We are only at the beginning of this market boom....

[auctionjmm]

Originally Posted by pewe

Yikes! Big red flag here

Buying on credit / using leverage is the precursor to a crash, so I would be worried about signals like this.


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It depends on the end game. Shows like "Shark Tank" exist because most successful businesses need credit to get started. In the sports card forums people talk about credit as if it's shameful but if you intend to grow a big business whether you are doing e-commerce or opening a card shop, that initial investment is crucial to making it all work. Maybe the kid maxing out 3 credit cards to buy basketball wax is heading for trouble but for a dealer whose in it for the long haul, credit can be an amazing thing.

[pewe]

Originally Posted by auctionjmm

It depends on the end game. Shows like "Shark Tank" exist because most successful businesses need credit to get started. In the sports card forums people talk about credit as if it's shameful but if you intend to grow a big business whether you are doing e-commerce or opening a card shop, that initial investment is crucial to making it all work. Maybe the kid maxing out 3 credit cards to buy basketball wax is heading for trouble but for a dealer whose in it for the long haul, credit can be an amazing thing.

I don’t believe “Shark Tank” hosts are generally financing the businesses on that show with debt...


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[auctionjmm]

Originally Posted by pewe

I don’t believe “Shark Tank” hosts are generally financing the businesses on that show with debt...


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There are plenty of debt deals on the show or hybrid deals where half is equity and half is debt. But that's one show. The premise that startup businesses loan money to launch is pretty commonplace. I'd bet Blowout Cards had debt on their books in the early days. It's rare that someone starts a business with their own money. It definitely happens but I think the majority of businesses are getting loans, even if it's friends and family, in order to launch their business.

[Snakeonia]

Originally Posted by MoreToppsPlease

Agreed, gradual, natural, predictable increases (or decreases) are best and healthiest.

Subjective, large peaks and valleys are dangerous. Sudden peaks are especially dangerous and smack of manipulation and/or newbie involvement.

Gradual predictable increases are all but a fairytale now a days. Cards are being traded like stocks and commodities. I wish it was slow and steady but also watched some cards stagnant for YEARS. Tim Duncan PSA 10 chrome rc. Was a 1-200 dollar card for the last couple decades. Should have been higher but thats just an opinion. Now more collectors involved and I think they overshot the price. The market will correct, dunno when but ebb and flow. But if a card has 100s of sales a a price point that is the new price and what the market has decided regardless of our wishes or opinions.


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[joe73]

Originally Posted by auctionjmm

There are plenty of debt deals on the show or hybrid deals where half is equity and half is debt. But that's one show. The premise that startup businesses loan money to launch is pretty commonplace. I'd bet Blowout Cards had debt on their books in the early days. It's rare that someone starts a business with their own money. It definitely happens but I think the majority of businesses are getting loans, even if it's friends and family, in order to launch their business.

Being a professional middleman based on raiding Targets isn't much of a business, though. Nobody in his right mind finances that as a long-term enterprise.

[dbpsooner]

Originally Posted by auctionjmm

There are plenty of debt deals on the show or hybrid deals where half is equity and half is debt. But that's one show. The premise that startup businesses loan money to launch is pretty commonplace. I'd bet Blowout Cards had debt on their books in the early days. It's rare that someone starts a business with their own money. It definitely happens but I think the majority of businesses are getting loans, even if it's friends and family, in order to launch their business.

Are there companies out there that haven't taken on debt in this low interest rate market? If not, what are they waiting for? Almost all companies carry debt as it is healthy when used appropriately.

[auctionjmm]

Originally Posted by joe73

Being a professional middleman based on raiding Targets isn't much of a business, though. Nobody in his right mind finances that as a long-term enterprise.

I agree with that, but that's a small segment of the overall market. Most of the dealers I know don't even bother with wax. They are buying large collections and grading/re-selling. If a 100k deal comes around that they know they can sell for 200k, they'd borrow the money in a heartbeat.

[auctionjmm]

Originally Posted by dbpsooner

Are there companies out there that haven't taken on debt in this low interest rate market? If not, what are they waiting for? Almost all companies carry debt as it is healthy when used appropriately.

Yep, exactly. That's why I don't necessarily consider debt to be a red flag. But debt in the wrong hands can certainly be a red flag. I'd hope that with the market being where it's at, even the casual seller using debt to fund purchases should be able to get out of it pretty quickly.

[joe73]

Originally Posted by auctionjmm

Yep, exactly. That's why I don't necessarily consider debt to be a red flag. But debt in the wrong hands can certainly be a red flag. I'd hope that with the market being where it's at, even the casual seller using debt to fund purchases should be able to get out of it pretty quickly.

