How to tell the difference between 1963 Post Cereal and 1963 Jello baseball cards

Issue Identification

For card collectors, identifying a card’s exact issue often becomes a problem when finding vintage cards either at flea markets, card shows or online.  To my knowledge, there is not an app yet whereby you can scan a card via your phone and have the issue identified.

The identification issue can become very confusing when several issues look almost exactly alike.  For example, Exhibit Supply Company cards of baseball, football and boxing greats had the same basic design over a half of a century with no statistics on the back until the 1960s issues.  Therefore, identifying an Exhibit Supply issue requires some knowledge of who was in the issue and sometimes minor differences across the issues in terms of color, printing and other smaller details.

1963 Post Cereal and 1963 Jello

The same problem applies to the 1963 Post Cereal and 1963 Jello baseball sets. Because these cards had the exact same visual design, players and numbers, they are often confused by sellers on eBay and even some experienced collectors who are not familiar with the two card issues.

The main reason for the confusion is that the issuer of the cards in 1963, General Foods, did not intend for the two issues to be seen as separate from each other.  In a clever marketing cross-promotion, both boxes of Jello and boxes of Post Cereal had one-sided baseball cards printed on the back of the box.  These cards could be pasted into a single album that General Foods gave away as a promotion in 1963 in which you could paste cards from either Jello or Post Cereal.  Hence, if a parent was buying either jello or cereal, you could get them to look for specific players.  Hence, it would be easier to fill your album with two product lines issuing the same cards.

Caption: Above is a picture of the 1963 album given away by General Foods.  Note that, on the bottom, it tells the collector to get cards from either Post cereal or Jello packages.   This was the across-brand promotion.

In general, it was easier to complete your collection through cereal boxes because the cards were issued in panels of multiple cards on the back of the boxes (complete 1963 box panels are collected today and sometimes sold on eBay).  Jello boxes were so small that only a single card could be placed on the back of the boxes.  However, because of the need to fit one card onto the back of a Jello box, the 1963 Jello cards were made just a bit smaller than the 1963 Post cards.  Also, a small design difference emerged in how the player’s STATS were line-ruled, likely as a result of having to shrink the design.

Caption: Above is a 1963 Jello box with Sandy Koufax.

These slight differences have caused hobbyists over the years to see these cards as two sets: 1963 Jello and 1963 Post Cereal.  This situation is not what the company likely intended (nor did General Foods managers likely care) when the cards were issued.  While some collectors do not care if a card is a Jello or Post card and will buy either issue interchangeably, the vast majority of today’s vintage collectors of these issues are particular about whether a card is Jello card or Post Cereal card.

Indeed, the value of certain cards or players is very dependent on which issue it comes from, either Jello or Post.  The scarcity of certain cards and thus their current prices is greatly influenced by their availability in 1963.  Players that were on unpopular cereals or jello flavors are scarce today and sell for a premium.  Therefore, if you do not identify a card’s issue correctly when selling on eBay or another venue, buyers may be upset.  For example, Frank Thomas #197 is a relatively common card in the 1963 Jello set.  However, Frank Thomas #197 is one of the hardest cards to find in the 1963 Post Cereal set.  Thus, if you list a 1963 Jello Frank Thomas #197 as a 1963 Post Frank Thomas #197, buyers will think you are either ill-informed or trying to scam them.  Even worse, you could buy a 1963 Jello Frank Thomas #197 card thinking it is the rare Post version.

Telling the Two Issues Apart

How do you tell the two issues apart?  It is easy once you know.  Below I have put a scan of both 1963 cards for Dick McAuliffe #48.  Jello is on the top.  Post is on the bottom.  When the cards are side-by-side, it is easy to see that Jello cards are smaller. However, buying online or at a show, one might not have a comparison card.  The best way to determine the issue is the red line in the middle of the STATS box.  In a 1963 Jello card, the red line stops shortly before and after the player’s STATS.  In the 1963 Post card, the red line will extend well beyond the beginning and end of the player’s STATS toward the border (compare McAuliffe cards below).

If one follows the red-line rule (Post = wide red line), you will never confuse cards from the two issues as this design is consistent across all cards.

Conclusion

In closing, please feel free to comment.  All comments are moderated to cut down on spam and to stay on the topic.

