Dale Calvert – Page 9 – CMGSportsCardInvestments.com

As many of you know, I recently made the decision to invest all my self-education time into the sports card market.A lot has changed since my brother and I owned our sports card and memorabilia shop back in the late 1980’s. Quite frankly with all the refractors, and reflactors, and prizims and subgrades, it is quite overwhelming and nothing close to the Topps, Donruss, Fleer, and Upper Deck world I once knew. With that said my research and experience tells me there is BIG MONEY to be made in this hobby, for the right people. I want to take a moment to reflect on what I have learned about the last three to four years in the card market. Yes have passively operated CMG Sport card Investments, but I have not been active IN THE HOBBY.My activities centered around speculating on new rookies, Hall of Famers, and World Series Players. That was about the extent of it.Very passive, not a lot of time energy or self-education time. That has all changed. The last several months I have dove head first into this market and am determined to learn what is really going on and all I can about the new Ultra Modern card market. I have been attempting to retrace the steps the market has taken over the last few years, to look at where we've been and where we are now and where we might be headed. These are just my thoughts, admittedly from the outside looking in as it relates to the last 4-5 years. First we need to understand who has joined the hobby. In short “Sneaker Flipping Hustlers” who could get enough shoe inventory. I am joking of course, but am I really?I found some charts from T-Pot at Market Makers and other sources that I will be sharing in this article. This first one shows the growth of different groups of participants in the hobby over time so what you see is this blue line the pure collectors a mostly straight line sloping upwards over time. This chart goes back to around summer of 2019 that's when many peopled started getting more serious and returning back into the hobby. That is about the time when we established our CMG SPORT CARD INVESTMENTS shop on eBay. Also during this time we saw many new YouTube channels to start popping off and many of us started to rekindle the nostalgia of our youth. The blue line has remained steady over time just sloping up gently. The hobby has definitely seen more growth in the pure collector category. These are people who really don't look to sell a lot. They are in it for the hobby. They want to collect cards, they love the cardboard and they're just building up their collection in a way that's meaningful to them. As far as Pure investors, I have no idea how much this group has gone up or down since the summer of 2019 but this is kind of what we project. For this example what I really used was data from several cards as well as from the indexes from the Sports Investor 500 to sort of see the ebbs and flows in prices and in sales volume over time. So if you see this this line of red representing the pure investors or what some of us would describe as gambling hustlers, has dropped very very low. Many have gone from sneakers to cards and now shifted to the crypto currency market.I think if you were to go back to 2019 the number of people just in it to make money, totally ambivalent and indifferent about the cardboard, was a very low portion of the hobby. Why? Because it wasn't super lucrative back then. To be in this market you had to have a love of the game and or collecting. The sneaker crowd hadn't jumped in the hobby yet. We see that group starting to enter the hobby in droves around August of 2020 when Gary Vee started talking more and more about investing in sports cards. We see this huge spike surge in interest in the number of pure investors people coming in just to flip & get rich quick. They come in and they start injecting a lot of sneaker profits. There was a dip & we end up back in that early spring late winter of 2021 levels. There was euphoria in February, March into April. Crazy numbers! All-Time highs on pretty much every single card in existence! Then the uptrend peaked and crashed sharp. Prices crashed back down into the summer another slight bump in the fall of that year and now ultimately the overall market is on a downhill trend.I think what we're seeing recently is a lot of money a lot of pure speculative investment money people exiting, who don't care about the cards, the sports, the teams or the players.That is a good thing. There thought process seems to be, oh this has been a downward market for over a year , it continues to go down so I'm out. I'm liquidating and we're seeing kind of a snowball effect. Personally, I am also an investor in the crypto market, www.cmgcrypto.com, and we I have observed more and more sneaker and sports card kids enter the crypto space. Then there's this group of the hybrid collectors/investors. This group, I think is the majority of people and the chart has them starting out here back in 2019 in slightly greater numbers than the collector group. It may have been a lot greater than the pure collectors but that group kind of kept growing and growing. I think it was a lot of people coming in finding cards from their childhood and then coming back into the hobby but also looking to make some extra money. Honestly, this is the largest group in our