History of Trading Cards as Collectors’ Items
Most people collect something at some point in their lives. Psychologists have identified a vast range of motivations behind the urge to collect, including pride in amassing beautiful objects, the satisfaction of getting a good deal when a seller fails to recognize the true value of what he or she is offering, the thrill of the hunt in seeking out rare items, the desire to create a legacy to pass on, the social aspect of participating in a sub-community of likeminded enthusiasts and simple nostalgia, among many other conscious and unconscious motives.
Trading cards are among the most popular types of collectibles. They trace their roots back to the 1800s, when people began collecting small illustrated“ trade cards” that companies printed first as a form of advertising and then as giveaways included with products to boost sales. Tobacco companies in particular adopted this practice, as the cards offered the added benefit of acting as a stiffener to protect the cigarettes.
In 1886, Goodwin & Company began producing cards featuring baseball players and created one of the first collectible sets. Other cigarette companies followed suit, and collectible cards featuring athletes from other sports, such as hockey, soon became popular as well.
Candy and chewing gum companies eventually took over the trading card market from tobacco companies. The Topps chewing gum company, which printed its first baseball card set in 1951, has since become the market leader in the trading card industry.
The collectible trading card market also includes non-sports cards( for example, cards for movies, TV shows, comics and current events) and cards used in collectible card games( such as Pokémon, Yu-Gi-Oh! and Magic the Gathering, or digital Hearthstone cards). However, sports-related cards have the longest history and are often the most coveted and valuable.
Sports card values are influenced by scarcity and condition, as well as more intangible factors like the player’ s success( current performance, if still active, as well as longer term) and the performance of the team. The most valuable card ever, which sold for $ 3.12 million in 2016, was a
1909 T206 Honus Wagner, produced by the American Tobacco Company.
After decades of being collected primarily by children and hobbyists, baseball cards suddenly soared in value in the late 1980s. The first price guides appeared, and the press hyped the value of sports cards as an investment. Third-party accreditation companies emerged as well, offering an industry standard to help collectors and investors value their collections. These professional grading services, used by all serious collectors today, will authenticate a card, grade its condition on a 10-point scale, seal it in a tamper-proof plastic holder and assign it a unique serial number.
A speculative bubble formed, and card companies rushed to print millions of cards to cash in on the dramatic increase in demand. Children were essentially priced out of the market during the boom years, and cards purchased by speculators were, of course, kept in mint condition, further ensuring oversupply( in contrast, many vintage cards, not initially recognized as having any particular value, have been lost or destroyed over the years). The bubble burst spectacularly, and many observers today remain convinced that trading card values are too volatile to allow cards to be considered a genuine alternative investment.
It’ s true that most ungraded mass-produced trading cards from the 1980s and 1990s are worth little today, and that modern cards are inherently more volatile, as active or recent players’ legacies are not yet fully established. However, many cards, both vintage and modern, have continued to appreciate, and elite specimens have held their value better than more common items.
In addition, technology developments since the mid-1990s have done for trading cards what electronic trading platforms have done for securities and other tradable asset classes, increasing price transparency and execution speed, while reducing transaction costs.
While the idea of a National Best Bid / Offer( NBBO) for baseball cards may be a bit far off, the rise of online auction platforms— such as eBay— has enabled buyers and sellers to connect faster and more seamlessly than ever before. Prices and spreads on each transaction have become more apparent as a result. Moreover, the increased volume facilitated by auction platforms like eBay has worked to bring down trading costs, or commissions paid to the auction house.
A more efficient market system has made it much easier for collectors to see returns on investment. Previously, individual collectors would find it virtually impossible to make much of a profit if they had to purchase at retail and then sell to a dealer or at auction on consignment. The best margins were achieved by finding hidden gems at estate sales or flea markets and then selling at swap meets— a process that may have been highly enjoyable but was undeniably time consuming. The ease of buying and selling online has created a much more liquid and less fragmented marketplace.
What’ s more: the availability of historical market data amassable from online auctions has simplified the performance tracking process. Investors require access to market data, analytics and information on historical returns in order to properly vet an investment opportunity, and new technology allows for the aggregation and analysis of sales data in a way that was impossible just a few years ago.
Regardless of whether a collector relishes the in-person treasure hunt at estate sales and antique shops or prefers the efficiency of an online auction, the availability of extensive sales data makes it much easier to value cards accurately, reducing risk.
Trading Card Market Indices
PWCC Marketplace *, the largest seller of investment-caliber trading cards, has recently begun tracking and cataloguing performance data for trading cards, with the idea that such data will inspire a more efficient, informed marketplace and greater confidence among would-be investors. PWCC recently developed three new market indices that demonstrate the investment performance of professionally graded trading cards over the past decade.
The PWCC Top 100, PWCC Top 500 and PWCC Top 2500 represent the top 100, 500 and 2,500 most valuable trading cards, respectively, as defined by sales price, tracked against the S & P 500 over the past 10 years. The research team will develop additional indices focusing on subsets of the larger market( e. g., pre-war baseball, modern basketball, etc.) as the collection of available data grows.
PWCC uses its own software to capture trading card value, based on original sales data obtained through a partnership
www. MoAF. org | Summer 2018 | FINANCIAL HISTORY 33