It has been an ugly few months. A pandemic is sweeping our nation. The S&P 500 Index has plummeted by 40%. Every so often we get a black swan that catches everyone by surprise.
This surprise is invisible and unstoppable – a powerful and contagious virus called the coronavirus or COVID-19. We weren’t prepared for it despite warnings.
As I’m writing this, the United States is still in the early innings of what will likely be a devastating and heartbreaking outcome for our country. And while the number of deaths are still fairly small in quantity, the economic impact is already being felt far and wide.
Airlines are shut down, restaurants are closed, hotels and casinos are closed up. Employees are getting laid off in the hopes they can quickly collect unemployment. Schools are closed and people are forced to work from home.
Life as we once knew it has completely changed. When will life get back to normal? If China or South Korea are any leading indicator, the US likely still has a few months of pain ahead. And that’s if they can get millennials to start practice social distancing.
When I discussed vintage sports cards as long term investments I discussed how cards might be ‘due’ for some sort of pullback given the significant advance in prices. I also noted that in past recessions high quality, high grade cards tend to hold up quite well. Why? Well most vintage collectors cherish those cards and look to sell those cards as a last resort.
But the big question—is this time different? I think it is. First there is uncertainty. None of us know with any sort of confidence when this thing ultimately comes to a close. That’s a big problem. With the financial crisis of 2008, we at least had some level of confidence that things could normalize when the Federal Reserve bailed out the banks.
With the financial crisis of 2008, we had consumers concerned about banks potentially going out of business and whether their might be a ‘bank run’. This time around it’s more about life or death. I’ve lived through the Internet Bubble of 1999 and the Financial Crisis of 2008, but this is by far the most concerned I’ve ever been.
From an economic standpoint there are so many people and businesses that need a bailout it makes my head spin. Airlines can’t survive for more than two months at a complete standstill, thus they are going to need a significant injection of capital–and that’s all assuming this is resolved in a few months. And the same can be said for restaurants, hotels, casinos and any leisure sort of business that requires in person attendance.
Thus, not only do the businesses need a lifeline, so do American Consumers. A $1 Trillion package is in the works that would provide US citizens a $1000 payment every month while this whole thing goes on. But when does it end? That’s anyone’s guess.
In the financial crisis, the majority of workers losing jobs were those in higher paying financial based jobs. This time around, it’s the lower wage workers which are getting significantly disrupted. While a $1000 check might help it doesn’t cover all the bills. If they can’t pay rent and the landlord can’t collect, what happens to real estate prices? And then what happens to all the small businesses? Do they ultimately survive the carnage?
This is anecdotal in nature, but I’m starting to see the fire sales with vintage cards. In each circumstance, the seller was trying to raise cash in order to cover lost wages. I’ve also had offers sent to me on eBay on cards I was watching–for a much lower price than the initial ask. But maybe it’s short term right? Well, not if we go into an actual full fledged depression.
Some think we will, and I wouldn’t rule out the possibility. If this virus resolves itself in two months (which I’m skeptical it will) then we are probably looking at just a mild recession. But if it drags out four months, six months or even a year, then we could be in big trouble. A restaurant and its workers aren’t going to be able to remain bailed out for a whole year. Same thing for the airlines and anything else leisure related.
In the most dire of circumstances, many collectors even looking to hang on to their prized possessions might be forced to sell in order to keep the lights on. Honestly I hope I’m wrong, but I at least think the possibility is there. If you do have cash on the sidelines, I think we could be entering a great buyers market for vintage collectors. Our ‘All Vintage Cards Value’ portfolio might be a good place for you to start.
Just remember there are families out there that people need to support, so it’s okay to get a card at a discount, but please let’s be reasonable–especially for someone that is desperate for cash. Stay safe out there all.