Pokemon is just fantastic, the video games, the show and of course the playing cards.
Countless childhood hours have been spent on these pocket monsters, and well countless
adulthood hours for that matter too, challenge me to a gen 6 random battle if you want to
see just how many hours we are talking here.
In and amongst all of this though these starry-eyed kids have grown up, found full-time jobs,
and learned that the real world isn’t quite as fun as running around with your friends
collecting gym badges.
And perhaps this is part of the reason that certain pokemon cards are now worth more than
most brand new cars.
You may have seen this phenomenon slowly taking over the internet with YouTubers dropping
hundreds of thousands of dollars on packs of pokemon playing cards.
But what is going on here?
Surely a nostalgia trip is not worth a house deposit, even to people who are incredibly
wealthy.
What’s more, is that this isn’t just some obscure market filled with eccentric millionaires,
there are hundreds of thousands of participants, buying selling and trading thousands of cards
for millions of dollars every day, all during a time of massive economic turbulence where
these same households might be struggling to find a job or pay rent.
So
What has been behind the boom in the value of Pokemon cards?
Could this be a genuine investment vehicle?
Or is this all heading towards being the next beanie baby bubble?
Intro add
To an outside observer this whole thing can look very strange. What effectively amounts
to children’s toys are being sold back and forth between mostly working-age professional
adults for astronomical amounts of money.
But maybe this is not all mindless hype. We explored in a video last week that supply
and demand often works in mysterious ways to give us prices we wouldnt normally expect.
So let’s peel back the foil and see what is behind this
Price Explosion Now, these bizarre prices are best approached
from supply and demand separately.
On the supply side, pokemon cards have all of the hallmarks of a collectible item.
They are relatively rare, and no longer in production.
And this is the first big thing that needs to be cleared up for people who aren’t active
within this market.
Most pokemon cars out there are worth pretty much nothing. If you were to go into GameStop
or whatever and buy some cards you might pay about 5 bucks for a pack of 12 and as soon
as you have opened them up they will be worth nothing.
Retail cards are easy to get a hold of, and they are still been made in factories all
around the world as we speak.
The cards that are actually making the headlines are early edition cars, and its pretty much
a case of the earlier the better.
These cards were first circulated in the late 1990’s and were hugely popular. Pokemon
made a lot of them but here is the thing, of the first edition collection only a few
particular cards are actually worth that much.
The 1st edition Charizard which is the card that today sells for over $100,000, well they
were rare even back then. Back when they were being thrown around a school playground.
Other less desirable cards from the first edition might sell for a couple of bucks,
and thats if the seller is even bothered to put it up on eBay.
This age is such a big factor because once a generation of pokemon cards is finished
they will never be printed ever again, they even come with an edition badge to signify
this fact.
This is a real problem, because back in the 1990’s when a card got sold it was almost
always given to a grubby little kid with grubby little hands who would trade it with their
grubby little friends.
Spirited battles in the playground and nothing but a rubber band to keep all of these cards
together meant that a vast majority of even the rarest cards from this generation have
been destroyed.
Even if these cards did survive it is extremely unlikely that they would be in good condition,
which is another hit to the supply side of this equation. Condition is everything.
There is a company called Proffesional Sports Authenticator or more commonly known as PSA,
which exists entirely to grade things like trading cards.
The companies latest operation today is surprise surprise pokemon cards.
The company will give the card a PSA score of 0 to 10, zero being basically illegible
garbage and a 10 being beyond factory perfect.
Thats right, a brand new card direct from the factory even back in 1999 might not have
received a psa score of 10, if there were any issues with things like print centering
or how well the card was cut out.
Now PSA scores are also very important, a 1st edition Charizard with a perfect PSA score
of 10, well yeah that might very well sell for 6 figures, if it has a PSA score of 7.5,
it will still be expensive but it will probably only fetch a few grand.
Any lower than that, and it’s probably going to be worth pretty much nothing, so don’t
go rummaging through your old school bag, you are gonna be disappointed.
All of this paints a pretty clear picture, there are not many first edition cards left,
of those that are left there are not many in good condition, and even of the cards left
in good condition most of them don’t have exciting characters like Blastoise or Charizard.
Now I know what the entrepreneurial amongst you might be thinking, lets go buy up some
current edition pokemon cards for a few bucks down at a local retailer, wait for them to
go out of production and then reap a massive profit.
Well sorry to burst your bubble but this isn’t going to work, what makes early edition cards
so valuable is that nobody thought to do this so most of them were lost.
The current edition cards are cool and all but current buyers are on average taking alot
better care of them so its unlikely to ever have the same level of scarcity.
When you combine all of these limiting factors with the fact that none of these will ever
be printed ever again well that pretty much covers the supply side.
But here is the thing, there’s probably only a few dozen boxes of pop tart crunch
left in the world, that would make it rarer than any pokemon card, and I am sure it too
had many positive childhood memories.
