Why It Pays To Invest InHigh Grade Pre-War Cards

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Posted By: bruce Dorskind

One very saavy investor enjoyed a 258% return in less than 3 weeks

He "stole" the Peckinpaugh card on Mastro and re-sold it 17 days
later for 2.5 times what he paid Mastro.

Sounds like this guy should forgot baseball cards and move up
to hedge funds.

It certainly appears that a well managed ultra high grade card portfolio
will provide a very satisfactory return, even for the discriminating investor.

The facts speak for themselves.

Mastro AUsction

1915 Cracker Jack #91 Roger Peckinpaugh - PSA 8
Lot Number 448

Number of Bids 9

Closing Bid $525.00

E Bay Auction- 17 days after the Mastro Auction Close....same ID number

1915 CRACKER JACK #91 R PECKINPAUGH PSA 8
Item number: 180157702308

Winning bid:
US $1,358.00

Sep-16-07 19:01:00 PDT 17 bids


Bruce Dorskind
America's Toughest Want List

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Posted By: barrysloate

You are certainly smitten with these hedge fund characters.

Of course a few questions: how often does this happen, and why aren't the ebay bidders paying attention to the largest auction house in the business? Perhaps this was merely an aberration and not a sign that high grade cards double every two weeks.

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Posted By: Jeff Lichtman

Despite Mastro's protests to the contrary, their CJ set went for a song -- and Bruce's cherry-picked ebay sale doesn't disprove this.

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Posted By: Bobby Binder

I do not know what it is but for some reason there are buyers that only use the auction houses and pay stupid money for some cards. These same cards that show up all the time on eBay for 30% of the price they pay. Maybe these people just want a simple way of collecting and not have to deal with the hassle of eBay and all the different sellers no matter the cost.

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Posted By: William

Not trying to be picky, but the $525 did not include buyer's premium so they paid $630 for the Peckinpaugh.

It appears they bought three others Cracker Jacks from Mastro. They basically broke even on one after EBAY fees, the other two they made a few hundred dollars on after EBAY fees.

Not bad, as they made around $1,000 on the four cards.

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Posted By: jay behrens

Bruce, how about go through the last years worth of major auctions and track the resale of those cards. I'm willing to bet that you won't find any others with that sort of return, even a year down the road.

Let;s look at the flip side of that deal you used. Whoever consigned the card to MAstro probably took a good hit. So from the Mastro consigner's viewpoint, it wasn't a good investment

I seem to remember someone doing a study on PSA9 t206s over the past 5 years or so and it showed a dramatic drop in price in most cards. Once the registry boys get their cards, there is no one else there to drive price unless they place bids themselves to try and artificially keep price levels high.

I've got a good reputation as an astute buyer and even if I had a huge bank account to buy whatever I wanted, I wouldn't be "investing" in high grade cards.

Jay

The richest person is not the one who has the most, but the one who needs the least.

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Posted By: Marty

Hello everyone although I am a newbe on this forum I have been a serious eclectic baseball collector since 1985. We are all investing in an educational pursuit as well as hoping as we go that someday if so inclined and we sell we might make a couple of bucks....BUT as everyone always says buy what you enjoy.........But having said that what do you all feel are under valued at this point?

GO YARD

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Posted By: John

Oh my god you mean someone made $728 dollars in 17 days wow that’s almost like $1.78 an hour each day WOW!!! Must be nice I’ve always wanted to try one of those really big sodas at 7/11, you know the ones like all the other multi-billionaires drink, imagine living on that side just for one day dropping that extra buck on that jumbo soda, the chicks, the parties ahhhh one can dream I guess.



**Added the Wagner for Jeff**

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Posted By: Jeff Lichtman

See? That's funny.

The kid has major skillz, what can I say?

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Posted By: Dan Kravitz

I think there is more money in buying low grade or rare/scarce baseball material. High grade cards will not always be high priced. The market is thin and if a couple guys back off of a card in an auction it could mean a whole lot less to the consigner.
Jay is right, the guy who consigned those CJ's took a bath.
I think you should be a collector first and an investor last. Buy cards cause you love 'em, when you invest, buy your kids education, real estate or stocks. DK

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Posted By: davidcycle

What does a 17 day flip variation in sell price have to due with the card being in high grade? Why couldn't this variation have happened if the card or card(s) were in lower grade?

