Taking money out of retirement funds to purchase cards

[parkplace33]

On another forum, I read a post where two member spoke about buying cards and withdrawing funds to purchase vintage cards that they wanted. One had being doing it for a while and said that “buying and holding vintage cards made more sense that investing in stocks”.

In a recent conversation with a dealer, he said that this was commonplace, especially in the last few years. Some buyers have had to delay card purchases due to having wait for the payout from funds.

Is this commonplace? I, personally, cannot fathom withdrawing funds from my retirement for card purchases, but maybe I am in the minority.

[rjackson44]

wuold never do that ,,what i dont have today i dont need tommorow

[111gecko]

I'm from the old school. Don't touch your home's equity or retirement accounts.

I remember 2008...401ks, home equity, college funds of so many people I knew...gone by being risky.

Not saying this is anything like the RE market, but you worked your entire life for that money.

An old investor told me years ago.."It's like a football game; when you make a field goal and there's a penalty on the play....never take points off the board and get greedy.."

[Peter_Spaeth]

It's not necessarily crazy. How has the 311 done compared to the S and P 500? Maybe it makes sense to diversify for some people.

[Leon]

Originally Posted by Peter_Spaeth

It's not necessarily crazy. How has the 311 done compared to the S and P 500? Maybe it makes sense to diversify for some people.

I act as if my cards ARE part of my retirement. For me, it's all about diversifying. I have quite a bit into cards but it's not a double digit percentage, or barely one, of my net worth. Everyone has a unique financial situation but having some of your money into cards isn't a bad thing.

.

[Fuddjcal]

Originally Posted by Leon

I act as if my cards ARE part of my retirement. For me, it's all about diversifying. I have quite a bit into cards but it's not a double digit percentage, or barely one, of my net worth. Everyone has a unique financial situation but having some of your money into cards isn't a bad thing.

.

1 thing to "invest " in the cards that you do, in lieu of funding the 401K or roth.
However, once in your retirement accounts, it's shouldn't be coming out until retirement. Also another thing to have a good portion in cash, within the account. Paying 30% taxes to withdrawal is for idiots. Dollar cost AVG never hurt anyone

[raulus]

Wow...

I mean...wow.

I suppose there are worse ways to invest your retirement savings. Certainly crypto is high on that list, along with anything where you're just spending it and it's gone forever.

There's no question that they'll probably get more enjoyment for now out of buying cards, but those chickens are going to come home to roost eventually, at which point hopefully they don't come begging for the rest of us to fund their retirement if they end up short.

But priorities, right? Cards are good fun, and if we're lucky, we'll sell them before we die for more than we spent on them (or before we die and the wife sells them for what she thinks we spent on them). But to risk your financial security on them seems like you're playing with fire.

[Republicaninmass]

It worked well for me over the last few years. However, I'm nowslowly adding back into stocks over the last year or so. Not something I'd reccomend if money is needed within the next 15 years

[G1911]

Draining retirement accounts to do it doesn’t sound like diversification but going all in on the current fad.

Although, I have been reliably informed by people who put too much of their money into cards that the only direction for baseball cards is up, and Mickey Mantle is the safest investment that can be made. Empty your retirement accounts, sell your house, and put all in on mass produced cardboard pictures. Be a visionary and print that money #investemoji

[Peter_Spaeth]

Originally Posted by G1911

Draining retirement accounts to do it doesn’t sound like diversification but going all in on the current fad.

Although, I have been reliably informed by people who put too much of their money into cards that the only direction for baseball cards is up, and Mickey Mantle is the safest investment that can be made. Empty your retirement accounts, sell your house, and put all in on mass produced cardboard pictures. Be a visionary and print that money #investemoji

I wouldn't advocate draining retirement accounts by any means, but it isn't an all or nothing proposition.

[Snapolit1]

Originally Posted by Peter_Spaeth

I wouldn't advocate draining retirement accounts by any means, but it isn't an all or nothing proposition.

Agree. Any collection worth more than a small amount is diversification of sorts.

I have never specifically taken retirement money to buy hobby stuff and never will.

[Johnny630]

Drew, I have heard some of the same things from dealers who set up at the bigger shows with the higher-end vintage names I collect. From what I’ve seen and heard this has been commonplace since around the Start of all these Vaults, especially since March 2020. Idk to each their own I guess.

[G1911]

Originally Posted by Peter_Spaeth

I wouldn't advocate draining retirement accounts by any means, but it isn't an all or nothing proposition.

