Stock market + alt assets plunging = ??? to your collecting or "investing"

[MoreToppsPlease]

Originally Posted by hermanotarjeta

The same rationale could work for someone who paid $10,000 for a 2016 bowman chrome auto Tatis PSA 10.

If you're rich, why lose $7000 and dump it at $3k, just hold on and pray he doesn't get hurt again.

Or if you're rich and paid $500 for a PSA 10, why sell at $3k when you've seen them at $10k. Maybe you have 10 copies and want to secure some profits I suppose? But you really don't need the money so why not let it ride?

However, the ex-Mcdonald's employee who paid $10k for it hoping to flip it for $50k doesn't have the time to sit on it, he's gotta dump it because he needs to pay off his cell phone bill, credit card bills from getting into too many breaks, etc. and he doesn't want to put the uni back on, you know, the one with the golden arches.

Yes, the card “alt-investment market” is like scratch-off lottery tickets in that it disproportionately affects the least wealthy in a negative way. The card alt-market winds up being an extra tax rather than another source of income for them.

Granted, the market has always included those that prey on the most vulnerable or clueless…but there’s been the most number of clueless in the card/alt-investment market in history these last couple of years. Lots of preening “big shots” who (mostly) understand how the card market works know how to line those people up like snake oil salesmen using the FOMO and their own greed against them to make profit.

[rwperu34]

Originally Posted by smanzari

I know when downturns happen, everyone yells "the sky is falling" but my eBay has NEVER been busier. I'm guessing people are still buying cards, just focusing on low-end ones

This is the only comment I read, but felt it worthy to respond before I reply to the OP.

I have experienced the exact opposite! My mid and high end cards are selling strong, it is the low dollar cards that are missing.

[tyrith]

Originally Posted by hermanotarjeta

I guess it depends when the rich folks bought their cards - maybe it doesn't even matter.

If they paid $750,000 for the psa 10 jordan, I really can't imagine why they would dump it at $250,000 and take a half a million dollar loss, especially if they could just keep the jordan for the long-term.

If they had purchased that jordan for $75,000, why would they sell it for $250,000 when they saw that it went up to $750,000? Shouldn't they have sold it at the peak? I would imagine they would be willing to wait till it gets higher again.

That's why I don't understand why the rich would want to liquidate their cards at the "market lows" - it's horrible timing and I bet those kind of rich people don't stay rich for long.

Primary reason to take a loss would be for tax reasons - to offset a large capital gain from some other investment. On a half million dollar loss, if there's an equal gain to offset it, you could easily be talking about freeing up $100K+ that would otherwise go to the feds. It's not worth holding on to the card at that point if you don't have a real expectation that it will go up.

[jbscott56]

NOT a promotion - I want to chime in with my thoughts on this topic... I covered this in my recent newsletter below

https://mintcondition.substack.com/p...may-2-2022?s=r

[hermanotarjeta]

Originally Posted by tyrith

Primary reason to take a loss would be for tax reasons - to offset a large capital gain from some other investment. On a half million dollar loss, if there's an equal gain to offset it, you could easily be talking about freeing up $100K+ that would otherwise go to the feds. It's not worth holding on to the card at that point if you don't have a real expectation that it will go up.

Overpaying for sports cards as a hedge for profits in equities or real estate profits? That’s an interesting concept.

But if you have major capital losses this year due to crypto/stock losses, there would be no reason to take an additional half a million hit unless you really need the money.

[fabiani12333]

Originally Posted by pewe

Reminder: just a thought starter. But I think the effect might be different than you imply. It may be more demand side, than supply side dumping (but some of both possible).

Let me paint the picture of Joe (fictional, but based loosely on people I understand got in real estate trouble in 2008, and are similar to folks now I hear debating some moves in their collecting).