The Mastro consignor likely lost money on his consignment, which could be used as equally valid evidence that high grade cards are a poor investment. 2 sales: 1 lost his shirt, one made lots of money. Explain how a 50% occurrence of losing money when selling high grade is an example of stellar investment potential.

Lastly, is this an example a self fulfilling argument, in that the example was use only because it proved the argument? If it did not sell for so much, would it have been presented as the defining example and would the thread have even been started? There are a plethora of examples of buying high grade cards from Mastro and selling them for a big loss on eBay.

Just seems to be a lot of loose strings to the initial argument. The initial conclusion may be correct, but the evidence quoted doesn't prove it or really much of anything.

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Posted By: Jared

If you've got the money to flip, you can make a profit, regardless if it's cards, real estate, etc. But it takes money to make money, so I'm not that impressed. In fact, it makes me furious when I consider that the guy who outbid me on a card I really love is probably gonna turn around and sell it just to make a few bucks.

BTW, it doesn't HAVE to be high-grade cards. By my observation, the ebay auction prices of SGC 10-30 T206 HOFers this summer have been very volatile.

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Posted By: Jeff Lichtman

....keep in mind the thread about 33 Goudey prices being flat to lower over the past few years.... Those are high grade prewar cards, too. When you consider the amount of shill bidding that goes on in both the auction houses and ebay, good luck making a lot of money when you flip your cards.

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Posted By: barrysloate

Bruce's example is arbitrary as he just picked one that made the buyer look smart. I'm sure there is someone else who bought a high grade card in the same auction, put it on ebay, and sold it for less. So is he an idiot while the other guy is a genius?

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Posted By: leon

Ya know, I have always said there is a fine line between being an idiot and being a genius. In many card situations that line is 1 bidder.....

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Posted By: barrysloate

Well analyzed

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Posted By: davidcycle

A problem with eBay, is you can never be sure the item sold.

The problem with auctions in general is you don't know how much shilling is involved, which makes auction prices unreliable to bogus and is most likely to hurt law abiding investors. If you're buying shilled items and selling without shills, your returns likely won't be so pretty.

If an item sells for $11,000 on eBay, it's impossible to know what it means. It might mean the item sold for $11,000, it might mean it didn't sell and it might mean that it sold by $3,000 of the price is shills.

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Posted By: Lee Behrens

At What point does beating your head against a wall begin to hurt?

Lee

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Posted By: T206Collector

...a glass door today. Cleanest thing you've ever seen. No stickers to point out that there was a door there. Walked right into it. My forehead hit first -- and let me tell you, it hurt like HELL!

Left a nice forehead grease circle on the door. If they don't clean it, someone might be able to avoid walking into it because they'll see my grease mark floating in the air.

Now I know what it feels like to be a bird flying into a window. It totally sucks, by the way.

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Posted By: Cobby33

I've sold low to mid-grade cards with similar profits in similarly short periods of time. One or two perhaps- and I'm sure I'm not the only one on here who has been so fortunate.

I've also taken a hit in short periods of time as well. So- interesting stat, but I'm not sure it really means anything in the grand scheme.

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Posted By: Al C.risafulli

"It certainly appears that a well managed ultra high grade card portfolio
will provide a very satisfactory return, even for the discriminating investor."

I would never knowingly disparage anyone publicly here, and so I hope the person who consigned the card that was "stolen" at Mastro is not a board member.

But what about the person who was the consignor? Was he/she a savvy investor, too? Was he/she the same person who paid $1,160 for a PSA 8 Peckinpaugh in the Mile High auction in November of 2005? Because if he/she was, then they bought the card for $1160 and sold it for $630, right? Savvy?

