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Industry & Grading


History of Sports Cards
The Recent Sports Card Investment Phenomenon
Factors Affecting Value
Grading
thePit.com vs. Internet Auctions

History of Sports Cards

Sports trading cards may just be pieces of cardboard splashed with printed images of sports figures on one side and their profile and statistics on the other, but their history can be traced back over 120 years.  They have stood the test of time.

Sports trading cards were first produced and offered in the 1880's by tobacco manufacturers who would include them as a free accompaniment to purchasers of their products.  Gum and candy makers soon employed the same marketing strategy and by the 1930's, the collecting of trading cards, along with other sports memorabilia, was rather commonplace.

It was not until the 1950's, however, in what many still think of as "The Golden Age" of sports, with the emergence of television and the rise to fame of athletes like Mantle, Mays, Unitas, and Russell, that sports card collecting began in earnest, taking its place as the favorite hobby of millions of Americans.

Professional sports has since evolved beyond entertainment into what is today, one of the nation's biggest businesses, and its trading card industry has undergone similar transformations.  Local trading shows have become a weekly routine in virtually every community and the literally minute-to-minute trading of cards via national audiences has exploded by way of the Internet auctions.

Some popular individual cards now regularly sell for mind-boggling dollar amounts.  The average price of the most actively traded cards hovers around $150 -- as you will see on thePit1 exchange.

The trading of sports cards now makes up a multi-billion dollar industry.  It is dominated not by children flipping cards during recess, but avid, knowledgeable sports fans seeking wise investments.


The Recent Sports Card Investment Phenomenon

The Internet has revolutionized the sports card marketplace.

It isn't about school children looking for free bubble gum anymore.  It is now a multi-billion dollar industry.  For many, it's no longer about collecting for sentimental value or nostalgia.  It's about earning a profit.  Collectors are now investors, and vice versa.

Sports cards have always presented opportunities for long-term capital appreciation.  Ask early investors of Kurt Warner, Randy Moss, Pedro Martinez, Alex Rodriguez and Vladimir Guerrerro, just to name a few.  But you better know your sports and do your research--just ask those who bought Ryan Leaf instead of Peyton Manning or Ricky Williams instead of Edgerrin James.

The prices of many cards actually fluctuate game to game, especially in football's short season.  When Peyton Manning blitzes the Jacksonville Jaguars with 4 touchdown passes and over 400 yards passing on Monday Night Football, his card price may increase noticeably.  When he struggles with three interceptions or loses a playoff game, the value of his card may dip.

The Internet auction is largely responsible for creating this exciting, previously unseen trading phenomenon.  thePit.com now revolutionizes the experience altogether by launching a much more advanced and efficient business model: a dynamic, sports card stock market that delivers transparent, live market prices and absolute liquidity so that  you can always buy and/or sell instantaneously from one single trusted source.  You can refuse delivery, avoid shipping costs, and trade in and out of your account.  We like to say it is where eBay meets E*Trade -- a place where every avid sports fan can finally put his or her sports knowledge to practical use and for the first time ever -- meaningfully and tangibly invest in sports players.

What was once fantasy is now reality.


Factors Affecting Value

Many wonder why sports cards command any value whatsoever.  After all, they are just pieces of cardboard.  Nostalgia, artistic merit, and even just the simple popularity of a particular sports figure appear to make many of them some very sought after commodities.

More fundamentally, however, the inherent value of sports cards lies in their scarcity, just like diamonds, gold, or any other precious commodity.  It is exciting to many, including the founders of thePit.com, to have in their possession one of the limited production, first ever manufactured cards of Michael Jordan, fresh out of the University of North Carolina, back when he still had hair.  Who knows what this gem minted card will be worth in 25 years.  It currently trades for over $40,000.  A Honus Wagner T206 Sweet Caporal Cigarette baseball trading card was auctioned off for a staggering $1,100,000 on eBay in July of 2000.

In pure bottom-line economic terms, just like the stock market, what ultimately determines the market price of a particular player's card is popular demand -- the price people are willing to pay.  As the public analyzes, predicts, and sometimes gambles on which company (whether it be a high flying Internet stock or a telecom sleeper) will become the next Microsoft, so too does the sports card trader try to figure out who will be the next Michael Jordan.  It is often not about a company's current profits or a player's current stardom, but about its or his future potential and future growth.

