SDC Weekly 149; What You Lose When Your Watch Gets a Ticker; Rolex Mirrored Latour's 25-year Escape Plan (Part 2); How Collecting Habits Change
Kalshi brings prediction markets to fine art, on NYCwatchguy's bull case for watches, how Rolex copied a wine producer to skim off every resale, and Kering's ex-car-CEO on luxury.
🚨 Welcome back to SDC Weekly!
I’ve been travelling for over a week now, and in between other commitments I have been working on a Ferrari Luce essay that I just cant seem to wrap up… anyway, something to look forward to, but for now, Jack Forster has done a fine job covering it here. I’m also bummed to be missing London Watch Week but if you’re in London this week, check it out here.
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🎰 What You Lose When Your Watch Gets a Ticker
A few months ago I wrote about Watch Futures; this was the Kalshi-Bezel product that lets you trade contracts on whether Rolex discontinues the Pepsi, or whether the Bezel Rolex Index closes above some line at the end of the month. After that, I wrote about the Courtyard loot box; this was the $10,000 mystery pack with maths that work out badly for almost everyone who opens one.
I thought I was done with the financialisation beat for a while... but last week ArtNews reported that Kalshi has launched the same prediction-market BS for fine art. So if you’re into that sort of thing, you can now bet on whether Basquiat’s auction record breaks this year (the crowd says no), or what the priciest lot of the year sells for (the crowd is split between $250m and $300m), or whether a specific painting clears a specific price.
What I find intriguing is that the watch version came first, and the art version came second. That’s backwards, don’t you think? Regardless, I think the art version is the more revealing of the two, because it says something about the road our hobby is already a few miles down.
“Hedging” = pure fiction
Kalshi’s legal counsel says “a collector sitting on ten million dollars in impressionist paintings has no efficient way to manage that exposure—until now,” and they go on to add they are giving the art world “the same financial infrastructure the rest of the economy takes for granted.”
You know what that’s describing? Hedging. This is the respectable, grown-up reason a market like this is supposed to exist. The idea is that if you own millions of dollars of Monets and you’re nervous, you sell some contracts that pay out when Impressionist prices fall, and now you’re protected.
Except think about whether that actually works for you, the watch collector. To hedge your safe full of Pateks, you’d need a liquid market in contracts that move reliably opposite to Patek prices and settle against an index everyone trusts. We do not have that. We have things like WatchCharts, which (as I’ve noted before, and as the comments section reminds me almost every time) aggregates settled sales but is contested and not collectively exhaustive. We have Chrono24 asking prices, which are basically ‘aspirational fiction’ at best. Bezel’s Beztimate is another attempt and it still only covers what clears on one platform.
So the “hedging” pitch is mostly just decorative, right? What you get in practice is a venue to speculate, but it’s framed as risk management. Which is fine! But it’s worth calling a spade a spade, because the delta between the stated reason a product exists (managing risk) and the actual thing it does (letting you gamble on prices) is the whole story here. It is the same gap as Courtyard’s 95% buyback guarantee, which sounds like a ‘safety net’ and is really just the spread.
How does art matter?
Does the fact that the art market is doing this accelerate things in watches? I happen to think so - and I’ll offer three possible reasons for this.
The first we can call legitimacy laundering. Art is one of the oldest and most socially respectable asset classes on earth (Sotheby’s traces its first sale to 1744). As ‘proof’, just consider how nobody needs a 20-minute explanation for why a Picasso is a financial asset. It just is. So when Kalshi bolts prediction markets onto art, the watch version stops looking like a weird crypto-adjacent stunt and starts looking like one node in a purportedly normal, regulated financial system. That’s not to say the watch market became ‘more legitimate’ - this new development just allows watches to stand next to something that is already ‘more established’.
The second reason is that they get to share the infrastructure. This is all on the same platforms, it all uses the same CFTC “event contract” legalese, and we even have the same legal counsel making the same speech with the noun swapped from watches to art. So really, once you’ve built the rails for art, running watches on them costs almost nothing. Going back to the supply-side point from my loot box essay - these products proliferate because it is now cheap to build them!
For my third reason, let’s turn to NYCwatchguy’s bull case for watches. He made an argument that watches carry a massive psychological handicap which art doesn’t - that handicap was that watches have an MSRP. When a watch that retails for $70,000 sells for $900,000, your brain anchors to the retail number and screams “that’s 13x retail, this is insane.” A painting has no hang tag. “Meaning has no cost of goods sold,” he writes - which is a good line I thought. The market is just the market.
