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From the outside looking in, Tom Sachs seemed to be the prototypical contemporary artist for a new, younger generation of affluent collectors. Yes, his art found its way to the auction block at Christie's and Sotheby's, but there are countless artists for whom that's the case. How many artists, though, are popular collaborators with Nike and have a model rocket NFT project that did over $35 million in sales?
Sachs often focuses on transforming iconic, capitalistic objects and brands, asking questions around consumerism, materialism, and commodification. His top auction sale, achieved just last May, was the $302,000 sale of "Tiffany Value Meal," a sculpture of a McDonalds value meal, painted Tiffany blue and emblazoned with the Tiffany & Co logo.
His "Mars Yard" sneakers, released in limited quantities with Nike, are perhaps some of the most desirable of the last decade. The Mars Yard 1.0 sells for close to $10,000 on the rare occasion it's available, while the 2.0 often finds itself in similar (though slightly lower) territory. Those sneakers separated themselves from the pack as the market tide rose in recent years. In fact, back in 2017, you could've bought a pair of the Mars Yard 2.0 for under $1,000, sometimes even as low as $600.
The success of those releases ultimately led to another collaboration on the NikeCraft General Purpose Shoe, this one meant to be an everyday shoe for a less limited audience. The first of the three colorways released so far dropped back in June, but already, almost 37,000 pairs of the three releases have changed hands on StockX, amounting to $8.5 million in total volume.
So, what's the problem?Well, it appears Tom Sachs is the problem.
According to a piece from New York Magazine's Curbed last week, the culture at the artist's studio is cultish and scary. Sachs is alleged to fly off the handle at employees, make demeaning comments, and treat female colleagues in a way that make them feel uncomfortable (at best). The studio environment is said to be psychologically taxing, leading to significant churn. We won't exhaustively rehash the details here, but they're all in the story.
Perhaps unsurprisingly, the studio denied most of what was told to New York. But it got worse. In the aftermath of the Curbed piece, Complex reported that the box for the Mars Yard 2.0 originally included the phrase "work like a slave," before Nike ultimately had it removed late in the release process. Then, ArtNet detailed allegations from former employees of meager pay and "dehumanizing" work.
Maybe the idea of a mercurial, even hostile artist is nothing particularly new. But in this era and in this social climate, where tolerance and acceptance of such behavior is lower than its ever been, the consequences could be meaningful, highlighting the reputational risk associated with investing in works and products linked to living artists and public figures.
Nike has stated that it is "deeply concerned by the very serious allegations." These allegations come at a challenging time for the company, which is also navigating the fallout from rising star Ja Morant's latest exploits.
Undoubtedly, there are (or were) more General Purpose Shoes in the works. In the last week, there has been mild price pressure on the existing pairs, though for the moment it appears negligible. That's not necessarily a shock - recall that initial price activity in the wake of Kanye West's worst moments and the subsequent termination of his Adidas partnership was also subdued and even positive in many cases.
On the other hand, the floor price for Tom Sachs Rocket Factory Rockets, from the artist's NFT project, is down 69% since March 13th. The number of sales was up 2,100% in the 7 days following the Curbed article, indicating there may have been a quicker reaction and march for the exits in the NFT world than in sneakers. Activity in general, though, is largely quieter now that most (89%) of the physical rockets associated with the NFTs have already launched.
Maybe a few articles won't be enough to irreparably damage Sachs's legacy, but if they prove to be smoke pluming from a much larger fire, the star of a figure operating uniquely at the intersection of art and streetwear should dim in a hurry.
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Disclaimer: You understand that by reading Altan Insights, you are not receiving financial advice. No content published here constitutes a recommendation that any particular security, transaction, or investment strategy is suitable for any specific person. You further understand that the author(s) are not advising you personally concerning the nature, potential, value or suitability of any particular security, transaction, or investment strategy. You alone are solely responsible for determining whether an investment, security or strategy, or any other product or service, is appropriate or suitable for you based on your investment objectives and personal financial situation. Please speak with a financial advisor to understand if the risks inherent in trading are appropriate for you. Trade at your own risk.
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The World Baseball Classic was a tremendous celebration of the sport - to the surprise and chagrin of many - but it ultimately belonged to Japan and Shohei Ohtani. Really though, it might have belonged to the Japanese fans, who demonstrated the extreme breadth of their might.
The statistics are jaw dropping. 62 million people in Japan watched the semifinal against Korea. For context, 113 million people watched the Super Bowl. That’s arguably our biggest sporting event here in the US. The game that 62 million people watched in Japan was a semifinal of a tournament that many didn’t think mattered prior to this year’s edition.
Let’s frame it a different way: the population of the entire country of Japan was 125 million as of 2021.
Now, before going any further, let’s preempt the soccer outcry and acknowledge that the World Cup Final drew close to 1.5 billion viewers. Those numbers are from FIFA so take them with a grain of salt, because….FIFA. Incredible, though. Absolutely incredible. But today, we’re covering the focused passion of Japan baseball fans.
For the quarterfinal against Italy, 48% of households in the country tuned in. That’s staggering! The quarterfinal and semifinal US games drew 2.26 million and 1.94 million viewers here in the States respectively. The final achieved a record 5.2 million American viewers. The semifinal and final were on FS1, and doesn’t that kind of say it all?
The focal point of Japan’s ravenous WBC consumption is Shohei Ohtani. Since the start of March, the dual threat has added 2.8 million followers on Instagram, becoming the most followed MLB player on the platform. That follower count pales in comparison to stars and even merely noteworthy players from some other sports, but its rapid ascendancy means he won’t be trailing most stars in any sport but soccer for very long.
