What's Up With The Comic Book Market? Market Update: Buy, Sell, or Hold?
We see mind-bending sales on comic books week after week, and it doesn't seem to be slowing down. These are unprecedented times, and many collectors have anxiety around the question, are we in a bubble? Should I buy, sell or hold? Will comic book prices ever come back down, and just what the hell is going on to cause them to spike so much? I'm going to provide a bunch of evidence and research to help answer all of those questions, with the goal and intention of providing some form of peace of mind for the community, and at the very least, more information so you can make more informed investing and collecting decisions. Stay tuned.
All of the above points and every single question about the current state of the comic book market can be explained by the simple principles of supply and demand. We see higher prices than ever before because the demand for key comics is exploding, and the supply has stayed the same. More people want the keys, and there aren't many to go around. The driving factor for this increase in demand is the MCU, followed by what DC is doing with films and shows, Netflix, Amazon Prime, and soon even more streaming platforms, all with their content.
Taking a Look at Actual Numbers
So let's look at some actual numbers with supply and demand — starting with supply. Some people argue that the supply of some key comics is not low. Let's take Ultimate Fallout 4, for example. There are currently about 2800 graded copies on the CGC census at 9.8. The thing about supply is it has to be considered in light of demand. Back in 2012, there wasn't nearly as high of a demand for this book (also less 9.8's at that time), but if there were 2800 9.8's in 2012, it would have been a very inexpensive book, probably less than $100. But what has changed in the last ten years is the demand has gone through the roof. There's the same amount of original copies printed, the supply is the same, but the demand is drastically different, meaning today this is over a $3000 book. That number of 2800 will be minuscule compared to demand when we see Mile swinging from the buildings of NYC on the big screen with some huge name actor behind it.
The Marvel Cinematic Universe is the driving force for this climate; let's look at some numbers why I think it will start to make a lot of sense. When Marvel drops a new trailer for any Spiderman movie, just on the YouTube channel alone, in the first 24 hours, it gets an average of 100M views. That's just YouTube, just the first day; there are so many other media outlets and ways they promote movies, so these are just super conservative estimates. Let's say Marvel drops a new trailer for a new live-action starring Miles Morales, and Let's say 1/10 of 1%, okay .001 of the total number of people who see the trailer for Miles Morales on YouTube in the first 24 hours only, you can see how conservative I am here, decide "I wonder what his first comic book appearance was" and head to eBay to look, that's 1000 people now after a UF4, there are only 2800 copies in existence, BUT there's only 26 at the time of doing this video, listed for sale on eBay. Those are super conservative numbers, and that's why we see prices double or triple overnight. It's not an anomaly, it's not a bubble, it's math, it's supply and demand, and it's a market correction after market conditions have changed, changing sentiment, and the price adjusts. Suppose you think $6k, or even $7500 for a UF4 post-movie trailer, is out of the question. In that case, I think you don't understand supply and demand, and you're underestimating the power of the MCU, FOMO, and these new Marvel narratives, and exactly how many new collectors and investors and influencing the market. I've talked to several sports card investors who have recently turned to invest in comics because they think the numbers on our census of the coveted 9.8 are super low compared to sports cards. High-grade sports cards are not as rare relative to high-grade key comics. They feel like they've been sleeping on this untapped market which is only now beginning to see its correction.
So, to sum up, the topic of supply and demand, I believe the supply of rare key comics is low relative to demand, that supply is going to stay the same, and the demand is going to get even greater because of influences like the MCU and new investors coming on the scene.
Comic Book Collectors and Investors
Who are they, and where are they coming from? In essence, we have new fans/hobbyists and new investors/speculators. Those are the new players in the market. The fans/hobbyists are coming because of the great and compelling content from the MCU and other comic book-based content creators. Just think of all the epic new content from the MCU alone: The Mandalorian, Wanda Vision, The Falcon, and Winter Soldier, to name a few, if only a small fraction of those who enjoyed those shows showed interests in the comics that inspired them, that's many many thousands of new collectors. And as we all know, the content is just getting started, with over a dozen new shows and movies on the horizon.
