PSA Submission: One Year Later

A year after submitting cards through PSA's grading service, why I probably won't be doing it again. Lessons learned with the benefit of hindsight.

Back when sports cards were going bananas, I made a rookie mistake even though I knew better. Rather than doing what I had done in years prior (sell my cards ungraded for whatever I could get), I decided to try my luck at the PSA grading process. Graded cards do so much better than ungraded cards, it was silly not to try at the time given the prices in the market. Though I'd gotten rid of roughly 90% of my card collection prior to the bubble last year, I carefully went through my entire remaining collection and found 23 cards that I felt would grade an 8 or better. Why 8? Grades of 8 or higher would justify the grading expense. That expense at the time was $12 per card for the "Value Modern" tier. It's a tier that I don't believe even exists anymore as it was the cheapest grading option available. I submitted my cards on January 28th, 2021. That's almost exactly a year ago and the cards still haven't been graded.

Why the delay?

I won't even attempt to guess how many other people had the exact same idea as I did at the exact same time, but I'd say it's probably somewhere around five figures. We're talking millions of new cards in the queue. The inflow of cards at PSA got so bad, the company actually had to halt the entire submission process while they handled the supply flood. This is what PSA President Steve Sloan emailed PSA Members at the end of March 2021:

I’ll try to further illustrate what has happened. The sheer volume of orders that PSA received in early March has fundamentally changed our ability to service the hobby. The reality is that we recently received more cards in three days than we did during the previous three months. Even after the surge, submissions continue at never-before-seen levels. Given our growing backlog, it would be disingenuous for us to continue to accept submissions for cards that we will be unable to process in the foreseeable future. It’s an unpleasant conclusion, especially after the March 1 price increase, but it is necessary to properly serve the customers who have already submitted to PSA.

Steve Sloan, PSA President

Because I opted for the cheapest grading option, I sealed my own fate. Anyone willing to pay more for grading services has been able to jump ahead of me in the grading line. As a result, I've been boxed out of the market. Unable to sell my cards as the supply of cards available from committed sellers has ballooned. Think that's had an impact on prices? Of course it has.

The Kobe Card

Even though I wanted 8's or better out of the 23 cards I selected, there was one card that I was certain would return a PSA 10. The 1996-97 Collector's Choice #267. A Kobe Bryant Rookie Card. When I submitted that card for grading, a PSA 10 was valued at just under $700. By late February, it had nearly doubled to a little over $1,300 at average sale price. As you could probably expect, I was a living embodiment of the smiley face emoticon with the green dollar sign tongue. Can you guess what happened next?

Yup. Prices have collapsed back down to pre-bubble levels. And there's probably still room to go lower. Last week's most recent sale pulled in $358 for the seller. Roughly half of what it would have returned when I submitted my cards last January. Here's the best part, my Kobe might not even be a 10. Sure there are other cards in the bundle that could grade well and get a decent multiple on the grading expense. But the Kobe was the one that I felt would justify the entire transaction.

Lessons Learned

I share this story because I've taken a couple lessons from it. The first is obvious even though it's difficult in the moment; as market participants we have to try really hard to avoid getting sucked into a hype-driven mania. We have to trade in markets that we know and I didn't really know the card market as well as I thought I did. The second lesson is understanding total expense. Still, a year later, I have no idea what my graded cards are going to be valued at by the time I get them. But I do know that whenever I get them, the margin is going to probably be significantly less than what I thought it would be when I submitted my cards. Grading isn't the only input cost.

Let's say Kobe returns a 10 and I can sell it for $200 in a few months. How am I selling it? eBay? eBay is going to take a nice vig right off the top. Then I have to ship it insured. Then I have to spend time and money getting it to the post office. Then comes the best part; taxes! Of course, I would also owe taxes on this transaction and eBay will be sure to let the IRS know they paid me next year. After all of that, how much of that $200 card sale will I actually get to keep after all of the expenses? Maybe $100 if I'm lucky. Was it worth it? Probably. But only if I get a 10.

Standard Disclaimer: I'm not an investment professional. None of this is investment advice.