NYT: US CPI Rises at Fastest Pace since 1982 - up 6.8% in November

[BrookIsland]

The above is a graph from the front page Saturday NY Times article (NB: Paywall may be active) - with the following opener:

Prices are rising at the fastest clip in nearly 40 years, fresh data released on Friday showed, as supply chain disruptions, rapid consumer demand and rising housing costs fuel an inflationary burst.

So question becomes, how does this affect card prices.

Was thinking there might be a fun (fun?) way to track this using e.g., a basket of marquee cards for which there are large or very large population reports.

I think PWCC may have something like this but I thought we could create our own and maybe track it as an indication of trends in the market.

What do you think the constituents should be - I was thinking each constituent should:

1. Be at various levels of price point so they reflect the buying appetite of people not just at the very top of the market going for the very top grades so as to capture more of the market appetite generally instead of specifically at the top end

2. Be "blue chip" players (as is the DJIA) so that e.g., we're not using players' cards that have fallen out of fashion or that have underperformed/overperformed as that leads to unhelpful noise & pricing volatility

3. Have many observable price points that are publicly available and auditable (e.g., eBay closed sales, acknowledging the limitations inherent to eBay)

4. Be quite "common" and easily acquired - i.e., "liquid" (e.g., I would think we should seek to avoid cards for which there are only 5 copies given the illiquidity premium paid by buyers for the exclusivity of having one of a very limited number of copies)

5. What other criteria?

On that basis, I think we are generally going to be focused on Young Guns and similar rookie cards from Topps/OPC from other eras.

Something like:

PSA 10 Auston Matthews Base YG
PSA 10 Connor McDavid Base YG
PSA 6 Wayne Gretzky OPC RC
PSA 6 Wayne Gretzky Topps RC
PSA 8 Mario Lemiuex OPC RC
PSA 8 Jaromir Jagr OPC Premier RC
Etc.

And to include how slightly lower end cards are fairing:
PSA 9 Auston Matthews Base YG
PSA 9 Connor McDavid Base YG
And lower grade versions of the cards listed above which satisfy the above criteria(?)

Was thinking of trying to do this monthly to have enough data to have observable prices.

So questions are:

1. What are the right cards for an index like this? (And noting that like the DJIA, we can have cards come in and out from month to month.)

2. Will this have any real utility?

3. Would anyone else be interested in helping populate the data into Google Sheet and then I or they can run the algo in Excel (but would be grateful for help on the Excel algo to run as we might want to e.g., put different weights to different cards instead of them all being equally weighted)

4. What else?

Was going to add a poll to this thread but thought comments might be more helpful.

 

[webottew]

Sounds like a great idea! So great that the Card Ladder (CL) team may be one step ahead of you :thumbsup:

Card Ladder has a CL50 index of 50 key cards from the Hobby. They have also introduced Sport and player indexes recently. Pretty sure the sub-indexes are based on ALL the respective cards for the sport in the CL database. If you prefer building your own index, you can build a CL Collection of the cards of your choosing -- assuming they are in the CL database

The advantage is that CL reviews and scrutinizes the data to confirm they are valid & paid sales. They pull data from eBay and some of the other public auction houses.

The primary restriction at this point is that the catalog of cards in the CL database is very limited. That should improve as more resources become available after their recent acquisition by Collectors Universe (ie, PSA, etc).

Also, the cards making up a "Top 50" index is subjective. The CL50 is a different list than what you or I may consider to monitor.

Below are some shots of the CL indexes. If you don't have a CL subscription yet, there is still some time to add it to your Christmas Want List. I assume you are on Santa's Nice List :groove:

 

[BrookIsland]

Saves me the work, Bill! That's a great resource and thank you for sharing it.

Then to what I guess is the second part of the question, how do you think cards are going to hold up against inflation in the near term? Maybe by segment it will vary (as a super high grade Gretzky is probably a pretty good inflation hedge) as I assume it's going to vary pretty significantly across hockey.

 

[Fred Bear]

Saves me the work, Bill! That's a great resource and thank you for sharing it.

Then to what I guess is the second part of the question, how do you think cards are going to hold up against inflation in the near term? Maybe by segment it will vary (as a super high grade Gretzky is probably a pretty good inflation hedge) as I assume it's going to vary pretty significantly across hockey.

I've never really tracked it with data, but inflation will negatively affect card prices and it becomes a great time to buy singles. Cards, as much as we all disagree, are a luxury expense and when inflation goes up discretionary spending goes down.

On the wax side, it's a bit more complicated because manufacturing costs are going up (some significantly) and so will product prices, unless they start to pull value. So, periods of high inflation result in potentially lower value wax with potentially higher price tags. In the current market, my guess is that the breakers will hardly notice, until a slow down in people buying in occurs. The end result is that less wax will get broken and supply will be down mirroring the lower demand.

The 'interesting' part here is that the market for McDavid won't drop nearly as much as the market for Troy Terry (which is why I think CL created their player indices). That, to me, is one of the big problems with 'market' indices for sports cards, you need (1) representative cards and (2) volume trading.

A McDavid YG doesn't accurately reflect even mid-range cards or players. Look at Ovi YGs right now, the hockey market is, in general, soft right now and his cards are soaring. You have to include an Ovi as a top 50/100 right now, but is it representative of the market, in general? Not even close...

