What I Don't Understand about Baseball Card Economics

[Peter_Spaeth]

April 4 Probstein sells one for 1025.
April 14 PWCC sells one for 1601.
Ok.

[RollieFingers]

how many people even work at these places? 2 months wait sounds like bad business anyway

[barrysloate]

Originally Posted by Dpeck100

https://www.npr.org/sections/thetwo-...or-155-million


Steve Wynn Picasso. I am sure many are aware or have read about this.

Quote from the article


"The restoration seems to be factored into the price," Beverly Schreiber Jacoby, valuation specialist and president of New York-based BSJ Fine Art, told Bloomberg. "If you didn't know that it has been damaged, you would not see it. It's superbly restored."


If a painting can be fixed without leaving a trail I believe cards can too.

If we reach the point that a baseball card can be restored with such skill that an alteration cannot be detected, then we should all agree that third party grading will become obsolete.

We can then accept that any baseball card that looks Mint is Mint. It won't matter if it was restored, because nobody will know the difference. Maybe this will be the future look of the hobby.

[mark evans]

Due to the inherent subjectivity in grading, I've believed for some time that the hobby is due for a 'correction' to redress the tremendous disparity in values at the high end of the grading scale. Of course, to date, this correction has existed only in my imagination.

But, I now wonder whether the current scandal, assuming well publicized, will trigger or help facilitate such a correction.

[drcy]

Originally Posted by Dpeck100

https://www.npr.org/sections/thetwo-...or-155-million


Steve Wynn Picasso. I am sure many are aware or have read about this.

Quote from the article


"The restoration seems to be factored into the price," Beverly Schreiber Jacoby, valuation specialist and president of New York-based BSJ Fine Art, told Bloomberg. "If you didn't know that it has been damaged, you would not see it. It's superbly restored."


If a painting can be fixed without leaving a trail I believe cards can too.

Restoration to paintings can be and is identifyed. The "you would not see it" is really saying "If you just looked at it when it's hanging on my wall, you wouldn't notice it."

[Dpeck100]

Originally Posted by drcy

Restoration to paintings can be and is identifyed. The "you would not see it" is really saying "If you just looked at it when it's hanging on my wall, you wouldn't notice it."

Gotcha.

Repairing a hole and making it look good sounds impressive to me.

Removing a stain and having the cardboard look the same seems to have happened many times successfully and that is all I am getting at. Perhaps they are not similar enough of examples. Just was trying to convey that significant repair has taken place to items such as this.

[Mark17]

Originally Posted by drcy

I think investors invest in how they're invested.

If it is known there are irrational variations in grading, but the prices still go along a line, they are investing in that line.

Investors have been keeping their heads in the sand about certain issues, because everyone else has been keeping their heads in the sand. Most everyone, including registry mebers with a brain must have already realized the irrational variations and margins in error in the number grades on labels, and many people have already been of the belief that many high-grade cards in holders are altered-- I've been of that belief for many years.

Also, what facts don't affect prices today, doesn't mean they won't affect prices tomorrow.

I think longterm investment in "high grade" vintage cards is a bad idea. Nice looking cards will still fetch good prices, but I don't believe in the future someone will pay $100,000 for a one grade increment knowing the card is likely altered to get to that grade. I, and of course many others, already thought it looney considering the normal variations (margins of error) in assigning a grade itself. Considerations the margins of error and variations is grading, paying $500,000 more for a 10 over a 9 is, in many people's opinion, silly enough, but paying $500,000 for a trimmed edge in someone's basement is beyond the pale of expectations.

My assumption, my opinion, is that the majority of high-grade vintage cards have been altered, or 'conserved' if you prefer. And, if and when that sets in with the hobby as a whole, I assume it will affect pricing.

I think two things are going on with some of the high roller investors:

1. When PSA assigns a card a high grade, that then is what the card "becomes." If you're holding a PSA 9 Mantle, forget what the card looks like; what it is, to the investor, is a PSA 9 Mantle, period. How it got there (overly generous grading, unnoticeable alteration) is basically irrelevant.

