What’s Been Happening with Luxury Items (and That Hummer EV)#

So, over the last couple of years, things that people used to think of as surefire ways to hold value, like G-Class Mercedes, Rolex watches (the Mariner types, you know), luxury handbags, and trading cards, have taken a huge hit. Basically, if you saw a fancy item in a kind of questionable ad from someone pushing a Drop Shipping course, its value has probably dropped by half.

If you’re ever feeling a bit down about how you’ve handled your money, honestly, go watch some videos of finance brokers trying to sort out someone who is $150,000 in negative equity on an electric Hummer. Yeah, they bought it with an 8-year loan planning to rent it out on Turo. Seeing that should make you feel a whole lot better about your own choices.

But, and I’m sorry to be the one to tell you this, things might just be starting to look up again for those types. We’re seeing a market where Bitcoin is hitting all-time records, stocks just keep going up, and Dogecoin is somehow worth more than big companies like Nintendo, Delta Airlines, or the Ford Motor Company.

Brace Yourself: “Everything is an Investment!”#

In a market where prices are just climbing, you better get ready. People are going to start calling just about anything an investment. They’ll say it to convince their customers, their partners, or maybe just themselves. But that doesn’t matter – as long as they can’t convince you.

This is the kind of thinking people use to justify spending $1,000 on a first edition pack of Pokémon cards from Logan Paul, or saying that watches aren’t just fashion or a personal statement, but “they’re also a great investment”. Same deal with bags – someone might say, “I have been collecting these bags for a minute, they’re also a great investment”.

Oh, hey, did you see that other video I did about the guy with the Hummer EV who was like $100,000 upside down? Yeah, that was… something else.

Alternative Investments: The Upsides (For Sophisticated Folks)#

Now, to be fair, alternative investments do have some attractive points, especially for sophisticated investors who actually know what they’re doing with them. Assets like commercial real estate, patents, private equity, distressed debt, commodities, and even certain collectibles have been bought by wealthy people as part of a bigger investment plan. They offer a few genuine advantages:

• Value Uncorrelated to Stocks: Often, the value of these assets doesn’t move in sync with the stock market. This is good if you’re wealthy and lose your high-paying job during a stock market crash. You might not have to sell all your investments at rock-bottom prices just to get by, because some of your alternative investments might still be doing okay. If you only had stocks and lost your job, you could be forced to sell at the worst possible time, which, as the finance bros say, is “not awesome”.
• More Control Over Value: If you own a plain old diversified stock portfolio, there’s not much you can do to make the whole market more valuable. But if you own commercial real estate or even something like artwork, you can market it or fix it up (“do it up”), which could help you sell it for a better price.
• Less Competitive Markets: If you’re trying to get an edge in the stock or bond market, you’re competing against teams of incredibly smart analysts from places like Jane Street and Citadel Securities. These folks did intense 4-year math programs at MIT just to try and eke out tiny percentage points of extra return. In niche alternative markets, you might actually know something that gives you a real edge without it being so close to illegal insider trading.

Why isn’t it insider trading? Because the Securities and Exchange Commission (SEC) really doesn’t pay much attention to what happens in these specific alternative markets. Now, if you’re actually an industry insider, this lack of oversight could be great for you. But, much more likely, for most people, this is actually a really bad thing.

The Downside of Alternative Investments (For Most People)#

So, before you think about putting money into, say, one of those syndicated artwork platforms like Masterworks, you need to know about the long list of problems with alternative investments.

• Highly Illiquid: They are usually very hard to sell quickly because the market for them is small and specific (niche). Finding a buyer who will pay a fair price can sometimes take years.
• Expensive to Buy and Sell: Buying stocks is cheap now, with commission-free brokerages everywhere (yeah, they have some hidden fees, but they’re tiny). If you want to sell a piece of artwork, jewelry, or another collectible, you’ll probably have to use an auction house or a specialized dealer. Sotheby’s, one of the most famous auction houses, charges a 20% commission on sales under $10 million. And guess what? That’s often paid by the buyer. Any investment where you’re automatically 20% down the moment you buy it is going to be risky at best.

Let’s be real, most people watching this aren’t actually thinking about buying multi-million dollar artwork for their investment plan. And if you are seriously looking at something like a syndicated artwork investment system, then honestly, I’ve really failed at teaching you how money works.

The Hype Around Manufactured Luxury Goods#

The alternative investments that have really grabbed everyone’s attention lately are manufactured luxury goods. These are things where companies either can’t make enough to meet demand or they deliberately limit how much they produce to make them feel exclusive.