Despite his outstanding production both at the plate and on the mound, Ohtani’s phenomenal status sometimes goes overlooked or underappreciated here in the United States. Perhaps that’s what toiling with the Angels will do. Ohtani won the AL MVP in 2021 and finished 2nd in the voting in 2022. While he was at it, he finished 4th in the voting for the 2022 Cy Young. For the analytics fans: last season, he finished 2nd in the AL in WAR….and 2nd in the AL in WAR for pitchers. We literally haven’t seen anything like this, and if you have, congratulations on living long enough to watch both Babe Ruth and Shohei Ohtani.
And yet, despite all that, it doesn’t feel like this phenomenon is fully appreciated, but rest assured, if America isn’t taking sufficient notice, you can be damn sure that half of the Japanese population is well-attuned.
Now, while America at large perhaps hasn’t caught Ohtani fever, the Hobby mostly has. In the last two years, the CardLadder Ohtani index is up a whopping 357%. His high-end cards are largely in line with those of his strongest contemporaries, and maybe you could argue that in-line is good enough considering “batting” and “pitching” prints often double the quantity of cards available.
Base cards have similarly enjoyed rapid appreciation. His 2018 Bowman Chrome (Batting) card, graded PSA 10, is up 168% over the last two years, but the vast majority of that appreciation took place in the spring of 2021. Still, it’s close to a $500 card, despite a PSA 10 population of 2,762.
Given the nature of the Hobby here in the US - the familiar Topps and Bowman centricity of it all - it’s the cards from standard, accepted sets that make the most noise. Ohtani’s “rookie” cards date to 2018, and sure, that was his rookie season in MLB and therefore his first opportunity for inclusion in standard US sets. But Ohtani was no ordinary rookie, not to professional baseball or to baseball cards.
Now is probably the time to note that, though it’s perhaps not quite as sophisticated, advanced, or popular as it is in the United States, Japan has a significant card collecting legacy. You could spend days learning about vintage Japanese baseball cards, and many US-based collectors have created an immensely fascinating niche in the category.
But the Japanese card market isn’t solely a story of the past. In fact, American collecting businesses have recently bet on its present and its future. Before its acquisition by Fanatics, Topps reached an agreement in 2021 with the Nippon Professional Baseball (NPB) league to produce licensed cards. That agreement was renewed for 2022. Card grading is not yet the Hobby staple in Japan that it is in America, but that’s changing as well. Back in 2018, PSA opened a Tokyo office to service that market. Today on prevalent Japanese auction sites and card shops, when you see a holdered card, it’s most frequently from PSA. They may not win that battle uncontested, though. CGC and CSG announced in August of 2022 that Brothers Co. Ltd., a card shop in Tokyo, would begin serving as an official submission center for grading.
While Topps entered the NPB card equation, there are thriving brands domestically: BBM (Baseball Magazine) and Calbee among them, which brings us back to Ohtani. Ohtani made his professional debut in Japan in 2013 at the age of 18. As a result, he has a number of Japanese rookie cards from that year, and the facts and figures are interesting.
Take, for example, the 2013 BBM 1st Version set. These were the first BBM Ohtani rookie cards to market. At present, the base card has a PSA 10 population of just 123 (total pop: 255) and most recently sold for $750 here in the US in August . Recall the Bowman base has a PSA 10 population of 2,762 and only sells for a couple hundred dollars less.
“But, the pop of BBM cards must be growing faster!” You would be correct about the overall set. It is. But the surplus in growth isn’t as staggering as you might assume given the massive disparity in absolute population.
The grading growth rates (shoutout Gemrate!) aren’t crazy unfavorable to BBM versus Bowman Chrome, and in the case of Ohtani specifically, the numbers are actually quite favorable to BBM. It’s just one comparison between two specific cards, but the conclusions are difficult to ignore.
The Bowman has been vastly more trafficked, even disproportionately to the disparity in population. It has sold over 1,500 times since the beginning of 2019 (h/t CardLadder). We’ve identified just 13 stateside sales of the BBM 1st Version PSA 10 over the same period. While we don’t have exhaustive data on Japan, even if you were to say it changed hands equally as frequently, it would still be just 21% of the population as compared to 55% for the Bowman. So, they’re also surfacing for sale much less often.
Perhaps that reduced availability is behind a less severe drawdown from peak for the BBM card. As of the most recent sale, it’s about 50% off its August 2021 high, while the Bowman is down 75% from its July 2021 peak. That resilience has allowed the BBM to finally eclipse the Bowman in value consistently over the last year. Despite the differential in supply, the BBM spent most of the prior two years beneath the Bowman in price, highlighting the brand strength of the latter, as well as the ability of increased supply to more rapidly capture changes in demand. While there is a gap in value between the two today, it appears to be narrowing rather than expanding at the moment.
Interestingly, the prices paid for the BBM 1st Version card on prominent Japan card commerce sites like Yahoo Japan or Mintmall are quite comparable to the prices paid in the US. The PSA 10 1st Version rookie most recently sold at auction on Yahoo for 100,000 yen, which translates to $755. The most recent stateside sale was in August for $750.
If you’re a major believer in Ohtani’s unique greatness, you’re blown away by the Japanese dedication to the sport (as evidenced by the WBC), and you believe that fandom eventually translates to a more robust baseball card appetite in the country (as Topps and PSA have believed), wouldn’t you be inclined think that rookie cards from Japan might be particularly intriguing to that audience? That’s not to say the interest in the great American brands and sets can’t also rise, but it would (will?) be interesting to see how an influx of Japanese demand approaches the differing supply dynamics.
