Liquidity & Investing vs collecting

[Dpeck100]

I have been active in stocks for 19 years and have been a full service broker for the past 12 and nothing I have ever touched or recommended has even come close to the rates of return I have experienced with cards. This hobby boggles my mind. You can take a raw card, pay a fee and literally print money. Amazing.

That said the liquidity of cards can't be compared to financial assets. There are a few cards like a 1986 Fleer Michael Jordan where anyone can list one on EBAY and achieve a near market price at anytime but that isn't the case for most cards. There is also a very high spread from the sale price to the net price that occurs from fees.

If you were to measure the performance of many of the top cards in the hobby they have crushed what a diversified portfolio consisting of stocks and bonds in the past ten years have returned and clearly many have been fantastic investments. That said cards do not pay interest or dividends and you can only win one way and that is price appreciation. This is a significant drawback that must be considered. Playing the buy high and sell higher game can certainly work but clearly buying today vs. a few months ago must be done with some caution.

For me personally I put financial savings ahead of cards as I would much rather have a large financial base that can create cash flow and only use excess cash to buy and generally sell a few things when I buy something at today's prices as it doesn't feel like a good investment to me. If someone wants to dump a large portion of their net worth into cards I don't see a problem with it if retirement is far off and they have great cash flow. That said for someone in their later years they must be ready to sell and for a lot of collectors myself included I hold my best cards for personal enjoyment and can't imagine selling them which obviously would be a problem for someone approaching retirement.

The other huge issue is buying the right cards. While it has been exciting to watch many sky rocket there are an even greater number that can't be sold for much and aren't participating in this move higher. Lately it has felt like you could throw darts at the market as star cards have been cruising higher but in reality if many want to convert their paper profits to cash the market for cards is not deep enough for a lot of people to head for the exits at the same time. When you see large price gaps in bids this suggests that if just a few people back away cards prices can fall and if those same buyers become sellers it creates even further problems.

The OP I recall was an oil trader and he should know that trading cards aren't even remotely as liquid as financial instruments. If one wants to dive really deep into this issue you could attempt to rank cards in terms of risk and segment cards with what would be considered lower beta vs. higher beta etc. That said when you see cards doubling and tripling in weeks you could throw a lot of that research out the window as the market for many cards is moving in a parabolic state and is extremely unpredictable. Because there is no way to hedge cards or bet against cards the market is more akin to an IPO when it gets listed as it can go vertical as there isn't artificial supply that can be thrown at it and the only way to make money is to go long the stock and it simply becomes a game of hot potato. If we are experiencing a hot potato game right now there will be some people that truly regret getting involved.