How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>bruce Dorskind</b><p><br /><br /><br /><br /><br />About a year ago, we suggested that a number of Hedge Funds would soon<br />look at rare baseball cards as an investment opportunity.<br /><br />Whilst the reaction to this post was generally negative, our conversations<br />with a number of Hedge Fund professionals led us to the conclusion<br />that rare cards, as well as other collectibles, were a strong investment<br />possibility.<br /><br />This weak, The Deal (wwwTheDeal.com) one of the most influential<br />and respected news sources on Wall Street carried a story about a hedge<br />fund that has been formed to "dominate the rare violin market."<br /><br /><br />In our view, a 25-50 million investment in rare baseball cards would<br />enable a fund to acquire a number of important collections and completely<br />change the nature of the baseball card business. Whilst this may not be<br />a popular idea amongst longtime collectors, those who have assembled<br />formidable collections of rare high grade cards will have the opportunity<br />to realize an incredible return on their investment.<br /><br />Violin Story<br /><br />One US fund promoter announced:<br /><br />For the last forty years, the value of great violins has increased dramatically. Being that they are 'tools of the trade', they are not prone to the fluctuation experienced in the fine arts market. This consistency makes the purchase of great instruments historically one of the most secure of art investments. Moreover, the use of one of these classic treasures can change the course of a career. We encourage individual and institutional investors to explore including stringed musical instruments as a separate asset class in investment portfolios to preserve the purchasing power of scarce capital ...<br /><br />A conservative estimate of the annual appreciation of a great violin used to be between 5% and 10%. However, already starting in the late 1970's, due to the globalization of Western economies, the influence and activities of foreign organizations and individuals in local markets have caused violin prices to rise more rapidly. There has been a steady increase in the rate of appreciation of great instruments. Since examples set the standard in the market, Machold Rare Violins looks to the sales prices of extraordinary violins to evaluate the current rate of increase. Today, we put the average annual percentage of appreciation between 10% and 15%<br /><br /><br />Yours truly,<br />

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>barrysloate</b><p>Wealthy people may decide to buy very large baseball card collections for themselves, but I don't see them putting together portfolios for their clients. I think it would be a bad move.

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>Jason L</b><p>This brings up the topic of one of my threads from a month ago that asked the question if others had seen any formal discussions of the card market as an asset class.<br />Obviously, if a hedge fund forms with the purpose of managing card collections as assets, then this would answer the question rather definitively.<br /><br />How does the violin market differ from cards?<br />How far away from this could we be in sports collectables?<br /><br />Is there good market information available in the violin market? (Is it better than that in the cards market?) <br />Is 3rd party grading/authentication a big component of the violin market?

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>JimCrandell</b><p>Bruce,<br /><br />Great post--You are one of the most thought provoking posters on the board.<br /><br />The recognition by money managers or hedge funds of sports cards as an investment class would be a major deveopment and lead to a major leg up in the values of rare high grade pre-war sportscards. I will watch with interest.<br /><br />

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>JimCrandell</b><p>Barry,<br /><br />Why? Anyone who would have had the foresight to invest a sum of money in high grade vintage sportscards in the last 5-10 years would be looking at huge returns today. Not that this is an indicator of future appreciation but if this were to happen, making a major investment before that might work out well. I always think of sportscards as X% of my investment portfolio and X% of my net worth. Same thing as any collectible. It should not be a major part of your portfolio but nothing wrong with 5-10% if you have money to invest.

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>Kenneth A. Cohen</b><p>The scenario presented by Mr. Dorskind does not seem at all farfetched to me. We have seen manias on much crazier commodities - e.g. tulips and beany babies. One thing for sure, you know it'll be time to get out, at least from an investment angle, when you start getting hot tips on baseball cards from your barber.

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>pas</b><p>Violins are a bit different in that musicians actually use, and presumably drive the demand for, high quality older instruments. Perhaps there are people who just collect them, but certainly the great violinists of the world also demand and pay for, and use, Stradivariuses and similar instruments -- presumably because they sound better, etc. So unlike cards there is some "intrinsic" value there. That said, it is hard to ignore that cards can be both a hobby and an investment, although one wonders whether hedge funds with fiduciary duties to investors would be willing to take the chance on future appreciation.

