Friday, April 3, 2009

Shell Games

I’ve collected things ever since I was young. Collecting might not have been what I would have called it when I was six years old having to convince my mom not to throw away tattered comic books. My justification consisted of the unknown idea of “someday” I might want to read them again. The first comic I remember buying was Amazing Spider-Man #250, featuring Spidey fighting the Hobgoblin. How could I not want it? The Hobgoblin even proclaimed “It’s great, steal it!” on the cover. Although tempted, I did cough up the whopping sixty cents and probably had the issue read before I even got back home. Spider-Man #250 might have been the first thing I purchased with the specific intent on keeping it. There might be a lot of stolen issues, who knows? My juvenile definition of collecting meant to aquire more of the same type of items with the intent getting a larger, “cooler” collection. Monetary value never factored into the equation.

Those who know me well or even a little, know I collect quite a few things, having spent the majority of my disposable income on things such as baseball cards, comics, records and a bunch of other things too numerous to mention. My parents would often comment on the ever-increasing space my stuff was taking up in their house (which became a more vocal issue after I began collecting vinyl records). “That’s a bunch of junk” was a phrase I heard – and still do hear fairly often.
“These (insert item here) are worth three hundred dollars” would be my generic reply.
“You should sell (insert item here) if you can get good money for it.”
“If I sell it, then what should I do with the money?”
“You should invest it.”
Needless to say, I never followed Mom and Dad’s advice. I never collected anything for the sheer value of it. I bought comics because I loved reading them, baseball cards because I was obsessed with statistics and the great photography on the old cards, and records because I loved listening to music. I didn’t understand why anyone would spend their money on shares of a company they knew little, if anything about. I knew the stock market dogma of “buy low, sell high” but I could apply that concept just as easily to garage-sailing and going to the flea market. As I became older and more versed in the value of my stuff, I could recognize a bargain when I saw it. An original Buddy Holly “45” from 1957 for fifty cents? I think I can afford that. A 1951 issue of Bugs Bunny for five bucks? Easy. Trading a 1986 Jose Canseco rookie card for a few hundred mint baseball cards from the mid-70’s? Yes, I really did pull that one off.

In my early teens, I discovered the price guides associated with comic books and baseball cards. The Overstreet and Beckett guides were (and still are) the bibles by which these collectables are judges. Beckett published monthly updates while Overstreet was published annually. Many collectors viewed the price guides as a Wall Street investor would their portfolio – a financial statement for the value of their “stuff”. Indeed, it was fun for my twelve year old self to watch his 1969 Nolan Ryan purchased for thirty dollars skyrocket to approximately 800 dollars. I guess the feeling was similar to the millions of Americans who loved seeing their 401k’s and investments balloon to incomprehensible heights in the last five years. Interestingly, both the comic book and baseball card hobbies became pawns in market inflation scams in the early 1990’s designed to take advantage of excited collectors and burgeoning investors.

The comic book industry gained substantial mainstream notice in the late 1980’s with the publication of “Watchmen” by Alan Moore and “The Dark Knight Returns” by Frank Miller. The widely expanding popularity of Marvel Comics’ “X-Men” and the uncontrollable anti-hero, Wolverine, were also beginning to permeate popular culture. Deciding to capitalize on their most popular product, Marvel began to expand the “X-Men” comic line to almost ten titles and inserted Wolverine in as many monthly issues as possible as comics with Wolverine appearances tended to rise quickly in value. The expanded X-Men line quickly resulted in inferior products. Many fans were not willing to purchase ten comics to follow an incomprehensible storyline which attempted to resolve itself over a year later, usually to the satisfaction of few readers.

The final nail in the comic investment coffin was Marvel’s asinine attempt to convince collectors to buy the same comic twice. Marvel began publishing selected comics (usually X-books) in a pre-sealed bag which contained trading cards or something else irrelevant inside. This forced the collector who wanted to read the comic to purchase two copies: one to open and read and the other to keep for value. Initially, this sparked a significant sales increase and interest in comic collecting by non-fans. Investors soon found out the sealed comics had little resale value despite the inflated prices placed on them by the Overstreet guide. As a result, the comic market became flooded with product nobody wanted, resulting in Marvel’s filing for bankruptcy in 1996. The comic book industry never recovered from this debacle, which saw Spider-Man, Hulk and the X-Men disappear from drug store racks, taking permanent residence in comic specialty stores.

The baseball card industry attempted to inflate and expand their market in a fashion acutely similar to Marvel Comics by using the Beckett Price Guide as a means of attracting outside investors. In 1989, Beckett increased its practice of over-inflating the value of unproven prospects. I attended the first-ever Twinsfest that year and was surprised to witness so many supposed collectors purchasing and selling dozens of Gregg Jefferies rookie cards while I thumbed through vintage albums looking for old Sparky Lyle and Bill Lee cards. As the 1989 season unfolded, Jefferies succumbed to the massive pressure built up by the baseball card industry. It took Jefferies a handful of years to recover from these unrealistic expectations, although he never came close to achieving the potential valued by Beckett before his career really began.

