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  #1  
Old 08-25-2005, 08:13 AM
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Default High grade cards are undervalued

Posted By: daviddbreadman

I am going to put a thesis that is going to be disagreed with, but here it is.

Its my opinion that the market for sportscards, especially high grade ones... perhaps PSA 6 and above for a T206 for example, is becoming more effecient. In the stock market an efficient market is basically defined as a market that is priced such that all available information is taken into account and prices accurately reflect all available public information.

To that end, I beleive that high grade cards are undervalued and will continue to increase until the market reaches an equilibrium point on supply and demand. This 'hobby' has expanded to include more and more of us who beleive that cards are not only beautiful but have inherent value as investments. I beleive this growth in demand has outstripped supply by a huge margin that is largely unrecognized by those who have been in the hobby so long they are biased to want 'things as they were'. On the supply side, Population reports are invaluable and a must to gain proper market information. I also beleive that as the market becomes more efficient there will be less and less high grade raw cards as owners look to 'legitimize' their cards by getting them graded. It will become a must if you want to sell your card for its full value. This will increase the accuracy and quality of information gained in population reports.

I can go on and on with my argument but will stop here and state lastly that contrary to what I read on this board I beleive that those paying so called exorbinant prices for high grade cards are indeed the 'smart money'.

Times are changing and those of us participating in this hobby must constantly evolve our thoughts to survive.

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  #2  
Old 08-25-2005, 08:36 AM
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Default High grade cards are undervalued

Posted By: Keith O'Leary

Now theres a different point of view!

*

Guess my collecting days are over .

*

*

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  #3  
Old 08-25-2005, 08:36 AM
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Default High grade cards are undervalued

Posted By: David Vargha

Gotta get to work, but here are my quick thoughts . . .

Above all, the marketplace will determine value, whether we agree with the judgment of the market or not. Like it or not, the PSA Set Registry has changed the card collecting landscape forever. Additionally, the population reports, while not fully accurate, have become a valuable gauge in determining relative scarcity.

It really depends on how you define "high end". If you are referring to pre-war sets where cards in EX, PSA 5 or SGC 60 condition are scarce, then I would most certainly agree. If you are talking about condition rarities for set registry collectors (such as the much ballyhooed PSA 8 Goudey card that has been discussed ad nauseum on this board), then you have a mixed bag. Again, refer to my point above regarding the marketplace. If two or three collectors are heavily pursuing that set and card, then prices will be strong. However, a population shift of even one more at that grade or the elimination of competitive bidding for that card results in a substantial drop in the hammer price. Once you start to get into condition rarities for the 50's and 60's, the proposition becomes even dicier.

(edited to correct bad grammar)

DavidVargha@hotmail.com

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  #4  
Old 08-25-2005, 08:50 AM
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Default High grade cards are undervalued

Posted By: identify7

I agree with your assessment in general, however, I think that as cmoking has pointed out; lessons can be learned from more mature hobbies.

Specifically, although grading has many advantages, many astute collectors prefer direct contact with their cards. Independent of third party documentation, identification of the best examples of the more desireable cards will occur. The result will be a condition census in which specific identification of each of the top cards will be established and their ownership tracked.

This process will show the population of the desireable cards in the top grades which they exist. In most cases these cards will all be 10s. For less common cards, those which have survived may be in any condition. All cards which fall below the condition census will be far less desireable; although still possibly good investment items.

High end card population reports generated by grading services must be inaccurate. The difference in values between top grades will continue to mandate resubmissions in an attempt to achieve a higher grade. The cost effectiveness of these resubmissions on just a single upgrade will continue to make the gamble worthwhile.

What results is a population report which containes data skewed by these attempts to achieve a higher grade and slabs which contain cards which just barely squeeked through to get that higher grade. Upon achievement of this status, having a slabbed card is admitting to owning low end (for example - PSA 9). So instead of a pedigree, a slab becomes a stigma.

I hope I have stated my opinions clearly enough to be understood. Certainly I may be wrong in my forecasts. But not necessarilly.

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  #5  
Old 08-25-2005, 09:03 AM
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Default High grade cards are undervalued

Posted By: cmoking

David,

You stated an opinion, which is fine, but you don't back up your opinion with anything credible. Sure the market is getting more efficient, but efficiency doesn't mean higher prices. Efficiency could lead to lower prices. Your opinion may be right (I'm not arguing either way), but you lack any valid reasoning why you hold your opinion. Yes, supply and demand should meet at the efficient price, even in a hobby, but you don't state why you think that efficient price is higher than the price cards are selling for now. Maybe you have other things on your mind in this issue, you state that you 'can go on and on', I'd like to hear more logic behind your reasoning.

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  #6  
Old 08-25-2005, 09:29 AM
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Default High grade cards are undervalued

Posted By: Hal Lewis

I don't think it is possible to know YET which way it will go... because I think it is "card specific."

Take this specific card for example, as it is clearly an important card:



To date, there are only 3 such cards graded HIGHER than this one. Those PSA 8's are selling for $125,000 with the juice in major auctions.

If 20 years from now there are STILL only 3 such cards graded higher than it...

then I completely agree that this card is UNDERVALUED and will be worth a great deal more at that time because of its rarity and its fame.

