ahahhahahahahaha yes!!!
This is a good point, but could be solved via diversification and a minimum amount of capital. ONLY investing in very rare items, like you said, would run the risk of volatility and stagnation. If it was diversified and had more liquid/available items like sealed booster boxes, 1st ed. WOTC, etc, there would be continuous price movement and activity. Then a rare event like a sale of a trophy card could move the value of the fund in the same way that a quarterly earnings report could move the price of a stock.
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What restrictions?
Thank you for that article link.
Bein Swiss myself, you all know now where I store my collection 
Where, behind your Mona Lisa?
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Actually this post got me thinking about a way to create an investment mechanism that is self contained and prevents speculation. Get ready guys things will get confusing and then boring, and then confusing again. 
Basically, instead of having an exchange fund goble up all copies of a valuable card, there could be an online exchange for pokemon cards in which each card is split into shares, something along these lines:
The actual cards would need to be stored at a 3rd party custodian service and inventory would need to be audited regularly. Shares for a particular card would be associated with its PSA cert number to ensure full transparency.
Let’s say @garyis2000 , wants to put one of his shadowless charizards for sale. The card gets sent to the custodian service and split into 100 shares which belong to Gary. He then logs in to his account and puts those shares up for sale. With each share sold, the equivalent dollar amount is added to his account and can be withdrawn.
People showed concern regarding the sale of the actual physical card, however that would not be a problem due to price discovery. If I want to sell my share of the Zard, the card doesn’t need to get sold, only my share does. And the only way it gets sold is if I sell it at a price that is accepted by the market.
This mechanism would not only allow ‘investors’ to sell their physical cards into the exchange and withdraw the funds, but also give them the opportunity to diversify their portfolio by reinvesting the proceeds of the sales into other cards on the exchange if they wish to do so.
Seems like a complicated endeavour, but it would ensure that whoever sees Pokemon cards as an investment would be able to trade on a purely financial platform in which price discovery would naturally be pegged to real life prices without disrupting their organic growth.
Now, the logistics of such a project would require an amount of capital that would only be justified if there was actually enough interest from the investment community which I think (and hope) there isn’t. Should such interest in financial speculation around pokemon cards materialize, I would rather see it in this format than in an MTG style buyout environment.
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Good work kaldo. Even “I” almost understand it. I’d love to participate just for fun.
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This is quite a good idea.
I’m very excited about this and can see unlimited potenial, so much so I’m considering investing and making it myself.
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Pretty neat and easy to understand, I like it! In this case though, who pays the 3rd party service/auditors?
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@khairis that was my main concern. With the cost of 3rd party security and auditing, along with inflation, I feel most if not all profit would be lost and you would just own part of a card.
Selling your portion would require another buyer and if there isn’t another buyer ready to hop in you would have to sell your shares at a large enough discount that someone couldn’t pass up. I’m not sure if this would be a good thing or a bad thing when it comes to maintaining value of the cards.
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The exchange makes money from the spread. As you can see, sellers sell for $200 and buyers buy for $204, meaning that if a share is sold, the exchange gets $4.
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@chopkins1994 , the purpose of such a platform was exactly to allow for price discovery, and do keep in mind that if a shadowless Zard just got sold for $20k in real life, it stands to reason that someone selling a share at $190 would be matched pretty quickly as that share is not just a number in a screen, but a percentage of an actual card.
I agree with what you are saying in the sense that liquidity may be limited, and I do believe that pokemon cards are not financialized enough to sustain the costs and logistics of such a platform.
My point was that as a collector with no interest in investing, I would rather see the financiers and investors have a platform like this for their financial trading as a way to curtail price manipulation, buyouts and all the dodgy stuff that has been plaguing MTG for over a decade. Also, it would add an extra layer of assurance to people if everything was properly audited and transparent.
Coming from MTG, I have serious concerns about the possibility of a wreckless and non standardized financialization of Pokemon cards.
