Ben Kepes: Bemoaning the new masters of the universe

The old excesses seen on Wall Street in previous generations have found a new home. Photo / Getty Images

I'm in constant fear of getting old. While I spend much of my time joking with my running mates that I'm an old, sad, broken man, I'm pretty lucky that, touch wood, I can still head out for a run for a few hours and be fairly confident that I won't keel over midway. As I near a half-century, I can be fairly satisfied that not too much rust has gotten into the chassis or bodywork. But while physically I'm in pretty good shape, sometimes something happens which reminds me that, as far as my values and perceptions go, I'm positively geriatric.

I was reminded of this uncomfortable fact recently while perusing the magazine shelf in the Christchurch Koru lounge. Since Air New Zealand decided to cut costs by dispensing with the daily papers in their lounges, visitors have had no other option than to chose from the small number of magazines that Air New Zealand has on the shelves. And since fashion and lifestyle magazines aren't my thing, on this occasion I picked up one of those personal investing magazines that give readers a five-minute guide (attention spans and all that) to becoming rich.

This particular magazine has recently been taken over by a property investment group (who are also branching out to reality television, just in case there wasn't enough cringe already). As would be expected, the veneer of content sitting on top of pure marketing was even thinner than is usually the case. The magazine reminded me a little of the heady days of the mid to late '80s. It was full of exhortations to "think big," "make your tenants (and the Government) pay your mortgage," "leverage for growth," and "retire in your '30s" messaging.

It was also full of pictures of impossible beautiful young people, driving late-model European vehicles, living in palatial homes and generally enjoying what appears to be a totally relaxed life - spending huge amounts of money that miraculously appears courtesy of rapidly growing property prices and historically low interest rates.

I did a bit of research about the company that is using this "magazine" as a marketing front, and it truly showed my age and my old-fashioned view of the world. Said company employs several dozen staff, all of whom appear to be in their mid 20s. I'm heartened that the news coverage suggesting that this demographic struggles to get ahead is obviously fake news, since this crew are all fabulously coutured, well coiffured, and flashing the usual accoutrements of success: jewellery, nice watches and the like.

If it wasn't for the significantly less voluminous hairdos (for the women) and the far narrower collars (both men and women), one would have thought this was a still from the successful movie depicting a previous period of excess, Wall Street. That's an interesting parallel since Wall Street (the place) specifically and the world of finance more generally in the '80s is a cautionary tale for us all.

Those twenty-somethings that are teaching people how to become rich and keeping the fashion boutiques and car dealerships afloat at the same time have been adults for only a few years. Those same few years have marked a unique period in the economy. Years marked by almost unbelievable growth in property prices and near-record low interest rates.

Put these two factors together and you have a perfect recipe for huge wealth creation, huge growth in inequity, and huge increased risk for those who grow tempted to leverage the current paradigm.

The risk here is that we look at the economy within the context of a very short sample range. Basically, if we take the past five years and extrapolate that out over decades, we have average properties worth tens of millions of dollars, steadily low interest rates, a taxation system that encourages this sort of concentration of wealth and a growing underclass who are both locked out of the property market and strangely happy to pay these masters of the universe high rents.

None of which is a given, Indeed, most of which seems highly unlikely if we take a longer-term view of the economy. While property prices, over the very long term, do indeed trend upwards, that ignored the short to medium-term ebbs and flows. And while interest rates are currently very low, it was only a few decades ago that they were up near 20 per cent. Imagine a scenario where all of these newly-minted tycoons, leveraged to the hilt, stare at stabilising property prices and interest rates jumping upwards. It'd be carnage.

But beyond the smartness or otherwise of jumping onto a superheated investment class that is at the very peak of its cycle, there's a bigger question here. The entire proposition of this magazine and the TV show is to "teach" people how to become rich so they can spend their days relaxing and tended to by an entire class of service workers. It's feudalism re-written and it makes the very dangerous assumption that an increasing proportion of the population is prepared to be subjugated by the whims of a small elite.

It's not what we should be aspiring to - either as individuals or as a society. It's inequitable, dangerous and likely to drive huge unintended consequences. Maybe I'm just an old fart who doesn't understand that the rules have changed and that there's gold to be made out of ticky tacky apartment developments and investments in shoebox infill housing, but I'm voting for a little less bling, a little less veneer and a little more doing of the real mahi.

- Ben Kepes is a Christchurch-based investor and entrepreneur.