Fractional ownership... of baseball cards... ? This can't be good. 0

[Revenant]

I heard about this recently:

https://www.sportscollectorsdaily.com/collectable-offers-fractionalized-ownership-of-valuable-sports-memorabilia/

The idea of fractional ownership of a baseball card as an investment that you will never hold (and probably have no interest in  as a collector). This can't possibly be good for collectables and hobbies. I don't like it for cards. I don't want it for coins.

It's a hobby... this seems... joyless.

[zadok]

amen....I want the part with the bubblegum...

[Fenntucky Mike]

This is fairly common, I think the winning horse of this years derby had around 4,200 "micro-owners". I think the shares were around $200 before the Derby. Those 4,200 people were/are probably pretty happy.

Some of it is bragging rights/having a piece of something you could never completely own on your own and the rest is speculation/gambling, either way if it isn't already in the coin world it may not be far off for the the most expensive lots.

1 hour ago, Revenant said:

This can't possibly be good for collectables and hobbies.

I don't know about that, will it increase selling prices, create buzz and bring people in, maybe? A coin "stock market"? Sole ownership of the top top stuff would go away, but does that make a difference?  

To tie in another thread, maybe this is what the ANA should do with there collection, sell off 40,000 shares but retain the majority stake and keep it in their possession and on display at the museum.

Edited October 29, 2020 by Fenntucky Mike
and on display at the museum.

[World Colonial]

Same theme as the recent thread started by the moderator.  This has nothing to do with collecting and everything to do with trading collectibles as 'widgets" and "investments".

I was offered the opportunity to do this once, by a South African collector who purportedly knew someone in the UK owning a 1931 South Africa mint set.  It never went anywhere but I suspect it would have taken somewhere around $150,000 to buy it, as they later tried to unsuccessfully trade a vacation home in Durban, South Africa for it.

Aside from not collecting at this level and not buying coins as "investments", it wasn't clear to me who would maintain custody.  If I had pursued it, the set would have to be split up. 

The only thing (literally) making this type of speculation mentality feasible is the biggest credit mania in the history of civilization.  This foolishness will end when it's over, whenever that happens.

[World Colonial]

4 minutes ago, Fenntucky Mike said:

I don't know about that, will it increase selling prices, create buzz and bring people in, maybe? A coin "stock market"? Sole ownership of the top top stuff would go away, but does that make a difference?  

To tie in another thread, maybe this is what the ANA should do with there collection, sell off 40,000 shares but retain the majority stake and keep it in their possession.

None of this has anything to do with collecting.

Anyone it brings into "collecting" will abandon it, just as the "collectors" who participated in the late 1980's TPG bubble when it collapsed.

Same thing with the South African speculation when the price peak occurred around YE 2011.  It took a few years but these buyers also left, many of them bag holders.

It won't be any different next time.

[RWB]

1 hour ago, Revenant said:

I heard about this recently:

https://www.sportscollectorsdaily.com/collectable-offers-fractionalized-ownership-of-valuable-sports-memorabilia/

The idea of fractional ownership of a baseball card as an investment that you will never hold (and probably have no interest in  as a collector). This can't possibly be good for collectables and hobbies. I don't like it for cards. I don't want it for coins.

It's a hobby... this seems... joyless.

OK. Happens in many joyless commodities. But -- who gets the runs, hits and errors -- What about guy's ERA? Does that get divided equally into 0.8221684 for each of three owners?

If it's a coin, how is it decided who gets the date, or portrait, or eagle? You can split a "CC" mintmark between any even number of owners, but what about "S" and "D" -- or especially "C" ?

Edited October 29, 2020 by RWB

[GoldFinger1969]

I was there during the Baseball Card Bubble of 1986-1992.  It was fun....it was packed full of exciting kids.  Now...... 

This is a great retrospective.  It's at the same location that houses the monthly Parsippany Coin Show:

 

 

[RWB]

Nice. Thanks for that. Can't begin to guess the selection of the title photo.....Can see why the guy has his hand on his heart...