Of course, this conversation can extend beyond the pure base cards. The 2013 BBM 1st Version set features various foil and holo facsimile parallels, which trade at higher prices, but remain relatively subdued when they do surface. Sealed boxes from that set have more or less plodded along at the same level since the summer of 2021; there was a sale for $1,117 in July 2021 on eBay, while a box sold in November of 2022 at Goldin for $1,246. There are also team sets and rookie sets to contend with, as well as sets from other brands.
While history hasn’t necessarily favored cards that predate a player’s arrival in the pre-eminent league or that league’s system (see: Ichiro or 2016 Upper Deck Euroleague Luka), history also hasn't yet witnessed an influx of Japanese collectors into traditional Hobby grading and sales channels. That influx is no certainty - perhaps it's not even highly probable - but 60+ million Japanese citizens deeply engaged in the World Baseball Classic is enough to get the wheels turning about the possibilities for Japanese cards of a now globally-relevant phenomenon.
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Disclaimer: You understand that by reading Altan Insights, you are not receiving financial advice. No content published here constitutes a recommendation that any particular security, transaction, or investment strategy is suitable for any specific person. You further understand that the author(s) are not advising you personally concerning the nature, potential, value or suitability of any particular security, transaction, or investment strategy. You alone are solely responsible for determining whether an investment, security or strategy, or any other product or service, is appropriate or suitable for you based on your investment objectives and personal financial situation. Please speak with a financial advisor to understand if the risks inherent in trading are appropriate for you. Trade at your own risk.
The March Sports Showcase hosted by Heritage Auctions features multiple of pre and post-war baseball cards, complete sets, sealed wax, graded tickets, and more. Preview three lots we'll be following as the final bids come through.
Prices for SGC 3 graded examples of the 1952 Topps Mickey Mantle peaked above $80,000 in the fall but have since receded back below $60,000 in 2023. Through early action, this well-conditioned Mantle card has already reached $50,400 with buyers premium and could exceed any other SGC 3 sale year-to-date with its impressive coloration and centering. No matter the grade, the 1952 Mantle always commands attention with its historic significance for the overall card market. This Mantle was printed by the Topps Chewing Gum Company in 1952, as part of a set of 407 cards that featured some of the biggest names in baseball. At the time, Topps was a relatively new player in the sports card market, having only been founded in 1938. However, they quickly established themselves as a major player in the hobby with the release of the 1952 set, which was the largest and most ambitious set they had ever produced. The set included a number of innovative features, including a colorful design, player statistics, and trivia questions. The 1952 Topps set also marked the first time that Topps featured Mickey Mantle on a baseball card as a solo player, without any teammates in the background. This was a significant development, as Mantle was already emerging as one of the greatest players of his generation.
Promoted as the "Thrilla in Manila", the classic boxing match tied to this ticket managed to live up to its hype, with both fighters giving it their all in what is considered one of the greatest fights in boxing history. The match lasted for 14 rounds, with Ali ultimately being declared the winner when Frazier's corner threw in the towel before the 15th round. The fight was known for its intense brutality, with both fighters pushing each other to their limits in the sweltering heat of Manila. Today, the Thrilla in Manila is regarded as one of the greatest moments in sports history, and the fight between Ali and Frazier is recognized as one of the most iconic rivalries in sports history. This PSA Authentic graded stub from the event has already surpassed $5,000 heading into the final days of the auction.
In 1985, WrestleMania, also known as WrestleMania I, introduced the inaugural edition of the professional wrestling pay-per-view event produced by the World Wrestling Federation (WWF, now WWE). It took place on March 31, 1985, at Madison Square Garden in New York City. The event was a huge success, drawing a record-breaking attendance of 19,121 fans and generating significant revenue through pay-per-view buys. The main event of the night featured the tag team of Hulk Hogan and Mr. T taking on the team of "Rowdy" Roddy Piper and "Mr. Wonderful" Paul Orndorff in a highly anticipated match. The event marked the beginning of what would become one of the most successful and iconic annual events in professional wrestling history. This ticket is one of just two graded 1.5 by PSA and is only surpassed by two examples higher. The ticket opened with an estimate of $2,000+ but has climbed above $6,000 with premium.
All Images via Heritage
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Disclaimer: You understand that by reading Altan Insights, you are not receiving financial advice. No content published here constitutes a recommendation that any particular security, transaction, or investment strategy is suitable for any specific person. You further understand that the author(s) are not advising you personally concerning the nature, potential, value or suitability of any particular security, transaction, or investment strategy. You alone are solely responsible for determining whether an investment, security or strategy, or any other product or service, is appropriate or suitable for you based on your investment objectives and personal financial situation. Please speak with a financial advisor to understand if the risks inherent in trading are appropriate for you. Trade at your own risk.
In 2016, an index tracking sales of fine art objects at major auction houses was sold to Sotheby’s (one of the houses being tracked) for an undisclosed sum. This index tracks what are called “same sale pairs” meaning a painting that is sold twice or more times, allowing its price performance to be tracked. At the time of the acquisition the index was comprised of 45,000 such pairs; up from an initial 4,896 analyzed in the original 2002 paper we are analyzing today from economics professors Jianping Mei and Michael Moses.
This section aims to point out the issues around the dataset this study is built upon. The core criticism that you will see of this paper is one of a lack of substantive data. You see, the art market is a very opaque enterprise; though the two major houses being examined here, Christie’s and Sotheby’s, dominate the auction market, they only account for a percentage of all fine art sales. Galleries, private dealers, direct-from-artist prices all vary wildly due to the environment wherein the purchase takes place. The authors make sure to note the narrow purview of their dataset.
