Introduction
I am neither the first person nor probably the last to address this issue. I want to first give credit to two very good articles about the junk wax era. The first is by Ryan Cracknell on the Cardboard Connection web site (footnote 1). The other is an eBay Guide by a person named Setbuilders, whom I cannot find his or her real name on eBay (footnote 2).
This posting will also reinforce a common theme you will see on this blog. That theme is: Don’t Collect Sports Cards to Make Money! In general, sports cards are a risky and lousy investment as compared to almost anything mainstream like stocks, mutual funds, gold or even a low-yielding money market account. Sports card collecting should be done instead because you love doing it for any reason other than making money and you can spare a few dollars to indulge that love. Rarely, will you make any money collecting.
Junk Wax
Junk wax stands for wax packs or boxes of wax packs of sports cards from the late 1980s or early 1990s that have very little value today. This time period is also referred to as the “junk era” for sports cards. Cards from this era have little value because they were massively overprinted in relation to what their demand would become and has been in recent years. Hence, supply of these cards wildly outstrips demand, even for the best players’ rookie cards, which leads to low values or prices. For example, the vast majority of 1988 Tom Glavine rookie cards that sell on eBay in PSA 9 (Mint) condition, sell for less than their cost of grading (footnote 3). Thus, even though Glavine is a sure-bet Hall of Fame player who is not tainted by steroids or other PEDs, his cards are so abundant that they must be absolutely GEM-MINT in order to get graded and sell at a profit.
The exact years of this junk era are unclear, but many argue that it runs from 1986 to 1993. I think it actually started earlier than 1986, but 1985 issues by Topps, Donruss and Fleer sets had some amazing rookie players (Clemens, Puckett, & McGwire in Topps), which seem to make those sets look more valuable than say 1986 sets, which largely have Jose Conseco as the only key rookie and Jose’s stock as a great player sank like the Titanic long ago.
The baseball strike of 1994-95, which wiped out the 1994 World Series, is often seen as the end of the junk era (footnote 2) because it massively decreased interest in baseball. This decline in popularity of baseball, which is the main sport for collecting sports cards, caused many sports card stores to go out of business (footnote 2) and several sports card manufacturers to begin having financial trouble that ultimately led to their demise. The remaining companies had to adjust their strategies to survive (having multiple brands, shorter print runs, inserts, autographs, etc.), and ultimately demand and supply for cards came into balance, although newer cards will never likely have the value that vintage cards retain.
Makings of a Mania
The junk wax era had all the makings of a classic economic bubble in which assets trade or sell at prices that are very inflated over their true value (footnote 4). I would refer to junk wax more as a mania than a bubble because economic bubbles usually burst very quickly leaving people who hold once-inflated assets with very suddenly much less valuable assets. For example of a bubble, think of real estate in San Diego. Housing prices dropped almost 30 percent in 2007 and 2008, which is a tremendous rate of deceleration (footnote 5) and stock market bubbles often crash in less than a day. The inherent lack of value of junk era cards was discovered much more slowly and some people today still do not understand that their carefully collected and protected junk era cards are not worth very much (footnote 1). In others words, the bubble did not just pop. The lack of value of junk era cards became knowledge more slowly with those hanging onto their "junk wax" longer taking the worst losses.
The cause of the junk era mania was the transformation of sports cards being primarily sold to children (or purchased by parents to give to children) to sports cards being primarily sold to collectors or hobbyists (footnotes 1,2). Even though the first baseball cards were packaged with tobacco products, baseball cards and subsequently other sports cards were often given to children by adults. For example, even on the back of 1952 Red Man Chewing Tobacco cards is the trademark line: ‘These Baseball Cards are for Red Man “Chewers” and Their Boys’. It was anticipated that cards would make it into the hands of children who would see the players as athletic role models. By the 1960s, Topps cards were almost exclusively found in the candy and gum aisles of your local drug stores and general merchandise stores (or what were often called dime stores). I remember buying the vast majority of my childhood cards from 1st through 5th grade at a drug store that I would stop at with my family after Church on Sunday to eat lunch at the counter. I also purchased cards at another drug store that was a bike ride from my house and even in 7th and 8th grade several friends and I would ride our bikes up to this drug store to purchase a soda and Topps Hockey or Baseball cards.
Kids were not collectors but rather read, examined, tacked to bulletin boards or played games with their cards usually destroying them in the process. I must have destroyed cards that would be worth thousands of dollars today. For example, my friends and I created a hockey game where we shot dice at little goals using hockey cards that were in the palm of our hand. Bobby Orr was one of my “lucky” players and I won many games with his cards but destroyed them in the process. We also had baseball games with cards, stepped all over them and colored beards and glasses on the guys we hated from the Yankees (I grew up near Detroit).
The main point is that almost all kids acted like this with their sports cards. It was part of growing up. The vast majority of vintage cards printed were destroyed by their owners. If not totally destroyed by their owners, they were put in boxes after their owners grew tired of them. These boxes in most cases were inevitably thrown out by parents doing Spring cleaning in some future year.