Edited October 29, 2020 by RWB

[Revenant]

31 minutes ago, World Colonial said:

Aside from not collecting at this level and not buying coins as "investments", it wasn't clear to me who would maintain custody.  

About the only way I could see something like this working would be if it was kept by a third party custodian - who would probably collect a fee and keep it in a vault. This has the practical, financial implication of giving the asset a negative carry and the unfortunate effect of sticking the piece of history in a box, away from people who might enjoy it. As I said - joyless.

[Revenant]

52 minutes ago, Fenntucky Mike said:

This is fairly common, I think the winning horse of this years derby had around 4,200 "micro-owners". I think the shares were around $200 before the Derby. Those 4,200 people were/are probably pretty happy.

 

The horse actually makes more sense to me because that is like being a share owner in a business. The horse competes for purses and can be used for breeding purposes, etc. A baseball card or other collectable is a non-income generating asset. It's like owning gold or something else that just sits there. To me, it has the value of being able to enjoy possessing it and looking at it, but, if you never possess it and never get to look at it... what's the point? I guess bragging rights as you say but... That's a lot of money just to get to say you own a piece of something you can't look at or use.

[Conder101]

Hate to tell you but this has been going on in coins for years already.  It isn't too unusual for high end coins to be jointly owned. Leon Hendrickson had a partner back when he bought the Dexter 1804 dollar back in the 1980's.  He did eventually buy out his partners share a couple years before the coin nearly became the first coin to sell for a million dollars (sold for $990,000.)  I've known of many coins that have been purchased at auction by a joint partnership.

[Revenant]

2 minutes ago, Conder101 said:

Hate to tell you but this has been going on in coins for years already.  It isn't too unusual for high end coins to be jointly owned. Leon Hendrickson had a partner back when he bought the Dexter 1804 dollar back in the 1980's.  He did eventually buy out his partners share a couple years before the coin nearly became the first coin to sell for a million dollars (sold for $990,000.)  I've known of many coins that have been purchased at auction by a joint partnership.

Mkay. Obviously I'm not and don't expect to ever be a participant in that market - that's more than I earn gross in 10 years.

I don't get it. I can't wrap my head around it. But I guess if it makes someone feel happy or it works for them and it makes them some money...

[gmarguli]

Fractional ownership is absolutely the wave of the future. It all makes perfect sense to allow people with less means, knowledge, or time to invest in areas they think will appreciate in value. It's here in stocks and real estate on the consumer level. It's available for other big ticket items like old master paintings to higher net worth individuals. I'm currently entertaining fractional ownership of elder care facilities. I think there is tremendous value and future demand in these facilities, but I don't want to invest $1M in a single one and have to spend time figuring out how to run it, so 50 people get together and put in 100K each and someone buys and runs 5 of them. Less risk with more properties, no time spent running the places, and the investors collect the dividends. 

[World Colonial]

58 minutes ago, Revenant said:

About the only way I could see something like this working would be if it was kept by a third party custodian - who would probably collect a fee and keep it in a vault. This has the practical, financial implication of giving the asset a negative carry and the unfortunate effect of sticking the piece of history in a box, away from people who might enjoy it. As I said - joyless.

Agreed and this is the whole point.

As you wrote in your post below the response to mine, there is no analogy between any collectible and horses and horse racing.

The owner of the fractional interest in race horse presumably has the potential (if not actuality) of participating in the cultural and social aspects of ownership.  I have no idea how profitable such an "investment" usually turns out, but the fractional owner still might get to attend all the social events that go with it, such as access to premium seating at the event and when it happens, photo ops at the award ceremony.

This is only an example, but obviously no such parallel exists with coin or other mass collectible ownership because it has zero appeal to anyone except a collector in the field where it can even exist.

What this means in practice is that the horse race "investor" may still be willing to lose money on their "investment" by getting something else out of it elsewhere, whether financially or socially.  Same principle applies to NASCAR race teams, sports teams, beauty pageants, sponsorship of the arts...I think you get the idea.  Without this secondary benefit, it's only sustainable as long as prices are rising.  Once this ends, everyone else bails out, leaving only hobbyist collectors and maybe "bargain hunters" hoping for a windfall.

