Abacus: Retail Investing and the Trading Card Boom.
Icon Sportswire
This summer, as quarantine dragged on, I found a couple of trading cards packed into the back of my desk drawer. From what I remembered, I had saved one in particular knowing it was incredibly rare. After doing a bit of research, my Shining Star Mew card from 1995, after years of relegation in my desk, was now found to be worth hundreds of dollars. This, somewhat strangely, seems to be the experience of many collectors, past and present, throughout this pandemic that has given us all the time to go digging through the past. A few weeks ago, a Michael Jordan rookie basketball card was sold for almost $215,000. Just two weeks later the same card in the exact same condition was sold for $738,000. The trading card market is booming and COVID is just part of the story. The revolution in retail investing has come to fruition in many ways this year. The highly-publicized incident with GameStop highlighted exactly how COVID, as well as, the internet, have created a seller’s market and a volatile environment for everyone. In many ways, the market for appreciable assets everywhere has been changed in the last year. Trading cards are no exception.
The demand for cards at the moment is in part due to the effects of lockdown. With everyone stuck at home, a popular explanation for the moment cards are having is that everyone, just like me, has gone digging through their drawers. This certainly helps explain some of the market forces that are driving demand among older demographics, but what about younger groups? One of the single largest drivers of the demand for cards right now has to be the internet. Look up “Pack Openings” in your browser right now and I promise the first results will be Twitch Streamers and Youtubers who are opening up virtual trading cards or even real trading card packs. This phenomenon of virtual cards has in some ways been keeping the industry alive by introducing that same drive for trading cards, in a new context, that has captured generations before. Further, real pack openings online often have dedicated hyper-specific communities of fans in which the hobbyist card traders have been able to build infrastructure to facilitate worldwide markets for rare cards. eBay alone reports selling 4 million trading cards in 2020.
Beyond the cultural moment trading cards are having, and a recession, where COVID has given people both the time and the motivation to begin investing with free services like Robinhood, high-profile stories like the rise of bitcoin and GameStop have brought even more people into the market. While putting a spotlight on retail investors as mentioned earlier, these incidents have also had more dangerous consequences. Influencers on Instagram and TikTok have taken what they have learned playing the market on Robinhood and offer out tips and advice, sometimes for a price. Other times, these content creators invite their subscribers to join a Discord, where calls to buy or sell a certain stock can be fed to an audience directly. These communities online and the places they overlap, such as Reddit, have single-handedly changed how markets move and have on occasion outright manipulated them. Similar communities, while more niche in the past, exist around trading cards, and now they are in the limelight.
While retail investors have driven up the demand for cards, a good with a fixed supply, Wall St. wants in on the action. Funds have been created that have seen investors gather upwards of $10 million to get into the premium trading card market. More than this, the market for cards has also become more sophisticated, featuring many of the modern advances in trading such as fractional shares for big money cards. That said, with all of this money entering the market at the moment, there are bubble fears.
With rock bottom interest rates to stimulate COVID recovery, many are taking advantage by financing long-term investments. This, in many cases, has seen the value of appreciable assets inflate dramatically, whether it is the IPO of Air B&B or Bumble that shot miles above their valuations, the value of many of these assets is greater than it should be. Dallas Mavericks owner Mark Cuban noted, “When you have such low-interest rates, you’re going to get appreciable assets inflating… I hedged the heck out of my portfolio” when discussing the current market volatility. While he was quick to say bubble fears are overblown, as seen above he does have his concerns about what the value of these assets that have taken off during COVID will be once interest rates return to more normal levels.
While the bubble fears exist, the trading card market has exciting advantages for investors. In some senses, cards make great assets, as they have assigned (I’ll be it arbitrary) rarity that helps preserve their value. Further, the risk management aspect of sports cards, in particular, is exciting for investors. Where stocks, specifically undiversified investments, can vary wildly day to day, sports cards allow investors to put their money on a career instead of a game or a day. This in effect is a powerful risk management technique that makes trading cards such a popular investment.
Josh Luber, Co-Founder of Stock-X, said when discussing the demand for cards noted, in regards to the Jordan card I mentioned earlier, “Everyone in the industry thinks its a $1 million card...But we all thought it was a year away instead of a month”. With real industry players behind what has become of this trading card movement, it seems like the cultural moment is here to stay. Where stock markets are gatekept and people have to learn and develop skills to enter the market, trading cards are near-universal. The online infrastructure is there to support buyers and sellers while also fostering a community around the process of just opening the cards themselves. The cards I kept when I was just 6 ended up making me more money than I could have imagined at that age, so who am I to judge.