This is not to say that the data is worthless, studying some percentage of the market can still give us a better understanding of the market as a whole. Though, there are a few other issues in the data that the authors spend this section pointing out.
Most importantly, the authors call attention to the potential selection bias in the study. In the context of this paper, selection bias comes in the form of the data set being based on sales from major U.S. auction houses, which tend to truncate both sides of the return distribution. It is also pointed out that missing is data on property that went up for sale, but did not meet the reserve price(1). Another significant factor mentioned by the authors is that of donations—uber high quality works are often given to museums from collectors (for among other reasons, a tax write-off), further skewing the data.
Mei and Moses also mention a potential backward-filled bias(2) that may appear in their findings. The fact that the data from pre-1950 is populated by well known auction house sales may skew returns upward due to these sales being made up of already-established artists from the time period.
Knowing this, we must understand that all manner of biases affect financial markets. So while we should not take the conclusions of this paper wholesale, there is absolutely knowledge to be gained from its findings.
Section two discusses the repeat-sales regression (RSR) method, which is used to estimate the fluctuations in the value of an average asset (painting in our case) over a particular time period. The benefit of using RSR in this case is that it controls for differing quality of assets; a helpful mechanism considering the differences in quality of paintings in the dataset. However, as mentioned earlier, the data used here is beset with data biases. So we must take caution when extrapolating from these findings.
The rest of this section outlines the statistical models used to build the index. We won’t dig into the mathematical nitty-gritty, but a couple of things are important to note.
The authors use a generalized least-squares regression to estimate the average return of a portfolio of paintings. By analyzing price changes in an individual work we are able to control for differences in quality among paintings; meaning high performing repeat sales of a high quality work will not affect the perceived quality of another work—in the eyes of the model that is. Said another way, each artwork is valued based on its own price history, allowing researchers to assume that price movements result from changes in market factors as opposed to changes in the quality of a work itself.
The price history of the paintings being tracked goes from 1875 to 2000. Over different periods within this time frame paintings performed admirably against the other financial instruments the authors decided to track.
From 1950-1999, the art index had an annual compounded rate of return of 8.2%, which is about on par with the 8.9% of the S&P and the 9.1% of the Dow during the same run. It outperformed both corporate and government bonds, which earned 2.2% and 1.9% respectively.
From 1900-1999, the Mei-Moses index underperformed stocks much more noticeably. While art earned a 5.2% return, the S&P and Dow earned 6.7% and 7.4% in the same period. The art index again outperformed both corporate and government bonds—which only received 2.9% and 1.4% over the century time frame.
From 1875-1999, the art index returned 5.2%. Losing out again only to the two stock indices: S&P earned 6.6% while the Dow earned 7.4%.
One important point to take note of is that over all these time periods art had by far the highest standard deviations(3) in each. Ranging from a low of 0.213 in the 1950-1999 period to a high of 0.428 in the 1875-1999 period. Each of the standard deviations for the paintings was higher than those for any of the other investment products on view.
It would seem that paintings as an investment over the period would favor a similar clientele that they do today. A well-moneyed group that is not put off by an asset class with high volatility; even if the payoff is only mediocre to good returns at best.
Common, albeit self-serving, advice from art dealers to invest in the most expensive works one can afford is rigorously analyzed in section four of the paper. It is a common sentiment among art market professionals that pieces with the most robust returns are more likely than not “masterpieces”. There had been previous analysis of this hypothesis by other researchers, but Mei and Moses were able to dig into this thesis specifically focused on expensive paintings due to their unique dataset.
What they found is surprising, considering it goes against what still is a pervasive opinion in the fine art market. They conclude that masterpieces did in fact underperform the broader art market.
In the table below, 'y' shows the difference in returns between masterpieces and the overall art market, considering their purchase prices. A negative 'y' means masterpieces perform worse than the general market. The t-statistic measures the reliability of the 'y' value. A higher absolute t-statistic means the observed difference in returns is less likely to be random, and more likely to be due to the masterpiece status of the work.
They built an equation that models the elasticity of art returns with respect to the log price of the property. Said more simply, the equation is a measure of the expected change in annual returns per some change in purchase price. Similar to the way one would model expected returns of buying shares in a high or low market capitalization of a company.
The authors even mention a similar “masterpiece underperformance” phenomenon within the stock market. The so-called “small firm effect” is an explanation for why smaller companies may achieve excess returns not justified by their risk profile.
Another potential explanation proffered by the authors is one of the purchase of art for pleasure or personal consumption. Since extremely high quality works have a high chance of ending up in penthouse apartments and gaudy mansions, it would stand to reason that utility the piece is generating is one of personal satisfaction instead of investment returns. Also, that when a piece experiences extraordinarily high priced transactions its return profile may be dampened by the future return reverting to the mean instead of continuing on an accelerated trajectory.
One issue we take with this section is how the authors define a masterpiece. The paper tracks masterpieces in so far as they track the returns of a work per its purchase price, but according to many this would not guarantee the work is truly a masterpiece.
For example, if you spent $5 million on a George Condo canvas you likely received a masterpiece. The artist’s most expensive public sale was for around $6 million, meaning that it would be safe to assume most works of his around that price point could be assumed a masterpiece. At least, in the eyes of high net worth collectors that is—I digress, though.
But if you were to buy a Pollock or Monet canvas today for $5 million, then the definition does not necessarily hold true. A Painting being expensive alone does not a masterpiece make. Assessing the elasticity of returns based on purchase price is a worthwhile analysis. Nevertheless, evaluating the performance profiles of masterpieces as a whole necessitates examining the œuvre(5) of each artist, which may problematically be subject to the analyst's personal taste.
