A Sports Post: Are Baseball Cards Good Penny Stocks?
If you don’t follow sports, the only reason to read this post is that it’s really fun to watch a good debate. If you do follow sports, this post may save your life. Here we go: Tom Joyce’s article on “The Fading Novelty of Baseball Cards.”
About 25 years ago, hundreds of fans would flock to weekend baseball card shows to buy up as much cardboard as they could. They took risks, shelling out $60-$100 ($106.70-$176.78 in 2016 USD) for Jose Canseco and Darryl Strawberry rookie cards, both of whom were on Hall of Fame tracks earlier in their careers. Heck, 19-year-old Todd Van Poppel’s 1991 Upper Deck rookie card sold for three dollars ($5.30 in 2016 USD) apiece before he had ever even pitched in a big league game….So what about those Canseco and Strawberry rookie cards that could warrant a Ben Franklin in 1991? Now, they typically go for a couple dollars at most.
Hate those players, don’t hate the game. Darryl Strawberry’s career tanked after his cocaine problem got out of hand. Jose Canseco’s steroid scandal was a final black mark against a career with only a few, all-too-brief prime years. But you don’t have to take my word for it. The Fool weighs in
Certainly there have been disappointments — Darryl Strawberry’s career fell off a cliff during his age 30 season in 1992, and he served a cocaine-related suspension in 1995; while Jose Canseco, Roger Clemens, Barry Bonds, Mark McGwire, and Sammy Sosa have seen their stocks hammered for steroid-related reasons. And clearly, valuation is always a valid concern, as it is with stocks: You can’t overpay and expect to generate a sufficient return on investment.
Todd Van Poppel is probably the biggest example of a Billy Beane-like flop in the majors since, I don’t know, Billy Beane. (In other words, a player who was overrated because he fit certain criteria that turned out to be unrelated to actual success at the major league level.)
Look at Todd holding that baseball. Notice that it’s a four-seam fastball? Yeah, well, major league hitters know how to hit a four-seam fastball, no matter how fast you throw it, unless you have other stuff as well. (Todd did not.) Now, on to Joyce’s bizarre math:
If [the 2010 Beckett listing of 7,851 cards] were the only cards made that year and each company produced the same number of them, that would mean there were nearly 10.7 million of each card produced.
Okay, but that’s not what happened. The card companies did not produce equal amounts of all types of all cards. You can *tell* they didn’t because a Mark McGwire rookie card can be worth anything from $1 to $500, depending on how many copies of that card exist.
Even someone like Steve Lyons, who was not much more than a replacement-caliber player in his nine-year career, had five mainstream cards in 1991.
Just because 5 kinds of Steve Lyons cards exist doesn’t mean you can multiply 5 * 10.7 million and get 53.5 million Steve Lyons cards. (I mean, in Steve Lyons’s case, maybe. That guy wasn’t very good. But the same cannot be said of All-Stars featured on various “special edition” rares.)
Topps (or the other, now-defunct card companies) doesn’t care what those cards are worth now.
The fact that Topps doesn’t exist any longer doesn’t change the collector’s market very much; nobody accepts Roman coins as legal tender anymore, either, but they’re still in demand.
At 60 cents ($1.07 in 2016 USD) for a pack of 10 cards became a penny stock investment for sports fans. And like most penny stocks, the investment failed miserably.
Joyce seems confused about what a penny stock is supposed to do (he also seems confused about sentence structure). Most penny stocks remain fairly static. Some of them depreciate, but that’s OK, since they weren’t expensive in the first place. (No, paying a couple cents per card is not making an expensive investment.) A few skyrocket, based on returns that aren’t knowable in advance (such as how a player’s career will turn out). But, even when they skyrocket, they’re still cheap. If a Darryl Strawberry card cost me two cents, and now it’s worth $2, that’s a very large return (10,000%).
It’s difficult to find someone who wants to buy those old junk wax commons except the occasional shark at a card show offering up one dollar for 1000 cards or five dollars for 5000 cards….Not worth the time and gas.
Bad deals from auction sharks do not determine the market value of a card. (I’ll get to the “time and gas” issue in a moment.) Let’s say you get a 1.5% APY on your card collection per year. That means, if you initially invested $1,000, you now have a collection worth $1,563.
That may not seem like a lot of money, given a 30-year wait, but the initial investment wasn’t all that big either. A savings account with 0.11% APY (the 2016 national average) would yield a profit of just $33 over the same 30 years.
Card shops were go-betweens that marked prices up further because they paid a rent/mortgage selling baseball cards, as absurd as that may seem now. With the Internet as America’s preferred marketplace now, there’s no longer a need for that markup.
While there’s a romance to brick-and-mortar shops and card shows, you can’t have it both ways. If eBay is driving down card values, it’s also driving down opportunity costs for collectors. Is making a purchase on eBay worth the time and gas? I think so. But don’t worry, I won’t be buying your Todd Van Poppel rookie cards anytime soon. I like this guy Johnny Damon better. Without him, the Athletics are screwed.
Until next time, this is Kugelmass saying…