Proposed Change to Lessen Manipulative Bidding/Conversation with PWCC/Input Wanted

[griffon512]

this is a long entry, but please bear with me and give input on the suggestions i make below on alleviating price manipulation. i realize this is a topic that has been written about ad nauseam, but hopefully i’m presenting a slightly different angle and have received positive feedback from the largest card auction house on ebay. your input/feedback will give us a much better probability of making these suggestions a reality across all the major auction houses on ebay.

the next couple of paragraphs give context for what i believe is fueling much higher prices in segments of the market, and the other paragraphs are focused on a change that as a community we can facilitate that i and a number of others believe will result in meaningfully less manipulation of prices. skip the next couple of paragraphs and jump to the paragraph that starts "with this context in mind" if you get bored. the last part of the post is my feedback after a conversation with brent, the head of pwcc.

one of the areas most discussed on this board is manipulation of prices through shill bidding. it is conventional wisdom that the sentences handed out to bill mastro and doug allen has done little to curb the amount of shill bidding. the huge appreciation in high grade cards of hall of famers/iconic players across all sports is likely the combination of new money coming into the hobby (“investors”) and price manipulation, causing these cards to be re-valued much higher. for those that haven’t participated by buying these cards there is a sense of guilt for having missed the boat and the presumption that the appreciation will continue, fueling them to participate in reaching for prices they find ridiculous. this reinforces that the inflated prices will at least be maintained…and they will until the marginal buyer stops reaching and supply starts to overwhelm demand. having spent over 15 years on wall street as a research analyst and money manager, this is the same dynamic i have seen in every bubble.

for what it is worth, i think the current rapid increase in prices in parts of the card market has the same source as what has fueled other asset classes, like the stock market over the last several years. the source is monetary policy of the federal reserve in this country and global central banks. since 2009 the federal reserve has literally printed trillions of dollars from thin air. they use this newly created money to purchase bonds in the open market, and in so doing increase the prices of these bonds (which lowers their yield and interest rate on newly issued bonds). the federal reserve justifies printing trillions of dollars from thin air because they believe lower interest rates would help people re-finance their homes at lower rates, increase asset prices (e.g., stock market), and spur corporate investments given the lower cost of borrowing. the downside is this policy is inflationary over time (hurting poor people the most), leads to a wealth gap (the rich are getting richer because they have the most exposure to risky assets like stocks while much of the middle class and poor people don’t benefit or are hurt as their costs of living go up without the same degree of exposure to risky assets that are inflating), and fuels speculative bubbles. the speculative bubbles are driven by safer alternatives of investing one’s assets (e.g., buying government bonds) yielding next to nothing because interest rates are so low.

this causes a search for yield, i.e., higher returns, which compels people to buy stocks instead of bonds. the monetary policies undertaken to reflate the economy following the “great recession” are unprecedented both in this country and the rest of the world. numerous bubbles have popped up as a result of this dynamic, including, in my view, parts of the high end card market. this doesn’t feel much different to me than what i saw in the tech bubble in the late 90’s. in fact, a number of the new “investors” in the card market are silicon valley and wall street workers who are rotating money out of other assets and/or putting new money to work. as others have written in this forum, investment buyers are a meaningful percentage of the bidders chasing cards and it doesn’t take a lot of them to impact prices, especially when “collectors” start to follow their lead. sorry if this explanation of the context for what’s happening in the card market was longwinded or redundant for many of you. just wanted to set the table for the more important part of the post that follows.

with this context in mind, the question still remains: what is the most practical way to significantly alleviate the degree of price manipulation in high end card market of many hofers/iconic figures, where the kindle for the fire is everything I described above? the simplest, practical to implement, and timely potential change that came to mind has to do with bid retractions on ebay. the major auction houses on ebay are setting record prices every day among the cards i mentioned before. in looking at the bid history on ebay of many of these cards there is a consistent theme: a very high number of bid retractions over the last 6 months (ebay discloses the number over this timeframe) from some of the major bidders.

