Future Hall of Fame quarterback Tom Brady has been in the news recently, not for anything football related, but for a just-released Bowman baseball card he’s on that collectors are going gaga for.

The quick backstory: After his senior year of high school, Tom Brady was drafted by the Montreal Expos in the 18th round of the 1995 MLB player draft.  Instead of signing with the Expos out of high school, Brady chose to take his football talents to the University of Michigan in Ann Arbor, and the rest is history.

Now retired from football with by far the most Super Bowl hardware of any quarterback in NFL history, Brady was approached by Michael Rubin’s Fanatics, which now owns and produces Topps/Bowman baseball cards, to hand-sign a number of super rare “what if” Brady baseball cards that have been inserted in the company’s newest annual set.  Who knows, maybe the two came up with the promotion at Rubin’s Hamptons white party this summer…

The elusive Tom Brady baseball “rookie card” can be found in packs of the just-released 2023 Bowman Draft product, which shipped to customers on 12/12 (Brady’s NFL jersey number) and additionally features the first rookie cards of players drafted in the 2023 MLB draft.

Brady appears to have signed 81 cards that have been inserted into packs, and the odds of pulling one have been tagged at roughly 1 in 26,600 packs!

As shown below, what appears to be the first Brady auto (autographed card) listed on eBay just sold on December 18th for $21,200!

In addition to the 81 Brady autographed cards randomly inserted into 2023 Bowman Draft packs, there are also non-autographed Brady “Expos” cards like the ones shown below that are still rare but are much more common than the autographed versions.  Even these are selling for more than $1,000 on eBay as of December 19th.

Now that you have the backstory, you may be wondering why Bespoke is writing an article about baseball cards?

While not experts by any means, we here at Bespoke know a thing or two about the sports card collectibles industry (we were, after all, kids once and now have kids of our own), so we thought: “What if we tried our luck and got in on the chase for the Brady auto?  Let’s buy a few boxes of 2023 Bowman Draft, open the packs, see what we get, and then calculate how much money we either lost or made on the whole endeavor.  We can then compare and contrast the ways that investing in the stock market is similar to and different from “investing” in sports cards collectibles.  And if we pull a super rare Brady auto, it will be a very nice Christmas!”

And here we are.  Last week we purchased six boxes of 2023 Bowman Draft from BlowoutCards.com.  The boxes arrived in a couple of days and we immediately sat down and started opening packs (called “ripping” by collectors)!

Did we pull a rare Brady?  Or what about other rare rookie autograph cards inserted in the product?  We know…the suspense is killing you…but first, let’s discuss some of the ways we think collecting baseball cards can be comparable to investing in stocks.

While many fans collect sports trading cards as a hobby instead of viewing them as an investment, a large contingent of collectors out there are indeed looking to make money in the process.  In simple terms, they’re trying to “buy low and sell high,” just like investors are trying to do when they buy and sell stocks.

We’ll get it out of the way now: many out there smirk at the thought of small, rectangular pieces of cardboard having any sort of value, because after all, the paper these cards are printed on is effectively worth nothing.  But, just like precious works of art or even to some degree, the share price of a stock, the value of something is what someone is willing to pay for it, right?  And the value of sports cards mostly comes down to three things: the athlete or celebrity on the card, the scarcity of the card, and the condition of the card.

If you’re a card collector that knows little to nothing about investing in the stock market, or vice versa, here’s a good way to break things down:

In the investment world, “blue-chip” large-cap stocks are mature companies that have weathered the ups and downs of multiple business cycles over the years.  These are generally companies that are past their peak “growth” phase, but they’re still generating steady profits, and they often pay back their shareholders in the form of annual dividends.  While these large-cap stocks may not be likely to double or triple in value in the near term, they can offer slow and steady returns over the years with relatively low volatility.  Some examples of blue-chip stocks are names like Apple (AAPL), Coca-Cola (KO), American Express (AXP), and Home Depot (HD).

