The topic for this go around was a fun one.
Which baseball card or set do you believe will be valuable in ten years? In other words, no matter what happens with the player(s) or industry going forward--injury, steroid accusations, drugs, gambling charges, the demise or ascendancy of Topps, Donruss and Upper Deck--what single card or set from baseball cards past or present do you believe is an absolute BUY and HOLD?
When I first saw the topic, I thought that I was in great shape. I mean, I’ve blogged about card value before, but when I got to thinking about it, I realized that I was at somewhat of a loss. You see, I don’t collect cards for their future value. I collect them because I am a collector. I like cataloguing things, tracking history and seeing changes over time. Still, card values dictate the market by influencing current prices or impacting a Card Investor’s “portfolio.” Compared to the days when my dad collected baseball cards (you know, for fun), the value side of the equation has much more sway today.
I thought that I would take this question from two angles: Economically and from a Collector’s Perspective.
The Economics:
Prices in everything are a function of supply and demand. The two work in tandem, but essentially, as supply decreases or demand increases prices will rise. We saw this with vintage cards (supply=those that weren’t thrown out by Mom when the collector went to college), and see it with players that become stars (as they become more popular, demand increases). Interestingly, with stars, as the become more popular demand increases, but so does supply through the creation of additional inserts and cards to meet demand and drive purchases. One thing that won’t change is the supply of that player’s Rookie Card, but more on that later.
The other key item here is the Price Elasticity of cards. Briefly, elasticity is the market’s sensitivity to price changes. If something is highly elastic (like candy bars), it means that consumers are very sensitive to price. A $2 Milky Way will lose most of its sales to a $1 Snickers. These two items are close substitutes, so a small price change in one will drastically reduce sales. On the flip side are items that are highly inelastic (like Gasoline). There is no close substitute to Gasoline, so price increases will have a lesser effect on how much is consumed.
As a player becomes a star, more and more cards of him are produced, meaning that more substitutes will become available. As more options are out there, prices become more elastic, leading to lower prices than you would see for a player who has become a star, but without the additional card production. While Demand is higher, there are also more choices, helping to keep prices from spiraling out of control. There is, of course, one major exception. Rookie Cards.
Rookie Cards are the “Buy and Holds” of the card industry. I’m not talking about prospecting here, I’m talking about economics. There is no clear substitute for a rookie card, be it a base, relic or autograph. Rookie Cards can only be produced during one season, and will always be among a player’s most coveted cards. The Rookie Card rules that MLB put in place in 2006 will prove to be the best, and most significant decision that has been made in the industry, perhaps ever. The Rookie Card logo removes confusion from the market (except in its first few years, when “Rookie” cards were produced prior to the advent of the rule and then re-produced with the Rookie Card logo a few years later), ensures that Rookie Cards are only made of players who have at least reached the major leagues (reduces the risk of prospecting) and will become a lasting, unmistakable mark for years to come.
The Demand for Rookie Cards is entirely artificial. There is no reason that a Rookie Card should be worth more than a card of the same player in any other given year, other than the fact that the market believes that it should be. Seriously, should a 1982 Cal Ripken Jr. card inherently be worth more than a 1983 card? No. But it is, because it’s his rookie card. With the Rookie Card rules in place, this market perception has been exploited to ensure that Rookie Cards are labeled and marked—forever differentiating them from releases in subsequent years.
Short Prints and Serial Numbering are other tactics that have been used to increase card value. As Supply is one of the key determinants of price, keeping supplies low will keep prices high. Create a short-printed or low numbered Rookie Card and you’re cooking with gas. Throw on an Autograph (which has no substitutes, hence highly inelastic) and you’ve got the holy grail.
Ultimately, the value of a card is entirely contingent on the player’s success and legacy. That is one reason that cards of Hall of Famers and past legends are valued so highly. An Autographed 1/1 RC of Justin Thompson is not going to bring in much cash. However, it will undoubtedly bring the most cash of any Justin Thompson release. So that is your economic formula for the quantifiable features of a card: Rookie Card, Low Supply and Inelasticity lead to the highest prices. If the player becomes a star, you’re good. If not, you’ll just have the highest value card of a low-value player.
“But wait! I saw UD Heroes Rookie Card #/25 sell for less than a Topps Heritage RC! What Gives?? You’re a liar!”
Tisk tisk. Elasticity is a function of how many close substitutes a card has and believe it or not, card collectors have become quite adept at figuring this out. Why do you think that Topps Moments & Milestones “1 of 1” cards can be had for $5? It’s because there are a TON of substitutes for the same player. With Heroes, for example, the creation of many very similar parallels, whose only difference is in the card’s color, has actually created substitutes within that set. By Contrast, Topps Heritage has few substitutes within the same set, and its unique design gives it few substitutes outside the set. While creating Artificial Scarcity via multiple parallels will cause player and some set collectors to buy more cards, actual prices that these cards will receive individually will decrease.
In one Line then, your “Buy and Hold” card from an Economic Perspective is:
A Rookie Card from a release with no or few substitutes and a limited supply.
This logic tells you why vintage rookie cards are among the most valuable in existence. Without knowing whether a player will be a star or whether a star will fall from grace, buying based on Supply is the best bet to minimize risk.
If you want me to draw up the graphs that show how this works, let me know in the comments and I’ll put it in a future post.
The Collector’s Perspective:
Now, the collector in me has a slightly different perspective. While people will continue to Buy and Hold individual cards in the hopes of a big time payoff, I believe that there is more value in completeness. I believe that baseball cards are an example of where a whole is worth more than the sum of its parts. Think about it. The individual cards from a mid-90’s Detroit Tigers set are essentially worthless. Yet a team set can sell for $3. Fast forward to the present day. A team set of base cards can sell for $4-5, but if you add in the inserts, autographs, and hard to get cards it can be worth much more than all of the individual pieces combined.
Ultimately, cards that are hard to find (or hard to find information on) are not only valuable on their own, but can provide tremendous value-added to a master set. Now, I am not suggesting that a 2007 Topps Detroit Tigers Master set can sell for hundreds this year. That it absurd, considering those cards are still (relatively) easy to obtain and that set could still be built. However, in 2017 it’s going to be a lot harder to get information on obscure retail cards or to find the short prints and that set is actually going to have some value.
So, for a collector like myself, the “buy and hold” strategy centers around creating complete sets that go beyond what you can just buy in a store (or Factory Sealed Set). The beauty of this strategy is that this is what collecting is, and has always been, about. It is about adding cards that you don’t have, or tracking down cards that are hard to find. Pulling a card that you need or trading your doubles to fill holes in your set while helping somebody else fill theirs. When you complete a set, there is nothing more to be done except for hold and enjoy. The “buy” was just something that you needed to do to complete your collection. In the end, when you have no more use for what you’ve put together, you can pass it along to the next generation--and I dare you to find a better reason to buy and hold than that.
