Investment Potential

[BlueDevil89]

ctownboy,

You've really put a lot of thought into possible scenarios that could cause the card market to fall. However, you can develop hypothetical scenarios that would provide logical arguments for the bubble-burst effect for any investment vehicle (stocks, real estate, bonds, etc). Fluctuations will continue in all market segments. That is why it is highly recommended that one have diversified investment holdings. Collectibles can be a valuable part of a balanced portfolio. Being overweighted in any one investment category increases one's level of risk.

Concerning baseball cards, a good rule of thumb is that if you have so much money tied up in little pieces of cardboard that it makes your uneasy all day and keeps you awake at night, you probably need to pare down your collection a bit. The same would go for any holding.

Fortunately, baseball's following continues to expand. Just because a certain segment of the population does not seem interested in collecting cards today, does not mean that the hobby is doomed in the long-term. On the contrary, the "collecting" gene is likely to remain strong in the population of future generations. Baseball fans who are fortunate to have a generous supply of disposable income will continue to pour new dollars into our favorite hobby. They may not be in a financial position to do so until their 30s, 40s or beyond, but the vintage market is really driven the 30+ age group anyway.

My greatest fear is the potential failing of paper, not cardboard. With the US government racking up debt levels in the trillions, the risk of a dollar collapse followed by runaway inflation may be a more likely scenario than a baseball card bubble. Cash is king, except during times of hyper-inflation --- then it's better to have the cash invested vs. in the bank, CDs, or the mattress.

That's the fear that keeps me up at nights...that inflation may hit so hard one day that I might not be able to afford to keep adding prize cards to my vintage collection.

Anyway, Happy New Year (...and Happy Collecting)!

[Exhibitman]

Originally Posted by BlueDevil89

That's the fear that keeps me up at nights...that inflation may hit so hard one day that I might not be able to afford to keep adding prize cards to my vintage collection.

Yeah but the cards you already have would be going up in price too. So the key is buy now and buy heavy while inflation is tame and cards are at lower prices than in past years.

Besides, there are better things to be afraid of at night. Like circus clowns.

[Fred]

$5K to burn....

Lets look at the recent history of card price escalation. In about 20 years the value of the cardboard has increased dramatically. The past ten years alone saw huge increases in valuations. IMO to think that prices are going to increase at the same rate would be a bit overly optimistic. But then again, who knows what the future holds. Maybe the number of people that held in an interest in the sport will start to dwindle and thus the number of people intersted in buying these pieces of cardboard will decrease. Basic economics - supply and demand. We all see what happened in the 80's and 90's - the frenzy for rookie cards killed the affordability of cards for the foundation of the hobby - KIDS. With less kids interested there will be less of a demand as these KIDS grow into their adulthood. With so many people getting burned in the "rookie card craze" there will be less people interested in throwing their dollars at this hobby.

Ok, maybe that's a doom and gloom theory but I hope it holds true because if this stuff hits bottom I want to buy every piece that I've always wanted. Why? Because I don't look at this stuff as an investment - I actually enjoy it.

I'm now stepping down from my soap box...

[mintacular]

There are a whole lot more reasons why the hobby has suffered than the rookie card craze of the 80s...In terms of collecting for "joy" only, collecting during my generation is much different than yours in this regard. When I collected, Beckett Price guides arrived each month with up arrows indicating that my '89Griffey UD had just jumped from $40 to $80--thus there was always a cash element to collecting (unfortunately). In short, my generation never fully experienced the pure joy of collecting as previous ones had. Fortunately for me, I learned to appreciate the cards per se admist this speculation time era, especially during later years.

[ctownboy]

bluedevil89,

The BIG difference I see between coins, precious metals, gemstones, artwork and even Ferraris, Lamborghinis and Porsches, is that those OTHER collectibles either have some sort fo inherent value or they have a WORLD WIDE market for them.

American coins STILL have value even if they are badly worn and are barely readable.

Gold and silver have value no matter if they are in ingot form, or are in coins or jewelry.

Precious stones, artwork and automobiles have value because people aroudn the world want those items.

King Farouk of Egypt had a great coin collection and many of them were American rarities.