What is an error card? (or variation card)

What is an error card? (or variation card)

I recently listed some 1991 Fleer baseball error or variation cards on eBay, which got me thinking about what actually determines if a card is a “true” error card?  Ultimately, the market for sports cards determines if a card is an error or variation card worth collecting.   If enough people are willing to collect a variation card, it obviously exists as a variation (social scientists would call this the social construction of reality, but I won’t delve into academic theories here...). Obviously, there has to be another version of an error card to make both worth collecting for a set builder or somebody that collects error cards.  Indeed, the 1991 Fleer baseball set is riddled with uncorrected error cards (usually labeled “UER” in a Beckett Guide or the Standard Catalog of Baseball Cards).  Uncorrected error cards usually have no extra value because there is no other corrected version to own.  While the errors might be funny or just plain innocuous on UER cards, they affect the value of the card very little in 99.99% of the cases where no corrected version exists.

So what is a true error card?

While this might seem like a silly discussion to people who do not collect sports cards, one just needs to go to eBay and search on the words ‘1990 Pro Set error’ (no apostrophes) to see a number of cards being sold as error cards that probably are not true error or variation cards.  The 1990 Pro Set Football set is so riddled with true error cards, which were later corrected by Pro Set, that thousands of collectors chase after the various versions of the cards. This situation has created an actual market for Pro Set error cards.  While I think this is a great and a fun collecting strategy for an otherwise hugely overprinted set, opportunists now often list 1990 Pro Set cards on eBay with simple printing errors that they try to claim are variation or error cards. To me, a print dot or slightly astray print line is not an error.

Indeed, I prefer the following definition for error cards:

“An error card is a sports card that contains some sort of mistake, such as a misspelling or a photo of someone other than the athlete named on the card.” (footnote 1).

I would further add the word ‘human’ before mistake to make the definition complete.  In other words, some person had to mess up or make an error in the process of taking a card from inception to printing it for consumers for it to be an error.  That error could be in proofreading the card for typos to having the wrong player on the card.

A perfect example is the 1989 Fleer Kevin Romine #98 card pictured below.  The error version on the left has the photo of Randy Kutcher – the wrong player.  Fleer, in later print runs, corrected the error with Kevin Romine’s actual photo in the card of the right.  It’s a pure human-error-caused variation.  Either the photographer messed up writing down whose picture was taken or somebody in the Fleer design studio chose the wrong picture in the first version.  Because Fleer also corrected the error, some collectors believe you need both cards to have the full set.  Again, uncorrected error cards, while interesting, do not create a possible second card to collect.

Caption: The card of the left is the 1989 Fleer Kevin Romine error card (#98a) that has a photo of Randy Kutcher instead of Romine.  After the error was discovered, it was corrected in later print runs with card #98b with a picture of Kevin Romine.  Both cards carry just #98 on the back of the card.

Because of the need for human error in the above definition, printing defects, mis-cut cards and other types of factory production mistakes would likely be ruled out as true error cards.  Such errors come from production presses, which while maybe caused by human errors such as poor printing press maintenance, are not systematic to the design of the card.  Being systematic to the design of the card is an important aspect of the error card because all copies of the same sports card are ultimately printed and centered uniquely when put under enough magnification such as a microscope.

So what is a true variation card?

A variation card (where no error occurred) would have a similar definition:

A sports card can have legitimate variations if the systematic design of the card varies due to human intervention in the process that changes the design, picture or wording.

A classic example of such variations would be Fleer 1991 Team Logo Stickers that were packaged with baseball cards in wax packs.  Each 1991 MLB team has two sticker variations.  While this difference was never acknowledged by Fleer, it has been speculated that Fleer used two different companies to print sticker inserts for 1991 and that each was sent slightly different designs by Fleer or allowed to adapt their own designs (footnote 2).  This explanation makes sense as it has been established that Fleer used two printing firms to make the actual baseball player cards in 1991 in order to maximize the amount of cards that would be printed (footnote 3) and thus flood the market during the junk era mania.

Caption: Above are Atlanta Braves 1991 Fleer Logo Stickers that are visibly different in design and thus are variations.  They have been given the designations NNO1a and NNO1b by the Trading Card Database.

Again, human intervention or error is central to creating variation cards.  Even if the card has no errors, the human decision or confusion that leads to two designs creates the legitimate variation.

