“As awareness of scarcity grows, both museums and private collectors face a ‘last chance’ situation every time a major work comes up for sale. Fearing they may never have another opportunity to add a certain artist or period to their collection, they purchase without consideration of past prices.”
Over the long run, two key things happen that enable the value of scarce high-grade baseball cards to rise:
- As the career of a true Hall of Fame-caliber star player progresses, the demand for the highest quality examples of that player’s key cards will tend to grow, and
- The supply of the highest quality examples of those key cards stops growing.
It’s simple economics. If demand grows while supply stays the same, then prices will rise. That static supply creates leverage – that is, sensitivity to changes in demand, or the ability for card values to rise (or fall) and multiples (explained in a moment) to expand (or contract) along with changes in demand. Meanwhile, the scarcer the card, the more leverage the card has, and thus the more sensitive the card’s value will be to changes in demand.
This – combined with the pricing power inherent in the high-leverage (scarce) key cards of star players – is the value of scarcity.
The problem for many of us who haven’t looked at a baseball card in 20 years is that our frame of reference has been completely skewed. For many of us, our frame of reference is the baseball card bubble of the late 1980s and early 1990s, a period from which there were a zillion different overproduced card sets, and with unopened boxes which remain in endless supply. Consequently, leverage for most issues from this period is quite low, and our general perception of non-vintage baseball cards is quite weak.
But as we pointed out last week, this general perception as applied to newer modern card issues is wrong.
Multiple Expansion is Real
In The Modern Baseball Card Investor, we used the term multiple expansion to describe the widening spread in values between premium-grade (PSA or BGS Gem Mint+ in modern issues) and ungraded cards, and also the spread between premium limited print, serialized parallels and base cards in Chrome Era modern issues (1993/1996-present), generally as a function of some combination of increasing demand due to growing star power; the card removal effect; and/or grade scarcity. Multiple expansion is not hypothetical conjecture, but a very real concept, with the clearest evidence of its existence present in the values of vintage issues.
The April 1990 issue of Beckett Baseball Card Monthly lists the 1952 Topps Mickey Mantle with a “HI” value of $6,750; Professional Sports Authenticator (PSA) did not grade its first card – which, incidentally, was the notorious PSA 8 Gretzky T206 Honus Wagner – until 1991. Fast forward to present times, and the August 2014 issue of Beckett Baseball pegs the “HI” value of the 1952 Topps Mickey Mantle at $30,000. PSA’s SMR price guide now pegs the value of a PSA Mint 9 copy (Pop: 6) at $450,000, or 15x Beckett’s ungraded book value (technically the “HI” value is now termed Beckett Value by Beckett), after a PSA NM-MT+ 8.5 sold for $272,500 in a 2013 REA auction.
Meanwhile, only three PSA Gem Mint 10 copies of the ’52 Topps Mantle exist. The last recorded sale of a PSA 10 came in June 2001, at a price of $275,000. It has been widely speculated that such a PSA 10 would fetch over $1 million today – or over 33x ungraded BV – and I suspect it would clear that mark quite easily.
Simply put, over the past 24 years, the ungraded value of the 1952 Topps Mickey Mantle has more than quadrupled, while the value of the very best graded examples of the card have accelerated to the point that the PSA 10 examples may be worth over 33x ungraded book value. Moreover, as discussed in The Modern Baseball Card Investor, this concept of multiple expansion is not limited to vintage issues.
Note: Part of the reason the multiples have expanded and ungraded values have advanced relatively little is due to the card removal effect, where the highest quality examples of a given card ultimately become graded and removed from the pool of ungraded cards, resulting in a lower average quality and value of ungraded examples of a given card. Put differently, the remaining pool of ungraded 1952 Topps Mickey Mantle cards is significantly weaker in 2014 than it was in 1990.
The Market for Any Given Player Could Change Quickly
Many of you reading this may already be familiar with my argument that the modern baseball card is underappreciated, and could be primed for a mass revaluation. At the very least, I do think that the case for high-grade, limited-print, premium color key cards of legitimate Hall of Fame-caliber players is very strong.
Consider for a moment two things:
- Four separate 1909-11 T206 Honus Wagner cards have now recorded a total of seven sales for over $1 million, while two of them have sold for over $2 million on three occasions.
- If we were to be generous and assumed that the entire print run of 2009 Bowman Chrome Draft Mike Trout Gold Refractor autos #’d/50 were valued at $10,000 each; the Orange Refractor autos #’d/25 at $20,000; the Red Refractor autos #’d/5 at $50,000; and the 1/1 Superfractor at $100,000, the total value would be $1,350,000.
When viewed this way, it becomes pretty clear that the market for certain modern baseball cards printed in these quantities can be very sensitive to changes in demand, and could change very fast. In the same way that the T206 Honus Wagner has generated seven separate million dollar sales pretty much on a whim – setting the market for vintage baseball cards in the process – the same thing could happen to modern baseball cards. Whether it turns out to be a Wall Street banker or a professional high stakes gambler or whoever, the fact is that it might only take one or two people with cash to play with to completely change the market for any given player.
Moreover, given the quantities that we are talking about, they could do this on a whim.
And I don’t know that it’s one or two people, but as I finished up writing The Modern Baseball Card Investor in April 2014, the market for Mike Trout had completely changed even just in the preceding months. In January 2013, a 2009 Bowman Chrome Draft Trout Orange Refractor auto #/25 graded BGS 10 Pristine with a 10 Auto sold for $8,500, and we were talking about Gold Refractor #/50 BGS 9.5/10 prices in the $4k range. Based on early 2014 sales of other 2009 Bowman Chrome Draft Mike Trout autos, the implied value of the BGS 10/10 Orange Refractor has at least tripled, while the 1/1 Superfractor – which is in the Beckett.com population report as a BGS 9 – could legitimately be a $100,000 card under the current prevailing market conditions.
2009 Bowman Chrome Draft Mike Trout Auto Sales: Through July 2014
|Orange Refractor #/25 BGS 9.5/10||$15,995||2/28/14|
|Gold Refractor #/50 BGS 9.5/10||$15,000||3/29/14|
|Gold Refractor #/50 BGS 9.5/10||$10,999||5/25/14|
|Gold Refractor #/50 BGS 9.5/10||$10,000||3/1/14|
|Gold Refractor #/50 BGS 9.5/10||$8,908||3/24/14|
|Gold Refractor #/50 BGS 9.5/10||$8,651||6/5/14|
|Gold Refractor #/50 PSA 10||$8,050||2/28/14|
|Gold Refractor #/50 PSA 10||$6,500||1/18/14|
|Blue Refractor #/150 BGS 9.5/10||$4,500||7/7/14|
|X-Fractor #/225 BGS 10/10||$4,145||2/6/14|
|Blue Refractor #/150 BGS 9.5/10||$4,103||4/9/14|
|Blue Refractor #/150 BGS 9.5/10||$3,753||3/20/14|
|Blue Refractor #/150 BGS 9.5/10||$3,706||3/31/14|
|Gold Refractor #/50 BGS 8/10||$3,553||3/22/14|
|Blue Refractor #/150 BGS 9.5/10||$3,425||3/2/14|
Sources: eBay, Terapeak.com
I’m not saying these values are reasonable – only that the market for modern baseball cards can change very quickly, such that at some point we could be staring at a new reality not just for Mike Trout, but for the modern baseball card in general.
Jeff Hwang is a gaming industry consultant and the best-selling author of Pot-Limit Omaha Poker: The Big Play Strategy, the three-volume Advanced Pot-Limit Omaha series and The Modern Baseball Card Investor. Follow Jeff on Twitter @RivalSchoolX.