Condition, Condition, Rarity, Rarity

There is little doubt that prices of many "collectible" baseball cards and memorabilia (we can not speak to autographs, equipment or uniforms) have
dropped by 15-40% since the financial crisis which was fueled by the collapse of Lehman Brothers.

In the 30+ months since the crisis began, we have tracked selected lots in over nearly 80 auctions (all major houses).

While prices have generally dropped, truly rare offerings, cards that are new to the market, and ultra high grade type card examples have more than held their own.

Whether one looks high grade Kalamazoo Bats, 19th Century team cabinets,
E cards in a grade of 7 or above, Boston Garters, J=K, and post cards with exceptionally rare team or player images, the prices have been strong. In most cases the prices were strong regardless of the auctioneer. Especially worth noting are the three groups of Negro League and PCL post cards that drew record prices in auctions where only a very small percentage of the hobby participated.

As in most collectible fields, the best of the best holds it own, even in a declining market. There are several reasons for this (1) rarity (2) the market is targeted to the top 5% of the collecting community (3) Wealthy collectors are more selective in their buying habits.

We look forward to the forth coming Bill Mastro collection and the REA auction in the Spring of 2011.

In the interim, look for these trends to continue. We predict that many auction houses will reduce the number of auctions and limit auction size

It just does not make sense to have 20% of the items remain unsold especially when the opening bids are between $100-$500. Catalog auctions
will lose business back to E Bay unless they refine their strategy.

We welcome your comments, as well as any extraordinary items that you may have for sale.

Bruce Dorskind
America's Toughest Want List
bdorskind@dorskindgroup.com

[barrysloate]

Bruce- I pretty much agree with all of your points. The very rarest material will continue to attract the wealthiest collectors, while the more available cards and memorabilia will remain soft for the foreseeable future. In a sense, there will be two hobbies- one for the rich, another for everyone else. I don't want to get too political, but that's the American landscape in the 21st century- a very small percentage of the population controls most of the wealth. So it would stand to reason they will be the ones fighting for the best material.

[Peter_Spaeth]

From my perspective, as a buyer of what Barry calls more available cards, what has happened is that many of the usual sources of such cards simply are not willing to sell them for anything close to reasonable prices, so as a result the cards are less available. I have struggled to find cards that in other times I could have quickly acquired, because I can't find them.

[barrysloate]

Peter- I think the majority of dealers are upside down on much of their inventory, and in order for them to offer cards at current levels they would be forced to take a loss. Many are not willing to do that, which is understandable.

[steve B]

The willingness to take a loss and the need to take a loss is what killed much modern stuff. Why pay full price when it will all be sold below cost in ayear or two at the latest?

But I don't think many people will take a loss on really good prewar cards. And when the economy comes back things could get very crazy.

A collectibles dealer I know gave me a few bits of great advice
You can make money on anything if you can buy it right.
Become a good guesser, if you guess right much more often than you guess wrong you'll do fine.
Don't dwell on or hang onto your mistakes
If something is good you can't pay too much, just too soon.

making all that work is tougher than it sounds, but it's sound thinking in the long run.

Steve B

[barrysloate]

Those are good points Steve, but it may take the economy a long time to come back. And somewhere in that time frame dealers need a cash flow of some kind. So each one has to make a personal decision on whether or not to sell something at a loss.

And not all prewar cards are great. Many are rather common- T206's of course fall into that category- so it's tough to generalize whether someone should sell or hold a given item.

[Jim VB]

Originally Posted by barrysloate

Peter- I think the majority of dealers are upside down on much of their inventory, and in order for them to offer cards at current levels they would be forced to take a loss. Many are not willing to do that, which is understandable.

From a business point of view, there is a fallacy with that way of thinking, prevalent as it may be.

Refusing to sell at true market prices often means refusing to sell at all. If this is the approach a business opts to take. They better have sufficient reserves to endure an extended period of reduced cash flow.

The money invested in inventory is already spent. It's gone, as far as the seller is concerned. Their profit results from continually buying, and reselling inventory. If their inventory is over valued, good business sense says to take the markdown necessary to move the goods, take whatever revenue they get, and buy more at the currently depressed prices.

Now I can fully understand if a collector, and sometimes seller, prefers not to take a "markdown," but full time dealers are different. A collector can just choose to sit it out and wait for an upturn. A true dealer will find it harder to do so.

Our hobby is filled with people who straddle that line between dealer and collector. Ebay makes it easy for anyone to open a store, with minimal overhead and expense, and become a dealer. A couple of months of reduced sales don't really pressure them that much. But anyone who relies on card sales as their prime source of income will react differently.