In the card collector’s world, think of large-cap blue chips as the cards of some of the best players of all time in their respective sports who have already retired or are closing in on retirement.  These are the All-Stars, Hall of Famers, and GOATs (greatest of all time) that created lasting legacies with fans during their playing days.  Now past the “growth” phase of their careers, the value of the blue-chip cards are no longer going to increase because of player performance, but rather scarcity and condition as the years pass from their playing days.  Examples of “blue chips” in the collecting world are the cards of players like Mickey Mantle, Nolan Ryan, Jim Brown, Joe Montana, Larry Bird, Michael Jordan, and Wayne Gretzky.

For the cards of players that didn’t form lasting legacies during their careers, unfortunately, their cards are going to be much less valuable, or even “bankrupt” like a large-cap stock of yesteryear whose profits slowly dwindled to nothing over time.  Eastman Kodak is a name that comes to mind here.

Next up in the investment world are small-caps or growth stocks.  These are the younger companies out there that may be currently experiencing rapid revenue growth even though they’ve yet to generate any real profits.  For these companies, the sky is still the limit as long as their management teams execute and their industry remains relevant.  If everything works out, growth stocks can double, triple, or even become “ten baggers” (stocks that go up 10x in value), but the future is still unknown, so they’re typically much more risky and volatile than blue chips.  Over time, only a small percentage of small-cap growth stocks will eventually turn into large-cap blue chips, so investors must do their research and choose wisely!

The small-cap growth stocks in the card collecting industry are the up-and-coming “prospects” found in modern-day packs like 2023 Bowman Draft that we wrote about earlier.  These are players that are still super early in their playing careers, whether they’re rookies in the NFL or NBA or still in the minor leagues for baseball.  Because the sky is still the limit and these athletes could turn out to be Hall of Famers, collectors looking for the “next” Tom Brady or Michael Jordan pay a premium for “potential,” but buying these cards is much more risky than buying “blue chips” since only a small percentage of players ever make it to the top of the mountain.  Players who would now be considered “small-cap, growth” stocks in the card world might be quarterback CJ Stroud, running back Bijan Robinson, NBA rookie Victor Wembanyama, or minor leaguers like Jackson Holliday with the Orioles or Paul Skenes with the Pirates.

In the card collecting world, you can either buy individual cards of players, which are called “singles” in the industry, or you can buy boxes or packs of products like 2023 Bowman Draft.  When you buy packs of cards, the contents are unknown, but there’s a chance you could pull a rare card of a player you’re looking for.  Buying an individual card of a highly sought-after rookie or prospect is much more expensive than buying a pack that simply gives you a chance to pull the same card.  By buying a low-cost pack, you have a chance to pull a really valuable card, but there’s also a very good chance that you’ll buy the pack and NOT pull anything valuable; essentially losing your money.  That’s what makes opening packs the riskiest part of the trading card industry.  More often than not, you’re going to lose money, because the companies producing the packs have to make money!  In this way, opening packs instead of buying singles is like trading options instead of buying individual stocks.  Trading options costs much less than buying the underlying stock, but the payoff can be huge even though your option can also just as easily expire worthless.

Hopefully you enjoyed some of the comparisons above!

We mentioned that opening packs is the riskiest part of the trading card industry, but that’s exactly what we did when we bought and opened our boxes of 2023 Bowman Draft in search of rare cards like the Tom Brady auto.  To find out how we did, check back tomorrow!  We’ll highlight everything we pulled (did we pull a Brady???) and then see if their combined value based on recent eBay sales gets us anywhere close to back to even!

Is there a Brady auto in one of these boxes…

Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read over the past week. The links are mostly market-related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.

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On This Day in History:

‘It’s all gone’: CAR-T therapy forces autoimmune diseases into remission (Nature)
CAR-T-cell therapy, a groundbreaking approach initially used for cancer treatment, has shown promising results in treating autoimmune disorders. In a recent study, 15 participants with autoimmune conditions experienced significant improvement, remaining disease-free or nearly so after the treatment. This therapy involves engineering a patient’s T cells to produce proteins called chimeric antigen receptors (CARs), which target and destroy B cells responsible for the autoimmune response. [Link]

