Interesting theory. I guess I'd add to it the fact that Reps have gotten so good... (Wall Street Journal recently reported that 9 out of 10 Rolex's you see are replicas...)
On the other hand, luxury watches were never about accurately telling time... maybe they were at first, but not for a long time. And there will always be a class of people who seek status through material signifiers: such as watches, cars and clothes...
The economy will take it's toll--and we've seen that with a depreciation of prices in the Gen market; but, long-term, I think luxury watches will remain strong, for better or worse.
RSM