Jan Heritage Auction putting up some nice artwork 4 4

[John E.]

On 1/1/2022 at 9:20 PM, tth2 said:

But now the Fed is supposed to be draining all of that excess money from the system,

 

How does the Fed accomplish this? Tax hikes?

 

[bernoulli]

On 1/2/2022 at 11:46 AM, John E. said:

How does the Fed accomplish this? Tax hikes?

 

I am a professor of economics and I will gladly answer your questions about the subject, as long as the moderators allow it. The Fed does not tax anybody. Before covid, the Fed was tapering, reducing its balance sheet, which is just another way to say it was lowering the amount of money in circulation (to keep things simple). The Fed can destroy money as easily as it creates through open market operations (buying and selling government bonds). 

One thing people should be careful: even though monetary policy has been extremely accommodative recently, it does not follow that the prices of every class of financial assets will increase. Yes, more money in circulation will tend to inflate asset prices, but specific asset classes have its own dynamics. 

For instance, say that the price of sports cards is determined by a combination of five main variables, with money easiness being one of them. The other unrelated variables may drive prices down (even permanently) even as the Fed's balance sheet continues to rise. 

In the figure you can see the Fed tapering, starting in late 2017. Covid changed all that.

Edited January 2, 2022 by bernoulli

[delekkerste]

On 1/1/2022 at 10:26 AM, tth2 said:

So much for Fed tightening causing the OA bubble to burst.

(a) The Fed hasn't tightened yet

(b) Art/collectibles markets generally operate on a lag

(c) Sports cards are rolling over for reasons other than monetary tightening

(d) I've already told you when the peak is going to be and what is going to cause the bubble to burst, but, shhh, that's strictly for your ears only.  

In any case, nice attempt at a reverse jinx, though.  

Edited January 2, 2022 by delekkerste

[John E.]

On 1/1/2022 at 10:08 PM, bernoulli said:

I am a professor of economics and I will gladly answer your questions about the subject, as long as the moderators allow it.

Thank you. That was quite helpful. 

[tth2]

On 1/2/2022 at 11:46 AM, John E. said:

On 1/2/2022 at 11:20 AM, tth2 said:

But now the Fed is supposed to be draining all of that excess money from the system,

 

How does the Fed accomplish this? Tax hikes?

The Fed can do many things, but the power to tax is not one of them.

It can drain liquidity by ceasing its purchases of various bonds (you may have seen various news reports of the Fed's "tapering", which is short hand for "tapering its bond purchases") and then selling off the massive amount of bonds it currently holds, which means the various buyers out there are paying their money to the Fed who will then take the money out of circulation. 

It can also drain liquidity by hiking interest rates, which makes banks and other parties less willing to borrow money.  

[tth2]

On 1/2/2022 at 12:08 PM, bernoulli said:

One thing people should be careful: even though monetary policy has been extremely accommodative recently, it does not follow that the prices of every class of financial assets will increase.

The barn door has closed and the horses have already left.  Monetary policy was extremely accommodative since March 2020 and the price of virtually every class of financial assets did increase.  Off the top of my head, the only traditional asset class that did not increase was gold.  Oil was late to the party, but ultimately it did rise.  

[tth2]

On 1/2/2022 at 12:49 PM, delekkerste said:

On 1/1/2022 at 11:26 PM, tth2 said:

So much for Fed tightening causing the OA bubble to burst.

(a) The Fed hasn't tightened yet

(b) Art/collectibles markets generally operate on a lag

(c) Sports cards are rolling over for reasons other than monetary tightening

What are these other reasons for sports cards rolling over, and why are they unique to sports cards?  Why are they not affecting comics and OA?

If you're saying that the "bear market" for sports cards that you were trumpeting in another thread is not due to reduced liquidity (or the prospect of reduced liquidity), then are you saying that sports cards will be hit with a double whammy once the Fed's tightening really begins to take hold?

On 1/2/2022 at 12:49 PM, delekkerste said:

In any case, nice attempt at a reverse jinx, though.  

 No need for me to engage in any superstitious activities in hopes of the market staying pumped up.  I've already sold off most of my comic collection (value-wise) so I'd actually welcome a big drop in comic prices. 

As for OA, sadly my OA collection is so paltry that I'm agnostic, at worst, about movements in the market.  In fact, given the number of pieces I'd still like to acquire, net net I would prefer to see a big decline in prices.

Edited January 2, 2022 by tth2

[Rick2you2]

On 1/1/2022 at 10:21 PM, tth2 said:

So why is the sports card market plunging?  Surely people there must engage in the same shenanigans as comic or OA collectors?

Different markets have different timelines, and situations affecting prices. Since I don’t know anything about that market, I can only hazard a guess that the prices went up higher, and disproportionately for an item where there were multiple copies. It probably attracted more pure speculators, too. Likewise, when the hot air comes out of the prices here, I expect it will be to less deep and slower because it is a smaller market where some real knowledge and artistic appreciation is important. 

[vodou]

On 1/1/2022 at 11:49 PM, delekkerste said:

(c) Sports cards are rolling over for reasons other than monetary tightening

Care to share? I'm not (and unlikely ever will be) a collector/player in this market, but I remain exceptionally curious about it!

[vodou]

On 1/1/2022 at 11:49 PM, delekkerste said:

(d) I've already told you when the peak is going to be and what is going to cause the bubble to burst, but, shhh, that's strictly for your ears only.  

If it's not the date I've been tossing around occasionally like a hand grenade then...you're wrong  

[John E.]