Wealthy people in India and the Middle East buy precious stones as a store house for value.

Ralph Lauren has a collection of Ferraris, Mercedes and Bugatti's that is valued at over $50 million dollars. If worst came to worst, he could still, at least, DRIVE those automobiles if he had to.

As far as vintage baseball cards, what inherent value or utility do they have? Can you take them to the store and use them as currency? Or to the bank and put them in your savings account?

Does their value fluctuate based on the current price of paper?

Baseball is prety much only followed in North America, Central America, South America, the Caribbean nations and Japan. Other than America, who or where is there a LOT of great baseball card collections?

Tell me, is there a person or people in the Dominican Republic, Venezuela or Japan who have a large and valuable vintage American baseball card collection?

Are the Chinese hoarding cards?

Are the shieks using their oil revenue to amass collections?

The answer to all of these questions, in my opinion, is probably not.

Collecting vintage baseball cards is mostly an American phenomenon and the cards themselves have little or no inherent value, except, of course, if you were hungry and needed something to eat or were cold and needed fuel for a fire.

This is why I say, using my previous opinions and compared to many other collectibles, which have a WORLD WIDE appeal, vintage baseball cards don't have as much upside as many people would like to think and hope they do.

[ctownboy]

Also, as far as my collecition goes, compared to MANY on this board, it isn't valued at very much (probably less than $30,000 dollars) and I haven't spent very much putting it together.

As I said previously, I grew up in a small town in Indiana and there were not very many baseball cards shops in my area. Even if there were, I didn't have a lot of money to spend on cards to begin with.

When I first started collecting cards, in 1977, I would ride my bicycle around town and the country roads and pick up glass soft drink bottles to redeem and aluminum cans to recycle. The money I made from these endeavors, I would take to the small local convenience store and buy packs with. When I was older, I mowed four yards a week to make money.

By the time I was in high school and had a car, I was able to get a "real" job but a LOT of the money I made from that went for gasoline, insurance and maintenance for my car. The savings I had up to that point went into buying some of my friends baseball collections.

When I went to college, I started selling some of my collection to pay bills but also to buy more collections. I bought one large collection which, for a short period of time, allowed me to be a dealer at some small shows in Indianapolis. It was during this time that I started getting REALLY interested in vintage (pre WWII) cards and memorabilia. That was because I had the time to go out and look for that type of stuff and also a little bit of money to actually spend on it when I found it.

Unfortunately, I didn't have nearly enough money because I had to pass up a LOT of good deals I found. Some of the things I had to pass up were four different finds, totaling probably 300, B18 blankets. Included in these were at least five Walter Johnson's and three Ty Cobbs. Total price for all? Less than $1,200 dollars or $4 dollars a blanket. Over 1000 tobacco cards from the 1880's. These were mostly things like fish, chickens, actresses, hold to light playing cards, Dudes and Worlds Smokers but also some N28's including Clarkson, Keefe, Caruthers, Annie Oakley, boxers, pugilists and other sports.

During this time, I also found but couldn't afford, a Kalamazoo Bats card with an ad back $600 dollars), a couple of K Bats team cards (Detroit for about $4,000 each), a Stevens Fire Arms ink blotter in really nice condition (common player, $200 dollars), an 1898 Cincinnati Reds season pass made out of sterling silver ($4,000 dollars), 13 Fatima team cards ($800 dollars), about 20 different Curtis Ireland Candy cards including Ty Cobb plus some E120 American Caramel cards ($1,000 dollars) about 20 different W502's including Ruth and Gehrig ($400 dollars), an E125 American Caramel Honus Wagner ($395 dollars), a small size Honus Wagner decal bat ($1,500 dollars), a Christy Mathewson Fan for a Fan ($3,500 dollars) and numerous other small finds or newer (1950's - 1960's) cards and memorabilia.

All told, for less than $30,000 dollars, I estimate I could have amassed a collection worth over $250,000 dollars today. When I say this, I mean these were items I found at antique stores, malls or shows, paper shows, small auctions and ads I put in newpapers. It was NOT me going to large auction houses and buying items from them or buying items from sports card dealers. In short, they were items I found.

