What’s it all worth? …and is it all worth it?

The stock market continues to climb. Property values are hitting record highs and 143,000 people have moved into work in just three months.

Yet, while Britain’s billionaires have seen their net worth more than double since the recession — the average household income has only just recovered from the banking crash. Most people are still no better off than they were in 2008, hardly surprising when a pound sterling today is worth less than 66% of its value 10 years ago…

Last week, I heard someone say that it would be more profitable for him to quit his job, move to the country and rent out his London pad.

It doesn’t add up.

“What is a cynic?A man who knows the price of everything and the value of nothing.”

Oscar Wilde, Lady Windermere’s Fan, 1892

Average UK wage last year for the estimated 21.5 million squeezed middle class people was £27,271. What’s more worrying than the gap that’s appearing between the rich and the rest, is that for ‘the rest’ in manual and medial jobs, they’ll soon be competing with those that don’t need a lunch break.

As Moore’s Law illustrates, it’s not the speed of technology change, but the rate of acceleration that should cause some concern. Just think, if a robot can become twice as smart every two years, then we will see more progress in robotics over the next two years than in all of history so far. Yep, as this future sky-net army continues to make inroads into our labour force, it’s pretty certain that not everyone will benefit…

Supply & Demand

So what do we know about technology and its impact on the world? Baby boomers, the internet of things: we hear a lot about the fit between products and markets. But what are these markets, and which will do well and which will tank? Let’s look at a few things people are really buying that aren’t on the CPI’s inflation index — these are my predictions for the next decade…

#1 | The Price of a Stamp?

Recently I went to a stamp fair. Yup, I’m a philatelist. Well, you can’t really call it a collection — I only own five. But, together, they are worth a tidy sum, so I think of them more as a diversified investment.

Indeed, many stamps now are so rare they can easily fetch tens or even hundreds of thousands of pounds; I saw one for sale on a tiny envelope for £750,000.

Yet all things, including stamps, are only worth what someone else is prepared to pay for them. And as I gazed around the room, even at my mid-life phase, I noticed, that I was probably half the average age of the majority of my fellow attendees. I only counted a handful of people who hadn’t yet retired.

So, this market — apart from an established book-maker, who sets their market prices annually — is like so many others. Supported by the notorious bunch of baby boomers whose influence will one day diminish, taking with it the value of postal stickers that no 20-year-old has any interest in owning. Pah.

VERDICT: SELL.

If the old buggers don’t dump their portfolios,
once inherited, their children soon will.

#2 | Safe as Houses?

The chronic shortage of British housing supply and increasing demand has meant that property prices have, on average, rocketed by 56% nationally since 2004, with a 90% increase in London.

Think about Mr Average City Professional, making his £100k salary. If he wants to buy a home, on a four times average he can’t even afford a studio. Surely when even the higher earners are priced out, the bubble is set to burst?

Consider also, we’re building at a rapid rate so the under-supply issue will be met at some point, although perhaps not in my lifetime. What happens when the interest rate has to move and with it the people that are leveraged to the hilt and hoping they can pay enough down before that loan really hurts.

As soon as it looks like it might swing, you may see a huge exodus. Bear in mind that you can live in a castle in Europe for the price of a London parking space. You know it’s warmer there, right?

VERDICT: BUY.

…but I‘ve been wrong about this before.

#3 | But is it Art?

Now. This has some pedigree. Not all of it. But the next generation will be in awe, wondering which filter the artist downloaded to create their masterpieces. Real talent will become a rarer commodity and will therefore be more greatly appreciated.

VERDICT: HOLD.

…it will always have a place.

#4 | Nice Motor…

Difficult one, this. Like fine art, they are both a luxury and a passion. Who knows what people will be happy to pay for a ‘real’ sports car with a manual gearbox in the future?

Volvo announced recently that it will be producing autonomous cars in ten years’ time, with road testing already announced for 2017. Apple’s rumour mill is rife about the car, too; will they or won’t they buy Tesla? Probably. Über will of course have taken over the world by then and will be switching its network to automated vehicles — and who will really want a car anyway?

It’s already happening. Classic cars, plus the top 1% of elite models, will remain in the hands of collectors as part of their wealth portfolio. For the rest of us, ride-sharing will be commonplace. Why would you want to own a car that you leave in a paid-for parking place all day? Madness. A San Francisco real estate firm has the right idea — offering unlimited, free Über rides in lieu of a parking space.

