Investing in sneakers might be a lucrative endeavor if you’re looking to succeed financially.
According to the Bank of America 2024 Study of Wealthy Americans, millennials and Gen Zers who have at least $3 million to invest are three times more likely than older generations to choose alternative assets. Put differently, they have avoided stocks in favor of collecting art, collectibles, and cryptocurrency.
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Compared to 40% of the wealthy overall, 83% of wealthy young Americans between the ages of 21 and 43 own or are interested in owning an art collection. In an interview with Bloomberg, Drew Watson, the head of art services at Bank of America (yes, there is such a position), stated that they are investing in “blue chip art.”
From 1945 to the present, Watson continued, “the fastest-growing segment of the art market is still post-[World War II] and contemporary art.” That’s enough to bring to mind pictures of young, wealthy people hurling wet Benjamins at a canvas in the style of Jackson Pollock and hope they stay.
The question is, do strategies like this paint a picture of financial gain?
Wealth beliefs across the generations
One trait that nearly all generations—Gen Z, millennials, and baby boomers—have in common is that they consider their financial stability to be good or excellent: 75% of those aged 21–43 and 78% of people aged 44 and beyond.
The vast majority of the more than one thousand respondents to the survey agreed that interest rates were not a reason for hope. A total of 52% of respondents thought that rates would either rise or remain unchanged, which is a reasonable prediction considering the Fed’s decision to rescind at least two of its three planned rate cuts this year.
That’s where the generations’ choices in wealth building divide dramatically. Since 72% of millennials and Gen Z feel that it is “no longer possible to achieve above-average investment returns by investing solely in traditional stocks and bonds,” there is mistrust among these generations towards the tried-and-true approach. Of those 44 and older, only 28% concur.
The article noted that younger generations had a strong affinity for cryptocurrencies, despite the fact that this runs counter to “a headline fraud case in the burgeoning crypto industry” that featured FTX’s collapse.
The largest cryptocurrency exchange in the world, Binance, entered a guilty plea in November to violating anti-money laundering rules, unlicensed money transmission, and penalties in a U.S. federal court. In exchange, Binance agreed to pay staggering fines of $4.3 billion.
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A (financial) appreciation of collectibles
Given that the collection of art and vintage goods also generates consumerist hype, it makes sense.
Which is, after all, more satisfying and simply enjoyable? Having 1,500 General Motors shares, or roughly $68,000 worth of shares? Or getting a classic GM vehicle that presently sells for an average of $69,200, such as a 1960 Chevy Corvette two-door convertible that looks exactly like the one on the cover of Bruce Springsteen’s memoir?
It’s impossible to say for sure if a collectible-based strategy may increase wealth, especially given how speculative value is (which is also true of cryptocurrencies).
If you had purchased that Corvette brand-new for $3,872, the amount mentioned by JD Power, perhaps it would have been a profitable investment. Even still, according to estimates from the Minneapolis Fed, that would be $39,900 in today’s dollars due to inflation. In Boss parlance, that’s less than two times return over 64 years, so it’s not exactly born-to-run stuff.
Compare that to the S&P 500’s inflation-adjusted returns. Macrotrends estimates that a 1960 investment of roughly $600 would be worth $5,470 today, or a more than 9x return.
Similar to cryptocurrency, becoming wealthy from a highly sought-after object typically depends on time and chance, which is a difficult endeavor at best. Additionally, bear in mind that the IRS taxes the sale of collectibles at a rate of 28%, which is a financial reality that many young, affluent people might easily overlook.
Despite this, the wealthy and young continue to buy watches, jewels, and wine/spirits as they are the most desirable items on their lists. They also have a soft spot for rare cars, antiques, and shoes. Coins, jewelry, and watches are the items that Gen X and older collectors are drawn to.
Let’s go back to those sneakers. Depending on whether you’re buying or selling, knowledgeable or naive, you may make a lot of money or lose a lot of money.
Particularly sought-after are Nike Air Jordans; an eBay vendor is presently asking $1 million for a pair of Jordan 1 retros. When they were first produced in 2010, these multicolored beauties retail for $135, but a pair recently sold for $1,281 on StockX.
It’s obvious what to learn from them: Steer away of people who would sell you their soul.