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>Al C.risafulli</b><p>It's an interesting subject, for sure, and definitely one that goes completely against the grain for those of us who participate in this hobby as a distraction from this sort of thing.<br /><br />I count myself among those people who considers baseball cards to be a "hobby" as opposed to an "investment," but at the same time, I am certainly aware that there is a dollar value associated with the cards I collect.<br /><br />Looking purely at prices realized for cards, and nothing else, it certainly behaves like a "market." Certain issues get popular and prices rise, other issues lose their popularity and prices drop. Hordes of cards are occasionally discovered (i.e. Dormand Postcards Gil Hodges) that have dramatic impacts on the prices of that issue, and certain cards can be viewed as "blue chip" cards that will always appreciate in value. And looking at the "market" as a whole, there certainly has been a steady appreciation in value over the years - definitely more so than some funds or company stocks.<br /><br />Even the most die-hard collectors among us have various strategies that they use to preserve the value of their cards. There's even a thread running right now that was started by Dan McKee - a collector I respect greatly - about the merits of keeping uncatalogued cards uncatalogued, as a way of preserving value.<br /><br />For me personally, I enjoy cards for a variety of reasons, very few of which have anything to do with their value. At the same time, as is the case with any other collectible, there is always going to be a segment of the population who is interested in the investment angle - owning something that is less pervious to the swings in the stock market, something tangible that you can hold in your hand but still has value, etc. And, of course, there will always be people who are interested in owning such items but don't want to do the research involved with actually getting to know what they're buying.<br /><br />It's not my particular style of collecting, and it definitely rubs the "purists" among us the wrong way, but it's no less legitimate a reason to collect than any other reason.<br /><br />So I guess that's my long-winded way of saying that I don't think it will be long before an enterprising individual is managing people's card portfolios, and perhaps even creating investment funds based on rare collectibles. And ultimately, I don't think the presence of such a thing will harm the hobby one bit.<br /><br />-Al<br /><br />Edited to be even more long-winded. I'm doing my best to fill the gap for Peter C for the morning.

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>Tom Boblitt</b><p>it isn't ALREADY happening...........<br /><br />

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>Jerry Hrechka</b><p> Already happened in the graded coin market (Late 1980's). Coin values ended up dropping severely and are only just now beginning to recover. Ultimatelely true value and demand will be determined by collectors.

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>Chad</b><p>And I'd bring this up to my boss, but I don't want to lose my job. I can see cards being used for an individuals investment portfolio, but they're just not liquid enough for use in a hedge fund. At least not a fund that operates on margin which are most of them. The nice thing about stocks, bonds and currencies is that you can buy today and sell tomorrow AND you don't have to worry about a conrer getting bent or depending on a third party to determine if the corner of your Treaury Note has been rebuilt.<br /><br />--Chad

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>barrysloate</b><p>Jim- you have invested a portion of your own money into baseball cards because you have a knowledge and appreciation for them. Would you recommend them to your clients? Or to put it another way, if a client wrote you a check for $1 million and asked you to put together a baseball card portfolio for him, what would you do?

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>JimCrandell</b><p>Barry,<br /><br />Yes to knowledge and appreciation. I collect because I love the hobby but given the size of my collection, I keep an eye on value and I always list it in my assets right along with houses, stocks, bonds etc. Yes if a client had a net worth of $15mm or more I would suggest $1mm in cards.<br /><br />What would I buy? Probably high grade(PSA 8 or 9) Ruths, Cobbs, Wagners, Gehrigs, low pop cards from major sets in 8 or 9, genuinely rare items in lesser grade.<br /><br />Jim

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>Jimmy</b><p>There is a definitely talk in business about investing in collectibles in general and sports cards and memorabilia are on the top of the list. I believe over the last 10 years the card market has grown to one of the most interesting and marketable hobbies which has turned collecting into investing for many people. We all invest a lot of time and money in the hobby we enjoy so much and that is way the hobby is worth a second look by leading investors in business. If you just look at the amount of companies that have been created or have grown over the past 10 years that have an interest in what people collect, we can see that the interest and investment will only get better over time.<br /><br />Jimmy<br />

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>barrysloate</b><p>Jim- fair enough, and collectors have been putting away high grade cards since the 1970's. But they have almost always done it themselves, based on the knowledge they acquired. Asking a hedge fund manager to do it is a different story. Would he know what he was doing? I don't think baseball cards can be bought blindly, and I have never put a portfolio together for a client. I would much prefer he learned to do it himself, and should I have cards for sale that would fit in, all the better.<br /><br />It's not the investment part the bothers me- I've seen how much cards have appreciated over the years- but the idea that somebody other than the collector himself is putting this thing together.

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>pas</b><p>Low pop commons are not great investments in my humble opinion, their value is easily compromised when (as is inevitable) more are found. It's a dramatic example to be sure, but 52 Bowman Casey Stengel was previously thought to be a low pop card in 8, routinely selling for over 2K. Yet Mastro just came up with a find of OVER FIFTY in 8 and 9, totally destroying the market for the card. I would stick to prewar HOFers for investment purposes, hard to go too far wrong there. <br /><br />

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>Al C.risafulli</b><p>Here's two interesting questions for Jim and Bruce both:<br /><br />Both of you have clearly been successful in your chosen careers, and both of you clearly have a keen interest in the financial component of vintage cards.<br /><br />I would imagine that at some point, like the rest of us, each of you will enter retirement.<br /><br />Upon retirement, would either of you ever consider a post-retirement career advising others in the area of investing in sports collectibles? <br /><br />If so, how would you approach it? Jim, I know you've given us some insight into this thread as to how you might advise a potential client, but I'd be interested in digging deeper. Let's say each of you had a client with a high enough net worth that they had a million dollars to put into your venture. What, specifically, would you advise them?<br /><br />Let's say the entire hobby is available to you - not just graded cards but ungraded, not just cards but memorabilia, and not just collectibles but the actual companies involved in manufacturing, selling, authenticating, and grading. You have the opportunity to invest a million dollars of someone else's money into the sports hobby.<br /><br />What would you do with that money?<br /><br />I'll think a little and volunteer my opinions as well, recognizing that my opinions are relatively worthless. <img src="/images/happy.gif" height=14 width=14><br /><br />-Al<br /><br />Edited for long-windedness once again.

