Anatomy of a Burst Bubble: Part 1: Baseball Cards

Bubble markets can happen in just about any asset class. It’s no joke that people became obsessed with tulips which led to the big Tulip Bubble in Holland in 1624.

Tulips? Who would pay a lot of money for a dumb flower? Apparently a lot of people. Once the herd starts moving in one direction, momentum takes over and people do crazy things.

And so it was with baseball cards. If you were not a male between the ages of 8 and 50 in the 1980s (or a sister of such males), you might not know what I’m talking about. Baseball cards began as a marketing tool for tobacco companies as far back as the 1870s. A card with a players picture was included in a pack of cigarettes. They became popular as collectibles amongst baseball fans but there was no value associated with them. After WWII, Topps became the first company to include a set of trading cards with bubble gum and the modern day baseball card, as we know it with the statistics on the back of the card, was born. Topps had a monopoly on the market, even beating back an anti-trust type lawsuit from competitor Fleer in the 1960s. Fleer would re-emerge on the scene in 1981, along with another company called Donruss, which then provided competition to Topps.

It also set the stage for the bubble to begin.

Kids used to just collect the players. Some traded them. Some put them in the spokes of their bike because of the cool sound they made. Many put them in shoeboxes to be unearthed by parents 20 years later. It wasn’t until the 1980s that things began to change.

Rookie cards, the first card of a player when he was entering the major leagues, started to become highly valuable. Topps used to issue “Update” sets specifically to update cards on players who had been traded. But in order to fill out a set which was 132 cards, the size of cardboard used in the production process, Topps started adding unheralded stars including those who had been on the Olympic team in years prior or players who were making a splash who the media thought had good major league prospects.

Some of these rookie cards would go on to be quite valuable because they were made in the limited update sets. In the mid-1980s, kids and baby boomers started really collecting. Baseball cards come in unopened wax packs containing a set amount of cards and a piece of gum (in the case of Topps.) (Topps stopped adding the gum in 1991.)

In the early 1980s, the packs would sell for a quarter at any 7-11 or grocery store. By the late 1980s, the full-fledged mania was on. Some collectors had packs from the 1970s, which had never been opened. Suddenly some of these, depending on the year, began selling for $100 each. There were less players in that era but many cards had become valuable. The odds were pretty good that among the 10 or so cards in the pack you were opening, one of them might be a valuable rookie card, worth more than the $100 you paid for the pack.

It was playing the lottery, but the odds were much better.

Nearly every weekend across the country, “baseball card shows” would be held at the local hotel, the moose lodge, or the church gym. Dealers would lay out their collections in boxes with glass tops so that customers could walk by the table and gaze inside at the pieces of cardboard.

In the world of baseball cards, condition was everything. The edges of the card needed to be sharp, and not frayed or, heaven forbid, bent. The card needed to be centered perfectly and the color and printing on the back unsmudged or faded. Cards in “mint” condition were the most valuable.

From the early days of the mania, older cards were more valuable because there were simply less of them. Too many kids had put them in the wheel spokes and no more could be made. There were stories of unsuspecting parents putting out Junior’s card collection in the garage sale (with Junior now married and on his own) and selling each card for a dime, not knowing that there was a goldmine in that cardboard. Some collectors started going to garage or estate sales in the hopes of there being a “little ole lady” willing to sell for cheap.

And a gold mine it quickly became. Baseball cards had become more lucrative than just about any other investment in the 1980s, including stocks.

By 1990, teenagers who had begun collecting only five years before were amassing secret stashes of cash that amounted to the thousands. The Saturday Evening Post reported on the mania in April of that year:

“The packet of cards you bought for a quarter in 1983 may include the rookie season card of the Boston Red Sox infielder Wade Boggs. The going price for this card today is $32. (That’s a return on investment of 12,800 percent. What stock, bond, or real-estate deal can match that? “It’s a lot better than putting your money in the bank at five or six percent,” says Sal Riggio, the owner of B & D Baseball Cards in Deltona, Florida.)”

“A 1965 Topps Company baseball card featuring the Hall of Famer Mickey Mantle will now fetch about $400. His 1952 rookie card produced by Topps is worth more than $6,000.”

“Every major city in America now has at least one store that buys and sells Mickey Mantle’s 1952 Topps rookie card, sold a few years ago for $3,000, is now valued at more than $6,000. Even the yellow pages often has a separate category for listing these [baseball card] outlets. “When I opened my shop in 1983,” Matt Federgreen says, “less than 200 baseball card shops existed nationwide. Today, there are probably more than 10,000 shops.”"

Any kid who knew anything in the 1980s was reading the “Bible” of baseball card collecting, Becketts. In its pages, published every month like a comic book, were lists of prices for all the cards in all the collections ever issued. It was like the stock ticker for baseball card collectors. In 1989, cashing in on the fire, Topps decided to start issuing cards under one of its old subsidiary names, Bowman. Another new company, Upper Deck, entered the business in the same year. Now, there were five companies all issuing sets with the same groups of players. By 1990, the mania had reached bubble proportions. But still it would take a few more years before the bubble would burst.

As bubbles tend to do, the party continued. The International Herald Tribune reported:

“It’s a recession-proof business,” says John Brigandi, co-owner of a New York specialty shop where card prices range from $8 to $40,000. “Our sales last year were $2 million, double the previous year.”"

Still, the tell-tale signs that the boom was about to come to an end were present. There were too many companies producing too many cards. Now, the collectors began to simply buy up complete sets of the new cards but the companies were issuing too many of them, making none of them especially unique or rare.

“The 1992 crop is hot off the press, arriving daily in candy stores, gas stations and specialty shops across the country. Each set numbers about 800 cards, one for every American and National League player, with a set generally sold in packets of 10 to 15 cards for anywhere from 55 cents to $1.25.”

What had in the 1980s been only 132 card sets, were now 800 cards in a set. The end was, as most bubbles end, unspectacular. Suddenly, the baseball card shows became less of a draw. As the new sets flooded the market, values began to decline. Collectors who had only entered the game in the 1990s, stopped buying cards. Even values on the older cards, always more valuable, began to decline.

The Baseball Card Bubble was over.

Since the mid-1990s, the market has done what most markets do after a severe decline in the asset price. Nothing. It declined and has stayed flat-lined for years. There is still a market, and profit, in trading the older cards. The most valuable cards in the beginning of the run-up in prices, remain the most valuable after the run-up in prices.

But what about that Topps Wade Bogg rookie card that had gone from 25 cents in 1983 to $32 by 1990? Today, you can find it on the internet for $29.99.

Some magazines have been reporting lately that baseball cards are making a comeback. After being in a Bear Market for 11 years (average bear markets last 10 to 25 years in most asset classes) it may be likely to come out of its slumber.

Could be time to get the collection out of the ole shoebox.