You can sell 100 shares of GE tomorrow, and before you sell it, you know what you're going to net. You can consign a baseball card to an auction house, and you have no idea what it will sell for. It all depends on how many people feel like bidding on your card, and how much money they're willing to spend.

Case in point: from what I can see, if the person who bid $1358 happened to get caught in traffic on the way home, or was watching television, or just didn't feel like bidding, the underbidder would have won the card for about $780. And if the underbidder didn't feel like bidding, the second underbidder would have gotten it for $667, and the seller then would have taken a loss on the card, once you factor in shipping.

So, Bruce, where you guys see a wildly successful, well-managed portfolio, I see dramatic swings in prices, where the "value" of a card is subject to fluctuations of up to 100% and a market that's so thin that just three people can break it. To me, that's about as wise an investment as multi-level marketing.

Buy cards for whatever reason you like, but I'm pretty comfortable with my decision to buy them because, well, I LIKE them.

-Al

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Posted By: Brian

Al, quit making sense.

I like applesauce.

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Posted By: Peter_Spaeth

I think the point is well taken in the sense that there are inefficiencies that result in some cards going relatively cheaply in auctions; and someone who really pays close attention can make money taking advantage of those. That said, I don't think it proves any general proposition that cards -- high mid or low grade -- are necessarily a good investment at this point.

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Posted By: Tom Boblitt

WELL said.........

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Posted By: Paul S

One (as opposed to we) can't base a conclusion on 1 or 2 cards. As other board members said earlier, one would have to get a large sampling, preferably of several types, and track them over time. (and probably by the time one figures it out, the card market's swung again.)

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Posted By: Rich Klein

Bruce is correct -- the better conditioned cards one can afford will bring you the best returns long term. However, as has been pointed out, specific instances can be either very positive or very negative. But, if you are willing to wait 20 years, then just as the stock market has been for that period, you will do very well.

Somehow, though, I don't think one specific high grade goudey card is the best barometer of long term value. We believe in a diverse long-term view.

Regards
Rich (and his alter-ego)

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Posted By: boxingcardman

"But, if you are willing to wait 20 years, then just as the stock market has been for that period, you will do very well."

No, you could do very well. Or you could do lousy, depending on whether you have to cash in during a slump. Or after your CEO steals your company blind. I bet there are lots of Enron pensioners who aren't so keen on long term investing in stocks. The stock market isn't a lock; if you want guaranteed rates buy bonds. Otherwise, you take a risk.

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Posted By: JimCrandell

I agree with Bruce's main point although I don't think the example he gives necessarily justifies it. The biggest threat to the continued escalation in high grade vintage cards is if collectors/investors lose confidence in the grading companies ability to detect altered cards and if the belief spreads that there are a growing number of altered cards in graded company holders.

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Posted By: barrysloate

Well Jim, the perception that altered cards have found their way into holders is already with us.

The road from here is for collectors to have renewed faith that the grading companies have gotten better in detecting this.

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Posted By: Chad

I think I'll get some popcorn.

And just my 2 cents...Any rare card, whether it be due to pristine condition or there just aren't very many of them, are probably going to appreciate. Low grade stuff with a decent image probably will, too. I'm not a high grade collector by any means and I haven't lost any money on the stuff I've sold. Keep your purchases within reason and you'll be fine. Now have fun, dammit.

And my investment tip of the day is large brokerage firms. Merrill Lynch, Bear Stearns, Lehman Bros. If you make any money on these, send me 10% of the net profits to my paypal account. I trust you guys!

--Chad

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Posted By: Rich Klein

You constantly mention that collectors are afraid that their high dollar cards in high grades have been tampered with. Yet, you are never willing to take that risk yourself to see what, if any, of your cards have been tampered with. I understand the concept about not wanting to take a loss; but until you are willing to in that sense, put your money where your belief it, you may never be able to affect that change you desire.

I know at one time, the idea was broached that SGC come to your house or vice versa (20 minute trip) to see about cards in a few sets which you believe may have problems. I would love to see that come to fruition just to see the results and frankly, to give YOUR viewpoint more credibility.

Regards
Rich

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Posted By: JimCrandell

Barry,

I'm aware of that--I said a "growing" number.