Some of the other more important factors that distinguish one card's value from another are:

Rookie cards - Card manufacturers distribute a new card for each current player or prospect each year.  More often than not, however, a player's rookie card commands the most value.  A rookie card is a player's first year of issue in a particular manufacturer's card set.  For example, manufacturer Upper Deck produces a card for Ken Griffey Jr. each year.  It produced its first card of Griffey, however, in the set it distributed to retailers in 1989, this is Griffey's rookie Upper Deck card.  This is also his most valuable Upper Deck card.

Quality of Manufacturer - Countless manufacturers have popped up over the years to produce cards.  Even McDonald's has given away its own sports cards.  As a general rule, only those cards produced by time tested, "brand name" manufacturers have any real value.  These include Topps, Fleer/Skybox, Upper Deck, Playoff, and Pacific.

Card Condition -  Mint cards are obviously worth more than cards in lesser condition.  Grading companies have recently become an overarching, dominant force in the industry, and collectors usually pay for these services to enhance their cards' values.  Highly graded cards command substantial premiums.  More importantly, grading has helped to commoditize cards, making them the perfect subject of a stock market like thePit.com.  Read more about grading and "investment grade" cards.

Quality of the Sports Athlete - Of course, the prices for cards of star athletes are much higher than those for average or mediocre players, whose cards often command no value whatsoever.  Most interesting, however, is collectors' interest in emerging players whom they predict might one day reach hall of fame status.  Cards of these individuals are usually in high demand as collectors seek wise investments.  Prices of these cards are also among the most volatile as they are determined by ongoing player performances.  Read more about the Recent Investment Phenomenon.


Grading

Historically, no rational collector would have ever purchased a trading card without first physically examining its condition.  All descriptions usually took the form of general terms (mint, near mint, very good, etc.), condition was always in the eye of the beholder, and haggling, time consuming buyer/seller negotiations inevitably ensued.

All of this changed in the early 1990s with the advent of neutral, third party professional grading companies.  These services employ state of the art technology and highly trained professional personnel to assign a numeric grade to the card (e.g., a 10, 9, or 8, etc.).  The company then forever preserves this certification by encapsulating the card in a sturdy protective, sonically-sealed holder prominently revealing the grade.

Not only do parties dealing in graded cards no longer debate condition, but they can now trade, with absolute confidence, without even having ever physically seen or touched the card.  There is now no difference between identical cards graded identically,   for example, one 1989 rookie Ken Griffey Jr. Upper Deck card, graded PSA 9, is the same as another-- and can be traded as such.  A graded sports trading card is, effectively, a true sports commodity, an interchangeable item. Note that thePit.com does not buy or sell cards that have qualifiers of any kind.

Predictably, the Internet revolution, and its need for sight unseen trading, has coincided with what has become a recent industry wide acceptance and meteoric explosion of grading companies ago.

Today, ungraded cards, even those which might appear to be in clear mint condition, are quickly becoming outdated and of much less value than their graded, certified counterparts.

To learn more about PSA and how to get cards graded by PSA, go to www.psacard.com.

Description of Grades

10 Gem Mint: A card with virtually no flaws.  It offers perfect registration, color, gloss, four sharp corners, and very slight printing impressions, if any.  The card front is centered no worse than 60/40 left to right and top to bottom.  On the back, there is allowance for 70/30 centering, but no worse.

9 Mint: Such a card may have very minor printing and color imperfections, such as printer's dots and off-white borders.  Centering on the front maybe slightly less than 60/40 left to right and top to bottom, but no worse than 65/35 with allowance for up to 90/10 on the back.  The card has four sharp corners.

8 Near Mint-Mint: One of two corners may have very slight fraying, minor printing and color imperfections, such as printer's dots and off-white borders.  A slight wax stain may be present on the reverse.  The card front is not centered less than 70/30, and the back can be no worse than 90/10.

