Memorabilia as an investment

[EddieP]

Memoribilia have no intrinsic value — and so unlike stocks, bonds and real estate— do not generate cash. Their value is extrinsic, i.e. based on appearance and/or what it could be sold for, which may not be its intrinsic value.

In the case of vintage cards you have pictures printed on cardboard. The intrinsic value of cardboard is $0. A T206 Honus Wagner sold for $7+ million. It’s extrinsic value is $7,000,000.

In options the greater the extrinsic value the greater the risk.

[Snapolit1]

Issue with memorabilia is the pool of willing buyers is much smaller than cards. You could have the coolest piece of memorabilia and there might be 5-10 people in the world who would ever consider spending $50,000 to buy it. Because of population reports, VCP, etc., cards are more easily monetized.

There was a breathtaking Christy Mathewson auction on Hunt last year. Truly mind boggling stuff. At the live auction it was clear there were only a relative handful of active bidders when stuff hit the big bucks. The old adage is you only need 2 active bidders to go nuts, but once one of those guys has one of them, the auction next time around might look very different.

[Exhibitman]

You are confusing cash flow with value. Nothing you can invest in has intrinsic value. Income producing real estate is great until you get a deadbeat tenant who digs in like a tick and has to be evicted. Or 60% vacancy rates like we had in office space in recent years. Dividend paying stocks too, until the board decides to cut off the dividends or the company goes tits up. Bonds are great until the debtor declares BK and stops paying.

What does have intrinsic value? Food, shelter, drugs. Stuff you can use or consume. The rest is just value storage or mechanisms that produce the stuff you use.

[EddieP]

Originally Posted by Exhibitman

You are confusing cash flow with value. Nothing you can invest in has intrinsic value. Income producing real estate is great until you get a deadbeat tenant who digs in like a tick and has to be evicted. Or 60% vacancy rates like we had in office space in recent years. Dividend paying stocks too, until the board decides to cut off the dividends or the company goes tits up. Bonds are great until the debtor declares BK and stops paying.

What does have intrinsic value? Food, shelter, drugs. Stuff you can use or consume. The rest is just value storage or mechanisms that produce the stuff you use.

I suggest you read Security Analysis by Benjamin Graham.

[Exhibitman]

Why? Cards aren't stocks.

[EddieP]

Originally Posted by Exhibitman

Why? Cards aren't stocks.

You’re speaking as if a Company has no intrinsic which is totally false. A simple google search can answer that question.

I’ ll make it easy for you:

Intrinsic Value Defined:
Intrinsic value represents the "true" or "fundamental" worth of a company, as opposed to its market price, which can be influenced by market sentiment and speculation. It's essentially what a rational investor would be willing to pay for the company, given its underlying characteristics.
Cash Flow as a Key Component:
Future cash flows are a primary driver of a company's intrinsic value. A company's ability to generate cash, whether through dividends, earnings, or free cash flow, is a major determinant of its worth.

[Exhibitman]

Originally Posted by EddieP

You’re speaking as if a Company has no intrinsic which is totally false. A simple google search can answer that question.

I’ ll make it easy for you:

Intrinsic Value Defined:
Intrinsic value represents the "true" or "fundamental" worth of a company, as opposed to its market price, which can be influenced by market sentiment and speculation. It's essentially what a rational investor would be willing to pay for the company, given its underlying characteristics.
Cash Flow as a Key Component:
Future cash flows are a primary driver of a company's intrinsic value. A company's ability to generate cash, whether through dividends, earnings, or free cash flow, is a major determinant of its worth.

Thank you, you have made it easy to pick apart the fallacies in your argument.

The problem with that classical simplistic definition is that it conflates control of underlying assets and cash flows with ownership of a minuscule unsecured general claim on the business. That is what the securities industry uses to sell stock to retail bettors, er, investors.

Think about it this way: if an alien landed and you had to explain what owning 100 shares of Disney stock means, what would you say you have? Control over the assets or cash flow of the company? Nope. Not unless you are spending millions or billions to gain an appreciable percentage of the entire float, and can get onto the board. Even then, you don't have control unless you control 50%+ of the shares AND can do what you want without the other shareholders suing you in the process. The right to vote on corporate board members? Who cares: you are asked to elect some nominees you don’t know, did not select, and do not control once they are on the board. Dividends? That is not a right, it is a privilege: the board can suspend dividends at will. Anything that someone else can take away is not a right. You don't even have the right to keep your stock. The board can engineer a merger, dilution or sale of the company, or an outsider can make a coercive offer for a majority control of the company and if you hold out you will either be shut out of management or you will be forced to sell. Look at squeeze out and freeze out cases. Oh, and don't forget the creditors of the business: they get paid first before a shareholder sees a dime of the underlying assets. Most companies that are liquidated in bankruptcies yield nothing for the shareholders.

If you don't actually control the assets and can't actually do anything with them, the supposed intrinsic value of what you have as you have defined it is zero. A stock purchase in a public company has value only because the people who are involved in the system with you agree that it does. In other words it is a shared belief system in the value of what the stock represents.

[sb1]

Originally Posted by EddieP

Memoribilia have no intrinsic value — and so unlike stocks, bonds and real estate— do not generate cash. Their value is extrinsic, i.e. based on appearance and/or what it could be sold for, which may not be its intrinsic value.

In the case of vintage cards you have pictures printed on cardboard. The intrinsic value of cardboard is $0. A T206 Honus Wagner sold for $7+ million. It’s extrinsic value is $7,000,000.

In options the greater the extrinsic value the greater the risk.

I used to own that Wagner, do you not think the person that sold it for 7+ bought is an "investment" or to keep in his collection long term??? I can assure it generated them a very large return.

[EddieP]

Originally Posted by sb1

I used to own that Wagner, do you not think the person that sold it for 7+ bought is an "investment" or to keep in his collection long term??? I can assure it generated them a very large return.

I don’t know. You have to ask him. For all we know in hundred years the whole card collecting business could be viewed as another Tulip mania.

[Fred]

I don't look at any of the cards or other memorabilia I collect as assets. All I know is that at some point I need to put a document together telling the family what to do with it all after I kick the bucket. I'm sure they're going to be a little surprised.

For those that have been doing this for a long time, I'm sure the stuff is worth a lot more now than when it was purchased 20, 30, 40 years ago but I'm guessing not many people were thinking, "hey, this stuff is going to be worth bank in 2, 3, or 4 decades." If they did, I'm sure the valuations today are well beyond what they were thinking.

[cardsagain74]

Originally Posted by EddieP

I don’t know. You have to ask him. For all we know in hundred years the whole card collecting business could be viewed as another Tulip mania.

Manias tend to last just a few years. That one, the Nasdaq in the late '90s, the junk wax boom of '89-'92. Or even quicker, like the recent pandemic boom in collectibles.

Sportscards (especially vintage) have had a large, mostly stable market for at least 40 years now. I'd hope that bodes well for the business not being a flash in the pan.