Health of Asset Class - Over/Under 1955 Topps Koufax PSA 9

[oldjudge]

Originally Posted by Rhotchkiss

Bob, I 100% agree with everything you said. Many on this board like things how they are and bemoan innovation. I don’t blame them, I hate change too! But where there is money involved, there is innovation, and we are seeing that in the hobby/asset class (why I struggled initially with the terminology). Those who don’t recognize the innovation may miss opportunities, or worse, get left behind.

I think fractional shares makes sense for a very few things that are super rare and super expensive - t206 Wagner, BN Ruth, PSA/SGC 9+ 1952 Topps Mantle, etc. That said, buying into a card mutual fund of diversified cards makes sense and is not very different from a stock or bond mutual fund. Nicolo makes some good points that one would have to consider, but if you can get comfortable with the sponsor and the fee structure, I card mutual fund makes. Frankly, I have dabbled with the idea of starting one and seeding it with my collection at FMV (as determined by appraisal).

Ryan-I disagree. Equity or debt mutual funds make sense because there is price transparency on the components. Arbs will keep the value in an appropriate range. Not so on a collectibles fund. If you can’t set value based on components then you are left solely with determining a market by best bid/offer. If an event happens the volatility could go through the roof. Are you going to trust the fund provider to tell you what the shares are worth?

[Rhotchkiss]

Originally Posted by oldjudge

Ryan-I disagree. Equity or debt mutual funds make sense because there is price transparency on the components. Arbs will keep the value in an appropriate range. Not so on a collectibles fund. If you can’t set value based on components then you are left solely with determining a market by best bid/offer. If an event happens the volatility could go through the roof. Are you going to trust the fund provider to tell you what the shares are worth?

No. I would be the fund provider…. But I hear what you are saying Jay. Sponsorship becomes SO much more important

[raulus]

Originally Posted by Rhotchkiss

No. I would be the fund provider…. But I hear what you are saying Jay. Sponsorship becomes SO much more important

Not to get tooooooooooo crazy here, but I suspect you'll have to comply with securities laws, which make the entire exercise a lot more exciting. Because the penalty for failure includes serious jail time, and that would end your trip real quick.

[Rhotchkiss]

Originally Posted by raulus

Not to get tooooooooooo crazy here, but I suspect you'll have to comply with securities laws, which make the entire exercise a lot more exciting. Because the penalty for failure includes serious jail time, and that would end your trip real quick.

That goes without saying. As someone who raises and invests funds, I am very aware of the federal and state compliance burdens associated with private offerings, and I believe something like this would qualify as a security for SEC purposes. Alas, it’s an idea right now, nothing more.

The point is that Bob’s discussion of card mutual funds is valid and could one day become a reality. Indeed, I have heard whispers of one about a year ago and I am very sure there are partnerships/LLCs of multiple partners/members that are currently buying cards, which is effectively fractional shares by another name

[Exhibitman]

Originally Posted by raulus

Not to get tooooooooooo crazy here, but I suspect you'll have to comply with securities laws, which make the entire exercise a lot more exciting. Because the penalty for failure includes serious jail time, and that would end your trip real quick.

Bingo! Compliance with securities laws is the way to legitimize the effort. Not skirt it, embrace it. If the fractional interest promoters can manage that, they have a chance at selling people on it not being a giant scam. If they act like the crypto bros, not so much.

[BobC]

Originally Posted by raulus

Not to get tooooooooooo crazy here, but I suspect you'll have to comply with securities laws, which make the entire exercise a lot more exciting. Because the penalty for failure includes serious jail time, and that would end your trip real quick.

Nic, I've said that very thing before here on the forum as well. The way the card industry (and it is more of an industry now than just a hobby, sorry to say) is going today, it does seem to be only a matter of time before someone really does start treating it more like a true investment for more people, and that gets the government to eventually have to start paying more and more attention to what is going on, and eventually expand regulatory oversight to the entire industry once it does get big enough.

Truth is, before now the card hobby hasn't been big and valuable enough for anyone in government to really care. It's a hobby! But with all the increasing value, things like "vaults" being created and companies maybe now starting to push fractional interests in cards, the whole business is starting to look more and more like some investment companies. You and I are long-time CPAs, and of anyone here on this forum, you know exactly how what the TPGs do for this card hobby industry is an outright joke, with absolutely no true oversight, regulation, standardization, and with virtually no consequences or accountability whatsoever for anything they do. Yet we both know that CPAs and TPGs main purpose is to provide the exact same thing.......an OPINION on the state or condition of something! As CPAs though, we go through sooooo much more crap and oversight because our opinions can end up affecting the entire financial markets of the world. But no one in authority apparently gives a rat's ass about a bunch of nerdy collectors accumulating pieces of cardboard. At least not yet!