cmgsportscardinvestments.com circle. This group is now tapering off but not declining as sharply and in the same way as that pure investor hustler group has. The green line at the top is the aggregate of all groups, that's the total number of people who have entered the hobby. So I think that overall there is no question the hobby has grown. The number of new people who have entered the hobby is up, some project somewhere between 300% - 400%. The number of people participating drives demand. demand drives prices up, that is just the way it always has been and always will be. Net I want to share something with you that that was originally shared on a video on the Signed and Slabbed social media account. This is one of the most insightful things I’ve heard in a long time about the about the hobby, & the journey of the hobbyist. There are different phases that we go through and so what we share here is a matrix. High price per card. low price per card. So how much money are you spending on the average card that you buy? When most people get back into the hobby they are in the nostalgia phase. As you probably know, my personal peak in baseball cards was in the late eighties and early nineties. Most go back in the era in which they left. Many buy things that remind them of their childhood. Cards that give them warm fuzzies. For me it is the 1968 Pete Rose Topps card. When most people re-enter the hobby they start buying low priced cards not spending a ton of money just kind of getting their feet wet with lower value cards. After they get comfortable with the process, the mindset shifts start. The first is usually, what else is out there? What about the players that I like currently? What about the teams that I like currently, what's this Panini stuff ? What's Topps doing these days? Whatever happened to Fleer? The logical flow is, You start discovering what's new and you're discovering the modern card market, which to put it bluntly is like a goat rodeo compared to the Topps, Donruss, Fleer era that many of us came from. As you do that, you start spending more money for a few reasons, primarily because you're getting more comfortable with the prices. You know price points you're also having to pay more money for a lot of ultra-modern stuff and you're getting a higher amount of variety because you're discovering all these new sets within the various brands. We then go through a phase of saying to yourself, wait a minute what's actually good here? Is any of this stuff that I bought any good?I thought it was cool. Is any of this player worn patch actually that important? You start discovering and sort of doing that sorting of the wheat from the chaff. You're finding out which cards are actually most sought after.You're probably not selling that much still at that point and you're starting to spend even more money because you're really uncovering the super cool stuff that's out there. Most will usually make a hard shift to the left maybe even a 180. at some point most hobbyists start paring down to what they really love.They start dumping what are commonly called hashtag “regrets cards”. Those that they were like oh I shouldn't have bought that. I didn't know any better or I know I overpaid for that. They start taking losses maybe they start selling stuff off many cards, some will be at a profit and they start the consolidation process into higher end cards & cards that are more rare. We start targeting cards that are scarcer and that's what we call the consolidation phase. Then for many, this can happen to a lot of people maybe you had no interest in vintage or you had no interest in sort of niche stuff that you didn't really understand you were kind of following the masses. sticking to the flagship type of products or kind of stuff that everybody goes after. You start thinking, l don't know if I like that so much anymore. What else is out there and you go through a vintage phase or you go through kind of a cult favorite phase where you start set building on something nobody else really knows anything about but was rare from 2013. So that's the pivot up you start spending even more money per card and you shift back to a little bit more variety again you're expanding a little bit you're keeping that stuff that you cared about but you're shifting. Suddenly you understand Mantles, you under understand Sugar Ray Robinson, suddenly you get Babe Ruth and then finally shifting back you upgrade your vintage from a PSA seven to a PSA eight or nine. You start chasing real grail cards instead of the you know one in 288 pack inserts of Jordan. This is a very normal cycle that I bounced off of a lot of people after I heard this and it really resonated with many people.You may be able to plot exactly where you are in this process. For me personally, I am at a different place. I fell in love with the hobby as an 8 year old. Wondered away when I was a teenager. Rediscovered walking through a card show at our local mall in my early thirties. Start a card shop & sports memorabilia shop that I owned with my brother during the end of the junk wax era. Over the last several years I have very passively investment in sportscards and operated our CMG Sportcards Store on eBay.Only recently, I am starting to understand the huge side gig potential for entrepreneurial minded people, even if they know nothing about