[griffon512]

this is a long entry, but please bear with me and give input on the suggestions i make below on alleviating price manipulation. i realize this is a topic that has been written about ad nauseam, but hopefully i’m presenting a slightly different angle and have received positive feedback from the largest card auction house on ebay. your input/feedback will give us a much better probability of making these suggestions a reality across all the major auction houses on ebay.

the next couple of paragraphs give context for what i believe is fueling much higher prices in segments of the market, and the other paragraphs are focused on a change that as a community we can facilitate that i and a number of others believe will result in meaningfully less manipulation of prices. skip the next couple of paragraphs and jump to the paragraph that starts "with this context in mind" if you get bored. the last part of the post is my feedback after a conversation with brent, the head of pwcc.

one of the areas most discussed on this board is manipulation of prices through shill bidding. it is conventional wisdom that the sentences handed out to bill mastro and doug allen has done little to curb the amount of shill bidding. the huge appreciation in high grade cards of hall of famers/iconic players across all sports is likely the combination of new money coming into the hobby (“investors”) and price manipulation, causing these cards to be re-valued much higher. for those that haven’t participated by buying these cards there is a sense of guilt for having missed the boat and the presumption that the appreciation will continue, fueling them to participate in reaching for prices they find ridiculous. this reinforces that the inflated prices will at least be maintained…and they will until the marginal buyer stops reaching and supply starts to overwhelm demand. having spent over 15 years on wall street as a research analyst and money manager, this is the same dynamic i have seen in every bubble.

for what it is worth, i think the current rapid increase in prices in parts of the card market has the same source as what has fueled other asset classes, like the stock market over the last several years. the source is monetary policy of the federal reserve in this country and global central banks. since 2009 the federal reserve has literally printed trillions of dollars from thin air. they use this newly created money to purchase bonds in the open market, and in so doing increase the prices of these bonds (which lowers their yield and interest rate on newly issued bonds). the federal reserve justifies printing trillions of dollars from thin air because they believe lower interest rates would help people re-finance their homes at lower rates, increase asset prices (e.g., stock market), and spur corporate investments given the lower cost of borrowing. the downside is this policy is inflationary over time (hurting poor people the most), leads to a wealth gap (the rich are getting richer because they have the most exposure to risky assets like stocks while much of the middle class and poor people don’t benefit or are hurt as their costs of living go up without the same degree of exposure to risky assets that are inflating), and fuels speculative bubbles. the speculative bubbles are driven by safer alternatives of investing one’s assets (e.g., buying government bonds) yielding next to nothing because interest rates are so low.

this causes a search for yield, i.e., higher returns, which compels people to buy stocks instead of bonds. the monetary policies undertaken to reflate the economy following the “great recession” are unprecedented both in this country and the rest of the world. numerous bubbles have popped up as a result of this dynamic, including, in my view, parts of the high end card market. this doesn’t feel much different to me than what i saw in the tech bubble in the late 90’s. in fact, a number of the new “investors” in the card market are silicon valley and wall street workers who are rotating money out of other assets and/or putting new money to work. as others have written in this forum, investment buyers are a meaningful percentage of the bidders chasing cards and it doesn’t take a lot of them to impact prices, especially when “collectors” start to follow their lead. sorry if this explanation of the context for what’s happening in the card market was longwinded or redundant for many of you. just wanted to set the table for the more important part of the post that follows.

with this context in mind, the question still remains: what is the most practical way to significantly alleviate the degree of price manipulation in high end card market of many hofers/iconic figures, where the kindle for the fire is everything I described above? the simplest, practical to implement, and timely potential change that came to mind has to do with bid retractions on ebay. the major auction houses on ebay are setting record prices every day among the cards i mentioned before. in looking at the bid history on ebay of many of these cards there is a consistent theme: a very high number of bid retractions over the last 6 months (ebay discloses the number over this timeframe) from some of the major bidders.

i think this is more indicative of a problem than % of bid activity with a given seller since a number of “investors” will follow just one or two ebay auctions houses because of time constraints, reliability of their service, etc. in my view, there are two major reasons for a high number of bid retractions. the first is when someone gets cold feet following a bid – call it potential buyer’s remorse or buyers remorse. the “oh sh_t” feeling we get when we bite off more than we can chew in money terms. the second -- and much more common – reason for a bid retraction is the bid was made solely to increase the price (shill bid) with an ulterior motive. my strong suggestion – which we need support from other board members to get strength from numbers/affect change – is that in the future the major ebay auction houses do not allow bidding from those who have above a certain of bid retractions over the last 6 months. i think the number should be low (like 2), but it’s open to debate. i routinely see the number of bid retractions over 6 months be greater than 20. that is inexcusable in almost every scenario i can think of.

in the middle of an auction i was bidding on -- where one of the bidders had around 20 bid retractions and following other auctions on ebay from different sellers that appeared to be shilled -- i got fed up and put a call into pwcc to notify them of what i was seeing in one of their auctions. after talking to one other person at pwcc who was helpful and friendly, he made the suggestion that i talk to brent. brent took the initiative and called me shortly after. i want to preface this by saying that although i post infrequently, i read the board often and find the vitriole directed at various parties and individuals unnecessary and counterproductive to a shared goal: having a healthy hobby with a lot of players where price is determined by bidding that is not manipulated.

if the feedback from my post devolves into personal attacks it will compromise this goal. i have consistently had good experiences buying from pwcc in terms of their customer service and quality of their offering. i had a very productive and informative conversation with brent, which was focused on bid retractions as a form of price manipulation. brent informed me that they have individuals on staff that are frequently citing instances of abuse to ebay. the most important subject that came out of the conversation is that pwcc, unbeknownst to me, is going to come out with new policies in the near future that, among other issues addressed, specifically aim to alleviate the bid retraction problem. i was going to write this post anyway, but brent reinforced that he wanted as much feedback as possible (again, not ad hominem attacks) from our community on what they can do to better address the issues affecting us. this feedback will allow them to shape their policies. one additional note, even if these high bid retractions bidders are not allowed to bid, they can start new accounts although brett informed me there are restrictions on their ability to bid and there are obvious other issues with "starting over." still, it's a potential problem. what can be done to alleviate this issue?

there will always be some manipulation in any asset class because money is involved, but there are steps we can take to make things better. please post your feedback on the bid retraction idea and/or other steps! thanks, james