I don’t know all the ins and outs of the Enron case, but I do know that one of the things that led to their downfall was the use of mark-to-market accounting. Using this system, a company assigns a value of a portfolio or account based on current market price. Enron took it one step further. They projected potential earnings by assuming an active market existed for their less actively traded assets, which opened the doors to manipulating their books with fantasy numbers of what values “could” be.
In the hands of an ethical accountant I’m sure this method works just fine. But when I realized that I use a similar system for my collecting, I quickly saw how this mark-to-market model can lead a company (or a collector) down the wrong path.
By hunting eBay on a daily basis, I’ve often found myself in a tricky predicament. I might have several auctions on my watch list that end the same night. If I can’t decide which one is more important, I might be tempted to bid on them all and max out my budget in one bid-happy evening.
And how do I convince myself that I can afford them all? Mark-to-Market Collecting.
My recent purchase of two graded comics, X-Men 131 and Amazing Spider-Man 194, is a perfect example. The cost was a very steep $300 (plus shipping). I convinced myself that I had that kind of cash by looking at my various collections and determining their worth on the open market. I factored in comics, football cards, DVDs…you name it, if I owned it, I considered how much I could sell it for to help me make this deal.
And if you’ve read any of my posts in the last week, you already know part of that decision. I researched eBay for realized prices on my three Alias DVD sets. They consistently sold for over $40; some as high as $80. So when I was weighing the pros and cons of shelling out that much cash, I knew the comic purchase wouldn’t be such burden on my wallet because I was factoring in my future sales on eBay.
When part of a well-oiled machine, this system isn’t so bad. But eBay addicts know how finicky the site can be. Sell an item at auction for $100 one day, and see that same item sell for $20 the next. Lucky for me, my Alias auctions are well on their way to bringing me $50 or more, but when I think about alternate scenarios in which these sets only fetched $8, I get squeamish. It worked this time, but will I be so lucky next time?
In this most recent incident, I was already in the clear because I actually had some money saved up from my April decision to not buy any collectibles (yes, it’s still April so I didn’t get through the whole month, but I was oh so close). However, I’d like to have money available for non-collectibles like, you know, food. And what about those eight comics on my watch list? I can’t just forget about those simply because I don’t have the cash, right?
Instead, I need to look at my other assets, like my Ex Machina comic set I’m willing to offload. Or maybe it’s time to research how much I can get for my X-Files DVD sets. Yes, today will most certainly be a day of determining current market value for my many collectibles to figure out just what I need to sell in order to pickup another prized possession.
Mark-to-market collecting at its finest.