What I Don't Understand about Baseball Card Economics

[glchen]

Originally Posted by barrysloate

I admit I am no more than a novice when it comes to understanding the general economy and the stock market, but here is one thing I have learned: The stock market rises and falls by processing information. When an interest rate cut is anticipated, the market goes up. If a tariff is instituted on China, for example, the market tanks. These are just two examples, but I recognize how information determines how markets move.

But in the baseball card hobby, the market appears to be absolutely tone deaf. We know grading is subjective and inconsistent; we know altered cards consistently get upgraded and slabbed; we know the card we buy as an 8 might have been resubmitted half a dozen times as a 7 until we find a grader willing to bump. Yet despite all this information that should be a giant warning sign to anyone thinking of investing in baseball cards, the money comes pouring in like an avalanche, and world records keep getting set.

We see 7's turn into 8's and increase fivefold in value. We see 8's become 9's and increase tenfold. And we all know it's all smoke and mirrors.

Yet buyers don't seem to be processing this information. They can't throw big money at this garbage fast enough. So what am I missing?

Barry, I'm not an economist, but I believe that you are comparing macroeconomic effects with microeconomics. For many individual stocks, it the same thing in that it can be all smoke and mirrors for all we know. We don't know if the insiders are buying or selling; the companies put forward different metrics like # of clicks, who their social evangelizers are, when they are losing money hand over foot, that you really don't know what the company is doing. You never have all of the information.


It's the same thing here. You have a bunch of cards that were submitted by Gary Moser. You don't know if they were altered or not. There's a good chance they were altered, but maybe not. Is the entire market going to tank because of this group of cards, probably not. Probably only this group is tainted. Are these cards worth 0? No, they are still authentic, but likely altered. So the floor to the price is the price of authentic/altered. However, the card might not be altered, so it probably won't reach that floor, but will likely just sell at a discount to another card at that grade. Why just a discount rather than the floor? Because where many buyers won't stand to have a card in their collection that may be altered/tainted, there's another buyer who's optimistic/naïve, whatever you want to call it, who thinks this card is completely fine after looking at it themselves, and are happy to get the card for cheaper than they would otherwise.

I'm not saying that I agree with this mentality, but just trying to explain it.

[barrysloate]

Originally Posted by glchen

Barry, I'm not an economist, but I believe that you are comparing macroeconomic effects with microeconomics. For many individual stocks, it the same thing in that it can be all smoke and mirrors for all we know. We don't know if the insiders are buying or selling; the companies put forward different metrics like # of clicks, who their social evangelizers are, when they are losing money hand over foot, that you really don't know what the company is doing. You never have all of the information.


It's the same thing here. You have a bunch of cards that were submitted by Gary Moser. You don't know if they were altered or not. There's a good chance they were altered, but maybe not. Is the entire market going to tank because of this group of cards, probably not. Probably only this group is tainted. Are these cards worth 0? No, they are still authentic, but likely altered. So the floor to the price is the price of authentic/altered. However, the card might not be altered, so it probably won't reach that floor, but will likely just sell at a discount to another card at that grade. Why just a discount rather than the floor? Because where many buyers won't stand to have a card in their collection that may be altered/tainted, there's another buyer who's optimistic/naïve, whatever you want to call it, who thinks this card is completely fine after looking at it themselves, and are happy to get the card for cheaper than they would otherwise.

I'm not saying that I agree with this mentality, but just trying to explain it.

Hi Gary,
So here is something that still troubles me. If the hobby has reached the point where the slightly altered cards are almost impossible to distinguish from the unaltered ones, then what use does the hobby have for third party graders? We pay them a lot of money to make determinations that many of us don't feel qualified to make ourselves. But it appears that as graders and authenticators they are no more skilled than we are.

So it's starting to look like (and truth be told it's been going on for a long time), all of these machinations are reduced down to one thing: getting the number we want on the slab. The whole hobby is really about that number.

Sorry folks, but it's a sad state of affairs. And I don't like it one bit.

[drcy]

Originally Posted by barrysloate

Hi Gary,
So here is something that still troubles me. If the hobby has reached the point where the slightly altered cards are almost impossible to distinguish from the unaltered ones, then what use does the hobby have for third party graders? We pay them a lot of money to make determinations that many of us don't feel qualified to make ourselves. But it appears that as graders and authenticators they are no more skilled than we are.

So it's starting to look like (and truth be told it's been going on for a long time), all of these machinations are reduced down to one thing: getting the number we want on the slab. The whole hobby is really about that number.

Sorry folks, but it's a sad state of affairs. And I don't like it one bit.

It could be that graders simply authenticate cards-- something others on Net54 have proposed. That would be a fair service too-- a third party that says the card is authentic.

Of course, the grading companies don't that.

[Dpeck100]

One of the things you have to keep in perspective is that many cards just simply mirror the income distribution and their price is driven by basic supply and demand forces.

The most popular baseball card is the 1952 Topps Mickey Mantle. A copy that has been run over by a car might still go for 10k and a PSA 10 would bring 10 million.

