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Wall Street is piling into trading cards as prices soar

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By Julia Horowitz, CNN Business
Updated 11:44 AM ET, Fri February 12, 2021

London (CNN Business) — Ken Goldin has sold sports trading cards for four decades. What happened earlier this month still shocked him.

In early February, a Michael Jordan rookie basketball card in pristine condition sold for a record $738,000 at an auction run by Goldin’s company. The kicker? The exact same item went for nearly $215,000 just weeks before.
“There’s never been a time like this in the history of the business,” Goldin told CNN Business. “I would bet that for every person who wanted a Michael Jordan rookie card in 2019, there’s 100 [now].”
The shock sale is part of a much bigger trend in sports collectibles that’s grabbed the attention of sophisticated investors as well as small traders, transforming card collecting from a fusty hobby into a major investment market. But the timing and scale of the price surge has also sparked worries that it may be fueled by the same speculative forces that recently sent bitcoin and meme stocks like GameStop through the roof.
    Industry insiders acknowledge that their business may be benefiting from broader market euphoria. But they push back on the idea that the boom in demand is generating a price bubble.
    “This is now part of our culture,” Goldin said. “I wouldn’t go anywhere near the word bubble.”

    The pandemic push

    The trading card renaissance has its roots in the pandemic. Stuck at home without live sports games, people began raiding their attics and basements and digging up old cards. They also sat down to watch “The Last Dance,” the documentary series about Jordan, the legendary former NBA star, that aired on ESPN.
    Suddenly, trading cards were everywhere, boosted by celebrity endorsers ranging from actor Mark Wahlberg, whose kids launched a collecting business, to DJ Steve Aoki and Resy co-founder Gary Vaynerchuk. Videos of fans opening packs of cards on YouTube and TikTok started racking up tens of thousands of views.
    “This is a market that’s growing in demand, but doesn’t have more supply,” Vaynerchuk, a longtime advocate of card investing, wrote on his website last March. “That’s a recipe for opportunity.”
    Prices for top-quality cards featuring all-time greats jumped dramatically. Those featuring newer talent rose, too, as enthusiasts tried to scout the next big stars.
    “Instead of betting on a game, people look at this, and they can bet on a career,” Goldin said.
    The spike in prices has caught the attention of a wider class of investment professionals, flush with cash following unprecedented stimulus measures from governments and central banks. Rock-bottom interest rates have also made it harder to find lucrative investments, bolstering interest in creative alternatives.
    “Funds are being created. They’re getting investors involved and pooling five, 10, 15 million dollars,” said Jesse Craig, director of business development at PWCC Marketplace, a top seller of premium cards.
    Josh Luber, the co-founder of sneaker resale startup StockX, left the company last year to form Six Forks Kids Club, an alternative asset management company focused on cards. The moment, he said, was simply too big to pass up.
    “It’s hard to find someone [in] my generation whose first business wasn’t buying baseball cards when they were 10,” Luber, who is 42, told CNN Business. “We’re all of the age where we have a little bit more money, but we’re also in positions of decision-making for investment funds.”
    The arrival of institutional money has quickly transformed the market. Goldin said for the first time in his career, he’s fielding calls from hedge funds interested in gaining exposure.
    Takeover interest has also emerged, given the limited number of prominent companies in the sector. Last month, angel investor Nat Turner and Steve Cohen, the billionaire hedge fund titan and owner of the New York Mets, announced they were buying authentication service Collectors Universe in a $853 million deal, after sweetening a bid first made in November.