That's not possible, or else we'd never have downturns. A lot of people will get burned.

[crownand]

Originally Posted by joe73

That's not possible, or else we'd never have downturns. A lot of people will get burned.

I think this time is different though. We are in a real boom! You just have to enjoy the trend. A great time to be alive!

[joe73]

Originally Posted by crownand

I think this time is different though.

Ha. Can't remember who said it, but when you hear the above, that's when you're supposed to run. Maybe Michael Bury?

[Boredlawyer]

Originally Posted by joe73

Ha. Can't remember who said it, but when you hear the above, that's when you're supposed to run. Maybe Michael Bury?

"Baseball cards will be in every IRA."

Between Pokemon cards, coins, stamps, and cards, my IRA is apparently going to filled with a lot of crap with no utility.

[pewe]

Originally Posted by auctionjmm

There are plenty of debt deals on the show or hybrid deals where half is equity and half is debt. But that's one show. The premise that startup businesses loan money to launch is pretty commonplace. I'd bet Blowout Cards had debt on their books in the early days. It's rare that someone starts a business with their own money. It definitely happens but I think the majority of businesses are getting loans, even if it's friends and family, in order to launch their business.

Is that right? I don’t watch the show. But color me surprised, given venture debt at the scale of those small businesses is a really frustrating and low MOIC vs effort. It’s probable they are doing it for the show.

Now secured bank loans for working capital, with a 4-5:1 equity to debt ratio... sure you can get SBIC offers.

But they probably wouldn’t let you use those loans for the type of things we are talking about on here: buying speculative assets is usually explicitly prohibited by most of those agreements.

Folks like The Fantastic Store (Blowout Cards) can use debt different, though, because buying wax from distributors would be considered inventory. But think they can’t buy anything with the express purpose of being an “investment” asset.

And you can get AR backed loans, too, so folks like the TPG would be able to offer credit to group sub.


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[auctionjmm]

Originally Posted by joe73

That's not possible, or else we'd never have downturns. A lot of people will get burned.

Of course it's possible. If a guy swipes his credit card at Target on Monday and sells his inventory in a short amount of time, he will be fine.

It's not like the market will "crash" in 24 hours and suddenly a stash of Hoops Premium Stock goes to 0 by morning.

The ones who will get burned are likely the ones who can afford to get burned. It will be the guys who grade thousands of cards and at some point the market crashes while they still have pending orders at PSA. Those guys may take a loss on the latter portion of their investment but if they've been grading/reselling these past 3 years they are already way head.

I have a TON of inventory right now and have not moved it as quickly as I'd like because I also work full time. But at least I know it's all funded already with the 90k+ I've made in the last 2 years. If my house burned down tomorrow morning it would suck, but I wouldn't be hurting. I've already made my money. A lot of folks will be in that position.

[pewe]

Originally Posted by auctionjmm

Yep, exactly. That's why I don't necessarily consider debt to be a red flag. But debt in the wrong hands can certainly be a red flag. I'd hope that with the market being where it's at, even the casual seller using debt to fund purchases should be able to get out of it pretty quickly.

It depends on use of debt. The debt you are talking about would normally never be allowed to underwrite speculative assets. Most debt people take on is working capital, or secured vs. accounts receivable or other hard assets.

It is often against debt covenants (I believe SBIC requires it) to use the debt to buy investment assets


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[joe73]

Originally Posted by auctionjmm

Of course it's possible. If a guy swipes his credit card at Target on Monday and sells his inventory in a short amount of time, he will be fine.

It's not like the market will "crash" in 24 hours and suddenly a stash of Hoops Premium Stock goes to 0 by morning.

The ones who will get burned are likely the ones who can afford to get burned. It will be the guys who grade thousands of cards and at some point the market crashes while they still have pending orders at PSA. Those guys may take a loss on the latter portion of their investment but if they've been grading/reselling these past 3 years they are already way head.

I have a TON of inventory right now and have not moved it as quickly as I'd like because I also work full time. But at least I know it's all funded already with the 90k+ I've made in the last 2 years. If my house burned down tomorrow morning it would suck, but I wouldn't be hurting. I've already made my money. A lot of folks will be in that position.

This is silly. The "ones who can afford to get burned" are almost never the ones who get burned when the party is over. The banks didn't lose in 2008. The bus drivers who bought $400,000 homes with $0 down lost.

[ThoseBackPages]

thanks joe

[pewe]

Originally Posted by auctionjmm

Yep, exactly. That's why I don't necessarily consider debt to be a red flag. But debt in the wrong hands can certainly be a red flag. I'd hope that with the market being where it's at, even the casual seller using debt to fund purchases should be able to get out of it pretty quickly.

