watch in very similar condition from a well-known trusted dealer or well-known auction houses, you might pay a premium. And collectors are willing to pay a premium. For the safety or the insurance? Because in younger markets, in the watch market, if you compare it to the classic car market or even to the art market, is a really young market. It's a very young market. And in those kind of markets which are comparably more intransparent, etc., it looks like that you can earn easy money very quickly. And so there are some players in the market which might use, let's say, strange practices. So if you invest 50,000, 100,000 or even 5,000 in a watch, I always recommend rather pay a premium and have a security that you buy from a trusted dealer, from a trusted auction house. than on some shady and unknown source out of the internet. I mean, there are hundreds of sources in the internet. But you wire money to someone you don't know, you get a watch you don't know, there are still factors you have to consider. Is the watch stolen? For example, what Auction House and what we do is we check if the watch is stolen. I mean, what we could do. With Interpol, Lost Art, there are things you should do. It's just a normal procedure. I think this is very rare. I mean, maybe 20 dealers in the world do this. And this is why I think a premium is also justified.

Stefan Wagner: 13:01 And once you have the watches or somebody has the watches, I mean, how do you make sure that the watch keep their value? I mean, there's probably a service to be done. Is it storage, insurance? I mean, there's all different people. Some have this, you know, movement.

Wulf Schütz: 13:20 Two sides of the coin. Keeping the value maybe has nothing to do with how you treat the watch in the first case, because if the watch just is not taste of the market anymore, the value goes down. But this is the beauty of watches. of vintage watches. In contrast to any other comparable assets like art, cars, etc., it almost needs no service. You have no storage costs, maybe a bank safe, most household insurance will cover it and even if you pay a little bit more you have no risk insurance that you can wear it every time. It's very, I mean, you can carry it everywhere.

Your classic cars, if you have a nice Ferrari, you paid a fortune for it. I mean, you can't go on the street if it's raining, etc. You can't carry it everywhere. So the maintenance costs, and this is always something people think about on this kind of what I call real assets. The maintenance costs of art and cars Also real estate. Gold is high compared to watches. With watches you basically have nothing. I mean you can have a briefcase and put 50 million in watches in there and the briefcase isn't heavy.

Stefan Wagner: 14:43 Now let's talk a little bit about the not so nice side about this. There's obviously one, I think they're called Frankenstein watches. So they're using real pieces, but they're cobbled together. And clearly trying to make something out of this is worth more than it actually is. How do you protect yourself? What's the issue there?

Wulf Schütz: 15:05 This is another point. So you have the condition as a key driver for value, besides rarity and demand for this specific model, but you also have the originality. And the less original the watch is, the less value it bears for most of the collectors. I have a kind of realistic view on that. I would say 100% of the vintage watches I have seen, I didn't buy originally. This is impossible because I'm too young. And so I can say all these parts are original Patek or Rolex. And from what I see, all these parts are period correct. So in that period when that watch was made, this was the plexiglass, this was the crown, this was the dial. And you have certain archives of manufacturers that help you on confirming that.

But I could never guarantee, and I always ask myself, why are people guaranteeing this is all original? I mean, it's impossible to prove, for example, that a bracelet, which was mass-produced in 100,000 pieces, was originally born with that watch. It might have been exchanged in a service in the 1960s, who knows. There are obvious things you see, so you have certain dials and you have to keep in mind that, especially in Rolex and certain type of watches, the dial makes about 90 plus percent of the whole value of the watch. This is not so much with Patek, what we have to see is that, especially Rolex and movements are It's not a differentiating factor.

Stefan Wagner: 16:57 Now, I mean, one step further, and when it gets ugly in a sense, is fakes. I mean, when the difference between material cost and what you can realize on the other side is such a difference, clearly people will try to make fakes and trying to sell it. I mean, how do you deal with that? Is it a common occurrence, or are these people found out reasonable quickly?

Wulf Schütz: 17:25 I think it's very common. You have this for all the luxury manufacturers, not only watches in their current production. Can you imagine how many fake Louis Vuitton bags and cases are out there? I mean, you see in certain countries on the street, people are offering you the whole range of Rolex watches.

