Money in the hobby

[barrysloate]

Here is something I simply do not understand regarding the large sums spent on baseball cards. Let's take two lots in the recent REA Auction: Lot 12, a PSA 9 Hank Aaron rookie which sold for 216K; and lot 13, a PSA 9 Sandy Koufax rookie which sold for 156K. We all know those are both very common cards, and only attained those lofty bids because they were graded Mint 9. For someone willing to pay such an extraordinary amount of money for them, there had to be a strong belief that what they were buying is exactly what it says on the label. But here is what we also know:

1) A card submitted for grading that comes back "Evidence of Trimming" can be resubmitted a month later and come back NR MT 7.

2) The same card can be submitted three times and come back with three different grades.

3) Countless trimmed and altered cards make it into holders with numerical grades with alarming frequency.

So can somebody tell me why there is such a blind faith in that little white label? To me there is a disconnect here that makes no sense. Why is something so subjective and so inconsistent treated with such absolute trust? You don't spend a quarter of a million dollars on something if you are not completely confident you are getting what you are paying for.

[Peter_Spaeth]

Originally Posted by barrysloate

Here is something I simply do not understand regarding the large sums spent on baseball cards. Let's take two lots in the recent REA Auction: Lot 12, a PSA 9 Hank Aaron rookie which sold for 216K; and lot 13, a PSA 9 Sandy Koufax rookie which sold for 156K. We all know those are both very common cards, and only attained those lofty bids because they were graded Mint 9. For someone willing to pay such an extraordinary amount of money for them, there had to be a strong belief that what they were buying is exactly what it says on the label. But here is what we also know:

1) A card submitted for grading that comes back "Evidence of Trimming" can be resubmitted a month later and come back NR MT 7.

2) The same card can be submitted three times and come back with three different grades.

3) Countless trimmed and altered cards make it into holders with numerical grades with alarming frequency.

So can somebody tell me why there is such a blind faith in that little white label? To me there is a disconnect here that makes no sense. Why is something so subjective and so inconsistent treated with such absolute trust? You don't spend a quarter of a million dollars on something if you are not completely confident you are getting what you are paying for.

Because the flip is the commodity, not the card. Flips sell, and nobody scrutinizes what's in the holder very much, at certain strata anyhow. I've seen cards posted here that I would bet my life are altered, but many just see the flip and ooh and aah.

"What we said of it, became a part of what it is." -- Wallace Stevens.

[ngnichols]

Originally Posted by barrysloate

Here is something I simply do not understand regarding the large sums spent on baseball cards. Let's take two lots in the recent REA Auction: Lot 12, a PSA 9 Hank Aaron rookie which sold for 216K; and lot 13, a PSA 9 Sandy Koufax rookie which sold for 156K. We all know those are both very common cards, and only attained those lofty bids because they were graded Mint 9. For someone willing to pay such an extraordinary amount of money for them, there had to be a strong belief that what they were buying is exactly what it says on the label. But here is what we also know:

1) A card submitted for grading that comes back "Evidence of Trimming" can be resubmitted a month later and come back NR MT 7.

2) The same card can be submitted three times and come back with three different grades.

3) Countless trimmed and altered cards make it into holders with numerical grades with alarming frequency.

So can somebody tell me why there is such a blind faith in that little white label? To me there is a disconnect here that makes no sense. Why is something so subjective and so inconsistent treated with such absolute trust? You don't spend a quarter of a million dollars on something if you are not completely confident you are getting what you are paying for.

All of the things you talk about involve human decisions/opinions. Take the human out of the equation and you won't have those issues. It's coming.........

[glchen]

Originally Posted by barrysloate

...
So can somebody tell me why there is such a blind faith in that little white label? To me there is a disconnect here that makes no sense. Why is something so subjective and so inconsistent treated with such absolute trust? You don't spend a quarter of a million dollars on something if you are not completely confident you are getting what you are paying for.

Barry, I completely see what you are saying here, and I agree with a lot of it. However, there are a lot of different ways that I could answer this question. However, to focus on the cards that are going for 6 figures, I'll put it this way. The people who are buying these cards go to shows or events like the PSA luncheons and see other collectors like them, and they trust that other rich people like them (e.g., Ken Kendrick, etc) are buying cards, so they know that it's not just them in this market. When they sell their cards, they get paid real cash, real money with no restrictions like you can't sell for 2 years. They see the card prices going up based upon VCP, past auction sales, or other ways that are easily accessible. And which cards are going up the fastest? The ones with the highest number on the flips, which makes perfect sense to them because rich people collect the highest quality collectibles.