The issue is not debt in the wrong hands, it’s whether it becomes a meaningful source of the capital funding purchases of speculative assets.

The problem is when some stress forces a tipping point of sellers listing faster than buyers have appetite and prices decline. Those on margin are forced to sell more to cover their margin, and it accelerates the supply with unchanged demand.

And at some point demand realizes they are at risk of catching a falling knife and demand falls in the face of further escalating supply.

This becomes the momentum and death spiral of a crash.

But as long as most cards are backed by cash, then owners generally just try to hold out if prices stagnate. And the market sees limited price erosion. Just very little turnover. The market “freezes up”.


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[auctionjmm]

Originally Posted by joe73

This is silly. The "ones who can afford to get burned" are almost never the ones who get burned when the party is over. The banks didn't lose in 2008. The bus drivers who bought $400,000 homes with $0 down lost.

Ok. So put together a profile of someone who is spending hundreds of thousands of dollars on cards with no intention of reselling in the short term and then we can have a conversation. I'm not aware of anyone who is spending large amounts of money on cards with a 10 year vision. The money being spent now is being turned in a few months. You've gotta prove that there are people out there who are heavily vested in cards with no intent to sell anything short term.

[ThoseBackPages]

jim, joe hates everything

[MoreToppsPlease]

Originally Posted by Snakeonia

Gradual predictable increases are all but a fairytale now a days. Cards are being traded like stocks and commodities. I wish it was slow and steady but also watched some cards stagnant for YEARS. Tim Duncan PSA 10 chrome rc. Was a 1-200 dollar card for the last couple decades. Should have been higher but thats just an opinion. Now more collectors involved and I think they overshot the price. The market will correct, dunno when but ebb and flow. But if a card has 100s of sales a a price point that is the new price and what the market has decided regardless of our wishes or opinions.


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What you’re describing isn’t collecting though. Flippers, investors and scalpers don’t have loyalty like collectors do.

[joe73]

Originally Posted by auctionjmm

Ok. So put together a profile of someone who is spending hundreds of thousands of dollars on cards with no intention of reselling in the short term and then we can have a conversation. I'm not aware of anyone who is spending large amounts of money on cards with a 10 year vision. The money being spent now is being turned in a few months. You've gotta prove that there are people out there who are heavily vested in cards with no intent to sell anything short term.

Huh? People who buy sports card with no intention to sell for 10 years are called collectors. You're arguing that all of the flippers will magically be able to get out while breaking even or at a minimal loss, which makes no sense. That's not how corrections ever work.

[MoreToppsPlease]

Originally Posted by auctionjmm

Of course it's possible. If a guy swipes his credit card at Target on Monday and sells his inventory in a short amount of time, he will be fine.

It's not like the market will "crash" in 24 hours and suddenly a stash of Hoops Premium Stock goes to 0 by morning.

The ones who will get burned are likely the ones who can afford to get burned. It will be the guys who grade thousands of cards and at some point the market crashes while they still have pending orders at PSA. Those guys may take a loss on the latter portion of their investment but if they've been grading/reselling these past 3 years they are already way head.

I have a TON of inventory right now and have not moved it as quickly as I'd like because I also work full time. But at least I know it's all funded already with the 90k+ I've made in the last 2 years. If my house burned down tomorrow morning it would suck, but I wouldn't be hurting. I've already made my money. A lot of folks will be in that position.

Big fish always come out ahead. Only the big fish.

[auctionjmm]

Originally Posted by joe73

This is silly. The "ones who can afford to get burned" are almost never the ones who get burned when the party is over. The banks didn't lose in 2008. The bus drivers who bought $400,000 homes with $0 down lost.

And to that point, that is completely different than what is happening in cards. Homeowners in 2008 were not speculative flippers. Joe the bus driver was an honest man who was talked into believing he could own his dream home with 0 down. For every one homeowner with a 400k asset, there are 400 card buyers with 1k assets. If/when the market crashes, those losses will be spread among so many people that for most it won't really hurt them. The guys lining up at Target with their red baskets are not going to be bankrupt if their little wax collection crashes. The true number of people who are actually harmed by a sports card market crash will be so small it will be insignificant.

[auctionjmm]

Originally Posted by joe73

Huh? People who buy sports card with no intention to sell for 10 years are called collectors. You're arguing that all of the flippers will magically be able to get out while breaking even or at a minimal loss, which makes no sense. That's not how corrections ever work.

See my post above. It makes total sense because that money is spread out over so many people that very few people are going to lose large amounts of money. They may lose a few grand in the end but it's not the same as people who lost homes. There are very few flippers sitting on 400k stacks of product.