The Depression of 2008

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Posted By: bruce Dorskind

Yesterday's near collapse of Bear Stearns is, we are afraid, is
mearly the "tip of the iceberg."

We believe that the recession of 08 could soon evolve
into the beginning of the next great depression.

All the signs are there.

What impact do you see on the baseball card and memorabilia market?

We believe that post-war high grade cards will drop at least 35%
Common pre-war cards at least 25%

As for the hobby's pricey true rarities, we expect very little movement
as the market is thin and the "major players" appear to be protected
from all but the blackest of scenarios

What do you think?


Bruce Dorskind
America's Toughest Want List

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Posted By: Frank Wakefield

I think it is 'merely', not 'nearly'...

Other than that I think ya'll are about correct up there, Bruce. We're not there, but we're headed there.

The Saudi currency is tied to the dollar. Oil is traded in dollars (but that might soon change). I drove across Texas twice just over a year ago. Rusty stuff was being cleaned off, new stuff booming. The oil price increases seemed to be good for Texas... hard on the rest of our country. I think this decline in the dollar was partly to deal with the Saudi's, and partly to held a certain segment of folks in our country.

And before I get to my point, look at your Fed refund check if you get one, or at the $600 bail out check that comes in a few weeks... it will be on a bank in Austin, Texas. Golly, if I had a bank I'd be willing to pay the Treasury for the privilege of sending those checks out. 300 million americans, maybe 150 million $600 checks on average, that would be $90 billion. What would the interest be on 90 billion for one day? What if folks left their checks in the mail box a day or two? Or on the fridge until the end of the week?? A bank in Texas could make a lot of money on that.

I think the financial wellbeing of our country was disguised about 4 years ago by a falsified housing/construction boom financed by subprime mortgages and the like. The financial woes of that are now apparent. I think things will become like Bruce says in a few months. And we'll eventually get out of it in a couple of years... maybe 3, after it has reached its low point. So bad times around election-time. And things will be better by next election-time.

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Posted By: barrysloate

Great Depression may be a bit severe. But should things get that bad, then of course the baseball card market will tank.

In a Depression people lose their homes and jobs; who is going to care about little pieces of cardboard under those circumstances? But hopefully the economy will show a little more resilience.

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Posted By: Doug

I agree with what Barry said. I'm no whale (more like a neon tetra) so I've pretty much quit buying altogether. I don't see the super wealthy people having too much to worry about, but the regular guy has to be hurting right about now. I'm probably spending about $300 a month on gas anymore and that really starts cutting into the disposable income after a while.

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Posted By: dennis

i wish the prices would go back to the way they were in the 70's and all the investors would get out and only the collectors who don't care about profit/$$$ would remain.there would be no more scammers making a buck selling bogus reprints, then,there would no longer be a need for the grading services as collectors don't need to be told the grade of their cards or if they are real. ...but that is not going to happen.

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Posted By: Frank Wakefield

Barry is right.

And I'll wish along with Dennis... it would be nice.

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Posted By: leon

Nowadays with inflation and the price of gas I had to put in my 4 cents instead of 2!! I have to agree with the group of 1. I think we will see some more softening in the mid to lower level collectibles. For what it's worth the fantastic items will continue to do well, imho. There just isn't enough supply of them and the folks spending 5 figures on 1 card aren't quite as affected....They are affected but it's not as life changing to them. America lives on credit too much and our National debt is a disaster. That coupled with the weakening dollar makes for a very poor economy. Almost daily I ask my wife, in somewhat amazement, how the people making 25k a yr with children can pay their bills? .....I have been harping on her about small stuff and yesterday I overheard her tell my 11 yr old that they didn't need to go cruising around as the cost would be $4 in gas just going to the store and back. I gave her a pat on the back for that one. I want her to be cognizant of money as I usually pay most of the bills so I can hide my card purchases and she doesn't see a lot of the family finances ....

edited typo

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Posted By: Fred C

Yesterday's near collapse of Bear Stearns is, we are afraid, is
mearly the "tip of the iceberg."

That sounds about right to us. Bruce, sorry about this next opening line but I couldn't resist:

We feel that whilst the subprime mortgages may be the beginning of a downward spiral there are more economic ills to be illumend.

Many speculators, common everyday people, were jumping on the real estate bandwagon only to find out that the wheels were coming off as they were getting on. Now it's going to be time to pay the piper. We have a government that believes in artificially propping up the sagging real estate market rather than just letting it find it's own natural bottom. Throwing good money after bad is not a wise decision. They will prop up the housing market for a short while but the bottom line is trying to qualify a person for a loag these days. Salaries have not increased proportionally to housing prices so either the home prices have to come down or salaries will have to escalate.