Now, let's talk about the new investors and speculators because that is a lot more nuanced — and it's fascinating. I believe most investors and speculators are coming from two places, the sports card investing world and the stock market. Having recently talked to several sports card collectors, it seems like a common trend in the mind-bending record sales of comics has caught their attention. Many sports card collectors have said, okay, let's take a look at these comics and see what's the big deal, and then they go to the census and see numbers like 2800 for UF4, and they go, wait, what? There are only 2800 of those? And they jump in. But these mind-bending sales of comics aren't just catching the attention of sports card collectors, it's catching the attention of stock market investors as well, and I believe stock market investors are having the largest impact of all.
As many of us know, the stock market is on really shaky legs right now. It's propped up on government funny money and could come tumbling down at any moment. In fact, the stock market is so volatile, all it takes is one announcement from the federal government, and it could see life-changing losses overnight. And then it can snowball from there. The stock market has always been this way. And investors know that something might become. Rumors of new strains of COVID 19 that could threaten further shutdowns can instantly cause the market to tank, although we have seen it bounce back from that very quickly. Also, rumors of a capital gain tax increase are causing some stock market investors to jump ship. Essentially, if you make big money in the stock market and realize those gains, you owe capital gains tax to the federal government. There are short-term capital gains, and long-term capital gains short term is less than a year and has a higher tax rate. The long term is more than a year and has a lower tax rate. When you are invested in stocks, you don't pay taxes unless you realize the gain or loss, meaning you sold the stock. So if the value of your stock goes up 1m, you don't realize it until you sell because the next day, it could go down 2 million dollars, and if you sold, you would realize a loss. Sometimes with the stock market, you are forced to sell and thus realize again and trigger capital gains tax. So, when the market is as volatile as it is now, commodities seem more desirable. Not to mention that commodities usually see big gains when the stock market tanks.
All of this, on top of rumors of a capital gains tax hike, has investors jumping ship and putting their money in commodities. A commodity is anything that is useful or valuable, such as water, oil, time, gold, silver, comic books, to name a few. Stock market investors with big money see these gains for big boy books like GSX1, Action comics one hitting 3.25m for an 8.5, and they get in. It's an investment they can put their money in and not have to pay the short-term capital gains tax because they can hold onto the investment for more than one year, and when tax laws are more favorable, they may decide to sell. I talked to one investor who pulled $400k out of the stock market and put it into comics. He bought all these amazing keys and grails, and I think he made a great investment choice. In fact, it's not really arguable because he's making a killing.
Another factor to consider is it's a lot easier to hide a sale of a grail from the government than stocks. Stocks are very easy to track where there are some opportunities to sell comics where you wouldn't pay taxes at all. I am NOT suggesting that this is okay or that you should do it. I pay all my taxes because I like to sleep at night, just another factor to consider when trying to understand why prices are going crazy. So many stock market investors are buying up these big-boy books, causing sales records to be broken week after week, and a rising tide raises all ships. These record-breaking sales of GSX1 in a 9.8 causes all grades to see a bump, and it's happening to enough keys that comics across the board see a significant bump. There is a FOMO frenzy that results, and for a good reason. New players are in the market snatching up all the keys.
How Inflation and the Economy Affect Comic Book Market Value
Now, I want to take a minute to look at inflation and the economy overall. There is no doubt that we see inflation across the board. But what causes inflation? Inflation is typically caused by an increase in production costs, raw materials, wages, and demand for products or services. We see all of those things. Let's start with wages. Something very strange is happening with wages in the US because of a pandemic.
In April of 2021, there were 9m unemployed Americans, but 8.1m job openings and unemployment actually jumped! So employers are having a very difficult time getting people to come back to work. Now I know this doesn't apply to everyone; there are some people watching this that would love to go back to work and can't. This is a macro conversation about what is happening in the country, not targeted at individual scenarios.
So the reasons that people don't want to go back to work, in general, are clear: unemployment benefits, child care, and covid concerns. Biden just extended the unemployment bonus package through September, meaning that 42% of people on unemployment are making more money than they ever did working.