Because I have never had a LOT of money of my own, the MOST I have ever spent on a baseball item was about $300 dollars. That was for a Lou Gehrig autograph model ball glove in bad condition which I turned around and traded for an S81 silk of Ed Walsh.

The first pre-WWII card I ever bought was a T206 Ty Cobb bat off shoulder. I paid $50 dollars for it around 1980. Yes, I overpaid for it but, again, I was from a small town and didn't have access to a lot of dealers or shops. I still own this card. Most of the other T206's (and T205's) I own I bought in one lot at a small auction for $3 dollars a piece.

My 16 Star Player Candy cards I bought at one time (with a Shotwell's Candy football card of Red Grange). I paid between $3 and $5 dollars a piece for each card and later I sold the Red Grange card. So, I have less than $2 dollars invested in each of these 16 cards.

I bought 42 B18 blankets at auction, including a Cobb and Walter Johnson and paid $325 for the whole lot.

I bought eight N172 Old Judge cards at an auction and the lot included an Anson, a Ewing and a Rusie. I paid $800 for everything.

As you can see, my collection was put together on the cheap because 1) I didn't have a lot of money to spend to begin with and 2) I put in many hours looking and and many miles of driving. So, even though I could sell what I own and pay off a lot of my debt, I enjoy what I own and have put in a LOT of work to be able to acquire these pieces.

Plus, if I did actually sell them, because of the rarity of some of these things, I would have a hard time replacing them even if I did have the money to do so.

In conclusion, if the market tanks and my collection becomes worthless, unlike many people, I have NOT put a LOT of money into it and thus will have mostly lost only "paper" profits. Can a "whale" who has spent a couple of hundred thousand dollars buying a T206 Wagner at a major auction say the same thing?

[barrysloate]

Ctownboy- you know, I actually read everything you wrote...that was a very long story.

[ctownboy]

Mr. Sloate,

Thank you for taking the time to read what I wrote. I am sure there are MANY who will just see the length of the post and skip over it. Their time and their decision. All I can do is post my thoughts and opinions and hope that people are interested in what I have to say and that I am making some sort of meaningful contribution to the board.

If I am NOT doing this, then I hope people will let me know (in a fairly nice and/or polite manner) and I will stop or reduce my posting.

When I first went to college, I wanted to major in journalism so that I could, hopefully, become a sports writer. What I soon discovered was the following;

1) I wasn't very good
2) I didn't have a lot of experience or contacts
3) Competition for jobs was tremendous
4) There wasn't a lot of money in it

So, I switched majors.

That being said, I am OFTEN, criticised for being wordy.

[BlueDevil89]

ctownboy,

I'm not worried about the level of card collecting interest in China or the Middle East. Those regions have not supported this hobby and we will not need them to do so in the future. The demand for cards will continue to come from the US economy as it always has.

Why are you worrying if the whales overpay for cards? By their nature, they overpay for things. They don't want to wait for bargains --- they don't have to, they're rich. If they pay top dollar to own things today, and lose interest and dump them for a loss tomorrow, so what. Being rich means never having to cry over a capital-gains-loss write-off.

Yes, pieces of cardboard have no intrinsic value. However, neither do the skills of hitting, fielding, and pitching a stitched piece of horsehide. Yet this simple sport generates billions of dollars of revenue each year because people love the game of baseball and have been passing this passion down from generation to generation for more than 150 years.

[FrankWakefield]

ctown... I was bicycling in 1964, doing the same thing. Coke bottles brought 4 cents, Pepsi and RCs 3 cents. I could find them in ditches along roads... I'd check the ditches on Saturday mornings, and usually get enough bottles to get 6 to 8 packs of cards...

And I read the posts.

An old collector of motor cars once explained to me that the value of Model T's peaked a few years ago, when men reaching retirement with spare money could indulge themselves by buying an old car they'd once had... He said the demand bubble peaked with that demographic. And that as those guys died off, the demand for those cars decreased a bit, and prices fell. (I never drove a Model T as a kid or as a first car, so I'm not as interested in having one as someone who did.) I understand that it isn't the same with ball cards. None of us saw Christy Mathewson pitch. (My great uncle did tell me about catching a train up to Detroit to pick up a car to drive back down to Kentucky. He went to a Tigers game, he told me about seeing Cobb getting a hit off of Walter Johnson, and stealing a base...) So we'll still collect Mathewson cards, and the old cards. But there is a slight effect to card collecting. Will any of you admit that you draw the line at the 20th century, and don't buy Old Judges?