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>JimCrandell</b><p>Peter,<br /><br />I heard that on the Stengel--thats bizarre.<br /><br />Have you heard anything about that?<br /><br />Anyway, when I say low pop I am talking about pre-war low pops for the most part.

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>leon</b><p>Part of the allure for me is the difficulty in obtaining certain cards, in any condition. Another part of the allure is that baseball was/is my favorite sport while growing up ...and still today...though I rarely follow major league baseball currently. The 3rd part, and maybe (dare I say) just as important, is the fact that the little masterpieces of art have gone up in value. It's like a tri-facta in that respect. The other part of collecting that is great fun is the camaraderie involved. I have met hundreds of really great people in the hobby and, with this board, it seems like I meet new folks every week. With all of that going for it, it's no wonder cards can be thought of as an investment.....regards

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>JimCrandell</b><p>Al,<br /><br />Wow--I have always bought and invested for myself but if I was going to invest $1mm dollars the first thing I would do is have a number of conversations with people I consider to be very knowledgeable. I really don't know too much outside of cards but I would at least investigate it. I might consider giving Kevin seed money to start his service.<br /><br />In cards, I would focus on high grade cards pre-war of the elite players of whom I mentioned four. I would then focus on rarities and would speak with people such as Leon or Jay Behrens or others who are knowledgeable. I would also consider condition rarities. An example might be making a bid for a rare 32 AC card(is it Lindstrom?) or the first Ruth card.<br /><br />Jim<br />

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>Jason</b><p>cardtarget.com (not trying to plug them, but in this case it IS on topic).<br /><br />and as Jim put it:<br /><br />"What would I buy? Probably high grade(PSA 8 or 9) Ruths, Cobbs, Wagners, Gehrigs, low pop cards from major sets in 8 or 9, genuinely rare items in lesser grade."<br /><br />that is seemingly their angle. Couple Mint 9 (PSA, SGC) t206s on there, as well as a budding Broadleaf 460 collection.<br /><br />regards,<br />Jason

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>pas</b><p>Jim, it was really bizarre, and I have not heard any explanation as to the origins of the lot. But it took probably 90 percent out of the value of the card.

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>JimCrandell</b><p>Peter,<br /><br />How about asking that super-knowledgeable group that you are still a member of and see if anyone knows--or maybe you couldn't tell me if they did as it would break the rules?

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>pas</b><p>I can ask them under clause 1-c-DAV and get back to you. <img src="/images/happy.gif" height=14 width=14>

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>JimCrandell</b><p>Peter,<br /><br />Does clause 1c-Dav mean don't send him the thread? <img src="/images/happy.gif" height=14 width=14>

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>Al C.risafulli</b><p>Never mind - just realized that Bruce started this thread and not Jim.<br /><br />But Jim, you're hijacking.<br /><br />-Al

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>JimCrandell</b><p>Sorry Al--you're right. But I did try to answer your question.

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>Al C.risafulli</b><p><img src="/images/happy.gif" height=14 width=14><br /><br />I just find this thread interesting. The other thing - not so much.<br /><br />-Al

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>barrysloate</b><p>I wish I had even a clue what you guys are talking about <img src="/images/happy.gif" height=14 width=14>

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>Corey R. Shanus</b><p>My guess is that unless hedge funds know what they're doing (i.e., making acquisition decisions based on real knowledge and understanding of what they're buying), they will not be successful in garnering high returns for their investors. Spending a lot of money in and of itself will not be enough. I recall an attempt by a well known collectibles company to generate investment returns by spending heavily in the Halper sale. They bought several million dollars of memorabilia, only to ultimately be forced to liquidate some time later at an overall loss. At the time they made their acquisitions, others opined that for the most part they paid too much and bought items that did not reflect the cream of the memorabilia market.

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>barrysloate</b><p>Corey- I remember that company well, and during the sale as I watched them bid and purchase very high priced material it crossed my mind that they didn't have a clue what they were doing. Not only were they paying too much, but they were buying the wrong things.<br /><br />I think wealthy people with expendable cash should get into collecting and enjoy what they are doing. I don't think hedge funds will get involved in baseball cards, and if they do, the results may not be as good as they hoped.

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>boxingcardman</b><p>$5 million will do it! Bring it on...

