Sand In The Vaseline

A Burning Question For Our Times

Reader Pablo asked me:

“I wonder if the looming financial crisis will tank the vintage market or if we’ll have a situation where wealthier investors (and collectors) will be gobbling up everything as collectors turn to selling their cards to pay the mortgage.”

Assuming the premise of Pablo’s question (I am not convinced there is a looming “financial crisis” but do believe we are overdue for a normal stock market correction and standard brand business cycle recession), the short answer is “yes.” The longer answer is…longer. I can’t tell you what to do but I can tell you what I did the last time we had a downturn.

In the 2008 Great Recession the residential real estate market was devastated here in SoCal. As a construction, real estate and business lawyer in Los Angeles, I did a lot of work in the California real estate-related fields in the ‘aughts; it was a frothy time. People were rolling in easy money and flinging piles of it at me to construct various deals for them. I recall going to an industry party the summer before the crash to glad-hand clients and even I was disgusted by the giddiness and recklessness of the people there. One particularly vulgar ‘playa’ was walking around with $200 bottle of Johnny Walker Blue to share with whoever wanted a shot and a giant dollar sign bling on a big gold rope around his fat neck. Ugh, gross. A few months later, it was over. All of my real estate clients went belly up virtually overnight and my wife lost her near full time accounting gig with a real estate advertising company. I got back from the National, had three days’ work, then nothing except bills to pay. ‘Best’ of all, none of the real estate people paid their summer bills; I lost months of cash flow overnight. The cash flow crunch left me to sell cards on eBay just to cover my nut for a few months, which I did. I was lucky it was quick; for every real estate client that I lost, I soon picked up two collections clients looking to get paid, often by the real estate industry. My practice was back up to full speed within two months and stayed humming at a record pace as I shepherded creditor clients through the bankruptcy and foreclosure processes. The Lawyer’s Prayer (“Lord, please sow distrust and dissent among the people so that thy servants may feast”) answered again.

The card market stayed afloat for several months after the real estate industry collapse, then certain sectors started to tank, some dramatically. I had the cash flow, so I started buying as prices dropped. I didn’t plow thousands into a few Babe Ruth cards for the ol’ PC (I should have); I plowed money into hundreds of PSA slabbed HOFers from the 1960s and 1970s. 4Sharp Corner, a big dealer that slabbed thousands and thousands of postwar mainstream cards under a special discount arrangement with PSA while mining for 9s and 10s, had its own website where it would liquidate the chaff returned cards at an extreme discount. I was grabbing up stacks of vintage PSA 6-7-8-9 cards for as little as $2 each and bundling $75 or more to get free shipping. It was nuts. I couldn’t get a card slabbed at PSA for under $6 plus delivery at the lowest point and here they were selling PSA 8 1970s cards for a fraction of that, delivered right to my door for free. I also started grabbing quality prewar boxing on eBay because the market was thin and the downturn just destroyed it. I remember picking up an E80 card and thinking just how nuts it was that the card had crashed 90% in a year.

In the end, I had hundreds of slabs at an average cost of well under the cost of bulk submittals to PSA and a pile of raw cards at very low cost, many of which I sent in to PSA under its various bulk specials before things went COVID nuts at the Evil Empire. I sold the vast majority of the slabs into the inflating COVID bubble for big multiples of what they cost me.

Nothing I did was new or revolutionary. I had the cash, so I followed age-old investment advice and behaved as a contrarian investor. 19th century investor Baron Nathan Rothschild is rumored to have said: “the time to buy is when there’s blood in the streets.” Warren Buffett definitely said: “Be fearful when others are greedy, and greedy when others are fearful.” If your life is stable, you can take advantage of someone else’s losses. So, to answer the original question: you better bet that there are lots of wealthier collectors with the means to weather a downturn and the resources to snap up great cards at a discount when the less fortunate are ready to sell their collections to pay the mortgage. The real vultures will be buying entire collections.

I was lucky; I freely and totally admit it. The risk of a contrarian investment is that you may be wrong or too early to keep it. That’s the problem with predicting a market: easy to do but hard to stick with to when things get dicey. I’ve never had the minerals for the really big swing, though. Hell, had I been firmer in my convictions on cards in the mid-1990s and bought what I thought were great investments, I would be retired on the proceeds of just a few of them.

Let’s say I really believe a downturn is coming and I can and want to follow Rothschild and Buffett and buy when everyone else is panicked. I’d want to have a pile of cash waiting in a high yield savings account. If I don’t want to sit waiting for a crash to get into things, about all I can suggest is to look for inefficiencies. Where are the fringes of ignorance in the hobby, where people will sell things way too cheap? Where is there a stupid divergence between like things? If it costs X to grade a card and Y to acquire it, the value of the graded item should be X + Y. If the value is a fraction of X + Y, maybe that is an inefficiency to buy into…

But don’t take my musings as advice; I dunno, I’m just some guy running his yap about cards.