Forget CPI. Inflation Is Measured With Art Nautilus.

Gerald Genta original sketch of Patek Philippe NautilusFour-and-a-half years ? Where does the time go! I’m not exactly sure either,i but regardless, it’s been exactly that long since we used fine art auction results instead of CPI to give us a sense of the real rate of inflation, so it’s high time we take a fresh look at the rate at which our dollars are decreasing in value.

While interest rates today are virtually identical to what they were in May 2014, they all but bottomed out to zero in the interim in a globally concerted effort to stimulate consumerism so as to minimise the blatant and brazen breaking of oh so many political promises.ii As we well know, the way that inflation is typically advertised, ie. the CPI/PPI basket of goods methodology, is intentionally if not outright maliciously flawed so as to obscure the shadowy mountains of debt being everywhere accumulated.

Those with eyes that do seeiii can’t help but notice the market impacts of this rapidly degrading purchasing power in the realms of fine art, fine automobiles, and others, but let’s take a year-end review of the dollar-denominated state of affairs for 2018. Our case study is, what else, but very, very nice watches!iv

Having just taken delivery of Osvaldo Patrizzi and Guido Mondani’s “Collecting Nautilus and Modern Patek Philippe Wristwatches,”v which was originally published in 2004 but updated in 2016, it’s nothing short of astonishing just how much prices have changed since the most recent update. While the 5711 gets most of the airtime these days, in less than three years, the O.G. Nautilus 3700vi and even the considerably less desirable “mid-size” 5800 have “done an air-cooled” and utterly exploded assploded in value. Comparing the Patrizzi/Mondani estimates from 2016 with current data from Chrono24, Christie’s, Sotheby’s, and premium brokers,vii this little table emergesviii :

Patek Philippe Nautilus price inflation 2016-2019

Of course, you know me, so it’s no surprise that I snuck Bitcoin in as a frame of reference, but an inflation rate of 53% since 2016 is still a fuck ton! Any collector worth their salt would be tickled pink to have ridden this most recent Nautilus wave, and would find themselves the talk of the town for it,ix but there’s still an opportunity cost to overcome, if too a social and emotional aspect of the equation.

But regardless, as with art and automobiles, there are still a functionally unlimited number of dollars chasing a very small and very limited number of wrist-wearable Genta-designed masterpieces named “Nautilus,”x so this isn’t so much a “bubble” as yet another example of the same phenomenon we looked at almost half-a-decade ago : dollars are plummeting in value. 

And how! These kinds of figures (53%!!) will never show up in the tightly regulated baskets of tightly regulated goods that make up the CPI and PPI, but the dizzying oceans of cash floating around the fiat world can’t help but funnel themselves into every manner of unregulated durable good, be they Picassos, Porsches, Pateks, or… Bitcoin, and with increasingly accelerated speeds.xi Dollars have to move. It’s in their nature.xii

The question is : if you’re going to take a bath, why not strap on a Nautilus ?

___ ___ ___

  1. ARGGHGHRHJ!1!! TIIIIME?!!!?!! 
  2. More than just political promises, you might argue, but social contracts too. *SNAP* right over the knee.
  3. Y’know that old Corbu line…
  4. Noooooooooice.
  5. The three-volume set was early Chrismukkah gift to myself alongside a similar three-volume set for Rolex and a single-volume Daytona book. The deep dive continues!
  6. The Nautilus was designed by Italian master Gerald Genta to resemble the porthole of a yacht, and indeed the 3700 was constructed thusly – in two hinged parts with the movement entering from the dial-side. This was not only challenging to produce but also to service, so later versions switched to a more conventional three-piece case while retaining the same 120m water resistance.

    For more, Brice Goulard at Monochrome offers a bang-up primer to the full history Nautilus here

  7. eg. A Collected Man, Steve Hallock.
  8. Since it’s very nearly 2019, the per annum (p.a.) inflation rates are calculated over a three year period instead of two. This gives some allowance for discrepancies between the time of writing and the time of publishing of “Collecting Nautilus” as well as the benefit of the doubt to the beleaguered dollar.

    Also, since the 2019 “unworn” numbers were estimated to be proportional to the 2016 numbers because it’s almost impossible to even find unworn examples for sale, the museum-quality safe queens changing hands privately as they must, the inflation p.a. figure ends up being the same, so only one is listed.

    Second-to-lastly, the bracelet and case “Materials” are encoded : S=Steel, YG=Yellow Gold, WG=White Gold, and YG/S=Two-Tone Yellow Gold/Steel. If I was being really French Swiss about it, I’d have labeled them, A, J, G, and AJ, respectively, but let’s give some respect to the international lingua franca, eh ?