However, there were a small number of adults who collected cards or by chance got their hands on some cards that survived being thrown out by somebody’s parent. By the early 1970s, many of these people were meeting in clubs or swap meets to trade or sell cards. It became apparent that some cards were valuable or desired (Mickey Mantle cards, tobacco cards, etc.), but there was little information about the value of these cards. While some mail order houses advertised prices in generalist hobby magazines or developed mailing lists with cards and prices, there was no solid information on pricing. There were a couple of low circulation publications like Sports Collectors Digest or Baseball Hobby News, but no systematic price guides. This situation was not a big deal because the number of hobbyists collecting cards was rather small.
This changed with the 1979 Sport Americana Baseball Card Price Guide in 1979 by James Beckett and Dennis Eckes. By collecting information from Hobby Dealers (who were not that many in number), Beckett and Eckes were able to lay out the values of various cards. For example, a Mint condition 1951 Bowman Mickey Mantle card #253 was being sold for $90.00 by dealers (Beckett and Eckes, 1979, p. 32) That price would be $285.59 in 2012 US dollars adjusting by the consumer price index.
Caption: This is a scan of my copy of the first Beckett price guide published in 1979. My late father found this at a garage sale in the early 1990s.
Beckett followed with more price guides and was producing a monthly baseball card price guide magazine by December 1984 (footnote 6). This was a major turning point for the sports card market because people realized that there was money in those pieces of cardboard with pictures of athletes on them (footnotes 1,2). Newspapers caught wind of the value of sports cards and articles began running about how people were turning old attic finds into hard cash.
For new sports card issues by the early 1980s, cards had become collectibles and a flood of new buyers entered the market (footnotes 1,2). These buyers, however, were quite different from the children who previously played with cards. Most of the flood of new buyers were adults or at least teenagers, and they tended to preserve their cards in either plastic pocket protectors or other means that protected the conditions of the cards. The goal of course was to have fun collecting AND to make money on their well-preserved collections when they would later sell them (footnote 2). The confidence of these new collectors was buoyed by the continued rise in value of vintage cards. For example, by 1984, the Mint condition 1951 Bowman Mickey Mantle card #253 had risen from $90.00 in 1979 to $375.00 in five years (footnote 6).
This set the stage for the sport card mania to take off full flight. There was a limited supply of vintage cards available. However, new cards came out every year and logically if these cards would similarly rise in value as did vintage cards, there was money to be made (along with the fun of collecting). Or so people thought….
The flood of new supply of new cards to the market
The sports card hobby kicked into overdrive to meet this drastically increased demand in the early 1980s. A number of factors began to dramatically increase the supply of new cards to the market. They were:
1. After years of legal wrangling, Donruss and Fleer entered as fully-licensed major baseball card producing companies in 1981 (see my prior post on how licensing works here: http://junkwaxandobservations.blogspot.com/2012/08/how-sports-card-royalties-work.html ). These companies broke the 25-year Topps monopoly by not distributing gum with their cards but rather stickers. Score would then enter the market in 1988, and Upper Deck would enter the baseball card market in in 1989. Suddenly, there were multiple companies turning out baseball cards and more generally sports cards. This would of course increase the supply of cards dramatically across the market (footnote 2)
2. Sports card specialty stores began popping up everywhere like crazy to meet the hobbyist demand. You could find vintage cards at these stores, but they extensively catered to the latest card releases by all the various card companies. They became the primary distribution outlet for sports cards, as your local drug stores had limited shelf space and could not handle multiple brands of cards.
3. None of the sports card companies practiced restricting their print runs. They would sell as many cards as they could print. Huge hobby demand drove the printing presses for cards into overdrive. Print runs were never published.
While this huge avalanche of new cards should have been a sign that newer cards would not rise in price like older cards, several aspects of the market masked the oversupply (footnote 1). First, most of the new collectors bought and stashed their cards in closets or storage units. The stashing was done so that 20 years down the road, the collectors could cash out. People bought unopened cases of wax boxes. Also, the card companies made stashing and storing easier by starting to sell complete factory sets. People would buy 20, 30 or even more factory sets, which ensure them that they had multiple crisp cards of any player that would make it famous.
Second, because people stashed new cards rather than selling them, there was no way to know what the appropriate price was for these stashed cards and sets (footnote 1). There was no real market mechanism like eBay to let people know what the true value of a card was. Indeed, card values seemed to oscillate with a player’s fortunes on the field with Mark McGwire cards probably being the most speculated and overpriced cards as Big Mac racked up so many homers.