2. The PSA population report creates artificial rarity. A seasoned collector will understand why a T206 Doyle in fair condition is quite highly desirable because of its (legitimate) rarity, while an investor will look at a 1967 Card #1 The Champs in PSA 10 and see that only one exists. So, to the investor, that card is unique. If he wants the BEST 1967 set, he must have that specific instance of that card (so his thinking goes.)

I have often thought that PSA, and other TPG, basically have a business model that allows them to create wealth out of thin air. I think collectors who buy cards that are legitimately scarce will, in the long run, have a "portfolio" of "assets" that will grow in value, while those who are paying huge multiples for those 9s and 10s are just inflating a false bubble.

[Dpeck100]

Originally Posted by barrysloate

If we reach the point that a baseball card can be restored with such skill that an alteration cannot be detected, then we should all agree that third party grading will become obsolete.

We can then accept that any baseball card that looks Mint is Mint. It won't matter if it was restored, because nobody will know the difference. Maybe this will be the future look of the hobby.

The reason I always point to the ego driven nature of high grade cards is in my view that is what drives the spread. If you can solve for a humans desire to "have the best" or have something someone else can't then it will change. I just think that human behavior is pretty well established and grading differentiates what started out as very similar items.

There is a big difference between a PSA 8 and a PSA 10. There are much smaller differences between a 9 and a 10. Probably the most liquid card that exists is the 86 Fleer Michael Jordan and under no circumstances will you ever see a card that is an 8 that looks as good as a 10. You easily could see one that is a 9 that does and I am sure some of the 10's started out as a 9. That said there are far too many collectors that get a thrill out of saying they have a 10. This isn't going to change.

[steve B]

Originally Posted by Dpeck100

The reason I always point to the ego driven nature of high grade cards is in my view that is what drives the spread. If you can solve for a humans desire to "have the best" or have something someone else can't then it will change. I just think that human behavior is pretty well established and grading differentiates what started out as very similar items.

There is a big difference between a PSA 8 and a PSA 10. There are much smaller differences between a 9 and a 10. Probably the most liquid card that exists is the 86 Fleer Michael Jordan and under no circumstances will you ever see a card that is an 8 that looks as good as a 10. You easily could see one that is a 9 that does and I am sure some of the 10's started out as a 9. That said there are far too many collectors that get a thrill out of saying they have a 10. This isn't going to change.

This is pretty much it. And exactly what the registry capitalizes on.

And I must say that I'm not immune. I initially sent cards out for grading so they'd be easier to sell someday. (Maybe a good decision, maybe not... )
Along the way I ended up with a couple that are either the highest graded, or really close. I was a bit surprised that it mattered to me once I was there.

[Exhibitman]

As long as there are people out there who will pay a multiple for each grade increment, we have the existing economic model. That's why this scandal won't have an impact broadly across the hobby but will have a deep impact : people who collect lesser condition cards, collect on a budget, etc., have no skin in this game.

[drcy]

Originally Posted by barrysloate

If we reach the point that a baseball card can be restored with such skill that an alteration cannot be detected, then we should all agree that third party grading will become obsolete.

We can then accept that any baseball card that looks Mint is Mint. It won't matter if it was restored, because nobody will know the difference. Maybe this will be the future look of the hobby.

Maybe but I think there will be a substantial difference in pricing. Unlike natural difference in grade, I don't think in the future someone, even someone with lots of money, will pay an extra $500,000 because one card had a very slightly better alteration than another altered card. It's one thing to pay that difference for what is perceived to be natural if very slight difference, but another to pay that difference knowing that the difference is because someone was just slightly better at using a paper cutter.

[drcy]

Originally Posted by Exhibitman

As long as there are people out there who will pay a multiple for each grade increment, we have the existing economic model. That's why this scandal won't have an impact broadly across the hobby but will have a deep impact : people who collect lesser condition cards, collect on a budget, etc., have no skin in this game.

