you are enjoying a fantasy baseball draft. it’s the spring of 200X. you’re on the clock. it’s round 4, you’ve got the second pick in the round. you know the run on closers is about to start. what you do next is a decision based on your perceived value. if you want mariano rivera, you have to get him now. if you wait on a closer, you might get stuck with trevor hoffman. obviously, there are a lot of factors, such as other available players, etc., but we’re in a vacuum. you have 2 choices. what do you do?
player A= 92.2% of saves converted, 2.25 career era, 1.01 whip, .922 k’s/ip
player B= 93.2% of saves converted, 2.73 career era, 1.04 whip, 1.05 k’s/ip
when you take away the names and look at the numbers, the obvious choice is to wait on the closer. the 2 players are identical, yet one always gets drafted before the other. one player is overvalued and one player is undervalued. their true value lies somewhere in the middle. hoffman and rivera have equal values! but good luck getting them at an equal price. people overpay for rivera everyday on ebay while hoffman goes unsold at bargain prices. both players are on their way to the hall of fame. which one is the better investment?
1992 bowman rc trevor hoffman psa 9, sold for $3.49 + $4.00 for s & h on october 7, 2009 with 1 bid on ebay.
1992 bowman rc mariano rivera psa 8, sold for $14.50 + $3.00 for s & h on october 8, 2009 with 6 bids on ebay.
a couple facts to consider. rivera is currently in the post season, which is sure do drive up demand, hoffman is not. also, rookie cards (rc) are not all created equal, but that’s a discussion for another time. for now, let’s assume these are relatively equal because i believe they are.
equal value.
both cards were the same year and make. both cards were graded, in fact hoffman’s card had a higher grade. yet, rivera’s card sold for the higher price. it should be obvious by now that rivera is overvalued. the fact that he’s a yankee almost guarantees it. yankees get a lot of press. padres (and now brewers) do not. hoffman flies under the radar while rivera is in the spot light. throw in the post season trips that being a yankee offers and you’ve got a recipe for overvalued. hoffman’s teams keep him out of the post season on a regular basis. lucky for investors, all we care about is intrinsic value not headlines.
what is the true value of these players? i don’t know. i never know. what i do know is that both players have the same intrinsic value, making them equal. the market has given them different prices. will the market correct and meet somewhere in the middle? it’s hard to say. the yankees have a large following, if they continue to demand rivera his value may always be higher than hoffman’s. my guess is there will be market corrections in the future. hoffman seems like a good deal at 42% of rivera’s price. rivera is a bad investment.
it’s unlikely that hoffman’s price will fall much from the $7.49 that was paid for him on ebay. there’s a solid chance that rivera’s price will fall from the $17.50 that was paid for him. consider what has to happen for these prices to rise or fall. both players have already established themselves as hall of famers. which investment would you make? i’ll stick with player B. that’s value.