The “Law of One Price” is an economic maxim that states "In the absence of trade frictions, and under conditions of free competition and price flexibility, identical goods sold in different locations must sell for the same price when prices are expressed in a common currency". An obvious challenge to testing this principle within the market for paintings is that an identical object is only sold a handful of times, usually over very many years. It cannot, for example, be sold at Christie’s and Sotheby’s separately on the same day.
Economist James Pesando analyzed this phenomenon in 1993, but his dataset was comprised of prints—a medium that does allow for two identical(4) work’s prices to be checked against one another. He found that the law is broken due to prints regularly selling for higher prices at Sotheby’s as opposed to Christie’s.
Mei and Moses found mixed results in this situation. 'Place of transaction' for American paintings seemed to have no bearing at all on performance or prices. Impressionist works on the other hand, experienced statistically significant higher returns when they were bought at other auction houses and ultimately sold at Sotheby’s; this would indicate that Sotheby’s did, on average, fetch higher prices during the period. Furthermore, when a work was bought at Sotheby’s and then sold at Christie’s it tended to receive lower returns compared to those paintings that were both bought and sold at Sotheby’s.
In the table below, 'p' represents the difference in returns between each buy-sell combination of houses. A positive 'p' means that the specific buy-sell combination outperforms the benchmark (both buying and selling at Christie's), while a negative 'p' indicates underperformance against the benchmark. The t-statistic measures the reliability of the 'p' value. A higher absolute t-statistic suggests the observed difference in returns is less likely to be random, and more likely to be dependent upon the "Buy—Sale" pair of the work.
This is all to say that the best way, according to the paper, to achieve quality returns with respect to the law of one price is to buy at smaller auction houses and then sell at one of the majors. The blue-chip reputation of the big houses lends credence to this theory.
The authors close the paper by restating the fundamental findings of the paper. Namely that art has outperformed some fixed income securities (and that gives a reason why portfolio diversification may be aided by the addition of artwork), so-called “masterpieces” tend to underperform the art market, and finally that the “Law of One Price” may or may not have a statistically significant effect on the New York auction market.
They go on to mention again that sample selection bias may be injecting significant bias into the return estimates.
The paper closes with a number of interesting questions that go unanswered: is there a systemic bias in bidding prices so that winning bids tend to exceed true value? Would a time-series analysis of this data imply that the entire market regularly experiences a mean reversion process? They kindly leave these questions for future research and we offer them to you, reader.
Footnotes:
Photo-Credit: Tingey Injury Law Firm
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Disclaimer: You understand that by reading Altan Insights, you are not receiving financial advice. No content published here constitutes a recommendation that any particular security, transaction, or investment strategy is suitable for any specific person. You further understand that the author(s) are not advising you personally concerning the nature, potential, value or suitability of any particular security, transaction, or investment strategy. You alone are solely responsible for determining whether an investment, security or strategy, or any other product or service, is appropriate or suitable for you based on your investment objectives and personal financial situation. Please speak with a financial advisor to understand if the risks inherent in trading are appropriate for you. Trade at your own risk.
History
The Karuizawa distillery was founded in 1955 by the Mercian Corporation, a subsidiary of the Kirin Brewery Company. Located in the town of Karuizawa, in the Nagano Prefecture of Japan, which was a popular holiday destination, the distillery was built on the site of an old vineyard, and used the pure, fresh water that flowed from the nearby Mount Asama as its source. In their earliest days, there was one key problem facing the distillery though: Karuizawa struggled to obtain ingredients like malt barley due to post-war import restrictions. Luckily for the distillery, just two years after opening, restrictions were relaxed & Karuizawa started using Golden Promise malt - the same used by Macallan.
Karuizawa initially produced blended whisky, but in 1976, the distillery started producing single malt whisky. The whisky was matured in ex-sherry casks, which gave it a rich, fruity flavor with notes of raisins and dried fruit. Even though the distillery offered impressive quality and low quantities, it was an up-hill battle for Karuizawa as the collector and investor markets favored Scotland's Speyside spirits. Additionally, Karuizawa's limited production meant they had to price their bottles above average market price - not a good combo for a distillery selling to a skeptical audience.
While the distillery produced whisky until 2000, it was closed down due to declining sales.
Closure
As mentioned, there were several factors that contributed to the closure of the Karuizawa distillery. One of the main factors was the decline in demand for whisky in Japan in the 1990s. The Japanese economy was in a recession, and consumers were turning to other drinks, such as beer and wine.
Another factor was the high cost of production. The Karuizawa distillery was a small, artisanal operation, and the cost of producing whisky was higher than that of larger distilleries. This meant that the price of Karuizawa whisky was higher than that of other Japanese whiskies, which made it less competitive in the marketplace. With limited market growth outside of Japan, the Karuizawa Distillery was officially mothballed in 2001. The building was overtaken by ivy and in 2012 all distillery equipment was liquidated while the remaining stills were demolished in 2016.
Market
Since the closure of the Karuizawa distillery in 2000, the market for Karuizawa whisky has grown rapidly. The rarity and quality of the whisky has made it highly sought after by collectors and whisky enthusiasts around the world.
Between 2018-2022, the Karuizawa Index tracked by Rare Whisky 101 increased by 200% while single bottles from vintages including their 1960, 1964, & 1965 have sold for at least $50,000/each. Record-breaking sales at auction have followed and in 2020, Sotheby's sold a 52-year bottle for $435,273, the most ever for a Japanese whisky. Within the collector market the demand has been sparked by strong performances by the whisky at competitions. Karuizawa has now won several prestigious awards including the World Whiskies Awards & the International Wine & Spirit Awards.