I agree. I've often considered the exorbitant prices paid for numbers on a label to be a different hobby. A world outside of my collecting world.

[Mdmtx]

I actually believe the trimming/alterations could be a major factor in the price escalation. Suppose the trimmer is buying a psa 4 card that he is pretty confidant that he can make a psa 6, will he care what VCP says the value of the 4 is? I doubt it. It becomes a matter of his business model that he win that particular card. I will admit I haven’t looked to see how the prices paid for the pre-altered cards compared to the then market price of the card. My gut tells me they purchased for whatever it took within reason.

Mark

[Rhotchkiss]

Originally Posted by Mdmtx

I actually believe the trimming/alterations could be a major factor in the price escalation. Suppose the trimmer is buying a psa 4 card that he is pretty confidant that he can make a psa 6, will he care what VCP says the value of the 4 is? I doubt it. It becomes a matter of his business model that he win that particular card. I will admit I haven’t looked to see how the prices paid for the pre-altered cards compared to the then market price of the card. My gut tells me they purchased for whatever it took within reason.

Mark

Mark, this is a very interesting point, namely that card doctors are pushing prices bc they are buying cards at high prices thinking they can crack, alter, submit and achieve higher grades which will bring even still higher prices.

For example,
Dr. A sees a great looking 33 Goudey Ruth in a PSA 4 flip. According to VCP, the card is worth approximately $Y. Dr. A feels he could take that PSA 4, crack it, remove a few stains and straighten up one border and get a PSA 6-7, which will make the card worth 4 x $Y. So, Dr. A is willing to 1.5 x VCP pricing on the PSA 4, thereby forever changing the value of a PSA 4 Goudey Ruth.

I am sure this happens. Mark, thanks for providing an angle I have not thought of -- nice to read something new.

Ryan

[Peter_Spaeth]

Originally Posted by Rhotchkiss

Mark, this is a very interesting point, namely that card doctors are pushing prices bc they are buying cards at high prices thinking they can crack, alter, submit and achieve higher grades which will bring even still higher prices.

For example,
Dr. A sees a great looking 33 Goudey Ruth in a PSA 4 flip. According to VCP, the card is worth approximately $Y. Dr. A feels he could take that PSA 4, crack it, remove a few stains and straighten up one border and get a PSA 6-7, which will make the card worth 4 x $Y. So, Dr. A is willing to 1.5 x VCP pricing on the PSA 4, thereby forever changing the value of a PSA 4 Goudey Ruth.

I am sure this happens. Mark, thanks for providing an angle I have not thought of -- nice to read something new.

Ryan

We've discussed this before in explaining some insane prices for cards that look great for the grade with only a trivial flaw. I think clearly you have some card doctor competition for such cards.

[drcy]

If all cards are altered, it also makes one wonder how important the TPA grades will be. If two cards are largely alike and both known to be altered, will it make such a big difference it is graded a 9 or 10. The price valuations may change significantly.

Of course, then, if the cards are altered, they are all "AUTH" the traditional 1-10 grades won't apply.

I'm no lawyer, but it makes me wonder how liable people can be for the general artificial prices across the board in the hobby. I.e. if undiagnosed altered cards, shilling and other illegal trickery inflated prices across the board, how legally responsible those people can be held for contributing to the general fall in prices not just the specific instances the directly participated in. Just a ponderment.

[Rhotchkiss]

Ok, maybe its not a new thought -- to me, in the moment, it was -- but still a great point. Namely, card doctors do all sorts of damage -- direct and collateral. But, at the same time, if you have a very pretty card with a few minor flaws, throw it in a PWCC auction (or really any AH) and hope that a Dr. will pay up to turn your PSA 4 into a PSA 7.

[Peter_Spaeth]

Originally Posted by Rhotchkiss

Ok, maybe its not a new thought -- to me, in the moment, it was -- but still a great point. Namely, card doctors do all sorts of damage -- direct and collateral. But, at the same time, if you have a very pretty card with a few minor flaws, throw it in a PWCC auction (or really any AH) and hope that a Dr. will pay up to turn your PSA 4 into a PSA 7.