As should be pointed out, arbiters play a key role in determining errors and variations for collectors.  For example, Beckett Price Guide recognition of an error or variation card gives it legitimacy for many collectors.  It suddenly becomes part of the set as listed in Beckett.  Some web sites also play influential roles.  The Trading Card Database tries to log all the error and variation cards in a set as reported by its crowd-sourcing users.  However, in either case, a collector must convince the editors or web site masters that a card is a legitimate error or variation card.

Caption: Above are two variations of Nolan Ryan's card #302 in the 1991 Fleer set.  The variation is subtle (e.g., where the lines are ruled through the years of stats on the back side of the card).  I would consider this card to be a legitimate variation because human intervention created the line ruling differences.  Note: Beckett does not recognize this variation in their set list for 1991 Fleer baseball.  It has been recognized the the Trading Card Database.

Returning to the original paragraph of this post, I would like to point out that the market of collectors usually determines if a variation/error card exists.  If enough collectors are willing to chase and acquire a card that is a different version of the same card, that card will be considered a variation by those collectors.  The purpose of this post was to try to encourage some collectors to think about what makes a variation card worth collecting versus a printing defect or some other non-human-based variation.

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.

Footnotes:

1. Definition from: http://sportscards.about.com/od/sportscardglossary/g/error_card.htm

2. http://fleersticker.blogspot.com/2009/07/1991-fleer-baseball-stickers.html

3. http://keymancollectibles.com/baseballcards/fleer/1991fleerbaseballcards.htm

Why most ‘Buy It Now’ sports cards on eBay are overpriced

Introduction

As a vintage set builder who largely uses eBay to buy cards, I often get very frustrated with not being able to acquire certain cards at market prices.  I have a number of “Followed Searches” on eBay (e.g., what used to be “Saved Searches” but apparently the word “followed” test markets better) through which I get daily updates of new listings on eBay of various types of cards.  For example, I have an eBay search on the words “1950 Bowman” with “SGC”, because I have a 1950 Bowman baseball card set in which all the cards are SGC graded.  I have probably purchased one hundred cards because of this search.

One of the aspects of eBay searching that bothers me is that week-after-week or month-after-month, I will see the same listings that come up repeatedly trying to sell a certain card for well over 200 percent of its market price.  These listings are almost always fixed price (e.g. Buy It Now) listings, but they can be auction listings where the starting action price is above the market value of the card.  Some of these listings can be attributed to the seller not knowing the true market price of the card, but others I have seen literally for years with the card in question not being sold over probably fifty different eBay listing periods.  To collectors, these listings are just an annoyance because they create background noise and waste our time when we are looking at the results of our saved searches or are paging down on eBay after a search.

Since the conversion rate (e.g., actual completion rate where somebody buys the card) on overpriced auctions is very, very low, why do some sellers continue to list cards that are very overpriced?  For cards relisted many times, it is not seller ignorance of the market price, because an economically rational seller would adjust his or her price downward after initially overpricing the card when the listing does not convert into a sale.  To understand some of the dynamics of overpricing, let’s run an experiment.

The Experiment

I went to eBay and looked at all the listings selling a 1989 Upper Deck Ken Griffey Jr. #1 in PSA 9 grade.  This card was chosen because it is an iconic modern rookie card of one of the best players of recent decades who is a sure-fire Baseball Hall of Fame player.  The card also exists in sufficient quantity at PSA 9 grade so that determining an average market price can be based on many observations (e.g., converted listings). As such, any average price figure will more likely represent the true value of the card.

While some people might argue that the PSA 10 version of the card should be the standard examined, PSA 10s are less numerous.  Also, the sort of mystical way that cards are given PSA 10 grades versus PSA 9 grades likely makes their market less efficient.  A Griffey PSA 9 is a good benchmark because such cards are “Mint”, generally look the same and cannot have qualified grades by PSA standards.  Therefore, a 1989 Upper Deck Ken Griffey Jr. #1 in PSA 9 grade is a standardized card for the most part.

