An actual investment produces something, and the rest is gambling

The sports-card collector and dealer Rob Hunegs said his market is as hot as it has been in 30 years.

"The market is also fluctuating, much like the stock market," he said. "For example, a Michael Jordan rookie card from 1986, a 1986 Fleer … if you looked six weeks ago it was selling for about $25,000, in a particular grade. That same card today you can buy all day long for about $13,000."

But what's really driving the market, he said, is not the interest in the vintage cards of the sports heroes of yesterday but a buying frenzy for the newly issued cards of current sports stars.

Hunegs described "runners" who visit Target stores and other retailers where cards are sold and try to buy up everything they can.

Hunegs has been active in the market since the 1980s, but he only opened his Golden Valley store, called Twin Cities Sports Cards, as a second career. He said customers will pop in to buy a pack of new cards of pro basketball stars, fish out the popular one and promptly list it on eBay.

"It's gambling, is what it is," Hunegs said. "That's too bad, because that's not collecting."

Today, we are seeing people behave this way with all sorts of assets.

A single bitcoin, the pioneering cryptocurrency, is worth 10 times as much as it was a year ago. Trading in what are called penny stocks is up more than 2,000% in the last year.

And while the spotlight moved on from trading in the shares of GameStop, the video game retailer, the action sure hasn't calmed down. Last week, the price of GameStop shares got as high as $283 and as low as $182.66. The stock closed in December, by the way, at $18.84.

News accounts of all these things, from digital art being sold at eye-popping amounts to trading in stocks talked up on Reddit, are usually sloppily written if not factually incorrect. That's because they use the term "investor" to describe the buyers.

They are not investing. They are speculating. Or, as the sports-card dealer put it, gambling.

Apologies if this sounds like what you would expect to hear asking your crankiest uncle for financial advice, but what makes an investment an actual investment is that it produces something.

That's interest if it's a bond, rent if it's a building or operating income if it's a new machine bought for a manufacturing plant.

That's why Warren Buffett has never warmed up to buying gold as an investment. A gold bar just lies in the safe, day after day. It might someday appreciate, or it might not, but in either case it won't generate a nickel.

The act of collecting is hard to place on the spectrum of what people do with their money, from saving on one end to reckless speculation on the other. That's because a collector will be motivated by more than making money. A genuine car enthusiast might spend $60,000 for well-preserved 1964½ Ford Mustang, appreciating that there's not all that many of these gems left.

Yet the definition of collecting these days seems to be getting stretched out of shape.

The recent innovation of fractional ownership of sports cards is an example, even though it's always pitched as a way to let any fan join the fun of collecting.

It's hard to imagine how much fun it would be to show friends an iPhone screen that confirms a 5% interest in a LeBron James card held in a safe out of state.

This notion of collecting is a part of the story behind what's maybe the hottest of the hot markets, for the recently invented assets called nonfungible tokens, or NFT's.

Because an NFT is part of a blockchain, a kind of digital ledger, it's a little like a bitcoin. The difference is that it has all this extra information on it, for whatever piece of digital content got minted with the token. That means it's unique.

And if there's only one of them, someone might consider it collectible.

Sports-related NFTs are a big part of the story, but people have made digital tokens for all sorts of creations. That includes a computer screenshot of the first post of a popular economics blog and an authenticated creation of the first tweet of Twitter co-founder Jack Dorsey.

At last check the bid for the Dorsey tweet, in an auction wrapping up this weekend, was $2.5 million, even though he didn't exactly launch the Twitter era with soaring rhetoric: "just setting up my twttr."

In the sports NFT market, someone bought a token for a highly stylized video-highlight reel of a single play made by NBA player Zion Williamson. The sale price was $100,000.

Apparently known in the market as a "moment," it's easy to go online and find it, or what certainly appears to be the identical piece of Williamson content, with just a few clicks of the mouse. The cost to view it on YouTube is approximately zero.

That suggests speculators are paying big money for items so insubstantial that they can hardly be said to really exist. But it's too soon to say it's a bubble market bound to pop. People spend money collecting all sorts of things the neighbors might think of as junk.

Yet there's plenty to suggest that NFTs are just one more thing to buy and sell in this new golden age of speculation.

If so, the buyers had better be nimble. Paying 5,000 Dutch guilders for a tulip bulb back in the 1630s only looked reckless after the market collapsed and no buyers at any price ever showed up.

And being savvy about money doesn't mean someone won't get caught on the wrong side of a speculative market.

One of the best-known observations of market behavior was reported in a classic work of economic history that appeared about 20 years after the roaring stock market of the late 1920s.

"The more intense the craze, the higher the type of intellect that succumbs to it."

lee.schafer@startribune.com 612-673-4302