Joe is a mid-40s yr old successful partner at a law firm (or a exec for a tech company or partner at a consulting firm or dental practice owner etc) earning $1mm/year (pre tax). He’s been enjoying years of nice personal cash flow on the back of a strong market. He’s got a wife and 3 kids who are still a few years from college, has a primary home and secondary vacation property, both with substantial mortgages (rates are low! Take advantage). Likes to lease the latest car. And the family is used to skiing every winter from a rental house (the vacation property is at the beach). His kids go to private school and do tons of extracurriculars. He and wife like to get away and they pay regularly for babysitting/part time nanny. He tithes regularly to chis church, and donates to his alma maters and kids schools. His life expenses, while a lot, only use up 80-90% of the post tax income.

Some friends got him back into collecting, as things heated up. He re-caught the bug he had as a kid in the 80s. Enjoys picking up all the cards he couldn’t afford as a kid. Having $$ to actually rip wax. It snowballs from spending $5k/yr to $100k+ over a few years.

The market crashes. His stable income dropped as the partner distribution halves. His stock market investments are off 50%. He’s going to have to sell assets to cover life expenses, or cut back on some expenses. Or both.

The family resists any pullback on their spend.

And he has a $100k/year collecting habit. And maybe $500k+ in “eBay value” of cards after appreciation.

What does he do???

Okay, so you're saying this hypothetical person is being forced to sell his cards as a financial necessity. Obviously, they and their family have overextended themselves because well-off and wealthy households normally don't have to sell off personal belongings just to pay for life expenses -- cutting back on extravagant expenses should be enough.

So if they can't pay for their hobby anymore, they'll automatically stop buying and ripping product. Then they'll look to pare back or completely liquidate their collection. If I were in their situation, I would pare back my collection and retain the most desired cards that will have long-term value.

[Donkaylove]

card show sales minimal this month, money tight. DA card world awful anniversary sale proves lack of interest at these prices and low end modern in general.............

[fabiani12333]

Originally Posted by Phoneboy

This thread is interesting to me.

A few random thoughts without quoting and replying...

The Jordan rookie hit $738k for exactly one weekend.

I agree with Premium's thoughts on improving your situation, but it takes a certain amount of intelligence, work ethic, and luck....at least it did for me. In 1995, I was 26 years old, working at a video store making $5.75/hour, and living with my parents. I convinced a guy to take a chance on me. If not for him, I wouldn't be where I am now.

Pewe's narrative about the lawyer is spot on. While he might sell, he doesn't have to sell to affect prices. If you have enough people deploying cash elsewhere, you see a drop in prices. Does he totally quit buying? Does he quit buying modern and stick with vintage? Personally, I've stopped buying anything. The cash that I have is going into the stock market. I'm not a lawyer or an investment banker, but I dumped a ton of money into cards over the past 3 years.

On the Rolex market, I have friends who play in this space. They have connections with jewelers, and are flipping Rolex watches as a side hustle. It's crazy to see these prices. $200,000 for a platinum Daytona?

That's a given. Prices have already dropped from the peak of the bubble. But if there's a sell-off, prices will tank.

And what would trigger a sell-off? Financial necessity and the expectation of continued lower prices.

[hermanotarjeta]

Originally Posted by Donkaylove

card show sales minimal this month, money tight. DA card world awful anniversary sale proves lack of interest at these prices and low end modern in general.............

Yeah, when was the last time the big retailers actually had a sale without jacking prices up then giving you a discount for the illusion of a sale?

This is the clearest objective evidence that sales are declining from their current levels. The big guys don’t just give away product for cheap if box prices only go up.

Since the pandemic pump, the big retailers have been holding product hostage versus the breakers, and us individual retail guys are the ones who got hurt.

Seriously, if you have a significant percentage of your net worth in sports cards, you need to position yourself to be safe financially, particularly you need to take into consideration if you lose your job.

Sports collectibles aren’t going to save you if your income is zero.

The layoffs are coming.

[KhalDrogo]

A box of 2018 Prizm BKB is still $4370. To break even, you basically need to hit Luka color and have it gem, or hit an Orange or better Trae.

Wax prices still need to be cut in half or more.

[hermanotarjeta]

Originally Posted by KhalDrogo

A box of 2018 Prizm BKB is still $4370. To break even, you basically need to hit Luka color and have it gem, or hit an Orange or better Trae.

Wax prices still need to be cut in half or more.