Only 60% of schools were open as of 4/21, meaning some people would have to pay out of pocket for childcare. And then some people just don't feel comfortable going back to work because of Covid-19. So many Americans have this choice: go back to work for less money and then pay a huge chunk of that less money to childcare, or stay home, Netflix and chill and bring in way more cash. What would you choose? Again, this doesn't apply to everyone but statistically, about 42% of unemployed Americans. In response, employers are offering pay increases and sign-on bonuses. And the only way to make up that added payroll expense is by increasing prices. The people that are impacted by this the most are the really low-income families, and that's a shame.
Another huge factor driving inflation is the stimulus packages. There is more money to go around, so people have more spending power, so demand has gone up, and we're seeing this is a major way with comics. Currently, there is no plan for a 4th stimulus package, but there are lots of things on the table for starting regular payments on a monthly basis to Americans, like child tax credits. And if we see new strains of the virus emerge causing more shutdowns, I am entirely confident that the government with print more checks and send them out. This is only going to inflate things more. To me, it seems like a very short-sighted response to the crisis. I don't want to pretend like I have a better solution; I don't. I'm simply stating that these stimulus packages are going to have huge long-term consequences, and we need to prepare for that.
So, to sum up, inflation, yes, we see it, but it's only a part of the explanation of what's driving comic book prices.
The Comic Market Boom
Now that we've talked about some factors causing the comic market to boom let's look at what could potentially cause it to burst. I see three potential factors: 1. Stock market crashing, 2. New outbreaks/strains of COVID causing shutdowns, 3. Sentiment changing about the value of comics. 4. The unknown X-factor. As far as the stock market and the housing market, the answer is simple, the Fed could increase interest rates, and a new strain of COVID-19 could cause shutdowns. If both of those things happen simultaneously, the stock market will take a huge hit, and both of those things are likely. But how will the comic book market respond?
- Let's look at how prices responded to the market crash of 2008. We had AF15 in a CGC 6.0 in April 2008 before the crash, we had a sale of 13,000, and after the crash, in 10/2008, we had a sale of 15,000, so an increase and trending up. X-men 1 in a CGC 4.0 average price in June of 2008 before the crash was 1250 and in November after the crash was 1400, increasing and trending up. I found this to be true for many blue-chip keys. The crash of 2008 saw an increase in the comic book market. And we all know from recent experience when the market crash in March of 2020, the comic book market exploded. And I think that will be the case again if we see the likely crash of the stock market due to economic conditions. The comic market will explode even more as investors pull out of stocks and look elsewhere to invest their funds.
- New strains of covid and more shutdowns — we saw what this did the first time. It triggered stimulus packages and a surge of interest in comics. I believe this would happen again.
- Sentiment changing about the value of comics. In my opinion, this is truly the most significant threat to the comic book market crashing. If the overall sentiment becomes that comic book prices are too high and the keys are way overvalued, people could start panic selling their books, and that could cause a significant correction. While this is possible, I think we first need to look at what causes the favorable sentiment right now? It's the MCU and new investors coming in. I don't think either of those things will change any time soon. The MCU will continue to put out epic content driving more interest, and new investors will continue to come in as the stock market is increasingly unstable. At least for the foreseeable future.
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The X-factor is something that we all should have learned from this COVID phenomenon. Anything can happen, and as soon as we think we have it all figured out, something completely unprecedented takes place, shaking things up.
I'll close with my final thoughts and my game plan for the foreseeable future. I think that the factors affecting the boom in the comic book market will continue for the foreseeable future, and there are a TON of speculation opportunities to take advantage of this market. I plan to continue investing and speculating on what I think to be wise investments. If sentiment begins to change or the x-factor presents itself, I will try to position myself so that I'm not holding too many cards when it all comes tumbling down. I'm going to remain vigilant and on the pulse of all things that affect the market and bring them to you if I find anything concerning. These are very uncertain times, and nobody knows the future, but I refuse to pull out and stick my head in the sand until the storm passes.
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