Complications

Panerai PAM 2A - Just Right!

Technically speaking, I've been collecting Panerai watches since 1998, when I first saw a Panerai in the 'one of-s' case of my favorite local watch shop. 

I'd later find out that as a Cartier dealer, taking on the Panerai line in the early days was maybe more of a requirement than an honor - a lot has changed since then! 

When I saw the huge watch with the strange device around its crown I had to take a closer look - the kiss of death if I'm trying to escape the visit with my bank account fully intact.  I can remember that while I really liked the look of the Panerai, it felt huge on my wrist - I was accustomed to something in the neighborhood of a Sea Dweller.... maybe 38 or 39mm and the extra 5 or 6mm of the Panerai seemed to make it gigantic in comparison. 

After a lot of talk about how exclusive the brand was and how great the watch itself looked on my wrist, there was the customary three rounds of haggling - the exchange of the check - and then the boxing of whatever watch I walked in with that day so that I could leave with my brand new Panerai on my wrist (repeating the correct pronunciation of Panerai - 'Pan-er-I' - under my breath in case anyone asked about the tuna can now attached to my left arm).  It was, as luck would have it, a Panerai PAM 2A - the best performing 'investment' that I have ever made in a watch! 

While I don't remember exactly what I paid... I'm sure the retail price at that point was under $2,000 and I know that the discounting was unusually deep since the dealer couldn't wait to get rid of it and I really wasn't all that convinced that I wanted it! 

Today, astoundingly, a nice Panerai 2A with the original box, paperwork, straps and opposing screws buckle can sell for almost 20 grand. 

Most alluring to me about the Panerai PAM 2A is the dial.  The aging tritium indexes and arabic numerals are starting to turn a vintage looking yellowish brown color that gives the watch an authenticity of sorts.  Equally compelling to me is that there is nothing superfluous at all about the dial or the design of the 2A - there's not even a seconds hand to get in the way. 

The whole presentation is one of an honest tool watch that looks like it could (and can) take a beating. 

The movement is, as movements go, nothing special at all -  dubbed the OP-I, it's a manually wound ETA 6497 with a minimal amount of re-working - a solid caseback means that the only the watchmaker will see the movement and it's been adorned accordingly.  Certainly not up for any awards on the frontiers of high-horology, the popular 6497 is though an incredibly robust performer and ideal for a large tool watch like the Panerai 2A.  Service is simple and the parts, like the watch, are large and easy to manipulate. 

Would I pay $20K for a 2A if I didn't have one?  Probably not - $20K can buy something close to the 2A in a more recent Panerai edition and the extra bucks could be put to good use in acquiring a few other nice tool watches that scratch the same itch.  Would I sell my 2A for more than 10x what I paid for it?  Not on your life!  I wear it more often than any other Panerai in my collection and it, for me, is the perfect watch and the perfect Panerai.          

Panerai Luminor 10 Days GMT - Two Zones and Plenty of Reserves

As Panerai begins to showcase its newly attained 'manufacture' status in its collection, the capabilities of the new in-house Panerai movements are being translated into significant benefits for the Panerai enthusiast.  The Panerai Luminor 1950 10 Days GMT owes two extremely practical functions to it's Panerai manufacture Caliber P2003 movement:  it displays a second time zone when the wearer finds that meaningful; and its power reserve exceeds 10 days. 

Suffice it to say that the rise of the Panerai brand has been astonishing to even the most critical of watch industry observers.  As one of Richemont's premier houses, Panerai's sales results now routinely eclipse even the most well recognized Richemont brands that have been household names for generations.  While many 'old-school' Panerai collectors wince each year as Panerai introduces its new creations, none would argue that, on the whole, Angelo Bonati (CEO) and his team at Panerai have always kept the history of the brand at the forefront of the design process.  Routinely , Mr. Bonati connects with collectors and fans of the brand to exchange ideas and get feedback.   

Even the name of the Panerai Luminor 1950 10 Days GMT is big.  Most will simply call it the PAM 270 (it's ref.).  The watch itself is substantial in every way yet exceptionally comfortable on the wrist and very easy on the eye.  Of course, instantly recognizable and exclusive to Panerai; is the crown locking device that occupies virtually the entire right side of the stainless steel case.  The whole of the case is carefully brushed with a circular pattern around the bezel and vertical patterns on the lugs and sides.  The bezel itself is high-polish and provides a perfect amount of contrast between the matte black of the dial and the satin finish of the rest of the case.  Everything on the dial is arranged logically and is very easy to read in all light conditions.  The subsidiary seconds hand at 9 o'clock has a display at it's 3 o'clock that indicates the time of day (AM or PM) in the 'home zone'.  A date display at 3 o'clock on the main dial indicates the date in luminous numbers on a black field.  The remaining power reserve is indicated via a laterally moving indicator aptly beneath the '10 DAYS' monachre and positioned just above 6 o'clock.