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>Chad</b><p>It's not going to happen. Investment managers may get involved at the request of a client, but hedge funds aren't going to waste their time. If a hedge fund did decide to drop 30 or 40 million into a baseball card fund, where are they going to get the cards and then, who are they going to sell them to? And how are they going to sell this plan to subscribers? And how are the subscribers going to get their cash back when they decide to sell their subscription? I'm not saying it's impossible, but the money isn't big enough to deal with the headaches. Also, what would a fund dedicated to baseball cards and memorabilia use as their hedge? Cards are definitely an investment opportunity, but I don't see how it could work at the scale a hedge fund would need it to work and how a hedge fund could deal with the illiquidity of the cards.<br /><br />--Chad

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>JimCrandell</b><p>Chad,<br /><br />As you undoubtedly know all hedge funds aren't hedged--you can be 100% long and unhedged.<br /><br />On illiquidity, you could put the cards in a Robert Edward auction or one of the Evil Empire's.<br /><br />As to where they can can get the cards--buy them at auction, from dealers and solicit collectors.<br /><br />Lastly, if it is a diversified fund you don't necessarily need $30-$40mm.<br /><br />Jim

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>Jason L</b><p>I think you are right in that involvement by a true "hedge fund" is unlikely for the liquidity and strategy issues that you mention; however, I do believe it is entirely possible (and more likely) that an investment fund that is arranged more along the lines of traditional private equity could become involved and do quite well in this market, as these are vehicles where longer lock-ups are the norm...(which would be a more appropriate strategy and operating arrangement for this asset and market structure)<br /><br />geez, how's that for a run-on sentence?

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>barrysloate</b><p>Bruce- I have a question for you:<br /><br />You started this thread early this morning, and as you always do, you walked away without offering any input whatsoever to it.<br /><br />Why do you start a topic and then abandon it?

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>Al C.risafulli</b><p>Yes, I did have some questions for Bruce and Jim that I posted earlier - Jim responded virtually immediately. Bruce?<br /><br />Anyone else?<br /><br />-Al

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>Fred C</b><p>Doesn't there have to be a sustainable market for these cards if someone is going to use them as an investment vehicle? <br /><br />If investors got into the cards then at some point in time the person or entity willing to pay the highest price for a card will own it, then what? If nobody is willing to pay more for it then there's only one way for the price to go. <br /><br />What happens if all the investors want to cash out and nobody's willing to buy the cards for the price specified? The cards will either be sold for a loss or the person has to sit on them for an indefinite period of time in hopes of a turn around but by that time the investor may have missed the boat on another opportunity. <br /><br />Have you ever heard the old saying that when the egg man drops by to sell you eggs you can name your price, if you go to the egg man than you're going to have to deal with his terms/price. If someone approaches someone to sell their cardboard then more than likely the potential buyer is in a good position to negotiate a good deal and there's a good chance they'll pay the seller less than what they paid for it. Who knows - in ten years there may not be a huge demand for the cards, then what? Mr. Hedgefund could be building a "house of cards" which could fall down at any time. <br /><br />Like I always say, I hope the price of this stuff drops like a rock. It'd be nice to clear out the investors and allow collectors to enjoy thier hobby, again. My guess is that there are a lot of long time hard core true collectos out there that will never be able to complete certain sets due to the recent financial dynamics of this hobby. <br /><br />Crash and burn baby. Crash and burn. I'd be happy to see the monetary market on cards crash.<br /><br />I bet I'm not the only one that feels this way.

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>Chad</b><p>You could go 100% long, but that's a lot of risk. Also, I think having to wait for a major auction to sell is pretty illiquid. The premiums auction houses charge are really large compared to the commissions on stocks, as well. Even if you could negotiate down the seller's premium, the buyer's premium isn't going anywhere. There's also the problem of coming up with an inventory. There are other obstacles as well.<br /><br />I do think it is possible for a fund to get involved in cards, but for the amount of work, risk and return, I'm not sure why one would get involved. Again, if a private investor wants to use cards as part of a diversified porfolio, I think that makes sense. In fact, I can think of others way to make cards an investment. If you knew somebody sharp, who knew the hobby backwards and forwards, I could see giving that guy/gal some startup capital to start a dealership/auction house. I wish it made sense for a hedge fund to get involved in cards--it would make my work much more fun, believe me--but I can't see it. Of course, now somebody will start one and make a gazillion dollars while having a great time and I'll curse the day I was ever born.<br /><br />--Chad<br /><br />edited to add: Jason L, I agree with what you're saying. I think bringing the term "hedge fund" into this discussion may be confusing things, too.

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>Joe D.</b><p>I don't think the personalities would allow it to work.<br /><br />Rare Cards can be very very very illiquid and are controlled by card nuts like us.<br /><br /><br />I could only imagine the frustration of card-hedge-fund manager trying to deal with some real collectors to fill the hedge fund portfolio. Can you imagine trying to wrangle (1 of 1s) from collectors and having people to answer to?<br /><br /><br />those situations make for funny sit-com television.<br /><br /><br /><br />so - for card hedge funds... I think the rare card market is not where success would be found. <br /><br />maybe the semi-rare market.