People on here, and elsewhere, had (and occasionally still do) talked long and hard about the FBI investigation into certain players in the card "hobby" industry, and the allegations of alteration fraud and other illegal activities they were suspected of being involved in. And since then many of those same people have bemoaned how it appears nothing has, or ever will, come or be done about any of it. If the card "hobby" industry were subject to some of these much higher levels of scrutiny and oversight as a truly recognized type of investment industry, with true governmental required oversight, like the SEC and FTC has over businesses here in the U.S., I'd venture to guess how much different those FBI investigations may have (or yet) turned out. I say "may" because technically they are still supposedly in an ongoing investigation, but nobody knows or has heard of anything new being done in regard to those investigations for some time now.

I have touted here on the forum before how any of us card collectors can be one of three different things; a dealer, collector/hobbyist, or an investor, and how technically anyone can actually be all three at the exact same time. They just have to organize and keep their activities separate, and be sure to prepare and keep as accurate and complete records and data about their separate activities as possible for if/when any of the tax authorities may come calling with questions. I've explained the main different tax consequences/attributes that go with each of these three different types of card owners they can be. And I've seen you post once or twice mentioning the same thing about card collectors being one of these three types as well, so I know we agree on that. What hasn't to my knowledge been directly challenged in tax law going up against the IRS yet is if they will truly recognize that someone selling their baseball cards could strictly be nothing more than an investor. And therefore, when they sell a card they held strictly as an investment, any profit on that sale should be subject to the same maximum 20% federal tax rate on the LTCG, just like from the sales of other traditional investments, like stocks and bonds, and NOT be subject to the currently higher 28% maximum federal tax rate on LTCGs from the sale of a collectible, such as a baseball card. The other major difference is that if a card you sell is a true investment, and not just a collectible, any losses on the sale of an investment would be potentially deductible against other gains and taxable income, but losses as purely collectibles are absolutely not deductible at all, not even against other gains from selling other baseball cards. I'm waiting for one these deep-pocket collectors/investors to sell say a T206 Wagner card for a few million of profit, and then take on the IRS and claim the most they owe in federal taxes on the gain is only 20%, and not 28%. Until you get to a case with enough potential dollars involved, I don't see anyone wasting the time and expense to fight the IRS for maybe just a few hundred or a few thousand dollars. But I firmly believe the argument is valid, and there for someone to eventually act on.

And in response to others who had asked what is maybe the difference between a baseball card being a collectible item or being an investment item, though I couldn't/still can't give them an exact, perfect and irrefutable definition and answer, the simplest way I had/have to put and describe it to everyone was, a collectible is something you would put on a shelf or hang on the wall in your man cave or office to show off and tell others about, an investment is something you'd be more likely to keep in your bank safe deposit box or in one of these new vault services that have just in recent years started operating. So when you take an operation like a PWCC or Goldin that has and operates a vault service for their clientele, and they also offer related/combined services to buy and sell those items on behalf of their clientele, it certainly starts to sound/look very similar to what you do when you call or otherwise contact your investment/financial planner/advisor/broker and ask them to buy/sell some stocks or other investments for you, doesn't it?

And what is the old saying, if it swims like a duck, looks like a duck, and quacks like a duck, it's a................................................. .....

[BobC]

Originally Posted by Exhibitman

Bingo! Compliance with securities laws is the way to legitimize the effort. Not skirt it, embrace it. If the fractional interest promoters can manage that, they have a chance at selling people on it not being a giant scam. If they act like the crypto bros, not so much.

Exactly right, and just think how that could also then apply to scrutiny and oversight of TPGs who review and opine on the sports cards and other items now being sold as investments. Just like the rules and regulations that CPAs who opine on the financial statements of publicly traded companies have to follow.

Like how a CPA cannot ever charge a contingent fee for any work or services they provide so they maintain their independence and do not have any potential bias or conflicts of interest, in both fact AND APPEARANCE! If that were similarly applied to TPGs, then they could technically only charge the exact same amount to grade a 1988 Gregg Jefferies rookie card as they would for grading a '52 Topps Mantle card, assuming they were providing the same exact service(s)/work. Now, how nice would that be that you are only charged for the actual work/services they perform, and not for what they can maybe get away with? Also, in the case of owners/employees of a TPG, they likely would never be allowed to have their own cards/items be graded or otherwise serviced by the same TPG they owned/worked for. For example, David Hall owned one of, if not the most celebrated T206 card collections of all time at one point, to my understanding. He also was behind the creation of, and at one time a major owner of, Collectors Universe I believe, which also (or at least did) own PSA as a wholly owned subsidiary. I wonder while still an owner who he may have had grading his T206 cards? Likewise, now that CU/PSA have been taken over by private ownership (and is no longer publicly traded), including by such as Nat Turner, I wonder who he has/would have do the work of grading any cards he may want to get graded now? That kind of thing happening would be a totally improper and unbelievably and absolutely biased conflict of interest occurrence and should never be (or have been) allowed to happen.

