Collectable Cards

What are collectable cards?

The difference between cards and stock [is] nobody loves a stock.
Ken Goldin

Trading cards are often seen as something for children or teens, you probably remember them from your childhood, even if it was just trading your favorite soccer player cards with your friends, but they are actually a much bigger market that has been around for more than a century. One of the ways to discover a card value is in fact how old the card is, some collectors that kept their childhood cards, can now sell them for a high price.

To define trading cards, they are “a small card, usually made out of paperboard or thick paper, which usually contains an image of a certain person, place or thing (fictional or real) and a short description of the picture, along with other text (attacks, statistics, or trivia). There is a wide variation of different types of cards. Modern cards even go as far as to include swatches of game-worn memorabilia, autographs, and even DNA hair samples of their subjects.”

Collectable cards as we know them today have a history dating back to the mid to late 19th Century with the earliest datable cards being issued in the 1870s. They started being used as advertisement when companies needed a way to publicize their products to a majorly illiterate public. With time the designs became more elaborate and these advertisements started to attract the attention of some very talented artists which made the design quality of the early trade cards much better, although at first, they weren’t really meant to be collected. It was only later with cigarette cards (cards put inside of cigarette packs to protect them) that the public started being interested in the collection of these objects. These had pictures of famous celebrities or politicians, animals and exotic places which to many was the only way to see the world.

“From the 1990s up to present day, the cards we see are predominantly those that are produced and sold in their own right as collectables. We could argue that today is the age of the ‘trading card’ as cards are seldom issued with other products anymore”.
This was one of the businesses that actually benefited from the pandemic, in particular sports cards where the lack of sports events drove the fans to look for something else they could cherish. Some people see it as owning stocks over a certain player. For example, if you buy a cheap card of a newcomer player and he turns out to be a star, you can resell it for much more. In particular, Michael Jordan cards saw an increase of 50% in the first few months of 2020.

Some of the most valuable cards ever sold are in fact sports cards, (like a Honus Wagner card, a famous baseball player sold for an unimaginable $3.12 million back in 2016), there’s many other types of cards (like Yu-Gi-Oh! card that reportedly sold for 2 million dollars) that sell for very high prices, making it a very profitable business.

*Two of the most valuable cards ever sold: on the left the Honus Wagner card and on the right the Tournament Black Luster Soldier Yu-Gi-Oh! Card.*

Market Analysis

As mentioned before, trading cards’ market has seen a considerable growth since the emergence of the covid-19 pandemic. All the major sectors such as Basketball and Baseball (leading the sports scene) and Pokemon and Yu-gi-oh (the most valuable Trading card games), saw their cards’ price grow, mainly due to people’s need for a new hobby during lockdown, a need that drove them to check their basements and open their old collections. This made some people realize that the old collection they had as kids turned into a gold mine, raising the supply in the market with new people trying to sell their cards, but also raising the demand, since people wanted to either finish their collections or simply invest in cards to later resell them.

This recent growth has expressed itself in many ways throughout the markets. In the basketball world, February 28, 2021, set the record for the most expensive basketball card sale to date. The 22 years old Slovenian player Luka Dončić’s card, formerly sold in December 2019 for $3.2 million, sold for $4.6 million, adding up to a 43% growth in little over a year. 2021 also set the record for the biggest sale in the trading cards universe, a 1952 card of the American baseball player Mickey Mantle, sold in January for $5.2 million.

On the Trading Card Games, Pokemon’s rise saw unprecedented levels, mainly due to the influence of famous YouTuber Logan Paul. With a huge following of over 20 million subscribers, in October 2020, LoganPaul released his first Pokémon pack opening video titled “I bought a $200,000 box of Pokémon cards”,anyone would have thought that it would influence the market on such a large scale, for example, after this date the 25 most expensive cards ever sold were purchased: from mid-November 2020 to the end of February 2021, likewise the value of each card increased very strongly.As an example, the fourth most expensive card, “1999 Pokémon Base 1st Edition Holo Charizard PSA 10” (PSA is a measure used to evaluate the quality of the card) was worth $36.000 on December of 2019, and one year later, on the 13th of December 2020, sold at $350,000, showing a 972% increase in price.

Pricing the Collectable

How are trading cards priced?

In the trading cards market, there are different types of prices at which the cards are sold. These prices depend on the circumstances in which the owner of the item sells the product. The first price of any card, the retail price, is the one determined by the retailer itself. For example, a package of Pokémon cards costs $4 at Wal-Mart nowadays (with the problem of not knowing what is inside). Also, the price of a trading card is not the same if the owner is selling it to a trading card dealer as it would be if sold in an auction or directly to a collector. Yet, besides the different prices at which a trading card can be sold, there is always a maximum price that someone is willing to pay. There exist some objective applicable criteria that helps determining their price, but for the most valuable cards the criteria are normally subjective, with factors such as the willing of rich people to own a specific card leading their market price. In this sense, and within the global pandemic, the price of the most valuable cards has gone to the sky due to the growth of demand as a result of the increasing interest of people in the topic.

Moreover, the general criteria which determines the price of trading cards are generally the following: age (how old the card is), condition (trading cards in excellent condition tend to be worth more than cards with flaws like centering issues, dinged corner and creases), scarcity (most times, the most valuable cards on the market are those which just exist in a very limited amount). Also, there are specific characteristics of the cards itself such as important characters, limited editions, rookie cards or superior powers (for trading card games) that are important in some way for the public. However, as mentioned before, there are many trading cards sold at auctions for enormous amounts of money just because those are the last items to finish someone ́s collection.