There are collectors out there who draw the line at 1952, because of the big Topps, and collect only forward from there. Those guys don't look at this board. We here aren't a fair sampling of ball card collectors.

The crass, hard-hearted, cynical side of me makes me think that if folks would invest in an education then they'd see that pouring money into a ball card collecton isn't investing. Not even if you want it to be.

[barrysloate]

Ctownboy- a bit wordy perhaps, but a lot of sincerity, something you don't see every day...and please call me Barry.

[bosoxphan]

I feel very comfortable in the demand profile for vintage cards over the next 10-15 years. After that who knows but are there really any investments outside real estate that you can forsee the future 20 years from now? Certainly not company stocks. The companies that dominated 20 years ago are very different than the ones leading the landscape now.

[Exhibitman]

Actually, Frank, I don't care for OJs; I just don't like the aesthetics.

I don't think the doom and gloom predictors or the endless market rise predictors are accurate. It is just silly to think that the hobby will crater (absent of course a total cratering of everything else) and it is equally silly to think that we will see T206 prices double in real terms over the next five years. We are not likely ever to see a National like the 1991 Anaheim show, nor, frankly, would I want to. The market for new shiny crap is 1/10 of what it was, but I have to question whether it ever should have been so crazy in the first place. I recall setting up with vintage cards at local shows next to guys selling 100-card bricks of Griffey, Sheffield and other hot rookies (Gregg Jeffries anyone?) in the early 1990s and knowing that there was something inherently wrong with the money changing hands on those deals. The only thing I've seen that was comparable was the real estate market in 2006-2007. The bottom line for the hobby is that about 70 million tickets are sold to baseball games every season. I do not see that pool of fans withering away. Some of them will read up on the history of the sport, will discover this site, and will become addicts just like us. I also see lots of collectors younger than me (more it seems every year I age) who haven't hit their peak earning years yet. They'll get there and the hobby will go on. Like those frothy heights, the current doldrums are out of whack and will pass as the economy passes through the rough patch. The same thing happened in the early 1980s. I know I'd be buying more cards at today's prices if I had the cash.

30 years is a long time, relatively speaking. It can be an entire career. Cards have a track record over 30 years of being pretty decent alternative investments. Like anything else, of course, there are some elements that are better than others and some that were just dum [sic] in the first place. The two constants, however, have been rarity and HOFers. Rare cards and memorabilia of the top players trump everything else for security and for return on investment.

As far as the question posed in this thread, in all candor, $5,000 is peanuts for investment purposes. At 10% year over year it would not even reach $90,000 in 30 years. And yes, I will take that ROI every day; my point is that $5,000 isn't going to make anyone rich or break anyone's back (if it might, don't risk it--put it in an insured account), so we're not really talking about big, life-altering money. If I was going to plunk $5K into the card market now without any real expertise in cards, I would look to purchase a variety of top-flight HOFers from rarer issues. I would avoid 'fad' things like rookie cards, modern gimmick cards, and high grade plastic (slabs), simply because of their volatility. I'd probably also take a chunk of the money and buy a Ruth check or a Cobb check if I could find a reasonably priced one. I really don't think you could go wrong with that. Now, if you want to gamble, my bet would be to go to the National and hunt raw cards for slabbing. I have spotted and slabbed some really high end commons over the last few years--nothing like pulling a few top slabs from raw commons to make your investment day--but it requires a good eye for what the graders want (education) and some luck and persistence slogging through piles of crap to get the few gems. I don't really consider that investment, though; more like placing a bet on a number in roulette.

[ctownboy]

bluedevil89,

I am not concerned about what the "whales" pay for things or what they collect. However, in the context of this thread, I am trying to point out that "investing" in cards may not be a wise thing to do, no matter what card or set you go after.