I examined all listings for this card that closed on eBay between 9-27-2014 and 10-31-2014, finding these listings using a number of different search terms related to the card so as to minimize the chances of missing any listing.  While the time window is sort of arbitrary, it covers over a month of concluded listings.  I also did not use listings where multiple copies of the card were being sold or the card was bundled with some other cards.  Only PSA 9 listings were counted.  Shipping was included in any prices reported so as to eliminate the effect of various shipping cost strategies. (footnote 1)

Here’s a description of the raw data:

Number of completed and successful auctions: 40

Number of completed and successful 'Buy It Now' listings: 9

Number of unsuccessful auctions (e.g., opening price was too high) or unsuccessful 'Buy It Now' Listings: 21

The chart below shows the results.

Of the 40 successful auctions, the average price was $42.56.  Prices ranged as low as $36.10 to as high as $51.98 in successful auctions.  However, the market for this card seems to be relatively informed as there is a normal distribution with a vast majority of the auctions clustering between $40 and $46.  Therefore, most final bids squeeze into this $6.00 price window.

The price of convenience. We can actually calculate the price of convenience from the data.  As shown in the chart, the average successful 'Buy It Now' price was $48.38.  Therefore:

$48.38  - $42.56  = $5.82

Thus, the average buyer, who did not want to compete in an auction and thus wait to buy or possibly be outbid, paid $5.82 for the convenience of getting the card purchased right away.  Nine buyers went this route versus 40 who got the card through auctions and generally paid less. (footnote 2)

Returning to the opening thesis of this post, the average price of unsuccessful 'Buy It Now' listings (or auctions where nobody bid on the opening price) was $61.58, which is approximately 145% of the average final successful auction price.  This was also not a trivial amount of the overall listings at 21 unconverted listings.  One seller was even listing the card at $99.99 with free shipping, which is 235% of what the card is worth at auction.

Therefore, we have established with this analysis that some sellers list cards at way above their price in a range that will not lead to the cards being purchased very frequently.  The fact that only 9 of the 30 Buy It Now listings were actually successful indicates that possibly a majority of Buy It Now listings are significantly overpriced, even when one factors in the convenience of not having to participate in an auction.

The Why of Overpricing

So why do sellers list a card in a price range where it is very, very unlikely to sell (for example, the 1989 Upper Deck Ken Griffey Jr. #1 in PSA 9 grade at $99.99)?  Here are the reasons that come to mind:

1. They are hoping for an uniformed buyer.  This idea has to be the basis for most of this pricing.  While most buyers of sports cards on eBay tend to know pricing, especially for graded cards, occasionally somebody’s parent or significant other goes online and wants to find a gift.  You would have to be a ‘newby’ to buying sports cards to fall for the $99.99 price on a 1989 Upper Deck Ken Griffey Jr. at PSA 9, but this might happen on rare occasions.

2. There is no seller penalty on eBay for unconverted listings.  Because eBay gives away so many free listings to sellers, the marginal cost of listing a card at too high a price is $0.00.  Therefore, it does not cost the seller anything to go fishing for somebody uninformed.  eBay will now even automatically relist unconverted listings for you, so it does not even take time to relist a very overpriced item.

3. There are no negative reputation effects for overpricing.  Because eBay buyers only rate converted auctions, sellers who frequently list 'Buy It Now' items at too high of a price do not receive any reputation loss.  Only if the shipping is priced too high, could it affect their feedback.  As a result, many of the overpriced listings also come with free shipping.

4. Most eBay sellers are not business people.  Business people rightfully consider inventory holding costs as part of their business.  There is an “opportunity cost” to not selling inventory, which is that you do not get the cash for the item that can then be used to buy more inventory to sell.  Since the average seller on eBay is a collector or a small business person, they often focus excessively on getting the best profit margin for card without considering the cost of money tied up in inventory.

5. In some cases, a seller may overprice a card when they are unsure of the market for the card.  I have done this myself.  This type of seller is less of a nuisance because they ultimately drop their price upon relisting as they learn the market.  I suggest that such possible temporary overpricing may even be a good strategy in markets for cards that are thinly traded (I will have another post down the road on thinly traded card markets).

What to do

Unfortunately, I do not think buyers can do much about the nuisance of dramatically overpriced cards on eBay.  Why I call the situation a nuisance is that these listings waste your time as you are looking for cards and have to scroll paste them.