    Not just Wall Street

    It’s not just big money getting into the game as the sector gets a financial makeover.
    Fractional trading has also reshaped the trading card business, allowing everyday buyers to purchase a small stake in a LeBron James or Patrick Mahomes card that would have otherwise been too costly, in the same way people can now buy a piece of expensive stocks like Apple (AAPL) and Amazon (AMZN).
    “We realized the potential fractional ownership could have to break down a massive barrier to entry,” said Ezra Levine, the CEO of Collectable, which buys sports cards and converts them into tradable assets registered with the Securities and Exchange Commission.
    Collectable distributes individual shares of cards on its platform through initial public offerings. The shares can then be bought and sold as if they were stock in Microsoft (MSFT) or AMC Entertainment (AMC).
    The firm has completed roughly 40 IPOs since last fall, and boasts of impressive returns. A 1986 Jordan card that went public at $10 per share in October is now trading at $60 per share, while stock in an autographed James card from 2003 has jumped 50% since late December.
    Not everyone is going this route. Other hobbyists are gathering on social media as they rip open new packs of cards, hoping they’ll contain younger talent that can later be sold for a huge profit on eBay. Some are making even bigger bets.
    “I spent $9,000 on this,” one TikTok user said in a post this week, holding up a James rookie card. “Call me crazy, but I think this is going to hit 20K. Let’s go.”

    Is it a bubble?

    After Craig brokered the sale of a rare Mickey Mantle card to entrepreneur and actor Rob Gough in January for $5.2 million — labeled the biggest sale for any trading card in history — questions about a price bubble seemed valid.
    Those in the business say there could be a pullback in prices for some extremely hot items, like the Jordan rookies, but they don’t think valuations are spinning out of control.
    “I think trading cards are one of the most undervalued asset classes out there,” Luber said.
    He added that while the 1986 Jordan card appreciated faster than he might have expected, he doesn’t think the value is out of line with where demand is headed.
    Everyone in the industry thinks it’s “a $1 million card,” Luber said. “But we all thought it was a year away instead of a month away.”
    Scott Keeney, who set up a fund to invest in trading cards and companies like Collectable with venture capitalists Courtney and Carter Reum, is similarly bullish. He thinks that one to two years from now, the prices that Jordan and Mantle cards are commanding will be far higher than they are now.
    “We look at all these other people coming in as more validation,” Keeney said. He declined to share how much his fund had raised, beyond stating it was at least seven figures.
    There are risks, of course. As with investing in rare art or wine, the potential for fraud looms. The Washington Post has reported that the FBI is looking into cards that were allegedly altered to improve their condition before they were authenticated by Collectors Universe and auctioned on platforms like PWCC.
    The industry has also seen a crash in prices before, after overzealous producers flooded the market in the 1980s and 1990s. As collectors discovered just how many were in the system, cards from the era plunged in value.
      Goldin acknowledges that prices will inevitably fluctuate. But he believes supply will remain in check, particularly on the upper end of the market.
      “The difference between cards and stock [is] nobody loves a stock,” he said. “Some people who buy these cards, to get them to sell it is like getting them to take off an arm.”

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      This AI reads children’s emotions as they learn

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      By Milly Chan, CNN Business
      Updated 9:11 AM ET, Wed February 17, 2021

      Hong Kong (CNN Business) — Before the pandemic, Ka Tim Chu, teacher and vice principal of Hong Kong’s True Light College, looked at his students’ faces to gauge how they were responding to classwork. Now, with most of his lessons online, technology is helping Chu to read the room. An AI-powered learning platform monitors his students’ emotions as they study at home.

      The software, 4 Little Trees, was created by Hong Kong-based startup Find Solution AI. While the use of emotion recognition AI in schools and other settings has caused concern, founder Viola Lam says it can make the virtual classroom as good as — or better than — the real thing.
      Students work on tests and homework on the platform as part of the school curriculum. While they study, the AI measures muscle points on their faces via the camera on their computer or tablet, and identifies emotions including happiness, sadness, anger, surprise and fear.