Undeterred by this failure, baseball card companies started a new practice a few years later, the insertion of “insert cards” in random packs. Insert cards were (and still are) short-printed cards of star players randomly placed in packs. Intended to entice investors rather than boys who idolized their heroes, card companies subsequently jacked the price of many products, hoping the chance of finding one out of five hundred Derek Jeter inserts would justify the seven dollar per pack purchase price. In 1995, I was at a sportscard shop in Hutchinson, MN and I noticed a few older men sitting by the sales counter opening packs of baseball cards in the same way gamblers open pull-tabs. I watched these guys remove the insert cards and trade them back to the shop owner for more packs. These ramblin’ gamblin’ dudes kept this habit going for hours until they, like most gamblers, ran out of money. As a result, the shop owner had a little extra cash in his pocket and a massive inventory of cards to sell. Most card shop owners believed the Beckett guide was the Bible and priced their cards accordingly. In doing so, they began to alienate their traditional market. Kids seemed unwilling to fork over their entire allowance for just one card. In a few years, the insert card craze had run its course and those looking to make a quick profit moved on to other endeavors, leaving many shop owners with gigantic, over-priced inventories and few customers willing to pay for them. This resulted in many shop owners taking a massive loss and ultimately going bankrupt.

These types of schemes evolved over the next fifteen years, resulting in the massive fraud perpetrated by Wall Street firms and those connected with its success. Back in my ferverent collecting days, I asked myself why anyone would invest their money at an entity that, by current consensus, is impossible to explain how it exactly functions. The textbook caveat of stock market investing is one makes a profit by buying low and selling high. However, the advice continually spewed from supposed experts like Jim Cramer and Suze Orman implied that the investor should rarely, if ever, sell. The market’s just going to get bigger and bigger was the mantra of almost all advisors connected to Wall Street in the last decade. The average investor believed it was foolish to cash out and miss an even bigger payoff. The problem Americans are now realizing is this supposed payoff would never come and was never going to. Granted, a small percentage of individuals were able to benefit from the over-inflated stock market, cashed out their portfolios and helped their family achieve financial security. Many Americans are now facing financial ruin from this chicanery, from evaporated savings to losing their homes.

The question that continues to not be posed by anyone in the media is why did so many millions of people fall for this scam? Why were we convinced investing in Wall Street was the most assured path to financial freedom? Why didn’t people just buy Mickey Mantle cards and Beatles albums instead? Whether anyone wants to admit it or not, Americans fell for this scheme because they wanted to. They wanted to be rich, brag at cocktail parties about the size of their portfolio and pretend to be one of those high rollers they now universally despise. If someone such as myself questioned why I should invest in the stock market, the traditional reply would be I just didn’t understand how the market functions. This is why CEO’s like Warren Buffet are billionares and I have a bunch of worthless Trashmen records. I was constantly told this by my father, who has exactly as much knowledge of Wall Street as Mr. Buffet currently does which judging by his billion dollar losses amounts to absolutely zero.

The methodology of this great swindle has its roots in our collective cultural mythology. A few weeks ago, I was reading my little girl “The Emperor’s New Clothes” by Hans Christian Anderson as I put her to bed. For those not familiar with the fairy tale, it centers around two charlatans who pass themselves off as weavers to an unsuspecting and vain emperor. The weavers claimed they made clothes that could only be seen by the wisest of individuals. If one could not see the clothes, they were not sophisticated enough to do so. The emperor fell for this pitch and even though he could not see the clothes, he pretended to do so as not to appear stupid. One by one, his courtiers followed suit, unwilling to look unenlightened and thus lose their place in his court. The weavers’ fraud is ultimately exposed when a child points out the emperor is completely naked as he parades himself through town.

Anderson’s point, or moral, is there have always been weavers and there always will be people willing to believe them. The Old West tale of the traveling medicine doctor who provided cures to those willing to pay for them is the first modern example of the con artist who eventually gained himself a seat on the high court of Wall Street. The medicine man sold sugar packets and whiskey as cures for all ailments. Wall Street sold us cures for our financial insecurities. Investors believed these claims because they wanted to. They didn’t want to miss out on the opportunity of massive wealth. To do so would be considered foolish. If everyone else is doing it, why should investing be doubted?

Looking at those massive portfolios must have brought investors the same feeling I get when I look at X-Men #10, the 1969 Nolan Ryan or the Chuck Berry record mounted on my wall. It is abhorrent for so many to lose this paper value but the question has to be raised if it really existed at all? I never bought into the Wall Street game and I never will. While depressing paper statements offer little enjoyment other that means to start a fire, I can still read Stan Lee’s introduction of the Juggernaut or look at a picture of a skinny kid who would eventually strike fear in hitters for over twenty years. They may prove to be as worthless as stock in AIG, but I can at least state I got something from my investment. Monetary value may dissipate but I can still listen to that rock and roll music any old time I choose it. There has been an increase in vinyl purchasing the last few years. Apparently, the sound quality of digital music is quite inferior to that of the record. I’ve seen Queen records at music stores commanding prices three times what I paid for them. Maybe the weavers have found a new method of conning us. For me, it doesn’t matter. If history teaches us one thing (and it should teach us infinitely) it is there is no way to get rich quick without being dishonest with yourself or your neighbor. Invest in yourself, those you care for and the things which make you happy. Trust me, it’s sound advice. Take it to the bank.

1 comment:

NetBizSavvy said...

What a cool game. I bet my friends would love to play it. By the way, did you know that Herobits, an upcoming card game will be released on June 2009? It's like playing like a superhero. I'm pretty sure you gonna enjoy it.