U3O8
609
A Different point of view...
Feb 07, 2019,07:37 AM
Perhaps as an exercise we should walk back 18 - 24 months to when the global economic outlook was beginning to darken and fear of uncertainty and unknowns became the prevalent theme. Brexit, Populism, Trump, Tariff wars, falling Chinese GDP estimates and constant news about declining Swiss Watch exports. Also, Brent going from $90 to below $50, quantitative tightening, a steepening yield curve and then fear of an inverting yield curve and stock market carnage in the emerging markets, and then in the developed markets. All of this affecting currency crosses as well.
Rolex, being the conservative company they are with an incremental approach to everything, probably looked at events in 2016 and figured that they needed to dial back production. Figure out the exact production points where they are marginally profitable without having to right size production and footprint. This would affect their supply chain and everything from outsourced to in-sourced production. If by our estimates the universe of Rolex buyers is growing and demand is increasing, then supply of watches is also tightening beyond the corporate decision to slash production at Rolex. But they would rather be profitable and not have to take redundancy charges by ramping up fixed assets and production for short run demand and then face cost absorption issues over a longer period.
And judging by the volatility in global events and in the financial markets, Rolex probably thought they were correct in their decision to dial back production. For a hundred year old company a 24 month period of some forgone revenue is acceptable if they stay profitable and also are accommodative with their stakeholders. If the world went to hell in a hand basket, then watchmakers, foundry workers, box assemblers, cafeteria workers in Geneva and Bienne wouldn't be out of jobs, and dealers globally wouldn't be left with tons of inventory. Everybody manages their working capital more efficiently now. Perhaps they are still uncertain about the global economy with the US's $22Trillion deficit (rising), Chinese GDP at or below 6% and despite no more FED tightening expected this cycle, a flight to quality and a stronger USD. Hard Brexit looming as well. So not sure if they will turn the lights back on and start up the dormant production lines.
But then again, the above is pure speculation. Maybe I'm making excuses for Rolex. Just my way of rationalizing the lack of inventory. Makes me believe that there are larger forces at play and its not because my AD doesn't like me.
As an aside, I walked into my AD in October 2017 and asked if they had a BLNR GMT I could try on, or another ceramic GMT. I have a couple of SS Rolex watches including a 16700 Pepsi, but no bigger Ceramics. I fully expected the "No" and the "waitlist" which I would have been relieved to be on. Instead I was told they had a BLNR GMT and I could have it. How I cursed my luck. So I reluctantly bought it. Now I can't believe the situation for SS Professional watches. My AD said the lack of inventory in all Rolex watches has made them adjust their display cases so that there were not so many slots that had no watches in them.
Anyway, good luck with your search.