Rich,

I'm sure you would but my goal in collecting isn't to make you happy, its to make me happy and if and when I do it, it will be on my own terms, not yours. And my idea for reforming the hobby does not involve going back and checking every card that has been graded--its to positively affect things in the future.

Lastly, I don't believe any of my sets or cards have problems.

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Posted By: Cobby33

All cards should be slabbed as "Auth." Certainly the grading companies can tell the difference between an authentic card and a faked on, can't they? On second thought...

This scheme will eliminate the shadow of doubt over altered cards and will create an interesting market. But it will also cut down the amount of material we have to talk about. Oh well.

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Posted By: leon

You said

"Lastly, I don't believe any of my sets or cards have problems."


I am not sure what to say about that.....I guess you have changed your opinion from reality to something else...This is in no way, shape, or form a personal attack. It seems we are all playing nicely on the board lately and I couldn't be happier about it. I just find it interesting that you have changed your mind...

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Posted By: JimCrandell

Leon,

While I believe that there are altered cards in holders and that by the law of averages I must have some too, there is nothing to make me believe that any of my sets or are more likely than others to have altered cards.

I was trying to respond to the poster that said give them(SGC) a few cards in sets that you believe may have problems--there are no cards that I own that I believe may have problems.

Clear?

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Posted By: Scot Reader

I think what Bruce's anecdote shows is that, due to a thinly traded market, there is an arbitrage opportunity in vintage baseball cards. It does not speak to whether vintage baseball cards are, or are not, a good investment.

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Posted By: Al C.risafulli

I'm not sure how this became a discussion about grading companies and alterations, as I'm not sure that was Bruces's intent when they made their original post. Although I certainly do not speak for them.

My contention is that while the buyer of the card in question seems to have done well on resale, but there's no indication as to whether the consignor did well on the sale of that same card. How can a single card serve as an example of a good investment and a bad one, both at the same time? It seems to me that the market conditions for the sale of cards have as much to do with the current climate and the universe of potential bidders as they do with the item itself.

Clearly with any collectible item, there will always be interest in obtaining the "best" of something, whether it be best condition, best player, best manufacturer, or whatever. From an "investment" standpoint, if you're going to look at our hobby that way, I suppose there will always be a buyer. However, it's difficult to use the sale of one card in particular to make such blanket statements. It could be said, for example, that there have been plenty of recent instances of high-grade prewar cards selling for less money than anticipated - and that might represent a softening in the overall "market". Such a softening could be due to a softening in the greater economy, a weakining of confidence in the quality of the cards or holders they're in, or any number of other factors.

I'm not smart enough to identify what the best "investment" is in this hobby. I consider myself lucky to be so dumb, because it enables me to have a hobby I can enjoy without freaking out too much over the investments I make that backfire. I just spent $300 on three brandy-new boxes of 2007 Upper Deck Goudey cards, ripped them open and probably have about $20 worth of cards as a result. But damn, I had fun.

-Al

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Posted By: barrysloate

I have to say in my current auction I'm still getting strong interest in scarce low to mid-grade cards, but a lot of my NR MT cards are soft. So where is all the interest right now in this higher grade material? I don't see it. I still say it all depends on who is bidding. Put another PSA 8 Peckinpaugh on ebay, and now that the winner of the last one has his, the next one might go for $700. Who knows who is going to bid on any given night?

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Posted By: Anthony

Barry-
Are the bids on the low grade scarcer cards coming from all different people, or a few guys rebidding? Ditto on the higher grade stuff?
Rhetorical question until the auction is over, but I wonder if it is a bunch of different bidders driving up the lower grade scarcer stuff, is that indicative of a wider collecting base for such items, and a smaller base for the higher grade items?
Either way, it ain't over til it's over. But it would be interesting to see how many unique bidders were on any given lot, and over time what conclusions could be drawn.

edited to add my name.