It would make a lot more sense with art paintings than collectibles, as the "investment" is a lot greater and some of the intangible benefits might still apply.

[World Colonial]

1 minute ago, gmarguli said:

Fractional ownership is absolutely the wave of the future. It all makes perfect sense to allow people with less means, knowledge, or time to invest in areas they think will appreciate in value. It's here in stocks and real estate on the consumer level. It's available for other big ticket items like old master paintings to higher net worth individuals. I'm currently entertaining fractional ownership of elder care facilities. I think there is tremendous value and future demand in these facilities, but I don't want to invest $1M in a single one and have to spend time figuring out how to run it, so 50 people get together and put in 100K each and someone buys and runs 5 of them. Less risk with more properties, no time spent running the places, and the investors collect the dividends. 

There is no analogy between coins and financial assets.  Or any business unless you are referring to a coin dealership, TPG or auction firm.  There is no analogy because only hobbyist collectors derive any utility from coin ownership.  Supposed coin "investors" don't derive any and will sell as soon as they tire of a dead asset or find better uses for their money.

There isn't much if any overlap with masters painting either that I see.  This is also a dead asset but at least someone might get an intangible benefit from it per my other post.  Is there any evidence coin collectors care about this?

As for non-collectors, we already have prior experience, the late 1980's US TPG bubble.  There is no practical difference between fractional ownership and the limited partnerships which Merrill Lynch and Kidder Peabody planned/launched which imploded a few years later.  What reason is there to believe this will be any more successful?

This foolishness is only credible due to the unprecedented level of speculation made possible by loose monetary policy which drives "yield seeking" and the lowest credit standards in the history of civilization.  It's lasted a lot longer than I ever thought possible but when it ends, this reckless speculation will end with it.

[Fenntucky Mike]

Why couldn't a fractionally owned coin go on tour to numismatic events? Owners get behind the scenes access to "their" coin and front row seats to the high end auction associated with the event, etc. Might have to get stadium seating for all the owners.

I agree it would not be a good investment as speculators would bid against speculators until... ohhh, so sorry.

Unless they start charging money to see these coins at shows (and turn a profit), kind of like the "world's biggest pig" booth at a county fair.

[Revenant]

3 minutes ago, Fenntucky Mike said:

Why couldn't a fractionally owned coin go on tour to numismatic events? Owners get behind the scenes access to "their" coin and front row seats to the high end auction associated with the event, etc. Might have to get stadium seating for all the owners.

I agree it would not be a good investment as speculators would bid against speculators until... ohhh, so sorry.

Unless they start charging money to see these coins at shows (and turn a profit), kind of like the "world's biggest pig" booth at a county fair.

Some of what you describe could be fun but you'd have to limit it to people with a minimum stake or the 10 or so highest stake owners. To use your horse example - surely you can't accommodate all 4,200 of those people at an event. I suppose there might be a natural limiter in that the small hands probably also wouldn't have the financial ability to travel to all of these things. Still, too many owners would be a problem.

The Greater Fool theory of investing seems to be immortal. Bitcoin mystifies me, and yet, it has gone from $0.01, to $19,000, back down to $3,000, and back up to $13,000. "Fool me once, shame on you. Fool me twice..."

I mean, if there was some way for this to generate a profit I could totally see it. But...

At least with owning gold I can see the logic of an inflation hedge / store of value. I guess some people would argue that rare coins and collectables have the same attribute / appeal but I don't think history supports this. Beanie babies... didn't end well. Baseball cards … have already crashed before. Comic books? Crashed. Magic Cards... mostly crashed I think. Lego sets? They haven't crashed yet but I know where I'm NOT putting my money.

[gmarguli]

1 hour ago, World Colonial said:

There is no analogy between coins and financial assets.  Or any business unless you are referring to a coin dealership, TPG or auction firm.  There is no analogy because only hobbyist collectors derive any utility from coin ownership.  Supposed coin "investors" don't derive any and will sell as soon as they tire of a dead asset or find better uses for their money.

