The Hour Glass

I've stated that 2021 is not as crazy as back in GFC or dot com. Frankly anyone competent can see a bubble but nobody knows when it will burst

https://www.valuebuddies.com/thread-8536...#pid163257

This watch segment is however a lesson of what a real bubble looks like.. almost 7X of retail price. What are GPU buyers complaining about? At least it's more durable than sports shoes

I've no idea how people authenticate these and am not surprised by the recent duo in Singapore that absconded from this bubble but more surprised at the crazy $32m amount that's like robbing a armoured bank truck

(30-07-2022, 12:04 PM)weijian Wrote: But to be honest, all these "analysis" is really just an academic exercise. Before I did my investment some time back, I re-read the last 100pages in VB on THG....there was just "so much noise" on hindsight. For THG, it is really about betting on the jockey, than the horse. While I don't have my own luxury watch but somehow I understand vanity I guess the amount of return on brain damage from THG, is much favorable in my situation.

THG has performed spectacularly over the past two years. And I will contend that it is actually the horse which contributed the majority of the performance; all luxury watch retailers enjoyed very good business. Those replies to SIAS only look good because the business currently looks very good.

This strong performance was induced by a perfect mix of pandemic, liquidity, and crazy returns from certain asset classes. THG rode the wave, and carried along its shareholders. There are many 'buy calls' on THG over the last 100 pages. But I don't see any of them arguing a boom in the resale value of watch prices leading to high demand at retailers leading to retailers gaining leverage over customers. 

Fundamentally, THG's business and financials are sound. But its outperformance was fueled by a confluence of unexpected events. So again, this demonstrates the role of (good or bad) luck, and the importance of diversification in investing.

Anyway, looking back is not worth as much compared to looking forward. So the more relevant exercise is to ask where the business will be heading in the next 10 years, and whether current prices are under or over valuing the business.

(30-07-2022, 06:12 PM)karlmarx Wrote: THG has performed spectacularly over the past two years. And I will contend that it is actually the horse which contributed the majority of the performance; all luxury watch retailers enjoyed very good business. Those replies to SIAS only look good because the business currently looks very good.

This strong performance was induced by a perfect mix of pandemic, liquidity, and crazy returns from certain asset classes. THG rode the wave, and carried along its shareholders. There are many 'buy calls' on THG over the last 100 pages. But I don't see any of them arguing a boom in the resale value of watch prices leading to high demand at retailers leading to retailers gaining leverage over customers. 

Fundamentally, THG's business and financials are sound. But its outperformance was fueled by a confluence of unexpected events. So again, this demonstrates the role of (good or bad) luck, and the importance of diversification in investing.

Anyway, looking back is not worth as much compared to looking forward. So the more relevant exercise is to ask where the business will be heading in the next 10 years, and whether current prices are under or over valuing the business.

Over my last X years investing as an OPMI, I realize I should try looking at jockeys first, and then horses. Of course, great money will be made identifying great horses and there are aplenty. But the field is a bit crowded and on a personal level, I do not have an edge.

It is a tad simpler to identify the jockey and depend on the jockey to identify the right horse and lead it where to go. And I will argue that the "look back" isn't meaningless, at least to me on a personal basis. The "look back" exercise gave me a simple (but powerful) lesson on how to look forward - ie. an OPMI like me probably wouldn't have good odds on the horse, and so it might be better to bet on the jockey. And sometimes when you think you found the right jockey, maybe prices may not matter too much after all (it is probably noise in the great scheme of things). The Tay family has some interesting dynamics and will be interesting to observe what's coming next. In essence, allowing the jockey to do his work, might continue to give this OPMI a better return on brain damage.

In the last hundred pages of this THG thread, there are VBs (probably around 2019), who obviously are watch collectors, alluding to the power of the retailer. Of course, they didn't state it explicitly but from those kind sharing, it wasn't too hard for a non watch collector (me) to vaguely understand where the dynamics lie.

d.o.g shared many times that absolute power was with the watch makers, and I absolutely agree. But expand the power sharing sphere and it gets slightly more complicated with interactions among various groups.