[barrysloate]

Originally Posted by glchen

Barry, I completely see what you are saying here, and I agree with a lot of it. However, there are a lot of different ways that I could answer this question. However, to focus on the cards that are going for 6 figures, I'll put it this way. The people who are buying these cards go to shows or events like the PSA luncheons and see other collectors like them, and they trust that other rich people like them (e.g., Ken Kendrick, etc) are buying cards, so they know that it's not just them in this market. When they sell their cards, they get paid real cash, real money with no restrictions like you can't sell for 2 years. They see the card prices going up based upon VCP, past auction sales, or other ways that are easily accessible. And which cards are going up the fastest? The ones with the highest number on the flips, which makes perfect sense to them because rich people collect the highest quality collectibles.

I understand herd mentality, and everyone assumes the card they buy will be just as desirable when it comes time to sell. But I still have trouble with how much faith is put on that label.

If you have 1952 Topps Mantle that grades PSA 8, and you are able to convince the grader that it deserves an extra ".5" on the label- not a full grade, but a half grade- that grader has just created a half a million dollars of wealth out of thin area. How did such a market evolve? Something about this simply escapes me.

And Peter S. is correct that the label, and not the card, is the commodity (and I love Wallace Stevens).

[Peter_Spaeth]

For 10 points Barry name the poem, no cheating.

[barrysloate]

Originally Posted by Peter_Spaeth

For 10 points Barry name the poem, no cheating.

Is it "The Emperor of Ice Cream"? It's just a guess.

[oldjudge]

"when you consider that the 1903 E107 Mathewson in the REA auction, which went for $144,000, was a $900- $1000 item in 1995--thus increasing in value around 150 times in just over ....."

Larry-I'm not sure where you are getting your 1995 number from. In the mid-1990s I won a beat to hell Mathewson E107 in a David Festberg auction for $2000. When I got it I found that the condition was even worse than described and I called David to say I was returning it. His response? No problem--the under bidder was Larry Fritsch and he'll take it.

[ls7plus]

Originally Posted by oldjudge

"when you consider that the 1903 E107 Mathewson in the REA auction, which went for $144,000, was a $900- $1000 item in 1995--thus increasing in value around 150 times in just over ....."

Larry-I'm not sure where you are getting your 1995 number from. In the mid-1990s I won a beat to hell Mathewson E107 in a David Festberg auction for $2000. When I got it I found that the condition was even worse than described and I called David to say I was returning it. His response? No problem--the under bidder was Larry Fritsch and he'll take it.

I'm just going by a guide issued in 1995 which I have found to be pretty reliable on a consistent basis. But a guide is just a guide. It would not surprise me at all to learn that several very knowledgeable collectors such as yourself and Fritsch would go well over guide when they knew how rare and significant that card was. I purchased a 1925 Gehrig rookie at the '98 National in ungraded VG for $500, and the seller almost begged me to take it at that price. After I verified its' authenticity with my 16X loupe, he really didn't have to try so hard, since I had other information that they had been changing hands at $1100 in the same grade around that time. I hope you kept it!!!

May your collecting bring you bliss,

Larry

[Peter_Spaeth]

Originally Posted by barrysloate

Is it "The Emperor of Ice Cream"? It's just a guess.

Postcard from the Volcano

[barrysloate]

Don't know that one...now I have to spend the whole weekend reading Wallace Stevens.

[drcy]

Originally Posted by barrysloate

I understand herd mentality, and everyone assumes the card they buy will be just as desirable when it comes time to sell. But I still have trouble with how much faith is put on that label.

If you have 1952 Topps Mantle that grades PSA 8, and you are able to convince the grader that it deserves an extra ".5" on the label- not a full grade, but a half grade- that grader has just created a half a million dollars of wealth out of thin area. How did such a market evolve? Something about this simply escapes me.

Some people put 100 percent certainty in something with 15 percent margin of error. But, really, their concern is financial value. The owner may be well aware of the margin of error in grading and the possibility of alterations, but all that matters is the financial value-- and if others invest in the label, then the label is what matters.

[glchen]

Barry, I don't disagree with you at all in regards to the flips, but for collectibles, people often defer to these so called experts in those fields even when buying extremely expensive things. When someone says that a wine receives a certain rating or the vintage that year was particularly excellent, do most of us have any idea what they are talking about? When some "expert" says this modern art painting is part of the new avant garde in the field right now and is worth hundreds of thousands of dollars, do those people who buy those paintings really have any idea what they are buying? And many collectors may come from collecting coins, where these same issues have been rehashed over and over again. I'm not saying I agree with it but just trying to explain how we got here.