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>leon</b><p>On the face of it I can really appreciate what you are saying about hoping the value of cards drops like a rock. My guess is less than 50% of die hard collectors would want that at this point....since we spend so much on the darn things. Even a die hard collector that spends $1000 on a card, because he has to in todays market to obtain it, wouldn't want that value to go to $100.....Just a different perspective. regards<br />leon

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>Jason L</b><p>has been born from reading your posts!<br /><br />A new TV Sitcom (perhaps on TBS since they know funny)!!<br /><br />Title: House of Cards<br /><br />Premise: A hedge or private equity fund type of outfit, staffed by aggressive quant jocks with freshly minted MBAs try to make ends meet, while having to do business with the grizzled old hobby veterans in all reaches of this wonderful country.<br /><br />Please, let's run with this...please add your ideas (in a separate thread if need be). Bruce may not mind if this thread is formally hijacked, since they are not around today! <img src="/images/happy.gif" height=14 width=14>

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>Paul S</b><p>Fred, philosophically I'm with you. In fact, I bought a lot of stuff years ago that I still have, so I wouldn't really realize any loss. But, can we wait until I sell it before the crash comes? Then I can at least buy it back again <img src="/images/happy.gif" height=14 width=14>

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>Marty Ogelvie</b><p><P>I want the market to go down also (way down) just long enough for me to secure a few 1,000 T206 cards.&nbsp; Then it could go back up.. is that too much to ask?</P><br><br>martyOgelvie<br />nyyankeecards.com

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>Alan</b><p>Does anyone remember when the baseball card market crashed in the early 1980's ? I remember I sat next to a collector, who bought a 1952 Topps Mantle for $600 in a live auction at the Columbia Hilton (Maryland) show sponsored by House of Cards (Huggins & Scott). Of course, after that crash, card values went back up higher & higher & higher....<br /><br />Alan

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>Marty</b><p>Most other collectibles have a world wide market. There are coin and stamp collectors everywhere. I know that there is some card collectors in other parts of the world, but I doubt that the percentage is that great. High end cards are not that liquid. Only a few collectors would be able to purchase the big money cards, and how many of them would invest in the funds so they would already have a piece of the action. The buyer's premium in the auction houses and how long between consignment and final payout is too long.<br /><br />I do believe that there is a place for a manager to handle card collections or investments. There are people that currently do a large portion of the buying for some collectors.

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>Fred C</b><p>Alan, <br /><br />yes I remember those great 80's (and before). I remember picking up the entire semi-high 52T series (minus Mays) for about $400 in really NICE condition (almost pack fresh). I'm not so naive to think things will ever go back to those days but it'd be nice to see prices again from just 6-7 years ago. <br /><br />Leon, <br /><br />you're right, there are quite a few collectors that have spent well $1K (and well over that amount) on cards that wouldn't want to see the prices dump but I'm one that has spent a few dollars on this stuff and if it all dumped tommorrow I wouldn't care. Sure, I'd lose money on the paper side of it (excuse the pun) but I'd be able to pick up the pieces a lot more inexpensively over the long run if the stuff takes a dump. <br /><br />Jason, <br /> <br />That could make for a fun comedy - I guess you get a couple of "geeky" looking dudes that are stock traders and show them eating up Wall Street. To use a line I've heard on the board before one of the guys could be at a bar and ask some girl if she wanted to see his Polar Bear Johnson. <br /><br />Ok, the guys don't have to be total geeks. We are geeks, aren't we? Does anyone ever remember telling someone about their cardboard collection many years ago only to see the other person look at you like you were strange? Well, I guess today it's different. Today, you tell someone how much some of this stuff is worth and they think differently about it. I kind of liked it when it was a more sheltered hobby.

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>David Smith</b><p>I think a hedge fund in baseball (sports) cards and memorabilia would be a bad idea. Not only is the market not as liquid as investment professionals would like but there is also risk involved.<br /><br />ALL it would take to spook EVERYONE is the PSA 8 T206 Wagner to be shown as NOT being what people think it is. Say someone has definitive PROOF it is cut from a sheet or otherwise altered. This woud bring grading companies and ALL graded cards into question. That risk would make some, if not all, gte out of the market. Since you can't just dump cards on the market like you can stocks, it would take a while to unwind the positions. If it were known the cards were being dumped on the market, MORE people would dump their cards and prices would drop.<br /><br />Just my opinion,<br /><br />David

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>Dave Hornish</b><p>Well, all of the 8's and above would finally and officially be in the hands of Wall St if Bruce's fantasy comes true. Since I'm in armpit land, it would not bother me one bit. I think it's a horrible idea for a fund though.

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>Ed Ivey</b><p>Lock all cards in portfolios to those caring only about bottom line.<br /><br />What happens to the allure of collecting - the very thing that has driven value up?<br /><br />It tanks. Value flushes. The hedge fund managers become dime a dozen cold callers.<br /><br />I'm no Warren Buffet. Just my hypothesis.