The rarity of Karuizawa whisky has also been fueled by the rise of the whisky investment market. In recent years, investors have been buying up rare bottles of whisky as an alternative asset class, and the high demand for rare whiskies has driven up.
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Disclaimer: You understand that by reading Altan Insights, you are not receiving financial advice. No content published here constitutes a recommendation that any particular security, transaction, or investment strategy is suitable for any specific person. You further understand that the author(s) are not advising you personally concerning the nature, potential, value or suitability of any particular security, transaction, or investment strategy. You alone are solely responsible for determining whether an investment, security or strategy, or any other product or service, is appropriate or suitable for you based on your investment objectives and personal financial situation. Please speak with a financial advisor to understand if the risks inherent in trading are appropriate for you. Trade at your own risk.
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The potential impact of the Silicon Valley Bank collapse on the tech, biotech, and venture capital industries was well understood, but there's another industry that was similarly awash in uncertainty over the weekend: wineries and vineyards.
SVB offered commercial banking and lending solutions to such businesses, predominantly but not exclusively in Napa Valley, relying on sector expertise to best serve the unique needs of businesses new and old. As of the end of 2022, the bank had $1.2 billion in loans outstanding to premium wineries and vineyards, comprising about 2% of the bank's total loan book.
While the winery loans were incredulously cited by some critics as an example of ill-conceived strategic decisions taken by the bank, this crisis was of course not a wine-driven calamity at all. Still, like thousands of other business owners, many family vineyards were left in limbo, awaiting a resolution.
The worst was prevented on Sunday, as the Fed communicated that depositors - both insured and uninsured - would be protected, ensuring that payrolls would be met and employees largely undisturbed. Clients like Chateau Montalena, Darioush, and Hirsch Vineyards (listed on the SVB website) are well-established in the high-end trade and on the auction scene, likely providing further insulation from grave outcomes
.Still, perhaps the great vineyards of tomorrow are losing a partner and advocate, depending on the outcome of any potential SVB acquisition or standalone operation. It's fair to wonder what a potential acquirer of SVB's premium wine loans might think about the future prospects in that business. Given the stigma and the general tumult in the banking industry, banks more broadly may reassess the merits of winery lending, "fair" or not.
Notably, SVB was not the largest lender to the US wine industry, a title held by American Ag Credit according to Wine Business.
This stick in the spokes of the California wine financing system comes on the heels of strong recent performance for California wines on the secondary market. The Liv-Ex California 50 index is up 29.9% over the last two years, though that index of course focuses on regional juggernauts, rather than upstarts. Similarly, California's share of transactions on Liv-Ex has risen from 1% in 2017 to a peak of near 8% in 2021 before dropping to 6% in 2022. It's unlikely that the established constituents on that marketplace and in those indices will see distress amidst potential changes in banking appetite, but the unique capital needs of developing vineyards may be challenged.
Another potential casualty? Thought leadership. SVB's wine division founder, Rob McMillan speculated about the future of the bank's benchmarking data, its unique database of winery financial statements for peer group analysis, and its State of the Industry reports.
Those concerns are noteworthy, but ultimately secondary. The California wine industry employs 422,000 people. Hopefully, disruptions to capital flow are minimally disruptive to employment, and great vineyards of tomorrow find a path to prosperity. Cliché, but we'll raise a glass to that.
Thus far, particularly now that depositors have been protected, it seems fallout on companies operating in other industries with collectible alternative asset ties will be limited. There are, however, additional concerns around the bankability of crypto-centric businesses in the wake of the Silvergate and Signature Bank seizures; both were widely-used in the crypto space. The news has been bullish for Bitcoin though, which is now up over 22% since Friday.
Undoubtedly, the discourse of the last week will have driven many wine and whisky collectors to consider tapping their prized investments. With the most traditional and fundamental concepts of value storage cast in doubt, they just might want to hold off.
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On March 26th of 2020, just weeks after COVID lockdowns began in the United States, a PSA 10 1986 Fleer Michael Jordan rookie card sold for $45,100 on eBay. A few weeks later, on April 19th, The Last Dance premiered to an audience of 6.3 million people. The next time a PSA 10 sold was on May 7th. By then, 5 more episodes had aired with an average viewership of 5.7 million people.
The May 7th sale at Heritage more than doubled the previous sale, reaching $96,000.
Just like that, the Jordan rookie became the "postercard" for the early stages of the sports card boom. During those dark, locked down months, people bonded over many things. Among them: nostalgia, cards, The Last Dance, and how freaking good Michael Jordan was.
In the late spring and early summer, prices remained elevated above pre-pandemic and pre-Last Dance levels, but the hysteria hadn’t fully taken hold, and the sports card craze had yet to fully ignite. After receding in value briefly in the summer months, the card “finally” reached six-figure territory for the first time in early September.
Just months after it broke $100,000, it broke $200,000. Just weeks after it broke $200,000, it broke $300,000. Just days after it broke $300,000, it skipped over $400,000, $500,000, and $600,000, crossing into $700,000 territory when two different examples sold for $720,000 in late January of 2021 at Goldin.
While some were just waiting for the furious march to reach seven-figures, $720,000 would prove to be a short term peak. A new high of $840,000 was set in July of 2021 at PWCC, but that was completely anomalous relative to results at the time. Price activity since January of 2021 has largely been negative, with values slowly bleeding lower over the course of two years. In fact, an early March 2023 sale at $144,000 was the lowest since November of 2020.
Many will have decried the persistent availability of supply as a culprit for depressed values. Nearly every marquee auction of the last several years, it seems, has played host to a PSA 10 Jordan rookie. Since the beginning of 2020, the card - which carries a population of 317 - has sold 110 times per CardLadder.
