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Originally Posted by Rhotchkiss
Phil, I agree with you 100% that this is likely not a good deal for the borrowers. And I also agree that it’s real good to be the lender on this one. Nevertheless, the arrangement provides liquidity for a relatively illiquid asset and I feel consenting adults should be able to transact however they choose, even if it’s more dangerous for one party. And, I believe that people should be responsible for their actions- if you are a big enough boy to buy a card and borrow against it, then don’t bitch when you lose your card to pay back the lender.
Regarding a propped up industry, this does smack of the Big Short in many ways (in a mini sense). Similarly, a super-high stock market propped up by buyers on margin loans. It most definitely appears that this will have an unhappy ending for some; I suspect most own the shiny stuff. But that’s how we learn and grow. Maybe it takes some pain to get regulation and oversight. Ultimately, these loans have utility.
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Agreed. Institutional lending on collectibles has been around for a long time but the asset class is more mature. It's one thing to have a Monet sitting in a Bank vault as collateral, another having a Luka Doncic sitting in an AH vault.
Sports cards as an asset class is very, very young, with that comes a lot of volatility and risk, and as an asset class leans more towards the stock market model than the Art market. How are those NFT's working out for ya'? Meme stocks? Crypto? Sometimes we're not as smart as we think we are and it's never a good idea to over leverage an asset class to buy more of the same asset class. There will be some investors that may use this tool wisely but there will be plenty who don't.
Live and learn though.