sports, or cards, but can follow very simple. sequential investing systems. That is the reason we started the cmg sports card investments website and training system.Recently, I have bought a enormous amount of cards and sets, I am now moving into the consolidation stage, and spending hours every week in my self-education phase, trying to wrap my mind around the modern market. For most this is progressive mindset is about a two to five year process, maybe on average three and a half years. I have gone through some of these stages earlier on my personal journey and now I am doing everything I can to short-cut the learning process.This really has to do with understanding the psychology of the collector/investor as they're working their way through everything that the hobby has to offer. I thought this chart was really insightful. now let's shift into some economics obviously, everything has to do with SCARCITY! Scarcity being rarity plus demand of a card. So you have two types of rarity actual rarity meaning low print runs low supply low availability of the card low variety and fabricated rarity. low pop counts this could be due to the era. obviously vintage. 90s very hard to get PSA 10’S, could be due to low print quality we've seen certain Prism rookie cards even in the last few years have you know issues.Shea G. Alexander's base prisms were like really tough to gem and get a ten on because of centering issues. There are many examples like that and then from a demand perspective you have variable demand this is the short term demand due to hype, good or poor performance, big news, new releases and number of active people in the market etc. People seem to forget that sustainable long-term demand has to do with proven greatness, all-time greatness. time-tested designs of cards that are loved by all iconic cards. This is the bottom line when it comes to scarcity If we look at this demand versus supply this is not a traditional supply and demand curve This is based upon four different theoretical groups of people entering the hobby over the last four years at different junctures. Group A is a small group that came back in into that nostalgia point back in 2019 in that summer July of 2019. Smaller group they entered the hobby and then they see some attrition over time. Let's say a fixed number of people that see some attrition to their numbers over time, a normal predictable group of people who enter for Nostalgia. B came in 2020 larger number of people came in. In 2020 slight attrition down like five percent on the original Group A who just lost interest.So we see a bigger group and these are the totals progressively in this dark blue line growing over time the number of people and this is equating this to demand. Number of people to demand. We see more attrition on the original group they're in their third year really or entering their third year of cycle maturity group two and another bigger group Group C.Group C is even more people coming into the hobby. Then we jump into 2022 and I think that's where we see this attrition there are new people entering the hobby now. There definitely are new people coming in. Fewer people coming in than what we saw in 2021 in fact maybe a little bit fewer than what we saw back in 2020. I think downward market people are kind of wondering if they should get involved in cards plus the economy and significant fall off from that group of people who entered in 2020. Now a lot of those pure investor/hustler types who have lost money who bought it the wrong times and are jaded and frustrated. So that's the total demand cycle and you can see the lines and how they're reflected now. What about the supply, what about what's available? Well we know we have existing cards available in yellow a whole market of cards that existed and compound year over year and so that's what we see here we see this supply these are theoretical numbers. Here we see this growth and obviously every previous year of new products new cards being built into then the next year's existing card totals and then adding up to the total number of cards available and what we see here if we look at 2021 is that in theory demand was outpacing supply so printing presses opening up lots of printing happening by the manufacturers trying to keep up with demand because you couldn’t find products on the shelves at retail or even hobby shops, everything being marked up 3 4 10 x on the secondary market, now with this fall off plus the manufacturers still presumably 1.5 or doubling the number of cards being printed yet again there's this separation now we have a surplus. Excess supply leads to downward pressure on price one of many factors leading to downward pressure on price right now but definitely one of them loss of demand, increased supply price is obviously going to come down. The chart above doesn’t quite tell the whole story. That's the who's involved, that's the supply. that's what's out there but what about these original two groups where are they in that maturity cycle? That is an important question. From nostalgia all the way up now into that somewhere between four five and six on that chart that I showed you earlier.So in the chart below the color scheme has been changed, just to kind of group A and B together these are the people who entered in 2019 and 2020. by now they don't have a