And then consign it back to you where you can put a nice sticker on it, write some garbage description, and sell for a new world record. And if it's centered OMG.

[RollieFingers]

Museums hire people to paint/ restore artifacts, old things.
Like world war one medals ,weapons , paraphernalia.
It's still the thing it was, and now better.
How does trimming a card now make it fake or of lesser value? Unless it's proven that a trimmed card eventually starts to peel/fold at the edge , while encased.. what's the big deal?
Unless it's a completely reproduced, digital, computer copy. It's THE card.

[ullmandds]

I totally feel you barry...part of me doesnt get it either?? I don’t think my vintage habits will change much as my collecting focus has been extremely thin lately anyway... and what I am looking for is in such short supply anyway I’m not so sure I really care if it’s altered if its all that is available? For newer high grade stuff I have never understood that market so I really don’t care!

[perezfan]

Originally Posted by RollieFingers

Museums hire people to paint/ restore artifacts, old things.
Like world war one medals ,weapons , paraphernalia.
It's still the thing it was, and now better.
How does trimming a card now make it fake or of lesser value? Unless it's proven that a trimmed card eventually starts to peel/fold at the edge , while encased.. what's the big deal?
Unless it's a completely reproduced, digital, computer copy. It's THE card.

There are potential problems aside from the one you suggested. Cards with creases flattened out don’t always stay that way. Often, the creases will re-appear with time.

And added color (to conceal flaws) can also change with time. Certain Chemicals used for “cleaning” can eventually erode the paper as time goes on. So the card you see in the slab very well might not be the card you see 5 years from now.

[drcy]

Originally Posted by RollieFingers

Museums hire people to paint/ restore artifacts, old things.
Like world war one medals ,weapons , paraphernalia.
It's still the thing it was, and now better.
How does trimming a card now make it fake or of lesser value? Unless it's proven that a trimmed card eventually starts to peel/fold at the edge , while encased.. what's the big deal?
Unless it's a completely reproduced, digital, computer copy. It's THE card.

Because the pricing of baseball cards is in part based on the condition of the card in it's natural, unaltered state. It isn't just "what it is" that is part of the value, but the natural condition.

Or, to answer it another way, because altering a card reduces the value. Condition-wise, an altered card ranks below the lowest number grade (1). It literally doesn't even get a number, though AUTH is quasi 0.

[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.

[RollieFingers]

Originally Posted by perezfan

There are potential problems aside from the one you suggested. Cards with creases flattened out don’t always stay that way. Often, the creases will re-appear with time.

And added color (to conceal flaws) can also change with time. Certain Chemicals used for “cleaning” can eventually erode the paper as time goes on. So the card you see in the slab very well might not be the card you see 5 years from now.

sure, chemicals etc. i agree. trimming, im sort of ok about/with

[ALBB]

Don't know about most guys..but Im sure glad I collect lower grade cards..and enjoy the hell out of it !!

[JollyElm]

If anyone is waiting for the media to 'catch up' and start investigating the topic at hand, don't hold your breath. The news moves too fast and things just quickly disappear. Remember the airplane that vanished in the Pacific? POOF!! Gone. How about those soccer kids trapped in an underwater cave. POOF!! Gone. We commemorated the 75th anniversary of D-Day only four days ago and POOF!! Gone. Not a word about it in the news today. The helicopter that crashed in NYC today? I give it until late tomorrow afternoon and POOF!! The story will be gone.

[perezfan]

And one day, Mastro/Legendary was poof... gone as well.

I’m holding out hope for the sake of our hobby.

[swarmee]

Originally Posted by RollieFingers

sure, chemicals etc. i agree. trimming, im sort of ok about/with

Then you are in the vast minority. And you can buy altered cards for $100 that most people would pay $1,000 in NM condition. Congrats. Just don't go trying to sell them as unaltered.

[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.