The crystal on the 270 is domed sapphire and anti-reflective; it creates some additional dial depth and dimension and compliments the already striking lines of the 10 Days GMT perfectly.  The caseback is also see-through owing to another sapphire crystal that's affixed by a screw-down bezel. 

When you're spending time in a timezone other than your own, the GMT displays your home time with it's arrow tipped hand that's synced with the AM/PM display that I previously mentioned.  The idea being that you likely know whether it's 3 in the morning or 3 in the afternoon where you are standing (hopefully anyway!) but if you are on an extended journey, you may lose track of the days and nights back home.  When you are on your home turf, the GMT hand tucks completely beneath the hour hand to become invisible.  Another nice feature owing to the caliber P2003 is the ability to re-zero the seconds hand (sub-dialed at 9 o'clock) by moving the crown to the third position (all the way out).  One step beyond 'hacking', this makes synchronizing the PAM 270 to atomic time even easier.

At it's base, a Caliber P2002, the P2003 movement incorporates an automatic winding system.  The 'governing' of the P2002 to 8 days of reserve power was also dispensed with resulting in the excess of 10 days reserve that the P2003 now enjoys.  Panerai limited the 2002 to account for the fact that many manually wound watches will be intermittently wound (so the torque range can vary widely).  With the addition of the automatic module, the range becomes much narrower allowing the full exploitation of the reserve capabilities without any negative consequence.  The P2003 movements performance is excellent and the fit and finish are exceptional with more than the expected attention to detail. 

Equipped with an alligator strap that's outfitted with a bottle-opener style buckle, the 270 is very comfortable on your wrist.  If you're new to big watches, the learning curve is actually very short when it comes to getting comfortable with wearing a Panerai. 

At just over $14,000 US, many will question the value proposition of the 10 Days GMT.  Certainly, this has been an ongoing theme on the various Panerai forums as collectors and devotees of the brand wrestle with the tool watch vs. technical masterpiece dilemma and skew it against the price curve. 

With the limited production and rampant demand intrinsic to the brand, Panerai watches rarely depreciate in value.  Even the early critics of Panerai now readily admit that all assertions that the popularity of the brand, that has come to be synonymous with the 'big watch', was just a passing fad have now been disproved.  Panerai is a carefully managed force with some significant history in the marketplace now that makes it much easier to justify the price of admission.

If I couldn't refer to the historic prices of Panerai watches and compare the MSRPs and secondary market pricing, I'm not sure that, even with the in-house movement, I could make a very convincing case for the Panerai Luminor 1950 10 Days GMT being a $14,000 watch.  But I can and so I will.  If history is any guide, it will be hard to lose much money at all if you purchase this watch, enjoy it thoroughly, and sell it at some point in the future.  It's hard to miss when you buy a Panerai!                 

Investing in Watches? Buy the Blue Chips and the 'Story' IPOs.

Much more exciting than mutual funds, some high-end Swiss watches are a very attractive investment that you can wear while you watch your fortune grow.

While many of us use the 'investment' angle to justify owning a silly number of watches, the truth is that most watches aren't going to appreciate in value anytime soon.  But there are exceptions!

If you want to increase your chances of picking a winner dramatically, you'll buy a Patek Philippe, especially one that has has some interesting complications or is limited in production.  It isn't just coincidence that the watches that consistently bring in the highest dollars at Christie's and Antiquorum are Pateks.  A robust and well heeled network of collectors routinely competes with the Patek Museum itself to propel the prices for rare and unusual Pateks into the stratosphere. 

The world's most expensive watch, a unique platinum Patek Philippe World Time Ref. 1415 made in 1939 sold for $4,026,524 in an Antiquorum auction. 

Surprisingly, the audience for a watch like this is a lot deeper than you might imagine.  Routinely bidding in the $750,000+ segment is spirited with sometimes as many as a dozen bidders competing for a particularly compelling example.  Many times these watches are pristine, include their original paperwork and packaging, and look unworn.  Sometimes they are obviously worn and include just a letter of authenticity from Patek.   

Christies too has established a firm footing in the top 5  watch auction results with the sale of a Patek Philippe "Grogan" single-button split-second chronograph made in 1925 and in a left-handed configuration. 

This watch sold for $1.9 million dollars and certainly made both the sellers and buyers day.  The original price of either of these watches has never been officially confirmed, but it's safe to say that rumors that neither set their original owners back more than a grand aren't far off.  Any way you analyze it, that's a spectacular return!

What can you do to turn the experience of owning a great watch into one that has a high likelihood of adding to your net worth?  Buy the Blue Chips or Pick an IPO with a great story. 

If you're searching blue chip watches, you really don't need to go any farther than Patek.  While Vacheron has certainly enjoyed some spectacular results of its own, Patek is really a much safer bet.