[AGuinness]

Originally Posted by glchen

Barry, I don't disagree with you at all in regards to the flips, but for collectibles, people often defer to these so called experts in those fields even when buying extremely expensive things.

And there are so many other third party experts out there involved in so many other areas of life. Buying a house, for instance, often includes multiple third party experts, such as realtors, assessors and inspectors. Many people consult the Kelley Blue Book (or similar publications) when buying a car. These type of experts, who help establish the condition and comparables of an item, are common in lots of places.

I do "get" the animosity towards TPGs, towards the money in the hobby, etc. but in the end, sports cards aren't just investments or tokens of our childhood or connections to the game, etc. Collecting cards (or whatever) is different things for different people, and perhaps many things for some, and that makes the hobby more nuanced and interesting, to me.

[kailes2872]

While I like the safety of the entombment of the card and the fact that the condition is locked forever (in theory - deterioration from chemicals as the possible exception), if I had my choice I would have them all raw so I could enjoy them in binders and look at them on a daily basis. As it stands, it take front/back photocopies of the graded cards - usually the high value superstars - with a label that shoes the grade, registration number and SMR and put it back in the binder

However, I have had too many circumstances where I have had a raw card talked down When I am selling - Ex becomes VG - and then pumped up When I am buying EX becomes NM. Of course, even with the standardization and commoditization of the flip/slab, most don't want to pay more than 70-75% of the VCP amount so I am not sure how far we have come.

Therefore, I buy graded cards primarily to protect my spouse/family in the case something happens to me. As that way there is a cost basis to work off of for the big stuff.

Based upon my budget/discretionary income, I buy mostly 6's and 7's. I'd love to have 8's but I can't justify the 4x price of a 6 for the incremental visual appeal over a strong 6. But to those who can - God bless and more power to you.

[dodgerfanjohn]

A similar thread came up on the psa forums a few years ago with a supposed "buying group" manipulated some elements of the market.

People kind of dismissed my answer, but the reality of what I'm going to say doesnt go away. Assuming a US population of 400 million, the top .1% of incomes is still...400,000 people. Make it the top .01% and thats still 40,000 people. At the levels of income that would involve, youd only need a handful of interested collectors chasing cards to support a market for the top level cards.

I am wondering if where one lives really influences their thinking on this. For instance in Los Angeles, Burbank Sportscards was heavily supported being near Toluca Lake...one of the wealthiest parts of the nation...as well as several other nearby neighborhoods that were favored parts of the entertainment industry. South Bay Sportscards in Lomita, CA charges outrageous prices. They are also right next to Rolling Hills and Palos Verdes, CA...neighborhoods with some very high incomes.

The number of people in LA with crazy money(say either $1million plus annual income, or $20 million plus liquid worth) might be 10x higher than many entire states. And NY, SF, Chicago, and maybe a few other big cities.

How many lottery winners, how many lotto level sports contracts, how many entertainment people, very successful investors and businessmen?

I can say with certainty that if I hit the lottery, my baseball card budget would blow from $1,000 a year or so to 25-100x that depending on how much money I had. And if I wanted a certain card or set that was rare, you can bet I'd be in there bidding it up.

Point being that the number of collectors out there with huge money...enough to the point that thousands or more are relatively meaningless...Is very likely a decent size number. And I think a lot of people in the hobby don't understand that. And those that do understand are tight lipped because their business depends on it.

[GaryPassamonte]

Barry- the word "ego" comes to mind in all this. It's not aesthetics. It's not a love of baseball history. It's not rekindling childhood dreams. It's just "ego."

[Tennis13]

I have thought about this a lot. First, I think 1950s-1960s is exploding because a ton of baby boomers are aging and capturing their history. I am much younger but still get excited opening a 1986 Donruss pack and hitting a worthless Canseco. So in that scenario a rising tide lifts all boats.

Vintage: perhaps there is some foreign laundering going on? I learned a ton about Macau and getting onshore money offshore. Throw into that some other country money that needs to be parked and that could explain some of the rise in value.

That said, some of these auctions from late 2015/early 2016 prices look a little inflated. We will see, but if they are inflated and you pay 10% to 15% to launder money, that's ok, right?