      Facial expression recognition AI can identify emotions with human-level accuracy.
        The system also monitors how long students take to answer questions; records their marks and performance history; generates reports on their strengths, weaknesses and motivation levels; and forecasts their grades. The program can adapt to each student, targeting knowledge gaps and offering game-style tests designed to make learning fun. Students perform 10% better in exams if they have learned using 4 Little Trees, says Lam.
        Lam, a former teacher, recalls finding out that certain students were struggling only when they got their exam results — by which time “it’s too late.”
        She launched 4 Little Trees in 2017 — with $5 million in funding — to give teachers a chance for “earlier intervention.” The number of schools using 4 Little Trees in Hong Kong has grown from 34 to 83, over the last year. Prices range from $10 to $49 per student per course.
        Lam says the technology has been especially useful to teachers during the pandemic because it allows them to remotely monitor their students’ emotions as they learn.
        Chu believes the technology’s benefits will outlast the pandemic, because it reduces his admin load by creating and marking personalized classwork and tests. And, unlike teachers, the expression-reading AI can pay close attention to the emotions of every student, even in a large class.
        But technology that monitors children’s faces raises concerns about privacy.
        In China, AI that analyzes biometric data for surveillance purposes in schools and other places has sparked controversy.
        Lam says 4 Little Trees records facial muscle data, which is how the AI interprets emotional expressions, but it does not video students’ faces.
        Pascale Fung, director of the Center for AI Research at Hong Kong University of Science and Technology, says “transparency” is key to maintaining students’ privacy. She says developers must get consent from parents to collect students’ data, and then “explain where the data is going to go.”
        Racial bias is also a serious issue for AI. Research shows that some emotional analysis technology has trouble identifying the emotions of darker skinned faces, in part because the algorithm is shaped by human bias and learns how to identify emotions from mostly White faces.
        Lam says she trains the AI with facial data that matches the demographics of the students. So far, it has worked well in Hong Kong’s predominantly Chinese society, but she is aware that more ethnically-mixed communities could be a bigger challenge for the software.

        Experts say emotional expression can vary between cultures and ethnicities.
        Lam says Find Solution AI’s emotion recognition works with 85% accuracy in Hong Kong. Fung says algorithms with “very good settings” can correctly identify primary emotions, such as happiness and sadness, up to 90% of the time.
        However, more complex emotions, like irritation, enthusiasm or anxiety, can be harder to read.
        “We can hope for 60% [or] 70% accuracy,” says Fung, adding that most people can’t identify complex emotions with a greater level of accuracy. “Human beings are not good at reading facial expressions” she says. “We would like to train machines to be … better than the average human.”
          As the AI improves, Lam hopes to develop applications for businesses, as well as schools, to better understand participants’ needs and increase engagement in online meetings and webinars.
          Where human communication is concerned, AI “can help to facilitate a better interaction,” she says.

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          Sony facing class action lawsuit over alleged PS5 controller defect

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          By Clare Duffy, CNN Business
          Updated 6:02 PM ET, Tue February 16, 2021

          New York (CNN Business) — Sony’s PlayStation 5 has been hugely popular — and hard for consumers to get their hands on — since it was released last fall. But not everyone who managed to snag one has been satisfied.