At face value, you might assume that more than a third of the population has turned over. While listings/records aren’t available for every single one of the sales today, we dug in to see how much of the activity came from the same cards. You might be surprised to learn how few verified duplicate sales have take place.
Only 11 cert numbers have been verifiably sold multiple times since the start of 2020, accounting for 26 of the 110 sales. Those 15 sales that were repeat sales of a cert previously sold during the period were executed at a $37k loss on average. Only five were made at a gain. Still, you could likely assume that nearly the entire balance of the 110 sales were gainers, given the low market value pre-2020.
In total, how many different certs have been sold since the start of 2020 is somewhat of an unknown. There were 16 eBay sales in 2020 where the cert number is now not easily identified. If you assume that none of those (or any of the other handful where listings are no longer available) were sold again to date, then the 110 sales would have taken place on 95 different certs. The likelihood is that a handful of those unknown certs did likely sell again, but in any case, you’re probably looking at 27-30% of the population that turned over in the last three years.
Said differently, approximately 67-70% of owners of the card watched it skyrocket from just under $40,000 at the beginning of 2020 to a peak of $840,000, with countless intermediate stops of enticing value, and they abstained from selling (at least publicly). That figure might also raise questions about just how much of the population is actually in circulation or really available for sale - i.e. how many are either currently with owners who are insistent on keeping it as part of their collections forever or are lost in some capacity.
Either way, the appeal of sale for the current ownership base has declined with prices, and the decline is quantifiable. There’s a metric that you often see used in analysis of Bitcoin called MVRV. It’s a ratio that compares the current market cap of the asset to the realized value of each asset in circulation. The realized value refers to the price at which that specific asset was last bought, and those are summed across each coin or asset, serving as the denominator of the ratio.
Market cap is easy enough to calculate for a sports card - it’s simply the most recent price multiplied by the population. For realized value, we know that figure for each cert that sold since the start of 2020 from our analysis above. For those that sold before 2020, we’re going to use an assumption for their purchase price. You could tweak this according to your preferences or your hypotheses, but we’re using an average of the last price of the year in 2019, 2018, and 2017 (which is approximately $26,000 for what it’s worth). The likelihood is that this mildly overstates aggregate cost basis, as there are some owners who got in very low many years ago, but it’s a reasonable approximation, and the calculation is ultimately more influenced by the cards that sold at much higher levels from 2020 onward.
As of the end of 2021, when the card sold for $360,000, the MVRV stood at 4.6x. That means that the card was worth 4.6x what the average owner had paid for it. Today, with the card at $144,000, the MVRV is just under 1.5x. You’ll notice the MVRV reduces by a greater proportion than the value; not only has the numerator been reduced, but the denominator will have also increased year-over-year, with more cards coming out of hiding and achieving a higher realized value.
This is a metric we’d like to evaluate more over time to understand how it has behaved in other cards and if/how reaching certain levels has led to outperformance or underperformance. Admittedly, on its own in this one scenario, its usefulness is limited. However, it does provide a more nuanced understanding of how an ownership base might view price levels. And suffice it to say, at these price levels, it’s far less attractive for much of the owner base to sell than it was a year ago.
That being said, we’d also estimate that only about 22% of the ownership base is currently underwater. With the way so much of the base held through higher prices though, the pool of prospective sellers may be drying up, even if slightly.
The high-end fascination with Jordan hasn’t subsided, as evidenced by a plethora of eye-popping memorabilia sales. While there may be more desirable Jordan cards of lower populations, the Fleer Jordan still stands as the most recognizable, entrenching it as a grail. There are only 317 copies available. Sure, populations get higher as you move down the grading scale, but if you believe in rising values and rising audiences in the Hobby, it’s hard to dismiss the gravitational pull of the PSA 10. Perhaps a return to the more steady, pre-2020 upward trajectory is on the way.
In the five years prior to 2020, the card appreciated at an annual rate of just under 23%. Had it stayed on that pace, the card would have been at approximately $70k at the end of 2022. So the card remains ahead of schedule today….but that schedule is based on a pre-2020 Hobby. Undoubtedly, the audience and general awareness have both grown; the question is to what extent does that growth elevate the card’s trajectory?
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Disclaimer: You understand that by reading Altan Insights, you are not receiving financial advice. No content published here constitutes a recommendation that any particular security, transaction, or investment strategy is suitable for any specific person. You further understand that the author(s) are not advising you personally concerning the nature, potential, value or suitability of any particular security, transaction, or investment strategy. You alone are solely responsible for determining whether an investment, security or strategy, or any other product or service, is appropriate or suitable for you based on your investment objectives and personal financial situation. Please speak with a financial advisor to understand if the risks inherent in trading are appropriate for you. Trade at your own risk.
History
The estate that is now known as Château Lafite Rothschild has a long and storied history that can be traced back to at least the 14th century. The first recorded mention of the estate's vineyards was in 1234, when they were owned by the Abbaye de Vertheuil, a religious community who influenced much of the early wine production throughout Bordeaux. In the 17th century, the estate was purchased by the Ségur family, who were already prominent in the Bordeaux wine trade. Jacques de Ségur, who acquired the property in 1695, is credited with turning the estate into a wine-producing powerhouse, and his wines soon became famous throughout Europe.
Sir Robert Walpole, the de facto 1st Prime Minister of Great Britain was a known wine connoisseur who reportedly spent six-figures multiple times on fine French wines.
