Economy

Sneakers Are The New Baseball Cards

By John Del Vecchio  |  July 3, 2019

Baseball cards…

When I was a kid, that was the easiest road to riches. Why mow lawns when you could triple your money on a Jose Canseco rookie card?

It seemed like every week, there were card shows everywhere, with wide-eyed fans like me, old-school collectors, and grifters. They were all strictly looking to cash in trading back and forth looking for the next big winner.

I still remember my first card show. I bought several wax packs of 1984 Topps baseball cards. My dad and I went to lunch, and I gently opened the three packs and sifted through the lot. Then, the Holy Grail… a Don Mattingly rookie card. This one wasn’t about money for me…

I was a huge Yankees fan, and Don Mattingly, tearing up the American League on his way to being named Rookie of the Year, was my favorite player. With the bulge of chaw in his cheek, the thick eye-black, a shaggy mustache and days of scruffy growth, he looked like a baseball player. He could hit, and he was a vacuum at first base.

They didn’t call him “Donnie Baseball” for nothing.

I was $40 richer. But I was happy beyond recompense to have another Mattingly in my collection.

At one time, there were thousands of baseball card shops dotting the U.S. Business boomed. Cards were selling for over a million a pop. Prices kept going up and up and up…

Then it all came crashing down. Total implosion. Wipeout. There’s even an interesting documentary about the Golden Era of the baseball card market, Jack of All Trades. Now, most of this stuff isn’t worth the paper it’s printed on.

I do still have a few cards that have maintained significant value over time, such as a 1948 Bowman Stan Musial that my dad found in a pack as a kid. But, for the most part, there’s not much riches in baseball cards these days.

Sneakers Are Overhyped

Based on that experience, my interest was really piqued recently about a subject I have no prior interest in, sneakers.

Today, sneakers are the big thing. I use them to work out in. That’s about it. Rarely would you see me in sneakers doing everyday things.

But, for some people, sneakers are big business… very big business.

In fact, there’s a purpose-built exchange — StockX — that allows people to buy and sell precious sneakers. And it’s got a billion-dollar valuation.

Several other similar exchanges have raised hundreds of millions of dollars from venture capitalists. There are tales of sellers dealing tens of thousands of pairs of sneakers, bringing in millions in revenue and fat double-digit profit margins.

The investment bank Cowen forecast that the industry will grow from a total value of $2 billion today to $6 billion by 2025. There’s nowhere to go but up!

You know what that sounds a lot like?

Baseball cards.

Different era, different product… big hype, big bubble.

Good luck trying to sell your overhyped Air Jordan’s in a recession. A friend of mine loves to sail. He’s world-class. And he has the dough to buy the very best boats. He told me something that really stuck with me: “John, you can always buy a sailboat. You just can’t sell one.”

Hence, I will never own a sailboat. If I want to go sailing, I’ll hire a skipper for the day, have some fun, and walk away relaxed, refreshed, and with no commitments.

That’s the problem with illiquid investments. Sure, there’s an exchange. But how deep are the buyers and sellers? How many people have the money to participate through thick and thin?

What does that market look like when everyone’s running for the exits? That does happen, you know.

If you love sneakers and want to make a business of your passion, good for you. Be prepared to lose your ass. If you treat a hobby as a get-rich-quick business, you’re almost sure to lose.

Here’s An Alternative Plan

It’s a lot more boring. But it works.

Save some of your income. Max out your retirement accounts. Invest a little more consistently in the stock market, whether it’s high, low, overpriced, crashing, flatlining… just be consistent.

Then — and only then — trade stuff like sneakers, wine, art, Star Wars toys, baseball cards…

Having fun is a very important part of life. Scheming to monetize it will, more often than not, end in tears.

A lot of the folks trading these wares haven’t seen a recession in their adult lives. We’re in the midst of the longest expansion ever; things look great up here. But, when the next downturn comes — and it will — they’ll learn some things about human nature… the most important being that it never changes.

On the bright side, they’ll still look really, really good with those “investments” on their feet…

John Del Vecchio

John Del Vecchio is the author of the bestselling book, Rule of 72: Compound Your Money and Uncover Hidden Stock Profits and What’s Behind The Numbers: A Guide To Exposing Financial Chicanery And Avoiding Huge Losses In Your Portfolio.

As the in-house stock market guru and forensic accountant for Dent Research, John stood on the shoulders of the great David Tice, James O’Shaughnessy and Dr. Howard Schilit, and built a framework of algorithms and a multi-factor grading system that has made him one of the more successful short-sellers around.

John is also the executive editor of our Hidden Fortunes newsletter and our trading service Small Cap All-Stars.

He graduated Summa Cum Laude from Bryant College with a B.S. in Finance and was awarded Beta Gamma Sigma honors. He earned the right to use the Chartered Financial Analyst designation in September 2001.MORE FROM AUTHOR