[Fballguy]

Originally Posted by perezfan

And added color (to conceal flaws) can also change with time. Certain Chemicals used for “cleaning” can eventually erode the paper as time goes on. So the card you see in the slab very well might not be the card you see 5 years from now.

Who wouldn't want a PSA 10 Dorian Gray rookie card?

[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.

[steve B]

Originally Posted by RollieFingers

sure, chemicals etc. i agree. trimming, im sort of ok about/with

You can't be serious...

[brianp-beme]

Originally Posted by Dpeck100

PWCC has 8,282 listings running right now.

From what I can tell it appears it is 100% business as usual.

Legendary continued on the elevated Mastro path for awhile, but as time went on their auctions became less impressive and seemed to have weaker results as a result of the cloud of suspicion of wrongdoing that surrounded the operation.

I figure the same will happen to PWCC...more and more collectors will lose confidence in their business, and their business will suffer, even if no criminal charges are levied upon them.

BrianP(arker)-beme

[70ToppsFanatic]

Originally Posted by barrysloate

David- I think PSA will deem most of these cards good after review for a very obvious reason.

This will not happen. Any TPG that did something like that would then become complicit in perpetuating a fraud and put their officers at risk of criminal charges assuming that they detect alteration doing the review but say otherwise.

More likely is a strategy to minimize the number of reviews done by tactics such as:

1) directing people with items that are potentially tainted to 3rd parties that they have some leverage over such that the 3rd party provides refunds, the suspected/tainted itema are returned to the TPG for review and any item found to be tainted is destroyed. The benefit to the 3rd party is that they don’t find themselves the subjects of wire fraud and mail fraud investigations based on complaints and evidence coming from the TPG.

2) not providing an itemized “recall” list

3) giving reviews the lowest priority for service due to the high demand of backlogged orders

[seanofjapan]

If we are using economic analysis, then I think its worth discussing whether PSA is "too big to fail" within the card collecting market. I think it is and that understanding that fact is the key to explaining why the top end of the market looks so stupid to the rest of us.

When economists use the phrase "too big to fail" they refer to an institution (like a bank) whose failure (bankruptcy) would be a disaster for the economy or a market as a whole. Because of its position, other actors will always step in to bail it out no matter how bad a situation it is in (like the US government bailout of Ford and GM a few years ago).

PSA is kind of in the same situation vis a vis the hobby - too many people with too much money are too invested in PSA (not directly as shareholders, but in a broader sense of owning and putting value in PSA graded cards) to let it disappear no matter how egregious a scandal it gets itself into.

The value of so many cards at the top end of the hobby is determined now more or less solely by the PSA number on the top of the stupid slabs they come in. If the brand were irreparably tarnished or the company went bankrupt (ending the registry, turning off the tap of newly graded PSA cards coming into the market, etc) then that would pose a serious financial threat to a lot of very financially powerful people within the hobby, who are all thus incentivized to prop PSA up by whatever means they have at their disposal and ensure that it survives whatever scandal it is going through at a given time point (in most cases all this requires is that they simply ignore the scandals and keep on buying PSA cards as if nothing was wrong).

Other grading companies aren't at anywhere near the same scale as PSA and would probably be allowed to fail since the value of top end cards in Beckett or SCG holders isn't anywhere near as tied to the holder as it is with PSA cards. Its sort of like PSA has a never ending supply of get out of jail free cards while its competitors don't.

Its a huge problem for the hobby IMHO.

[perezfan]

If that's really the case, then I just want to be done. This money-fueled corruption is just too depressing. What a ridiculous hobby this has become, where unseen microscopic differences lead to outright fraud that commands tens of thousands of dollars.

Some probably thought Mastro was too big to fail as well. They were by far the #1 Auction House during their prolonged peak, but that came to a rather abrupt end. Perhaps not an apples-to-apples comparison, but there is at least some precedent.

[seanofjapan]

Originally Posted by perezfan

If that's really the case, then I just want to be done. This money-fueled corruption is just too depressing. What a ridiculous hobby this has become, where unseen microscopic differences lead to outright fraud that commands tens of thousands of dollars.