If you’re to the point where you’re taking money out of retirement accounts, and incurring the heavy taxes and fees for doing that early and improperly, I have a hard time seeing how this person isn’t going all in. Once you’ve gone this far, there isn’t much further to go.

I have no problem if people want to invest some money in coins, stamps, crypto, beanie babies or cardboard. It’s riskier, but there’s also a plausible chance they will outperform my index funds. If you’re taking money out of retirement accounts to do it, this person really should hit pause and reflect on what they are doing.

[Fuddjcal]

Originally Posted by parkplace33

On another forum, I read a post where two member spoke about buying cards and withdrawing funds to purchase vintage cards that they wanted. One had being doing it for a while and said that “buying and holding vintage cards made more sense that investing in stocks”.

In a recent conversation with a dealer, he said that this was commonplace, especially in the last few years. Some buyers have had to delay card purchases due to having wait for the payout from funds.

Is this commonplace? I, personally, cannot fathom withdrawing funds from my retirement for card purchases, but maybe I am in the minority.

what really makes sense is the 30% taxes with penalty. Very Dopey Strategy made by Dopey Mcdope dopes

[Johnny630]

Originally Posted by Fuddjcal

what really makes sense is the 30% taxes with penalty. Very Dopey Strategy made by Dopey Mcdope dopes

Very Dopey Chuck. I hope Bob C can opine on this further. To me, this whole subject of investing in sports cards has taken a sharp turn for many to day trading, no buy and hold investing or buy and homework investing. They want To be vaulted where they can easily flip their cards while buying other ones in the blink of an eye. I don’t mind people investing in cards one bit, it’s the PWCC Brokerage House Trading that has me a little concerned about the future.

[Exhibitman]

As card prices surged, my wife asked me why I hadn't bought some of the highest-flying cards when they were relatively affordable (Ruth RC, etc.). I said because I was being responsible and putting every spare dime into IRAs and other savings vehicles: if I'd come home and said "hey, honey, I just took the IRA money and bought a great Babe Ruth card", she'd have thrown me and the Ruth card out of the house.

As for the OP, I think many of us are starting to look at our collections as retirement vehicles. I know that I plan to make picking and dealing into my main occupation when I can retire from my law practice. It can generate some reasonable income and it is just plain fun.

Taxes are intensely personal; there is no one-size-fits-all formula. For example, right now cards held for more than a year are taxed as capital gains at 28%. However, if you create a business and sell that way, your profits are taxed as ordinary income. Then there is the question of entity use, which can result in a pass-through of some income tax-free under the Section 199A deduction. You have to calculate hard and soft costs of using an entity (state franchise taxes, formation costs, costs to file tax returns) against the costs of either going with capital gains or doing a Schedule C and eating some self-employment taxes.

There's also the question of what else you could do with your money and what you have done with your money. Cards are a storehouse of (untaxed) value, same as any other hard asset that doesn't produce income, but the cost to get out is that tax hit on your profits. On the other end of the spectrum, the first $500,000 of gains from the sale of a married couple's principal residence is tax-free. So, you could say that it makes sense to buy a home first and accrue up to $500,000 in potential gains at a tax-free rate over time rather than buy a card first and face a tax on the gains when you sell. $500,000 tax-free is the same as roughly $700,000 with taxes.

In other words, there is no simple advice other than if you are really interested, have a professional figure it out for you.

ETA: one further thought on pulling funds from retirement accounts. We will all face the dreaded "RMD" (required minimum distribution) if we live long enough (I think it is/was 70.5 and I thought I read it was going to be 72), and if we inherit an IRA the distributions can start even earlier than that (Inherited IRAs have to be liquidated within ten years). Money is going to come out of these accounts and be taxed, so spending it on cards may be a good play at that point, as a reinvestment. Until an RMD, it is really, really dicey to pull money out; the ROI better be stellar to justify the tax rate and the penalty for early withdrawal. Plus, the accounts offer a level of asset protection that cards...don't.

And while we are at it, one final thought on velocity. One mistake that the shiny crapsters make is not getting out with a profit when the getting is good. I was at a card show recently and one of the dealers was screaming into his cell phone at someone to "dump my Tatis!" Apparently, he'd been offered into six figures for a Tatis card, declined, and had, shall we say, regrets. If you want to have the card until you die, that's one thing, but if you don't, get out when the profit is good and move into the next deal.

[G1911]

Cards might go down, cards might go up.

Stocks might go down, stocks might go up.

