Buggy Whip Manufacturers Association or The Big Short?

Welcome home from the National, everyone. I hope you all had a great time, and best wishes to those who came home with COVID (I know of four cases in my little circle of friends).

I am hearing a great deal of protest from modern card folks about the attitudes of collectors of vintage cards. Basically, it takes the form of a whine about how it isn’t nice to crap all over someone’s way of collecting, and it isn’t fair to label people who collect modern cards, participate in breaks, etc., as “stupid”.

That isn’t what is going on at all. People are not being called "stupid"; some collectors are being told they are engaged in highly speculative investment activities, spurred on by investment touting and log-rolling that tries to gloss modern cards as investment grade items, and they should watch their sixes. Collect whatever makes you smile. I am into utterly worthless but absolutely beautiful prewar Japanese printed invitations, greeting cards and postcards. But when you start talking the financial end of it, you walk into the buzzsaw of critical analysis.

Now, the criticism/advice isn’t gratuitous. Those of us voicing the warnings on modern are not making personal attacks and aren’t doing it for shits and giggles. We see ourselves less as scolds than as Cassandras. No one likes to hear "remember thou art mortal", but we say it anyway. Long-time collectors have real world perspectives on this: we are sitting on monster boxes full of it. What has been expressed is the wonder at how history repeats and how the lessons of the past typically are relearned the hard way by those who are new to the field and are convinced that this time it is going to be different than it has been in every single other speculative bubble over the last 40 years. Ignorance can be bliss, but in investments, ignorance is fatal, and as the hobby evolves into a form of alternative investment, more money than ever is at risk, yet many act as if risk was non-existent and us old farts are just being dicks about it.

I happen to think, from what I see, that a sizable percentage of newbies are dangerously ignorant of the hobby’s boom-and-bust cycles. They have never seen, nor do they comprehend, what happens in the hobby when we have a basic, high unemployment, 6–18-month recession. Sales flatline and prices drop. Not a problem if you are holding a card with a population of a few hundred. It will come back. When no one is buying abundant, hyped cards on the flip, however, these newer participants are going to crap themselves then sell right into a price-demand death spiral. They always do. It crashes the items that are speculative, thinly collected, not otherwise subject to genuine collector demand, or with a massive pop. Does that mean every Kaboom! or Jambalaya is going to fall into the commons bins? Of course not. But prices will drop hard and fast and when your financial model depends on rapidly laddering prices, look out below.

I don't think there is a serious debate to be had that a sizable percentage of newbies are engaging in a form of young player/new card speculation that has a long track record of failure. The cabinets of longtime collectors are littered with the cardboard images of flashes in the pan, from Ron Kittle to Kevin Maas; we've all got piles of junk (damn you Keston Hiura). Most prospects will go sour, as will their cards. There is no reason to believe that the people speculatively accumulating cards of shiny new players will have a different outcome than everyone else who followed that strategy in the last 40 years. What does stand out today is the steep trajectory of the price increases and the resulting incredible sums at risk, so much more than in any other rookie card run. I don't really care that the twenty bucks I put into Topps Walgreens yellow Hiura cards is gone; I would be shitting egg rolls if I'd spent thousands on a signed shiny limited edition thingy. The scary thing about modern is that there are tons of very expensive signed shiny limited edition thingies that place really large sums of money at risk and that new ones come out practically every week.

The unprecedented level of hype is real too. What is shiny and new today is not so shiny or new next week. There is a strategy being deployed to manipulate people who do not have sufficient perspective into buying items and services that are not likely to have real value over the long haul. In that regard, Fanatics and Panini and all of the breakers and influencers remind me of stock bucket shops slogging dodgy IPOs. There is an epic degree of pumping by influencers, manufacturers, and the people who make money off the speculators (the service providers like PSA and Goldin). What is missing is end user collector demand for all this product. The proof of that, as it was in past crazes, is how many of these cards are being slabbed, sold and resold rapidly rather than disappearing into long treasured collections. 30 years ago, it was 100 count stacks of Gregg Jeffries and Gary Sheffield 89 UD cards. Today it is the latest shiny, varied, limited edition card. Both scenarios featured rapid price rises and frenzied trading of abundantly-available cards. That form of price laddering looks great but it has a nasty way of crashing, especially when the economy cools (e.g. unemployment rises); it is true with IPOs, it was true of every rookie card bubble, and there is no reason to think it will not be true here again. Take NFTs as a cautionary tale of hype without substance. The believers in NFTs are strangely silent now because they got cleaned out when the hype failed and the music stopped playing; Bored Ape NFT, anyone?