[barrysloate]

Good analysis Jim, and I'll admit that during this year I've had to sell a lot of my material at a loss. I try to keep those losses to a minimum, and I try to sell items that aren't too rare and won't be missed. But there are plenty of people who just refuse to sell anything at a loss. I agree it's not a great strategy, but I don't assume that every baseball card dealer is an economic wiz.

[Matthew H]

Jim's post is right on the money. When prices started to inflate, dealers made inflated profits from their inventory. I seriously doubt they continued to sell at lower prices because they bought their inventory when prices were lower. Now there is an adjustment, that "extra" profit has to come from somewhere. If you purchased cards only when prices were inflated, sorry about your luck, that money is coming from you.

If you decide to sit on the cards, put them back in your personal collection and enjoy them that way. It may be a long time before the upturn your waiting for comes along. Just like how it may be a long time before the average two bedroom one bath condo in Los Angeles sells for 850K again.

[Exhibitman]

Pretty accurate statements, folks. I'd add IMO that overall rarity has been the key factor in holding value, much more than condition. If you stocked up on rare cards before the crash-stuff you just don't see regardless of condition--you will be pleasantly surprised if you sell them now. If you loaded up on the flavor of the month mainstream cards, you are going to take a hit selling them now. If you fall into the latter category and are treating your selling as a business, you might consider liquidating the biggest loss items before year end to net the losses against your taxable gains for the year. Might help cushion the blow of the loss some to know that the tax man is your partner in it.

[calvindog]

Originally Posted by Jim VB

From a business point of view, there is a fallacy with that way of thinking, prevalent as it may be.

Refusing to sell at true market prices often means refusing to sell at all. If this is the approach a business opts to take. They better have sufficient reserves to endure an extended period of reduced cash flow.

The money invested in inventory is already spent. It's gone, as far as the seller is concerned. Their profit results from continually buying, and reselling inventory. If their inventory is over valued, good business sense says to take the markdown necessary to move the goods, take whatever revenue they get, and buy more at the currently depressed prices.

Now I can fully understand if a collector, and sometimes seller, prefers not to take a "markdown," but full time dealers are different. A collector can just choose to sit it out and wait for an upturn. A true dealer will find it harder to do so.

Our hobby is filled with people who straddle that line between dealer and collector. Ebay makes it easy for anyone to open a store, with minimal overhead and expense, and become a dealer. A couple of months of reduced sales don't really pressure them that much. But anyone who relies on card sales as their prime source of income will react differently.

This is dead-on accurate. Holding one's inventory at the expense of purchasing new inventory makes no sense -- but have you been to a show recently? It's somewhat hard to find the economists under all those t-shirts with mustard stains.

[HRBAKER]

Originally Posted by calvindog

This is dead-on accurate. Holding one's inventory at the expense of purchasing new inventory makes no sense -- but have you been to a show recently? It's somewhat hard to find the economists under all those t-shirts with mustard stains.

There's a good line hiding here about mustard stains and "trickle-down" economics but I can't put my finger on it. Even in good times I never spied too many economists behind the tables at a card show. In many retail businesses that are inventory driven much of their profit is sitting in inventory build, if you are sitting on what this thread is calling common prewar stuff there is really only one way to pull out the profit and that is mark it down. If you don't need to that's another story.

[tbob]

Originally Posted by Matthew H

Jim's post is right on the money. When prices started to inflate, dealers made inflated profits from their inventory. I seriously doubt they continued to sell at lower prices because they bought their inventory when prices were lower. Now there is an adjustment, that "extra" profit has to come from somewhere. If you purchased cards only when prices were inflated, sorry about your luck, that money is coming from you.

If you decide to sit on the cards, put them back in your personal collection and enjoy them that way. It may be a long time before the upturn your waiting for comes along. Just like how it may be a long time before the average two bedroom one bath condo in Los Angeles sells for 850K again.

I agree with Jim and Matt. Well said.

[tbob]

Originally Posted by Yankeefan51

As in most collectible fields, the best of the best holds it own, even in a declining market. There are several reasons for this (1) rarity (2) the market is targeted to the top 5% of the collecting community (3) Wealthy collectors are more selective in their buying habits.
Bruce Dorskind

Bruce- I agree with a lot of what you have said in this thread but I disagree with this statement. Although some of the people paying nose bleed prices are collector/inverstors, many are simply investors. I don't consider these individuals "the top 5% of the collecting community." Also, I disagree, emphatically, with the comment that wealthy collectors are more selective in their buying habits. Some of the most selective collectors are those with budgets and knowledge of card prices and card issues, not just guys with plenty of money to throw around and buy whatever strikes their fancy. I guess that's where you and I will always respectfully disagree: I believe the "top collectors" are those who share their knowledge, give back to the hobby, who collect the pieces of cardboard for more than just the value of the cards and enjoy and cherish the hobby and not just who has "the most toys and the most money."
tbob

[steve B]

Excellent points Everyone especially Barry and Jim.

