Jun 18, 2014

    The message of a $687k watch

    I HAVE been hearing a lot about the spending habits of the 0.01 per cent lately.

    Perhaps, a little bit too much.

    Don't worry, this isn't going to be a class-warfare rant or a treatise on living the simpler, less materialistic life. Rather, it is a suggestion to some folks that perhaps they might want to make some of their conspicuous consumption a little less conspicuous.

    For example, I learnt last week that Tiffany & Co had a secret room for the big spenders. That's because when you're dropping US$20 million on a necklace that, according to Tiffany's vice-president, is being bought with literally a wheelbarrow full of cash, you want some, you know, privacy.

    Or how about those folks who want to learn how to drive a US$500,000 car very, very fast and they need to take a specific class? It's tough luck if you don't have a Lamborghini Aventador Roadster yet, because they are sold out. So is the new US$1.4 million Ferrari LaFerrari.

    You can still buy a Bentley GT, or a Ferrari California T - assuming you don't mind hearing the derisive snickers of the parking valets behind your back.

    The condo in the peak of the Woolworth building is going for US$110 million. That isn't the building, just one apartment. That's a relative bargain, compared with the Hamptons estate that was just purchased for US$147 million.

    But it wasn't a car, a diamond necklace, or a house that made me realise that perhaps the ultra rich have become a bit tone deaf; it was a watch - or a "timepiece", as the brochure describes it.

    In an advertisement in last week's New York Times, I saw a picture of the Greubel Forsey GF05. As the picture showed, it's a busy little number in platinum and black. A quick Google search revealed a selling price of US$549,000 (S$687,000).

    I half expected to see a tagline that read, "For when you need to tell the time, but you just can't do it without spending the equivalent of 36 years of minimum-wage salary."

    A timepiece that costs almost triple the United States' median home price (US$201,700) does seem a tad pricey to us peasants.

    Not too long ago, in the latter days of the financial crisis and the early part of the slow and painful economic recovery, conspicuous consumption became a bit of an embarrassment.

    The world had sidled up to the abyss, peered over. That look into eternal darkness seemed to have chided some of the wasteful spending of the 0.01 per cent. Ultra-luxury goods saw sales plummet. It almost seemed that people had begun to reassess their lives and priorities.

    Just kidding, that was an image issue.

    The stock-market rally of almost 200 per cent since then has emboldened the biggest of the big spenders to return to their profligate ways. And who can blame them, with the Federal Reserve's Flow of Funds reporting that the total household net worth of the US is US$81.8 trillion.

    That is a lot of expensive cars, houses and watches. We have money to burn, apparently - and we are.

    What does the spending with reckless abandon actually mean?

    Are we back to business as usual in America in the midst of the fifth year of recovery since the crisis? Does frivolity with enormous sums of money represent the sort of mania we see only at bubble tops?

    I have no idea. But it certainly makes me a bit nervous to see the very, very wealthy party like it's 1999.

    Like the VIX (an index derived from the option market's estimates of future volatility), the Shiller cyclically adjusted price-earnings ratio, and venture-capital investing, the spending habits of the 0.01 per cent are a data series worth watching.