Why Pokémon cards are growing faster than your retirement account

0:01Stacey Vanek Smith:NPR.

0:11Stacey Vanek Smith:This is The Indicator from Planet Money. I'm Darian Woods. And Ricky Mulvey. Yep, I'm here to talk about Pokemon cards. It's one of the hottest speculative booms right now. Card Ladder tracks the sales data of cards, and it says that an index of thousands of rare Pokemon cards is up about 170%. That's over the last year alone. Pokemon cards have become sort of an asset class. In other words, something you can invest in, like a stock or a precious metal. Fans have always loved the characters and collected the cards, sometimes paying big bucks. But now, speculators aren't buying and selling because they love the characters.

0:48Stacey Vanek Smith:They're chasing rapid price appreciation and media hype. And the values of many rare Pokemon cards have held up, at least for now. At the same time, gold and the broader stock market have declined over the past couple months. Still, parts of this market are walking and cracking like a bubble. So, we went to the Denver card show to meet the visitors and vendors, those selling into the boom. I'm trying to get around$4.75 for it right now. And those buying. I mean, it's going to hold its value later on. And ask why you or your parents threw out those old Pokemon cards. I used to have a bunch. I don't know where they are now.

1:27Neither do I. And you know, Darian, they could have been worth thousands of dollars.

1:30Stacey Vanek Smith:They could have been. The alternative future of Ricky Mulvey, living large from his Pokemon collection. We'll give you three things to know about this market right after the break.

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3:00Stacey Vanek Smith:The first thing to understand about the Pokemon card boom is that perfection is worth significantly more than almost perfect. Quality matters. Collectors will send their cards to Professional Sports Authenticators, or PSA, and have them graded on a scale of 1 to 10, with 10 being a flawless grade. And the quality difference between a 9 and a 10 can be minuscule. It may just be like a white dot on the corner of the back of the card. That's Joshua Johnson, the co-founder of Card Ladder. He tracks the prices of collectibles. They just want to buy the 10s. A 9 obviously has a flaw. I don't want to even have to think about that.

3:39I'll just buy the 10.

3:40Stacey Vanek Smith:Let's say you want to buy a Pikachu with a grey felt hat. This is a card that Pokemon made in collaboration with the Van Gogh Museum. It really looks like Van Gogh painted Pikachu, and Pikachu looks pretty spiffy in his grey felt hat. Yeah, in a starry night. And you'll pay a lot for that privilege. It's about 800 bucks when it's graded at a 9. But a perfect 10 of this grey felt hat Pikachu will cost you close to$2 ,500. We met Chris Gonzalez at the Denver Card Show. He says he's a collector and he just spent$1 ,750 cash for a Mega Charizard. It was graded at a flawless PSA 10. Chris said he likes the art.

4:25And this being created a card, I mean, it's going to hold its value later on. I mean, I've seen like, you've seen a bunch of YouTubers going viral with selling their million dollar cards. I mean, not trying to get that, but I mean, it's cool. I like it. And I'd rather buy now because some of these cards later on, they're not affordable later.

4:44Stacey Vanek Smith:Chris is referencing Logan Paul, the WWE superstar and YouTuber who recently sold a rare Pikachu card for over$16 million. dollars. This is the media hype. Chris says he's holding on to the card for a while and enjoying it, but he recognizes there is a risk in holding on to Pokemon cards if you think of it as an investment. I enjoy the card. I'm comfortable paying that much. I mean, don't go broke over it. So far, Chris has been right about his card. We met him a few weeks ago. His Mega Charizard is now selling on eBay for$1 ,000 more than the price he paid. Darian, this feels like rapid price appreciation.

5:24Stacey Vanek Smith:It's growing faster than my retirement account, I can tell you that. And the second thing to know about this boom is that it's not tied to a functional purpose. Pokemon cards are used for a trading card game. Joshua with Card Ladder says that's not what's happening now. It's probably like 5 % of the people that buy the boxes is for the purpose of, you know, building the set and playing the game. I would guess it's some ridiculously low member. Collectors are excited about the characters, the art, and for some of them, the belief that these cards might grow in value. The third thing to know about this market is the split between vintage and modern cards.