Two of his favorite productions just so happened to be from the vines of Lafite, their 1732 and 1733 vintages. With rising aristocratic appeal, Lafite became branded as the 'King's wine' at a time when producers were looking for any opportunity to distinguish themselves from a crowded wine market.
In 1787, Château Lafite Rothschild was purchased by the Rothschild family, who were already well-established in the banking industry. The Rothschilds continued to build on the estate's reputation for quality, and in the mid-19th century, Château Lafite Rothschild was considered one of the greatest wines in the world. The Rothschilds also played an important role in modernizing the Bordeaux wine industry, introducing new winemaking techniques and technologies that helped to improve the quality of wines throughout the region.
Market
Today, Château Lafite Rothschild is one of the most prestigious wine producers in the world, and its wines are highly coveted by collectors and enthusiasts. The estate produces both red and white wines, although it is best known for its reds, which are made from a blend of Cabernet Sauvignon, Merlot, Cabernet Franc, and Petit Verdot grapes.
One of the most significant sales of Château Lafite Rothschild took place in 2010, when a single bottle of the 1869 vintage sold for a record-breaking $232,692 at a Sotheby's auction in Hong Kong. This sale set a new world record for the highest price ever paid for a single bottle of wine although that price has since been surpassed, it remains a breakout result for an already established brand.
Another notable sale of Château Lafite Rothschild took place in 2011, when a collection of 1,407 bottles from the estate's 2008 vintage sold for $7.8 million at a Sotheby's auction in Hong Kong. This sale set a new record for the highest price ever paid for a single lot of wine, and underscored the growing demand for high-end Bordeaux wines in emerging markets.
In 2016, a single bottle of the 1945 vintage of Château Lafite Rothschild sold for $28,300 at a Sotheby's auction in New York. Due to World War II, production was incredibly limited but at least re-emerging as war-torn France attempted to recover. In turn, the 1945 vintage is widely considered to be one of the greatest in the estate's history, and is highly prized by collectors for its exceptional quality and rarity.
The increased demand within the Asian market has only pushed Lafite further as a powerful name in the wine business. Between 2011-2021, the average price of Lafite Rothschild across all vintages increased by more than 11% annually - outpacing market averages by nearly 5%. Additionally, in a 2020 report on the most commonly searched wines on Liv-Ex, Lafite dominated attention in Asia, laying claim to 8 of the top 10 most sought-after wines.
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Disclaimer: You understand that by reading Altan Insights, you are not receiving financial advice. No content published here constitutes a recommendation that any particular security, transaction, or investment strategy is suitable for any specific person. You further understand that the author(s) are not advising you personally concerning the nature, potential, value or suitability of any particular security, transaction, or investment strategy. You alone are solely responsible for determining whether an investment, security or strategy, or any other product or service, is appropriate or suitable for you based on your investment objectives and personal financial situation. Please speak with a financial advisor to understand if the risks inherent in trading are appropriate for you. Trade at your own risk.
The February Vintage Elite Auction features an assemblage of pre and post-war baseball cards, complete sets, sealed wax, and graded photos. Before the auction closes, preview the top lots scheduled to sell in this edition of Auction Action!
Released during an exciting time in baseball history, the 1962 Topps Set captures a Golden Age for the sport of baseball. As the cards were rolling-off the printing press, the New York Yankees were hoisting the trophy as defending World Series champions with stars like Mickey Mantle, Roger Maris, and Whitey Ford. The set also included rookie cards of several players who would go on to have notable careers, including Lou Brock, Gaylord Perry, and Joe Torre. This leading lot features a complete collection of 1962 Topps baseball cards which showcases a variety of subsets including Sporting News All Star and Managers' Dream. The cards carry a woodgrain boarder, unique specifically to the '62 production and this particular collection consists of 598 cards - all of which are graded PSA 8.
The first card ever produced for one of the greatest players in baseball history. Willie Mays, who played for 22 seasons mostly with the New York and San Francisco Giants, was a 24-time All-Star, a 2-time MVP, and a 12-time Gold Glove winner and has a legacy that is still recognized by the game today. This particular card is one of 77 Mays rookies graded PSA 8 and has attracted 14 bids with a current price of $175,000. Prices for PSA 8's have fluctuated between $160,000 - $240,000 over the last 12-months after surging above $300,000 in 2021. There are no gem mint copies in existence and only nine total examples graded higher in PSA's census.
Frank Robinson's impact on the sport of baseball cannot be overstated and his array of accolades is one of the most impressive you'll find. Robinson played for five different teams over his 21-year career, and he was the first player to win the Most Valuable Player award in both the American and National Leagues. He was a 14-time All-Star, a two-time World Series champion, and a first-ballot Hall of Fame selection. His accomplishments on the field are matched by his impact in the dugout, as he became the first African American manager in MLB history, and went on to manage four different teams. This card is the one and only gem mint example in existence and displays a masterful portrait of a baseball icon. The crisp, deep yellow background acts as a bright canvas around Robinson while his time is etched in a red that coincidentally mixes well with his team - the Cincinnati Redlegs. Through 5 early bids, the card has reached $84,000 and looks poised to close within six-figures when the hammer falls.
All Images via Goldin
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Disclaimer: You understand that by reading Altan Insights, you are not receiving financial advice. No content published here constitutes a recommendation that any particular security, transaction, or investment strategy is suitable for any specific person. You further understand that the author(s) are not advising you personally concerning the nature, potential, value or suitability of any particular security, transaction, or investment strategy. You alone are solely responsible for determining whether an investment, security or strategy, or any other product or service, is appropriate or suitable for you based on your investment objectives and personal financial situation. Please speak with a financial advisor to understand if the risks inherent in trading are appropriate for you. Trade at your own risk.
