Changing of the Guard: The Commoditization of Sportscards

[Aquarian Sports Cards]

ugh, now I can't find it. Just Dean's over-inflated silliness at $445. However there are a number of PSA 5's between $149 and $199, so while I can't find the card I mentioned above, there are still signs of sanity in the market.

[Tennis13]

I am a relative novice to this world compared to you all. A few things with respect to economic theory that could be going on here. First, you have supply and demand curves, and relatively speaking, you have a fixed supply curve at best, or an inward shifting one at worse. Prices could go up due to contrived scarcity, or due to rising demand. It seems based on discussions, nobody is certain.

Second, you could have cartel pricing going on here. A few people/organizations are working together to control supply. In order to do that, one must first corner the market supply, and then trickle it out at an agreed upon speed. Or they could be divvying up players: you got Aaron, I got Mays etc. by company. OPEC has done this for close to 50 years to varying levels of short term and long term success. The DoJ is not going to go after collusion in the baseball card secondary market.

Third, you could have somebody buying 10 or 15 of a sort of specific card or player, then purposely bidding up the last one purchased to set the market so they can unload 1 or 2 at 10x value to an ill informed buyer to break even, and then unload 13 remaining in the OPEC manner. Would this require auction manipulation? Perhaps, but that's apparently not stopped many people before in this industry. In addition, if you owned a company that charged based on final pricing for your services, this could almost be a lost leader in your business.

Fourth, I see a ton of posts about "1000% year-over-year growth in price. That's a bubble." Well, not necessarily. It depends on if we started with an undervalued asset or an overvalued, mega-liquid, mature product. If you bought Sirius XM Satelitte stock at the trough of the 2009 financial crisis, you would have a similiar return over 3 years. Same wih gold from 2004 to 2011, but from 1980s to 2004 you would have been flat on gold notional terms. My point is that assets don't appreciate linearly, and when they move, they move. Sometimes they have a blowoff top (bubble) and sometimes they don't. But 1000% on a $0.25 asset is a heckuva lot different than 1000% on a $5 million asset. Elasticity of demand is much more inelastic on cheaper prices than higher prices. So I would be careful about getting wrapped up in percentage increase numbers, in my opinion. As crazy as it may sound, $1500 is not a lot of money to professionals in large cities where the cost of living may be 5x middle and southern America.

Finally, the industry is well known for lack of good institutionalization of risk and controls. Think about the worst firms you can find in finance, and that's sort of where this industry stands in my mind as a collective. Sad, but unfortunately true. So there could be some dodgy things going on. Again, you all know so much more than I do about that. When you have prices charged based on appraised value rather than a flat rate, it's in that comapny's best interest to have higher appraisal values. It's in long-term market players best interests to see their assets appreciate quicker.

To hear people bit h about how expensive things are, though, is a welcome change to the past 25 years in this hobby. You have all dealt in depreciating assets for so long, that any inventory you actually hold that's appreciating could be unloaded at these "absurd" prices and you get all the joys and experiences the past few decades free of charge or with a small profit. Not bad, I would say.

[Exhibitman]

The hobby definitely is a scummy business. More card auctioneers and dealers have gone to jail since 2008 than banksters.

As for the run up I've decided to post certain cards for sale at 'ridiculous' prices and test the waters. If they sell I will happily take the profits. If not I will happily keep them.

[Leon]

Originally Posted by Exhibitman

The hobby definitely is a scummy business. More card auctioneers and dealers have gone to jail since 2008 than banksters.

As for the run up I've decided to post certain cards for sale at 'ridiculous' prices and test the waters. If they sell I will happily take the profits. If not I will happily keep them.

It is a scummy business for some but they might have been scummy in other areas had they been there. We are in an unregulated billion dollar industry. Need anyone say more? There is no doubt in my mind there is some manipulation going. I am in the corner of thinking that says whomever is doing it is spinning their wheels at best and will get creamed financially at worst (or go to jail if they are doing something illegal). I am not talking about a collector buying an 8 or a 9 for their set. I am talking about trying to corner the market on cards which there are hundreds and thousands of, and that is crazy if you ask me (and some others).