demand for all this new stuff that's being printed. In fact many of them are pretty frustrated with it. They're even maybe totally turned off by it & want nothing to do with it outside of short print, super short print grail type cards. Prism golds and photo variations and things of that nature. They don't want that, they are looking for niche cards. They want a very specific set of cards and that's represented in the chart below by the line in the pink fuchsia color. The supply of those cards below demand creating scarcity creating you know price stability we're still seeing some cards selling for record highs and that's part of the reason why these are cards that never enter the market. When they do hit auction there's sort of this convergence of people with all their eyes on it. Competing for those cards and those are the types of cards that can be the ones that are the best hedges against inflation as we're heading into or in the middle of a recession. Those specific cards that have niche demand at that foundational layer of collectors no matter what's going on in the market. The challenge can be they can be pretty cost prohibitive for a lot of people so there's something to think about with that.Many investors come to the conclusion, my collection is losing value let me liquidate and upgrade into a Jordan or a Kobe or a Gretzky or a Brady or a Jeter or something else like that. Most mature hobbyists they don't want the stuff that is being massed produced again, today. They want to focus on the stuff they care about the most. Another chart that will be a mind tweak for you is the one below, showing the growth in the number of sets and variations not just print runs but growth in sets and variations since 1980. Data from a trading card database showing the variations of prism base cards, prism silvers, prism red wave, ruby wave, and on and on. Those would all be a sets in this case. When you see these numbers. It DOES NOT represent over 3 000 distinct products. A set is a variation within a product but look at this growth! I want you to really stop and think about something, there was a lot of interest in the 90s. At the time it felt like there was too much variety, too many sets even Kobe looks like he has a lot of different rookie cards. So many that it's hard to know which one to buy or which ones that people really gravitate toward. Look at these the number of the amount of variation the number of sets and variations from this era compared to recent. The advent of inserts the advent of parallels we saw the birth of refractors and foil and all of this stuff right die cuts the 2000s being the forgotten area era many collectors exited the hobby they got jaded the print runs were skyrocketing the cards weren't valuable they got into later stages of their life and cards were considered dorky and something for kids. Early panini years they struggled few were collectors but there was still more variety you might say this was a healthy amount of variety based on today's demand being eight to ten years later that was the right amount but they continue to scale that up and the chart identifies era as the Panini explosion. The renaissance of interest in the card market old collectors return and new people enter but this is what people are calling not only the junk slab era but what we might call the junk variation era, there's so much variety. If you were to just total up 2016 to 2020 just looking at this chart off the top of my head it looks like you could go back 20 years maybe more and total up all that variation and that's where it would equal so unless demand is outpacing that level of supply for these cards you're going to see this sort of latent decline in prices automatically. on a lot of this stuff from the last few years. People will be losing interest in it because the average collector or collector investor will be going through that maturation cycle and wanting nothing to do with a lot of this stuff.Then what happens to those cards? We can only focus on so many players at a time. NUMBER OF ROOKIE CARDS BY PLAYER Gary Payton10 rookie cards That's it 10 total rookie cards. Michael Jordan had slightly more than Gary Payton Kobe Bryant 101 Distinct Rookie Cards If you go 84 to 86 Kobe Bryant has 101 distinct rookie cards according to trading card database. Different variations of the same card so that's everything from his base Topps to his Topps chrome base, refractors. Finest. errors .gold refractor. Metal 101, etc. You must understand this! A player must be a generational great in order to even sustain demand at that level at 101 cards. Lebron has 486 rookie cards. Now Lebron obviously is also and all-time great with even more demand than Kobe & right on par with Jordan in most people's eyes. 486 rookie cardsGiannis has slightly fewer than Lebron. Back in 2013, early Panini years. Luca well above Lebron, somewhere at 1200 – 1300.Zion ironically being a 2019 rookie with 2019 different rookie cards. Investors must understand, even if Zion Williamson can come back and get to form and be one of the greatest players if not the greatest player of all time. which is obviously a long long. long shot at this point. There will not be a sustained demand for all these cards! This is just the variance this is not all the print runs so when you're looking at Prism based cards when you're