Alternate "investments": things, objects, toys, cars, watches, art, etc.
The third in my series of probably 5 posts on non-capital-market investments concerns "things". Objects such as collectibles (baseball cards, stamps, cars, art, watches, antiques, collectibles, books, anything that may hold value or potentially appreciate). The last 2 will probably be on farmland and entrepreneurship, two things that represent 80+% of my time on this planet. Without any doubt the best potential investment you can make is starting a business. It is also the riskiest and the most costly, and something very few people understand at all if they haven't tried it. But enough on future posts, lets get to this one.
I am not an expert in many of these areas, so this post is as much to start a discussion as it is to give advice... but a couple of things are worth noting.
First, these things have one thing that stocks, bonds, bank CDs, options, etc. (i.e., capital markets) will never have, and that is that they can bring pleasure to your life. They can be conversation pieces, they can represent a pastime that isn't as clinical and practical and serious as running stock screens and reading 10ks, they can be beautiful, and more. Therefore, along the lines of observing that ones quality of life is not defined by a total in a bank or brokerage account (although its certainly influenced by it), it seems reasonable or even sensible to put some amount of ones assets into these types of "investments" (I use quotes because they have a dubious track record in my view).
Second, these things, just like the stock market, have market risk. They have bubbles, they have bull and bear markets, believe it or not, that is true. I'll get to the massive, societal, widespread, amazing bull market in baseball cards in a minute. Over the last 20ish years, your return on investment for baseball cards is negative 50ish%. The return in baseball cards from the early 80's to the late 80's was many times your money. There was a point as a kid when the massive stack of cards I bought for 30 cents for a pack of I think 15 cards with most of the money I got for christmas and birthdays as a kid was worth 5 figures. That made me a pretty rich 13 year old from a far-below-poverty-line family! It isn't worth spit anymore. Art, baseball cards, ferraris, all of these things have markets and as such they have market risk. The baseball card bubble probably rivaled the tech bubble in magnitude, and its fallout rivals it in magnitude of disaster... Here is the story:
As a kid growing up I came from a poor farm family. Farming is an interesting industry in that it can be wildly profitable (like in the red river valley of north dakota and minnesota where most of hte sugar we eat is grown, and where family farms started 100+ years and and expanded since and passed down through the generations leave 100s or thousands of farmers millionairs or decamillionaires. I believe its true that the Fargo, ND area has the highest per-capita ratio of millionaires in the US. Most of them don't live in the city, but in the surrounding area, most are farmers. I read that once. We're talking land worth 1000's of dollars an acre and farms of 1000's or 10's of 1000's of acres). In other areas, farming is barely break even, with families struggling to make ends meet on traditional family farms. In all areas, the wealth of farmers varies widely with their strategy and situation. I grew up on a farm of about 800 acres in the middle of nowhere, on hilly, somewhat sandy land. The land yielded just enough grain to feed a herd of cattle, which is how we sort of made a living. Cattle, like equities, has wild, swinging markets and my father, while wildly brilliant, never really tried to play the swings in the market. He just bought cattle at the same time every year and sold at the same time... this resulted in years when the family income was massively negative, and years when we made some money. Overall he made about 300 grand for a family of 5 in the 18 years I lived at home, about 1/3 of that wasin the last 2 or 3 years I lived there.
But, for christmas and birthdays each year, I got a buck or 3 or 5 or 10, and I made some money doing insanely not-fun things like shoveling out grain bins for other farmers in the area (picture a grain bin, just a tin shell basically, but on a hot summer day its maybe 120 or 130 degrees in there, and your job is to shovel probably a few thousand pounds of grain into an auger. Dusty, incredibly hot, hard work. You'd make like 10 bucks for a day of shoveling). I spent basically all of the money I had on baseball cards starting in 1981 or so when I first had some money. I wound up with quite a number of cards, maybe 10 thousand. They cost about 2 cents each, if even that, over most of that time. Sometime in the mid/late 80's, around 86 or 87 or so, baseball card collecting caught fire.