Generally, over the long haul, if the major stock market indexes doesn’t go up over the long haul (a retirement account is a long haul investment), the dollar will be collapsing and collectibles will be worth little to nothing. One may make more on 52 Mantle’s or the right vintage, but the indexes are a lot more secure. If they collapse, everything collapses. I’m all for taking some smart gambles, but retirement accounts should not be withdrawn (with those heavy penalty hits) to gamble on baseball cards. Safe and solid is a wiser approach for retirement, but that’s just my opinion. If one wants to go risky, risking it in a way that doesn’t incur huge withdrawal fees seems the wiser risk. Take some income and put it into cards if one wants, or yolo it on crypto, some risks can pay off a lot better than the stock market. But don’t take out of retirement accounts to do it.

[Johnny630]

I would only plow into an investment asset class during some kind of treacherous time in the market when it becomes ridiculously under valued relative to it's past performance. High End Vintage to me right now is not the time.

[Peter_Spaeth]

Originally Posted by Johnny630

I would only plow into an investment asset class during some kind of treacherous time in the market when it becomes ridiculously under valued relative to it's past performance. High End Vintage to me right now is not the time.

If only we could know when things were ridiculously undervalued, we'd all be fabulously wealthy.

[Johnny630]

Originally Posted by Peter_Spaeth

If only we could know when things were ridiculously undervalued, we'd all be fabulously wealthy.

Warren Buffett did it quite well over the years!!

[Casey2296]

Originally Posted by Peter_Spaeth

If only we could know when things were ridiculously undervalued, we'd all be fabulously wealthy.

Like this?

In mid-April 2020 the price of a barrel of West Texas crude went below $0 as sellers had to pay get rid of it.

2.5 years later a barrel of WTI currently sits at $87.78

[Mark17]

Originally Posted by Peter_Spaeth

If only we could know when things were ridiculously undervalued, we'd all be fabulously wealthy.

Game used flannels. They are at least 50 years old, so truly vintage. They are scarce, large, colorful, display well, and are tied directly to the player, the stadium, the clubhouse, the batters box and basepaths. With road jerseys, they also travelled with the teams on trains or planes. A pre- 1958 road jersey from any NL team likely saw Ebbets Field, the Polo Grounds, Sportsmans' Park, and so on.

There might even be actual trace DNA in the fibers of the shirt.

If you're looking for the next thing where suddenly, everybody is going to say, "Doh! Of course! This is the coolest, most under-valued thing ever," it's flannel gamers.

[todeen]

Originally Posted by parkplace33

On another forum, I read a post where two member spoke about buying cards and withdrawing funds to purchase vintage cards that they wanted. One had being doing it for a while and said that “buying and holding vintage cards made more sense that investing in stocks”.



In a recent conversation with a dealer, he said that this was commonplace, especially in the last few years. Some buyers have had to delay card purchases due to having wait for the payout from funds.



Is this commonplace? I, personally, cannot fathom withdrawing funds from my retirement for card purchases, but maybe I am in the minority.

I would be shocked if it was investing in modern sports cards. That's a risky game especially Bowman 1st. I wouldn't encourage that.

My dad did not invest in stocks, he invested in index fund portfolios. it created diversity and shrank risk. it also prevented high yields from stocks like Apple and Amazon. If an investor is strictly talking selling stock to invest in major foundational sports cards, I'd probably not be too concerned because IMO the risk is the same, and he's trying to create diversity. But if an investor wanted to move from an index fund to cards, maybe I would be hesitant because diversity is built into the funds.

I would think the investor could do no more worse with major foundational cards than with bonds. I might even encourage cards over bonds if they are just trying to hedge against inflation rather than seeing it as a volatile market.

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[Gorditadogg]

Cards are not an investment. If you are buying cards to make money on them you are speculating, not investing. There is no intrinsic value to cards, all they are worth is what the old farts on this site are willing to pay for them, as long as we are around.

If you made a lot of money on cards, good for you. Maybe you were smart, maybe you were lucky, or most likely you were just obsessed.

Bur think about it. Right now you have a piece of cardboard with a picture on it that cost two cents to make 50 or 100 years ago, and you are hoping somebody will be willing to buy it from you for $1000 or $100,000 ten or twenty years from now. Because why?



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[Exhibitman]

Originally Posted by Gorditadogg

Cards are not an investment. If you are buying cards to make money on them you are speculating, not investing. There is no intrinsic value to cards, all they are worth is what the old farts on this site are willing to pay for them, as long as we are around.

If you made a lot of money on cards, good for you. Maybe you were smart, maybe you were lucky, or most likely you were just obsessed.