          A class action lawsuit accuses Sony (SNE) of violating consumer fraud statutes and breaching warranty agreements because of an alleged defect with the PS5 DualSense wireless controllers, according to a complaint filed in the Southern District of New York on Friday.
          The filing comes soon after the law firm Chimicles Schwartz Kriner & Donaldson-Smith — which is among the firms listed as working on the suit — set up a web page soliciting reports of issues with the controllers. Gaming news site IGN first reported the firm’s investigation and the lawsuit.
          The class action suit alleges that the DualSense controllers, which were released in November along with the new PS5 console, suffer from a defect known as “drift,” wherein characters or other elements on screen move without the user manipulating the controller’s joystick.
            “This defect significantly interferes with gameplay and thus compromises the DualSense Controller’s core functionality,” the complaint says.
            Sony did not immediately respond to a request for comment on the lawsuit.
            The complaint claims that the plaintiff, Lmarc Turner, experienced a controller drift issue on the day he purchased a PS5 in early February. Turner contacted customer service and followed their troubleshooting instructions, to no avail, the complaint says.
            “Given that his experience with contacting Sony the first time did not satisfactorily address the drift issue,” Turner opted to purchase another DualSense controller for $69.99 a few days later, the complaint says. “Had Plaintiff been aware of the Drift Defect prior to purchasing his PS5, he otherwise would not have purchased the PS5, or would have paid substantially less for it.”
            The suit also alleges that Sony has been aware of the drift issue because of “online consumer complaints, complaints made by consumers directly to it, and through its own pre-release testing.”
            There have been a number of reports on the issue in gaming blogs and on social media. Drifting, also known as “stick drift,” has been an issue with previous gaming controllers from other companies, too.
            “One user reported the issue 10 days after receiving the PS5 console, stating that they tried every possible fix — power-cycling the console, turning Bluetooth on and off, resetting the controller, and charging it fully overnight — to no avail,” the complaint says. “Notwithstanding its knowledge of the Drift Defect, Sony has failed to disclose this material information to consumers.”
            The suit alleges that customers seeking help with their devices have run into a backlog on Sony’s dedicated portal for issues with PS5 hardware, and face long wait times to speak with customer service agents. It claims that when consumers return the controllers for in-warranty repairs related to drift, they “have to pay for shipping the controller to a Sony repair center … and Sony does not reimburse customers for these shipping costs.”
              “Recent software and firmware updates did not ameliorate or address the Drift Defect in any way,” according to the complaint.
              The lawsuit seeks to make Sony implement a recall or free replacement program to address the issue for all class members, in addition to other relief such as damage payments to compensate consumers for out of pocket expenses to fix the alleged defect. Sony said earlier this month that it sold 4.5 million units of PS5 hardware between its launch and December 31.

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              Parler comes back online one month after going dark

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              By Brian Fung, CNN Business
              Updated 1:58 PM ET, Mon February 15, 2021

              (CNN Business) — Parler, the social network favored by conservatives, came back online Monday with a redesigned website one month after it was suspended by Amazon Web Services and effectively driven offline.

              “Speak freely and express yourself openly, without fear of being ‘deplatformed’ for your views,” Parler’s homepage read. Content from before Parler vanished no longer seems to be available. In its first post on the platform Monday, Parler’s own account welcomed users back and said: “We will not be canceled,” followed by an emoji of a flexing bicep.
              The website’s return marks the reopening of the social network after revelations that some of the US Capitol rioters had organized on Parler prompted major tech platforms to cease doing business with the company.
              The decisions by Amazon (AMZN), Apple (AAPL) and Google (GOOGL) not to work with Parler essentially cut the company off from the public internet. For the past several weeks, visitors to Parler.com had been greeted by a static placeholder message.
                Now the full service appears to be back online. In addition to bearing an apparently redesigned logo, the site also links to a new community guidelines document that explains the company “will not knowingly allow itself to be used as a tool for crime, civil torts, or other unlawful acts.”
                The community guidelines still maintain that the platform will try to remove content as little as possible, showing how the company is attempting to balance its pitch to users as a haven for unrestricted speech with the scrutiny it’s faced for its role in enabling violent extremists to organize.
                “In no case will Parler decide what [content will] be removed or filtered, or whose account will be removed, on the basis of the opinion expressed within the content at issue,” according to the community guidelines.
                The document adds that Parler expects users to curate their own feeds by using platform-provided tools such as muting or blocking users and keywords.
                  Since it was removed from Amazon Web Services’ hosting platform, questions have arisen over where Parler might turn for its infrastructure support, including domain hosting and web security. CNN previously reported that the company had hired DDoS-guard, a Russia-based cloud-services provider. That decision raised eyebrows and prompted the chairwoman of the House Oversight Committee to seek documents from Parler about its ties to DDoS-guard.
                  Now, in its latest incarnation, Parler directs traffic to an IP address linked to a California-based cloud services provider called SkySilk. Parler and SkySilk didn’t immediately respond to a request for comment.

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                  The long, bumpy road to the Apple Car

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                  By Samantha Murphy Kelly, CNN Business
                  Updated 12:20 PM ET, Sun February 14, 2021

                  New York (CNN Business) — For such a secretive company, Apple’s car efforts have been in plain sight for years.

