I have been getting messages on every platform asking the same question: “what makes what is happening right now different than the 2008 recession?”
First, let me briefly walk through what exactly happened in the 2008 recession.
2008 wasn’t so much of a real estate crisis but a real estate accessibility issue… which isn’t necessarily what is happening here.
In 2008 lending regulations were very different and more in favor of pushing homeownership onto people. They did this by approving people for homes without even seeing income verification (they called these NINJA loans, “No Income / No Job Applicants”. This means that people who were not financially capable of homeownership were indeed able to own homes thanks to the low “teaser rate” for the first few years of the loan before their payments would skyrocket, even to triple their intro offer.
Mind you, this was also a time when house-flipping became HUGE, so not only are people (who couldn’t afford a home to begin with) buying homes, but now they were working to flip these homes that they can’t afford to try and turn a quick profit.
These types of strategies are bubble-like in nature as the success is dependent upon the market continuing to trend upward and not crash and burn; rather than actual backed data or skills setting the expectation for success.
However, the lack of income verification, the amount of money out from banks, and the general lack of care for this process spreading across the country ultimately led to incredible back-lash there soon after.
When you give people who can’t afford homes a mortgage, what happens?
They default. They can’t pay their payments.
Now the banks are the ones in debt for giving out loans on homes that shouldn’t have been given to begin with. Hence the ultimate market crash, recession, and lack of funds across the nation.
So, while homes are the big investment/cause of the 2008 crash, today we aren’t going to be focusing on real estate but rather on watches in the 2022 market.
Watches are different than real estate because they are essentially a cash-based asset, they are not a borrowed-against asset like a home or car would be.
Watches have always been a place to park money given the point I made above.
Only recently have watches become an investment strategy due to the market becoming so hot on certain pieces and certain brands.
All of the inequality though falls back to the most basic economic principle, supply and demand. Whether it is homes, watches, or cars, we are seeing a decrease in supply and high levels of demand.
Due to COVID, there are a lot of supply shortages in the world due to lack of materials and manual labor, however, demand is higher now than ever due to migration inside the nation as well as the formation of new wealth from crypto and entrepreneurial ventures.
This basic principle of economics is responsible for creating the drastic rising in prices that you see today.
Now, why are watches great in this market?
Perhaps the best thing about watches is that, unlike cars/homes, they are as mobile and liquid as anything can be. The buying & selling process can happen in less than an hour, and the value is recognized worldwide.
On the other hand, selling a house or car can take 15-45 days and lots of documents have to be submitted, as well as a lot of time and effort going into the process as a whole.
Watches can be done with a simple wire, check, or cash and a trip to a local coffee shop or post office, making the whole process quick and easy as opposed to other assets.
Cost entry is also accessible, too.
In order to buy a car even a cheaper daily driver car, typically you will need upwards of $7-10k, now those aren’t cars for an investment of course, but you understand what I am saying.
To buy a home, you need at least $150-200k depending on what it is you are looking for and where you live.
You can start with as little as $2,000 and once you sell your $2k watch, you can take the profit and buy your next watch for $3k and then sell that for $5k and continue to move up and up until you are wearing and trading watches in the 6 figure market.
Need another reason?
Well, one of the most valuable investments that have been steadily on the rise for years is: gold (and other precious metals). What are watches made of? Gold and other precious metals.
However, while owning a brick of gold is cool and all, there is no real function to the brick itself.
But an Audemars Piguet Yellow Gold Brick watch… well there is value in the material AND function, so you can wear and enjoy your investment while still being comfortable in the fact that your money is safe.
These are the reasons why investing in watches is safer than investing in real estate.
More importantly, this is why watches aren’t susceptible to recession standards, but please do remember, overpaying for a watch can still leave you in a hairy predicament, but that is something you can avoid by taking the lessons here at Watch Trading Academy seriously.