Market veteran Steve Hanke says his best investment is a Patek Philippe watch he bought at 16 — and shares his biggest regret
· Business Insider
Courtesy of Steve Hanke; Tyler Le/BI
- Steve Hanke says the best investment of his life is a Patek Philippe pocket watch he bought at 16.
- The veteran trader said the pleasure he gets from admiring the timepiece is a type of dividend.
- Hanke said his biggest investing mistake was not buying Iowa farmland as his grandfather did.
A pocket watch and a parcel of farmland.
Visit freshyourfeel.org for more information.
Veteran trader Steve Hanke counts those two items among the best investments and biggest misses of his life.
Hanke, 83, started trading soybeans at age 14, and he's been playing the currency and commodity markets ever since.
The longtime professor of applied economics at Johns Hopkins University served as president of Toronto Trust Argentina when it was the world's best-performing emerging-market mutual fund in 1995.
Hanke spoke to Business Insider for the debut story in our new "Hits, Misses, and Millions" series, in which we ask elite investors and business leaders to share their best and worst investments.
Even top investors make painful mistakes.
This story is part of our Hits, Misses, and Millions series, where we ask leading figures in finance and business to share the best and worst investments they've ever made, and what they learned from them.
What's your top investment? Do you have one major regret? Let us know by email at [email protected].
The hits
At age 16, Hanke purchased a Patek Philippe pocket watch for $90 at an auction in Omaha.
"I bought that timepiece because it was beautiful and the price was little more than the value of the gold content of the case," Hanke told Business Insider in a recent email.
"As it turns out, I had unknowingly purchased a rare collectible, custom-made for the original owner in 1917," he continued. "I've continued to enjoy the ever-appreciating Patek for 67 years."
Hanke's watch could fetch over $100,000 at auction today, or more than 1,100 times what he paid for it, based on online listings for similar timepieces.
He told Business Insider that when he bought it, "no one wanted pocket watches." They typically sold for around $40 or roughly the value of the gold in their cases, so he "did pay a bit of a premium for my beauty," he said.
Hanke now only wears the watch on special occasions, but "the rest of the time I admire it," he said. The "pleasure" he gets from seeing it every day is a form of non-financial payout, he added.
"So, the Patek has generated both a capital gain and significant dividends," he said.
Hanke also shared other notable investments from his career. In 1985, he modeled the oil market and anticipated a breakdown in OPEC's production discipline that would send crude prices crashing to under $10 a barrel.
"I was leveraged and short in more ways than you can shake a stick at," he said, adding that when his prediction came true, that was a "pretty big payday."
Hanke also recalled that at TTA, he and his team "loaded up" on Argentine bonds while others were selling them during the so-called "Tequila Crisis" in 1994, when the Mexican government devalued the peso, leading to major turmoil in emerging markets. This resulted in the firm outperforming all of its emerging-market peers in 1995, Hanke said.
The misses
Hanke said he's endured many losses as a trader, but prudently using stop-loss orders — which instruct a broker to sell a security or cover a short when the price falls to a set level — has ensured that "none have been catastrophic or even notable."
"In any case, I am a Stoic and don't cry over spilled milk," he added.
Hanke did share one investment that he "thought about making, but failed to pull the trigger on," and it now ranks among his greatest investing regrets.
"As a farm boy from the state of Iowa, I always wanted to follow in one of my grandfathers' footsteps and invest in Iowa farmland," he said.
When the average price of Iowa farmland fell below $2,100 per acre in 2002, he was tempted to buy but didn't. The average price has risen more than fivefold since then to over $11,500 an acre, he said.
Hanke said the annual inflation-adjusted rate of return is only 5.2%, but his "mistake of omission," in Warren Buffett's parlance, is "perhaps the only investment regret that I can report."
The lesson
Hanke's pocket watch showcases the value of a storied brand, a good deal, a decadeslong holding period, and a beautiful object that can be worn and admired.
His lack of large investing mishaps speaks to the power of capping losses, while his regret over not buying Iowa farmland shows the importance of acting when opportunity arises.
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