Normally, the prices for trading cards are already stipulated at online or physical price guides such as SMR ́s PSA where experts stipulate the current value of a card based on past sales of the exact same item or on similar ones. As well, the auction prices of the cards are registered on platforms such as PSA Auction Price and eBay, and as result the consumers can estimate and consult the value of their cards checking the last sales.
Following, there are two examples to describe the specific characteristics which give more value to trading cards, and also to show the lector some average trading card prices and how they evolve in time .

Examples:

Baseball cards:

For baseball cards, the specific characteristics to make them more valuable are, the year when it was produced (there are some years with better reputation than others), the players portrayed on the card (Willie Mays, Mickey Mantle, Hank Aaron, Ted Williams, Roberto Clemente…), the players rookie cards…; normally, the older a baseball card is the more likely it will have higher value.

*Harry Brecheen #28 1951 Topps Blue Bac*k

Player: Harry David Brecheen (October 14, 1914 – January 17, 2004) pitched for his entire career in St. Louis with the Cardinals (1940, 1943-1948) and the Browns (1953).
Age: 1951
Characteristics: The 1951 Topps H. Breecheen is a special card, first because he was a hell of a pitcher, but also because it is from the first Topps baseball card set.
Value: A normal card from Brecheen wouldn’t be worth more than a two-digit number. With a starting price of less than a dollar when acquired for the first time probably on a chewing gum package, the PSA 10th grade card is now valued in $1.405,30 dollars (the last price at which it was sold in an auction). Even though the card is from the first Topps set, the set is underrated and this is one of the only cards that overpass the $1.000 dollars mark, this because it wasn’t very popular at the time, the cards set realized one year later are worth thousands more.

Pokémon Cards

The specific characteristics that determine the value of a Pokémon trading card are: the rareness of the card (there are common, uncommon and rare cards), the composition (there can be different materials for one same card) and the character’s popularity.

*Pidgeot-Holo 1St Edition | Nintendo Pokemon Jungle*

Pokemon: Pidgeot is a normal / flying type Pokémon introduced in the first generation. It is the evolved form of Pidgeotto.
Age: 1998
Characteristics: The Pidgeot – Holo 1st Edition is a special card firstly because of the fact of being a first edition, then because it is from one of the fist sets realized in America, the Jungle set, and last because it as a Holographic card.
Value: Normally, unlimited, common made material cards of that single set wouldn’t be worth more than a few dollars but because of the special characteristics, nowadays a Pidgeot-Holo 1st Ed. GEM-Mt 10 (best PSA grade) is worth $1.484,83 dollars in average, $2,299.99 dollars was the PSA highest price registered for this card.

Pros and Cons

As we have already seen, collectible cards are an item with a good market, however, other factors should be analyzed before deciding whether or not to invest in this type of asset. For example, it has been shown that they have been able to match inflation or even increase in value due to inflation, something that would differ from traditional investment options. Trading cards provide a unique opportunity to keep your investment portfolio diversified. The more diversified a portfolio is, the safer you will be in the investment branch. In case one form of investment does not generate a good return, you have others to back up the losses. Needless to say, investing in alternative assets is fun. Many people do it for the sheer pleasure of owning something that no one else has. With these types of collectables you are able to invest in what you like, if you are a baseball fan you can acquire a Babe Ruth or Mickey Mantle card keep it in your personal collection and wait a few years for it to increase in value, this point refers to the emotional part of this type of investments, since they allow you to obtain a level of satisfaction even before the profit.

Above mentioned relates to one of the major disadvantages of collectible cards, they are a long- term investment: in most cases they can take several years to increase in market value and do not provide any income until you sell them. Jane Raffan of ArtiFacts Art Services says that research shows that 5 years is the “absolute minimum, in most cases” for an investor to expect to make a profit on resale, while 10 years would be a more realistic time frame.

Another negative point is that collectibles are subject to fairly high taxes: the capital gains tax on your net gain from the sale of a collectible is 28%. You may also be subject to a net investment income tax of 3.8%, depending on your adjusted gross income (AGI). As long as you keep the item for more than one year, you will not pay more than that amount. This type of collectibles requires a good insurance, since, being mostly antique objects, they demand a lot of care and can be easily mistreated, one of the insurance companies that specializes in this type of assets is Collectibles Insurance Services founded in 1966, a collection valued at $ 50,000 was quoted at $ 342 in annual premium cost, this despite being a constant expense during the time it is kept, is a minimal amount.

Growth and Expectations for the Future

In the chart above we can see the PWCC 100 index against the S&P 500. PWCC 100 is an index created by PWCC Marketplace, the largest seller of investment-grade trading cards, year after year it generates such index based on the ROI (Return-on-Investment) of a specific group of qualified cards, such data is provided by eBay and VintageCardPrices.com. As of December 2020, the PWCC 100 was scorching hot relative to the S&P 500 at 392%, denoting good resilience to the pandemic. As traditional asset markets are proving volatile amid financial turbulence and economic uncertainty brought on by the Covid-19 crisis, non-traditional assets, including art, wine and collectibles, are getting a closer look from investors. Brent Huigens, CEO of PWCC Marketplace mentions “While the comparison to the stock market of late is interesting, future growth could be much more extreme as trading cards become increasingly apparent to tangible asset investors.”

Information compiled by eBay reported a 142% increase in trading card sales in 2020, with soccer (up 1586%) and basketball (up 373%). Collectible cards are particularly attractive because they can generate revenue; in the wake of this new interest sports card producers have taken advantage of the increased interest to raise prices: they are printing smaller runs, often stamped with serial numbers (so they can be collected), and offering premium autographed versions. “Sports cards are the furthest thing from a “get rich quick” scheme. But just like real estate, the stock market, or anything else, there are inevitably moments when things burst in value due to supply and demand” Gary Vaynerchuck. The last two decades have been transformative for investments, they have shown us how volatile the financial markets are, so it is not such a bad idea to rethink portfolios and start investing in something alternative like collectible cards.