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How To Get Free Stuff / Trading Chains / Challenge

If you’ve been reading this blog, by now you should have some pretty good ideas about how to make a killing with collectibles.  But even with plenty of “wins”, buying collectibles can put a strain on your wallet.

 

I recently bought a dog-eared copy of Amazing Spider-Man #1 at a comicbook convention. 

 

 

 

 

This comicbook is considered a collector’s Holy Grail.  Yet, the reality is that I didn’t pay much for it.  I did shell out some money, yes, but more than half of my purchase was taken in trade.  I traded four very nice comicbooks, plus a handful of cash for my Spidey #1.  But I’m sure you can guess, I didn’t pay much for the comicbooks I traded.  In fact, much of the money that I spent on that comicbook came from sales of other comicbooks over the internet, and even those were purchased at a discount.  In total, I estimate that I probably actually pulled about ¼ of the purchase price from my household income.  The rest of the money came from labor…buying and selling collectibles of all types. 

 

So let’s follow this method of buying great collectibles to its conclusion and put it to the test.  Imagine this.  I have a collectible worth close to $100.  I sell it for $100.  Then with that money, I focus on buying another collectible worth 50% more than my purchase price.   I then turn around and sell that item worth $150 for $130 to facilitate a quick sale.  Now, what do I do with the money?  I pull my original investment of $100 off the top.  That leaves me with $30 profit.  Next, I take 1/3 of the profit ($10) and put it with the $100, so I now have $110 to spend.  So if I keep doing this, I will get to dabble in more and more expensive collectibles.  The other $20 is saved for a future purchase of a collectible I want to keep.  Here are the steps again laid out:

 

1. Sell a collectible (rare currency) for $100.  This is my “purchase money”
2. Use the “purchase money” to buy another collectible (a comic book) that is worth at least 50% more…so let’s say I buy something worth $150 for $100.
3. Now I sell the new collectible (the comicbook) at a discount to its value for $130.
4. I take back my “purchase money” ($100) and I add 1/3 of my profit to it ($10).  So now my new purchase money is $110.
5. I put the $20 aside for the next item that I want to buy and keep (after all, I am a collector of things!)
6. Now I keep going.  I take my purchase money of $110 and I get lucky and buy something worth $200. 
7. I sell the $200 item for $170.  My profit is $60.  So I take 1/3 of the profit ($20) and add it to my purchase money ($110), so now I have $130 of purchase money for the next flip.
8. And I set aside the remaining profit of $40 and add it to the previous $20 I already set aside…so now I have $60 to buy and hold the next item I really want.

 

Is this REALLY getting collectibles for free?  No, because I’m earning the money.  I just don’t think of it as work because I enjoy buying and selling collectibles.

 

The eight steps above are what I would call a “Trading Chain”.  I just made that up…nifty, huh?  The thing is, if you do a trading chain, it can get downright boring waiting for your item to sell.  But there is a solution to that problem….two trading chains!  A guy could run multiple trading chains and have some fun doing it.

 

So what about putting it to the test?

 

Here’s what we’ll do.  I have about ten comicbooks.  They are the Walking Dead comicbook series. 

 

 

 

 

 

The beautiful thing about them is that I bought them all for a cover price of $3 each after I knew they were worth at least double what I paid for them.  Since then the price has risen some more.  So I will donate those comics to this test.  I have a person who is indicating that they want to buy them now.  So as of today (3/19/13) they will be my seed money.  Whatever I sell them for will become my “purchase money”.

 

So check back with this thread on my progress.  I will document the steps below:

 

1. About a year ago, I bought ten comics for $30.
2. The ten comicbooks are now for sale and proceeds will be my “purchase money”.
3. ???  What’s next?  Stay tuned.

This blog has moved to http://makingakillingwithcollectibles.com/

We moved to http://makingakillingwithcollectibles.com/ .  I like blogspot, but it has some shortcomings I just have a problem with based on my presentation style.  We'll still be writing about comic books, coin collecting, collectibles, currency (paper money), old video games and economic theory about investing in collectibles.

Am I A Shrewd Buyer or the Greater Fool?

I just posed a question to a currency forum that I like to frequent.  I stated that I just won a hotly contested auction, and I asked if I was a "greater fool" because I was willing to pay more than anyone else.

I then gave my reasoning that if I win an item in an auction, I only paid a few dollars more than the next lowest bid (AKA: "the underbidder").  Therefore, I could sell it to him for almost as much as I bought it for.