My biggest return on THG, is not the money I earned, but the appreciation of "cap the downside and the upside will take care of itself" principle. One can read the book, but only truly learn from experience.

I would rather look for a great horse 1st rather than a great jockey. The jockey just needs to be at a certain level of competence and honesty. Of course it would be great if we can have both.

The performance of horse(business) is usually quite consistent. It usually takes some time for the dynamics to change. It changes quickly only due to unexpected events such as the pandemic or the onslaught of technology that makes the new entrant much better.

THG is somewhat like the glove/mask makers, a sudden surge in demand with supplies being unable to cope. Remember the sky high prices of masks? $20 per box. Now is more like $2? But unlike gloves and masks which are commodity type products and easy to manufacture, luxury watches have much lower supply and many watch makers dont ramp up capacity during a surge in demand. So the downside can be somewhat slowed down and contianed to a certain extent.

What I dont like about the THG business is the fact that it is a niche luxury item and mostly sold to enthusiasts. Market can be fickle when it comes to such things. Even within the watch segment the trends come and go. Earlier period, people desired thicker watches, now from what I understand, the trend is thin. While the segment will always have its buyers, the longer term level of interest and profitability is very much unknown.

(30-07-2022, 02:04 PM)specuvestor Wrote: I've stated that 2021 is not as crazy as back in GFC or dot com. Frankly anyone competent can see a bubble but nobody knows when it will burst

https://www.valuebuddies.com/thread-8536...#pid163257

This watch segment is however a lesson of what a real bubble looks like.. almost 7X of retail price. What are GPU buyers complaining about? At least it's more durable than sports shoes

I've no idea how people authenticate these and am not surprised by the recent duo in Singapore that absconded from this bubble but more surprised at the crazy $32m amount that's like robbing a armoured bank truck

That's what you call a Long Con, or you could even say it may not have started out as a con as they were supplying genuine luxury watches to many buyers worth 10k/20k or more each. Then perhaps they piled up orders till 32m and decided since the bottom had fallen out of the watch market and no more demand, just abscond with the profits and retire on the beach in Thailand like a king. It will be very hard to charge them, especially if you cant find them, as they were probably not running this as a business, but as a private collectors group thing.

Nowadays with so much liquidity and greed in the world, its probably much easier to run a white collor type con like this, or like 3AC crypto thing, and just run road/plane than to physically try to rob something, where you cant run. 


You can bring to watch dealer or watch repair shop to authenticate, usually open up and look at the "movement" and jewels and components will tell, also magnifying close up of watch dial components will show often as almost all fakes have rough finishing. Youtube also has a lot of informative videos on spotting the fakes

(30-07-2022, 06:12 PM)karlmarx Wrote:

(30-07-2022, 12:04 PM)weijian Wrote: But to be honest, all these "analysis" is really just an academic exercise. Before I did my investment some time back, I re-read the last 100pages in VB on THG....there was just "so much noise" on hindsight. For THG, it is really about betting on the jockey, than the horse. While I don't have my own luxury watch but somehow I understand vanity I guess the amount of return on brain damage from THG, is much favorable in my situation.

THG has performed spectacularly over the past two years. And I will contend that it is actually the horse which contributed the majority of the performance; all luxury watch retailers enjoyed very good business. Those replies to SIAS only look good because the business currently looks very good.

This strong performance was induced by a perfect mix of pandemic, liquidity, and crazy returns from certain asset classes. THG rode the wave, and carried along its shareholders. There are many 'buy calls' on THG over the last 100 pages. But I don't see any of them arguing a boom in the resale value of watch prices leading to high demand at retailers leading to retailers gaining leverage over customers. 

Fundamentally, THG's business and financials are sound. But its outperformance was fueled by a confluence of unexpected events. So again, this demonstrates the role of (good or bad) luck, and the importance of diversification in investing.

Anyway, looking back is not worth as much compared to looking forward. So the more relevant exercise is to ask where the business will be heading in the next 10 years, and whether current prices are under or over valuing the business.

