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Pokemon cards teach early lesson in volatility

Published Sep. 9, 2005

Young collectors who once had a hot commodity learn the hard way that such financial bubbles eventually burst.

Mike Loprete stood at the counter of a comic book store, slowly shook his 11-year-old head and remembered when he was rich.

Back in 1999, when the Pokemon fad was the talk of every playground, Mike's collection of cards, neatly stored at his home in Roseland, N.J., was worth hundreds of dollars. But like investors in dot-com flameouts and other once-highflying technology stocks who thought the Nasdaq could rise forever, Mike sat on his assets and watched them dwindle away.

"I should have sold," Mike said. "I could have had three times as much as I paid for them."

Fads and fancies have sent the value of all kinds of assets soaring since the earliest days in finance. And from 17th century Dutch tulips to present-day Internet stocks, such bubbles inevitably have burst.

But for millions of young Americans, their first introduction to volatile markets has been Pokemon trading cards. A large number of them have been given a hard lesson about how scarcity can temporarily drive up prices, but that many assets _ be they Pokemon cards or technology companies _ are only valuable if sold at the right time.

A year ago, Pokemon cards were the most popular plaything on the planet. Elementary schools were forced to ban the cards asschoolyard speculators ignored their math homework and frenetically bought and sold rare holographic foil cards on the playground. Dealers marked up $3 packets of cards to $12 or more. The rarest cards sold for as much as $375.

Now the card market has virtually collapsed, and Pokemon "thousand-aires" have watched their net worth be wiped out.

At New World Manga, a store in Livingston, N.J., specializing in comics and card games, children still gather every Friday for the weekly Pokemon league. But even many of these diehard players said the glory days of collecting had passed.

As others played the card game behind him, Alex Formato, a 12-year-old Pokemon collector from West Orange, N.J., sold three relatively rare cards to Tung Cheng, co-owner of New World Manga. Last year, Alex would have been paid in cash. These days, he just gets store credit, a sign of how far the Pokemon market has fallen. Alex has some 10,000 cards, and there are days he wonders why he held on to them. Why didn't he sell last spring when Pokemon cards were still the hottest thing around?

"I have the original set completed," Alex said. "Everyone used to want the whole set. It would have been worth $400; now it's $200 or less."

On eBay, the highest bids for the first edition base-set Charizard, a rare Pokemon card once valued at $375, have been $100 lately. Booster packs that dealers were paying $4.75 for can now be had for $1, said Brian Wallos, a collectibles dealer. Boxes of Japanese cards that a year ago fetched $300 now sell for $80, he said.

Wallos dove into the Pokemon fad in 1999, but these days he is back to buying and selling Beanie Babies. And kid culture has moved on to the next thing.

"Now everyone likes Digimon," said Molly Berenhaus, 10, after winning a game during last week's Pokemon league at New World Manga.

Michael Krois, the chief executive of Affiliate Pros, which runs a Pokemon card trading site, said he watched the number of cards sold on his site plummet just as the bull market began to lose steam.

"I found the amount of cards sold on my site was directly proportional to the stock market's value," Krois said. "When it dipped, I sold fewer cards. The number of daily visitors to my site, just like Nasdaq, peaked in April."

Other youngsters have been left wondering why anyone was paying more than $300 for a single shiny trading card in the first place.

"It's kind of funny that regular cards with foil stuff on them were ever worth so much," said Molly, the 10-year-old who does not care about card prices but is disappointed that it is getting harder to find people with whom to play the actual Pokemon game.

But more than a few Pokemon players, like technology-stock bulls who saw Gateway's disappointing holiday computer sales figures as a buying opportunity, think the game will be back.

Zach Jacobs, 11, of Florham Park, N.J., bought a price guide last year and calculated the value of his hundreds of Pokemon cards: They supposedly were worth more than $2,000. He sold a few cards to friends, getting $18 for a couple of them. But he only made about $80 total on his sales.

He has not gone back to the price guides to see how far the value of his collection has fallen. And that would not be reliable anyway. Some guides, their livelihood dependent on interest in Pokemon remaining strong, have kept the list prices for Pokemon cards high despite falling prices on eBay, among wholesale dealers and inschoolyard transactions.

Meanwhile, some price guide editors, along with collectors like Zach, predict prices will rebound.

"Probably when the new sets come out, the prices will go up again," Zach said.

Jimmy O'Brien, a longhaired 14-year-old with a wispy moustache as well as a Pokemon baseball cap and jacket, said part of the problem was that people were selling Pokemon at outrageous, unjustifiable prices. But he does not think the Pokemon cards are down for good.

"Everything old is new again," said Jimmy, who has traveled to Los Angeles and Minnesota to compete in Pokemon tournaments. "Lava lamps went out and came back, so this might, too."

But there are other former Pokemon players who say the game is over. The cards, part of an elaborate marketing campaign, were created for two players to face off with their own carefully constructed decks of Pokemon characters. Players randomly draw several Pokemon from their deck, then flip coins to see how much damage their characters can inflict on their opponents.

Colin Oettle, 13, of Livingston, N.J., bought his first Pokemon cards in 1998 before the fad really took off. When other kids caught on, he watched the list price of his cards surge past the value of his carefully compiled collection of glass.

"I've thought about selling from time to time to get the extra money," Colin said, "but I've never done it."

Now that the market has collapsed, Colin said he could not obsess over the missed opportunity, advice investors in, say, or may find hard to be so grown-up about. Colin is moving on to playing Magic now but said his Pokemon days honed his skills at addition, improved his organization and taught him about the value of collecting, not to mention the fickleness of markets.

"It's a little disappointing," Colin said. "But life is life."