Find a Patek with a fair bit of complication and buy it in platinum so you'll be sure that the production numbers are fairly small.  If you have to order it and there happens to be a list that you need to know someone to get on to and even then you have to plunk down a substantial deposit a year before it's actually manufactured - you're definitely on the right track.  While you can expect to pay something very close to retail for these watches, you can also count on being able to sell them for more than you paid on the day that they arrive at the dealers and a year or two later, the appreciation will be dramatic.  Pass on the quick return and twenty or thirty years down the road, you might just be able to fund a serious lifestyle with the gains.

On to the IPO strategy.  If you have spent some time in the world of great watches and you can get a sense of the pulse of the collectors market by visiting the brand forums, you may be able to find a trend that makes a particular watch brand or model launch seem like a home run.  Such was the case when the small niche Panerai brand was acquired by Richemont in the late 90s.

Panerai is the perfect example of the 'story IPO watch'.  Trading on the rich history associated with this brand that originally served as the exclusive supplier of watches and diving instruments for the Italian Navy, Richemont created the perfect storm when it combined provenance and a unique look; a huge tool watch with a unique and prominent crown locking mechanism, that couldn't be mistaken for anything else on the market at that time. 

Initially, leveraging it's relationships with the Cartier authorized dealer network, Richemont began to distribute Panerai to a somewhat less than enthusiastic dealer audience. 

Seemingly forced to sell these over-sized tool watches in cases next to a much more refined and genteel selection of Cartier timepieces, dealers often discounted these 'A' series watches to levels close to actual cost.  The watch of the Italian Navy certainly wasn't 'flying off the shelves' in the early days. 

As the market evolved and the over-sized watch phenomenon took hold; dealers suddenly were clamoring to become Panerai authorized agents, customers were lined up and happy to pay full retail if they were lucky enough to find a watch, and authorized dealers were frantically trying to persuade Richemont to send them more inventory.  Just as quickly, anything Panerai became very collectible and the value of the watches themselves skyrocketed on the collectors market. 

The same can be said for small boutique brands like F.P. Journe and Richard Mille.  Watches from either of these well-respected houses are exceptionally well crafted, very attractively designed, and almost sure to be good long-term investments.  Again, there's a story associated with these brands and it's compelling and unique. 

Don't discount watches as investments.  It's nice to be able to enjoy something now that has the potential to appreciate in value over the long term.  In 'investment grade' watches, the worst case scenario is that you wind up with a great watch!      

   

Grey Market Watches - Masterfully Veiled Price Discrimination!

I've thought a lot about the real dynamics of the so-called 'grey market' for watches and the degree to which the manufacturers have an interest in keeping it alive.   

Going back to some of the things that I learned about in B school; it seems like the luxury watch market would make the perfect case study for the clandestine and well executed practice of price discrimination. 

As the theory goes, it's advantageous to be able to sell the same product to various segments of the market at the highest price that they are willing to pay for it.  It's best, of course, if you are interested in preserving the integrity of the brand; to do this by convincing those who are willing to pay the higher price that they are getting something that's somehow different from those who are paying the lowest price.  Most people won't pay more simply because they can, they need to perceive some additional value in parting with the extra money. 

Certainly much is made about the importance of only buying from an 'Authorized Dealer' and there's a large segment of watch collectors who would never buy a new watch anywhere else.  A great deal of time and money has been spent to convince us that deviating from the officially sanctioned route for acquiring a new watch is fraught with all sorts of peril:  Will the watch be authentic?  Will the warranty be honored if there's a problem?  Is it stolen?  Is it really new?  Will it even arrive on your doorstep after you share you credit card details with a stranger who is a thousand miles away?   

To keep the dream alive and maximize the drama (and profit margin), there's the sometimes comical dog and pony show that you'll encounter when you venture down the discount path with your 'Authorized Dealer' (AD).  You know the one.... where they'll lose the whole line and the multi-million dollar inventory will vanish overnight if the manufacturer finds out that they gave even their best customer a 20% discount.  It's important for the maximization of the strategy to keep the premium buyer paying the premium price at the authorized shop so that the bargain hunter still feels like he or she is getting a deal when the Grey Market seller offers him or her a 25 or 30% savings.

It seems to me like that real charm of the arrangement in the watch business, at least from the perspective of the manufacturer, is that the dealers (both authorized and unauthorized) take care of all of the dirty work and absorb most of the grief.   

By requiring the Authorized Dealer to take on more watches than they can feasibly sell, the manufacturer all but insures the creation of an arrangement between the AD and a grey market vendor.  Obviously, while this can't be officially sanctioned or suggested, the manufacturer absolutely needs this 'off the record' distribution channel to move the most product possible.  While they remain unrecognized and sometimes even maligned, grey market 'dealers' do sell a lot of watches.   

In 'encouraging' the AD to hold the line on price with clients who see the value in the AD relationship and will pay a premium for it, the manufacturer sets up the value proposition that the grey market dealer needs to convince the clients that value the best price above all else that they are, in fact, getting a deal!