Some probably thought Mastro was too big to fail as well. They were by far the #1 Auction House during their prolonged peak, but that came to a rather abrupt end. Perhaps not an apples-to-apples comparison, but there is at least some precedent.

I don't think Mastro,as an auction house, was in the same category as PSA, a grader in terms of a "too big to fail" analysis. If an auction house fails then collectors can pretty easily shift to another one to buy/sell high end cards, so it doesn't have the same positioning. There isn't a replacement for PSA, which draws most of its importance simply based on the fact that so many existing high end cards are in PSA holders (which no new entrant can hope to replicate) waiting in the wings like that.

An example might illustrate the point. If you've got a PSA 10 1952 Topps Mickey Mantle that you paid $500,000 for (or whatever they go for these days), what happens to the value of that if PSA goes under?

The difficulty is in separating the value of the card from the value of the PSA number attached to it. If PSA no longer exists, the PSA number isn't going to be worth as much because the trust (real or imagined) that it was based on no longer exists, and the infrastructure that supported it (the registry, etc) also no longer exists. So the value of that PSA number has nowhere to go but down (independent of the value of the card).

This wouldn't be a problem if the "PSA 10" (or 9, 8 etc) premium wasn't too big, but its now astronomical. A mere single step down that grade hierarchy can reduce a top end card's value by a factor of 10 or more, which is going to be tens or hundreds of thousands of dollars in a lot of cases. Switching it from a PSA holder to an SCG one is likewise going to put a lot of money at risk, since the market doesn't value SCG as highly and its unlikely that they would be able to step in to replace a defunct PSA (in part because of the likely negative fallout towards graders in general from a PSA collapse).

So if you've got that PSA 10 1952 Mantle and you hear about a scandal involving PSA, you've got a huge incentive to ignore it and carry on as usual. And every other collector wealthy enough to have high end cards like that is playing the same game with the same incentives. All of them will collectively have millions, maybe hundreds of millions, to lose from a PSA collapse and nothing to gain. So their incentive, oddly enough, might be not just to carry on as usual, but even to double down on their PSA card investment.

Its why the top end of the hobby looks so stupid to those of us with more modest means. Wealthy card collectors are likely extremely paranoid about anything happening to PSA (I would be if I was one) because so much of the value of their own collections is now based on the stupid slabs their cards are in rather than the cards themselves. And they are the people with the resources available to keep the market winds blowing in PSAs favor no matter what the scandal.

[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.

[benjulmag]

Originally Posted by seanofjapan

If we are using economic analysis, then I think its worth discussing whether PSA is "too big to fail" within the card collecting market. I think it is and that understanding that fact is the key to explaining why the top end of the market looks so stupid to the rest of us.

When economists use the phrase "too big to fail" they refer to an institution (like a bank) whose failure (bankruptcy) would be a disaster for the economy or a market as a whole. Because of its position, other actors will always step in to bail it out no matter how bad a situation it is in (like the US government bailout of Ford and GM a few years ago).

PSA is kind of in the same situation vis a vis the hobby - too many people with too much money are too invested in PSA (not directly as shareholders, but in a broader sense of owning and putting value in PSA graded cards) to let it disappear no matter how egregious a scandal it gets itself into.

The value of so many cards at the top end of the hobby is determined now more or less solely by the PSA number on the top of the stupid slabs they come in. If the brand were irreparably tarnished or the company went bankrupt (ending the registry, turning off the tap of newly graded PSA cards coming into the market, etc) then that would pose a serious financial threat to a lot of very financially powerful people within the hobby, who are all thus incentivized to prop PSA up by whatever means they have at their disposal and ensure that it survives whatever scandal it is going through at a given time point (in most cases all this requires is that they simply ignore the scandals and keep on buying PSA cards as if nothing was wrong).

