Cost of Grading and the Return on Investment (part 1)

Buccaneer · March 28, 2005 1:28PM

[ok, here it is - a rough draft]

I have long complained here about the cost (and purpose) of graded sets but most of it had been just curmudgeon-talk for I really don't know the cost of grading and the return on investment. I think about this because everyday I take the PSA renewal form to work and wonder whether I should play this game. So I did a little exercise to help me answer that question. Here's what I did and the results.

First, I put into the spreadsheet the SMR set values for the grades PSA 5 - PSA 9 in the years 1952 - 1969 (Topps only). These are the years the SMR Report has a set value for, hence the "part 1". Here they are (sorry for the formatting, they don't give you much html code here):

psa5 psa6 psa7 psa8 psa9
1952 40297 59360 100695 285480 857400
1953 9834 15651 25862 71140 289675
1954 6784 10094 16080 42895 164360
1955 5673 8530 14676 40675 164715
1956 6234 9444 16051 38395 151570
1957 6740 10794 18657 46180 203415
1958 5758 8823 14084 37915 196785
1959 4811 7856 14052 31004 152435
1960 3595 5731 9886 22290 102560
1961 4856 6772 12013 24847 108820
1962 4456 6843 11641 32503 193795
1963 4152 6339 11045 24471 119480
1964 3201 4786 8883 18403 75750
1965 3273 4736 8388 18427 72470
1966 3840 5305 9555 19677 82995
1967 3392 5332 8835 17577 69695
1968 2499 3658 5816 12343 44410
1969 2810 5485 9296 23444 74405

Assuming those are the "returns" one can get on a set, we can now determine the "costs".

First we need to figure out the total cost of grading per set. There are two figures we can use. The following lists the cheapest grading fee for that year - and since PSA splits out stars vs commons, I calculated 90% of the set using the cheapest rate and 10% using $15 (shipping/insurance is nominal - $0.30/card for 50 cards). Here's the first list:

1952 $3,541
1953 $2,384
1954 $1,950
1955 $1,607
1956 $2,668
1957 $3,175
1958 $3,853
1959 $4,462
1960 $3,947
1961 $4,050
1962 $4,126
1963 $3,974
1964 $4,050
1965 $4,126
1966 $4,126
1967 $4,202
1968 $4,126
1969 $4,582

This second list uses $5/card across the board:

1952 $2,035
1953 $1,370
1954 $1,250
1955 $1,030
1956 $1,710
1957 $2,035
1958 $2,470
1959 $2,860
1960 $2,860
1961 $2,935
1962 $2,990
1963 $2,880
1964 $2,935
1965 $2,990
1966 $2,990
1967 $3,045
1968 $2,990
1969 $3,320

Additionally, we need to add in the cost of the cards and for this part of the experiment, we will buy the cards at half of book (Beckett) for the grades EX-EX/MT-NM. For the higher grades, let's say we can buy those at the same price as the NM cards (half book). Here's what the cost of the cards could look like:

raw5 raw6 raw7-9
1952 26000 39000 65000
1953 6000 9000 15000
1954 3200 4800 8000
1955 3200 4800 8000
1956 3200 4800 8000
1957 4000 6000 10000
1958 2400 3600 6000
1959 2000 3000 5000
1960 2000 3000 5000
1961 2800 4200 7000
1962 2400 3600 6000
1963 2000 3000 5000
1964 1400 2100 3500
1965 1600 2400 4000
1966 1600 2400 4000
1967 2000 3000 5000
1968 1200 1800 3000
1969 1120 1680 2800

Since the grading fee is a constant regardless of grade, we just add the cost of the cards to the cost of grading (assuming in this list, we use the minimum grading fees - not the $5/card list):

total5 total6 total7 total8 total9
1952 16541 23041 36041 36041 36041
1953 5384 6884 9884 9884 9884
1954 3550 4350 5950 5950 5950
1955 3207 4007 5607 5607 5607
1956 4268 5068 6668 6668 6668
1957 5175 6175 8175 8175 8175
1958 5053 5653 6853 6853 6853
1959 5462 5962 6962 6962 6962
1960 4947 5447 6447 6447 6447
1961 5450 6150 7550 7550 7550
1962 5326 5926 7126 7126 7126
1963 4974 5474 6474 6474 6474
1964 4750 5100 5800 5800 5800
1965 4926 5326 6126 6126 6126
1966 4926 5326 6126 6126 6126
1967 5202 5702 6702 6702 6702
1968 4726 5026 5626 5626 5626
1969 5142 5422 5982 5982 5982

In comparing this list to the SMR list, it actually looks quite reasonable to grade a whole set - even if you have to buy all of the cards and then send them in for grading. Here are the years, by grade, one can assume a positive ROI:

PSA 5: 1952-1958
PSA 6: 1952-1963, 1969
PSA 7+: 1952-1969

There are many assumptions in coming up with this simplistic list - from the return value of the SMR to the cost of the cards purchased. (Of course, one can buy the cards already graded at a discount but that would be another matrix to see what would be the break-even cost per card.)