I'm not saying it became popular among kids. I'm saying my uncles, fathers at my school, everybody starting "collecting" them. A Honus Wagner rookie card sold for $100k plus, Mickey Mantles rookie card sold for $10k+, common cards (like of crappy players you've never herad of) were selling for 5 or 10 cents, rookie cards of good players (like Roger Clemens or Don Mattingly) were selling for 10 or 20 or 30 or 50 bucks.
Those massive stacks of pointless pieces of paper with baseball stats and a picture on them were suddenly valuable. At one point you could buy a pack of cards for 40 cents at the local grocery store and immediately turn a paper profit of at least triple your money. Because the 15 cards in it were worth at least 5 cents each and you'd always get at least one worth 50 cents or so.
New brands started hitting the market, old brands started charging more, baseball card shops popped up everywhere. There was one next to the k-mart where my mom did most of her shopping, 3 more scattered across the nearest city. Kids from my school called me to ask what their cards were worth as I had a Beckett magazine (a price guide), a couple of times parents from the local school called to ask. My uncles started preserving cards in plastic sleeves, I kept a running list of my net worth in baseball cards.
One of the craziest days of my life is when i spent $6 on a pack of 1984 Donruss baseball cards on the wild hope of getting a Don Mattingly rookie card, which was worth like $80 at the time, and which I could never have afforded... and got hte card. The only thrill the equity markets have ever given me that comes even close is the Nova Chemical buyout on 2/23/09. It was my biggest position at the time.
We bought binders, we bought plastic sleeves, we kept all of our cards in "mint" condition. I was worth 12 grand! I'd probably spent maybe, at most, a grand or 2 to get the cards. I got "old" ones at kmart on sale, I got them at rummage sales, I got them for 25 or 30 cents at the local grocery store where a gumball was a nickel. 6 or 7 years X 30 or 40 bucks in b-day and christmas money + grainbin shoveling money. Massive return on investment!
Today, 20+ years later, that 1984 Don Mattingly Donruss rookie card is worth $25. A return on investment of -60+% in 20+ years. Not very good. It was a bubble! My richer cousins spent all their christmas money on full sets of cards, which they never opened, on the logic that when they got to college they'd be worth 100's or thousands of dollars. They are worth less than half of what they paid 20+ years ago. All the card shops are gone, baseball cards are sold now only in tiny corners of general hobby shops that sell pokemon cards and comics and you name it. No more dedicated stores within 100's of miles of where I live. They used to be everywhere.
A bubble, a bust. In baseball cards. You could once triple your money (on paper) just for buying a pack of cards. In the fullness of time, that purchase doesn't even have you above water.
But, though I lost alot of money by not selling out, it was fun. I loved baseball. My first year, I was 12, and it was little league, and I struck out my first 41 times at bat. I was that hopelessly nerdy kid whose dad was too embarassed to come watch the games. Its not a nice feeling to have your dad tell you he wont come to any more games becuse you suck so bad. lol Every dollar I didn't spend on baseball cards I spent on an old worn out copy of "The Science of Hitting" by Ted Williams and a pitching how-to book by Bob Gibson that I got for a dime at a rummage sale. I pitched and begged my younger brother to throw me batting practice all day every day. At night I'd read and re-read the books and in slow motion practice throwing curve balls and stuff. At 15 our team went 7-7. We won the 7 games I pitched, 5 no hitters, a 1 hitter and a 2 hitter. 49 innings 130ish strikeouts, only one time did a batter even foul off or put into play a curveball that year (more on that later). Not one time did a batter pull a fastball. One guy who was a few times a big league all star went 0-4 in his life against me, 2 strikeouts. At 16 my town, of 600 peopl, no longer had a team. A town 30 miles away invited me to come play for them and visited my dad, but forever practical, he refused to let me waste the gas money on driving that far to let me play a childs game. And my baseball career came to an end. I have only picked up a mit and ball to play with my son since then. My once mid-80s mph fastball is now low 60's, lol. Said future big leage all star struck out on a curve and a fastball clocked at 87. He played for a town with 50x more people than mine, we won 1 of 2 in a doubleheader. Not bad for a 115lb 15 year old. I gave up a few runs that year, even a couple earned runs, twice by beaning in a runner, lol. Control was not my speciality, I threw every pitch with a strained grunt. I hit 380 that year, up from 020 my first year. Baseball was once big in my town, we had a kid make the majors. He hit 18 home runs in our home field ... back then baseball went to 18 in my town. I was the only kid to ever hit one over the fence in our home field on our team from that era, and the last kid to do so. Its an undescribable feeling to feel that kind of contact and take off running, get around first only to realize that the fielders aren't paying attention anymore, and look around, and realize teh thing is gone. If the prettiest girl in town had come to give me a kiss, I wouldn't have cared. Nothing could have topped that.