As I said before the secondary luxury watch market peaked in April this year and prices  correcting hard since then much like crypto. There will still be demand for new watches going forward so THG will still have business, but I would expect both top and bottomline to return to precovid levels, with revenue for coming year dropping back to 750m and earnings possibly around 75m. Could be worse if we have a global recession that results in a GLUT of luxury watches as all the speculators puke and finally capitulate. 

Just look at the moonswatches now, MOONSWATCH anyone interested?

I’m just amazed they can gather so much money which in a sense is also a sign of bubble eg dot com shell companies and the recent SPAC

The 2 are on interpol so I think there’s a good case. They chose to be rich criminals than free Spartans 🙂

Many of these watches are Brand New In Box or so they claim. Doubt they will allow you to open up. To paraphrase Buffett it’s to take out and fondle them once a while. I’ve seen the YouTube videos but usually are low grade imitation comparisons. When the stakes are high I’m sure there will be many incentivised. I would have thought one is extra careful when handling over large sums to people on the net but I can be wrong 😬

(31-07-2022, 02:39 PM)BlueKelah Wrote:

(30-07-2022, 02:04 PM)specuvestor Wrote: I've stated that 2021 is not as crazy as back in GFC or dot com. Frankly anyone competent can see a bubble but nobody knows when it will burst

https://www.valuebuddies.com/thread-8536...#pid163257

This watch segment is however a lesson of what a real bubble looks like.. almost 7X of retail price. What are GPU buyers complaining about? At least it's more durable than sports shoes

I've no idea how people authenticate these and am not surprised by the recent duo in Singapore that absconded from this bubble but more surprised at the crazy $32m amount that's like robbing a armoured bank truck

That's what you call a Long Con, or you could even say it may not have started out as a con as they were supplying genuine luxury watches to many buyers worth 10k/20k or more each. Then perhaps they piled up orders till 32m and decided since the bottom had fallen out of the watch market and no more demand, just abscond with the profits and retire on the beach in Thailand like a king. It will be very hard to charge them, especially if you cant find them, as they were probably not running this as a business, but as a private collectors group thing.

Nowadays with so much liquidity and greed in the world, its probably much easier to run a white collor type con like this, or like 3AC crypto thing, and just run road/plane than to physically try to rob something, where you cant run. 


You can bring to watch dealer or watch repair shop to authenticate, usually open up and look at the "movement" and jewels and components will tell, also magnifying close up of watch dial components will show often as almost all fakes have rough finishing. Youtube also has a lot of informative videos on spotting the fakes

(30-07-2022, 12:04 PM)weijian Wrote: While I don't have my own luxury watch but somehow I understand vanity  

Sometimes, it may not purely be vanity, for some companies(not referring to property agents/financial advisors), there used to be(or are) "unofficial dress code", for e.g. watch - Tag Heuer/Rolex, pen - Montblanc, eyewear - Oakley. I have no idea who started the trend. With increasing digital adoption, I guess the watches/pens could be less "relevant" now. 

There were(or are) also companies(not referring to watch retailers) who give out lux watches(e.g. Tag Heuer) for long service awards.

---------------------------------------------

Speaking of the $32m scam couple, I still can't figure out how some can pass tens/hundreds of thousands to them to purchase watches, particularly if what the couple offer is just a simple normal purchasing process.

Purchasing luxury watches from official retailers is probably straightfwd but when one decides to buy from other sources like pre-owned dealers, the process (at the pt of sales) should go something like this : (1) check the watch/bracelet for scratches (2) verify the serial no. of the paperwork(for watches with paperwork) with that of the watch - exterior (3) request the dealer to open up the watch(via special dedicated watch tools so as not to compromise the watch) (4) check that the serial no. of the movement matches - interior (5) bring to official service center to authenticate the watch(shd be FOC for Rolex).

At the end of the day, I think purchasing such "assets" is similar to that of stocks, we have to at least do some due diligence.