Think high-end luxury watches from brands like Patek Philippe and Rolex, limited run cars, and certain designer shoes and handbags. These often have crazy long waiting lists at the official stores, sometimes stretching for years before you even get the chance to spend a huge amount of money (five figures or more) on a fashion item.

The Gray Market: Sounds Easy, Often Isn’t#

This situation has created a huge gray market for these items. People buy the item from an authorized dealer (after waiting forever) and then immediately sell it for more money to someone who just wants it right now.

Buying something one day and instantly selling it the next for a big profit sounds like the safest investment ever, right? It would be, if it actually worked that way consistently.

People saw this chance for easy money and jumped on it so hard that there are even websites that collect sales data and make trackable indexes for these luxury goods. But if you look at these indexes, as you can see, they haven’t exactly been showing a great story about how these “investments” have actually performed.

It might not surprise you, but the hype around these luxury markets is strongly connected to the hype around other alternative investments, like cryptocurrencies. And with the current huge surge in dog-themed financial instruments and other similar crazy stuff, we need to talk about this before someone else does something stupid. So, it’s time to figure out how money works and learn just how risky these alternative investments can be.

Sponsored Segment: Ridge Wallet#

This week’s video is sponsored by Ridge.

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Personally, I just really like how Ridge wallets make carrying my essentials simple without being bulky. It’s been super helpful for staying organized and secure when I’m out and about.

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Why People Chase Risk: The Lottery Ticket Dream#

There’s another big reason why people are drawn to really risky alternative investments. It’s simply the hope that it could be a lottery ticket out of poverty. Building wealth with a balanced mix of stocks, bonds, and real estate is powerful, no doubt. But if you don’t have much money to start with, even getting the kind of returns that Warren Buffett gets won’t make you rich in your lifetime unless you can regularly add more money to those investments.

Things like cryptocurrencies, meme stocks, trading cards, and even just plain gambling give a lot of people hope. Even if, for most of them, it’ll just make their financial problems worse. But for the lucky few who timed their buys just right, they’ve turned small amounts of money into really substantial wealth.

The 2020-2022 Luxury Boom Explained#

The people who cashed out of these risky positions often spend a lot, especially on luxury goods, to show off their new wealth. This is part of why the market for luxury goods saw such a huge boom from 2020 to 2022.

The trend was so strong that people actually started seeing these luxury items as investments themselves. The brands, even though they’d never say it publicly, heavily played into this idea of scarcity. They limited how many popular products they made and kept raising prices every year, even more than inflation. This made it feel like it was a special privilege just to be allowed to pay the price of a family SUV for a watch.

At the end of the day, these are companies trying to make a profit. The only reason they’d limit production is because it lets them charge a much higher premium. Paying $50,000 for a watch** might sound crazy, but if someone who just made a fortune on a **monkey jpeg** is willing to buy it from you for **$100,000, well, then it starts feeling like responsible investing, right?

So, Why Isn’t The Luxury Boom Happening Now?#

What’s really interesting is why this isn’t happening again right now. The price of really risky investments is way up, but the price of all the luxury stuff that people usually buy when their doggy coin takes off has stayed down. So, what’s going on?

The simple, logical answer would be that sports bettors and meme coin speculators have suddenly become super responsible with money and are investing their profits wisely instead of splurging on fancy things to show off. Yeah, okay, that’s probably not it.

The Real Reasons For The Shift#

Actually, three main things (well, plus a bonus one) have happened. These expensive items that people insisted were great investments are actually showing us a much bigger change happening in the economy and how regular people invest.

Here are the reasons:

Smart People Can Still Do Stupid Things#

It should be obvious, but even really smart people can make foolish choices with their money if they really want something to be true. A lot of people desperately want to believe that their new luxury purchase is not just a fun toy, but also a smart investment. But often, it simply isn’t.

Even if there’s a price difference between what you pay in the store and what you could sell it for second-hand (the gray market premium), you usually have to spend a lot of money at the official dealers first just to get to the front of the waiting list to even buy the item initially. After all that, the returns, once you factor in the risk and the cost of getting the item in the first place, are probably very bad, if they exist at all.

Here’s the simple truth: If you want to invest your money, invest your money. If you want to buy something nice to treat yourself, buy something nice and treat yourself. Don’t try to do both at the same time and end up doing both poorly.

Keep Learning How Money Works#

If all this has convinced you to stick with more traditional ways of investing, then go watch that other video I made called “why you are not actually an investor at all” to keep learning how money works.