Another forum member shrewdly pointed out that I could only get the same kind of money if there was yet another person who would act as an underbidder to my underbidder.  Very true if I sell in an auction setting.  So am I a greater fool?

I say no.  Because it depends on what you buy.  I purchased an a drop-dead gorgeous 1935 Canadian Bank of Commerce $5 Note in the collectible grade of Extremely Fine.  True, I didn't buy the highest grade available, but I don't always have alot of funds to spend on stuff like this because I have this terrible habit of keeping everything I buy instead of recycling cash to buy the next thing.

As I see it, I "hit the trifecta", because the item I bought is (1.) Desireable because of it's beauty, (2.) It is somewhat rare (3.) It is a higher grade.  Those are the three components of what makes a good collectible, and when you have all three working for you, the collectible will tend to rise in price nicely over time.

But here's the last piece of the puzzle.  I didn't overpay.  I did my research on what these beautiful notes sell for, and I put in a bid that was high enough to hopefully win, but not so high that I would overpay.  In fact, my bid was entered such that if I won, I would get a good deal (I did!).  Did I get a Super Deal?  No.  But when you are buying an item that has the trifecta, it is really very hard to find a "Super Deal"...there are just too many people looking for it.  I can say that my winning bid was only $8 from my maximum bid.  If it went higher than that, I'd would have had to wait for the next one to come along, but that would be OK, because I'm not in a hurry.  If I didn't buy this one, then I've have more money saved up to spend on soething else.  But even then, I would stay disciplined and not overpay.

So am I the greater fool?  No.  Because I did my homework and I didn't overpay.  I remained disciplined.  And the item that I bought had the trifecta of condition, rarity, and wow-factor going for it.  True, I might have to hold it for a while to make a profit, but this when and item has all three components of what makes a collectible great, holding onto it is a pleasure.

Collector Steve

A new milestone

Today we hit 1,000 views and this is my 25th  post/entry.  I hope all of you are enjoying this blog.  When you log into the blog, don't just scroll down and read what is there.  Also click on the links on the right side of the page and read the archived stuff.  Some of the better articles, IMHO, include:

 "A time machine and $800"

The article about buying slabs is very informative

The article about getting stuff for free is good

There is an article about buying an 1839 Large Cent or a 1939 Nickel that pertains to all collectors regarding making a good purchase.

"Those are Hot Right now" is good advice.


So read, read, read!  And for gosh sakes, please comment on the posts.  People want to hear what you have to say about these concepts.

Collector Steve

How Many Reasons Are There To Buy That Thing?

Over the long term, some collectibles increase in value nicely.  Some of them just languish.  You can have a lot of fun collecting items that don't increase in value very much, but when it comes time for you to sell, or your family to sell your collection on your behalf after you're gone (Yikes!), it would be nice if your collection was filled with those items that increased in value handsomely.

There are many ingredients in the soup that makes up the future performance of collectibles.  One of the strongest ingredients is good demographics.  If you collect what the young folks want to collect, you'll probably do fine.  But let me tell you about a simplistic way to evaluate them.

LET ME COUNT THE WAYS...

In simple terms, if a collectible has multiple reasons...multiple aspects of attraction...to be a desireable collectible, it will probably do pretty well.

Let me give you an example...look at this comic book:

This is a copy of Four Color Comcs #178.  It is the first appearance of Scrooge McDuck.  It's worth about $125 in that condition.  Why is such a dog-eared book worth so much.  Let's count the ways:

1.  It's a neat looking cover.  Come on!  That bear is so cute, and the fact that he's angry makes him even cuter.

2.  It's an IMPORTANT book in the series.  This is the first appearance of Scrooge McDuck!

3.  It's rare.  Not a lot of these out there.

4.  Interestingly, another reason is that it has "cross-over appeal".  It is an item that would be desireable not just to a comic book collector, but also to a Walt Disney Item ("Disneyana") collector.

So we have four reasons why it is desireable.  But what if it had all four of those reasons, but it was in high grade?  High grade comics are also collected for that aspect alone.  Then it would have FIVE reasons why it was desireable.  FIVE is more than four, so we'd expect it to be worth more.

