Pricing and flight to quality

[kailes2872]

Originally Posted by Seven

2. People using cards as a vehicle for investment. Whether for better or worse something will happen with the market come November. Gold is being invested in more heavily and it appears cards are also being seen as a viable investment. There's always a market for big names.

For the life of me, I can't understand why people are using it as an investment. By the time you pay 22% buyers premium on the buy side and 10% commission on the sell side (assuming no discount rate is given), it is tough to even break even. If you add to the fact that capital gains rate on collectibles is 28% - more than the tax rate for married filing jointly up to $326,600 (24%) - cards as an investment make other people money but it is tough to break even - even after holding onto the cards for a few years.

Somewhere along the way, the collection moves from a hobby to an asset class. I don't want to have to go to a safe deposit box to visit my collection. I don't want to have a ton of value in the house and have them at risk for fire or theft. This thread has me thinking long and hard about what to do in the future. For the first time, I have been clicking on the consign now banners and investigating what that means. It is something that I wouldn't have even thought to consider even a year ago.

[swarmee]

Oh, you think these guys are paying taxes on their earnings?

[kailes2872]

Originally Posted by swarmee

Oh, you think these guys are paying taxes on their earnings?

Well, since it is a public forum and our names are in listed, then I assume that all taxes are paid.

[swarmee]

Originally Posted by kailes2872

Well, since it is a public forum and our names are in listed, then I assume that all taxes are paid.

It's funny how often I see this question on forums: "Do you get a 1099 from PayPal with 200 transactions *and* $20,000 in sales *or* either 200 sales or $20K?"
I'm mainly talking about all the modern basketball flippers on blowout. But whoever reports these guys to the IRS and takes the referral money will probably out-earn all of them... ;-)

[Exhibitman]

Originally Posted by swarmee

It's funny how often I see this question on forums: "Do you get a 1099 from PayPal with 200 transactions *and* $20,000 in sales *or* either 200 sales or $20K?"
I'm mainly talking about all the modern basketball flippers on blowout. But whoever reports these guys to the IRS and takes the referral money will probably out-earn all of them... ;-)

Back around 1990 I was setting up at local shows selling mostly vintage baseball. Doing OK most weekends and having fun. One weekend I was at a show in North Hollywood CA and the guy next to me was doing crazy business on 1989 Upper Deck cards, which he had stacks of. Between customers he started telling me what a gold mine modern was, how he'd opened cases of 1989 UD and was selling thousands and thousands in Griffey, Sheffield and the other hot RCs and error cards (remember the Dale Murphy reversed neg?). Anyhow, he went on for a while about how it was all cash, no taxes, etc. He asked me what I do. I told him I am an attorney. He asked for who. I said that I was an assistant US attorney in the tax fraud division at the Justice Department. He turned so white I thought he was going to have a heart attack. I quickly let him know that I was a construction attorney so he wouldn't stroke out.

The moral of the story is that if you are gonna cheat the tax man, STFU about it...

[savedfrommyspokes]

Originally Posted by kailes2872

For the life of me, I can't understand why people are using it as an investment. By the time you pay 22% buyers premium on the buy side and 10% commission on the sell side (assuming no discount rate is given), it is tough to even break even. If you add to the fact that capital gains rate on collectibles is 28% - more than the tax rate for married filing jointly up to $326,600 (24%) - cards as an investment make other people money but it is tough to break even - even after holding onto the cards for a few years.

Don't forget (unless they reside in a handful of states) that these investors are also now being charged 6-10% for sales tax.....unless of course they also have a resale license.

[puckpaul]

Newsflash....too late, it has already happened. You need to consider all you are afraid of.

Originally Posted by kailes2872

For the life of me, I can't understand why people are using it as an investment. By the time you pay 22% buyers premium on the buy side and 10% commission on the sell side (assuming no discount rate is given), it is tough to even break even. If you add to the fact that capital gains rate on collectibles is 28% - more than the tax rate for married filing jointly up to $326,600 (24%) - cards as an investment make other people money but it is tough to break even - even after holding onto the cards for a few years.

Somewhere along the way, the collection moves from a hobby to an asset class. I don't want to have to go to a safe deposit box to visit my collection. I don't want to have a ton of value in the house and have them at risk for fire or theft. This thread has me thinking long and hard about what to do in the future. For the first time, I have been clicking on the consign now banners and investigating what that means. It is something that I wouldn't have even thought to consider even a year ago.

[cardsagain74]

Originally Posted by kailes2872

For the life of me, I can't understand why people are using it as an investment. By the time you pay 22% buyers premium on the buy side and 10% commission on the sell side (assuming no discount rate is given), it is tough to even break even. If you add to the fact that capital gains rate on collectibles is 28% - more than the tax rate for married filing jointly up to $326,600 (24%) - cards as an investment make other people money but it is tough to break even - even after holding onto the cards for a few years.

Transaction costs are the most misunderstood and ignored factor by the majority of people (whether it be baseball cards, stock options, making a bet in a sportsbook, you name it). And the prevalence of them for a particular trade or investment is so paramount to someone's bottom line.

I've seen people (who are otherwise great with money and experienced securities investors) buying and selling options with a bid-ask spread of 5.25 by 6.50. Similar to your example of what happens in the card market using ebay or auction houses.

No sign of this changing though. People still like to attempt flipping cards regardless of that uphill battle from the beginning, and the market's done so well lately that it disguises how tough it is during times like this