Bur think about it. Right now you have a piece of cardboard with a picture on it that cost two cents to make 50 or 100 years ago, and you are hoping somebody will be willing to buy it from you for $1000 or $100,000 ten or twenty years from now. Because why?



Sent from my SM-S906U using Tapatalk

The intrinsic value argument is not a good argument because it is exactly what can be said about stocks, art, gold, diamonds, and nearly every other thing (tangible and intangible) that we use to store value. There is no intrinsic value to any of it other than what some old farts willing to pay for it agree it is worth. As for speculation, so-called 'investments' all are speculation. if that was not the case, why would SEC Rule 156 (17 CFR 230.156) prohibit mutual funds from telling investors to base their expectations of future results on past performance? Simple: because it is all speculative. Any differentiation between one form of construct and another is merely a perception of value and risk relative to one another.

There is little in this world with 'intrinsic' value. Just land, food, fuel, weapons and drugs. But securities, art, cards, even a dollar? Just a construct, worth what people collectively agree it is worth. Or to quote Gordon Gekko: "The illusion has become real, and the more real it becomes, the more desperately they want it. Capitalism at it's finest."

[raulus]

Originally Posted by Exhibitman

The intrinsic value argument is not a good argument because it is exactly what can be said about stocks, art, gold, diamonds, and nearly every other thing (tangible and intangible) that we use to store value. There is no intrinsic value to any of it other than what some old farts willing to pay for it agree it is worth. As for speculation, so-called 'investments' all are speculation. if that was not the case, why would SEC Rule 156 (17 CFR 230.156) prohibit mutual funds from telling investors to base their expectations of future results on past performance? Simple: because it is all speculative. Any differentiation between one form of construct and another is merely a perception of value and risk relative to one another.

There is little in this world with 'intrinsic' value. Just land, food, fuel, weapons and drugs. But securities, art, cards, even a dollar? Just a construct, worth what people collectively agree it is worth. Or to quote Gordon Gekko: "The illusion has become real, and the more real it becomes, the more desperately they want it. Capitalism at it's finest."

I think this discussion about speculative assets misses the point, because the real issue is productive assets v. nonproductive assets.

I've always found this discussion by Mr. Buffet to be enlightening from the 2011 shareholder letter, so I'm pasting it here, as it highlights some key differences between asset classes, which appear to be germane to this discussion about investing in cardboard v. other asset classes. It's a bit lengthy, but I've always found it to be insightful:

Investment possibilities are both many and varied. There are three major categories, however, and it’s important to understand the characteristics of each. So let’s survey the field.

Investments that are denominated in a given currency include money-market funds, bonds, mortgages, bank deposits, and other instruments. Most of these currency-based investments are thought of as “safe.”

In truth they are among the most dangerous of assets. Their beta may be zero, but their risk is huge. Over the past century these instruments have destroyed the purchasing power of investors in many countries, even as the holders continued to receive timely payments of interest and principal. This ugly result, moreover, will forever recur. Governments determine the ultimate value of money, and systemic forces will sometimes cause them to gravitate to policies that produce inflation. From time to time such policies spin out of control. Even in the U.S., where the wish for a stable currency is strong, the dollar has fallen a staggering 86% in value since 1965, when I took over management of Berkshire. It takes no less than $7 today to buy what $1 did at that time. Consequently, a tax-free institution would have needed 4.3% interest annually from bond investments over that period to simply maintain its purchasing power. Its managers would have been kidding themselves if they thought of any portion of that interest as “income.”

For tax-paying investors like you and me, the picture has been far worse. During the same 47-year period, continuous rolling of U.S. Treasury bills produced 5.7% annually. That sounds satisfactory. But if an individual investor paid personal income taxes at a rate averaging 25%, this 5.7% return would have yielded nothing in the way of real income. This investor’s visible income tax would have stripped him of 1.4 points of the stated yield, and the invisible inflation tax would have devoured the remaining 4.3 points. It’s noteworthy that the implicit inflation “tax” was more than triple the explicit income tax that our investor probably thought of as his main burden. “In God We Trust” may be imprinted on our currency, but the hand that activates our government’s printing press has been all too human. High interest rates, of course, can compensate purchasers for the inflation risk they face with currency-based investments – and indeed, rates in the early 1980s did that job nicely. Current rates, however, do not come close to offsetting the purchasing-power risk that investors assume. Right now bonds should come with a warning label. Under today’s conditions, therefore, I do not like currency-based investments.

