Considering 40 million+ Americans are out of work and U.S. consumer spending slid -13.6% in April – the “largest drop on record” – it’s surprising that eBay trading card sales rose +59% during the month. One certainly wouldn’t have guessed a hobby that peaked in the mid-to-late 1980s would experience a resurgence in the midst of a global recession more than a quarter century later. But with shelter in place orders preventing people from spending their discretionary income elsewhere (think: most stores/shops are closed) and household incomes climbing (+10.5% in April) as a result of social assistance from the U.S. government, there’s seemingly no shortage of money available to be spent on the nostalgia driven commodities. Rick Probstein, eBay’s #1 seller of sports cards and memorabilia, said his company posted a record $8.2 million in sales last month (the previous record for a single month was $7 million).
Our Take: The rising interest in trading cards – and subsequently card prices – has been fueled, in part, by the volatility of the global financial markets since the Coronavirus outbreak began. Probstein said that Asian investors are looking for “alternative investments classes and with basketball among their passions [they’re buying up the cards of NBA players]” (Ken Goldin, Goldin Auctions, added that there’s also been a surge in investment interest from the Middle East and Eastern Europe). The January passing of former Lakers star Kobe Bryant and ESPN’s June release of ‘The Last Dance’ documentary “got prices going on Bryant and [Michael] Jordan and [the momentum surrounding those two players] has sort of trickled down throughout the remainder of the industry.” It’s worth mentioning that trading cards aren’t the only alternative asset class to have performed over the last +/- 90 days. “Gold is up. Art prices are strong. Comic books are doing very well and a couple bottles of whiskey recently sold for over $1 million.”
Shelter in place orders and social distancing measures have forced the cancelation of card shows worldwide since the outbreak began. As a result, “there’s been a consolidation [of buyers] within the market; primarily to eBay.” The increased competition for sought after cards (which thanks to Gary Vaynerchuk also now includes the sneaker flippers of the world) has driven prices upwards. Probstein said he expects transaction volume on the online marketplace to remain steady post-COVID. “There are some people who will simply never do a card show again.” The risk of transmitting a virus in a small room, with a large number of people handling the same assets, is too great.
It’s fair to wonder if the trading card boom will subside once society returns to some semblance of normalcy (you must assume people have less free time to spend on hobbies and more expenses). Probstein doesn’t believe it will. The card shark is convinced the current market demand is real and not the result of a circumstance driven bubble. “The trading card business is a mature market. It’s a sophisticated market. There are collectors of cards, but for the most part it’s an investment driven industry.” Of course, investing in modern cards is more akin to buying Bitcoin than a series of government backed bonds. “The market is so sensitive to the performance of the athletes that if Zion Williamson scores 30 points the value of his cards could increase +15% within 24 hours. If he gets hurt, prices can go down just as fast.”
Non-believers will say that unlike vintage cards, the population of modern trading cards (both rookie cards and limited inserts) has the potential to rise (think: most of the Ken Griffey Jr. rookie cards in existence have yet to be graded) and thus investing in a card at today’s premiums is akin to buying at the market’s peak. But Probstein isn’t particularly concerned about an influx of cards flooding the market and subsequently tanking prices. He believes if a card’s population begins to rise significantly that the grading companies will objectively begin to tighten guidelines (making it tougher to find a ‘new’ card that will grade out as a 10).
It’s also been suggested with millennials who came of age during the early days of ‘junk wax’ the industry’s most active demographic, that trading cards might not be great long-term investments. The assumption is that as the group ages the cards will lose value (the presumption is the next generation won’t have the same sentimentality for the business). But Probstein doesn’t believe “the card industry has become an old man’s game.” The Top Rated eBay seller said “there’s still a lot of young people buying cards.” Goldin agreed saying his“6 year old and his friends trade cards (his son actually breaks packs on camera and posts the videos to YouTube). We see teenagers buying and selling cards. And there are 24 year olds – with $300K in the bank – participating in auctions.”
If there is a concern as it relates to the industry’s aging audience, Probstein suggested it would be related to the value of vintage cards and the possibility they flat line over time. While kids today want Jordan and Kobe rookies, they’re simply not interested in adding the likes of Mickey Mantle and Honus Wagner to their portfolio (at least relative to the previous generation).
It must be noted that the rise in Collectors Universe Inc.’s (PSA’s parent company) share price over the last 2 months (+56%) is not necessarily reflective of investor confidence in the trading card business’ future. Probstein reminds “coins are the biggest part of their business, not cards.”
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