He treats the MSRP as watches’ ‘burden’, that is, retail price is the thing keeping them stuck at kindergarten while art sits in the faculty lounge. I suppose as a psychological matter, that’s fair enough.
But why not flip this and look at it the way a financial derivatives expert would. A prediction market needs one thing above all else, and that is an objective, agreed reference point to settle against. Did the contract resolve yes or no? That question has to have a straight answer, otherwise nobody will trade on it.
And here, I think watches are better collateral than art, not worse. A watch has a retail price, secondary comps, settled-sale indices, model references, serial numbers and all this other data. Art has an auctioneer’s estimate and a hammer - and this is precisely why the art contracts are forced into fuzzy wording like “will the record break” or “will the top lot clear $250m.” The very MSRP that NYCwatchguy calls the watch market’s anchor is the thing that makes a watch easier to write a bet on.
Is the bull case valid?
Give the man his due first; I agree that the pool of people who can afford ‘culturally important’ and scarce objects is growing faster than the supply of those objects, and the best objects are Schelling points (places people converge on without needing to coordinate). Everyone knows the Paul Newman Daytona, everyone seems to have now heard of Rexhep… and he’s right that most of the “this is insane” reaction is just MSRP anchoring plus unfamiliarity. He’s also right that you’re early to a market while it’s still uncomfortable, not after it’s comfortable.
I do have two pushbacks, though.
He leans hard on “art had a 250-year head start” - this is the idea that watches are simply walking art’s path but on a compressed timeline. Maybe. But that framing inherently assumes that watches must get to where art did, as if it were a law of physics. It’s really just one path among several. Art became a financial asset class, but it didn’t have to.
The other thing is how he frames watches “becoming art” as the bull case. But ‘bull case’ depends on your perspective, and in his framing, it really isn’t a good outcome for watch enthusiasts. Watches becoming art means watches becoming vaulted wall-assets you bet on instead of just being objects you wear and enjoy. The endpoint of ‘full financialisation’ might be something insane like a Journe in a vault in Delaware with a live ticker next to it - this is the sort of future I find a bit grim.
The ceiling in his story is, to me, more of a mass-cultural-damage scenario.
Thought experiment
Assume you love your watch, and today, you experience its market value somewhat ‘episodically’ through an auction result here, a forum thread there… things you can choose to look up or simply ignore. Now imagine a live prediction market trading 24/7 next to a Bezel index ticker, both flashing red and green. “Journe Résonance souscription breaks CHF 6m by December” at 41 cents, up two on the day.
More than the bet itself, the continuity is the big change here. Financial salience would go from something episodic or ‘ignorable’ to something ever-present and constant. The fact that art is now going down this path and accelerating things can maybe lead to betting on cultural objects becoming ordinary. And once it’s ordinary, it takes a lot of effort to look away from it.
And that’s not all… think about who has the edge in a watch prediction market; dealers with allocation, people who see the catalogues early, and arguably the brands themselves. Christie’s told ArtNews its conflict rules already bar employees from these markets. Watch brands have never needed rules like that, because until recently, nobody could make money trading on the colour of a Rolex release. A retail punter betting on watch prices is effectively sitting at a table where the other players can see his cards. The ‘democratisation’ here is real in the sense that anyone can play, but it is not real in the sense that everyone can win.
So, what to do with this?
Probably nothing, honestly. A prediction market is, at bottom, a kind of machine for turning collective social belief into a number. That’s not nothing, because price is, after all, a type of collective social belief represented in a number. It is what we tacitly agree something is worth right now given everything we know and feel. You can interpret that as efficient price discovery (bullish) or as something which turns watches’ meaning into a ticker (less so).
I haven’t budged from my previous conclusion; Kalshi can price your watch, but it still can’t tell you whether it was worth buying. All this financialisation infrastructure is going to keep knocking at the door whether we like it or not, and the only move that stays available to you is to keep your attention on the object and let the ticker blur into background noise. Whether that’s still possible, in a hobby that seems increasingly designed to financialise your attention, is the question we will need to answer for ourselves.
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Related link:
Unpolished Article. It’s Too Hot Out There. When the market runs hot, ‘collecting’ can make speculation feel like curation.
💰Rolex Mirrored Latour’s 25-year Escape Plan (Part 2)
In case you missed it (read Part 1 here), last week’s argument was that the watch industry’s AD system, with its allocation games and forced bundling, is basically identical to the Bordeaux wine trade’s en primeur system. I say this because both have selective distribution networks where producers dictate terms, intermediaries that absorb risk, and consumers who pay a ‘bundling tax’ for access to the good stuff. The wine model has been in operation, mostly unchanged, for a couple of hundred years; the watch industry model replicated this in about fifty years or less.