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Posted By: <b>Ted Zanidakis</b><p>I recall well what you are reporting....and, I still have all the Beckett's and CPU's (Card Prices Update....a monthly<br /> price guide.) from that era to reinforce my memory of those early 1980's. A 1952T Mantle in 1980 peaked at $3000.<br />By 1982 the exact same card going for only $500.<br /><br />The idea presented here has been pretty well "beaten down" by most of the previous posters here. I can't add much<br /> more to this discussion, except to say that this "high-end" stuff is just a risky "high-stakes" gamble.<br /><br /> It's not for me......<br /><br />T-Rex TED

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Posted By: <b>Ted Zanidakis</b><p>This find of 50+ near mint Hi# Stengel cards has occurred before with 1952 Bowman's.<br />In 1982, I came across a find of GEM prefect 1952 B Joe Collins (about 40 cards). What<br />do Collins (#181) and Stengel (#217) have in common, they were both the uppermost,<br />left corner card on their respective 36-card sheets. And therefore, subject to all kinds<br />of dings, etc. But, surprise, surprise a batch of perfect cards appear and the so-called<br />experts are stunned !<br /><br />There have been other such finds of 1952 Bowmans in near GEM mint condition....Crosetti<br /> (#252), the last card in this set, is one. You guys "live and die" by these POP reports, but<br /> there will always be such finds to "pop" your POP reports.<br /><br />T-Rex TED

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Posted By: <b>JimCrandell</b><p>I repeat that any hedge fund set up to do this in the last five years would have enjoyed spectacular returns--like shooting fish in a barrel.<br /><br />The next five years may be tougher. The person managing the fund is critical. Quality and a good eye for value would be the keys.

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Posted By: <b>barrysloate</b><p>Jim- that's a very good point. The last five years have been spectacular, but the next five may not be as kind.

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Posted By: <b>David Smith</b><p>Jim,<br /><br />So what if TWO hedge funds like this have ALREADY been set up and hsve been buying cards for the lsst five years?? What if the increases in price is because these two have been bidding and competing agaisnt each other?? Then, what if one decides to liquidate and the buyers aren't there for the stuff?? At least not at the price levels the cards were bought for because these two were really the only ones duking it out??<br /><br />In short, what if these two have created an artificial market??<br /><br />David

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Posted By: <b>JimCrandell</b><p>David,<br /><br />I think there are a number of buyers for high end sportscards and the removal of one fund would not crash the market.

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>cmoking</b><p>"And I'd bring this up to my boss, but I don't want to lose my job."<br /><br />Chad is a smart man.

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Posted By: <b>peter chao</b><p>The Sports Cards and Memorabilia market is similiar in some ways to penny stocks. It also has some of the same problems. They are both thinly traded and there are problems with liquidity.<br /><br />The hedge funds have never looked kindly upon penny stocks. It is doubtful that they would be very interested in Sports Cards.<br /><br />Peter C.

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Posted By: <b>Bill Cornell</b><p><i>The recognition by money managers or hedge funds of sports cards as an investment class would be a major deveopment and lead to a major leg up in the values of rare high grade pre-war sportscards.</i><br /><br />Hedge [sic] funds are places where rich people go to get less rich. If you had the exciting opportunity to pay a <a href="http://www.nytimes.com/2007/03/04/business/yourmoney/04stra.html?ex=1330664400&en=7ae7860e0a8b20b9&ei=5 090&partner=rssuserland&emc=rss">2/20 rate</a> or even (gasp) a 3/30 rate and you took it, then your redistribution of wealth is a fact, not a theory. <br /><br />Put $25m into the vintage card 'market' and you'll watch almost every buyer disappear. Then prices, um, what? Ah - go down. See what happened when Copeland got hungry, and then bulimic, 15 years ago.<br /><br />More board posturing. Let's move on.<br /><br /><br />Bill

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Posted By: <b>David R</b><p>I just have a hard time believing that today's younger generations (under 30 and especially under 20) are going to care about, or be willing to pay as much for, these old pieces of cardboard as we are when they reach the age when they have the most disposable income. My impression is that most folks on this board are in the 35-65 age range. Younger generations seem much less interested in, or religious about, collecting baseball cards than folks of our generation. Today there are so many more distractions -- video games, text messaging, pokemon, lots of other sports that have grown in popularity, etc. -- for kids growing up. And with all the media coverage today exposing every human flaw and misstep, kids today just don't seem to look at professional baseball players with the same reverence that we did when we were kids. While many folks of our generation may be willing to shell out big bucks to get that mint condition Mickey Mantle that they could never find as a kid, or to buy that tobacco or gum card of the players their Dad or Grandfather worshipped and talked about so fondly while they were growing up, I doubt that kids today will feel the same way. <br /><br />For those of us who have lots of money "invested" (whether we consider ourselves investors or collectors), it's nice to think (for our own self-interest) that the market for these will continue to prosper as time goes on. And maybe it will for the next 20 years or so and maybe that's long enough. But as a long-term investment vehicle for younger folks, I don't think it makes much sense. <br /> <br />I'm sure I'll get some pushback from those of us who have lots invested, but as Barry would say, that's my three cents.

