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Comment by cletus | Hacker News Reader

From scanning this, it sounds like the author is specifically talking about sports trading cards, most characterized by baseball cards.

This market certainly went crazy price-wise but then, as the author pointed out, tanked. It basically tanked because everyone started collecting the cards. Like any collectible market, it mainly took off to begin with because no one was collecting these things and keeping them in mint condition. The realization of that then created oversupply.

I can't speak much for that market but in the past year Pokemon in particular has exploded, to the point where the the ratings companies where so inundated with submissions that they had to stop accepting them.

The Pokemon market seems to have cooled but prices for mint condition first edition cards still seem to be pretty high. It's impossible to predict where this market will go just like any collectible market because it's so driven by market sentiment.

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> It's impossible to predict where this market will go just like any collectible market because it's so driven by market sentiment.

As someone who knows little about trading cards or "markets" in general I guess, how is this different than any other market? Seems like everything is driven by market sentiment, even things like toilet paper from time to time.

You don't use up trading cards like you do toilet paper. Neither are trading cards continuously produced like toilet paper.

Sure, that was just one (tongue-in-cheek) example. What about stocks?

Stocks represent fractional ownership of a future income stream - the profits of the underlying corporation. You can (in principle) buy a stock, never sell it, and get back more money than you put in. So you're not completely dependent on what others are willing to pay for it in the future.

Trading cards (and cryptocurrencies) are not like that. You can only make money if someone else is willing to pay more for it.

> Stocks represent fractional ownership of a future income stream - the profits of the underlying corporation. You can (in principle) buy a stock, never sell it, and get back more money than you put in. So you're not completely dependent on what others are willing to pay for it in the future.

Correct me if I'm wrong, as I don't know much about stocks, but doesn't that require the company to have/pay out dividends? Otherwise you do require others to buy the stock when you sell it.

> Trading cards (and cryptocurrencies) are not like that

Don't know enough about trading cards to say that you're incorrect, but you're definitely wrong about cryptocurrencies. You can do various things to earn more without loosing your current amount, from staking (Polkadot), loaning (Compound) to getting rewarded for providing liquidity (Uniswap) or for doing nothing at all (Algorand).

> doesn't that require the company to have/pay out dividends?

If you make money along the way, as opposed to when you sell, then yes. The prevailing corporate playbook seems to prefer stock buybacks over dividends, which accomplishes roughly the same thing but only triggers tax liabilities for the stockholders who “cash out” by selling.

Obviously there is a limit to this process, but in a frictionless world of perfect financial knowledge a stockholder would always prefer the buyback approach since it defers taxes on the gains as long as possible.

Thank you; I recognize that you're correct regarding cryptocurrency here and I was not.

And yes, a company would have to pay dividends, which is what I was hiding in my "in principle" parenthetical.

With the exception of companies that pay dividends, if you don’t sell the stock you don’t get back anything because it is an unrealized gain(or loss). You trade your money for ownership, and you can only have one or the other.

There was a time when trading in equity shares was driven in part by the so-called "fundamentals". How the business was doing (and the outlook), if the company was making money (and would make money in the future), things like that.

Is that not how it is now? The top companies seem to have pretty good fundamentals and trajectories to me.

You mean like Tesla? Or even any of the top tech companies?

Not any specific company. The person I responded to implied that equity shares are not being traded according to if they were making money or will make money.

But from this list, and the net profit and net profit margin figures, they seem to be mostly ordered correctly.

https://companiesmarketcap.com/

I was (mostly) joking! Fundamentals are still somewhat relevant.

Nevertheless:

"The basic issue is that right now everything is dumb. You can complain about that, or you can embrace it. In investing in 2021, “my channel checks and fundamental modeling suggest that this company will grow earnings faster than the market expects so I will buy it with a price target 20% above today’s price” might sound smarter than “this company’s chief executive officer just tweeted a picture of a dog at Elon Musk so I’m going to buy out-of-the-money call options expiring Friday because the stock will go up 200% today,” but the latter approach happens to work better right now.

https://www.bloomberg.com/opinion/articles/2021-11-04/macy-s...

Short term trading might be more dumb than usual, but for investment horizons years into the future, it still seems like people are betting on companies that are in relatively strong positions to have inflation protected cash flows.

Tesla does have good fundamentals and a good trajectory as a car company. They make a product that people want, that sells well even with large margins, for which demand is expected to continue to grow.

The fact that the market ran up its stock price till the P/E went stratospheric doesn’t make their core business any less viable.

If Tesla stock crashes, it likely won’t be because of anything the company did, but because all bubbles eventually burst, and just about every market, from equities to crypto to trading cards and real estate is heinously overvalued right now and due for correction.

> The fact that the market ran up its stock price till the P/E went stratospheric doesn’t make their core business any less viable.

Of course the highly inflated stock price doesn't make their business less viable. It does make it more viable! They've raised large amounts of capital at very favorable terms.

In any case, the point is that the price is quite dettached from those "good fundamentals".

NFTs are collectables and subject to the same trajectory.

I don't understand who can afford these with gas prices so high. NFTs aren't some typical trading card market. I think it's mostly tax evasion and some wealth posturing.

You create an NFT sell it to yourself, the price tanks you deduct it from your taxes and then sit on a pile of USD coin in another wallet that no one knows about.

I doubt there is any jurisdiction in which one could deduct losses on a collectible of any kind, let alone an NFT, let alone unrealized losses.

The real use is, you have $X dollars that you acquired by doing crimes. You want to buy a yacht with that money, but you don't want the authorities asking questions. So you sell an NFT to yourself, attribute your crime money to getting lucky in crypto, pay taxes on it, and poof! You're on a boat.

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