We are starting to hear the term "bubble" thrown around again, and not just in the equity markets. Real estate has been on fire, and I'm not sure we've ever seen the current perfect storm of exceedingly low mortgage rates, already low inventories in some areas of the country and increasing demand. Add to that a flight from some cities to the suburbs or vacation areas and you've got the ultimate seller's market and bubble-like conditions.
If it is indeed a bubble in housing, it's not the same kind we saw in 2008. I'm not sure how it plays out, but the combination of rising mortgage rates and a decrease in demand (that may or may not occur if people return to the cities) should tell the tale.
Talk about bubbles, last week a 2000 Tom Brady Playoff Contenders Championship rookie card sold for $2.25 million. It was 1 of 100 that were made, so there's a rarity value here, but still, that is crazy money. I was following the particular auction (Leland's) and thought I was seeing things when the bidding was over $1 million. Interestingly, it seems that the sports card market has garnered renewed interest and significantly higher prices over the past year. I don't know if its pandemic-related; perhaps boredom has led us to focus on indoor hobbies, but the prices I've been seeing have risen dramatically and it is looking like a bubble, to me anyway.
Back in the late 1980s, so many cards (baseball in particular) were produced that there isn't a great deal of demand for certain years. I remember teaming up with some others to purchase a couple thousand 1991 Topps Wes Chamberlain rookie cards. At the time, Chamberlain appeared to have a very bright baseball future, and attempting to forecast future superstars and buying scores of their rookie cards was all the rage. Chamberlain's career never took off and his 500 cards sit somewhere in a box in mint condition, but not worth the paper they are printed on.
One area that has really taken off is the market or older, unopened cards, whether baseball, football, basketball or non-sports related. There are now opportunities to buy into packs of cards, which are opened live, submitted for grading, then sold, with the proceeds split among investors. If nothing else, it is fun to watch. If we'd only known...
The recent and very new resurgence in value stocks, however, is one area that may not be a bubble. Value has played second fiddle to growth for years:
- Large-Cap Growth (Russell 1000 Growth Index) has outperformed Large Value (Russell 1000 Value Index) on an annualized basis for the one-year through 10-year periods by 303 basis points annually. Year to date, value is ahead by 505 basis points.
- Small-Cap Growth (Russell 2000 Growth Index) has outperformed Large Value (Russell 2000 Value Index) on an annualized basis for the one-year through 10-year periods by 165 basis points annually. Year to date, value is ahead by 845 basis points.
- Microcap Growth (Russell Microcap Growth Index) has outperformed Microcap Value (Russell Microcap Value Index) on an annualized basis for the one-year through 10-year periods by 49 basis points annually. Year to date, value is ahead by 574 basis points.
Interestingly, the historical performance spread between growth and value narrows considerably as market cap decreases.
We'll see if value can keep its very recent winning streak alive.