Comic books taught me about illiquid markets.
As a youth, I was an avid collector. For years, I monitored the value of my “investment” by checking prices in the various guides that purported to offer the going rates. By those accounts, my collection at its peak should have been worth five figures.
The crown jewel, if you’ll indulge me a bit of nerdy braggadocio, was a complete set of the popular new X-Men.
My brother, literally a rocket scientist, would shake his head at my obsession. If comics were so valuable, he’d ask, why didn't someone on Wall Street buy every issue of the X-Men and corner the market?
The answer, which I didn’t understand at the time, was risk. Wall Street doesn't buy comic books because there’s a risk in getting stuck with hard-to-value assets, especially when there’s no common exchange or uniformity to the investments.
Wall Street, however, seemed to have no problem with illiquid markets so long as they had an air of financial wizardry, such as credit-default swaps and collateralized debt obligations (CDO). These markets turned out to be the financial equivalent of Beanie Babies or X-Men comics, and yet Wall Street pumped trillions of dollars into them. [...]