BUT...

if 5 years from now there are 13 such cards that are graded higher than this one, then I believe that the value will indeed fall down a good bit.

SO...

the big RISE in prices of vintage graded cards is important in the long run, because it is the ONLY thing that can perhaps drive all vintage cards OUT of long-time "collections" and into the "free market." People just can't afford NOT to sell them.

THEN... and ONLY then... when a majority of the cards are graded and accounted for... will we have a much better sense of how many high-grade cards exist and what they are truly "worth" to collectors.

REMEMBER...

while there are a LOT of cards still ungraded in private collections, there are also a lot of nice "looking" cards that will NOT grade too high. This is why they remain ungraded.

A lot of old-time collectors trimmed their cards, so they may LOOK pristine but will NOT grade well.

A lot of old-time collectors glued their cards to something, thereby messing up the backs.

A lot of old-time collectors didn't care too much about scratches on the surface or creases or corner condition.

AND...

since we are talking about OLD cards that are ONLY still around because they were saved by these very same collectors...

the odds of finding a high-grade rare vintage card that just "shows up" somewhere are slim to none.

BUT...

there WAS a huge find last year of MINT condition 1914 Cracker Jack cards that sold for $800,000 for the whole set...

so let's keep an eye out and see what that does to the value of all the OTHER graded 1914 CJ's that PREVIOUSLY had been considered some of the highest graded examples.


Does anyone know what the "find" of 1914 CJ's has done to the price of OTHER high-grade 1914 CJ's???

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  #7  
Old 08-25-2005, 09:36 AM
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Default High grade cards are undervalued

Posted By: FYS

The market is far from efficient at the moment. There are conflicting views regarding how much product has yet to be uncovered and how much product is sitting in private collections that refuse to use 3rd party grading. You will also get varying views on how many people actually collect particular sets and to what degree (low grade/taking their time etc.). In order for a market to be efficient, all known information on a particulary must be public. That is far from the case. Population reports, eBay completed and the number of posters on this and other forums does not equal efficient information. More efficient, yes, but not efficeint. There are also many long time collectors that have knowledge and information about various collections that few other people are aware. Again, this contradicts an efficient market.

In any case, who cares, collect what you enjoy and pay for what you can afford.

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  #8  
Old 08-25-2005, 11:00 AM
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Default High grade cards are undervalued

Posted By: identify7

I care.

Not because I will ever own a high ticket card.

Solely because I want to know the scope of collectibles in my hobby. I want to know if Hal's Ruth is third best or thirtiest best. We can not even determine orders of magnitude here.

Persons have put away cards when they were very inexpensive, and although they have appreciated very significantly, current values do not flush them out. I do not think that anything that can happen in the hobby, will flush them out. Because I think that many of the holders of these cards are not in touch with the hobby nor need to cash out the heirlooms.

But what do I know? Nothing. This is solely speculation. Maybe there only exists an insignificant quantity of important cards which the hobby is unaware of. But important stuff keeps popping up.

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  #9  
Old 08-25-2005, 11:01 AM
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Default High grade cards are undervalued

Posted By: T206Collector

General statements about how market price is driven by supply and demand (okay, I follow you up to this point) followed by broad, unsubstantiated and flawed assumptions about the supply and demand of baseball cards in various conditions and across 3/4 of a Century today does not persuasively argue that the market for vintage cards is "efficient" or nearly establish that relying on population reports to determine relative scarcity is anything other than inane.

As I have previoulsy opined elsewhere in this forum, people who argue that population reports establish relative scarcity are more likely than not defending expensive purchases that they have made. It is just that simple. Nothing more than the biased opinions of collectors who want to believe they own the only truly mint T206 Unglaub card, and then want the rest of the world to believe they made a good investment by spending more than a $1,000 on it. The only way that makes sense is if you buy the skewed view of the world set forth in the various pronouncements above (and in other posts on this forum).

With any economic model -- whether you are calculating the gross domestic product of China, or the market value of a T206 Grimshaw in PSA 7 condition -- there are always going to be assumptions drawn. It is beyond refute that the assumptions being drawn by those deluding themselves (and others) into thinking that population reports actually reflect true scarcity in the market are deeply flawed. It reminds me of an old "joke" that I was told in one of my economics classes in college:

A philosopher, a chemist and an economist are stranged on a desert island without anything to eat. Just before they are about to starve, a crate with hundreds of cans of food washes ashore. The three gentlemen set to work devising a plan to open the cans.

The philosopher recommends that they all sit down and really think about whether or not there really is food in the cans.

The chemist disagrees, explaining that it would be much better to leave the cans in saltwater long enough so that the cans will corrode and open on their own.

The economist just shakes his head at both of these suggestions, and replies, "Fellas, it's easy. Just assume a can opener."

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  #10  
Old 08-25-2005, 11:49 AM
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Default High grade cards are undervalued

Posted By: warshawlaw

that rarity is not the same as condition rarity. High grade cards that are rare are good investments. High grade cards that are condition rarities (i.e., there are lots of lower grade specimens) are much more speculative investments. They depend on the continued competition of a comparatively small segment of high grade set builders. I would much rather have a PSA 3 T206 Plank than a PSA 8 T206 Cobb because I know that the Plank will always be in demand from a wide audience of collectors.

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