[revlis]

An interesting parallel is currently happening with Magic the Gathering cards. Wizards of the Coast (maker of Magic the gathering) have a "reserve list" - these are cards they have said will never be printed again in subsequent releases.

As a result, people started to buy up all copies of certain cards on this list. They then posted about cornering the market thus creating a buying frenzy and driving prices up.

Some truly standup guys are trying to get in on the action too, might have heard of him - Martin Shkreli - see article below.

http://www.geek.com/games/real-life-...cards-1661003/

I am in a way reluctant to fan the flames of this whole conspiracy topic but there is some fairly compelling evidence at least with other collectibles. While baseball doesn't have a reserved list we do have 'pop' reports which could serve a similar purpose. I do however agree with Leon's above point that this is a futile effort to corner the market completely. I do also think this 'new blood' is good for the health of the hobby. I myself am part of that new blood.

[TanksAndSpartans]

Tennis13 touched on one of the things I was thinking, but articulated it better.

Say you quietly buy 5 PSA 8 cards over the course of a year (say Jim Brown rookies just as an example)

I'll use round numbers:

5*6K=30K

Then suddenly collude with someone to run an auction up to 17K

You now have 6 cards at a cost of 30K + 17K = 47K

The hope would be that 17K price acts a signal or whatever and the card gets hot. Even if the 6 are now sold over time, some auctioned off or however at 10K each (a bargain relative to the 17K price), you have:

6*10K=60K-47K=13K profit

[Tennis13]

Originally Posted by TanksAndSpartans

Tennis13 touched on one of the things I was thinking, but articulated it better.

Say you quietly buy 5 PSA 8 cards over the course of a year (say Jim Brown rookies just as an example)

I'll use round numbers:

5*6K=30K

Then suddenly collude with someone to run an auction up to 17K

You now have 6 cards at a cost of 30K + 17K = 47K

The hope would be that 17K price acts a signal or whatever and the card gets hot. Even if the 6 are now sold over time, some auctioned off or however at 10K each (a bargain relative to the 17K price), you have:

6*10K=60K-47K=13K profit

So let's be real methodical here. All possible winners in this situation:

1). You corner market and outbid a few people that JUST MISS over and over. You have identified the buyers. Now pull the cards off market for 18 months or 24 months. Whatever. Or better (illegaly) yet, keep bid rigging so that guy keeps just barely missing out. Then Finally after he has been outbid and hasn't seen his big card for 18 months, you relist, see him chase and overpay. To get your sort of economics outlined above. Because you have cornered the market, you can release at whatever speed you want and control the supply. Contrived scarcity.

2). Card graders are charging by value. If i own a $100 million dollar company and spend $500k to generate 20% or 25% higher grading revs per year due to increased market value, AND I get to personally hold an "asset" in a card, well that's a leveraged win-win situation. Nothing illegal here, but definitely higher risk for ruin by leveraging yourself to same industry.

3). I am an auction house. I take a percentage of gross sales. I have indicated sellers, and I am trying to get them off the fence. I point to specific cards/auctions/factors that allow me to auction your card off and max your value. This would be a very legal, big data approach that would be really awesome to try to pull off. Let's build a regression off every possible sale we have from last 15 years and try to predict the factors that maximize card values. And if we have to buy a few to put it to the test, to strum up interest, nothing wrong with that.


Those are the only 3 possibilities I see for a sort of "ulterior" motive to prices going higher. None of which are illegal, unless there is collusion on #1. But cornering the market is not illegal if you do it alone, and it's often ruinous long-term.

I don't think any of the above 3 scenarios are very likely, because 1&3 are a high risk of ruin. Scenario 2 is possible, but I don't think those guys are rich enough to actually do what you all think is happening. My hunch is there are a handful of rich tech/hedge fund dudes that are in an arms race with each other, and these prices are rounding errors to billionaires, and they are just buying everything they never could buy growing up.

Never underestimate bored billionaires. Ballmer paid $2 billion+ for the Clippers because he needed something to do. $100,000 for a baseball card: big deal.