If you can manufacture something in high demand, then you have a huge incentive to create more of that thing — whether it’s watches or sneakers or shares of a company. When that happens, the law of supply and demand tends to ensure that the secondary-market price of that object is likely to fall.
Why it matters: The price of collectibles seems to be falling back into vaguely rational territory. There are lots of reasons why that might be happening, but the simplest possible explanation is just that more of them are being made.
The big picture: In 2021, global supply-chain problems were in large part responsible for a surge of second-hand prices for sneakers, watches, and other collectibles. In many cases, self-fulfilling speculative frenzies broke out, with astonishing rises in price.
- Driving the news: The sneaker market is falling, per Axios’ Kate Marino, after a steep rise that began after the pandemic hit and that was accelerated by factory closures in Vietnam which caused a shortfall of 130 million pairs of sneakers — and empty shelves at retailers.
Something similar is happening in watches. The WatchCharts Overall Market Index dropped 26% between April and December 2022 and has continued to decline in 2023 — again, following an astonishing run-up in 2021.
- When a certain style of watch becomes hugely popular, it generally takes between nine and 12 months to shift production from other models to meet demand, per Cartier CEO Cyrille Vigneron. (He says Cartier can do it in three months.)
- Rolex, the market bellwether, is on the record saying that it continually increases its production capacity “as much as possible.”
Be smart: Nike and Rolex have in common that they almost never reveal the edition size of their product — a key piece of information for any speculator.
- That’s in stark contrast to more established secondary markets in fine art, wine, or even whiskey.
The bottom line: Any similarity to goings-on in AMC stock is left as an exercise for the reader.