You're absolutely 100% dead wrong. Coins are financial assets. Collectors derive pleasure from owning them which creates their value. However, collectors also expect them to hold their value or increase in value. No collector buys a coin expecting a loss. Investors don't care about the underlying asset, they just want it to go up in price, but they don't care what they buy. So of course investors will sell the fractional ownership in the coin as soon as they find a better use for the money. Does that surprise you? Is there any reason to think they wouldn't? That doesn't mean that this idea will fail. The coin market and the investment world is very different from 1989 when people went crazy bidding up everything without knowing what the fund was actually going to invest in. 

[World Colonial]

9 minutes ago, gmarguli said:

You're absolutely 100% dead wrong. Coins are financial assets. Collectors derive pleasure from owning them which creates their value. However, collectors also expect them to hold their value or increase in value. No collector buys a coin expecting a loss. Investors don't care about the underlying asset, they just want it to go up in price, but they don't care what they buy. So of course investors will sell the fractional ownership in the coin as soon as they find a better use for the money. Does that surprise you? Is there any reason to think they wouldn't? That doesn't mean that this idea will fail. The coin market and the investment world is very different from 1989 when people went crazy bidding up everything without knowing what the fund was actually going to invest in. 

So I keep hearing on coin forums or occasionally in the numismatic press.  Based upon your own description, why would anyone other than a "collector" want to "invest" in such a puny, illiquid market when so many better options exist?  

There is no scale of significance to coins, even US.  Whatever scale exists is disproportionately in generic pre-1933 gold and Morgan dollars, not in the coins implied by this thread.

I can't prove this won't happen but the evidence demonstrates if it ever does, it will be by existing US collectors, not anyone else.  I read many posts before the auction of the 1794 SP dollar claiming some non-collector "might" want it, including from you.  Potentially at least 57,000 (those with a net worth >$100MM) could buy it outright, yet none of them did.  They didn't buy this coin the prior two sales either, or the last three times an 1804 dollar came up for sale, or the Pogue 1822 and 1854 half eagles.  That's zero for 250,000 to 500,000 statistically just for these eight lots and even worse going back decades.  Yet it's still supposed to be credible that these people want to buy coins.

I presume there are few examples where this happens but it's effectively a lottery probability event with no predictive value.  The only one I recall offhand is the Brasher Doubloon profiled in a recent Robb Report.

[zadok]

...fractional investors are just that, they r investors n they make little to no pretense to be collectors, even if they invest in a collectible...they invest in hopes they get a profitable return on their investment...horses per se have long been syndicated by persons who never see the horse, just give me my share of the winnings if there r any n my share of the stud fees or foals if that applies...multi-million dollar paintings, potential scientific discoveries, mineral deposits and yes even some baseball r also syndicated or fractionalized...some coins have been purchased by conglomerates/syndicates but to a far lesser degree, perhaps because the resale market is not easily predictable n also very shallow, also because so few coins lend themselves to the lofty prices necessary to syndicate...r coins analogous to financial assets, absolutely...coins if bought with a investment consideration r no different than buying any other speculative asset...r such coins dead investments, absolutely not...they r just dormant the same as a painting or rare stamp, after all all shares of stock r dead investments as well, they just have an open market on which they r reflected on a near daily basis, same with gold, coins more or less have trends rather than a market...as for fractional investment assets, all stock shares r fractional investments; however, we now have fractional investments in individual shares of fractional investments (robinhood) we shall see how this turns out...fractional investments in coins isn't likely to be widespread n most likely not exceptionally profitable, the coin spectrum just doesn't support a broad market base, but there r a few coins that could lend themselves to that level of speculation, the participants most likely wont be collectors, they just want a return on their investment...much like gm who invests in assisted living homes, he doesn't want to own a table , a wall, a bed, a wheelchair or a flower bed, he just wants a portion of the proceeds n hopes he mite not need to live there n eat up all his proceeds...

...I guess if one wanted a living investment, one could invest in a Christmas tree farm, depending on which part of the world lives in...