6:00Stacey Vanek Smith:When Pokemon cards first came out three decades ago, most collectors didn't view them as something that could hold value for years to come. That's why your mom threw them out. I'm not going to blame her. I don't know if she did. It might have been me. Maybe not your mom, Darian, but some moms. So now these vintage cards have a more limited supply, especially at the higher grades. Many of the collectors played with Pokemon cards or traded them on playgrounds. And other vintage collectibles have maintained their value over longer periods of time. The comic book with Spider-Man's first appearance has returned about 11 % per year since 2009.

6:36Stacey Vanek Smith:And that was only graded at a 4, which means the book could have some scratches. But the modern cards are already viewed as a collectible. So more of these cards are being pampered, graded, then sold on eBay right after they come out of a pack. Joshua worries a mix of increased supply and rising prices could mean that some modern cards are in a bubble. It just requires like a lot of the same people continuing to buy the same stuff over and over at these prices. And if there's any sort of loss of confidence, like it's going to just come crashing down because there's just so much supply. What Joshua is describing is an economic concept called the greater fool theory.

7:15Stacey Vanek Smith:Some speculators may be buying Pokemon cards, not just because they love the art or the character, or even that they think it should be valued at what the price is, but because they think a greater fool will come along and spend more than them. When that buyer doesn't come along, though, the price crashes. So some collectors are worried about a bubble, but the gamble is still drawing speculators in. Opening packs of Pokemon cards generally has a worse payback than buying scratch-off lottery tickets, but sometimes you hit a winner. The chance of hitting it big is why new boxes of Pokemon cards fly off shelves and often sell for more than their retail price on secondary markets.

7:55It's contributed to a speculative boom that has made collecting more difficult for Pokemon fans with a smaller budget, like Peyton Daigle back at the card show. I usually just bring$20 with me, and I try to trade cards, or once I'm out of that$20, I'm usually just walking around kind of looking. Payton says this Pokemon boom has made it more difficult for him to collect Dragonite, his favorite Pokemon. Yeah, I would say especially making cards that I want go much higher than I can afford. Joshua Johnson believes this booming market reflects how the younger generation doesn't believe the economy is working for them and thinks that maybe this will.

8:33You know, older generations have all the real estate. They have that on lock. You know, the stock market is kind of, it seems like it's a bit manipulated based on like politics. And so the younger person kind of feels like, I'm just sort of like hoping I make enough money to survive in an apartment, you know.

8:47Stacey Vanek Smith:But trading card markets can be manipulated too. It just takes a few buyers to drive up the price of specific cards. And a trading card is not a security, like a stock. And so there's less protection from manipulation. There's not a Pokemon Securities and Exchange Commission. Sports cards are manipulated all the time. Joshua is still bullish on Pokemon as a whole, even though he sees pockets of bubbles. He believes that people will continue to buy cards tied to a strong franchise, and that an amount of financial nihilism amongst the younger generation makes the asset appealing. Trading Pokemon cards isn't just about the potential gains, though.

9:24We caught up with Ricardo Morales after he purchased four cards at his booth. Oh, yeah, I'm very happy. I'm only going to sell one of them. The other one's going to go to my sister, and the other two that I got, the two Mew2s, they're going to a friend of mine that loves collecting Mew2. Oh, so you're not here just as a vendor, you're here as a collector as well. Yes, exactly, yeah. I love collecting, bro. I've been collecting forever, and what I like about vending is it gives me the opportunity to connect with people and also be able to buy cards that I want at a little cheaper price.

9:56Stacey Vanek Smith:It's the people like Ricardo that are really backing this Pokemon boom with their love for its characters and the nostalgia. For those speculators, though, there's always the chance that the next pack of cards you open could be worth thousands of dollars. Minus the tax you owe, of course. This episode was produced by Corey Bridges with engineering from Sina Lofredo. It was fact-checked by Sierra Juarez. Kate Kincannon is the editor of the show. The Indicator is a production of NPR.

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