Borrowing against graded cards

[vthobby]

Originally Posted by Peter_Spaeth

Why is "the Vault" any more secure than a bank? Is it in some bunker ten feet deep under Oregon with ten levels of security clearance?

Peter,

I did not say that the Vault is more secure than a bank. It's not to be frank but I'm sure according to those I've talked to at PWCC that it is state of the art AND every item is INSURED.

My collectibles are NOT insured at the moment so I see a VERY valuable option here. "The Vault" is closer to Russia than my bank is so an ICBM could easily take out my Wee Willie Keelers that will be stored there in the future and that frankly upsets me. Now if the Russian's take Willie's solid advice to "Hit 'em where they aint" then my collectibles will be safe in The Vault, but I digress.

Peace, Mike

[Peter_Spaeth]

Originally Posted by vtgmsc

Peter,

I did not say that the Vault is more secure than a bank. It's not to be frank but I'm sure according to those I've talked to at PWCC that it is state of the art AND every item is INSURED.

My collectibles are NOT insured at the moment so I see a VERY valuable option here. "The Vault" is closer to Russia than my bank is so an ICBM could easily take out my Wee Willie Keelers that will be stored there in the future and that frankly upsets me. Now if the Russian's take Willie's solid advice to "Hit 'em where they aint" then my collectibles will be safe in The Vault, but I digress.

Peace, Mike

Read the fine print is my advice.

[eliotdeutsch]

As was mentioned, things like this go on all the time in financial markets. So all details of pricing the collateral, custodial services, defaults etc can be solved here like it is there.

Where I see this breaking down is the “negative carry” is just too great.

If you buy a security that yields 5% and you use it as collateral to finance the purchase, of this financing rate is sufficiently low, you’re levered returns are higher. That’s the main reason why all institutional investors use leverage.

In the baseball card market, where cards don’t pay interest or a dividend or any cash flow of any kind, you’re buying for the sole purpose of capital appreciation. If you then layer on leverage at a very high rate, you’d better hope your cards appreciate dramatically and fast or you’d just be better off using cash.

At best, I see this as a method of achieving short term funding, but like others mentioned, of you have 50k in cads,, you can get much cheaper funding in other ways. At worst, it’s a way for auction houses to lure borrowers into cards they ordinarily couldn’t afford, knowing full well they’ll probably default on the loans, resulting in nice profit for auction house.

Lenders would have to do extreme due diligence before making these loans in order not to be predatory. All this resulting in no one using the program.