Even so, Berkshire holds significant amounts of them, primarily of the short-term variety. At Berkshire the need for ample liquidity occupies center stage and will never be slighted, however inadequate rates may be. Accommodating this need, we primarily hold U.S. Treasury bills, the only investment that can be counted on for liquidity under the most chaotic of economic conditions. Our working level for liquidity is $20 billion; $10 billion is our absolute minimum. Beyond the requirements that liquidity and regulators impose on us, we will purchase currency-related securities only if they offer the possibility of unusual gain – either because a particular credit is mispriced, as can occur in periodic junk-bond debacles, or because rates rise to a level that offers the possibility of realizing substantial capital gains on high-grade bonds when rates fall. Though we’ve exploited both opportunities in the past – and may do so again – we are now 180 degrees removed from such prospects. Today, a wry comment that Wall Streeter Shelby Cullom Davis made long ago seems apt: “Bonds promoted as offering risk-free returns are now priced to deliver return-free risk.”

The second major category of investments involves assets that will never produce anything, but that are purchased in the buyer’s hope that someone else – who also knows that the assets will be forever unproductive – will pay more for them in the future. Tulips, of all things, briefly became a favorite of such buyers in the 17th century. This type of investment requires an expanding pool of buyers, who, in turn, are enticed because they believe the buying pool will expand still further. Owners are not inspired by what the asset itself can produce – it will remain lifeless forever – but rather by the belief that others will desire it even more avidly in the future. The major asset in this category is gold, currently a huge favorite of investors who fear almost all other assets, especially paper money (of whose value, as noted, they are right to be fearful). Gold, however, has two significant shortcomings, being neither of much use nor procreative. True, gold has some industrial and decorative utility, but the demand for these purposes is both limited and incapable of soaking up new production. Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end. What motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As “bandwagon” investors join any party, they create their own truth – for a while. Over the past 15 years, both Internet stocks and houses have demonstrated the extraordinary excesses that can be created by combining an initially sensible thesis with well-publicized rising prices. In these bubbles, an army of originally skeptical investors succumbed to the “proof” delivered by the market, and the pool of buyers – for a time – expanded sufficiently to keep the bandwagon rolling. But bubbles blown large enough inevitably pop. And then the old proverb is confirmed once again: “What the wise man does in the beginning, the fool does in the end.”

Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A. Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B? Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion.

Buyers – whether jewelry and industrial users, frightened individuals, or speculators – must continually absorb this additional supply to merely maintain an equilibrium at present prices. A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond. Admittedly, when people a century from now are fearful, it’s likely many will still rush to gold. I’m confident, however, that the $9.6 trillion current valuation of pile A will compound over the century at a rate far inferior to that achieved by pile B.

Our first two categories enjoy maximum popularity at peaks of fear: Terror over economic collapse drives individuals to currency-based assets, most particularly U.S. obligations, and fear of currency collapse fosters movement to sterile assets such as gold. We heard “cash is king” in late 2008, just when cash should have been deployed rather than held. Similarly, we heard “cash is trash” in the early 1980s just when fixed-dollar investments were at their most attractive level in memory. On those occasions, investors who required a supportive crowd paid dearly for that comfort.

My own preference – and you knew this was coming – is our third category: investment in productive assets, whether businesses, farms, or real estate. Ideally, these assets should have the ability in inflationary times to deliver output that will retain its purchasing-power value while requiring a minimum of new capital investment. Farms, real estate, and many businesses such as Coca-Cola, IBM and our own See’s Candy meet that double-barreled test. Certain other companies – think of our regulated utilities, for example – fail it because inflation places heavy capital requirements on them. To earn more, their owners must invest more. Even so, these investments will remain superior to nonproductive or currency-based assets.

Whether the currency a century from now is based on gold, seashells, shark teeth, or a piece of paper (as today), people will be willing to exchange a couple of minutes of their daily labor for a Coca-Cola or some See’s peanut brittle. In the future the U.S. population will move more goods, consume more food, and require more living space than it does now. People will forever exchange what they produce for what others produce. Our country’s businesses will continue to efficiently deliver goods and services wanted by our citizens. Metaphorically, these commercial “cows” will live for centuries and give ever greater quantities of “milk” to boot. Their value will be determined not by the medium of exchange but rather by their capacity to deliver milk. Proceeds from the sale of the milk will compound for the owners of the cows, just as they did during the 20th century when the Dow increased from 66 to 11,497 (and paid loads of dividends as well). Berkshire’s goal will be to increase its ownership of first-class businesses. Our first choice will be to own them in their entirety – but we will also be owners by way of holding sizable amounts of marketable stocks. I believe that over any extended period of time this category of investing will prove to be the runaway winner among the three we’ve examined. More important, it will be by far the safest.