looking at Hoops base cards or Hoops premium cards those cards aren't going to hold value and we're starting to see that fall off now. We're starting to see those irrational prices from the euphoric period of 2020 early you know late 2020 early 2021 come into effect and again this is stuff that has been covered by the Sports Card Investor in the past.For many of us that have been around the hobby for years and understand math and supply and demand, the way that these prices come out for high draft picks now which obviously drives wax prices to the moon, like we've seen with all kinds of wax over the last few years, it's based on the players in the box and what people are willing to pay for them. The truth is, even if they become generational talents that's the only way their prices can sustain over time because of opportunity cost because of the stickiness of the hobby and the recency bias and because of historical precedent.It make no financial sense that these athletes are coming out and their prices are more than proven hall of fame caliber players Here's the evolution of what happens their prices over time based on each of those trajectories in year one if they are superstar they're pretty good looking good their prices will almost certainly still go down!The data shows that strongly for every single player in the market movers database there is not a player a top five draft pick who has come out whose prices haven't gone down sharply from the time that they first released. Assuming a high draft pick top three draft pick in the NBA or something, they're all coming out at two thousand dollars which is ridiculous.Check out this chart.GENERATIONAL SUPER STAR OR BUST? The players year two. if they're looking good maybe they had a rookie of the year award, they're looking like a top 20 or 30 player in the NBA already, maybe they rebound back slightly above where they started. Then years three or four maybe they're looking good they win a MVP or they make the NBA All Star Team, they could see a slight bump and by year six if they're a superstar they're probably right back where they started at that high point of year zero when the card was released. Everything else is a total blood bath! It's down down down down down if they are not the absolute best player of their draft class and of a five year span of the draft class and generational talents are the ones like Giannis who can go from $2000 to $20 000 for the same card but it's a needle in a haystack so this. Here is what that chart looks like here's all the other scenarios, here's the generational talent price trajectory and if I remove that generational talent you can see all of these players losing value. Only the superstar one holding value everything else going down in price that's another part of this broader dynamic of what we're seeing now supply and demand. Back to economics 101 supply and demand price on your y-axis quantity on your x-axis okay and you've got your supply curve and your demand curve and the way these things move so what we saw in 2019-20 and we split these nto the cross years because that's kind of how the market evolved it was heavily tied to basketball seasons so 2019 into 2020 demand went up demand undeniably went up and this is what we saw happen so this is how you determine you know map out uh the price what happened to price and what happened to quantity okay so price goes up because demand goes up let's say supply stayed relatively static and you're really looking at the supply of the product from the year before so 2018 product pushing into that year with 2019 starting to be released, So this is what happens price goes up. quantity goes up as demand increases shift to 2021-22 demand skyrockets why pure investors entering lots of hot money entering. Investor the entire number of people participating in this space is just going up like wildfire, you've got the coveted lockdowns, you've got money, you know free money people sitting on stacks of money, they're bored. All of those different factors, supply also increases then the manufacturers with a one year delay are starting to catch up. They're increasing supply and so price still up quantity through the roof. vol sales volume on cards absolutely through the roof, from about August of 2020 to March or April of 2021 we saw an incredible number of cards being sold consistently. Plus a high amount of wax was being sold so that is what happened to the prices & the quantity 2021-22 demand resetting coming back down to where it was back into the 2019-2020 transition when it boosted the problem is supply has increased it's continued to increase it's probably increased more than this, Then we saw quantity shift, volume shift back but price dropped back. Many prices have dropped back where it started maybe in 2019 2020 actually a lot of cards. Now lets take a look at Luka Doncic Prism Silver a card, it is kind of synonymous with that era. This card has a lot of sales history, a lot of price movements and changes. This chart maps out exactly what has happened over time. Heading into 2019 2020 six to eight years or so of absolutely unprecedented prosperity, comfort, ease, luxury a lot of disposable income countries flourishing record highs. Everything leading up all the way up until somehow Biden was put into office. Foundationally here we see where these