Knowing which stuff to take a loss on is a key thing in the points the guy gave me. He's also very good at networking to turn stuff quickly, sometimes before he gets it back to the shop.

If I was more of a dealer, I'd probably bail on easily replaced inventory like lower grade common t206s. But I'd also be buying the truly difficult stuff and expect to keep it for a few years. I wish I had the money right now for some of the really great stuff. But there's a budget, and I've never gone into debt for cards. If I can't buy it with cash on hand I just can't buy it. So for me there's no pressure to sell either for profit or loss.

The problem a lot of dealers get into aside from common startup mistakes like not setting aside tax money is not having enough money to work with.

At one shop I used to go to the owner gave me the rundown on what finished him off just before he closed. Started with about 50K, and bought inventory. Like nearly anything issued that year, plus a couple colections of older stuff. About a month in, the better older cards were gone and the "new" stuff wasn't new anymore So the remaining got spent for more new cards. Next couple months the new cards were bought on credit. And he still bought every product offered. Only a few had any lasting saleability. At about the 1 year mark he had no money, big inventory, and no available credit. So the below cost sales began. Had to do that to raise money for the next batch of stuff. And older cards were out of the question. At about the 2 year mark he had no money, nearly no inventory, and a load of debt.
And that was without taking a paycheck during the 2 years.

Cards or any sort of collectibles is a tough business. I've a lot of respect for the abilities of anyone that manages to survive let alone make an actual living at it.

[Leon]

There are some really good points in this thread. As a collector AND flipper/dealer I can safely say it's not as easy as buying a card for x and selling it for xx. If it were that easy everyone would do it. I commonly lose money on cards that I have had in inventory. Even on new sales I only get it right most of the times and lose money on many cards. It's part of the deal. I don't mind losing on some as long as when it's said and done, as posted above, I make more good buys than bad ones. Anything not rare or in high demand, that was bought from 1-4 yrs ago, is probably upside down in value today, and maybe a lot!! I quoted a card on the BST yesterday for $565....I paid $800 for it three years ago. That's the way the cookie crumbles. regards

[Doug]

Originally Posted by barrysloate

Good analysis Jim, and I'll admit that during this year I've had to sell a lot of my material at a loss. I try to keep those losses to a minimum, and I try to sell items that aren't too rare and won't be missed. But there are plenty of people who just refuse to sell anything at a loss. I agree it's not a great strategy, but I don't assume that every baseball card dealer is an economic wiz.

I'm sure no economics expert. I thought buy high, sell low was the strategy all of these years!

[Exhibitman]

I figure that the money I spend on cards is in lieu of golfing or other diversions, so as long as I don't need to have the cash flow, I won't sell off stuff at a loss. I'd rather just have the cards to enjoy.

[sportscardpete]

Originally Posted by Exhibitman

I figure that the money I spend on cards is in lieu of golfing or other diversions, so as long as I don't need to have the cash flow, I won't sell off stuff at a loss. I'd rather just have the cards to enjoy.

To be honest, if I was a collector, I would be excited to have a time come like this where the market is fairly cheap. Investors are probably hating the market, but that comes with the risks in buying with the intent of flipping. If you're in it for the hobby, price fluctuations should not matter (well, should not matter much). I've picked up quite a few cards in recent weeks that I never thought I would be able to afford when prices were skyrocketing. I used to have a budget that wouldn't get me anything nicer than an e93 HOF graded psa 1. Now, I picked up an e93 Plank PSA 3 for $475, a price that probably would have went for double in 2007.

Investors and dealers should be making their purchases now, and than sell it off when the market recovers (maybe in a year or three). However, they got greedy in scooping up cards at all-time highs and are now holding on to cards that will most certainly be marked down. There is simply not enough free cash for these dealers, and that is why prices aren't really recovering. They can't really buy anything, since they will have to cover their markdowns.

For collectors that have some free cash flow, it is a perfect time to add to a collection. Just sit back, relax, and enjoy the cards. In a few years, they are bound to go up. And even if they don't, people have to remember it is a hobby. Not an investments portfolio.

Take care,

Pete

[M's_Fan]

I'm going to disagree with the central premise of the original post: That "truly rare" and "ultra high grade" cards haven't declined in value.

This is not the case. I've seen everything go down, rare stuff of Shoeless Joe, Plank, etc., you name it, you can likely find an example of price depreciation in recent months/years.

The high-end art market took a big dive in this recession, and high-end baseball collectibles are not some magic category that is recession-proof.

The simple fact is there are a lot less wealthy people out there than there used to be, and bidding competition isn't what it used to be.