Cash-flush amateurs now hunting Birkins and Banksy
STOCKS, bonds and commodities? Old hat.
Once the preserve of the superrich, or just the eccentric, all kinds of unusual investments from vintage handbags and shares in fine art to rare Pokemon cards are now the happy hunting ground for stuck-at-home punters.
Often armed with lockdown-era savings, such amateur investors are seeking higher returns beyond conventional markets where rocketing prices are prompting warnings of bubbles. They have in turn driven prices on some “alternative” assets up several hundred percent higher in the past year.
And just like the no-fee trading apps such as Robinhood that enabled hordes of small-time equity traders to rattle seasoned hedge funds during the recent “Gamestonks” episodes, digital platforms are empowering wannabe investors with as little as $20 (R290) to dabble in collectables.
Value can apparently lurk in all sorts of places.
Collectors’ cards based on Nintendo’s hit 1990s video game Pokemon have exploded in value in the past year.
One first-edition of its fire-flying character “Charizard” has rocketed 800% in a year, after YouTube star Logan Paul paid $150 000 for one in October. Recent auctions have valued the card at $300 000.
Chicago-based Pokemon enthusiast Zack Browning, who purchased four of the cards in 2016 for less than $5 000 each, estimates his overall Pokemon collection is now worth $3m-5m.
Browning, who embarked on his Pokemon investing career after studying finance at university, described the game card’s resurgence as “astounding and incredible”.
He said parts of the Pokemon market were more predictable than stock markets, which he said were overvalued.
Measuring profit or loss on a painting or gauging demand for such collectables is a lot harder than in equity or currency markets, given items often have little in common with each other and can be traded only occasionally, such as by auction.
But a luxury investment index published by compiler Knight Frank showed that although top-end assets such as fine art fell in value during the pandemic, “relatively affordable luxury pick-me-ups” did well.
While the AMR All-Art Index, based on auction prices, fell 11% last year, according to Knight Frank, Hermes’ iconic Birkin handbag, first launched in the 1980s, rose 17%, ahead of fine wine and classic cars.
Andrew Shirley, who edits the Knight Frank report, said last year’s most expensive Birkin sold for $200 000, with Asian luxury collectors “very happy to bid on handbags online”.
For people unable to stump up $200 000 an item, there are platforms such as New York-based Otis which launched in 2019.
These platforms buy anything from a Pokemon card to a basketball jersey signed by basketball legend Kobe Bryant, securitise them and then offer investors shares in the items that they can buy and sell.
Last year Otis offered customers the chance to buy shares in a work by British street artist Banksy at $20 a share.
Those shares hit $34 earlier this month, a 70% gain that valued the piece at $722 000, Otis said. Investors tend to be aged 25 to 45, with disposable incomes of $100 000-plus, Otis founder and chief executive Michael Karnjanaprakorn said.
The most expensive item on Otis is a 1986 Basketball card set by sports cards maker Fleer. Sold two months ago at $10 a share, it has since surged 305% to over $40.
At another collectables platform, Rally, the number of users is doubling every 30 days, according to chief executive George Leimer. He said “several hundred thousand” investors used the platform.
The platform has also seen sought-after Pokemon cards surge into six-figures, Leimer said. “The drive behind this is similar to what we are seeing in the rest of the retail investing world,” he said, pointing to the surge in popularity of Robinhood and other such apps. But few seem to bank profits. He said the percentage of investors who withdrew their winnings rather than reinvest was in the “low single digits”.
As more punters flock to alternative assets, many warn of risks. John-Paul Smith, a former senior equity strategist at Deutsche Bank, now dabbles in buying northern British art.
He sees little difference between the behaviour of some “alternatives” investors and the equity frenzy. “Banksy is pure momentum, it’s like a hot tech stock,” he said.
“The psychology is similar in any market.”
But conceptually, it seems “less foolish” to buy unconventional assets today than at any time in the 30 years Smith says he has followed markets.
Not only are stocks expensive, vast central bank and government stimulus will eventually spur inflation, he said. He urges investors to differentiate between what might be a passion or a hobby and an investment.
If they set out solely to profit, they probably won’t, given how esoteric each part of markets like art can be.
“I would not advise anybody (to) put their pension in,” Smith said, a stance also taken by Pokemon investor Browning. |