    Lastly, a note on the importance of “box and papers” from Patrizzi and Mondani : would-be collectors can’t ignore that “papers” consisting of the original warranty card and Certificate Of Origin are vastly more valuable than the Extract From The Archives that we frequently see constituting “papers” on eg. Chrono24. Caveat emptor!

    Patrizzi-Mondani valuation estimates

  9. The “town” here is, of course, not the entire city where the collector lives. Their garbageman and barber don’t care. But their RedBarInstagram buddies sure do!
  10. Exact Nautilus 3700 production figures are known only to Patek but this happens to be a very good estimate :

    Patek Philippe Nautilus 3700 Production Numbers

  11. Recall that I estimated the inflation rate from 2012-2015 at 41.5%, and now 2016-2019 is 53%. That’s more than a 20% in the annual rate. It doesn’t take a math genius to figure out that Voltaire was indeed onto something all those years ago.
  12. Contrariwise, it’s in the nature of Bitcoin not to move. In fact, miners even used to priviledge the movement of older coins by incorporating “coin age” alongside miner fees when creating mempool hierarchies. Alas, those days are but a distant memory now.

8 thoughts on “Forget CPI. Inflation Is Measured With Art Nautilus.

  1. I cannot resist to bite the hook here: what exactly makes that thing “limited”, other than unverifiable promises from the vendor ?

    The Swiss, or if you like, even the Chinese, were they to give a damn — can make all the “Nautilus” they want, in the process “inflating the monetary mass” all they like, and without necessarily bothering to publicly say anything.

    • Pete D. says:

      Hard to believe though it may be, the art and collectible markets work on a surprising amount of human trust. This can lead to corruption in the fine art markets when selecting “rising stars” and “the next great contemporary artist,” but in the automobile and watch markets, the level of finishing, quality control, engineering, and specialised supply chains mean that efforts at counterfeiting are more of a comedy of errors than a real commercial threat. A fake Nautilus at Sotheby’s would be as obviously out-of-place as a Tramborghini on the starting line of the Super Trofeo GT3 series.

      As to unverifiable vendor claims, serial numbers, open communication between collectors, and provenance are obviously the best defence. While neither Patek, Rolex or anyone else in the Swiss watch industry has ever been caught behaving badly in this manner to my knowledge, carmakers, most notably Ferrari, have been at several point in their history guilty of producing “extras,” though with seemingly no detriment to value, desirability, or collectibility. Ferrari is still #1 in the vintage market.

      But that’s irrationality for you.

  2. Re: serial numbers, even if they only “overproduce” to “replace” units lost at sea, burned in plane wrecks, etc. that’s still dough…

    • Pete D. says:

      Let’s not get lost in the weeds. What you’re really asking is how manipulable is the asset ? To which the only possible answer is : it depends on your frame of reference. There never has been and never could be an market-priced asset immune from manipulation. The next question of “how much is ok?” is a personal one at best, but there are certainly markets that are more susceptible than others.

      There’s at least a simplicity and innocence to collectibles being as it’s free of the financial engineering associated with larger and more sophisticated markets. It’s thankfully not even conceivable that a Credit Default Nautilus (CDN) would be available from GS or MS. This arguably makes collectibles markets less susceptible to Wall Street’s influence, but as discussed on these pages previously, a few Italian aesthetes are all it takes to move these minnow-sized sub-markets (the 37XX series of Nautilus is currently worth about $1bn all told), though even that takes years or even decades.

      From another angle, you might ask how much does perfect knowledge of the total possible supply matter to its long-term price ? I don’t have a good answer for that. On one hand, while it’s obviously less than ideal to know that the supply can theoretically be increased for any given asset, in practice, I’m inclined to say that it’s the magnitude of this potential increase that’s most important. Can there be a “surprise” doubling of the world’s known oil, gold, or diamond supply ? Of course. Can there be a “surprise” doubling of Ferrari 250 GTOs with racing pedigree or Paul Newman Daytonas worn by Paul Newman ? Not really. So in this regard, at least, the little machines fare rather well. Recall that Bitcoin isn’t even perfect in this regard. How many coins have been lost forever, not least of all Satoshi’s stash ? There’s considerable uncertainty about at least 5-10% of Bitcoin’s total supply.

      As an added bonus, even if it’s not vendors who could increase the known supply but scavengers and barn hunters, there’s a huge amount of charm to this! One day, there will be “barn find” bitcoins on dusty paper wallets or old laptops. Being superstitious as we are, this is arguably a feature, not a bug. I mean, who doesn’t like to get a little lucky now and again ?

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