This week, we dig deeper, and explore what happens when even the producers decide that system isn’t extracting enough. In both industries, the inevitable outcome appears to be that the most powerful producers stop relying on the merchants and instead, start eating their lunch.
On 12 April 2012, Frédéric Engerer, the man who ran Château Latour for its owner François Pinault, sent a letter to the Bordeaux négociants informing them that the 2011 vintage would be Latour’s last en primeur release. From 2012 onwards, Latour would not sell its wine in barrel at all. Instead, it would hold the wine itself, in its own cellars, and release it through the négociants only when Latour decided it was ready to drink - sometimes seven years for the second wine, and 10-12 for the grand vin1.
The Bordeaux trade did not, on the whole, take this lying down. Latour was one of the five first growths - the very top of the 1855 classification I mentioned last week - and one of the biggest single beneficiaries of the en primeur system. The estate’s release prices had been hitting €500 per bottle and rising. The Bordeaux Chamber of Commerce, the négociants, and the international wine press all reacted as though Latour had announced half of Europe was leaving NATO or something along those lines.
There were 3 official reasons given at the time. First, provenance - Latour wanted to guarantee that every bottle leaving its cellars had been stored perfectly since the day it was bottled. Second, consumer preference - many drinkers had been complaining about being asked to buy ten-year-old wines two years before they were even finished. Third, control over release timing - Latour wanted to drip-feed older vintages into the market instead of emptying its cellar every spring at one price.
I said ‘official’ reasons because that was mostly BS cover. The real reason, which of course the trade understood within about 10 seconds of reading the letter, was to get more margin. A château that already commands €500 a bottle at release does not need en primeur to help with their cash flow (which was the original purpose, remember?). What it needs is to own the appreciation curve - to be the one selling the 2012 in 2024, at the 2024 price, instead of the négociant who bought it in 2013 and has been holding it in a warehouse for a decade. Pinault had spent the previous ten years renovating Latour’s cellars and reducing the proportion of each vintage sold via en primeur, in preparation for exactly this move. The plan was a decade-long capital intensive project with a mindset that was ready to take the risk onto their own books.
The next question was pretty obvious; if Latour could do this, why couldn’t others do the same? From what I’ve understood, the answer is that pulling off a Latour-style exit required enormous capital, an owner with patience for the long game, and the willingness to take on inventory risk that the négociants had previously absorbed; most châteaux can’t manage that, but clearly, Latour could.
Latour-shaped hole
What was more interesting in the years after Latour’s exit was what the négociants did with the Latour-shaped hole in their annual campaign.
A first growth dropping out of en primeur is a serious chunk of revenue removed from the Bordeaux trade, which meant the merchants needed a replacement. They didn’t find it within Bordeaux - in fact, they couldn’t, really, because the system was already maxed out on Bordeaux supply. So instead, they just expanded the franchise and built what’s now called ‘Beyond Bordeaux’, using La Place’s distribution infrastructure to sell wines that have nothing to do with Bordeaux at all.
The first non-Bordeaux wine to use La Place was Almaviva, from Chile, in 1998. Then Opus One from Napa in 2004. Then Masseto from Tuscany in 2009. By the time Latour left in 2012, the Beyond Bordeaux category had decent momentum. Today La Place distributes Penfolds (Australia), Solaia (Tuscany), Almaviva (Chile), Catena Zapata (Argentina), Vérité (California) and dozens of others, all using the same négociant–courtier–merchant model that has existed since the 17th century.
In short, Bordeaux merchants had built a massive distribution system, and when their main supplier started shrinking away, they made it available, for a fee, to anyone else who wanted that distribution. CVBG, one of the larger négociants, today reports that Beyond Bordeaux accounts for about 20% of its turnover, with Bordeaux en primeur only 35% and Bordeaux back-vintages 45%. So essentially, the system survived the exit of its largest producer by becoming a distribution layer for other producers’ luxury inventory.
The lesson in watches, if you’re drawing the same parallels I did, is that when a system stops working for the most powerful player in it, that player moves first, and the rest of the system will be forced to adapt to whatever’s left after they’re gone.
Rolex’s version
This brings us to Rolex, which did something similar between December 2022 and August 2023 - except they did it in a compressed timeframe that ought to be slightly alarming to anyone involved in watch retail.