PWCCs index requires that a specific card (grade, not serial number) register 2 sales in a calendar year (which is why a Gretzky PSA 10 doesn't make the cut). 2 sales in 12 months isn't really 'volume' trading, even on rare cards. You lose a lot of statistical information when you can only talk about what the market does over a year or 6 months. Now PWCC offsets this by looking at many cards on some of their indices but then it goes back to what does the index represent, the 'market' or 'high end investment cards'?

 

[BrookIsland]

Fred Bear - I agree with all of that and exactly the logic I was thinking through in seeking to create a truly representative index (or perhaps several different sub-indexes).

Much in the way that there are some correlations between the DJIA, the S&P and Russell 2000, individual performance by player, card and set will vary (perhaps massively in some cases) between them in times of high volatility and/or where their constituents are disproportionately affected by some trend or another.

Same goes with cards exactly as you posit.

What I'm really curious to see is just how much softening there is on high end stuff that's not quite marquee high end relative to inflation - e.g., some of the rarer subsets in Cup and/or SP Authentic which are very collectible by hockey enthusiasts but much less of a fungible value holder to market collectors/speculators (cf. a non-RC year Draisaitl Limited Logos to a McDavid PSA 10 YG).

There will be some point where there's real arbitrage on singles (and perhaps too in wax, but take your points) on the value of the dollar as compared to market demand where there'll be opportunity - but there's so much illiquidity and opacity in pricing that it may be hard to capture. No easy way to see pricing/market everywhere in the way you can to a greater degree in the financial markets.

Very interested to see what happens next as I've got a desire to get a number of PC singles on the higher end knowing now that both my money is going to be worth more now on an NPV basis, but totally uncertain by how much and how much (or little) prices will change on those PC items and when the right time will be to pounce.

 

[quincy]

This is one of the most wonderfully wonky threads in a long time.

 

[japhi]

1/3 of the money in circulation in the US has entered has been printed in the past 18 months. Inflation is downstream of that, and the ridiculous inflation we are seeing in all hard assets is a reflection of the money supply. Which is about to get significantly tighter, 7-10% inflation is disastrous. Sure our hockey cards are going up in value but so is food, housing, fuels, everything we consume daily.

I know this isn't a financial website but if you have debt look out.

 

[BrookIsland]

japhi - do you mean "cost" instead of "value" - on a relative basis, I would be surprised if hockey cards kept up with housing (which has exploded in price long before the card market) and energy - if anything, I'd say the relative value of nearly all cards will fall relative to these things in the near term (other than those at the very top) even if their costs increase.

I disagree with you in part about the debt comment you've made on the basis that this is just about the best time possible to be a borrower of fixed rate low interest rate debt. Interest rates and inflation are going to rise making the cost of repaying the principal (and the debt service) on a relative basis, much cheaper.

It may not be a great time to be a lender of fixed rate debt (or to have a large bond portfolio particularly if the credits you hold were recently issued at low rates). That I'll agree with you on. Similarly, you should be ok if you're a lender of floating rate debt (or hold a bunch of it in your portfolio), but definitely not in a great spot if you're a borrower of floating-rate debt.

Irrespective, interest rates rising and inflation are generally I think net negative to card value (even if their prices increase) as they will potentially materially reduce demand.

 

[japhi]

My debt comment was in relation to those on variable rates, or fixed rates that will need to be renegotiated in the next 1-3 years. Canada specific. Significant amount of Canadians have interest only HELOC's, variable mortgage rates or terms near expiry. Going to be somewhat of a reckoning as rates increase dramatically. Agree with you that there will be downward pressure on the demand side (and significant increase in supply as all of these graded cards hit the market).

There is an slogan that Bank of Nova uses, "you are richer then you think". I think a lot of Canadians are about to learn they aren't as rich as they thought. Canadians are buried in debt, that debt is about to get significantly more expensive to service and harder to access. Should be an interesting next 5 years. Apologies for the derail, I think I'm a bit off topic. I like where you are heading with an index / basket.

 

[joshpackham]

As far as mortgage rates go, I just got my renewal for mine and I was offered a 3 year fixed at 1.99 % not sure what the variable rate is currently but I can only imagine both are going to increase in the next 6 -12 months

 

[BrookIsland]

Yikes japhi - that has the feel of turning from inflation/debt reckoning to a recession - and that definitely will not be good for card values, compounding an anticipated discretionary spending decline precipitously from lots of extra money to people struggling to keep up with their debt service/grocery bills.

Thinking about that a bit - and looking to the Fanatics deal, wonder whether that becomes extremely costly for Fanatics given what I expect is a fee rich waterfall with the players unions, leagues and players at the top. What happens if there's not enough revenue from sales to feed everyone with their hand out.

If there's a one or two standard deviation move downward in demand (and/or a proper recession), does that push Fanatics into free fall and having to beg a release from their obligations?

Certainly the fact that they have equity and not just licensing relationships helps, but I have to expect the players union, leagues and players are still going to have something like a preferred/top of the waterfall interest where they get a top line share before money flows down to Fanatics.

Would love to see those deal docs...

Irrespective, another piece that will hurt the industry (to say nothing of the broader economy) but perhaps will allow Topps / Panini to get their licenses back if the worst happens and there's a bankruptcy.