In a perfect world, eBay would provide the solution by changing their pricing structure.  For example, cutting the final value fees by 25% on auctions that start under $1 with free shipping would be a possible solution to this problem.  This could be combined with less free listings.  A lot of sellers listing cards would embrace this option because they are already doing it anyway (e.g., having low starting prices).  Others would follow and volume upticks might offset lower final value fees for eBay.  The relative scarcity of free listings would stop the fishing expeditions with the high priced 'Buy It Now' auctions.

However, I cannot see eBay accepting this idea because the number of listings is a key metric they report to Wall Street.  I wish Wall Street would pay more attention to converted listings.

To do yourself a favor when you search for a widely available card on eBay, click on the button to display Auctions only.  Ultimately, you will pay less, on average, using an auction to acquire a card.  Also, your eyes will thank you with less listings to scroll through since you will not have to look at the Buy It Now listings.  If you do want to pay for the convenience of buying it now, I suggest a quick look at the recent sold listings, which can be found by clicking on a box in the left hand column as your go down the search results page.  That way, you can get an idea of how much you are paying for convenience and if a Buy It Now price is too high.

My advice for sellers who want to sell cards through Buy It Now auctions is to also examine the recent finished auction prices.  As shown on the data on Ken Griffey Jr.’s Upper Deck Rookie card, you would want your Buy It Now price to be at the upper end of the normal distribution of auction prices.  There are some auction buyers willing to pay at the end of the right tail and you can capture those higher than average prices without having to list your card a dozen different times.  The key is to again scan the recent completed auction results and set your price around the level of the highest converted auctions.  Also, you should realize that eBay charges generally higher final value fess on Buy It Now listings.

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:

1. I did exclude one successful auction that was an outlier.  In this auction the seller claimed that the card was under-graded and should have been a PSA 10 instead of a PSA 9.  They also included many high resolution scans to back their claim.  This approach seemed to convince some buyers, because the auction closed much higher than other auctions.

2. Two auctions actually went higher than the average Buy It Now price.  Such situations are quite possible when bidders become emotionally attached to “winning” an auction.  Such emotional attachment only costs a couple of dollars on a 1989 Upper Deck Ken Griffey Jr. #1 in PSA 9 grade.  However, if one was buying a house at a Sheriff’s auction, such emotional attachment could be more costly.

Buying Hot Rookie Cards on eBay: A Bad Investment

Preface

As with other postings, I again want to emphasize that sports cards are a lousy investment.  Buy sports cards for any other reason than to make money.  Buy them because you love sports, admire a certain player, love to make sets or any other reason than to make money.

The Hot Rookie or Young Player

Rookie cards are the currency of sports card collecting in the modern era.  After the market for sports cards shifted from being a market for children to a collectables market at the beginning of the junk wax era in the mid-1980s, the only cards that have high value are rookie cards of famous players.  The best evidence of this fact is to open an issue of the Sports Market Report or go to PSA’s web site at look at the value of cards from recent years (go to: http://www.psacard.com/SMRPriceGuide/ ).  Only Rookie Cards in High Grade (PSA 9 or 10) are very valuable.

Why are rookie cards worth more?  To somebody not in the sports card hobby, this is actually a legitimate question.  The answer is that having a rookie card means that you have a card of a player before they became famous at professional sports.  It’s usually a player’s first chronological card, so there is no ‘sports card history’ of that player.  In other words, you have a card of that player from when he or she was just some ‘Joe Schmo’ and not on the cover of GQ.  Also, a player’s rookie year is likely to be the year where the least number of cards are printed of the player.  Any player that is a star in their rookie year has increased number of cards printed of him or her in subsequent years because of increased popularity.  For example, Panini Prestige printed a complete seven card special insert series of Tim Tebow cards in their 2012 Prestige series just largely because he’s Tim Tebow.  Supply expands to meet demand.

Caption: The Hot Rookie card: 2011 Topps Chrome Colin Kaepernick Black Refractor auto /25.  This card sold on 1-20-2013 on eBay for $1500.00 in an auction that garnered 31 bids.  Kaepernick has started 1/2 the season and has led his 49ers team to the Super Bowl in his 2nd year in the NFL.

As a matter of fact, not even all rookie cards of great players are valuable.  Because Panini, Topps and Upper Deck have so many brands (Prestige, Chrome, Finest, Score, UD, Rookies & Stars, etc., etc.), there are literally dozens to hundreds of different rookie cards of various players.  Again, this is an example of how supply has expanded to meet demand and thus the average price of a rookie card for any player goes down.  Indeed, players that emerge during their rookie season can even have more cards printed of them in late-season card series, which is again an example of supply expanding to meet demand.