You are seeing foreign money that needs a home in a ton of urban real estate markets on the high end. Why not baseball cards if they meet an ultimate need which may not be a collector need?

[Peter_Spaeth]

Originally Posted by GaryPassamonte

Barry- the word "ego" comes to mind in all this. It's not aesthetics. It's not a love of baseball history. It's not rekindling childhood dreams. It's just "ego."

Gary, exactly. It can't be the cards, because the minute differences in the corners (even assuming the cards are actually graded accurately and consistently and that's a huge assumption) are not even visible to most eyes without a loupe.

[botn]

Originally Posted by barrysloate

I understand herd mentality, and everyone assumes the card they buy will be just as desirable when it comes time to sell. But I still have trouble with how much faith is put on that label.

If you have 1952 Topps Mantle that grades PSA 8, and you are able to convince the grader that it deserves an extra ".5" on the label- not a full grade, but a half grade- that grader has just created a half a million dollars of wealth out of thin area. How did such a market evolve? Something about this simply escapes me.

And Peter S. is correct that the label, and not the card, is the commodity (and I love Wallace Stevens).

Hi Barry,

It may have been touched on but I think the people who are buying cards that cost in excess of 100K don't even notice a dip in the account balance after paying for that card and they have a belief that PSA is too big to fail.

Greg

[barrysloate]

Hi Greg,
I don't doubt that some people have so much money that a few hundred thousand won't make a dent, and I also see how there are those who will pay anything to get the best. That's the easy part of the equation. What I can't fathom is how something so imprecise, and so subjective, as grading is accepted with so much blind faith. I guess PSA has done a remarkable job of building their product. That's the best answer so far.

[obcbobd]

From previous posters I see where making a T206 counterfeit would be near impossible due to changes in printing and especially paper. What about more recent cards? 52 Mantle? Gretsky/Jordan/Rose rookies?

[botn]

Originally Posted by barrysloate

Hi Greg,
I don't doubt that some people have so much money that a few hundred thousand won't make a dent, and I also see how there are those who will pay anything to get the best. That's the easy part of the equation. What I can't fathom is how something so imprecise, and so subjective, as grading is accepted with so much blind faith. I guess PSA has done a remarkable job of building their product. That's the best answer so far.

Safety in numbers I suppose, Barry. So much money has been invested in graded material and continues to be spent. I look at every card I buy, regardless of what it costs...maybe because I feel I have to and because I can. Not everyone buying cards has the expertise to determine if their card is graded right so it is easier to defer to the "experts". I know I do not approach much of anything in my life, that way.

[Rookiemonster]

I think it's very possible to be in to cards for money and the love of the hobby.
When I was a kid in the 90s I lived to see the up arrow in the Beckett on cards I owned. So of course I hated to see the dreaded down arrows. I had dreams of my cards going up up up and me cashing in.

I also had cards that I just liked because of the image or the player. Most of what I said rings true today. I love to see my cards increase in value and hate it when they go down.

Now of late I've been buying 80s and 90s inserts. ( trying to buy a home ) so I've been taking it easy and I don't really care about the value but I'm still only buying cards I think are undervalued or rare for the era even.

[Exhibitman]

Originally Posted by barrysloate

If you have 1952 Topps Mantle that grades PSA 8, and you are able to convince the grader that it deserves an extra ".5" on the label- not a full grade, but a half grade- that grader has just created a half a million dollars of wealth out of thin area. How did such a market evolve? Something about this simply escapes me.

Rich dudes comparing pee-pee's. Nothing new about that. Same as faster cars, bigger boats or trophy wives.

[ls7plus]

Originally Posted by barrysloate

Here is something I simply do not understand regarding the large sums spent on baseball cards. Let's take two lots in the recent REA Auction: Lot 12, a PSA 9 Hank Aaron rookie which sold for 216K; and lot 13, a PSA 9 Sandy Koufax rookie which sold for 156K. We all know those are both very common cards, and only attained those lofty bids because they were graded Mint 9. For someone willing to pay such an extraordinary amount of money for them, there had to be a strong belief that what they were buying is exactly what it says on the label. But here is what we also know:

1) A card submitted for grading that comes back "Evidence of Trimming" can be resubmitted a month later and come back NR MT 7.

2) The same card can be submitted three times and come back with three different grades.

3) Countless trimmed and altered cards make it into holders with numerical grades with alarming frequency.

So can somebody tell me why there is such a blind faith in that little white label? To me there is a disconnect here that makes no sense. Why is something so subjective and so inconsistent treated with such absolute trust? You don't spend a quarter of a million dollars on something if you are not completely confident you are getting what you are paying for.