There is another school of thought that sets graded PSA 5 - 7 would only get 60-80% of SMR. If we use the 60% figure, then the positive ROI list would look like this:

PSA 5: 1952-1955
PSA 6: 1952-1957
PSA 7: 1952-1959, 1963
PSA 8+: 1952-1969

Finally, using the $5/card grading fee would save about $1200 per set on grading cost, so that would make most of the sets cost effective.

There could be a part 2 if I can find the SMR values for the 1970-1985 sets. If anyone can supply them to me, I can plug the numbers in.

For whatever it's worth.

WinPitcher · March 28, 2005 1:31PM

and what did it tell you?

WinPitcher · March 28, 2005 1:31PM

hit the wrong button...stayed tuned

Nevermind then

ajmoeller81 · March 28, 2005 11:59PM

Wow. Nice analysis.

Now can we see the same study performed on sets from 2000 through today?

wildcat05 · March 29, 2005 1:12AM

nice set

Fabfrank · March 29, 2005 1:39AM

Interesting analysis Buccaneer. I guess the only factor we can't put a price on is the enjoyment factor of participating in this happy. That's the one factor that varys from collector to collector. I believe that enjoyment factor is what determines what someone will pay for a card, not the SMR.

calleocho · March 29, 2005 2:10AM

Its a good analysis.

dont let anyone ever tell you that baseball cards collectors are not anal about numbers lol.

you should focus your analysis some more though, its far too general.

maybe picking and dissecting just a particular set and then extrapolate many different scenarios.

Buccaneer · March 29, 2005 2:23AM

Here’s my point in responding to those saying it’s all about fun, not investments. No one likes to throw money away (unless one has money to throw away). Look at all of the talk here on value, deals, cost of buying a card, getting good grades, etc. – that’s all about spending money wisely (or perhaps getting something more than what you paid). After all, the better we are able to manage our collection, the better we are able to add to the fun of building it!

My simple exercise was to prove to me that one can get a better return on a graded set, despite the significant cost in doing so (collections turn over all of the time, so it’s natural to think along these lines). That had always been the case for the investor grades (PSA8-10) but I didn’t know if it would hold for the collector grades (PSA5-7). It is unfortunate to me that the pieces of cardboards that we have loved (and still do so) have become encapsulated commodities that we cannot feel or handle anymore for fear of lessening their values (make no mistake, a graded NM card is worth more than an ungraded NM card). Buyers want to be sure what they are getting and this is the best way to do so because as time goes by, the untrustworthiness of raw cards will only increase and that’s not fun to watch. I will be completing my 1957 set in this manner – not for the competition – but for the fun of finding good deals, seeing the set get more completed each month and knowing that I am not wasting my limited funds.

Fabfrank · March 29, 2005 3:09AM

will be completing my 1957 set in this manner – not for the competition – but for the fun

Bucc- That's what the hobby should be about. The fact that there is an investment issue is what makes any collectible unique. I take a very simplistic view on my card collecting (probaly over simplistic

)
The funds are all disposable. Whether I spend it on drink, smoke, women, gambling, vacation, food etc. it's eventually gone. If the value of my cards goes down, I'll still enjoy them (just like a steak). But I'll still have them to enjoy over and over again. My bottom line on collectibles is "It's only worth what someone is willing to pay for it"

Teemu · March 29, 2005 5:58AM

FabFrank,

I couldn't agree more. I collect because I love the history of the game and the cardboard brings back such great memories of growing up as a kid. Yes, it is an investment, but its more of a hobby and the fun of collecting that I believe most people collect. Sure, there are those who collect for nothing more than a profit, but I feel the majority do it for the fun of it.

Just the other night, I asked the wife if she wanted to go out to dinner at Ruth Chris's Steakhouse with the kids or go to the grocery store and buy a pound of bologna and a loaf of bread for dinner. I told her that if we ate the bologna, I could use the balance of what I would have paid for my dinner at Ruth Chris's on sportscards.

As you said, the next day I had the cards but the steak dinner would have been gone. I would have enjoyed both, but would still have the cards!!!!!!

BuckeyeHockey · March 29, 2005 6:53AM

Tom,

If that was my house, I would need to use the money I saved from going to grocery store on medical bills after my wife crushed my head with an iron skillet! *s*

Teemu · March 30, 2005 1:56AM

Larry,

I never said I didn't get hit upside the head with an iron skillet!!!! Guess I should have known better to ask the question!!

But it does make sense, doesn't it?