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Posted By: Corey R. shanus

I think Peter S and Scot have nailed it -- in any market there are inefficiences that can lead to grossly above normal returns, which are hardly indicative of general market investment prospects. To truly put Bruce's hypothesis to a test, one would need to put together a basket of high-graded cards from a variety of issues, hold them for a period of time, then see what the ultimate return is net of transaction costs (e.g., net return from selling them after the auction house's cut is subtracted). Given the extraordinary appreciation over the past several years coupled with the potential bombshell if and when the extent of slabbed altered cards becomes exposed, it is very unclear to me how good a long term investment these cards are. For my nickel, I would invest in (1) geniune rarities (i.e., not condition rarities) where absurb price fluctuation based on de minimus condition variation does not receive such prominence or (2) high graded cards with impeccable provenance thus leading to market confidence the cards have not been altered.

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Posted By: JK

I think the biggest indicator that the initial premise was flawed is that Bruce has failed to come back to this thread and argue in support of his position.

For what its worth, I completely agree with Al - very good, well-reasoned posts.

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Posted By: Chad

But it seems The Group has a vested interest in all of us thinking that high grade stuff is the way to go. These posts seem kind of like advertising to me. This really doesn't bother me--I like Bruce's posts, actually--he really hits the buttons and gets people talking around here.

--Chad

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Posted By: Paul S

Find the nicest example you can at a price you can afford. If investing, hope for the best and try not to be too disappointed if things don't go as anticipated. Don't forget to enjoy the card, as if you wouldn't mind keeping it in your collection.

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Posted By: Steve Murray

Unless they are buying the hi-grade cards for re-sale I would think that their touting them would be counter-productive.

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Posted By: Chad

My mistake if they don't, though. If they don't resale them, then the constant trumpeting of how smart it is to collect them confuses me as it would only serve to drive up the prices of things they want to buy. Not that my being confused is indicative of anything other than my normal state of consciousness.

--Chad

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Posted By: barrysloate

Anthony- the bids seem to be from a wide range of bidders. Some leave ceilings so that will create multiple bids as others participate. I've actually had a few bids in the last hour on some of the higher grade material, so there's a slight improvement. But I am clearly seeing more interest in scarcity than condition.

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Posted By: boxingcardman

Barry: I think over the long haul true rarity is always going to trump condition. Look at what a beater T206 Wagner sells for. Look at what people pay for beater Zeenut DiMaggios. Take a major player from a rare set and it will do very well over time regardless of condition simply because there is so much demand among advanced collectors for those cards.

Chad: I agree that the Dorskinds are engaging in a bit of apple-polishing, but that seems to be de rigueur for them.

Al: absolutely spot on.

The CJ is a great example of perspective and perception. Great "investment" for the buyer; not so much for the seller. Bottom line is that someone got railed in that Mastro auction, someone got lucky on that ebay auction, because the right people were watching that day. Simple as that. I saw all those CJs in Mastro and thought about bidding but, frankly, I was in overload by then from all the auctions plus ebay plus the recent National. The result doesn't mean jack about "the market". Heck, even when the stock market is crashing, someone is there buying and selling and someone is making money. If you want to look at overall "market" health you need to look at a big sampling of items. How are the totals (selling prices and numbers of different bidders) for all the myriad auctions? There's your measure of market health.

One thing that is overlooked is how well you can do with popular cards in grades that average collectors want. T206 is the primary example. So many collectors that even a vast supply is absorbed and desirable HOFers continue to escalate in price. I know since I've been shopping for Cobb-Young-Matty-Speaker and have been watching the price trends.

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Posted By: barrysloate

One thing Bruce has accomplished is he now has almost everyone using the first person plural and "whilst." He might convert us all yet.

But I do wonder why he doesn't come on to defend his point. He started a provocative discussion and the majority of posters disagreed with his analysis. So why abandon the thread? Why not come back and defend your position, if you truly believe it?

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Posted By: Dave F

Barry...

I think Bruce is a good guy, I would just assume it takes a few days for him to write up a couple paragraphs in response while having to insert his language and crafty words into it....

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Posted By: peter chao

The Dorskinds are probably too busy trying to snipe the high grade commons that they are trying to flip.

Peter C.