Stefan Wagner: 17:50 But I have to say, in these places, often they're quite obvious fakes.

Wulf Schütz: 17:53 I think they're getting better. Because the production costs of making a perfect fake watch, compared to what you can get out of that, the spread is quite amazing. So I think they're getting better. We have this, unfortunately, also in the vintage watch world. So you have to be very careful. And the one collector, the one dealer, the one auctioneer who said, I've never had a fake, I never bought a fake watch, it's all fake parts. It's just lying. It is very difficult to see it. And you have to do your homework. I think nothing beats experience in evaluating that and a great network and exchanging knowledge.

So if it comes before we acquire a watch, you do proper diligence. Just an interesting story. I met an investment professional, really successful, and he bought a watch for around 100,000. And he showed me the watch and I said, I don't know how to say it, but the watch is completely fake. And he said, I can't believe it, blah, blah, blah. And I said, you know, what amazes me is you do due diligence on all your investments, thorough due diligence. You hire consultants and blah. And then you buy a watch and don't do due diligence. And this is what I find really amazing.

And this is what brings me back to rather pay a premium and you buy from someone who did the due diligence for you because It's not about the deal he's losing, it's about his reputation he's losing. And in the vintage watch market, or in any type of this kind of market, cars, etc., art, the reputation is the most important thing you have. Because this is what brings people to you. Word of mouth, etc.

You don't need to market that in the way you would market a company. And this is why this due diligence part is so important. So what you usually do if someone offers you a watch, I would ask for the provenance. Not the provenance in the way, did the watch belong to John F. Kennedy or someone? It would be nice. I ask, okay, how long do you have the watch, where did you buy the watch, etc. And then I do a simple check.

And most people don't do this, but this is my advice what you should do. Just check the serial number. Type the serial number into Google. Check in Google. Maybe the watch was sold in an auction house. And then compare the watch you have in your hand with the picture of the auction picture. And sometimes you find surprising makeup change of watches. You can't believe what I've seen. It's such a simple thing. People don't think about it. But in today's world, you have so many, maybe too many, but so many possibilities to do your own due diligence without being super knowledgeable.

Buy a book, another example, you buy a watch of 50,000 but you're reluctant to pay 200,000 for a proper book with all the information about the reference you're just intending to buy. I keep saying, this is really, if you would buy a small apartment as an investment, you would do a proper diligence. You would send an architect and see, okay, is this the right build? You would ask, okay, is this the right… Is it the right place in the city, etc. And even if you buy a watch not for investment, and I have to say, in first watches shouldn't be an investment, you should like them. But given the fact that we are at a price level now for certain watches which is high, I think you should do a proper diligence or ask someone to help you. And if you pay for that, I mean, come on, you also pay the architect who looks at your apartment which you intend to buy.

Stefan Wagner: 22:22 That leaves me with my last question. So what are your favorite, up to three, favorite Wall Street finance movies and why?

Wulf Schütz: 22:33 Wall Street finance movies.

Stefan Wagner: 22:36 Is it Wall Street? Is it Margin Call? Is it Big Short?

Wulf Schütz: 22:40 I mean, Wall Street is really good. And I actually have to say, I also like the second part. I have to say, it's not a Wall Street movie, but I watched The Wolf of Wall Street after I met um what's his name uh the real guy the real guy played by yeah and I really like that movie I have to say um because it's so crazy um and I like this kind of 1980s I’m a vintage guy so I was, I grew up in the late 70s and 1980s, so I'm a really 1980s guy. So that's why I like Wall Street, of course. That's why I like this movie. Yeah, I like this kind of 80s kind of movies because this was just a different time and in some ways it's… I know you can't compare it to today's time, and I think it wouldn't be good. But as a movie, I think I like it. And the movie should be entertaining.

Stefan Wagner: 23:56 Exactly. And they are entertaining. Absolutely. Thank you very much.

Wulf Schütz: 24:02 Thank you very much for having me.