The one exception to this supply expands to meet demand rule is autographed rookie cards.  There is a reason that all the valuable hot rookie cards are now only autographed cards.  Autographed cards are limited to the number of cards that a player can or is willing to autograph for the various card companies.  While a player can obviously sign thousands of cards (or the little autograph stickers that are put on cards), the player cannot sign nearly as fast as printing presses churn out new non-autographed cards.  Also, players get tired of signing cards; machines do not get tired of printing them.  As a result, autographed cards become the scarce rookie card commodity.  Again, look at SMR or PSA’s web site at the value of great young players' cards from recent years across all sports.  The only rookie cards that have very high value are the autographed cards.

Buying Rookie Cards of Hot Players

This brings to the front the question of how does the collector acquire valuable rookie cards?  There are two basic ways.  First, the collector can buy new packs and boxes of a card company’s new issues in hopes of snagging one of the randomly inserted autographed rookie cards.  Premium card brands tend to have more rookie autographed cards inserted, which is why the collector pays more-dollars-per-pack for the premium cards.   The card companies also aggressively advertise the “hit-rate” per box of autographs with brands like Bowman Chrome and Bowman Draft Prospects topping the baseball rookie card brands because of aggressive signing of young prospects to autograph contracts.

The problem with buying packs and boxes, however, is that the collector has to roll the dice with Lady Luck on getting hot rookie autographs.  Your chances of getting a hot rookie autograph are much less than getting a card autographed by some “good player” who is not a rookie and thus has 15,000 autographs floating around on existing cards.

Second, and more commonly, the collector can go on eBay (or some other site like Beckett’s Marketplace) and buy a hot rookie autograph card from somebody who was lucky enough to get one in their packs or boxes.  This seems easy enough.  You pay the market rate for the hot rookie’s card, it gets shipped to you, you get to own it, and you capture its future appreciation in value as the player in question wins Super Bowls, scores hat tricks, hit home runs or whatever he or she does.  If it was so easy……

It’s not.  When you buy a hot rookie on eBay, you enter a market where the value of the hot rookie card is tremendously over-inflated as an investment due to non-rational thinking.  Markets and emotions do not mix very well, and the sports card market is one that is jet-fueled by emotion and speculation.  For example, most sports card collectors love sports and have emotional attachments to particular teams and particular players.  I personally think this is a good attribute of collectors and sports cards, but it is a bad recipe for investing.  For example, what makes us search for the highest yield in Certificates of Deposit (for those of us with savings) is that we have no emotional attachment to the financial institution that takes our money as long as they are FDIC insured.  This attribute is what makes the market for Certificates of Deposit so competitive and efficient with relatively low-profits for banks.  We rationally search and take the highest interest rate.  No emotion, no mistakes, pretty rational.

Here’s why the market for hot rookies is irrational:

1. It suffers from hype.  ESPN and the culture of 24 hour media attention raise the profile of young rookie players who are doing well.  They get a disproportional amount of media time.  Also, marketers, looking for the next young star to lock into their advertising plans, tend to make younger stars the focus on their advertising.  For example, how many times have you seen Robert Griffin III on television advertisements this year?

2. It suffers from distorted supply.  For example, let’s say that Robert Griffin III (RG3) does go on to become a Pro Football Hall of Fame Player and is enshrined in Canton, Ohio.  In this case, RG3 would end up signing about 100,000+ more football cards over the rest of his career as supply would rise to meet demand.  This would have a severe effect on the price for autographed RG3 cards.  While there would still be the same number of autographed RG3 rookie cards in existence as today, some of the demand for those cards would be siphoned off by people that just want an autographed RG3 card, just not necessarily a rookie card.  Those people in 2012 have to chase the smaller number of RG3 rookie cards on the market.  In the future, they can chase the any of the 100,000+ cards signed in the future.