[Peter_Spaeth]

Nicolo, yes, and a fabulous analysis thank you, but everyone isn't 30 years old with a 40 year investing horizon.

[Johnny630]

Originally Posted by raulus

I think this discussion about speculative assets misses the point, because the real issue is productive assets v. nonproductive assets.

I've always found this discussion by Mr. Buffet to be enlightening from the 2011 shareholder letter, so I'm pasting it here, as it highlights some key differences between asset classes, which appear to be germane to this discussion about investing in cardboard v. other asset classes. It's a bit lengthy, but I've always found it to be insightful:

Investment possibilities are both many and varied. There are three major categories, however, and it’s important to understand the characteristics of each. So let’s survey the field.

Investments that are denominated in a given currency include money-market funds, bonds, mortgages, bank deposits, and other instruments. Most of these currency-based investments are thought of as “safe.”

In truth they are among the most dangerous of assets. Their beta may be zero, but their risk is huge. Over the past century these instruments have destroyed the purchasing power of investors in many countries, even as the holders continued to receive timely payments of interest and principal. This ugly result, moreover, will forever recur. Governments determine the ultimate value of money, and systemic forces will sometimes cause them to gravitate to policies that produce inflation. From time to time such policies spin out of control. Even in the U.S., where the wish for a stable currency is strong, the dollar has fallen a staggering 86% in value since 1965, when I took over management of Berkshire. It takes no less than $7 today to buy what $1 did at that time. Consequently, a tax-free institution would have needed 4.3% interest annually from bond investments over that period to simply maintain its purchasing power. Its managers would have been kidding themselves if they thought of any portion of that interest as “income.”

For tax-paying investors like you and me, the picture has been far worse. During the same 47-year period, continuous rolling of U.S. Treasury bills produced 5.7% annually. That sounds satisfactory. But if an individual investor paid personal income taxes at a rate averaging 25%, this 5.7% return would have yielded nothing in the way of real income. This investor’s visible income tax would have stripped him of 1.4 points of the stated yield, and the invisible inflation tax would have devoured the remaining 4.3 points. It’s noteworthy that the implicit inflation “tax” was more than triple the explicit income tax that our investor probably thought of as his main burden. “In God We Trust” may be imprinted on our currency, but the hand that activates our government’s printing press has been all too human. High interest rates, of course, can compensate purchasers for the inflation risk they face with currency-based investments – and indeed, rates in the early 1980s did that job nicely. Current rates, however, do not come close to offsetting the purchasing-power risk that investors assume. Right now bonds should come with a warning label. Under today’s conditions, therefore, I do not like currency-based investments.

Even so, Berkshire holds significant amounts of them, primarily of the short-term variety. At Berkshire the need for ample liquidity occupies center stage and will never be slighted, however inadequate rates may be. Accommodating this need, we primarily hold U.S. Treasury bills, the only investment that can be counted on for liquidity under the most chaotic of economic conditions. Our working level for liquidity is $20 billion; $10 billion is our absolute minimum. Beyond the requirements that liquidity and regulators impose on us, we will purchase currency-related securities only if they offer the possibility of unusual gain – either because a particular credit is mispriced, as can occur in periodic junk-bond debacles, or because rates rise to a level that offers the possibility of realizing substantial capital gains on high-grade bonds when rates fall. Though we’ve exploited both opportunities in the past – and may do so again – we are now 180 degrees removed from such prospects. Today, a wry comment that Wall Streeter Shelby Cullom Davis made long ago seems apt: “Bonds promoted as offering risk-free returns are now priced to deliver return-free risk.”

The second major category of investments involves assets that will never produce anything, but that are purchased in the buyer’s hope that someone else – who also knows that the assets will be forever unproductive – will pay more for them in the future. Tulips, of all things, briefly became a favorite of such buyers in the 17th century. This type of investment requires an expanding pool of buyers, who, in turn, are enticed because they believe the buying pool will expand still further. Owners are not inspired by what the asset itself can produce – it will remain lifeless forever – but rather by the belief that others will desire it even more avidly in the future. The major asset in this category is gold, currently a huge favorite of investors who fear almost all other assets, especially paper money (of whose value, as noted, they are right to be fearful). Gold, however, has two significant shortcomings, being neither of much use nor procreative. True, gold has some industrial and decorative utility, but the demand for these purposes is both limited and incapable of soaking up new production. Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end. What motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As “bandwagon” investors join any party, they create their own truth – for a while. Over the past 15 years, both Internet stocks and houses have demonstrated the extraordinary excesses that can be created by combining an initially sensible thesis with well-publicized rising prices. In these bubbles, an army of originally skeptical investors succumbed to the “proof” delivered by the market, and the pool of buyers – for a time – expanded sufficiently to keep the bandwagon rolling. But bubbles blown large enough inevitably pop. And then the old proverb is confirmed once again: “What the wise man does in the beginning, the fool does in the end.”

Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A. Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B? Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion.

Buyers – whether jewelry and industrial users, frightened individuals, or speculators – must continually absorb this additional supply to merely maintain an equilibrium at present prices. A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond. Admittedly, when people a century from now are fearful, it’s likely many will still rush to gold. I’m confident, however, that the $9.6 trillion current valuation of pile A will compound over the century at a rate far inferior to that achieved by pile B.

Our first two categories enjoy maximum popularity at peaks of fear: Terror over economic collapse drives individuals to currency-based assets, most particularly U.S. obligations, and fear of currency collapse fosters movement to sterile assets such as gold. We heard “cash is king” in late 2008, just when cash should have been deployed rather than held. Similarly, we heard “cash is trash” in the early 1980s just when fixed-dollar investments were at their most attractive level in memory. On those occasions, investors who required a supportive crowd paid dearly for that comfort.

My own preference – and you knew this was coming – is our third category: investment in productive assets, whether businesses, farms, or real estate. Ideally, these assets should have the ability in inflationary times to deliver output that will retain its purchasing-power value while requiring a minimum of new capital investment. Farms, real estate, and many businesses such as Coca-Cola, IBM and our own See’s Candy meet that double-barreled test. Certain other companies – think of our regulated utilities, for example – fail it because inflation places heavy capital requirements on them. To earn more, their owners must invest more. Even so, these investments will remain superior to nonproductive or currency-based assets.

Whether the currency a century from now is based on gold, seashells, shark teeth, or a piece of paper (as today), people will be willing to exchange a couple of minutes of their daily labor for a Coca-Cola or some See’s peanut brittle. In the future the U.S. population will move more goods, consume more food, and require more living space than it does now. People will forever exchange what they produce for what others produce. Our country’s businesses will continue to efficiently deliver goods and services wanted by our citizens. Metaphorically, these commercial “cows” will live for centuries and give ever greater quantities of “milk” to boot. Their value will be determined not by the medium of exchange but rather by their capacity to deliver milk. Proceeds from the sale of the milk will compound for the owners of the cows, just as they did during the 20th century when the Dow increased from 66 to 11,497 (and paid loads of dividends as well). Berkshire’s goal will be to increase its ownership of first-class businesses. Our first choice will be to own them in their entirety – but we will also be owners by way of holding sizable amounts of marketable stocks. I believe that over any extended period of time this category of investing will prove to be the runaway winner among the three we’ve examined. More important, it will be by far the safest.

This is so brilliant

[Exhibitman]

Here's the thing: we all see what we want to see.

Dollar-based assets are terrible, unless they aren't. My wife's grandfather, who was a machinist, got lucky and bought a mess of Treasuries when interest rates were over 10%. When inflation came down, he ended up with a big winner.

Hard assets, also terrible until they are not. Case in point: gold. The inflation-adjusted price of gold was equivalent to over $9,000 an ounce in 1979-1980, at its all-time peak. My father bought a tube of Krugerrands in the mid-1970s and sold it a few years later for a giant profit. Timing was everything.

Income-producing assets, really dependent on what the asset is and the degree to which it is subject to outside forces. Take rental real estate. Big asset with a track record of performance. Until it hits a wall of political resistance. Like rent control or the shelter in place eviction freezes of the pandemic. Even a dirtbag tenant who uses the non-emergency law can remain in place for months before he can be dug out of the property (my clients have had more than a few of those). No income and you still pay the carrying costs throughout. If you have a thousand units, you can handle it readily. if you have a single building, a few nasty deadbeats and vacancies can kill you. I know of more than one real estate entity facing capital calls due to cash flow issues stemming from losses of tenants and inability to evict deadbeats.

None of it is assured, it just depends on timing and specific risks to the asset. That's why you have to diversify and take profits. At the recent Burbank show a guy came to my table wanting to trade. He opened his custom Zion card case (which they all have now) and pulled out a stack of limited-edition autographed cards...of Walker Buehler. Oops! Probably should have traded some of those when the profits were there and picked up other players, like Tatis. OK, bad example.