The inflated price of wax has never been primarily related to yield, it’s primarily related to breakers. You always need to divide the box prices by 30 to calculate the random team buy in. At current prices, it would be $140 per spot, which for degenerate gamblers is chump change. These boxes used to be close to $8000, which is nearing $300 per spot. That price scared some people away, especially when you are only getting a base chrome Tatum for your Celtics spot. Anything less than $100 per spot is an autopay spot for many degenerates.

[cardsin47]

Originally Posted by KhalDrogo

A box of 2018 Prizm BKB is still $4370. To break even, you basically need to hit Luka color and have it gem, or hit an Orange or better Trae.

Wax prices still need to be cut in half or more.

Since that’s not gonna’ happen, pricey wax should not be viewed as a financially viable way to get Singles - it has to remain sealed

[KhalDrogo]

Originally Posted by hermanotarjeta

The inflated price of wax has never been primarily related to yield, it’s primarily related to breakers. You always need to divide the box prices by 30 to calculate the random team buy in. At current prices, it would be $140 per spot, which for degenerate gamblers is chump change. These boxes used to be close to $8000, which is nearing $300 per spot. That price scared some people away, especially when you are only getting a base chrome Tatum for your Celtics spot. Anything less than $100 per spot is an autopay spot for many degenerates.

Hasn’t always been that way though. 95% of breakers should die off this year. That will help to start normalizing wax.

Originally Posted by cardsin47

Since that’s not gonna’ happen, pricey wax should not be viewed as a financially viable way to get Singles - it has to remain sealed

Wax needs to be opened for the hobby cycle to continue. When singles don’t show up, people lose interest.

[hermanotarjeta]

Originally Posted by KhalDrogo

Hasn’t always been that way though. 95% of breakers should die off this year. That will help to start normalizing wax.


Wax needs to be opened for the hobby cycle to continue. When singles don’t show up, people lose interest.

Yes, the hope is that as more people lose jobs and are laid off, the degenerate gambler population will decline and many of the marginal breakers will go under as well.

Unfortunately, the more established breakers will exist with the few remaining wealthy degenerates, and the big retail guys will always hold those premium wax prices hostage.

Again, it's the retail collector that gets screwed in the cross fire.

The big breakers will break regardless the cost. In fact, I bet the big breakers prefer their case prices are cheaper so that more degenerates can participate.

It will be interesting to see how this all plays out.

[pewe]

Originally Posted by KhalDrogo

A box of 2018 Prizm BKB is still $4370. To break even, you basically need to hit Luka color and have it gem, or hit an Orange or better Trae.

Wax prices still need to be cut in half or more.

If ‘18 is an indication, I think you are right. Distributors (including folks like BO who have verticals of unopened pallets of product) will probably start to try to move product (multiple vintages) “at cost” themselves or through liquidators. The question: will distributors go below cost?


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[tyrith]

Originally Posted by hermanotarjeta

Overpaying for sports cards as a hedge for profits in equities or real estate profits? That’s an interesting concept.

But if you have major capital losses this year due to crypto/stock losses, there would be no reason to take an additional half a million hit unless you really need the money.

It's not as much a hedge, more if a wealthy person had big sports cards because they wanted them but was okay with moving on. And it's true - the optimum time to make that play would have been in the 2021 dip, because most people with heavy market exposure had huge tax gains in 2021 and won't this year. But there are still businesses that get sold, real estate deals that get sold, security positions from a long time ago that get sold, etc.

[pewe]

Originally Posted by fabiani12333

Okay, so you're saying this hypothetical person is being forced to sell his cards as a financial necessity. Obviously, they and their family have overextended themselves because well-off and wealthy households normally don't have to sell off personal belongings just to pay for life expenses -- cutting back on extravagant expenses should be enough.

So if they can't pay for their hobby anymore, they'll automatically stop buying and ripping product. Then they'll look to pair back or completely liquidate their collection. If I were in their situation, I would pair back my collection and retain the most desired cards that will have long-term value.

Well, I think in the case I laid out this hypothetical “wealthy” buyer first stops spending $100k/year on cards. AND maybe sells some cards. But I’d anticipate that is a bit more modest for some (many?) at the start.


