When I was a kid this Mark McGwire rookie card was the third greatest thing to own, next to a dog and a bb gun. During the apex of the Reagan years such cards were fetching absurd premiums; each time selling quicker than the time before. Child speculators were so swept up in the bubble that even the Beckett price guide, the CNBC for baseball cards, became an object of value. I recall trading ten pristine Becketts for one unopened wax pack of Topps baseball cards. And at the time, Topps trading cards were the world reserve currency, if you were ten and living in the suburbs of America.
My particular interest though was basketball cards and no card was more valuable than the Michael Jordan rookie. I bought hundreds of wax packs trying to be like Mike. Not Jordan, but Mike Wilson, a neighbor who stumbled across three Michael Jordan rookie cards in one summer. All of us admired his sudden prosperity with the admiration and jealousy of failing but persistent prospectors.
"That could be me!" I thought, running off to the hobby store to spend yet another week's allowance on sports cards.
I found the mother lode in the early nineties when a local toy store went under. I was there at sunrise for the going out of business sale. Amongst its liquidated inventory of Teddy Ruxpins and NES controllers I found six boxes of NBA Hoops cards. Unopened. Virgin. Teeming with potential wealth. The set was too late for Michael Jordan, but it was likely full of David Robinsons, which at the time were being passed for over $300 per card. I spent all of my Christmas cash, some $100, on the boxes and took them home to be secured safely in my parents' basement.
They are still there and still unopened. I came across them while visiting this summer, and decided to research how much my investment is worth. Sadly, they are worth nothing. Really. They are for sale by the dozen on eBay and none are moving.
The sports card industry, like any business, responded to the massive demand for cards in the late eighties and early nineties, by printing more supply. While the original enthusiasm for rare cards might have created an actual market for a few rare series, the inflation of these companies pumping out hundreds of thousands of cards diluted the rareness of even the most popular players. At some point it became apparent that supply was not an issue and the entire bubble burst.
I saw the same thing play out again with Beanie Babies and internet stocks. (For the record, I am one of the few people who made money in the Beanie Baby craze. I was in Germany when the supposedly rare "Germania" bear was issued. I purchased a number of them and resold them on eBay for an incredible markup. Internet stocks- well, let's just say Peapod.com did not deliver for me).
By the time the housing bubble was puffing up, I knew the signs of impending financial trauma, and took necessary precautions to protect against it. I am proud to say I actually bought puts on Goldman, Fannie Mae, and even Lehman in early 2008- months before they tanked. And I bought some gold.
Of course now the talk today is of gold and bubbles. One naturally thinks that gold is different than baseball cards or internet stocks or speculative real estate. Precious metals, it is said, have intrinsic value.
The intrinsic value of a baseball card, for example, is virtually nothing- it is whatever the underlying worth of the paper and ink adds up to. For stocks value can actually deteriorate to zero, since a corporation might borrow money and become insolvent. Real estate can actually collapse into the negative because it can be leveraged or decrease in value to such a point that relative to taxation and other obligations, the asset becomes a liability.
Gold however can only go down in worth and, so long as there is even an iota of demand for one of the world's most historically prized substances, maintain some value.
Of course gold might be trading at an impossibly high level right now. The supply of gold might actually grossly outweigh demand and we might soon see a massive pullback in price. We might also see government or transnational manipulation of the market in order to address global debt and capital issues. But perhaps the safest bet in the world is that gold will never be without value; certainly not for the next hundred years (I mention one-hundred years because, conceivably, modern alchemy might find a way to create gold, but I do not see this happening in an economical fashion anytime soon).
Gold will never be worthless, but a lot of other investments will.
No phenomenon illustrates this better than the sports card trading market on eBay. It is fascinating to note that while nearly every sports card collector would have been crushed by the depreciation of their investments in the past fifteen years, there is one exception. In 1992 Topps introduced 23karat gold lined cards. Why not? Gold was trading for next to nothing and the stuff looked cool stuck on a card. It was shiny and malleable and impressive. This should have been a hint that it was valuable. Topps was not catering to card collectors' interest in precious metal investments though. The goal was to keep the card trading Ponzi scheme afloat with another new novelty item. Manufacturers had been doing this for ages, introducing cards with gum, then without gum, then with calendars, then with special issue cards- whatever was necessary to keep investors interested. Ponzi started handing out doughnuts when he needed to drum up new customers.
Today these cards, although having less than an ounce of gold each, sell occasionally on eBay.
With that in mind, and the amount of time I wasted in my youth drinking beer, I wish I could go back in time and give myself some advice. I recall hearing often in the eighties that apocryphal story about how someone blamed their mother for "throwing away my baseball cards" when the storyteller went away to college. The lesson, of course, is that the tidy mother had cost the young investor a fortune in precious cards. The reality though is that those cards would soon be worthless. If I could speak to a younger version of myself I would say this: avoid sports cards as an investment. Enjoy them for what is written on them if it interests you, but you will never make any money from them. And do not drink too much beer. There are better things in life to waste time on and nine times out of ten alcohol just gets you in trouble. But if you do insist on getting drunk, choose this schnapps. And save the empties.
Sensible libertarian views on nearly everything- except foreign affairs.