It will be interesting to find out how much "credit" is out there and how this "credit" will be repaid as fuel, energy and food prices increase. Default, default, default, bankruptcy, bankruptcy and bankruptcy... who pays for all of that? If someone has a $100K credit line (which was used to pay for all kinds of things) and they default on the payments then WHO gets to pick up the tab?

Ok, so what's the price of tea in China got to do with baseball cards? Nothing, but the economic whoas of our country will definitely take a peice of our discretionary spending cash away from baseball cards. - BUY LOW and enjoy.

I tend to think that the rare stuff may come out into the market but you have to figure that if your so bad off that you can't buy the cheap stuff, there probably isn't much way for you to buy the high end stuff.

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Posted By: barrysloate

While I agree that the very rich will not be as affected by a worsening economy, many people who sink hundreds of thousands of dollars a year or more into baseball cards may choose not to, even if they can. Many of the mind-boggling prices we've seen over the past few years are based partly on buyer exuberance; that it doesn't matter what you pay for quality because it can only go up.

But with that bubble burst, many of the big spenders may see this as a time to take a break. Of course, it can also be a good time to buy low and sock some cards away. So in the end, you can't generalize. People are going to do whatever they feel is best.

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Posted By: Jeff Lichtman

Guys, don't kid yourselves. The very rich will be getting pounded financially very soon. Bear will be the first bank to go and the rest may follow. It will be very, very ugly soon.

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Posted By: David Simon

Another way to look at it is, everyone is finding out that they had a lot less money than they thought they had. The only thing missing from the last recession in '91 is the President isn't raising taxes. That would cause the crash down. I don't envy the incoming President.

Like the rest of the market, now is not a bad time to be 'short' and be selling. You can always buy the cards you want on the 'dip' and get a great discount in the next 12-24 months.

ds

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Posted By: Jason Duncan

I disagree. I think now is a good time to be buying. There are alot of good deals out there in the midgrade market. I would stay away from high grade material for now. I think the economy could get alot worse, but it will not get that bad. Prices will adjust and move up soon.


Jason

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Posted By: rob

Jeff,

The US Govt will not let any of the large banks fail.

Rob

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Posted By: Jeff Lichtman

Bear Stearns will cease to exist shortly. The govt can only do so much. The Depression occurred despite governmental intervention.

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Posted By: rob

Jeff, I was more referring to your "others will follow" comment. The largest US banks, i.e. citibank, jp morgan and the like will not cease to exist.

Rob

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Posted By: Jeff Lichtman

JP Morgan seems to be holding its own. But Bear and its assets will soon be sold off. If money disappears, the banks disappear as well. Washington Mutual has about had it. While some banks will remain, more failures will follow.

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Posted By: Marc S.

I think the economy is in significantly better shape than the media (and many of this board) portray it. And I think talks of a depression and an economy that will tank over the next 6-9 months is exceptionally overblown.

Marc

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Posted By: Jason Duncan

Marc S.


You summed up exactly what I wanted to say. Our biggest problem in America is the MEDIA. It is our own worst enemy.

Jason

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Posted By: steve

On ebay I missed a GREAT looking T206 Cobb bat on PSA 5 with no tilt, full borders and near perfect centered - it went for $2450.ish - great value on a high end for the grade card. These were up to $2800. while back.

And I picked up two T206 Johnson portraits PSA 5's for $1450.ish each - while ago they were upwards of $1800.

Buy low - Sell high.

Keep to vintage high demand clean items of upper tier major HOF'ers.

Be able to have 5+ year holding period.

Will have big smile on face years down the road.

steve.

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Posted By: Andrew

Yup, put me in the contrarian camp...it's the "sky is falling", media negativity snowball that will get us there, and without such fanning of the flames, the scenarios of which you speak might not even occur. A true "Depression", really? On that note, the financial press here is much less dramatic. I was recently in Asia and the analogies and word choice use by the English accented reporter used were just hilarious, over-the-top "sell the farm", "batten down the hatches" type commentary.

I'm sure many of you are waiving your finger (when it's not clicking the remote between Fox News and MSNBC) with gloom and doom. Sorry, I didn't jump too high when threat alert was Orange and I didn't don the gloves when opening my mail during the Anthrax scare.

...if I'm dead wrong, then I'll be sure to sell my cardboard before heading to the soup line.

"Take your life in your own hands and what happens? A terrible thing: no one to blame." -- Erica Jong

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Posted By: Larry G

Negative Attitudes only give way to more negativity but here are some facts:

Where there are economic problems, someone if not many are already thinking past that and making decisions for the future.