                  The headlines have been steady: prominent auto industry poaches, one approved car patent after another, sightings of mysterious self-driving cars around its Cupertino, California, headquarters, and most recently, widely reported talks of a multi-billion dollar partnership to build an autonomous electric car with Hyundai and Kia.
                  But this month, just as the rumor mill was reaching a fever pitch over the partnership reports, Apple (AAPL) appeared to pump the brakes on the deal after Hyundai prematurely revealed discussions were underway, according to Bloomberg. As an internal saying goes, the fastest way to not work with Apple is to talk about working with Apple. (Hyundai and Kia said this week they are not in talks with Apple to develop self-driving cars.)
                  Even by Apple’s standards of long-rumored products, the Apple Car has been longer rumored than most. Alongside the hype are apparent setbacks: In 2016, it “scaled back” its ambitions followed by more layoffs a few years later; meanwhile automakers and tech rivals continue to move forward with their projects. And now, with its latest potential partnership appearing to unravel, there are new questions about which carmakers are left for Apple to work with on the effort, if it still plans to move forward.
                    All of it has contributed to the feeling that the Apple Car is always arriving but never quite here.
                    “A few years ago an article came out that said the project was over,” said Reilly Brennan, general partner at Trucks VC, which invests in transportation companies. “I laughed at the time because I knew at least a dozen people who were working on stuff at Apple in this sphere.”
                    “It’s been a constant pot on a low boil on the back of your stove that has continued to sit at that same level,” Brennan added. “Maybe there will be an announcement coming, but I don’t know. It’s been the same for years.”
                    It’s not hard to understand why Apple would want to break into a trillion-dollar industry. But at the same time, auto development is complex. Tesla has demonstrated the appeal of a software-focused car, but it’s taken years for Elon Musk’s company to become profitable — and the money it does make isn’t from car sales. The question has always been how Apple will try to crack this space: by building a car itself, partnering with an automaker, creating car software or something else entirely?
                    Sam Abuelsamid, a car industry analyst with consulting firm Guidehouse Insights, believes Apple may be more interested in mobility services, including a robo-taxi division, as it has shifted its focus in recent years to paid services to boost revenue amid a saturated smartphone market. Apple is already an investor in Chinese ridesharing giant Didi. And in 2019, Apple acquired Drive.ai, a self-driving startup that had worked with Lyft on a robotaxi pilot project.
                    It’d be a move somewhat reminiscent of the Apple TV when people previously speculated the company was working on a television set, but Apple instead released a small streaming box that sits alongside existing TVs. “They opted not to do a TV set because margins were too low, and they couldn’t create something better than what was already out there,” said Abuelsamid.
                    When Apple approached Drive.ai about a possible acquisition, the tech giant was “serious about their efforts, though they were extremely tight lipped and didn’t want us to discuss or confirm anything publicly,” said a former Drive.ai board member, who spoke to CNN Business on condition of anonymity. The former board member added that “most of the Drive.ai employees that I know that are there are still working on special projects and still on the car project.”
                    Apple didn’t respond to a request for comment on this story.
                    Whichever path it pursues in the auto sector, Apple must increasingly compete not just with automakers but tech companies and startups for talent and traction. Some companies like Zoox, a self-driving car startup acquired by Amazon, have reportedly poached auto-centric talent from Apple. Apple, for its part, has poached employees from companies like Porsche, Google’s Waymo and Tesla, including the executive who once oversaw development of its Model 3 car.
                    If and when Apple does finalize its car plans, industry watchers expect the company will try to stay true to its secretive approach with other products and announce it at the last possible moment, just before it’s ready to go on sale. “It’d be unusual if they started acting like an automaker and teased something that’s coming out in 5 years,” Brennan said.
                      But despite years of rumors, big hires and research and development, it’s entirely possible an Apple car project might never become a reality.
                      “I’ve always been skeptical that Apple would actually pull the trigger on getting into the car business,” Abuelsamid said. “Apple has shifted direction multiple times in the past few years around car tech, trying to figure out what and if there’s anything they want to do. It spends a lot of time researching a lot of products, many of which never actually come to market.”

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