i think this is more indicative of a problem than % of bid activity with a given seller since a number of “investors” will follow just one or two ebay auctions houses because of time constraints, reliability of their service, etc. in my view, there are two major reasons for a high number of bid retractions. the first is when someone gets cold feet following a bid – call it potential buyer’s remorse or buyers remorse. the “oh sh_t” feeling we get when we bite off more than we can chew in money terms. the second -- and much more common – reason for a bid retraction is the bid was made solely to increase the price (shill bid) with an ulterior motive. my strong suggestion – which we need support from other board members to get strength from numbers/affect change – is that in the future the major ebay auction houses do not allow bidding from those who have above a certain of bid retractions over the last 6 months. i think the number should be low (like 2), but it’s open to debate. i routinely see the number of bid retractions over 6 months be greater than 20. that is inexcusable in almost every scenario i can think of.

in the middle of an auction i was bidding on -- where one of the bidders had around 20 bid retractions and following other auctions on ebay from different sellers that appeared to be shilled -- i got fed up and put a call into pwcc to notify them of what i was seeing in one of their auctions. after talking to one other person at pwcc who was helpful and friendly, he made the suggestion that i talk to brent. brent took the initiative and called me shortly after. i want to preface this by saying that although i post infrequently, i read the board often and find the vitriole directed at various parties and individuals unnecessary and counterproductive to a shared goal: having a healthy hobby with a lot of players where price is determined by bidding that is not manipulated.

if the feedback from my post devolves into personal attacks it will compromise this goal. i have consistently had good experiences buying from pwcc in terms of their customer service and quality of their offering. i had a very productive and informative conversation with brent, which was focused on bid retractions as a form of price manipulation. brent informed me that they have individuals on staff that are frequently citing instances of abuse to ebay. the most important subject that came out of the conversation is that pwcc, unbeknownst to me, is going to come out with new policies in the near future that, among other issues addressed, specifically aim to alleviate the bid retraction problem. i was going to write this post anyway, but brent reinforced that he wanted as much feedback as possible (again, not ad hominem attacks) from our community on what they can do to better address the issues affecting us. this feedback will allow them to shape their policies. one additional note, even if these high bid retractions bidders are not allowed to bid, they can start new accounts although brett informed me there are restrictions on their ability to bid and there are obvious other issues with "starting over." still, it's a potential problem. what can be done to alleviate this issue?

there will always be some manipulation in any asset class because money is involved, but there are steps we can take to make things better. please post your feedback on the bid retraction idea and/or other steps! thanks, james

[1952boyntoncollector]

one 'quick fix' can be if there is ever a bid retraction on an auction you 'won' you have the option of canceling with no recourse.... i know its not a total fix but i know i would drop out of any auction in which someone bid more than me, then 'retracted'...i would than drop out of that auction but right now i always honor paying on any items i 'won'...so if the rules were clear i coudl get out of a 'win' if there was a bid retraction that may prevent some abuse

[Mark17]

Originally Posted by 1952boyntoncollector

one 'quick fix' can be if there is ever a bid retraction on an auction you 'won' you have the option of canceling with no recourse.... i know its not a total fix but i know i would drop out of any auction in which someone bid more than me, then 'retracted'...i would than drop out of that auction but right now i always honor paying on any items i 'won'...so if the rules were clear i coudl get out of a 'win' if there was a bid retraction that may prevent some abuse

I'd take it a step further and say that whenever there is a bid retraction, the bidder who then holds the highest bid should have the option at that point of pulling their bid back as well, and so on, down the line if necessary, until no existing bid was the result of having been inflated by the retracted bid. Everyone should know that every bid they place is against a sincere bidder and not someone who has, or will, retract their bid.

For auction houses, if this is a serious problem, perhaps they should consider having all bidders give them a deposit prior to auction close, that would be non-refundable in case of a retraction that didn't have merit. For ebay, they should automatically ban users after their third retraction, and cross-reference new users (by PayPal account, bank account, credit card numbers, name and address, and so on) to make it harder for them to skirt the rule by opening new accounts.

I recently bid in an auction (the seller was a forum member here in fact,) where I was outbid and that bid was cancelled (not retracted) apparently because the bidder had 0 feedback. It wasn't an issue as I was outbid later anyway but at the time, the cancellation reverted me into the top position. So, the same policy should apply for both retractions and cancellations.