cards the price started here and kind of spiked up we built a baseline of green of organic growth. Covet happens, Gary Vee starts talking about sportscards and namely, Luca. Lockdowns, stimulus checks, boredom, stored up disposable income that's not being used on trips, eating or dining out or anything. People just have money piling up as they're working we call this the hot money. This is the hot money era and people have referred to this period as though we put jet fuel or rocket fuel onto the market all of those things coalesce together. We thought for a minute it was going to collapse and instead it did the exact opposite and that's back to that era again like i said august of 2020 up through into March April of 2021. Then it started to come back down that was the rocket fuel era you can see it was hot it was on fire then we see this little bit of a maybe a dead cat bounce if you're familiar with that term. (People were cashing out) Things start coming down sharply and people go wait maybe it's not so bad and there's a little bit of a recovery right? I don't know if really that's what's happening there, I wasn’t paying a lot of attention at the time. But restrictions got lifted and people were out to do more and had a little bit more hope and optimism about what was going on that's when we saw a lot of debates in the public forum about inflation and what's happening. A lot of the democrats who don’t own calculators were saying there's no inflation happening other people saying absolutely there's inflation happening have you been to grocery store or gas pump lately? It was a bit of a weird limbo error and we saw some recovery in prices now inflation stock market declines interest rates climbing rapidly wars and rumors of wars, and all kinds of corruption and government interference in the crypto space, we moved into a disruptive society, which quite frankly, I personally don’t believe we will ever recover from. Everything kind of coming back down and here's that jet it's it's coming down and it's coming down hard. So the question is, where are we now? Prices are back to late 2019 early 2020 levels if you trace that line all the way across on Mahomes, Luca, and a lot of these key athletes and players that's where we are in terms of price. Certainly others are up others down but that's where we are we're still up about 400 on price on this Luca card if you had bought this Luca card back in 2019 you're up $400 on your money if you're still holding that card so I'm calling this the organic healthy non-gmo growth period over the span of three years and this also ties in nicely into many economic patterns. I would expect to see some recovery at some point it could be drawn out depending on what happens with the rest of the market progressively over time. I expect the overall market not necessarily this Luca card but the overall market more of that index view the macro view of the market to climb back up it's going to take years. I believe years to get back to the point that we did back here in that 2020 to 2021 period if we ever get back there anytime soon. So that is kind of what has happened here over the past few years. So what's next? I don't actually know, I don't have a crystal ball. I feel confident saying that Hall of Fame vintage player will increase in value, year after year at rates that will return you more than the S&P 500. Now may be a good time to consolidate and get into those higher end cards it's not simple. It is why making comparisons to stocks or crypto is really imperfect and a totally different, but quite simular game than working with cards. You will always have options depending on what you want to do and if you are willing to take options. Now may be the time for recalibrating and regaining focus solidifying your identity as a collector and what you hope to do long term with your cards. So overall no matter how you slice and dice the data there can be no denying that the collectors are the backbone of this hobby some collectors only buy they consume and they never consolidate. The vast majority of collectors do sell whether they call it investing they call it speculation call it flipping call it trading up whatever they want to do dealing whatever you call it most collectors do it and in a perfect world you can fund your personal collection with your bigger card hustle project and that's who we're left with now. That's likely those of you who engaged in the hobby the last couple of years & just stuck it out through this long article. 300% growth in the participants in the hobby since 2019 and most of us are here to stay. I know I am and I hope you are, I am having a blast.I am super optimistic about the future of this hobby. I have high hopes about what Fanatics can do I'm optimistic about their ability to fix some of what's broken in the ultra-modern. You can have fun no matter what the market is doing overall thank you so much for sticking with met through this long article. I hope you found these insights this valuable I know this is such an important topic and if you wouldn't mind be sure to subscribe to our newsletter so you can be notified when other important articles are posted. If this article spoke to you, you will enjoy this video from Market Movers where we got a lot of the data for this article. https://youtu.be/w-opQHsEF6M?si=cwJ5frzifChf9Vps