Even still these boxes of cereal are not selling hundreds of thousands of dollars for so there
has to be something else going on to
Bulk up demand
Economists recognize a range of factors that will influence demand for a product.
One of the biggest ones is the price of competing goods, if you are tossing up between two otherwise
identical washing machines, but one is cheaper than the other, chances are you are going
to buy the cheaper machine.
If the more expensive machine suddenly put on a 50% off sale, well then your decision
would most likely change all over again. People shop around for cheaper options, especially
when they spending alot of money. Like let’s say a few thousand dollars on a playing card.
Pokemon cards don’t really have alternatives. Sure there are other card games but if you
want a pokemon card you have to get the ones produced from the pokemon company.
utility is of course another major factor, people are willing to pay more for a good
that is better or more reliable at doing something.
Now pokemon cards are basically cardboard, reliability shouldn’t be a major factor
here, but some cards are better than others.
Of course we saw that cards in better condition fetched significantly higher prices but in
terms of actual utility value most of the high-priced cards are actually not that good.
You could pull out a first edition Charizard in a pokemon card battle today, all of the
different editions can be used with or against one another, but it’s not a very good card.
I mean it’s decent, however, there has been a gradual power creep over later editions
of pokemon cards which means that there are a lot better cards in the game that are a
lot cheaper.
This is probably something that a lot of you watching may have forgotten, which is that
these cards are part of a game, you are supposed to play with them, even still for all intents
and purposes the usefulness of these cards in battle has very little do to with their
value on the market.
Now on a macro level, demand is also influenced by income.
If more people are making more money they will be able to buy more goods or have the
ability to pay a higher price for the goods that they already purchase.
The aforementioned grubby little kids from the late 90’s have all grown up now and
they are in their late 20’s early 30’s with jobs and incomes of their own. So the
buying power of the target market has certainly increased, but it’s not like this is a new
development.
If anything the demographic that has the most affinity to these cards has been having a
particularly rough time in 2020. Unemployment has spiked and a lot of younger workers are
struggling to pay rent let alone drop a few grand on a toy.
This all leaves us with the last big determinant of demand, the expectation for future price
increases.
If a share is selling for $100 today but you think it will be worth $200 tomorrow, you
would buy that share. The same is true for all kinds of other perceived investments.
We have explored the resale market for things like Rolexes and sneakers before on this channel
and a big driver of that demand was the idea that people could buy these items, enjoy them,
and then sell them off at a later date at a profit.
Even beyond this maybe they are just straight-up good investments.
People are constantly told to invest, but they are also told to never invest in things
that they don’t understand.
The financial markets are filled with things like Disintermediation maps, spacs, profitless
companies, imputed interest, wall street bets, and historic highs during a global disaster,
all equally hard to make sense of.
I mean I have a master’s degree in this field, have spent years working in it and
I still don’t understand half of this bull [Bleep].
It’s easy to see why people put it into the too hard basket, and then look to something
like trading cars as a quirky alternative. This expectation of a price rise then leads
to a price rise and on and on as more people jump on board with it.
This perception has also shifted the market for these cards and made them into what is
known as an ostentatious good.
And ostentatious good is something that is demanded because it is expensive. The fact
that people are willing to spend hundreds of thousands of dollars on a pokemon card
gives an aura of legitimacy to spending $1,000 on your own more modest collection.
This is slightly distinct from Giffen goods which people purchase just to look rich but
for the sake of pokemon cards, you could probably call it that too.
People like jake paul wouldn’t make a video about buying a case of pokemon cards if they
were only worth a couple of bucks.
Sure he might genuinely enjoy them or whatever but a video about a $200,000 case of pokemon
cards will get a lot more attention.
If anything it might actually be a really cheap way for people that depend on publicity
to get this attention. Spend $200,000 on a car, or a house or a boat, eh that’s practically
middle class these days. Spend $100,000 on cards and then you have yourself some headlines.
That attention drives more demand and the cycle repeats itself all over again.
So is this a bubble?
Well yeah probably, sure there is a constantly decreasing supply and that’s great and all,
but these cards have very little utility value and an audience that is only really showing
interest in them again because of the price tag.
Ask yourself honestly, did you click on this video because of the price tag in the thumbnail
or because you thought oh boy a Charizard with such strong HP would really make a great
addition to my bench team.
Sure there are some diehard fans and that is awesome, but anybody thinking this is a
prudent investor needs to understand that it is purely speculative at best.
Or who knows prove me wrong, I have definitely seen crazier things than a Charizard selling
for a few million dollars at a Christie’s auction.
Final Thoughts
Pokemon is great fun and it has brought a lot of happiness to the lives of the people
that enjoy it in all of its forms.
That happiness and the nostalgia that comes with it is obviously something that some people
are willing to pay a lot of money for. This money attracts more money and very soon things
can start to get a little out of hand.
But if nothing else this craziness is a great case study for what determines how we truly
value things.
And what could possibly be more valuable than exclusive insights, knowledge, and information
from people in the know? All of which is made available to you
With trends.