Inhaled SARS-CoV-2 vaccine for single-dose dry powder aerosol immunization (Nature)
Scientists have developed a new type of COVID-19 vaccine that you can inhale as a dry powder instead of getting as a shot. This vaccine is designed to work after just one dose, and it targets the lungs to give a strong immune response, not just in the bloodstream but also in the respiratory system. The vaccine can also adapt to different strains of the virus, such as the original and Omicron variants, making it a promising tool for fighting COVID-19 and possibly other similar viruses. [Link]

Economic Trends

Digesting inflation (Briefing Book)
Despite recent disinflation, consumer sentiment remains negative, potentially due to the cumulative effect of significant price increases over the past three years. Even though annual inflation eased to 3.2% this year, the overall increase in prices over the last three years was 18.6%. The University of Michigan’s consumer sentiment index remains low, similar to levels during the Great Recession, despite improvements in inflation and gas prices, as well as a seemingly lower risk of recession. [Link]

The ID.4 Could Be Volkswagen’s First EV Made With U.S. Union Labor (Heatmap News)
UAW president Shawn Fain aims to aims to organize non-union auto workers, starting with Volkswagen’s Chattanooga, Tennessee plant where over 30% of workers have signed union cards. The Chattanooga plant, VW’s only US factory, has been accused of lower pay and poor working conditions. Previous unionization attempts failed in 2014 and 2019. Potential unionization at Tesla’s US factories was also mentioned. This development comes after UAW secured significant raises and benefits with major automakers earlier this year. [Link]

Lending and Saving

Gen X’s Retirement Problem (RIA Intel)
Gen X is looking at a retirement savings issue, as nearly half of non-retired Gen Xers (aged 43 to 58) have not started retirement planning, with 61% expressing doubt about achieving their dream retirement. This group anticipates needing $1.1 million for a comfortable retirement but expects to have only about $661,013 saved, creating a savings gap of $451,170, which is larger than that of Millennials and Baby Boomers. Contributing to this issue is Gen X’s allocation of 32% of their retirement assets to cash, driven by a fear of loss and a lack of investment knowledge. This points out the need for financial literacy and knowledge for effectively saving for retirement. Check our “Get Invested” slides that point out the benefits of long-term investing in the stock market! [Link]

Elon Musk told lenders they would not lose money on Twitter deal (Financial Times)
Elon Musk assured the banks who lent him $13bn for his Twitter buyout, now rebranded as X, that they would not incur losses (would they have lent to him if he promised them losses), despite the company’s value falling sharply post-acquisition. However, the lenders, including major banks like Morgan Stanley and Bank of America, face potentially significant losses if they sell the debt, with market investors showing reluctance to buy X’s bonds and loans. The banks have kept the debt on their balance sheets, hoping for an improvement in X’s performance after cost-cutting measures. [Link]

Crime

Crime in 2023: Murder Plummeted, Violent and Property Crime Likely Fell Nationally (Jeff-alytics)
Challenging the common perception that crime is on the rise in the US, this article discusses crime’s decline in 2023. Based on data from the FBI, murders have decreased 12.7%, with declines in 73% of over 175 cities analyzed. Now, that doesn’t mean there aren’t outlier cities that have experienced a rise in crime, nor does it mean the level of violence is close to acceptable. Other violent crimes also saw significant drop-offs YoY, with motor vehicle theft up 10%. Violent crime is also down across the board between urban, suburban, and rural counties. Ideally, this news provides a hopeful outlook that violent crime can continue to trend in the right direction. [Link]

Artificial Intelligence

News Publishers See Google’s AI Search Tool as a Traffic-Destroying Nightmare (WSJ)
The Atlantic is concerned about Google’s integration of AI into its search engine, fearing it could significantly reduce the magazine’s web traffic. About 40% of The Atlantic’s traffic comes from Google searches, and a model suggests that AI-powered searches could answer 75% of user queries directly, bypassing external links to the magazine. Google is testing an AI search product called “Search Generative Experience” with 10 million users. This shift highlights the risks for media outlets relying on tech companies for visibility, especially as AI technology could directly provide answers, reducing the need for users to visit the original content sources. [Link]