On 1/2/2022 at 2:02 AM, tth2 said:

The Fed can do many things, but the power to tax is not one of them.

It can drain liquidity by ceasing its purchases of various bonds (you may have seen various news reports of the Fed's "tapering", which is short hand for "tapering its bond purchases") and then selling off the massive amount of bonds it currently holds, which means the various buyers out there are paying their money to the Fed who will then take the money out of circulation. 

It can also drain liquidity by hiking interest rates, which makes banks and other parties less willing to borrow money.  

Thank you. That makes a lot of sense. 

[batman_fan]

I collect non-sports cards and the stuff I buy is up 3x what they sold for a year ago.

[delekkerste]

On 1/2/2022 at 3:19 AM, tth2 said:

What are these other reasons for sports cards rolling over, and why are they unique to sports cards?  Why are they not affecting comics and OA?

Because comics and OA didn't go up 10-25x in 2020 and the first two months of 2021 as a lot of sports cards did. 1986 Fleer Michael Jordan PSA 10s went from $30-$35K to an absurd $720K during this time, catalyzed by The Last Dance and sports cards in general becoming a religion, a lifestyle, an investment, a hot topic for influencers, news desks, etc. all of a sudden.  Sure, the easy money environment was a nice tailwind, but, that was just one piece of the puzzle. 

I had lunch with my friend Vincent Z. from Metropolis back in February of this year, and we were bemoaning how absurd it was that you could have bought a stack of Jordan PSA 10s (pop. 300+) 12 months earlier for the same price as a Hulk #1 CGC 9.2 (pop. 6), but, by Feb. 2021, you could only buy a little over half of one Jordan (!!) with the cash equivalent of a Hulk #1 CGC 9.2. And, since then, those assets have been on very divergent paths, with the Jordan card down by 50-60% from peak and the Hulk #1 9.2 probably up 100% or thereabouts. So cards have been on a very different trajectory than comics/OA.

We basically had a perfect storm of everything hit sports cards in 2020-early 2021 and create a huge mania that was being talked about and reported on almost every day during this period.  Easy money was part of it, but, basically prices just got so out of hand that not even the Fed doing $120B of QE/month could keep most of the card market afloat. 

It's now settled science that the overwhelming majority of cards are down from their Q1 peaks, with many cut in half or more like the Jordan card.  That said, there's still a good number of cards, mostly higher-end, that have held on to their gains and some are even still climbing.  So, it's very much like the stock market in that regard, where the "average" stock is in a bear market, but, the indexes are only a few percent of their highs due to everyone hiding out in mega-cap tech and a handful of other names.

Edited January 2, 2022 by delekkerste

[exitmusicblue]

OA isn't plunging because it's something all sorts of other collectibles aren't.

It's art.

[tth2]

On 1/3/2022 at 12:29 PM, exitmusicblue said:

OA isn't plunging because it's something all sorts of other collectibles aren't.

It's art.

So art (whether OA or fine art) won’t be affected by Fed tightening?  Good to know.

So if I understand the various responses to my post, the declines in the sports card market are unique and limited to its own ecosystem (because, in summary, sports card collectors are stupid) and are not a canary in the coal mine for other asset classes, including collectibles.

I feel much better now! 

[exitmusicblue]

On 1/2/2022 at 10:01 PM, tth2 said:

So art (whether OA or fine art) won’t be affected by Fed tightening?  Good to know.

So if I understand the various responses to my post, the declines in the sports card market are unique and limited to its own ecosystem (because, in summary, sports card collectors are stupid) and are not a canary in the coal mine for other asset classes, including collectibles.

I feel much better now! 

I think art is the outlier, not sports cards.  : )

[exitmusicblue]

P.S.  Wow, sports cards in general really have taken a beating.  Was concerned I needed to sub a certain card or two fast, but guess I can take my time.

Back on subject -- some fun GA offerings.  Curious how the Harvey PCH art does.  Horror fandom...

 

Edited January 3, 2022 by exitmusicblue

[Rick2you2]

On 1/3/2022 at 1:01 AM, tth2 said:

So art (whether OA or fine art) won’t be affected by Fed tightening?  Good to know.

So if I understand the various responses to my post, the declines in the sports card market are unique and limited to its own ecosystem (because, in summary, sports card collectors are stupid) and are not a canary in the coal mine for other asset classes, including collectibles.

I feel much better now! 

I think that’s overstating the case. First, there is a serious economics question as to how great an impact the Fed tightening will have on anything, let alone collectibles. Second, cards have shot up way higher than OA, and fine art has a broader public appeal which probably gives it a bit of price protection over the long term. Will Fed tightening affect OA prices? A little, but the next recession will have a greater effect (unless you count the Fed’s credit tightening as a partial cause, which it will be). 

As to sports cards, and given their history of boom or bust pricing, no comment. 

[tth2]

On 1/3/2022 at 7:42 PM, Rick2you2 said:

cards have shot up way higher than OA

Isn't that only because the top cards have actually come up for sale, while the best OA that's known to exist has not?

The highest price for a sports card is $6.6m for a T206, with the second highest price being $5.2m for a 1952 Mickey Mantle.

Is there any known OA that would have a shot at selling for more than that? 

Certainly if the OA to Action 1, Tec 27, AF 15, etc. existed, they would blow past those amounts.  

[John E.]

On 1/3/2022 at 7:28 AM, tth2 said: 

Certainly if the OA to Action 1, Tec 27, AF 15, etc. existed, they would blow past those amounts.  

Luckily, the complete art for AF15 exists 

Next time I’m in DC I’m for sure going to the LoC and get some use out of my tax dollars!