When "whales" spend their money, either wisely or follishly, they are creating a demand in the market which I can not do.

With the advent of graded cards, auction houses dedicated to sports memorabilia and the internet, "whales" have an easier time finding things to buy and somewhat more assurance of what they are buying as being authentic. When they spend, all ships elevate with a rising tide. So, if they want to buy rare back T206s and go after them hard, prices go up. Same with Wilson Frank cards or anything else they throw their money at.

The problem is, what happens when they STOP throwing money at a card or a set? What happens if and when they become disinterested in collecting cards and/or memorabilia or they die? Where is the demand going to come from to keep the prices as high as they are or to increase them?

Are foreigners going to magically come into the market? They haven't done so in the last 10 years so why start now?

Are young people going to step in? If so, WHERE are they going to get the money from? T206 Wagners in VG condition go for what, $150,000 or $200,000 thousand dollars. How many people 40 and younger collect cards AND have that type of cash to throw around on ONE card?

How much do common T206's go for now as compared to 10 years ago? How much has the price increase in those cards been because of Baby Boomers using their money to buy cards? WHat happens when they STOP buying cards or they die? WHat happens when the heirs start putting all of that product onto the market?

If the person who started this thread (or their friend) is wanting to know about investing in cards and which one or ones are going to go up in value they also have to be told about the downside. What I have been posting about is the downside I see (and also the risks my mentor has warned me about).

Again, if my collection drops to ZERO value, I will be a little upset BUT I wont panic. That is because I haven't spent a lot to put it together and I didn't start out collecting thinking about making huge bucks and retiring early.

I bought what I liked and what I could afford.

[ctownboy]

Thank you Barry and please call me David.

[bosoxphan]

There will be new whales imo. Know quite a few collectors in their 30's (of which im one) who spend thousands on single cards. Not whales yet but the whales weren't whales in their 30's either.
If future generations is the key to any collectibles market than i can't think of a single one who's going to be around long term. I know very few youngish coin collectors, art collectors, etc.

[rhettyeakley]

I had felt the way alot of the posters here do several years ago when I was in my mid 20's. At that time I really didn't know many people my age collecting vintage cards. However, I am 32 now and I have met so many young collectors between 25-35 years old over the past few years that I am actually fairly optimistic about the future of our little hobby.

I think you may actually see an increase in collectors of vintage cards over the coming years that were born and collected during the "rookie card craze" of the 1980's, people like me. I (along with most of my friends) collected cards and we were really into it, however, like most young people I completely lost interest in cards between ages 18-22 or so as I spent time studying and chasing skirts. But once I began to have an actual income and my "collecting gene" began to kick in again I went back to what I knew (baseball cards) and changed my focus to the things that had actually held their value over the years (vintage). In short, I think many people from my generation could come back as they begin to have discretionary income to play with.

-Rhett

[smtjoy]

Good thread.

I see what you are saying ctownboy but if what you said is true then cards should not have any value right now because of their lack of inherent value and world wide appeal. Not only do they have a strong current value, over the last 10-20 years many have had large monentary increases.

While I centainly don't know how cards will do in the future, I am happy to spend the amount of money I do regardless of what they will do (I fall into group 3, I collect cards but im very aware of the values and flip them when I choose).

I do not think cards make a good investment over the long haul but I believe the same for all collectible and with the investment market in such a mess it really is a unique storm as far as where to put ones investment money.

I do know that I have been collecting my little niche of exhibits and clemente cards for a long while and because of my knowledge in those area I have been able to outpreform the market in general for cards. I know the cards to stay away from that have been going down (PSA 8 topps clementes and common 47-66 exhibits), I pick up cards and flip that are priced too low and I know the cards I am ready to overpay for if they appear on the market (58 kahns, 68 venz topps, 31-32 ruth, 25 terry, 23-24 bottomly, etc).

I guess what I am trying to say is the only way to really do above market is to have an area where you are an expert and you can use that knowledge to your advantage. It does not mean you all always make money but you will cut your losses in a downward market and outpreform in an upward one. Granted I think this advice applies to all collectibles as well as investment markets. Knowledge is king.