[glchen]

Originally Posted by 1952boyntoncollector

one 'quick fix' can be if there is ever a bid retraction on an auction you 'won' you have the option of canceling with no recourse.... i know its not a total fix but i know i would drop out of any auction in which someone bid more than me, then 'retracted'...i would than drop out of that auction but right now i always honor paying on any items i 'won'...so if the rules were clear i coudl get out of a 'win' if there was a bid retraction that may prevent some abuse

This won't work, and will only encourage more shilling. The shiller will just have a friend or a fake account put up a bid on the auction, and then retract it. Then if the shiller inadvertently "wins" an auction, they will just say there is a retraction, and back out of the winning bid. However, that data point will still be in VCP and completed sales on ebay. If the shiller does not win the auction, they will just count on the winning bidder purchasing the card anyway even though there is a retraction in the bidding history.

Frankly, I think ebay has to change their software to allow sellers to block bidders who have retractions in their history. For example, I know some retractions may be legitimate like a bidding mistake. However, I would still say sellers should block bidders who have more than 1 retraction per month. The other thing I would say is that ebay should also give sellers the option to show the full bidder id in their auctions (and bidders who know which auctions will show their full id's). If ebay does provide this option, then PWCC should display the full bidder id's in their auctions (and other major consignors like Probstein123 should follow). Finally, I think some major auction houses, if you don't pay after winning an auction, they state that they will publish your name and out you as a nonpaying bidder (I think Clean Sweep has said they would do this). For any repeat non-paying bidders, PWCC should publish the name, city, and state of this person on its website. Hopefully, that would help in dissuading some of the shilling going on.

[4815162342]

Whew, I had to take a nap in the middle of that first post. The only way any of this will change is if collectors stop buying. I don't see that happening any time soon. Until I go to sell, which will be the same day collectors stop buying.

[FirstYearCards]

I bid what I am willing to pay and walk away. If it somehow gets bid up to my price, no problem, that's what I was willing to pay.

[griffon512]

ok...but the point is if bidders with a number of bid retractions over the last 6 months are not allowed to bid in an auction it is more likely that you would pay a lower price on some items. is that something you want or don't want?

[Snapolit1]

Is that a post or the first half of Moby Dick?

[trobba]

Originally Posted by Snapolit1

Is that a post or the first half of Moby Dick?

Classic, very funny stuff

[pokerplyr80]

I'm not so sure the retractions are having as big of an impact as you think. A lot of ebay bidders, myself included, will place an early bid or two, but save the real bid for a last minute snipe. If a bid or two had been made and retracted along the way I might not even notice. If someone shill bids up to my max with 5 days left and then retracts, what have they really gained? It was probably far from what my snipe will be in the end.

I do agree that retractions shouldn't be used as a tool to determine another bidder's max. I would support banning those from auctions with more than a couple of retractions, or banning retractions all together. I believe most, if not all other auctions have language in their terms and conditions that say all bids are final and no retractions are allowed. Perhaps changing the ebay policy would be a solution.

[iwantitiwinit]

Aren't these changes ebay would have to enact not PWCC? If thats the case I don't know any of this even matters.

[LuckyLarry]

Like a lot of others, I use a snipe service and forget about it. I am aware of the shill bidding and also the bid retractions, but am unsure how they affect me.

I do know that I have been bidding through eBay since 1998 and have 1629 positives, mostly as a buyer. And I've never made even one bid retraction?

Larry

[Beastmode]

Originally Posted by LuckyLarry

Like a lot of others, I use a snipe service and forget about it. I am aware of the shill bidding and also the bid retractions, but am unsure how they affect me.

I do know that I have been bidding through eBay since 1998 and have 1629 positives, mostly as a buyer. And I've never made even one bid retraction?

Larry

++ Learn to enjoy being the underbidder. Shilling wasn't invented last month, it's been here for centuries, and it's found a nice little nest on e-bay, even worse at AH's.

Stop giving yourself a coronary; snipe a bid at what you think is fair and walk away. Be cautious at any AH's, there's a reason the auctions never end.

If you have time to take on the establishment, more power to you. I'd love to see someone take the manipulators down. But PWCC is the messenger, don't kill them.