[World Colonial]

1 hour ago, Revenant said:

I mean, if there was some way for this to generate a profit I could totally see it. But...

At least with owning gold I can see the logic of an inflation hedge / store of value. I guess some people would argue that rare coins and collectables have the same attribute / appeal but I don't think history supports this. Beanie babies... didn't end well. Baseball cards … have already crashed before. Comic books? Crashed. Magic Cards... mostly crashed I think. Lego sets? They haven't crashed yet but I know where I'm NOT putting my money.

Coins have a bigger appeal than the examples you listed but it makes no sense to think its any kind of real alternative to larger more liquid asset markets.

It's also easy to write in the abstract that it's feasible, yet where is the actual evidence to support it, except in very isolated instances by existing US collectors?  There has been nothing stopping anyone from doing it to this point, as there is nothing revolutionary with this idea.  If it's so financially appealing, why don't many more do it now?

[zadok]

...regard the 1794 SP dollar...its not that there weren't non-collector investors that wouldn't buy it, it was more that those investors wouldn't buy it at the reserve price...

[World Colonial]

2 minutes ago, zadok said:

...fractional investors are just that, they r investors n they make little to no pretense to be collectors, even if they invest in a collectible...they invest in hopes they get a profitable return on their investment...horses per se have long been syndicated by persons who never see the horse, just give me my share of the winnings if there r any n my share of the stud fees or foals if that applies...multi-million dollar paintings, potential scientific discoveries, mineral deposits and yes even some baseball r also syndicated or fractionalized...some coins have been purchased by conglomerates/syndicates but to a far lesser degree, perhaps because the resale market is not easily predictable n also very shallow, also because so few coins lend themselves to the lofty prices necessary to syndicate...r coins analogous to financial assets, absolutely...coins if bought with a investment consideration r no different than buying any other speculative asset...r such coins dead investments, absolutely not...they r just dormant the same as a painting or rare stamp, after all all shares of stock r dead investments as well, they just have an open market on which they r reflected on a near daily basis, same with gold, coins more or less have trends rather than a market...as for fractional investment assets, all stock shares r fractional investments; however, we now have fractional investments in individual shares of fractional investments (robinhood) we shall see how this turns out...fractional investments in coins isn't likely to be widespread n most likely not exceptionally profitable, the coin spectrum just doesn't support a broad market base, but there r a few coins that could lend themselves to that level of speculation, the participants most likely wont be collectors, they just want a return on their investment...much like gm who invests in assisted living homes, he doesn't want to own a table , a wall, a bed, a wheelchair or a flower bed, he just wants a portion of the proceeds n hopes he mite not need to live there n eat up all his proceeds...

...I guess if one wanted a living investment, one could invest in a Christmas tree farm, depending on which part of the world lives in...

The reason I called coins "dead" investments is because it has no utility other than to a collector.  Same as any other collectible.  Obviously, I am aware that coin buyers have and can make money off of coins.  This is self-evident.

With "mainstream" asset classes or an operating business, the owner can make a return other than appreciation: dividends, interest, rents and royalties.  Even commodities have some use to somebody.  It's used in industry or consumed by an end user.  People who don't favor gold love to quote Warren Buffet.  Well, if Warren Buffet were to express an opinion on coins and used the same reasoning, he'd conclude it's an even worse investment than gold.

[World Colonial]

3 minutes ago, zadok said:

...regard the 1794 SP dollar...its not that there weren't non-collector investors that wouldn't buy it, it was more that those investors wouldn't buy it at the reserve price...

Obviously they would buy it at a low enough price if they thought they could make money from it. 

The whole point of my comments here is that they didn't believe it was a competitive "investment".  Most of them don't even know this particular coin exists but that's beside the point.  Presumably, practically all of them know coin collecting exists but just don't care.  They aren't interested in collecting and don't believe it's a better option for their money.  If they thought otherwise, they would investigate their options (whether this coin or another one) and the price level would be much higher.

It isn't because almost none of these people have any noticeable financial commitment to coin buying.