[Exhibitman]

One of the things I've noticed about crypto and meme stocks and card investing is how similarly the participants behave. There is an almost palpable sense of giving the middle finger to The Man in all of it, hence the hostility of the young towards mainstream investments like mutual funds. The card 'bros i see at shows would be right at home selling weed. Same style as the drug dealers who used to supply our highs in college. That makes it harder to promote an investment angle on cards. Too many players want to be 'playas', not investors, and stubbornly resist efforts to professionalize the hobby or make it look like a mainstream investment. So many collectors also like the sheer transgressiveness of buying and selling in cash in a field without much regulation. It gives them that "G's and keys" swagger to throw around cash, feel like a street guy, but with cards and without any real danger. Look at some of the linguistic stylings of the hobby: buyer's premium is "vig", cards are "product", etc. The fact that the authorities don't really seem to care actually is a selling point.

[joshuanip]

Originally Posted by Exhibitman

One of the things I've noticed about crypto and meme stocks and card investing is how similarly the participants behave. There is an almost palpable sense of giving the middle finger to The Man in all of it, hence the hostility of the young towards mainstream investments like mutual funds. The card 'bros i see at shows would be right at home selling weed. Same style as the drug dealers who used to supply our highs in college. That makes it harder to promote an investment angle on cards. Too many players want to be 'playas', not investors, and stubbornly resist efforts to professionalize the hobby or make it look like a mainstream investment. So many collectors also like the sheer transgressiveness of buying and selling in cash in a field without much regulation. It gives them that "G's and keys" swagger to throw around cash, feel like a street guy, but with cards and without any real danger. Look at some of the linguistic stylings of the hobby: buyer's premium is "vig", cards are "product", etc. The fact that the authorities don't really seem to care actually is a selling point.

The Singer interview in the current WSJ is apt. Fed’s response to every crisis is to print money and the rise of crypto is a libertarian impulse for the disdain on the fed’s disrespect to fiat currency… article is bearish on crypto which I agree on, it root principles to crypto and art/cards are the same. An alternative store of value. But art and cards have another thing going for them, they can’t be produced in any more quantities that that exist out there. There will be “finds” but supply is pretty much set (sans e98 prior to bsf). And there is something tangible to the asset unlike “ether” assets.

Always thought and still think employment is the highest coefficient in card prices (as it affects demand (by people’s wherewithal) and supply (as people need to sell to fund cost of living). And with that metric we’re doing pretty good.

Of course there’s asset beta, which is what we are feeling today, as people “trade” based on how far cards appreciated and where they think cards will go. But as a long term driver, it’s hard to argue against the initial point as to why cards are a good store of value in a diversified asset portfolio.

[Exhibitman]

Originally Posted by joshuanip

The Singer interview in the current WSJ is apt. Fed’s response to every crisis is to print money and the rise of crypto is a libertarian impulse for the disdain on the fed’s disrespect to fiat currency… article is bearish on crypto which I agree on, it root principles to crypto and art/cards are the same. An alternative store of value. But art and cards have another thing going for them, they can’t be produced in any more quantities that that exist out there. There will be “finds” but supply is pretty much set (sans e98 prior to bsf). And there is something tangible to the asset unlike “ether” assets.

Always thought and still think employment is the highest coefficient in card prices (as it affects demand (by people’s wherewithal) and supply (as people need to sell to fund cost of living). And with that metric we’re doing pretty good.

Of course there’s asset beta, which is what we are feeling today, as people “trade” based on how far cards appreciated and where they think cards will go. But as a long term driver, it’s hard to argue against the initial point as to why cards are a good store of value in a diversified asset portfolio.

It is hard to argue against alternative value stores in inflationary times. Whether it is a store or a scam is the question and at least with a card (or gold or real estate) there is something tangible, as long as you actually have possession of it. The rest is just speculating on the potential gains of one asset versus another over time. For example, I wouldn't have wanted to invest in New York City commercial real estate in 2019. It may be tangible but remote working has made a disaster of it. I'll say one thing for cards in particular:



They're a lot prettier to look at than a deed.