(31-07-2022, 09:14 PM)dreamybear Wrote:

(30-07-2022, 12:04 PM)weijian Wrote: While I don't have my own luxury watch but somehow I understand vanity  

Sometimes, it may not purely be vanity, for some companies(not referring to property agents/financial advisors), there used to be(or are) "unofficial dress code", for e.g. watch - Tag Heuer/Rolex, pen - Montblanc, eyewear - Oakley. I have no idea who started the trend. With increasing digital adoption, I guess the watches/pens could be less "relevant" now. 

There were(or are) also companies(not referring to watch retailers) who give out lux watches(e.g. Tag Heuer) for long service awards.

---------------------------------------------

Speaking of the $32m scam couple, I still can't figure out how some can pass tens/hundreds of thousands to them to purchase watches, particularly if what the couple offer is just a simple normal purchasing process.

Purchasing luxury watches from official retailers is probably straightfwd but when one decides to buy from other sources like pre-owned dealers, the process (at the pt of sales) should go something like this : (1) check the watch/bracelet for scratches (2) verify the serial no. of the paperwork(for watches with paperwork) with that of the watch - exterior (3) request the dealer to open up the watch(via special dedicated watch tools so as not to compromise the watch) (4) check that the serial no. of the movement matches - interior (5) bring to official service center to authenticate the watch(shd be FOC for Rolex).

At the end of the day, I think purchasing such "assets" is similar to that of stocks, we have to at least do some due diligence.

just a quick insight how the scam goes from what i understand. Tradenation (TN) sells these watches at 1-2k less than other grey dealers but the catch is that you have to wait a certain time period. (If its too good to be true it probably is; that is why they only sell slightly cheaper).

They started out by delivering the watches and slowly get good reviews and more orders. The watch bubble burst sometime in April but i'm puzzled because the orders they took earlier vs current market price they could have easily buy the watches and profit the difference.

Its over here where 'netizens' speculate they took the money to invest else where.

Sorry can't resist to side track a bit. Nothing new under the sun

https://news.bloomberglaw.com/white-coll...nzi-scheme
For years, he seemed like a wizard of Niketown – a Lamborghini-loving sneakerhead who made millions peddling rare Air Jordans at crazy low prices.
Now, this consummate shoe salesman has been accused by federal authorities of masterminding a Ponzi scheme custom-fit to these strange financial times.
After all the get-rich dramas and market mischief of the pandemic economy – from cryptocurrency to SPACs, to “stonks” and more – it’s come to this: a Bernie Madoff of sneakers.
That, in a nutshell, is how authorities characterize Michael Malekzadeh, of Eugene, Oregon. Prosecutors say Malekzadeh, 39, and his Zadeh Kicks LLC swindled thousands of people across the nation in a multimillion-dollar scam involving nubuck and leather, rather than stocks and bonds.
<SNIP>
The latest limited-edition Air Jordans, the 11 Cool Grey, appears to have been a step too far.
As Nike prepared to drop the new high-tops last December, Malekzadeh made a move, prosecutors say. Nike was pricing the 11 Cool Grey – nubuck upper, grey patent-leather mudguard – at $225.
But Malekzadeh’s company offered to sell them for as little as $115, before the December release date, with the understanding that buyers agreed to take delivery a few weeks after the official drop.
Zadeh Kicks sold 600,000 pairs. It only had 6,000.
Most customers never got the shoes they paid for. Zadeh Kicks, however, pocketed $70 million, prosecutors say.
According to court documents, Malekzadeh spent much of his profits on Bentleys, Ferraris and Lamborghinis. Some $3 million went to Louis Vuitton bags, jewelry, furs and watches as expensive as $600,000 a piece. 

(30-07-2022, 02:04 PM)specuvestor Wrote: I've stated that 2021 is not as crazy as back in GFC or dot com. Frankly anyone competent can see a bubble but nobody knows when it will burst

https://www.valuebuddies.com/thread-8536...#pid163257

This watch segment is however a lesson of what a real bubble looks like.. almost 7X of retail price. What are GPU buyers complaining about? At least it's more durable than sports shoes

I've no idea how people authenticate these and am not surprised by the recent duo in Singapore that absconded from this bubble but more surprised at the crazy $32m amount that's like robbing a armoured bank truck