You know what is concrete, though? Paying off your debts. Borrowing to invest is a fool's errand for average people. Debt for baseball cards? Puh-leese: that box break is not going to beat the credit cost. Again, back to my wife's grandfather, not a sophisticated guy but knew from the Depression that debt was the key. Own your stuff and owe no one. That's how you weather downturns. He paid off his house and saved to pay for new things. Not very fashionable, but he paid for both his granddaughters' college after their deadbeat dad walked out, and left enough money to secure his grocery clerk daughter's retirement, too. That's what I aim for: to own my stuff and not to owe jack-squat to anyone, maybe leave a legacy for my kid. Of course, it will probably be Ruth cards...

[raulus]

I guess the beauty of living in a free country is that you get to choose how to spend your time and financial resources. And nobody can force you otherwise. Your mother and wife might try, but even their influence has limits. And the beauty is that all of our actions have consequences. If I make brilliant choices, then I reap the rewards. If they are foolish, then I suffer accordingly. Sometimes it takes years or decades for the natural results to manifest, but the law of the harvest is just as true today as it has ever been.

If you decide to pull your cash out of retirement and put it into cards, then God bless you. I really hope it works out well for you financially. And if not, then hopefully you can derive some pleasure in just having the cards.

And for those of us that under-allocate to cards and over-allocate to other assets, hopefully our choices work out for us as well, and we don't look back and wish that we had just let it all ride on cardboard.

Happy collecting, and hopefully we can all enjoy a well-deserved retirement when the time comes, hopefully sooner than later, free of financial worry, and replete with hoarding cardboard and arguing with strangers online about piffle.

[theshowandme]

This is such an insane concept to me

[Exhibitman]

Well, with every stock index down substantially this year, maybe not so insane...

[Leon]

Originally Posted by Exhibitman

Well, with every stock index down substantially this year, maybe not so insane...

My cards have done better than my stocks!! And I have mostly Apple and Amazon...
.

[sb1]

Having done well in both cards and the stock market over the last 30 years, I came to the conclusion when looking at my daughter's brokerage account which we opened when she was 16, that if I had invested every nickel in Apple we would be almost 2x's ahead.

[G1911]

I can't wait to see the screen caps of people's closed 401K accounts as they pull it out, take that massive tax hit, and put it all into baseball cards. The people who think this makes sense have had several weeks to put their money where their advocacy is

[G1911]

Originally Posted by theshowandme

This is such an insane concept to me

It seems like an insane concept, because it is

[rats60]

Originally Posted by G1911

It seems like an insane concept, because it is

Losing money in the stock market is better than making money with baseball cards?

[G1911]

Originally Posted by rats60

Losing money in the stock market is better than making money with baseball cards?

The vast majority of 401K accounts make money, not a loss. It's really, really, really hard to put your money into a 401K for many years and produce a net loss. It takes serious mismanagement and stacking horrible decisions to do so. The tax structure has been gone over.

But if you believe a 401K or an IRA is bad and pulling money out of retirement accounts to YOLO on cardboard is wisdom, do it. I eagerly await the screen caps of people putting their money where there mouth is and closing their retirement accounts, taking that massive tax hit, and spending it all on baseball cards. Surely they will come any minute now to show us doubters and actually do it.

[rats60]

Originally Posted by G1911

The vast majority of 401K accounts make money, not a loss. It's really, really, really hard to put your money into a 401K for many years and produce a net loss. It takes serious mismanagement and stacking horrible decisions to do so. The tax structure has been gone over.

But if you believe a 401K or an IRA is bad and pulling money out of retirement accounts to YOLO on cardboard is wisdom, do it. I eagerly await the screen caps of people putting their money where there mouth is and closing their retirement accounts, taking that massive tax hit, and spending it all on baseball cards. Surely they will come any minute now to show us doubters and actually do it.

You have lost ~20% in the market this year. There is no guarantee that it is going up anytime soon. Many experts think it is going down more as the economy gets worse.

Yes, the tax structure has been gone over. There are ways to take money out, depending on the type of retirement account, without penalties. If none of these fit the individual needs, then it probably isn't wise.

This thread was started because the OP heard people were doing it, but we don't know the specifics. I doubt they are coming here to post because most are negative about cards as an investment. Most of my retirement is already in my collection and I am way ahead of where I would have been if I had maxed out retirement account, so I am already good.