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[anusinha]

retail products this year stink, aside from the top 10% of products like prizm megas, most stuff isnt even selling well at msrp. granted msrp is a bit higher than most years.

[rwperu34]

My thoughts, observations, and plans re: the OP;

I have been out of it for nearly two full weeks. The first week was completely out of it (I'm talking 100%) by plan. I shut down my store and stopped buying 7-10 days before. The second week was not planned and I was around, selling but not buying and not following prices other than my sales.

When I left 12 days ago the S&P 500 was roughly 4200. By the time I got back it was hovering around 3800 before bouncing back to 4000. That's down from a peak of 4800 (Jan) or 4600 (Apr). Those drops are significant.

My baseball card sales have not slowed, however. My $ per day in May is right in line with April...which was higher than any other month of my short career. This despite my 10 day (from selling) break. Part of that is Yordan Alvarez being en fuego, but that's also how this thing works. Somebody is always hot. I'm operating from the POV that cards are flat at worst over those two weeks.

I have been saying for years the thing that is going to derail the bull market in sports cards is a recession. We are staring that in the face, IMO. The Fed is still running behind in cooling off the economy. Inflation is a big ol' nothing burger to me (a symptom of the problem rather than the problem), but overall spending might be too high. I'd like to see the trendline from 1983 rather than 2019, but there is no doubt it's running hot compared to the latter trend. If The Fed is using a more recent trendline, they are going to tighten until they go too far. The question is can they engineer a soft landing? I'm doubtful. They are simply too slow to react. The Fed is going to overcorrect like it always does.

I think if you're looking for similarities from the past, the 1970s would be a better guide than the 21st century. If we have one, this will be more of a supply shock recession than one of inadequate demand (even though The Fed cooling off demand will be what ultimately triggers it!). One big difference between now and then however is the abundance of capital. In the 70s capital was scarce, today it is abundant. Count this as a point in favor of a soft(ish) landing.

How will these views change my behavior? I've been targeting Nov. 2022 prices since Nov. 2021. My Price Index was up 20% from Nov. 2021 to mid Apr. Even in the boom years prices didn't rise much from Apr. to Nov. To me that represents sort of a ceiling for Nov. 2022 prices (ie Nov. 2021 +20%). Maybe we're a month behind (ie hit peak in May instead of April) due to the lockout, but that doesn't change the overall outlook.

I think the really big question is how much "forced" selling do we see? Could it be situation where we see super low sales volume but prices are maintained for the most part? Or will it be like the PSA deluge where people just auction off everything? Obviously both of those scenarios lead to very different outcomes.

The PSA deluge is not going to stop. Ever. We have likely not hit the bottom for PSA 10 prices of common stuff. Even if we mantain strong demand. When demand wanes and prices really plunge, will that eventually drag down everything else (#'d, wax, BCA...etc)?

In any case, I don't see any harm in stockpiling cash for the offseason. I'm not going to take a discount (relative to current market) on sales though. So not panic. Just build up and look to have a strong 2023, one way or the other.

[cardsin47]

Originally Posted by KhalDrogo

Wax needs to be opened for the hobby cycle to continue. When singles don’t show up, people lose interest.

Correct - but as Wax gets more and more expensive, the window to open it between release and when it still makes sense to open gets smaller and smaller

[ConcordXI]

Originally Posted by hermanotarjeta

Yeah, when was the last time the big retailers actually had a sale without jacking prices up then giving you a discount for the illusion of a sale?

This is the clearest objective evidence that sales are declining from their current levels. The big guys don’t just give away product for cheap if box prices only go up.

Since the pandemic pump, the big retailers have been holding product hostage versus the breakers, and us individual retail guys are the ones who got hurt.

Seriously, if you have a significant percentage of your net worth in sports cards, you need to position yourself to be safe financially, particularly you need to take into consideration if you lose your job.

Sports collectibles aren’t going to save you if your income is zero.

The layoffs are coming.

