Are Pre-War Baseball Cards "Solid" Investments?

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Posted By: warshawlaw

There are some things an "investment" is not:

It is not an intangible, ephemeral thing like an education. An investment is an asset you can sell off. You do not sell your education, you sell your time or your labor or your expertise. To include your education in the "investment" category is nice rhetoric but it obscures the analysis we are after. It is not purely an income-generating thing (most stocks, residences, gold, etc. do not throw off income streams).

I believe that the core defining characteristics of an investment are (1) it is a tangible, fungible thing or right that the society considers to be of value, (2) society allows it to be traded, and (3) people in that society consider to be worth spending time and resources to trade in. Remove one or more of these factors and watch how it changes your perception as to whether it is an investment: I do no think anyone would consider "investing" in a stable of prostitutes in Los Angeles, but legalize the activity as it is in some parts of Nevada and "investing" in a brothel is certainly within the realm of possibilities. Ditto for drugs. It is an "investment" to buy shares in Coors or Anhaeuser-Busch because booze is legal; prohibit liquor and the "investment" collapses.

One thing that people (including some here) often fixate on, sometimes implicitly, as a characteristic of an investment, is lack of pleasure as a hallmark of an investment: that except for its potential to return, you would not buy it. I often hear people say, in essence, that cards cannot be an investment because it is a hobby or because they like it. Bull. There are lots of things that are "investments" that people enjoy too. Many people consider their homes to be investments. And they have been proven amazingly correct over the last few years as the Fed has softened the stock market collapse by inflating a real estate bubble. My house has more than tripled in value, easily the best "investment" I made, but I also enjoy it too.

A few people pointed out the adverse tax treatment of cards as proof they are not investments. Wrong again. The tax code is a reflection of special interest lobbying and resulting policy decisions, not reality. To give you an example: if I am employed by someone who does not offer health insurance, I purchase it myself with post-tax dollars. if I am self-employed, I offer coverage to myself through my business as a benefit and pay for it with pre-tax dollars. Same coverage, same insurance, different tax treatment. There is no rational basis for that difference in treatment; it is merely a policy decision made by politicians who are bought and paid for by lobbyists. I guarantee you that if the card business had a lobbyist and sufficient cash to spread around Washington, the word "cards" would find its way into the tax regulations. There is no rational basis for treating cards differently than coins or stamps, it is merely a policy decision. What it means is that cards are an inferior investment from a tax treatment standpoint.

In sum, there are no hard and fast classifications or rules for what is an investment; it is all about what people think.

Now, are cards an investment? Well, society considers them to be of value, allows them to be traded, and lots of people spend their time and assets on them. By my interpretation, cards are an investment, certainly. Whether they are a good investment or a bad investment is the question. IMHO, they have been historically a decent investment for people who understand WTF they are doing. Like anything else, you have to be an expert in the field to understand how to invest in cards. Otherwise, you are a monkey throwing darts. Great example: Last night I had dinner with my parents. My father and I were talking about cards (the Mastro auction) and he said that I should buy up cards of those young players with the Dodgers because they may become superstars. I had to enlighten him as to why that is a poor investment strategy.