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Posted By: <b>bruce Dorskind</b><p><br />The Only Thing To Fear Is Fear Itself<br /><br /><br />Whilst predicting future returns on investment is pure speculation, we would like<br />to make several observations to refute some of the commentary with regard<br />to the card market<br /><br />1. Mr Chao, whilst free with his commentary, apparently has no understanding whatsoever<br />of the breadth and scope of the hedge fund market. There are nearly 10,000 hedge<br />funds with a plethora of different strategies. A number of funds are invested in very<br />niche markets. Not all funds require immediate liquidity. A number of billion dollar<br />plus funds have two and three year lock up periods.<br /><br />2. Mr. Copeland spent a considerable sum of money on baseball cards in a short period<br />of time. Although he was a very successful Sporting Goods retailer, he was not particularly<br />savvy with regard to his baseball card investment. He limited his purchases to five dealers.<br />He bought an incredible range of different items and his purchase price had nothing to<br />do with the rest of the market. <br /><br />Furthermore at the time Copeland built his collection (we spoke numerous times), far less<br />price and market information was available and the Internet was still on Al Gore's drawing<br />board.<br /><br />Someone who entered the market today, would have to spend at least 10X what Copeland<br />spent to have any impact whatsoever on the market<br /><br />3. If and when a Hedge Fund decided to invest in baseball cards, they could buy all the<br />knowledge they need. The prospect of a billion dollar plus fund, spending $25 million<br />based on instinct and a few calls to leading auction houses, is laughable at best.<br />On two occasions we have been retained as expert consultants to major hedge funds.<br />Our remuneration was never an issue...investing in expertise is part and parcel of<br />the due diligence process. Those who think otherwise sound childlike, at best.<br /><br />4. It is impossible to predict what today's young boys and girls will collect in 20 years.<br />Everyone thought the coin market was just for old folks, then, led by Harvey Stack, the<br />"State Quarter Program" was introduced and 70 million people now collect coins<br /><br />5. While the average Board Member maybe a "early stage" Baby Boomer, the Board, whilst<br />distinguished in some ways represents well less than 2% of the total expenditure on baseball<br />cards in America. If anyone has any doubts on this issue ask Bill Mastro and Rob Lifson<br />what percentage of their total sales from the last 10 auctions came from active Network 54<br />participants. <br /><br />It is all well and good to have an open debate and to give thought about the future direction<br />of rare card collecting and its investment potential. It is our hope, however, that some of<br />the posters who appear to be afraid of a major money market investor do their homework<br />before posting.<br /><br />Bruce Dorskind<br />America's Toughest Want List<br />

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Posted By: <b>Ed Ivey</b><p>Whilst the dog ate my homework, it's still fun to post once in a while.

How Long Before Hedge Funds Control The Rare Card Market?
 

Posted By: <b>barrysloate</b><p>Is it really true that Harvey Stack had some influence on the State Quarter program? He once interviewed me for a job- at Stack's (didn't get it).

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Posted By: <b>leon</b><p>That was fairly well thought out and maybe not quite as condescending as usual....One point I do disagree on is the amount of money spent vis a vis the auction houses by folks that at least lurk here at Net54. I am not so sure on memorabilia but on the vintage cards side I would have to guess the percentage is higher than 20%, and maybe it would approach 50%, or more. In Mastro's live auction...the total would be over 80%...I am sure. best regards

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Posted By: <b>MVSNYC</b><p>Leon- i think your estimates are pretty optimistic, IMO.<br /><br /><br />MS

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Posted By: <b>leon</b><p>From the folks AT the Net54 Dinner and me being at the Mastro Live Auction....Yes, I do believe those percentages are very close....and I didn't say I was sure about the 50%....I said I was sure of the 20% and it would approach 50%....And about the Live Auction....yes, I feel close to 80% spent on the cards were folks that check this board out.....especially since the first lot was a good bit itself....best regards<br /><br />edited spellin'

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Posted By: <b>Corey R. Shanus</b><p>I think it will be very difficult for hedge funds to generate high returns, regardless who they hire to advise them, for two main reasons. (1) High transactions costs when selling items -- even assuming the SP is negotiated down to zero, the typical auction house has a BP of 15%-20%; (2) when making their acquisitions they will be competing with collectors who will be looking to buy items based on their enjoyment of owning it, regardless how good an investment it is. Or to put it another way, a hedge fund's utility curve puts zero value on the pleasures of ownership. Collectors' utility curves, in contrast, typically put high values on ownership pleasures, which makes an item much more valuable to a collector than to a fund. The fund therefore will find it very difficult to outbid the collector and still garner high returns.

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Posted By: <b>barrysloate</b><p>Also, another obvious detriment is that, as we've discussed, the baseball card industry is unregulated. Will a fund want to put tens of millions of dollars into high grade baseball cards when the sellers of those cards are quite often ethically challenged?