Our government, love them or not , will NOT allow retail major banks to fail but investment banking firms such as Bear, Goldman etc. serve no general retail purpose and are not FDIC insured on many financial issues so they have more exposure but bank stocks are VERY LOW and pay dividends. It is true that larger weaker banks may be bought out or merge.

Older, nice visually appealing Baseball Cards especially stars and classic sets like R319, T205, t206, T202 etc...grades 4-8, will always be bought in mid grades because demand by the masses of collectors is less risky, supply will always be less than demand as long as there are no natural disasters and has possibly of upgrade. Very high priced high end pre war and post war cards which have a more affluent but limited market can fluctuate especially HIGH GRADE commons. Still there will always be residual value(20-40%) off current market pricing and is facilitated by high volume dealers and bargain hunters.

A Boston Garter common or E107 common or T211 Red Suns etc....or other obscure "toughest" issues which are RARE but very high priced and limited in supply and limited on how many collectors actually collect those could fluctuate just as readily as a PSA 8 1953 Bowman Mantle or a 1954 Topps Banks Rookie but still will always find a home.

Lastly- There is little chance the Great Depression of 2008 can facilitate as long as level headed decision makers and the educated public realizes that hard work and ethical workers, especially service and craftsman are always in demand. The future may show that those that actually add something to society instead of the manipulators of numbers and investments will be able to weather any storm since they have skills. It will be tough for those that fell prey to the housing manipulations that were allowed to prey upon the innocent by a handful of unscrupulous institutions and mortgage bankers or those that simply want to roll over and complain.

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Posted By: barrysloate

The media may in fact exaggerate some of the problems we are having, because negativity does make for a good story.

But that aside, there are really some serious things going on. Gold topped $1000 an ounce yesterday. Oil is $110 barrell. Does anybody want to blame the media for that?

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Posted By: Steve

If you have the cash, now and the immediate future would be a very good time to be buying.

Moi? I'm too busy paying off 500.00 oil bills I get every 2 weeks.

Steve

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Posted By: Todd Schultz

I'm with Barry. Although I cannot stand the American Media and might even consider them a bane in our society, the signs are either there or getting there. Here in the Southwest, the problems are very, very real. Things don't move much in election years either--people hedge, wondering what type of administration will be coming on board. I can't see things turning back to the good before mid '09 at the earliest.

As for the hobby, I believe alot of us are in it for the long ride, or at least not the short term. Whatever happens to card values over the next two-three years is of little import to me; actually, I would benefit by falling prices, assuming I can actually make some money to spend on cards

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Posted By: Dan Bretta

I think this thread is depressing. While I would love to see baseball card prices tank I certainly don't want to see our economy tank. If the two are tied together I'll root for the economy to recover even if it means I can't afford the cards I want to collect.

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Posted By: Larry G

Barry- For those two conditions blame:

A war that costs the US billions a month, almost a trillion this year....a government that fails to address our tax dollars should be spent HERE first to improve our country. We started this job, why do we not control the oil supply from there and give us a DEEP DISCOUNT to offset the costs of preserving their democracy!

Gold manipulators inflating the prices because the media does add fuel to the fire..lets face it gold is a "perceived value"..you cannot eat it, only so much jewelry you can wear and is barely used industrially...

land and commodities are far more valuable, banks finance these necessities....gold is only 3000 years a head of baseball cards, both are non corrosive and a metal or cardboard, period.

oil is a necessity but if we release some of our billions of gallons of reserves to "flood oil in the market", we could drop the price $20 a barrel in one day and let EVERYONE use 50% less gas and plastic starting......NOW as Kramer says! Drive less, turn down heat, air , lights, then the speculators and oil suppliers can drink their products...wait, they may start buying water futures!

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Posted By: barrysloate

Larry- agreed.

The money dissipated on the war will set us back a generation. And the value of gold is mostly based on the emotional climate of the world, and right now people are nervous, both the big fish and the pond scum. There will be some difficult times ahead, there is no way around it.

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Posted By: CoreyRS.hanus

Forgetting for moment about the ills in the real estate/credit markets, what about the astronomic increase in cards over the past several years? No market can keep rising at such stratopheric rates without having a correction. And typically the greater and longer the increase before the correction, the greater the correction. So then it seems to me that two forces might be at work on depressing card prices, the worsening economy AND the fact that a correction in the card market is long overdo. In the next month or two several major auctions will be taking place. It will be interesting to see how they do.