7 Near Mint: A card that features most of the original gloss, but has slight surface wear and slight fraying on more than one corner.  The photo may be slightly out of focus and the card may contain minor printing imperfections.  Minor wax stains are acceptable only on the card back.  Centering on the card front must be no worse than 75/25 and can be up to 90/10 on the back.

thePit.com vs. Internet Auctions


thePit.com was conceived of as a more efficient, much faster, more reliable way of trading than the Internet auction.  Below is a comparison.

Auction Sites thePit.com
Effort

Just completing an Internet auction has become something of an art form. Books and articles have been published which detail tips, tactics, and strategies for the auction user.

Sellers typically must provide a detailed, comprehensive description of his/her card. They are encouraged to purchase scanners to include pictures of their cards with their description. Sellers also must monitor their auctions to ensure that they promptly answer any questions sent by potential bidders before the auction expires.

Bidders likewise must constantly check the status of their bids to see if and when they have been outbid. They need to check other listings to ensure that the same card is not currently being auctioned at perhaps a better price. Buyers are also cautioned to check whatever feedback exists on the lister in an effort to protect themselves against fraudulent or disreputable sellers.

Users log on to the site, find the card they wish to purchase or sell, view its listed bid/ask price, and enter an order.

Sellers need not provide detailed information about their cards, and buyers need not worry about the condition of the card they are purchasing.

Cumbersome Settlement

When the auction finally ends, the buyer and seller then must personally contact each other and negotiate the terms of sale, including insurance, escrow accounts, methods of payment, shipping costs, and delivery schedules.

No complicated settlement procedures are required after a transaction is completed. The card is placed directly into the user's account where it can be sold immediately or shipped to the user.
The Delay

Most auctions take a few days, and sometimes up to two weeks. Buyers must wait until the auction expires not only to complete the transaction, but even to learn if they have won -- and if they were not the highest bidder, they must repeat the process. Sellers have some control over the length of the auction period, but often are inclined to set enough of a waiting period to generate bids and maximize price.

Purchases and sales are completed instantly upon execution by thePit.com's market maker.
A Binding Contract for an Unknown and Random Prices

When auctioning collectibles, sellers hope to receive a certain price for their item. In reality, other than through the use of cumbersome reserve pricing, they have no assurance of the final amount they will receive. Often, the same items auctioned simultaneously will sell for vastly different prices.

Prices fluctuate generally because of supply and demand. thePit.com also only accepts limit orders, ensuring users only trade at known prices.
Artificial Prices and Price Manipulation

There are frequent news reports about sellers creating false identities and bidding on their own auctions to drive up the price or to avoid having to execute an undesirable highest bid.

thePit.com's proprietary trading system allows market makers to guard against price manipulation. Market makers are able to view all bid and ask prices, inventory levels, order sizes and transaction histories for each card in their market. They also can cross-check the trading activity and portfolios of individual traders to prevent attempts to corner the market in a particular card.

While no Internet system can completely prevent users from establishing false identities, the Company's customer service department works closely with its market makers to spot inconsistencies in the information provided by traders when opening and trading in and out of their accounts. The Company also utilizes a credit card authorization service to verify customer information.

Distrust and Increasing Fraud

According to the Federal Trade Commission, 43% of the Internet complaints it received in 2000 dealt with on-line auction fraud. The FBI's recently- created Fraud Complaint Center (IFCC) has stated, 'fuction (sic) fraud is by far the most Internet fraud, comprising nearly 2/3 of all complaints.'

All trades are executed and guaranteed by a single trusted medium, thePit.com. Users need not worry about fraudulent, anonymous, or untraceable buyers or sellers, since the Company acts as the intermediary in each trade.

The Company also takes steps to guard itself against fraud by sellers. Transactions must be settled within five days, and any cash proceeds from sales to the Company are held until the Company receives the card and verifies its condition.

Shipping and Insurance costs

Nearly all transactions require the seller to ship the cards to the buyer, who usually bears this additional cost.

Users have the unique option of leaving collectibles they purchase in an account maintained by the Company at no cost -- an especially useful feature for those who anticipate quick re-sales or who want to avoid shipping and insurance costs.
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