VERDICT: SELL.

…no plug, no good.

#5 | Time’s up for Watches?

When was the last time you put on a watch and felt it was absolutely necessary? Before its launch, many dismissed the iWatch as a gimmick — how short sighted. Sure, there’s a fair way to go but don’t underestimate the significance of this. Apple have been working their latest category defining product for years and if you think its only going to attract the lower-end or sports watch consumer, you’d be wrong. (Ask Angela Ahrendts, former CEO of Burberry.)

Some question whether the higher Apple models can replace the statures brands; can you really compare a gold watch from Apple to one from Rolex — ermm, yes.

Sure, I have the obligatory expensive status symbol that allows me to scuba dive at 50,000ft or whatever. I put it on each morning and then proceed to check the time on my phone. I can see this relegated to use for ‘special occasions’ — whatever they are — while I strap my iWatch or Samsung Gear on for work. You have to feel a little sorry for the mighty Swiss houses, they can hardly start introducing heart rate monitors — it will only tighten the noose around their necks faster.

Yep — something tells me that the next generation really won’t want what you are ‘merely looking after for them’ — they’re going to take one look at your dumb Patek and wonder where the weather report is.

VERDICT: SELL.

…what? you haven’t already?

#6 | Startups?

Despite my predictions about the new automated car market, do I think that Über is worth its stated $50bn? It’s a big number for a taxi company that owns no cars. That said, if you consider that Alibaba owns no stock and Airbnb owns no real estate, they’re in good company.

There’s still a lot of money floating around tech ‘startups’ — even the average employee is earning $125k each year now. But over the next decade our third dot-com bubble will pop. People are going to get tired of chasing unicorns, supporting the next bunch of hot shots while they burn through their cash enroute to the next big thing. And, it’s no longer just the investor community getting screwed: thanks to crowdfunding, the masses now have a taste for what it’s like to back the dreamers — most of whom are dreaming up valuations that are so far from reality and underlying asset value that, even if they did build the next Twitter, no low-level investor would see a return. The good stocks have gone, it’s still about who you know, not when you buy.

Still, at least all these proud failures can blog about what they’ve learned and get you to download the next one. Secret, Jelly, eToys, Pay by Touch, Boo.com, I can only assume it’s difficult to focus when you have $millions in the bank…

VERDICT: SELL.

…The boom is bust.

#7 | Put them in the stocks.

Shares have, in general, outperformed everything. Quantitative easing has boosted the markets so much that the levels are almost meaningless.
The Dow at 18,000 but only worth 9,000; frankly, it could double again.

But, despite the Dow hitting pre-crash highs, companies reporting positive earnings, and the financial media saying we are looking at the “beginning of a new bull market,” some believe the stock market is on the verge of another historic collapse.

The annual S&P 500 consensus earnings-per-share is expected to come in much lower than originally thought. Stocks are priced 53% higher than their 10-year average and the herd is distinctly bullish — you should always to go against the trend right?

VERDICT: SELL.

…and hope the market does what many thought it would do a year ago…

#8 |  Is cash king? The kind is dead.

What’s the value of money? The Swiss made their currency worth 20% more than the Euro earlier this year; despite the fact that Sterling only managed 3.5 % after the election, I’m sure others will do the same.

But real disruption to the value and flow of cash isn’t likely to come from international trade and commodity prices. It’s the likes of Virgin Money, Metro, Aldermore, Shawbrook and Paragon who will change the face of banking and the way we manage our money. The next generation of banks will have no physical presence and will charge no transaction fees.

Add to the mix Apple Pay, Google Wallet and Facebook, with their 600m users primed to use mobiles to exchange money on the go, and you’ve a lot of uncertainty and possibility around the value and flow of cash.

The role of digital currency in all of this is also still yet to materialise on a mass market scale, although Bitcoin is still evolving — taking another step into the mainstream with Coinbase now in talks with UK financial regulators about setting up a Bitcoin exchange in the UK.

VERDICT: HOLD.

…but it might not be worth as much.

Whilst I’m certain that these predictions represent the consensus of opinion and will be met with universal accord, you can contact me @jamesolden.

About James Olden

An ideas man; direct my own, invest in others.