I’ve been talking about the rise of collectibles for a while now, but even I have to admit that the some of the numbers I'm seeing are starting to become too difficult to ignore.
Last year, I asked whether the surge in Pokémon cards, sports cards and other collectibles was simply another hot trend or potentially the beginnings of a new investable asset class. And then earlier this year, I revisited that discussion as money appeared to be increasingly moving between cryptocurrencies and collectibles.
Now, fast forward a couple of months and the market has taken another big leap forward.
A 2005 Rayquaza Gold Star graded CGC Pristine 10 sold for $1.02 million through Fanatics Collect in August. And at the time, it became the first English language Pokémon card to cross the $1 million mark.
A few weeks later came an even bigger number.
A Torchic Gold Star graded PSA 10 from 2004's EX Team Rocket Returns set recently sold for $2.7 million through Alt, setting another record for an English language Pokémon card.
And this is perhaps where the conversation starts to get more interesting.
We are no longer just talking about people spending a few thousand dollars on nostalgia anymore. At these extravagant prices, collectibles are competing for the same pools of capital that could otherwise be sitting in stocks, crypto, watches, art or other alternative assets.
In the current landscape, there is somewhat of an investment infrastructure forming around the hobby. Grading companies provide the necessary authentication and condition benchmarks, major auction platforms are playing a role in terms of improving price discovery, while vaulting services and online marketplaces make it easier for expensive collectibles to change hands without owners physically carrying millions of dollars worth of cardboard around.
That being said, there is also the uncomfortable question of whether parts of the high-end collectibles market can be used for money laundering given their portability and sometimes subjective valuations. I would say that deserves a separate discussion on its own, but for this piece I’m more interested in what the rise in genuine investor demand says about collectibles as an emerging asset class.
With all of the above, none of that automatically means that the prices we are seeing actually make sense.
The Rayquaza Gold Star is a good example. Its CGC Pristine 10 grade is unique in the company's population report (the only example to receive that grade), while a PSA 10 copy for example sold for $682,500 in July.
That arguably represents an enormous premium for scarcity at the very top end of the market. But of course, one must take into account how the perceived value of the card has changed over the last three months - and things do move very quickly in the collectibles market.
In stocks, we can argue about things like earnings, cash flows and valuation multiples. But with collectibles, the value ultimately comes down to what the next collector is willing to pay for rarity, condition, provenance and desirability.
When demand is booming, that can produce extraordinary returns. But when liquidity disappears, price discovery can become considerably more uncomfortable.
So, is this all a bubble?
I would say parts of it definitely does draw some parallels to one. Record prices attract attention, and the attention then attracts new buyers and new buyers push prices higher and higher. We've seen that script play out one too many a time in traditional markets before.
That being said, I am also becoming less convinced that collectibles on its own merit are merely a passing fad.
The more interesting development is that the market is becoming more financialised by the day. Collectibles are turning more and more into an alternative store of value for certain investors, sitting alongside some niche markets like art, watches, vintage cars, and even crypto.
That doesn't make the $2.7 million card sale cheap though. However, it does suggest the bigger question is changing.
Perhaps we're no longer asking the question of whether collectibles can become an investment market. Instead, we might already be starting to find out what that market looks like when real money arrives.
This article was written by Justin Low at investinglive.com.from Investinglive RSS Breaking education Feed https://ift.tt/hZSMzBP
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