IMHO, Barry (and good to hear from you, by the way), a lot of these guys paying huge, enormous premiums for "9's" vs "8's" and "10's" vs "9's" are quite literally paying for the holder/flip inside. There simply is no way that the difference in the quality of the card can match the price differential, so what are they getting for their money? A holder with a piece of paper in it, for which they have paid tens or even hundreds of thousands of dollars more than they would have for a beautiful card graded just one level lower. Far better to invest in something like the 1907 Seamless Steel Ty Cobb rookie Orlando Rodriguez of this board won in the REA auction ($24,000?), where both grading services have slabbed a total of four examples, and both Orly and I believe that that number is not going to increase much at all over the next few decades. Same with cards like the 1914 Baltimore News Ruth (11 total graded?), the Dietsche Fielding Pose and Wolverine News Cobb rookies, etc., etc.

I have studied the coin hobby extensively, as it has followed essentially the same path as that of cards, only with a 120 year head start. In that context, where there is a vast difference in the price of a coin, for example, in Mint State 67 vs Mint State 64 or 63, but little substantive difference of any real note between the quality of the two, and the item at issue is not all that rare, the values of the higher numerically graded items have tended to be cyclical, ebbing and flowing with the ingress and egress of investor types. On the other hand, truly rare and significant items tend to keep appreciating in virtually linear fashion (although those gaining the most in value over time among that group are those in better condition). And while on the subject, coins have also been the target of many counterfeiting attempts, with very little real success over the years. Items made through different methods always tend to leave different footprints, so I don't think we will be seeing a few hundred undetectable, newly manufactured Baltimore News Ruths in the next decade, century or even millenium! Same case scenario with Orly's Seamless Steel Cobb rookie (and presumably my own Wolverine Portrait and Dietsche Fielding Pose Cobbs).

Regards,

Larry

[hcv123]

Originally Posted by barrysloate

Here is something I simply do not understand regarding the large sums spent on baseball cards. Let's take two lots in the recent REA Auction: Lot 12, a PSA 9 Hank Aaron rookie which sold for 216K; and lot 13, a PSA 9 Sandy Koufax rookie which sold for 156K. We all know those are both very common cards, and only attained those lofty bids because they were graded Mint 9. For someone willing to pay such an extraordinary amount of money for them, there had to be a strong belief that what they were buying is exactly what it says on the label. But here is what we also know:

1) A card submitted for grading that comes back "Evidence of Trimming" can be resubmitted a month later and come back NR MT 7.

2) The same card can be submitted three times and come back with three different grades.

3) Countless trimmed and altered cards make it into holders with numerical grades with alarming frequency.

So can somebody tell me why there is such a blind faith in that little white label? To me there is a disconnect here that makes no sense. Why is something so subjective and so inconsistent treated with such absolute trust? You don't spend a quarter of a million dollars on something if you are not completely confident you are getting what you are paying for.

I believe many people do put their faith in the holder. Of course most of these people are not hard core collectors that know better (and know the market better), but apparently there are some/many? with deep pockets. Doing this a long time and also stunned at some of the numbers.

[mark evans]

I agree with Barry that, given the inherent subjectivity in grading, it is hard to justify the enormous disparities at the high end of valuable cards, like 8 v. 8.5 for example. It would seem to me that these disparities would diminish over time.

Further, while I would never offer unsolicited advice, it seems fair to speculate that the increase in values of vintage cards will taper off over time due to aging baby boomers and general economic conditions.

Finally, I am not offended by folks who approach the hobby for its investment value. I recognize that infusion of serious money engenders unpleasant consequences, like fraud, but think these problems can be adequately addressed by self-regulation assuming sufficient desire, and by law enforcement efforts where necessary.

[ullmandds]

Originally Posted by mark evans

I agree with Barry that, given the inherent subjectivity in grading, it is hard to justify the enormous disparities at the high end of valuable cards, like 8 v. 8.5 for example. It would seem to me that these disparities would diminish over time.

Further, while I would never offer unsolicited advice, it seems fair to speculate that the increase in values of vintage cards will taper off over time due to aging baby boomers and general economic conditions.

Finally, I am not offended by folks who approach the hobby for its investment value. I recognize that infusion of serious money engenders unpleasant consequences, like fraud, but think these problems can be adequately addressed by self-regulation assuming sufficient desire, and by law enforcement efforts where necessary.

I totally agree!