JUANA SUMMERS, HOST:
Pokemon cards have been popular for decades, but they are hot right now. Our colleagues over at The Indicator From Planet Money, Ricky Mulvey and Darian Woods, explain the speculative boom behind the trading card game.
DARIAN WOODS, BYLINE: The first thing to understand about the Pokemon card boom is that perfection is worth significantly more than almost perfect.
RICKY MULVEY, BYLINE: Collectors will send their cards to professional sports authenticators, or PSA, and have them graded on a scale of 1 to 10.
WOODS: And the quality difference between a 9 and a 10 can be minuscule.
JOSHUA JOHNSON: It may just be, like, a white dot on the corner of the back of the card.
MULVEY: That's Joshua Johnson, the co-founder of Card Ladder. He tracks the prices of collectibles.
JOHNSON: They just want to, like, buy the tens.
WOODS: Let's say you want to buy a Pikachu with a gray felt hat. It's about 800 bucks when it's graded at a nine, but a perfect 10 of this Pikachu will cost you close to $2,500.
MULVEY: We met Chris Gonzalez at the Denver Card show, and he just spent $1,750 cash for a Mega Charizard. It was graded at a flawless PSA 10.
CHRIS GONZALEZ: And this being graded card, I mean, it's going to hold its value later on. I mean, I've seen, like - you've seen a bunch of YouTubers going viral with selling their million-dollar cards.
WOODS: So far, Chris has been right about his card. His Mega Charizard is now selling on eBay for $1,000 more than the price he paid.
MULVEY: This feels like rapid price appreciation.
WOODS: It's growing faster than my retirement account, I can tell you that. And the second thing to know about this boom is that it's not tied to a functional purpose. Pokemon cards are used for a trading card game. Joshua, with Card Ladder, says that's not what's happening now.
JOHNSON: It's probably like 5% of the people that buy the boxes is for the purpose of playing the game. I would guess it's some ridiculously low number.
WOODS: The third thing to know about this market is the split between vintage and modern cards. When Pokemon cards first came out three decades ago, most collectors didn't view them as something that could hold value for years to come.
MULVEY: So now these vintage cards have a more limited supply, especially at the higher grades. But the modern cards are already viewed as a collectible. Joshua worries a mix of increased supply and rising prices could mean that some modern cards are in a bubble.
JOHNSON: If there's any sort of loss of confidence, like, it's going to just come crashing down because there's just so much supply.
WOODS: What Joshua is describing is an economic concept called the greater fool theory. Some speculators may be buying Pokemon cards because they think a greater fool will come along and spend more than them.
MULVEY: Opening packs of Pokemon cards generally has a worse payback than buying scratch-off lottery tickets, but sometimes you hit a winner. Joshua Johnson believes this booming market reflects how the younger generation doesn't believe the economy is working for them and thinks that maybe this will.
JOHNSON: You know, older generations have all the real estate. You know, the stock market is kind of - it seems like it's a bit manipulated based on, like, politics. And so the younger person kind of feels like, I'm just sort of, like, hoping I make enough money to survive in an apartment, you know?
WOODS: But trading card markets can be manipulated, too. It just takes a few buyers to drive up the price of specific cards. And a trading card is not a security, like a stock, and so there's less protection from manipulation. There's not a Pokemon Securities and Exchange Commission.
Joshua is still bullish on Pokemon as a whole. He believes that people will continue to buy cards tied to a strong franchise and that an amount of financial nihilism amongst the younger generation makes the asset appealing.
MULVEY: Ricky Mulvey.
WOODS: Darian Woods, NPR News.
(SOUNDBITE OF JASON PAIGE SONG, "POKEMON THEME") Transcript provided by NPR, Copyright NPR.
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