Bubbles Will Burst. Always. It’s Just a Matter Of Time.
A Bubble Exposes Short-Term Thinking
I think William Shakespeare was a collector. At least, he could have been talking about a pop-culture collectibles bubble when he wrote in Macbeth, Act 5 scene 5:
“[It is] but a walking shadow, a poor player
That struts and frets his hour upon the stage,
And then is heard no more. It is a tale
Told by an idiot, full of sound and fury,
Signifying nothing.”
Or, maybe Macbeth was just sad because his wife died. I don’t know.
Either way, The Bard could have written about Beanie Babies, Norman Rockwell plates, Hummel figurines, or (you fill in the blank here). These collectibles strutted for their “hour” upon the world stage and then were heard no more. A newer item caught the public’s attention, and buyers flocked to obtain it. The market became hot, but soon that bubble, too, burst. It was “a tale told by an idiot…signifying nothing.”
As baseball great Yogi Berra said, it’s like déjà vu all over again.
Right now, trading cards are hot. NFTs are hot. Comic books are hot. The NFT craze is already starting to crumble. It won’t be too long before other pop collectibles markets crumble as well.
Dealers “of a certain age” are nodding their heads in agreement. We have seen it all before.
And it’s sad, really. At least it is for collectors. Manufacturers and dealers will make out like bandits in the short term. So will speculators who had a competitive edge. But most others will find only disappointment.
What Happens When a Bubble Bursts
A collectibles bubble occurs when an item exceeds its intrinsic value by a large margin. A classic example of a pop-collectibles bubble bursting is the story of Beanie Babies. Author Zack Bissonnette deftly tells it in his book The Great Beanie Baby Bubble: Mass Delusion and the Dark Side of Cute. For the book, Bissonnette interviewed hundreds of people, including a prison interview with a man who killed a co-worker over a Beanie Baby debt.
In 1998, Beanie Babies were hot. They had sales of $1.4 billion. To support prices, CEO Ty Warner retired some dolls on a whim, creating artificial scarcity and enticing collectors to pay up to $5,000 for a toy formerly retailed for $5.00.
And then the bubble burst.
Bissonnette tells of a 2010 visit to Kimball’s auction house in Amherst, MA. In the gallery were three large Rubbermaid containers containing nearly 500 mint-in-box Beanie Babies and accessories. The collection was carefully curated; it was accompanied by price guides, magazines, and spreadsheets. Clearly, the collection was assembled with investment in mind. Finally, the “investor” was ready to cash out.
The entire lot sold for under $100.
That’s the nature of bubbles. Prices are driven by speculation. Increasing demand and increasing supply work together to create a mania for a particular item. But mania is not sustainable. Markets change. Collectors age out or lose interest. Sales drop off. Manufacturers retire the product. Late adopters and uninformed speculators are then stuck with worthless collectibles.
In a 2015 New York Post article, Larry Getlin pointed out that:
“Warner’s brilliance in this area created an investment bubble as unstable as…the Internet stock bubble of the late 1990s. People neglected other areas of their lives to spend all day trading, and some even invested their children’s college funds in toys that they believed would bring an astronomical return on investment. It worked for a few. The rest were left with beans.”
Let me make this clear: Pop culture collectibles are not investments. They are speculative.
Yet Another Collectibles Bubble Waiting to Burst
Which speculators in the current collectibles market will be left with beans? Consider the sports trading card market, for instance. It’s hard to believe it could be any hotter. Currently, it’s estimated to be worth $5.4 billion annually. Moreover, prices have been going up steadily. Facebook sportscard buy-sell-trade groups handle nearly 6,000 posts per day. eBay alone does $4.7 billion in sportscard sales a year.
Demand is strong. Sportscards (and trading cards in general) have been hot for about 7 years. Speculators, not collectors, are driving sales. As with any product, manufacturers will continue to make an item until market penetration is maximized. Sportscard manufacturers essentially have a license to print money. They print cards, people buy them. There are always enough cards to go around. Scarcity doesn’t exist for cards printed in the past 30 years.
The supply of cards is massive. There are pallets of unopened card boxes and shoeboxes of collections everywhere. Supply already exceeds demand. Prices will come down. When they do, most speculators will lose money. Collectors, though, will be delighted with the lower prices. The market will stabilize, and investors and collectors will move in to pick up the pieces.
How to Avoid A Collectibles Bubble
This is an easy task: don’t speculate unless you know what you are doing. Speculation is for subject-matter experts, whether in financial markets or antiques and collectibles. Speculators are sophisticated investors who know a market well. They know the difference between speculative, established, and mature markets. They can make educated decisions about buying and selling because they have studied the facts surrounding a situation. Their research isn’t constrained to searching pages one and two of Google. They are not brainwashed by marketing hype.
You will be hard-pressed to find an article that discusses how many “investors” are taking a bath on sportscards in a Google search. Instead, you’ll find page after page of articles telling how everyone can get rich selling sportscards. So who posts these rosy predictions for sportscards? People who want to sell you something. That’s right; the ones giving advice about cards are dealers, auction houses, and grading companies.
Savvy speculators don’t “bet the farm.” They don’t risk their lifestyles on foolishness. They don’t engage in casino-style investing. Uninformed speculation is like gambling in Las Vegas: the odds are against you. So you had better know your subject and know the odds of making money before you start.
Are Collectibles a Bad Investment?
In my opinion, pop-culture collectibles should never be the foundation of someone’s financial portfolio. They are too risky. They are not investments; they are speculations.
Collectibles markets change. Some never gain traction. Others fizzle after a short run. But some endure. Baseball cards have been around since before I was a kid. I collected them, traded them, and attached them to the spokes of my bicycle so it might sound like a motorcycle. As a result, I have fond memories of my baseball cards.
Collecting is a nostalgia-driven activity. Of course, each generation has its nostalgic attachments. But items that trigger nostalgia in me (coming of age in the 1950s/1960s) are different than those of my children (born 1977-1985). They have no memories of branded lunchboxes or Lincoln Logs. Instead, their generation grew up with Star Wars, Pokemon, and role-playing games. Our grandchildren will remember newer things, probably things you and I have never heard of. So what is the likelihood that my children or grandchildren will want Lincoln Logs? Zilch.
There is a difference between the mindsets of collectors, investors, and speculators. Collectors are enticed by the thrill of discovery and nostalgia. Investors buy for the long haul. They buy established collectibles (collected for 30-50 years) with verifiable track records. Speculators, though, want quick profits. Quick profits may be good if they are willing (and can afford) to take risks.
Unschooled collectibles speculation is driven by greed. It’s caused by dreams of quick profits and great rewards. It is, as Shakespeare said, “A tale told by an idiot, full of sound and fury, signifying nothing.”
Unlike traditional financial instruments, collectibles are an unregulated market. It’s the Wild, Wild West out there. Unsubstantiated claims are rampant. Data is scarce. Still, some want fast, high returns on a small investment. Speculators are the ones who create collectibles bubbles. It has happened before and will happen again. And that’s the way it is. That’s the (not so) New Normal.
Wayne Jordan is WorthPoint’s Senior Editor. He is the author of four books: The Business of Antiques published by Krause Books, Antique Mall Profits for Dealers and Dabblers, Consignment Gold Rush: the Ultimate Startup Guide and Relocate for Less published by Learning Curve Books. He is a regular contributor to a variety of antiques trade publications. He blogs at sellmoreantiques.net.
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