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That’s a good point and I’d prefer to steer clear of those buyouts that happened in MTG as well. I think MTG is slightly different in that many of the cards values are based partially on playability in specific formats. A lot of the non power 9 reserved list spikes were also part of the rise in popularity of commander. And when it comes to MTG we have data on print runs. We know how many were printed and that along with WOTCs promise of never reprinting those cards is an investor’s paradise.
For pokemon we may have a rough idea of how many could be out there but there’s no numerical data available and no guarantee that they will never be printed again. If I was an investor that didn’t know the fine details of the market or it’s participants, the evolutions set would have scared the absolute shit out of me. I would have bet money that prices would have plummeted and would have sold out all of my base set stuff. But the market did the exact opposite!
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The biggest issue I see is just lack of market size and depth in Pokemon. With hedge funds you are talking $100M or more AUM typically. Hedge funds typically operate as a small subset within billion and trillion dollar markets like real estate, securities, commodities etc. You just don’t get the fees and everything to scale down enough and make sense unless you are working at those high numbers I think.
Sure they could likely be a bit smaller and maybe something could work, but what would we be talking about? It seems like it would have to be a huge scale (percentage wise of the total cards out there) coordinated effort to even scrape together $10M-$50M of cards to get going. I mean what is the entire market cap of all Pokemon? You’d be looking at a decent chunk of the total market and I’m just not sure you’d get all those owners to go for it.
It also feels like some may be romanticizing the idea a bit. Your average e4 goer isn’t going to be able to own a part of this theoretical hedge fund. I think some out there think that they’d be able to buy into this for $1,000 or $5,000 or something. That isn’t typically hedge fund type of money.
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I have been buying vintage mtg cards for the past few years and I don’t buy the buyout issue in mtg. Every single card is available in mtg all the time. Outside of ABU and the top cards in the 4 horsemen, the prices aren’t crazy. Especially considering everything vintage in mtg is older than all English Pokemon cards. Also, I bought multiple cards from the last PWCC block well below the “market price”. If buyouts were as rampant as people suggest, I shouldn’t be able to buy $600 under on a $1500 card.
Buyouts in Pokemon won’t occur in the same way. There are people who already own numerous copies of cards they enjoy. Regardless, the buyout noise is economic ignorance and warped entitlement. For example, lets say there are 100 1st ed base boxes left in existence. Currently 0 are available. It doesn’t matter if 50 are with one person, and the rest are with 50 separate individuals, or all 100 are with 100 separate individuals; none are available.
The beauty of open markets is competition self regulates. Especially for non-essential pieces of cardboard. If anything trying to inorganically stranglehold prices on cards people don’t own is final level entitlement.
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@smpratte, what the MTG community commonly refers to as buyouts aren’t buyouts in which a card is completely removed from the market in an organic manner, rather attempts to buy all available copies of a card overnight with the sole purpose of creating artifical scarcity and flip it afterwards. There are hundreds of examples of this and Rudy talks about this widely in his earlier videos.
It is unregulated financial speculation. Basically a targeted ‘attack’ on a particular card that makes it spike from $5 to $50 in a couple of days and then crash back to $10 within a few months.
This is what I don’t want happening to Pokemon.
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@kaldoverde, I understand the premise for mtg buyouts, I just don’t subscribe to the outrage.
Basically what are the worst case scenarios with buyouts in mtg that have actually occurred?
I sense an EFour Hedge Fund coming.
@smpratte , artificial buyouts by speculators price out legitimate collectors for whom a couple of days before collecting a particular card or set was a reality. Imagine that halfway through you collecting a particular set, a bunch of financial speculators come in and cause a 1000% price increase in 5 of the rare cards that you don’t yet own.
True, the cards will eventually come back down to 200%, but the negative effect it has on you as a collector will probably steer you away from the hobby as you see it riddled with fake speculation and price manipulation, leaving you subject to other people’s greed. Also, as collectors we buy what we can afford, but I don’t think any of us would be happy to buy a card today for an artificially inflated price and have it come crashing down 500%.
We may not be financiers, but we all have set budgets for the hobby, so having people eating away at that budget through speculation does create a negative experience. I speak based on my own experience and of a few friends, so can’t speak for the entire MTG community.
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