[gmarguli]

1 hour ago, World Colonial said:

So I keep hearing on coin forums or occasionally in the numismatic press.  Based upon your own description, why would anyone other than a "collector" want to "invest" in such a puny, illiquid market when so many better options exist?  

There is no scale of significance to coins, even US.  Whatever scale exists is disproportionately in generic pre-1933 gold and Morgan dollars, not in the coins implied by this thread.

There doesn't have to be a massive investment pool of coins for it to make sense. I think you'd be surprised to know how many small investment pools are out there. It also doesn't have to consist of mega-rarities. Do a search for private investments for accredited investors. 

As for why someone would invest, especially a non-collector? To make money. You can buy fractional ownership in a vineyards yield. In a collection of rare Whiskeys. Groups of paintings. There are tons of investments deals out there for accredited investors looking to dump $50K-$1M in alternative investments. Many of these pools have redemption restrictions. I may not drink wine or like whiskey, but that doesn't mean I wouldn't invest in it if I thought it was a good investment. 

[GoldFinger1969]

5 hours ago, gmarguli said:

Fractional ownership is absolutely the wave of the future. It all makes perfect sense to allow people with less means, knowledge, or time to invest in areas they think will appreciate in value. It's here in stocks and real estate on the consumer level. It's available for other big ticket items like old master paintings to higher net worth individuals. I'm currently entertaining fractional ownership of elder care facilities. I think there is tremendous value and future demand in these facilities, but I don't want to invest $1M in a single one and have to spend time figuring out how to run it, so 50 people get together and put in 100K each and someone buys and runs 5 of them. Less risk with more properties, no time spent running the places, and the investors collect the dividends. 

I agree that for those who want to play the PRICE APPRECIATION GAME, the fractional method makes kind of sense.  Hell, you might see the pooled resources of 100 or 1,000 coin collectors giving the heavyweights a run for their money the next time a million-dollar coin is up for sale.

However..... folks buy coins because they want to own them....hold them....show them off.  This fractional thing makes that an impossibility.

[RWB]

Fractional coin ownership. Anybody got a nice band saw?

[GoldFinger1969]

4 hours ago, gmarguli said:

You're absolutely 100% dead wrong. Coins are financial assets. 

No, coins are NOT financial assets.  They are speculations....commodities.

[zadok]

...oxy-moronic statement...commodities r financial assets, all stocks r speculations n financial assets...im sure the irs n many financial institutions would strongly disagree with ur assessment...

[World Colonial]

2 hours ago, gmarguli said:

There doesn't have to be a massive investment pool of coins for it to make sense. I think you'd be surprised to know how many small investment pools are out there. It also doesn't have to consist of mega-rarities. Do a search for private investments for accredited investors. 

As for why someone would invest, especially a non-collector? To make money. You can buy fractional ownership in a vineyards yield. In a collection of rare Whiskeys. Groups of paintings. There are tons of investments deals out there for accredited investors looking to dump $50K-$1M in alternative investments. Many of these pools have redemption restrictions. I may not drink wine or like whiskey, but that doesn't mean I wouldn't invest in it if I thought it was a good investment. 

I'm familiar. with some of what you included.  The question I have is, since you are telling me so many affluent people already are familiar with fractional ownership in other areas, why aren't they doing it with coins now?

I'm aware this is possible.  None of this ultimately gets around the fact that the ultimate end user for coins is the coin collector.  I see absolute no basis to claim that non-collector "investors" are going to perpetually trade coins (fractional ownership or otherwise) with each other at constantly higher prices as "widgets" while collector hobbyist buyers mostly or entirely sit and watch from the sidelines.

If you are telling me this is already happening, my response is the one I gave before.  What this thread (not just you) is describing is just one more aspect of the full blown mania which has been going on for over 20 years.  (It started in the early 80's shortly after coins were firat widely bought as "investments".   Most people have no clue it's a mania because they think it's "normal".)

Given the absurd financial behavior we see in other areas, I'm certainly not going to tell you it will never happen.  I am going to tell you that if it does, it will only last as long as the bigger bubble which makes it possible.