From a financial perspective, I am not sure the newbs understand that the hobby is a particularly brutal investment when it comes to new players and modern cards because the bet can go to zero very fast and there is no hedging or exit strategy available. Even in a falling stock market, you can set a stop loss and get out, and real estate never goes to zero, it cycles, but when Sam Horn goes down the tubes there is no exit and no bottom except the commons bin. Babe Ruth does not go down the crapper the way the latest, greatest thing will when his WAR falls to 1.8 (yeah, looking at you, Pete Alonso).

That is what is being expressed, not insults. Now, if that is interpreted as "you are stupid, I am smart", that is in the eye of the reader. Heck, I could be off my rocker and missing the greatest investment since Apple’s IPO. I am not Nostradamus; I don't know tomorrow. If I did, I would not waste my time pontificating here; I'd be day trading. I freely admit I could be wrong and this time it could be different. But that cuts both way: if I can be wrong, so can someone with the opposite perspective, and I like my odds a lot better. Either way, there is no need to blow it up into something personal when it is just financial commentary.

I do understand the appeal of the energy and excitement of the modern hobby. It is a very different zeitgeist to be in modern versus vintage. There is an excitement and a movement and a momentum that is its own unique and intoxicating energy. But that is not necessarily a good thing. What happens when we have a run of the mill recession (not the non-recession of today that the GOP is falsely hyping to try and win an election) and that energy stops when the real estate, stock and job markets tank and people feel scared? As I view things, the casino-level action that inspires modern is a symptom of a speculative bubble, not an end in and of itself. People who get into trouble bubbles conflate the two every time.

I also don't disagree with those who point out that minor start and lesser HOFers are not investment cards. They never have been, unless they get that special number from the PSA man and give the registry geeks wood as a result. The more salient questions are whether the vast majority of modern collectors will give a shit about the latest flash in the pan rookies when their WAR figures fall into mere mortal levels, or who will be buying today’s cornucopia of overproduced cards 5-10-20 years down the line. You can buy a 1993 Topps Derek Jeter RC for less than it cost ten years ago. There are thousands of them for sale every day on eBay. Anything that can be accumulated by the hundreds for the asking is not an investment, it is a commodity, and anyone accumulating them is a speculator.

All I know is that when I set up in Anaheim next month, I will move hundreds of pre-2000 cards and 90% of the people approaching me to trade will want to swap overabundant and overpriced modern for vintage. Oh, and every old card I try to buy at auction lately spirals out of my range. The latest Huggins and Scott auction that closed August 3rd set benchmarks on vintage cards I own in the grades I own them. Vintage is very, very healthy and deep.

But what about the scads of kids at the National feverishly dealing in modern cards? Kids are always going to get into the current stuff; we all did. I was abuzz every year with the latest offerings from Topps, and crazy to get that rookie (I recall Willie Randolph’s 1976 cards—the base RC and the traded card— and the Ron Guidry RC with great fondness today as the young stalwarts of the first Yankees team of my childhood to win a pennant). Our current stuff is now vintage. Man, how I chased those cards. A percentage of those kids trading cards will study history and become intrigued with the past, like all of us did; no one is born with a desire to buy a Harry Hooper card. They always do, and the 'boring' cards from 100-150 years ago will come to life for them and that itch will start. First it is the Mt. Rushmore players: Ruth, Cobb, Gehrig, Robinson, etc. Then, it is the next tier down, and so on, until they are chasing regional Claude Osteen cards for their Dodgers franchise collections. It is the journey of a lifetime of collecting.

We vintage guys may be the buggy whip manufacturers association; we also might be shorting the mortgage lenders in 2007. Time will tell.