Tom

Buccaneer · March 30, 2005 3:54AM

How's this for a food analogy:

Would you go out buy a $3.00 piece of steak, pay someone $8.30 to cook it and then throw half it away before you eat the remaining? You might think it's fun to keep doing that but you'll still be hungry!

Scoop · March 31, 2005 2:15PM

Buc, grading raw is the most value-efficient way to collect a set.....even if your grading eye does not start out so great.

By keeping intial submissions at a minimal number, lets say 25 or less, you can sell those that come back below your required grade and make more knowledgeable submissions the next time, maybe even resubmitting some of the borderline cards. In this way you keep your costs low....much lower than buying already graded cards.

Jim

1967topps · March 31, 2005 8:21PM

>>1967 3392 5332 8835 17577 69695

if someone would like to send me 17577, I will gladly pay postage and
send them 609 PSA 8 cards as listed above

detroitfan2 · April 1, 2005 11:02AM

This is a great discussion topic. I'm no expert, but for the last 2.5 years, I've been buying PSA graded Topps cards from the 1950's, plus the 1953 Bowman color set. I have yet to submit a card myself, everything I have bought has been already graded.

Here's a link to my currently registered sets: My Modest Sets. As you can see, I'm mostly a PSA 5/6 buyer, although I have a few 52's in as low as PSA 2.

My opinion is that there is no way that anyone can make money submitting 1950's cards that return as PSA 5's or 6's. This is obviously true for the late 1950's, where you can buy PSA 5's and even 6's for less than $5.00 per card (for commons).

I also think it's true for earlier 1950's cards (1952-1955). I have a rather strange way of tracking my cards. I list each card in a set by it's Hi Beckett value, then I track the price I pay for each card, as well as the % of Hi Book. Here's my current results. The Hi Book value is from an April 2004 edition of the Beckett Vintage magazine, not an SMR:

1952 Topps:

PSA 2: 12 cards, Hi Book = $2100, paid $286.15, or 14% of hi book
PSA 3: 10 cards, Hi Book = $4920, paid $322.75, or 7% of hi book (skewed because of #1 Pafko)
PSA 4: 6 cards, Hi Book = $530, paid $116.24, or 22% of hi book
PSA 5: 10 cards, Hi Book = $420, paid $124.73 or 29.7% of hi book

Summary: Total Hi book of individual cards = $84,640, at current pace, will pay $9025.47 for a set with a weighted grade of 2.91.
PSA 2 % is skewed high because 1952 Topps high numbers have a hi book of $250, which is not realistic for some reason. PSA 3 % is skewed low because of the $4000 hi book on Pafko, which I paid $200 for in PSA 3 (or 5%). Buying PSA 5 cards for under 30% of high book is unreal. No way can the submitter be making money on these. As a side note, I have been buying low to mid grade raw 52 Topps and "guessing" the PSA grade (I'm probably at most 1 grade higher than what PSA would give). The percentages of Hi book are nearly identical to the already graded cards, and it's a minimum of another $7 to grade each card.

1953 Topps:

PSA 5: 20 cards, Hi Book = $1180, paid $287.41 or 24.4% of hi book

Summary: Total Hi book of individual cards = $19,625. A long way to go, but at current pace, will pay $4948.04 for a set with a weighted grade of PSA 5.02. This boggles my mind, even at $7000 to $8000 this sounds like a steal.

1953 Bowman:

PSA 5: 31 cards, Hi Book = $3680, paid $881.92 or 21% of hi book
PSA 6: 7 cards, Hi Book = $335, paid $98.99 or 30% of hi book

Summary: One of the most unbelievable of all. Total Hi value of individual cards = $17,720. Have about 25% of the set, at current pace it will cost $3892.31 for a set with a PSA grade of 5.08. Even if I begin to spend more, I'm convinced I can finish this set for $5000 - $6000, or 1/3 of hi book. And this is for a PSA graded entire set.

1954 Topps:

PSA 4: 13 cards, Hi Book = $215, paid $73.97 or 34% of hi book
PSA 5: 39 cards, Hi Book = $905, paid $333.41 or 37% of hi book
PSA 6: 5 cards, Hi Book = $75, paid $45.12 or 60% of hi book

Summary: Total Hi value of individual cards = $10,820. At current pace, will complete set for $4097.07 with an average grade of PSA 4.88. These percentages may even go down, as most of the above cards are commons, which typically have a higher % of hi book.