What this tells you is there is far too much demand for the number of copies that exist and then the cards are allocated across the income distribution and land in the hands of those who want them most. What motives they have to purchase are irrelevant and all that matters is if they can complete the transaction. Looking forward the hands they land in can certainly play a role in the long term prices but as long as collectors still covet the card it will hold fairly strong.

You are going to need to see a significant shift in the demand for the card for prices to come tumbling down significantly. Buyers just accept the fact that you buy one graded and that isn't going to change.

All of the reasons to want to own this historic baseball card still exist. It is still one of the ultimate symbols of Americana. He is still arguably the most popular baseball player ever. The 1952 Topps is still one of if not the most popular baseball card sets ever produced. All of these demand drivers create the environment where this is considered a prized collectible and so the animal spirits aren't going to go away and the rewards of ownership and the bragging rights associated still exist.

There are a lot of people who just simply hate grading and so they are always going to have an issue with graded cards but the overwhelming majority have accepted it as a principle of the card market.

I can remember it like it was yesterday going into a short lived card shop in the Fashion Square mall in Orlando during the home run chase and seeing the eye popping print of the 1985 Topps Mark McGwire going for $7,500 in a PSA 10 in the Beckett. As much as I wanted to think my copy was just as good it wasn't. It was obvious it wasn't. It looked nothing like a 10. It is hard to diminish the fact that it is quite frankly a better card and it is visible and the red flip reminds you of the fact that it is nicer than yours and when you go to look up the selling prices it sells for more than yours by a wide margin too every time.

All of this isn't going away. The movement to try and turn cards into assets and make them legitimate financial investments isn't going to stop. Brent in many ways just has taken the bull by the horns but there are clearly others under the surface trying to do the exact same thing.

As long as there is money that needs to find a home and humans are living collectibles of some form will be sought after and trading cards have a long history of collection and it is only natural with the supply constraints many have that prices have risen significantly.

There is never going to be an environment where a card like a Mantle isn't differentiated in price by grade and the spreads are going to stay very wide. Just the other day we saw the report of the Honus Wagner PSA 2 that was reported to have sold privately for 1.2 million. People take these cards seriously and when you have a market where people will pay these kinds of prices for relics of history this saga we are going through isn't going to change it.

[glchen]

Originally Posted by barrysloate

Hi Gary,
So here is something that still troubles me. If the hobby has reached the point where the slightly altered cards are almost impossible to distinguish from the unaltered ones, then what use does the hobby have for third party graders? We pay them a lot of money to make determinations that many of us don't feel qualified to make ourselves. But it appears that as graders and authenticators they are no more skilled than we are.

So it's starting to look like (and truth be told it's been going on for a long time), all of these machinations are reduced down to one thing: getting the number we want on the slab. The whole hobby is really about that number.

Sorry folks, but it's a sad state of affairs. And I don't like it one bit.

Barry, I think there are a couple of categories of collectors here. First is the type that is on this board (and similar ones like blowout) who try to understand as much as possible about cards, including grading, alterations, shilling, etc. These folks can usually do a better job authenticating and grading cards than the TPG's can. Then there are the folks who just like to collect/invest in cards, and don't care about the other stuff. They know TPG's make mistakes, but don't care because they trust they can still do a better job than they can. For example, I'm not much of a handyman. If something breaks, I look on yelp for a service person with good reviews, and hire that person to fix that thing the broke. I could do the research myself on how to fix that thing, and learn how to fix it, so that I can save money and do it myself in the future. I'm just not interested in that stuff, and don't trust that I can fix it better than someone who does it for a living.


For people in the latter camp, I think that TPG's are still useful and better than them. And the other part of TPG's is the safety factor. Some people may not care about the grade actually, but just want the card holdered because it's less prone to being damaged that way. Or if they left the cards to a loved one in their will, that person will know those cards are worth something rather than 80s junk. So although I completely agree when the cards are really valuable, it's buyer beware for what's on the flip, I think that there are other things useful for TPGs rather than to just filtering out these frauds which are getting harder and harder to do.

[barrysloate]

I've said this before and will repeat: I have no problem with a company that examines cards for alterations, and then assigns them an unbiased grade. The problem is the ones we have must do a much, much better job than they are now. They have to figure out a better way to catch these cards being submitted by card doctors. If not, then I have no faith in the product. End of story.

[benjulmag]

Originally Posted by barrysloate

Hi Gary,
So here is something that still troubles me. If the hobby has reached the point where the slightly altered cards are almost impossible to distinguish from the unaltered ones, then what use does the hobby have for third party graders? We pay them a lot of money to make determinations that many of us don't feel qualified to make ourselves. But it appears that as graders and authenticators they are no more skilled than we are.

So it's starting to look like (and truth be told it's been going on for a long time), all of these machinations are reduced down to one thing: getting the number we want on the slab. The whole hobby is really about that number.

Sorry folks, but it's a sad state of affairs. And I don't like it one bit.

I think the hobby has reached the point where under current grading methods altered cards are almost impossible to distinguish from the unaltered ones. And I think to a skilled card doctor we might be talking about more than just the slightly altered. But, because IMO the technology exists to expose these alterations and in time it will be employed by TPGs, it could be very risky to buy the number on the slab if to hold value the card eventually will need to be re slabbed under the newer methods.

