One of the big trends of 2020 has been the explosion in interest in alternative assets, broad defined, for individual investors. This includes not just financial assets but things like collectibles. Watching from the sidelines it seems like people are having a blast trading art, sneakers, trading cards and the like.
John Street Capital has a big post on entitled 10 Thoughts as 2020 Comes to an End on the year’s big fintech trends. I think it does a great job of highlighting the big trends of the past year. One of which is the theme of the democratization and financialization of all manner of assets. How this ‘financialization of everything‘ is proceeding:
In 2020 we saw the continued growth of what we call “Alternative Alternative Asset” marketplaces such as platforms like Rally with 120 IPO’s this year across collectible cars, memorabilia, watches + luxury good, comics + literature, and wine + whisky.
Unlike financial assets, collectibles don’t have any intrinsic value. A trading card is, in the end, just a piece of thin cardboard. That isn’t to say that you shouldn’t be on these platforms buying and selling collectibles. It just means you need to recognize the overriding impact of collective psychology on the prices you pay for these assets.
It’s not controversial to say our individual and collective tastes change over time. Who doesn’t look back at old photos and cringe at your younger self’s style choices? The same could be said for society as a whole. From the trivial to the profound, what is considered acceptable, let alone trendy, in society shift over time. Sometimes these shifts are slow in coming and sometimes they are abrupt.
A couple examples spring to mind. In the early twentieth century the two of the most popular sports in America were horse racing and boxing. These sports haven’t disappeared but have experienced a long slide off the radar screen of the general public.
A year ago, it was generally considered polite to shake someone’s hand as a greeting and sign of respect. Today an outstretched hand is viewed as a invitation to spread a deadly disease.
The inspiration for this post is an article by Alden Wicker in the New York Times about the decline of the mink coat. Mink coats were once seen as prized possessions worthy of passing down from one generation to the next. Wicker notes that many fashion brands have banned fur and most retailers are selling off inventory and getting out of the business. Wicker writes:
At the time a mink coat was the height of luxury and elegance…Today it’s a different story. “Mink coats have become obsolete,” said Laura Sophie Cox. a British celebrity and editorial stylist.
Wicker reports there are now businesses popping up that re-purpose fur coats into household items. In short, tastes change. Items once worth tens of thousands of dollars now sit unused in closets.
None of this is meant to dissuade you from participating on any of these platforms. It looks like fun, especially if you have an underlying interest in these items. However as with any ‘investment’ you need to go in with your eyes wide open and recognize that what you are doing is risky. Tastes change. You never know when today’s Pokemon card set could be tomorrow’s mink coat.
