Sometimes it is helpful to look outside finance to help illustrate the supply and demand dynamics that can drive markets.  In some cases the results in non-financial markets can develop bubble-like behavior now familiar to investors.  For instance, the case of baseball cards.

Dave Jamieson at (via Freakonomics) has an excerpt up from his new book Mint Condition on the “great baseball card bubble.”  In it he notes how the hobby of collecting baseball cards evolved into big business and then into a full-blown bubble.  Once there was a central authority for card prices the business went into overdrive.  Jamieson writes:

By the ’80s, baseball card values were rising beyond the average hobbyist’s means. As prices continued to climb, baseball cards were touted as a legitimate investment alternative to stocks, with the Wall Street Journal referring to them as sound “inflation hedges” and “nostalgia futures.”

Not surprisingly supply was created to help mop up the rising demand for cards.  The baseball card companies complied by printing cards in “astronomical numbers.”  Like all bubbles there was a willful disbelief that the bubble could never end.  Jamieson again:

Precious few collectors seemed to ponder the possibility that baseball cards could depreciate. As the number of card shops in the United States ballooned to 10,000, dealers filled their storage rooms with unopened cases of 1988 Donruss as if they were Treasury bills or bearer bonds.

As with all bubbles, the story ends badly for nearly everyone involved.  Jamieson notes that only the most rare and vintage cards escaped the price destruction of the great baseball card bubble.  For baseball card hobbyists at least there is something to look forward to.

Michael Eisner’s Topps Inc. has brought a new sports-card game, Attax, to America.  The game which originated in England with soccer player has been adapted for baseball.  Gregory Zuckerman at reports on the growing interest in the cards:

Attax combines a once-popular kids’ pastime—collecting baseball and other sports cards—with a present-day “fantasy” games twist. Kids can build teams and compete against each other…The company is gearing up for a big test for Attax in the U.S.: a nationwide rollout of baseball cards for the 2010 major-league season on April 5, opening day.

It is unclear whether Attax will revitalize the baseball card business, but a test run did go well.  However we can be pretty sure that the baseball card business will never reach the heights it did a couple decades ago when thin pieces of cardboard were touted as legitimate investments.

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