[tschock]

Originally Posted by benjulmag

But, because IMO the technology exists to expose these alterations and in time it will be employed by TPGs...

Only if they are held accountable for their 'mistakes'. Otherwise, BAU.

[barrysloate]

Originally Posted by benjulmag

I think the hobby has reached the point where under current grading methods altered cards are almost impossible to distinguish from the unaltered ones. And I think to a skilled card doctor we might be talking about more than just the slightly altered. But, because IMO the technology exists to expose these alterations and in time it will be employed by TPGs, it could be very risky to buy the number on the slab if to hold value the card eventually will need to be re slabbed under the newer methods.

So if it is true that card doctors do work with such skill that it is basically undetectable, then it seems like there is no premium in having an original undoctored card. Because the card that is pack fresh Mint would be worth exactly the same as the altered Mint. Thus, I suggest that card doctors pick up their pace, and in no time at all every card in the collecting universe will be in Mint condition. Then we can all own the #1 set on the registry, all at the same time!

[benjulmag]

Originally Posted by barrysloate

So if it is true that card doctors do work with such skill that it is basically undetectable, then it seems like there is no premium in having an original undoctored card. Because the card that is pack fresh Mint would be worth exactly the same as the altered Mint. Thus, I suggest that card doctors pick up their pace, and in no time at all every card in the collecting universe will be in Mint condition. Then we can all own the #1 set on the registry, all at the same time!

Now isn't that a thought! Alteration becomes essentially impossible to detect causing the supply of high grade vintage cards to soar, and their prices to fall. Or....technology comes to the rescue and such alteration becomes detectable. Under that scenario two things happen, provided that in order to hold value such cards need to be re slabbed under the newer method: 1. The supply of unaltered high grade vintage cards plummet and the true unaltered ones hold or rise in value. 2. The prices of altered ones (the majority) plummet in value.

[darwinbulldog]

What's really going to upset the apple cart is when we find out the Black Swamp Find was just Gary Moser's master's thesis project.

[SMPEP]

Originally Posted by darwinbulldog

What's really going to upset the apple cart is when we find out the Black Swamp Find was just Gary Moser's master's thesis project.

I have to say ... the first second I heard about this find ... my immediate response was ... why on Earth would anyone believe this claim? I lived in Ohio. I've been in farm houses there. The change in humidity from summer to winter alone should have made folks skeptical.

[Peter_Spaeth]

Originally Posted by darwinbulldog

What's really going to upset the apple cart is when we find out the Black Swamp Find was just Gary Moser's master's thesis project.

A truly outstanding post.

[barrysloate]

Originally Posted by benjulmag

Now isn't that a thought! Alteration becomes essentially impossible to detect causing the supply of high grade vintage cards to soar, and their prices to fall. Or....technology comes to the rescue and such alteration becomes detectable. Under that scenario two things happen, provided that in order to hold value such cards need to be re slabbed under the newer method: 1. The supply of unaltered high grade vintage cards plummet and the true unaltered ones hold or rise in value. 2. The prices of altered ones (the majority) plummet in value.

So I am back to my original premise: why isn't any of this information built into the price of Mint cards? If I'm a buyer and I know anything about what is going on with high grade cards, I'm moving forward with caution. But the current market plows ahead like a freight train.

[benjulmag]

Originally Posted by barrysloate

So I am back to my original premise: why isn't any of this information built into the price of Mint cards? If I'm a buyer and I know anything about what is going on with high grade cards, I'm moving forward with caution. But the current market plows ahead like a freight train.

How much of this is understood outside this Board? And even within this Board, there is disagreement how widespread the problem is. I've expressed my opinion. I've never said it reflects the majority view.

[drcy]

Originally Posted by barrysloate

So I am back to my original premise: why isn't any of this information built into the price of Mint cards? If I'm a buyer and I know anything about what is going on with high grade cards, I'm moving forward with caution. But the current market plows ahead like a freight train.

Just concerning the margins of error and subjectivity and flip of the coin of grades, I never understood it.

[Rhotchkiss]

Originally Posted by barrysloate

So I am back to my original premise: why isn't any of this information built into the price of Mint cards? If I'm a buyer and I know anything about what is going on with high grade cards, I'm moving forward with caution. But the current market plows ahead like a freight train.

Barry, I am not sure the market is plowing ahead. Last night, a very pretty PSA 8, t206 Wajo pitching closed for under $19k - by recent comps, that should have been a $30k+ card. The e98 cobb psa 9 went “cheap” in my opinion, as did the t206 O’Hara polar bear PSA 5, the e105 Wagner PSA 5, the higher grades Lajoies (portrait and throwing), among other cards I was watching with interest. It seems the two cards that did not go cheap that I was watching, were the only two I bid on - the t206 brown Lenox and the t215-1. I think some prices from last night’s auction reflected the fear. Is that short lived? Probably. But I think many cards, especially mid-high grades that I was watching, went a bit cheap