Third, the people and groups that could have possibly foretold of this oversupply had an economic interest not to stop the mania. Beckett was selling a lot of magazines as the sports card market sizzled. The sports card hobby shops had no real interest in pointing out oversupply, even if they knew about it, because their whole business was dependent upon sports cards being collectables that people believed would increase in value. The card companies had no real reason to think of restricting output on any particular issue because that was just lost money to them as long as people kept on buying. Even if they had an inkling, none of the parties in the industry had the economic motivation to tell collectors that the “emperor had no clothes” when it can to the value of cards in the market.
The beginning of the end
Some observers perceive the years 1990 and 1991 as the peak of the sports card boom or mania (footnote 1). The baseball strike of 1994-95 certainly started the beginning of the end of the mania. The strike reduced demand for baseball cards and started driving collectors from the market due to disgust with both MLB and the players. Some collectors began to unload their modern card collections at a fraction of what they thought they were worth. These were actually the lucky collectors.
The manufacturers would also suffer. After doubling printing plant capacity in 1991, Donruss-Leaf was sold by its owner to Pinnacle Brands, the maker of Score brand cards, in 1995. This reflected the suddenly diminished market for sports cards. Pinnacle Brands would declare bankruptcy in 1998 (footnote 7). Sports card stores began closing.
As I said before, the sports card mania though was not a bubble and had a slow, halting depreciation in prices of cards from this era. Indeed, there was a short rise in interest in junk era cards in 1998 and 1999 because of the home run race between Mark McGwire and Sammy Sosa. I remember McGwire’s 1985 Topps card going on eBay for $50 in ungraded state in 1998 if the card had a nice scan and looked in Mint shape. However, this high point quickly faded with eBay becoming the main way that cards were bought and sold in the early part of the last decade. Once eBay gained popularity and people started listing all their stored up “junk wax” in the early part of the last decade, reality set in. It became abundantly clear that there were way, way too many cards still in existence from the junk wax era that were in pristine shape or not even opened in factory sets or wax packs. Strong information about supply and demand from a market like eBay that has millions of buyers and sellers revealed the true huge oversupply of junk era cards. Today, a 1985 Topps Mark McGwire rookie card sells for just under $10 in PSA 8 grade (average of prices checked on eBay, 10-8-2012, and includes shipping), which barely covers the cost of grading. Ungraded versions with good looking scans sell for $3.00-$7.00. I saw an ad on my local Craig’s List site today selling the following unopened factory sets for $5 each: 1988 Donruss, 1990 Donruss, 1991 Donruss, 1992 Donruss, 1988 Fleer, 1990 Fleer, 1991 Fleer, 1988 Score, 1990 Score and 1991 Score. Five dollars is far less than these sets cost when manufactured. I have seen this advertisement before, which indicates that the seller is not having that much success offloading the junk wax.
Also, the price of junk era cards or junk wax just seems to go lower as more and more people break out those old stuck away boxes and factory sets that they thought would make them wealthy some day. It also does not help prices that many of the junk wax era heroes in baseball have been implicated in steroids scandals thus tainting their accomplishments. McGwire, Sosa, Bonds, Clemens and company may make it into the Hall of Fame at some point, but their cards’ values will suffer from the stigma of PEDs.
One final ironic note may be that cards that ultimately may have the most value from the junk era are 'error' cards. The infamous 1989 Billy Ripken “F**k Face” card has now passed the 1989 Fleer Ken Griffey, Jr. Rookie Card in value (PSA online SMR checked on 10-8-2012). Indeed, a version of this same Billy Ripken card is now more valuable than the iconic 1989 Ken Griffey Upper Deck Rookie Card (PSA online SMR checked on 10-8-2012). There are even collectors who specialize in collecting mainly error cards from the junk wax era (for one web site, see: http://junkwaxgems.wordpress.com/ ). There were a lot of error cards because you had so many companies cranking out cards so fast for hungry collectors that proofing cards probably only slowed down their cash flow.
End Note
Like all other posts, please feel free to make comments. I review all comments before they are posted in order to reduce spam and keep things on topic. Also, it may take me a few days to review comments.
Footnotes:
3. Data on Glavine’s 1988 rookie card auctions comes from personal examination of eBay auctions that were listed as finished on 10-5-2012. Topps Tiffany and Score Glossy Glavine rookie cards at PSA 9 go for higher amounts, so they might be considered an exception.
4. Nice discussion of the causes of economic bubbles can be found here:
It seems history either repeats or rhymes, whichever one prefers. Today card manufacturers are similarly cranking out cards to meet growing demand, and maybe of these cards are getting slabbed. Similarly prices are rising parabolically. This won't end well, if history is any indicator.
ReplyDeleteWe are sort of in a mania or bubble again in sports cards. The Coronavirus pandemic rekindled interest in collecting as people were stuck at home with their computers. The summer 2020 documentary on Michael Jordan on ESPN also has exploded demand for his cards. We are also seeing a lot of speculation in graded cards from the Cryptocurrency and Robin Hood generation of young people looking for investments that can be flipped.
ReplyDeleteGiven that cards have no inherent income generating potential like a corporation (and hence a share of its stock), this bubble will likely end badly for many people.