In response to Karl Jobst’s video on the vintage video game market. The video is an update to his previous video that explained the unclear links between the largest valuation house and auction house. In both of these videos, his speculation is always that a bubble must be formed because people buy to speculate.
It was mentioned that the same Resident Evil copy sold for $264,000 in 2021 and $38,400 in 2023. Since the auction seems to be exactly the same, it was guessed that the game never left the auction house’s storage.
Let me suggest an alternative hypothesis for what is happening.
Premise:
- Drug dealer has money they need to pay drug lord.
- Drug lord receives lots of money that need to be laundered before use.
Process:
- Drug lord purchases something collectible for a cheap price from someone unrelated.
- Drug lord creates an advert for the piece, with a price set to what is owed by the dealer. It is high enough that no one else would bother to buy it. Low enough to not set off alarms (which is why they need a “speculation” bubble to hide in to launder serious money.)
- Drug dealer just happens to be a “collector of fine arts” and buys the piece, handing money to the drug lord. The drug lord has “clean” money, thanks to her/his speculative foresight.
- Drug dealer now has an irrelevant art piece and sells it for way less. If the piece is not sold back to the drug lord to do this all over, the drug dealer can actually ride the speculative bubble…
If the bubble is deflating for one type of collectible, it’s time to find the next one to hide laundered money as “speculative gains.” The scheme doesn’t work well if the drug lord needs to buy the collectibles at a high price to start with. This would explain why there are ever revolving bubbles and busts. It also explains why the same piece can have widely different prices; it’s the spread that matters, because that’s paying for something illicit.
Whether this is cars, watches, Beanie Babies, NFTs or vintage games doesn’t matter to those involved. What matters is that prices are inflating, so that gains don’t look suspicious.