Enforcing Laws & Regulations

US agency takes first step to mandate anti-drunk driving technology (Reuters)
U.S. auto safety regulators have initiated steps to mandate carmakers to incorporate technology that prevents intoxicated drivers from starting their vehicles. This move follows a congressional directive in 2021, aiming to reduce over 10,000 annual road deaths caused by impaired driving. Various technologies are being considered, including breath or touch-based sensors that detect the presence of alcohol and cameras that monitor eye movements. However, the NHTSA needs to ensure the reliability of these technologies and their public acceptance, as even a 99.9% accuracy rate could result in a significant number of false positives. [Link]

Federal Regulators Seek to Force Starbucks to Reopen 23 Stores (NYT)
Federal labor regulators have accused Starbucks of illegally closing 23 stores as a tactic to suppress union organizing among its employees, with at least seven of these stores having unionized. The issue is set for a hearing with an administrative judge next summer, unless settled earlier by Starbucks. The company has faced over 100 complaints and numerous rulings against it for similar issues. The National Labor Relations Board is seeking to reopen these stores and compensate affected employees. [Link]

Creative Combinations

Doritos nacho cheese liquor sounds like a stunt, but it’s actually good (Washington Post)
This unusual spirit was born out of curiosity when the CEO of Empirical Spirits, experimenting with distillation, decided to use actual Doritos as the flavor source. Initially kept as a novelty item for friends and family, the spirit evoked strong, nostalgic reactions and was eventually presented to Frito-Lay. Despite its unconventional nature, the product is seen as a creative exploration in the spirits industry, recommended for use in cocktails like margaritas and Bloody Marys. [Link]

Competitive Markets

Kirkland & Ellis: is it party over for the world’s most profitable law firm? (Financial Times)
Kirkland & Ellis, a highly profitable law firm known for its work with private equity, has developed a culture and business model similar to a hedge fund or investment bank, with aggressive tactics and high earnings for partners. However, it faces new challenges as interest rates rise and private equity deals decline, affecting its co-investing perks and overall business. Additionally, Kirkland’s dominant position and practices have come under scrutiny from industry bodies and competitors, with rivals adopting similar strategies and poaching its business. [Link]

Give a Gift

Thank your Amazon driver with a $5 gift at no extra cost (ABC4 Utah)
Amazon has launched a holiday initiative where customers can show appreciation to their delivery drivers through the website or app, or even using Alexa by saying “Alexa, thank my driver.” The first 2 million expressions of gratitude will include a $5 gift from Amazon to the driver, at no cost to the customer. This “Thank My Driver” program, which began in 2022, has been a year-round initiative, with top-thanked drivers from the previous year receiving $10,000 from Amazon. Happy holidays! [Link]

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Have a great weekend!

At the start of 2022, the seven largest S&P 500 stocks by market cap (which have begun to colloquially be called the Magnificent Seven) possessed a combined market cap of $11.78 trillion.  However, severe losses throughout 2022 meant that by the end of the year these stocks were down 47.7% on average.  In terms of the combined market cap, that dropped the total down to just $6.9 trillion.  In 2023, those same seven stocks have averaged a gain of 106.6%.  While not all of these stocks have fully recovered—for example, Telsa (TSLA), Alphabet (GOOGL), and Meta (META) all have lower market caps than at the start of 2022—the strong performance this year on the whole has meant the combined market cap has made a round trip.  Now back to square one, what’s next?

Both the NYSE FAANG+ Index and Renaissance IPO ETF (IPO) have put in place fresh 52-week highs in the past couple of days, however, zooming out, those fresh highs are on different planets. The NYSE FAANG+ index—comprised of many mega cap Tech stocks—is not only at a 52-week high, but it’s trading at record highs.  Since the pre-COVID market high in February 2020, the FANG+ group is now up 120.1%.  As for the IPO ETF, this week’s 52-week high only leaves the group at the highest levels since April 2022. Contrary to the all-time high for FAANG+, IPO is still down 51.7% from its February 2021 high and is up a meager 4.7% since pre-COVID.  As you can see below, these two traded closely inline with each other in the early days of the post-COVID rally, but FANG+ has left IPO in the dust since the start of 2022.