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Posted By: <b>Brian</b><p>&lt;&lt;I would have to guess the percentage is higher than 20%, and maybe it would approach 50%, or more. In Mastro's live auction...the total would be over 80%...I am sure. best regards&gt;&gt;<br /><br /><br />I can see why so many are so eager to advertise here.

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Posted By: <b>Jason L</b><p>I would imagine that hedge funds with their deep pockets could pay anyone just about anything required in order to get a card altered to obtain the realized price (return) that they require...<br /><br />As Bruce said, price was no object for market information. I don't doubt that. Nor do I doubt that price would be no object to turn a dozen PSA 4 T206s into PSA 8s. If they're scarce HOFers, well, then the money might actually be meaningful to a fund entity.<br /><br />Hmmm....

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Posted By: <b>Alan</b><p>I think everyone who won something at the Mastro live auction is at least a lurker, if not an active participant of this board.<br /><br />Alan

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Posted By: <b>Jay</b><p>Barry--Funds invest in all kinds of unregulated areas so I don't think that's an issue. What is an issue is market depth,lack of price discovery and high transactions costs.<br /><br />Bruce--I believe the 2% figure that you have thrown out is low, and not by a trivial amount. That would mean that in a typical $10 million Mastro auction board members purchase only $200,000 of the total. That is not just low, it is crazy low.

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Posted By: <b>dstudeba</b><p>Thank you Chad, Bill, and Corey for your posts.

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Posted By: <b>bruce Dorskind</b><p><br /><br /><br /><br /><br /><br />Jay;<br /><br />The comment we made is that Board Members represent 2% of the<br />total card market.<br /><br />We have no way of knowing who is lurking and how often. One never sees posts<br />from the "big three" high grade collectors. Our sense from speaking with major <br />auctioneers is that a number of their biggest customers are private investors<br />and are not involved in any social networking site.<br /><br />While there are certainly people like yourself and countless others who spend<br />considerable money on the acquisition of cards, it would be difficult to believe,<br />given Board traffic and the number of catalogs sent out by Mastro and Lifson,<br />as well as the number of bidders on E Bay that active board members (those<br />who post) account for a large percentage of the market.<br /><br />Leon's remark with regard to the live Mastro Auction at the National relates<br />to one event which had less than 40 baseball card lots and the most expensive<br />lot was acquired by a Board Member. Nice to know but small in the scope of<br />things.<br /><br />Our point is that the rare baseball card market is changing rapidly, subject to<br />outside influences and could be significantly affected by a major influx of<br />capital. <br /><br />Jay, as someone who works in the financial services industry, you also recognize<br />that if a professional investment firm entered the market with $25-50 million<br />they would not have to subject themselves to auction fees. They could simply<br />contact a large group of collectors. There are many, many dealers out there<br />who would be all too happy, for a fee, to serve as a source of introduction.<br /><br />If one wants to understand the power of marketing, go no further than Mr. Mint.<br />While many don't agree with his style, he has managed to acquire several hundred<br />millions in cards...all of it without a single auction acquisition.<br /><br />There is not a single correct answer here. Rather, the point is that the market will<br />evolve and when and if a hedge fund or like organization enters the market, the old<br />rules and channels will go away.<br /><br /><br />Bruce Dorskind<br />Ameerica's Toughest Want List<br />

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Posted By: <b>Jay</b><p>Bruce--For some time I have thought that a hedge fund presence in cards was a possiblity. My guess is that the most likely way that it would happen is as part of a "collectibles" fund. That would solve the market depth issue since, in addition to cards, the pool could be invested in coins, art, or any other of a number of collectible categories.

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Posted By: <b>PC</b><p>The illiquidity point made by Peter above appears to have been confused with fund lock-ups, and Peter's point missed completely -- whilst hedge funds might lock-up their investors, the investments made by such funds are not locked-up. The investments may be more or less liquid compared to other investments, but that has nothing to do with an investor lock-up.<br /><br />In any event, whilst one's ownership interests in a hedge fund might be illiquid due to a lock-up, one would expect the investments made by such funds to be rather more liquid.<br /><br />How liquid is of course a matter of risk tolerance determined by the fund, but liquidity is an issue for realizing gains, and fund managers make their 20% on gains. And since that 20% is really the only thing the managers care about, liquidity is most certainly a key consideration.

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Posted By: <b>Fred C</b><p>Wouldn't there have to be some type of oversight? I couldn't imagine people blindly investing money into a "collectibles fund". There's just too many ways that people can and would get ripped off. There are enough unscrupulous people out there willing to find a way to screw the general public. You could get a bunch of independent investors together but a public offering wouldn't fly (IMO) unless there were measures in place to protect the public. I guess it's unchartered territory in some ways. Could you imagine a "Memory Lane Collectibles Hedge Fund"?

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Posted By: <b>Jeff Lichtman</b><p>Fred, please do not give JP any new ideas; the portion of the country that answers its telephones will suffer because of it.

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Posted By: <b>Fred C</b><p>JP?

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Posted By: <b>Jeff Lichtman</b><p>United States v. JP Cohen.<br /><br />