Baseball was my life. The first time a poor kid who was the last in his class to hit puberty and spent a fair bit of time in lockers that bigger kids shoved him into had some pride, felt good about life. So should I have sold? naw, those cards... Those cards were worth more to me in pride than in money, I'm glad I kept them. I gotta remember to go look at them one of these days. Alwyas, in my life, I have looked onward and upward (or at what I thought was upward), I have hardly ever thought about the past, and often not bothered to pay attention to the present, always working on a better tomorrow. ... its a strange, odd feeling to tell this story, which I haven't told in a decade or more.
And thats the value of this type of investment: it can enrich your life and bring you joy above and beyond money.
Moving on, I'll talk, and ask, about some potential investments ...
But, first, another little story about my life. My longtime, and only, and probably only ever, business partner was from my tiny miserable home town. He is 2 1/2 years younger than me. So on the day that the future big-league all star went 0-4 against me, something unbelievable happened. ... remember I said 2 strikeouts, right? But 0-4, that means that he put the ball in play twice.
One was a mediumly well hit ball to center field that was a reasonably routine fly ball, the other one was a hung curveball that this kid hit the living crap out of. The only hung curve I threw all season and it was to the best player I ever threw a pitch too, he crushed it. Towering shot to center in a big park.
Our team had only 8 kids, so we played 2 outfielders. When i pitched basically nobody ever pulled the ball so we played a center fielder and a right fielder, shifting to left/center if a leftie was at bat. My 12 year old future business partner was not exactly willie mays, he frequently dropped practice flies during warm up and stuff.
So its July 1990, and I hang a curveball to a guy who got 200 hits in the big leagues once, and who's older than us (it was like a warmup practice game for a bigger-city team, basically). There are runners on 2nd and third because of an error, a wlak, and a wild pitch. We scored one run on a miracle, and there was absolutely no reason to believe we'd score again. This kid hits a shot to center.
I turn around, sunk, and knowing thats the game. In essence if the ball got hit, somebody got on base. If a ball got hit to the outfield there was a fair chance of an inside the park home run or 4-base error. Short handed and not exactly talented, it was pretty amazing if our team got somebody out on a ball put in play. The 7 games we lost that year we lost every one by the 10 run rule. I made 8 errors in an inning at 3rd base once 2 years earlier, that was not happy. We had a fantastic catcher who almost always picked my wild pitches out of the dirt tho...
Anyway, I turn around and this gangly, scrawny, sucky 12 year old kid is running straight backwards. I can only see his back, he hardly turns around to even look, then he shoves his mitt in the air. And pulls it in, on a dead sprint backwards, crashes into the wall, falls down, like 20 seconds later he stands up with the ball in his hand... It was Willie Mays in 1954 catching Vic Wertz's shot and them some. From an inept 12 year old off the bat of a 16 year old future big leaguer.
One of the most amazing moments of my life and the begining of what became a decades-long, fantastically productive relationship. The grin and look of amazement on his face is as priceless as that photo of a sailor returned home kissing that girl after WWII. The grin on mine was probably even sillier.