Baseball Card Bubble

I'm not an economist, but I play one online.  One of the things about economics that fascinates me are "bubbles" within an economy. 

My wife and I barely got out of the recent "housing bubble" just before it burst and the housing market went to hell.  While we ended up losing around $2000 (if not more, I don't remember the numbers at this moment) on our house, at least we got it sold before we came out to Omaha.  We got lucky and we made a wise decision, because in all reality, we could still be the owners of a home in different state than the one in which we are living.

So, while I have a little bit of life experience with regard to "bubbles", I should probably have more.  I missed (or wasn't paying attention) to the "Tech Bubble" of the late 1990s, nor did I feel much pain within the current financial recession/bubble.  With that said, there was one "bubble burst" that occurred during my lifetime that has had a lasting and impacting effect on me personally:  The Baseball (and, in my case, Basketball) Card Bubble Burst of the 1990s.

Last month, Slate printed an excerpt of Dave Jamieson's book Mint Condition: How Baseball Cards Became an American Obsession.  While Mr. Jamieson's book focuses on the baseball card bubble, I can attest that the same thing was happening in the basketball card market, which is where me and my friends invested our money during our preteen years, and, unfortunately, we had entered the market when it was in its decent during the mid-90s.

By the '80s, baseball card values were rising beyond the average hobbyist's means. As prices continued to climb, baseball cards were touted as a legitimate investment alternative to stocks, with the Wall Street Journal referring to them as sound "inflation hedges" and "nostalgia futures." Newspapers started running feature stories with headlines such as "Turning Cardboard Into Cash" (the Washington Post), "A Grand Slam Profit May Be in the Cards" (the New York Times), and "Cards Put Gold, Stocks to Shame as Investment" (the Orange County Register). A hobby bulletin called the Ball Street Journal, claiming entrée to a network of scouts and coaches, promised collectors "insider scouting information" that would help them invest in the cards of rising big-league prospects. Collectors bought bundles of rookie cards as a way to gamble legally on a player's future.

Unfortunately for investors, each one of those cards was being printed in astronomical numbers. The card companies were shrewd enough never to disclose how many cards they were actually producing, but even conservative estimates put the number well into the billions. One trade magazine estimated the tally at 81 billion trading cards per year in the late '80s and early '90s, or more than 300 cards for every American annually.

Precious few collectors seemed to ponder the possibility that baseball cards could depreciate. As the number of card shops in the United States ballooned to 10,000, dealers filled their storage rooms with unopened cases of 1988 Donruss as if they were Treasury bills or bearer bonds. Shops were regularly burglarized, their stocks of cards taken as loot. In early 1990, a card dealer was found bludgeoned to death behind the display case in his shop in San Luis Obispo, Calif., with $10,000 worth of cards missing. A few weeks later, Bob Engel, a respected National League umpire, was arrested for allegedly stealing more than 4,180 Score baseball cards, worth $143.98, from a Target store in Bakersfield, Calif., and attempting to steal another 50 packs from a Costco.

(...)

In 1989, the Upper Deck Co. would transform the industry with flashy, high-priced cards aimed at investment-minded collectors. As the sales of new sports cards swelled to more than $1 billion a year, children began to flee the hobby, turned off by the pricey packs and confounding number of sets. The baseball strike of 1994 ushered in an industrywide hangover that still hasn't ended. Revenues from new sports cards have fallen to around $200 million a year, roughly one-seventh of what they were at their peak. While vintage cards like the T206 Honus Wagner and the 1952 Topps Mickey Mantle have continued to soar in value, baseball card's boom times produced no such valuable merchandise. Those 1988 Donruss cards, once considered a savvy investment, can now be bought in bulk for around 1 cent apiece.

{Emphasis mine}

Mr. Jamieson brings up some very important points that take me back to my card collecting hayday.

He says that "unfortunately for investors, each one of those cards was being printed in astronomical numbers."  Even as a kid, I had figured out that many of my cards could be worth more money if it they weren't so easy to come by.  I would open pack after pack of cards, only to end up with maybe one or two unique cards and a boatload of duplicates. 

I collected basketball cards fanatically for about 4 years in the mid-90s, and the fruits of that labor has been distilled into one shoe box of cards that I consider to be worth keeping around.  I continue to drag that box around mostly because of sentimental value and not because I hope that one day they may become monetarily valuable.  (Ah, who am I kidding?  Of course I hope that I'll be able to take that box to the Antiques Road Show and be surprised when one of those cards is appraised at thousands of dollars.  Every kid who ever collected cards has this hope deep down inside of them.)

And, as Mr. Jamieson points out, I was one of those children who fled the card collecting market because I was being priced out of the market.  And, looking back, it kind of pisses me off that that happened.  In the years before I left, the lure of finding a "gem" of a card (rookie, autograph, etc.) was the driving force when buying pack after pack of cards.  By the time I'd left collecting, the trading card companies had taken all of the work out of getting these cards by pulling them out of the standard packs, and instead sold packs of cards that were "guaranteed" to contain one high priced card.  But, the catch was that these packs of five to ten cards cost $20 or more.

In addition to being priced out of the "unique" cards of the time, the market was also getting completely saturated with card companies.  During Michael Jordan's rookie season, there was one card company, which meant that there was one Michael Jordan rookie cards, which meant that it was a rare and valuable card.  However, ten years later when Kobe Bryant was a rookie, there were at least six major card companies (and each with countless different branches/brands within a company) putting out Kobe Bryant rookie cards, which meant there were literally hundreds of different Kobe Bryant rookie cards in the market.  And it was like that for every other player in the league. 

As I've mentioned before, my favorite player in the NBA was John Stockton, which meant his cards were the ones I sought out the most.  I have a couple hundred unique cards of his, and I didn't even collect during the final 10 years of his career.  (I have however picked up a few of his later cards in the past few years.)  The only cards that I would actively seek to purchase would be one of his rookie cards or an autograph card. 

One advantage to collecting his cards and not those of, say, Michael Jordan or Kobe Bryant or Lebron James, is that I would hypothesize that his smaller fan base lead to a reduction of John Stockton cards in the market.  Where everyone who has kept their cards over the years made sure to keep their Jordan/Bryant/James cards, if they ever did throw out cards, 2nd tier players would have been the first to be thrown away.  And every Stockton card that is taken out of the card collecting community makes mine that much more valuable. 

Just as in baseball cards, the basketball card market tanked in the late 1990s due to over-saturation and artificially high prices ("unique" cards that weren't really that unique) and a dwindling fan base.  I would say that there was a correlation between my fandom of card collecting and my interest in the NBA:  when I stopped collecting cards, I stopped caring about the NBA. 

It's a terrible shame, but a great lesson in economics: the card companies were short sighted and thought that interest in their product would continue forever.  Rather than building their industry with the idea of "life-long collectors", they sought to increase their current sales no matter how it affected their futures. 

Getting away from the business side of card collecting, I wonder if the internet has improved or ruined the personal aspect of card collecting.  When I was a kid, the only people who I could trade cards with were the only two other people I knew who traded cards, my friends BJ and Eric.  We would haggle, barter, and trade cards for hours at a time.  I wonder if anyone does that anymore when you can put your cards online for the world to bid on.  Then again, it has never been easier to get into contact with other collectors, even if they never come face to face.

I will admit that writing about my card collection has lead me to go dig them out of a box in the garage.  So, if you'll excuse me, I'm going to relive my youth for a few moments as I look through my inventory.