3. It suffers from biased expectations of the future.  Psychology shows that there is a human tendency to extrapolate today’s norms into being the future’s norms and to underestimate the chances of bad events happening.  So, for example, because football players like Colin Kaepernick, Andrew Luck and Robert Griffen III had great years this year as rookies (or a 2^nd year player in the case of Kaepernick), the estimates of their future accomplishments by many of the buyers on the market assume continued high performance into the long term future.  This is not likely the case.  Without examining the merits of any of the three players, history suggests that injuries, loss of skills, regression to mean performance, off-the-field events or poor coaching will keep them out of the Hall of Fame.  While I am not a betting person, the odds are probably 1-3 that not one of them ever makes it to the Hall of Fame.  While they have shown they are great players for a short period of time (i.e., one season), Hall of Fame credentials are built over a decade of strong performance.  In the short-term 24 hour media world that we live in, nobody is thinking ahead a decade.

Because of these three market anomalies and collectors' emotional attachments to players and teams, the market for hot rookies itself is way too hot or super-inflated.  Prices rocket upward to the point that even if the player go on to make the Hall of Fame, the card probably does not gain too much in value in the future or even drops.  Given the odds of not making the Hall of Fame in any sport, buying hot rookies is an investment huge negative expected value.

Some Evidence

If you do not believe the thesis of this post, let’s look at some data.  I went over to the shelf and pulled out SMR magazine from February 2007 (5 years ago).  On page 92, the valuable PSA graded rookies from 2006 football card issues are listed (similar to how 2012 football card issues would be listed in February 2013 SMR today).

The players whose cards were valuable were:

Jay Cutler

Matt Leinert

Reggie Bush

Vince Young

DeAngelo Williams

AJ Hawk

Their autograph cards in PSA 9 condition were listed as being worth anywhere from $140 to $345. (footnote 1)

Here are some comparisons from eBay today:

2006 Donruss Elite Reggie Bush #204 Auto /100

Last sold on eBay in BGS 9 grade for $25 including shipping on 11-12-2012

SMR in February 2007 was $275.00 in PSA 9.

2006 Donruss Elite Matt Leinart #192 Auto /100

Last sold on eBay ungraded for $13 including shipping on 11-21-2012

SMR in February 2007 was $140 in PSA 9.

2006 Donruss Elite Vince Young #221 Auto /100

Last sold on eBay ungraded for $11 including shipping on 1-22-2013

SMR in February 2007 was $150 in PSA 9. (footnote 2)

While one could argue that 2006 was a particularly bad year for rookie cards of football players, it is an example of how hot rookie cards depreciate in value over time on average.  Players who are hot and the next Joe Namath usually are not. (footnote 3)

Occasionally there is the breakthrough player like Tom Brady, who was drafted in the fifth round and whose cards continue to have high value over time.  However, if you are a veteran collector, by the time you realized that Tom Brady was a great player his rookie cards had already taken off in price.  And for every Tom Brady, there are 25 Matt Leinarts.

What to do?

As I said before, collect great rookie cards for any reason other than trying to make money.  Buy a Colin Kaepernick rookie card because you love the 49ers and you want a piece of history related to their run to the Super Bowl in 2012-13.  Buy a Tim Tebow rookie card because you are a Florida Gator fan or like what Tebow stands for in his religious beliefs.  Buy an RG3 card because you like his pencil mustache and he won the Heisman Trophy.  Just don’t buy their cards to make money.

Also, if you build sets like me, you might want to focus on building sets where there are autographed inserts of rookies.  If you hit a hot rookie auto in a pack or box by chance, it can often finance building the entire base set plus some inserts if you sell it.

If you are not going to hold a hot rookie card for a long time, one can always try arbitraging the market.  That would entail buying a rookie when the price is low and quickly reselling if and when the price goes high.  Again, I do not think this is a good way to make money.  You either need to have insight into NFL talent that other people do not have or you are just playing roulette with your money.  It's better to buy a good low-risk mutual fund.

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

1. PSA 10 cards of these 2006 rookies were worth much more, but these should not be considered due to the almost impossible-to-understand nature in which PSA 10s are handed out by PSA.

2. Data was taken by looking at all the completed auctions for 2006 Donruss Elite cards on 1-31-2013.  Donruss Elite was chosen because it was a medium-to-high end brand with autographs only being numbered to 100 on the cards.  It was one of three brands listed in the February 2007 SMR where cards had reported values.

3. It should be noted that Cutler’s autographed rookie cards still hold some value as reported in SMR.