I have been tracking prices on the...BO competitor...and this is their first sale in a while that did not have an increase in the "usual" price beforehand. For Basketball product (which I pay the most attention to) many of the 2020-21 boxes are at the lowest prices they have been since release and are barely moving. They are still way above what I am willing to pay for 95% of them (the only decent deal were Mosaic Hangers at $25) but the "mark up then mark down" dynamic wasn't there this time.

I don't mean that to disagree with you, but instead that it's yet another indication that your overall points are accurate.

[hermanotarjeta]

Originally Posted by tyrith

It's not as much a hedge, more if a wealthy person had big sports cards because they wanted them but was okay with moving on. And it's true - the optimum time to make that play would have been in the 2021 dip, because most people with heavy market exposure had huge tax gains in 2021 and won't this year. But there are still businesses that get sold, real estate deals that get sold, security positions from a long time ago that get sold, etc.

I would argue from the emotional aspect that a wealthy person would rather dump/max out tax loss harvesting by getting rid of really failed stocks like Peloton, Beyond Meat, etc. prior to disposing of their prized sportscard.

If it was so easy for a purchaser to dump their valued card possession like they would a failed stock, I really question how much financial support sports cards really have. That would be a bad sign for people who want to view sports cards as stable investments.

It's easier theoretically and more liquid to dump something intangible like stocks versus something you store under your pillow at night, like a six-figure jordan rookie.

If that high-end card market continues to plummet like you say is possible, watch out below. Once sports cards gets treated like equities, even 90% dumps are possible.

You say you will be there to buy those dumps, but even $75,000 is a lot of money when you've got no money and got no job.

[pewe]

Originally Posted by cardsin47

Correct - but as Wax gets more and more expensive, the window to open it between release and when it still makes sense to open gets smaller and smaller

Well… until wax price craters like it did in ‘18.

At some point the distributors and retailers will be forced to flush multiple vintages of inventory at cost again.

Although, even at those cratered prices, it didn’t make ripping the wax very worthwhile


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[JeremyNick]

Originally Posted by pewe

Reminder: just a thought starter. But I think the effect might be different than you imply. It may be more demand side, than supply side dumping (but some of both possible).

Let me paint the picture of Joe (fictional, but based loosely on people I understand got in real estate trouble in 2008, and are similar to folks now I hear debating some moves in their collecting).

Joe is a mid-40s yr old successful partner at a law firm (or a exec for a tech company or partner at a consulting firm or dental practice owner etc) earning $1mm/year (pre tax). He’s been enjoying years of nice personal cash flow on the back of a strong market. He’s got a wife and 3 kids who are still a few years from college, has a primary home and secondary vacation property, both with substantial mortgages (rates are low! Take advantage). Likes to lease the latest car. And the family is used to skiing every winter from a rental house (the vacation property is at the beach). His kids go to private school and do tons of extracurriculars. He and wife like to get away and they pay regularly for babysitting/part time nanny. He tithes regularly to chis church, and donates to his alma maters and kids schools. His life expenses, while a lot, only use up 80-90% of the post tax income.

Some friends got him back into collecting, as things heated up. He re-caught the bug he had as a kid in the 80s. Enjoys picking up all the cards he couldn’t afford as a kid. Having $$ to actually rip wax. It snowballs from spending $5k/yr to $100k+ over a few years.

The market crashes. His stable income dropped as the partner distribution halves. His stock market investments are off 50%. He’s going to have to sell assets to cover life expenses, or cut back on some expenses. Or both.

The family resists any pullback on their spend.

And he has a $100k/year collecting habit. And maybe $500k+ in “eBay value” of cards after appreciation.

What does he do???

I really appreciate the post.

After reading through this, my initial thought is to fire the dog poop guy or go to every other week. It will also help the kids agility training to dodge the dookie piles.

The rest will work itself out.

[js0000001]

Originally Posted by pewe

Well… until wax price craters like it did in ‘18.

At some point the distributors and retailers will be forced to flush multiple vintages of inventory at cost again.

Although, even at those cratered prices, it didn’t make ripping the wax very worthwhile


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I opened so many inexpensive 2018 Update blaster cases. Should have kept them sealed!