I believe there is a ‘golden rule’ to collecting watches, classic cars or anything of personal relevance and value for that matter: It is a rule which I try and stick to at all times.
You can never pay enough for ‘trophy assets‘.
You see in collecting- it sometimes pays to ‘overpay‘. We will explain in detail shortly what we mean by that.
For now lets get to the point of this post. Picasso’s ‘La Reve’ (the dream) sold for $155m which is a record for a piece of US artwork sold. The owner Steve Wynn, a big art collector and billionaire owner of Wynn resorts- sold it to another billionaire -Mr Cohen owner of SAC Capital the alternative investment specialist.
Now this deal is interesting for several reasons:
1) For one it is among the largest art deals ever to take place. The only known transaction which is larger is the Cezanne deal -sold to the Qatari Royal Family which was valued at an apparent $250m (although nobody can confirm this). 2) The deal is furthermore interesting because Mr. Wynn who suffers from partial blindness in one eye accidentally put his elbow through this painting and severely damaged it in 2006. Experts took several years to restore the painting but nonetheless- the painting is not entirely original anymore.
So why are we pointing this out?
Because, although this painting was damaged- Wynn still managed to sell it for more than 3x what he bought it in 1997 – where he paid $47m. At the time people thought he overpaid by a large margin. The point is: If you are buying the best of something that is available at the time- you cannot make a mistake by bidding aggressively and setting a probable record for it at the time. The best of something by definition is scarce, and thus a premium is often warranted. There is always someone richer and more impatient down the road who will pay even more to acquire the asset. What seems like ‘overpaying’ at the time is often a very good deal. I have done this numerous times with watches but also cars.
Concluding thoughts
The reason this deal is interesting is not for the large amount paid but rather the logic behind this transaction. The deal is very telling how two billionaires go about collecting.
It sounds irrational to pay aggressively for something and even ‘overpay’ in order to acquire the asset at the time. But I have seen it time and time again: It is mostly never a mistake to pay handsomely if your bidding for the best of something. This is not intuitive nor does it apply to other areas such as investments. In fact overpaying for financial assets is often a costly mistake.
Not so in classic cars or watches.
If the best of something becomes available- bid for it in confidence. You can almost never pay too much.