Other grading companies aren't at anywhere near the same scale as PSA and would probably be allowed to fail since the value of top end cards in Beckett or SCG holders isn't anywhere near as tied to the holder as it is with PSA cards. Its sort of like PSA has a never ending supply of get out of jail free cards while its competitors don't.

Its a huge problem for the hobby IMHO.

I respectfully disagree PSA is too big to fail.

The value of a PSA slabbed card is not the slab, it is the card. Yes, I get it that a PSA slabbed card might sell for more than an SGC slabbed card, but assuming the card was properly evaluated, the asset still exists. In contrast, if a big car company fails, so many jobs both within the failed company as well as the companies that constitute that company's supply chain will be lost. People will be out of work, and communities will suffer greatly.

Bubbles built on fiction eventually burst. We saw that in the housing market where securitized mortgage prices built on vacant or grossly overpriced realty eventually fell to the level the value of the collateralized assets dictated they fall to.

IMO the value of high grade PSA slabbed vintage cards are similarly built on overpriced assets -- altered baseball cards that pass as unaltered. For this bubble to burst all that is needed is enough publicity to come out for it to be widespread knowledge OUTSIDE THIS BOARD that the majority (yes, I mean majority) of 8s, 9s and 10s are altered. What do you have then? Are you saying the private club of wealthy people who are invested in these cards will continue to sell them amongst themselves and that will sustain the prices? Don't you think at least some of them purchased the cards believing they were as advertised, and will not continue to purchase them as it nothing happened? And don't you think new people will be hesitant to join a club whose membership is predicated on purchasing altered baseball cards? And what about entities such as PWCC who look at cards as assets and are forerunners to major funds invested in such cards. I would think they would be taking one huge legal risk investing in such assets if it is general knowledge the assets are tainted. Should the fund collapse, I can only imagine the lawsuits that will follow, and the ensuing outcry for criminal accountability.

And let's talk about bragging rights. I display all my 9s and 10s in a display case prominently displayed in my home where my cocktail party guests can ooh and ahh at how great they are and how important I must be. Then one of my guests in a loud voice asks my opinion about that recent newspaper article claiming most of these cards are altered and worth a fraction of what they sold for. It sort of reminds me of that scene in the movie "Dave" where the fired chief of staff was gathered in his living room with his powerful friends to watch Dave deliver his speech to Congress. Then when Dave exposes who was behind the scam (the former chief of staff) and the camera returns to the guy's living room, all the high-powered guests have left and former chief of staff is sitting all alone with this shell-shocked look on his face.

IMO the sooner this bubble bursts the better. I'm not saying there will not be fallout and some wealthy (and powerful) people will not be hurt. But such people were hurt (a lot worse) when other bubbles burst, and the fact they were did not prevent those bubbles from bursting.

[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.

[swarmee]

Originally Posted by seanofjapan

Other grading companies aren't at anywhere near the same scale as PSA and would probably be allowed to fail since the value of top end cards in Beckett or SCG holders isn't anywhere near as tied to the holder as it is with PSA cards.

Maybe not in the vintage realm, but Beckett most certainly gets exponential growth curve value improvements on modern cards. You should read this thread:
https://www.blowoutforums.com/showthread.php?t=1297069

[seanofjapan]

Originally Posted by benjulmag

I respectfully disagree PSA is too big to fail.

The value of a PSA slabbed card is not the slab, it is the card. Yes, I get it that a PSA slabbed card might sell for more than an SGC slabbed card, but assuming the card was properly evaluated, the asset still exists. In contrast, if a big car company fails, so many jobs both within the failed company as well as the companies that constitute that company's supply chain will be lost. People will be out of work, and communities will suffer greatly.

Bubbles built on fiction eventually burst. We saw that in the housing market where securitized mortgage prices built on vacant or grossly overpriced realty eventually fell to the level the value of the collateralized assets dictated they fall to.