Finally, I do not share the pessimism that we are about to undergo a depression. Recession yes, depression no. The only good thing though, to come from all this is that FINALLY people are seeing the need to regulate the credit markets as regards to real estate lending, much as in the wake of the Great Depression people recognized the need to regulate the securities markets. Being in the real estate business, I can tell you that some of the transactions that took place were outrageous, and it is unfortunately the case that people are not knowledgable enough to look out for their own affairs. Regulation is needed (and that is coming from a guy who is a staunch conservative in regard to economic policy).

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Posted By: Cobby33

If there truly is a "depression" looming (which I think is being dramatic) and one's livelihood is not baseball cards, then who really gives a crap? Don't we have bigger things to worry about?

Let's just hope for the best.

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Posted By: Steve

<<<oil is a necessity but if we release some of our billions of gallons of reserves >>


Billions? we currently have 700 million barrels, (in the Strategic reserve) or enough for about 2 months of use. We currently use betwen 11 and 12 million barrels a day.

What we do have is oil shale but it is not yet worth it to get the oil from the shale.


Steve

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Posted By: Mike

I'm I missing something. Why is 1% of the mortages having this much effect on the total picture ? Please explain. There has always been foreclosures and now their is more , but how much more ? About 99% of us still are paying off the mortage or already own a house. Again please explain.

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Posted By: barrysloate

Corey- funny, the real estate market was not properly regulated, and the baseball card market is almost entirely unregulated ( I will say that getting a card slabbed by SGC is the closest we have come as industry to keeping things honest).

Is it possible baseball cards may be heading for the same fate as real estate?

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Posted By: paulstratton

A Great Depression? Doubt it. I think we have evolved just a little bit since the late 1920's. It's a world wide marketplace for all commodities now, it wasn't that way even 10 years ago. We thought competition was a good thing? Guess not.

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Posted By: LetsGoBucs

We are the problem. Voters that continue to elect weak politicians on the basis of "what they will do for you" are to blame for the mess we have. And it is a mess.

I hate to say this but the USA has put ourselves in a difficult position. The weakness of the dollar is a national embarrasment. People all over the world are changing their savings accounts out of USD into their national currencies. With the USD weakness two critical things will happen over time - our businesses will be bought by foreign companies, and we become laborers to the world instead of the capitalists of the world - and US based businesses will find it tougher to expand overseas due to costs. Both of these are things that happen slowly over time and both reduce our standard of living over time.

We continue to spend on social programs instead of investing in infrastructure. We spend more per pupil than any country in the world, yet have mid tier education system because we bend over backwards for the teacher's unions. We allow unfair trade, Europe imposes VAT taxes on all imports - guess what that really is - its an import duty. We don't impose any import duties on their goods and services. We've helped Brazil pass us by in agriculture, allowed our steel industry to become second rate after 3 decades of other countries subsidizing their industries, imposed stupid immigration rules that discourage the best and brightest from attending US universities, and we just funded about 35,000 French and German jobs with a 40 Billion award for a fuel tanker - Does anyone really think its better for a French and German company to develop the technical expertises to do this rather than an American company?

The simple truth of the matter is that Social security needs to be cut by 30%. Means testing for those earning more than 50K. Medicare also needs to be cut by 30% and the harsh truth is that some people will go without healthcare. This year, public sector employees passed private sector employees in average pay - that is simply not sustainable in a capitalist society and Government employees need to receive pay cuts and benefit reductions.

The investment from the foreign wealth funds are just the beginning. We are being taken over financially year by year. And the end result will be much less opportunity for our children and grandchildren.

If it all sounds bad - on a macro level it is. It shows what weak leaders along with an unengaged public can lead to. Soon the same type of austerity programs we used to insist on through the world bank as a condition of countries receiving loans will be imposed on the USA!

We actually need to stop lowering interest rates, accept that we have a recession. Stop spending hundreds of billions helping out empty MBA suits, cut social programs and start standing up the the USA in trade. Inflation on top of our current situation will really push us further down the slippery slope. The only bailout that should happen should be for people over the age of 50 living in a home worth less than 300K who refinanced their mortgage and its obvious they were "hoodwinked" by a slimy salesman. Everyone else will have to bear the burden of their stupidity or greediness or whatever.

We have been poorly represented by our politicians and have poorly represented ourselves by continuing to believe the unbelievable in electing them again and again.

Sorry for the long post - to answer the original intent of the post - pre war card prices are going down - average of 50% by mid 2009.