1955 Topps:

Recently sold the following through Lelands: 55 Topps Near Set

This set had the following:

PSA 5: 104 cards, Hi Book = $6462, paid $2314.47 or 36%
PSA 6: 77 cards, Hi Book = $2496, paid $1525.34 or 61%

Here's 2 other 1955 recent sales to compare to the above: 1955 1/2 graded

1955 PSA 6 set

What have I learned? I'm convinced that if you collect mid range PSA graded cards (6's or less), there is no way to make money submitting them yourself. I'm convinced that if you had a complete 1955 Topps PSA 5 set and you busted all of the cards out of the holders except for maybe the top 5 cards and listed the set on ebay as Ex-Mint, you would get nearly the same price that you would if you left the cards in their PSA 5 holders. I don't think people appreciate the quality of a PSA 5 or 6 card. Look at the quality of the cards in the PSA 6 set that sold for $6750. I'm convinced that if you busted each of these out and had a reputable dealer list them as near mint (which they would be in raw form to most dealers), you'd probably get near $6750. You certainly wouldn't $1800 less, which is what it would cost to grade all 210 cards.

Anyway, I hope this is clear. I always thought PSA should have specials for cards which are going to grade less than a PSA 6, but perhaps there's a minimum cost to PSA to grade each card, and they would never go much below $5 per card.

Happy Collecting!

detroitfan2

detroitfan2 · April 1, 2005 11:07AM

Sorry, I can't get my set registry link to work. Here's the link for my 1953 Bowman, you can get the rest from there:

1953 Bowman

Buccaneer · April 1, 2005 11:21AM

<< <i>Buc, grading raw is the most value-efficient way to collect a set.....even if your grading eye does not start out so great.

By keeping intial submissions at a minimal number, lets say 25 or less, you can sell those that come back below your required grade and make more knowledgeable submissions the next time, maybe even resubmitting some of the borderline cards. In this way you keep your costs low....much lower than buying already graded cards.

Jim >>

Jim, are you talking about investor grade conditions, like what you are doing in 1956? I would understand this to be true for them but not for collector grades (7 or under). For example, I buy most of my raw vintages from Mick. For 1957s, that have generally run from $3-7 in ExMt/NM. The cheapest I can get those cards graded would be for about $8.30 (including s/h/i) EACH. I buy PSA 6 commons on eBay for $5-8 each. I have heard the same thing for higher grade 1960s commons in PSA 8 where even those can't get sold for grading fees. Is your value-efficient way for older, high grade vintage sets only?

Buccaneer · April 1, 2005 11:22AM

detroitfan, nice work. Glad to see someone else as anal retentive as I.

mariner · April 1, 2005 12:31PM

It is all very interesting....great thread, Steve!

Buccaneer · April 1, 2005 12:53PM

<< <i>>>1967 3392 5332 8835 17577 69695

if someone would like to send me 17577, I will gladly pay postage and
send them 609 PSA 8 cards as listed above >>

Just curious, what would the Sell price for a 1967 PSA 8 set be?

goudeygold · April 1, 2005 3:44PM

I wish this same logic would be applied to a pre-war scenario using smaller sets. Try the 33 sport kings, my 38 goudey fettish, the 33 or 34 goudeys, and maybe even a 41 playball set, or some other smaller ones. With these your numbers won't be so skewed by the "modern" sets being burdoned with a 85% common rate (or more!) in the set composition. Only problem here is the "guide" won't be of much use since it is pretty much worthless for most pre-war at the 6 and up level anyway due to bidding wars and scarce supply. Most of the high grade examples from these sets are "locked up" in long term sets and don't change hands much. Watch and see what the PSA 9 34 Goudey on ebay right now goes for. Now that is a crazy rarity!!

I love analysis, especially when it comes to making money. (I know... do it for fun, etc...)

GG

Sets · April 2, 2005 6:02AM

ok, so should I grade my 56 set or not? lets assume I will average a 5, Ex.??

detroitfan2 · April 2, 2005 6:34AM

>>ok, so should I grade my 56 set or not? lets assume I will average a 5, Ex.??

Hi Sets,

If you are planning to sell the set, I would say grade only the top 10 highest dollar cards. The thing to remember about the 1956 set is that there's 100+ more cards than the 54 and 55 sets, so the grading costs go up considerably (by about 1/3). If you're planning to get PSA 5's, I think you'll be ahead selling it ungraded except for the high dollar cards.

Now, if you're planning to keep it, that's another story, at least in my opinion. I'm happen to love graded cards because of the following, in no particular order:

(1) There's really no better way to protect your cards than a PSA (or SGC) holder.
(2) With the PSA set registry, you can inventory your cards very easily and always have access to it.
(3) You will always know the true grade of your set. This may sound a little strange, but if anything ever happens to me, my family pretty much will know what it is I have and approximately what it's worth should they decide to part with it.

Good Luck!

Tom (detroitfan2)

gaspipe26 · April 2, 2005 8:07AM

I got confused early on

calleocho · April 2, 2005 9:35AM

good job detroit!

Cost of Grading and the Return on Investment (part 1)

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