Now let's look at another one:

This is Vault of Evil #1.  In the condition shown, it's worth $10 to $20.  Let's count the reasons why it's a good collectible:

1. It's got a cool cover!  Come on man, a WEREWOLF!  That's just neat.

2.   It's a nicer grade.  It's not mint, but it's certainly nicer than the Four Color, right?

3.  And....umm....hmmm....  Ok, I'm drawing a blank here.  Maybe because it's a first issue???  Though that's not too important in a short, otherwise unimportant series, right?

So in summary, I can really only think of TWO reasons why it would be considered a good collectible.  Two is certainly less than Four, so over the long term, this might not do as well as the Four Color, but, in fairness, for it's age, it did OK for the owner's initial 20 cent investment.  ***See my blog article about the 1839 Large Cent and the 1939 Nickel where I discuss the ages of collectibles and it's bearing on value***

However, the thing to walk away with is that there are only Two really good reasons to seek it out.  There are other comics with more than two reasons that might be a better choice over the long term.

Now let's look at the most valuable comic book out there.  A near mint copy of Action #1, which sold recently for $1.5 million.  Wow!  Crazy money!  But let's count the reasons.

1.  First Superman Appearance (very important)

2. First Superhero Appearance (extremely important)

3.  Very Rare

4.  It has a very cool cover (trust me).

5.  It is in very high grade

6.  There are many other firsts, such as the first super strong character, first character to wear his underwear outside his tights :), first mention of Ma & Pa Kent., etc.

7.  It has a track record of steady increases in value.  This can be a good reason to buy something, but it can also be a reason that a price bubble is forming...the difference is often based on how fast the price is rising.

OK, so I count several reasons why an Action #1 would be considered desireable.  So it's the big winner in our counting contest.

The point here is not to just count the reasons why something is desireable and use that as a valuation tool.  It's not a valuation tool.  But it is a good screening tool for separating the pearls from the lowly peas.  If the collectible you're contemplating purchasing is desireable for only a couple of reasons, you might want to keep shopping.  If you find an item where you can think of several reasons why it would be good, like condition, cross-over appeal, rarity, it's "cool factor", then it will probably increase in value nicely over time.

"Those Are Hot Right Now."

I was watching one of my favorite shows the other night.  I'm a big car buff and I like a show called, Chasing Classic Cars.  Maybe you've seen it.  The show centers around a fellow named Wayne Carini, who buys, sells, represents and brokers fine automobiles.  It's a great show to watch because it combines beautiful cars with collector techniques and mentality.  Just as I collect coins, comicbooks, currency, and telescopes, some people collect cars as prolifically.  The fact is, I have a car collection too, but it consists of a couple of older air cooled Volkswagens in various states of disrepair.  Maybe I should be wrenching on them instead of blogging about them, but then you wouldn't have anything to read, right? :)

ANYWAY...as I was watching the show, Mr. Carini mentioned that he wanted to sell a particular car because "those are hot right now".  And that brought me right back to the topic of rotational leadership.  (If you hunt for it, I have another blog entry on rotational leadership where I broach this topic.)

But I wanted to reiterate the importance of rotational leadership from a different angle.  The "Do" and "Don't" of collecting.  Here they are:

Don't chase after something that is "hot right now"....you'll overpay.

Do chase after things that will get hot, hopefully in the near future?

But wait, how do we pick something like that?!!

The answer is:

Chase the things that are hot 95% of the time, but only chase them during that 5% of the time when they are not hot. 

OK, I'm exaggerating, but you get the point.

Here's food for thought while you're digesting that.  I mentioned my Hulk #2 comicbook in a previous blog.

 I watch the price of that book and it varies radically, but it stays in a trading range.  Why is that?  Well, for starters, there aren't lot of people looking for a low grade Hulk #2.  But likewise, there aren't a lot of people putting one up for sale either.  Because of this, five buyers of that book earnestly looking to buy it at an online auction site could be considered a high demand so the comic book would be considered "hot".  Likewise, five motivated sellers of that book at an online auction site would create a "glut" of them for sale.  If there is an oversupply, the sellers will compete with each other on price, and the foolish sellers will lower their prices until others (who may not necessarily want the book) think to themselves, "Wow, I don't need that book but that's too cheap so I'd better buy it". 

You want to be that buyer!  You want to be the guy or gal who buys it during a glut and then sells it when it's hot.  If the item is rare, and appeals to a focused group of buyers, the price differential between a glut and a hot market can be a large swing.  So buy during a glut and sell when they are hot.  That's what the professionals do.