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Posted By: Cobby33

"We spend more per pupil than any country in the world." WRONG as to California, which ranks lower than a lot of underdeveloped nations. As for teacher's unions (and no, I'm not in one)- that's not the problem. The problem is putting inept teachers in administrative positions and over-funding those. Teachers remain the most important profession which is grossly underpaid.

"We have been poorly represented by our politicians and have poorly represented ourselves by continuing to believe the unbelievable in electing them again and again." TRUE (to a certain extent).

"A war that costs the US billions a month, almost a trillion this year....a government that fails to address our tax dollars should be spent HERE first to improve our country." YES!

"Gold manipulators inflating the prices because the media does add fuel to the fire." Not true. Gold and other similar commodities have proven their value over thousands of years and hypothetically, if paper becomes useless, precious metals and similar commodities garner much more in trade. "Land ...is far more valuable." Not these days.

"I'm I missing something. Why is 1% of the mortages having this much effect on the total picture ?" I'm not familir with the 1% figure, but in some areas, that figure is drastically higher.

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Posted By: barrysloate

I predict that in the next couple of years we will be surpassed economically and militarily by Belgium.

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Posted By: steve

I am not that old, but old enough to see a few presidential elections.

Going into last election with Kerry, I would have bet the house on a landslide democratic victory - a would be end to the Iraq waste of effort, money and lives.

More than any other election, I was STUNNED !!! to see the electoral votes come in from across the US heartland. Could not believe what I was seeing with all the Bush electoral wins.

I think I even shed a few tears, could not believe the US people actually voted this guy in a second time - SHOCKED!!!

steve

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Posted By: David Atkatz

"Our biggest problem in America is the MEDIA. It is our own worst enemy."

Yeah. We should just believe whatever Dubya's press secretary tells us.

Happy days are here again.

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Posted By: Al C.risafulli

I just read this thread and traded all my cards for a truckload of cigarettes and chocolate. When this all goes down, I want something that will retain its value.

-Al

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Posted By: barrysloate

Al- chocolate melts. That's a high risk investment.

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Posted By: Mark Holt

Damn, so you're the one that outbid me on the cigarettes Al.

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Posted By: Cobby33

Al-
How about porn?

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Posted By: paulstratton

You just had to go and steal my Belgium pick. I'll go with Luxembourg instead.

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Posted By: Al C.risafulli

Barry:

No way chocolate melts in my house. My wife won't let me turn the damn heat above 60 at $3.50 a gallon for propane.

Porn is a good idea, though. Porn is always a good idea.

-Al

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Posted By: Richard Masson

I am not sure a public chat room for baseball cards is the proper venue for this discussion, but I will say that in my experience, things are never as bad (or as good) as they appear. Financial institutions are highly leveraged (banks, investment banks, etc.) and there is not one of them that can withstand a "run on the bank" like what faced Bear, Stearns this past week. Remember there are two kinds if insolvency: balance sheet insolvency where liabilities exceed assets (the entire banking system in the early 90s, for example) and cash flow insolvency (what do you mean my money isn't in the safe? I want my money now!). As best I can tell, Bear is facing the latter. It's assets will be liquidated or its business units sold, liabilites will be settled, and that will be that. Perhaps the same fate awaits Lehman or others. We'll see.

The mechanism by which problems with subprime home loans translate into bigger problems is through a relatively new invention called collateralized debt obligations, or CDOs. There are many places where you can find out how these work, but to cut to the bottom line, the very riskiest pieces of CDOs (which will probably collect nothing) were pooled together and debt was issued against them which was erroneously rated AAA, but which will probably also collect nothing. Ownership of this debt is pervasive because AAA rated paper historically never defaults, let alone incurs losses. When the music stopped, many large institutions were left holding the bag. This translates into issues in the broader economy because those with losses are reluctant to lend more money to anyone else, even creditworthy borrowers; instead, they become focused on shrinking their loan base.

Do not despair. The beauty of our financial system is that we recognize losses pretty quickly and move on (unlike, say, Japan). What emerges is a stronger and more competitive system.

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Posted By: David Atkatz

"Medicare also needs to be cut by 30% and the harsh truth is that some people will go without healthcare."

You volunteering, 'Bucs?

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Posted By: Al C.risafulli

Thanks, Richard. That seems like a pretty sound and level-headed analysis. Particularly that last part of the first paragraph.

Umm, wanna buy some chocolate?

-Al

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Posted By: Bruce Babcock

One Nicholl.

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Posted By: Steve

I can't believe there has been no mention of China. They're in a buying mood -our debt.

We needed to change our buying habits years back. This house is full of low-value plastic sh1t from China... Our kids are screwed

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Posted By: David Atkatz

What this country needs is a good five-cent Nicholl.