IMO the value of high grade PSA slabbed vintage cards are similarly built on overpriced assets -- altered baseball cards that pass as unaltered. For this bubble to burst all that is needed is enough publicity to come out for it to be widespread knowledge OUTSIDE THIS BOARD that the majority (yes, I mean majority) of 8s, 9s and 10s are altered. What do you have then? Are you saying the private club of wealthy people who are invested in these cards will continue to sell them amongst themselves and that will sustain the prices? Don't you think at least some of them purchased the cards believing they were as advertised, and will not continue to purchase them as it nothing happened? And don't you think new people will be hesitant to join a club whose membership is predicated on purchasing altered baseball cards? And what about entities such as PWCC who look at cards at assets and are forerunners to major funds invested in such cards. I would think they would be taking one huge legal risk investing in such assets if it is general knowledge the assets are tainted. Should the fund collapse, I can only imagine the lawsuits that will follow, and the ensuing outcry for criminal accountability.

And let's talk about bragging rights. I display all my 9s and 10s in a display case prominently displayed in my home where my cocktail party guests can ooh and ahh at how great they are and how important I must be. Then one of my guests in a loud voice asks my opinion about that recent newspaper article claiming most of these cards are altered and worth a fraction of what they sold for. It sort of reminds me of that scene in the movie "Dave" where the fired chief of staff was gathered in his living room with his powerful friends to watch Dave deliver his speech to Congress. Then when Dave exposes who was behind the scam (the former chief of staff) and the camera returns to the guy's living room, all the high-powered guests have left and former chief of staff is sitting all alone with this shell-shocked look on his face.

IMO the sooner this bubble bursts the better. I'm not saying there will not be fallout and some wealthy (and powerful) people will not be hurt. But such people were hurt (a lot worse) when other bubbles burst, and the fact they were did not prevent those bubbles from bursting.

Hey, we are on the same page, I agree with you: it is a bubble and I have no problem with it bursting. By “too big to fail” I didn’t mean to literally say PSA can’t ever go under. I just meant that if you want to understand why it seems to defy gravity despite the constant scandals, complaints and sheer insanity of the market for 9s and 10s, you need to analyze its position in the market from that perspective. The wealthy end of the market has a lot invested in PSA stuff and a lot to lose if they go under. If a really massive scandal or other event breaks the spell, then of course they’ll cut their losses and jump ship. But short of that, they have tied their fortunes to the PSA bandwagon and are pretty incentivized to keep things the way they are, no matter how insane it looks to the rest of us.

[packs]

If you invest in something it'll never be fun. Why is everyone worried about prices anyway? Aren't we all collectors? If your collection was suddenly worthless, would it keep you from buying more cards?

[benjulmag]

Originally Posted by seanofjapan

Hey, we are on the same page, I agree with you: it is a bubble and I have no problem with it bursting. By “too big to fail” I didn’t mean to literally say PSA can’t ever go under. I just meant that if you want to understand why it seems to defy gravity despite the constant scandals, complaints and sheer insanity of the market for 9s and 10s, you need to analyze its position in the market from that perspective. The wealthy end of the market has a lot invested in PSA stuff and a lot to lose if they go under. If a really massive scandal or other event breaks the spell, then of course they’ll cut their losses and jump ship. But short of that, they have tied their fortunes to the PSA bandwagon and are pretty incentivized to keep things the way they are, no matter how insane it looks to the rest of us.

I don't disagree with what you said. The only twist I would put on it is that because IMO the bubble is built on a fiction (unaltered high grade slabbed cards), the bubble inevitably must burst. You are correct there are powerful forces incentivized to keep it going and to prevent it from bursting. And that could very well prolong how long it will take. But as we have seen with other bubbles, eventually the forces of fact will overcome the forces of fiction.

[bnorth]

Originally Posted by steve B

That the vast majority of people - even the "smart" ones with degrees etc. are quite often stupid.

Originally Posted by Aquarian Sports Cards

The market is so easily manipulated that there's very little disincentive to a deep pocket investor with, shall we say, moral flexibility.

These 2 posts describe baseball card economics perfectly. It is fun to watch the pump and dump manipulation that goes on in the forums.

[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.