What Batman's "Junk" teaches us about Modern Portfolio Theory

2022 appears to be ending the way it started. Uncertainty was certainly in no short supply. The war in Ukraine (beginning in February) fuelled global inflation and spilled over into South Africa prematurely beginning rising interest rates. The year is drawing to a close with the Phala Phala saga. Sky’s political editor Alan McGuiness tweeted that, “My son has lived through four chancellors, three home secretaries, two prime ministers and two monarchs. He's four months old”.

By far the best performing assets in my portfolio for 2022 are my comics. Yep, that’s right. While markets strained two unrelated things happened in the world of DC and Marvel comics recently. Taking a step or two back to 2018, the comic fraternity was abuzz with the release of the “Batman Damned” Series.?Masterful and gritty storytelling from Brian Azzarello and illustrated by award-winning artist Lee Bermejo. Something was different about this book, however.

Quickly after its release social media was abuzz talking about Batman’s “junk” or the “batpenis”. You can imagine the memes and innuendo considering Batman’s 2IC is “Dick Grayson”. Some commentators were calling the image “full frontal nudity”. In reality, the image causing so much stir was one where Batman is standing naked in the shadows with the very faintest of ink outlines leaving most to one’s imagination. Much ado about nothing.

Being lucky enough to get Bermejo’s signature at Midtown Comics in New York (together with a little sketch) quickly turned a cover price of $50 to what today can only be bought on eBay for nearly $1,000 and that’s in 4 short years. Most of the appreciation though has come in 2022 as DC announced it would no longer be printing the image, stating that it “does little to add to the story”. Did they anticipate this reaction? A bold and clever move if they did, no doubt.

In 2020, X-Men legend and creator, Chris Claremont would also release his “Paragon Collection”, signed and including lithographs of some iconic scenes from the era. There was a limited release of 2,000 copies at $199 that included a variant cover of X-Men (2019) #13. In 2022 these have increased in demand and are now trading at $750 on eBay as a bundle; or if you invest in getting the books graded individually by CGC (the Certified Guaranty Company - the Moody’s of comics) you could get much more. So that’s a compound return of 111% and 95% p/a respectively. Not too shabby.

The great thing about comics (and Art) as an asset class is the utility we get from just looking at them. The conversations they sometimes spark, how lucky we feel at finding a buried treasure. That sense of pride when a houseguest remarks on the book or their favourite books or even movie. For its illiquidity as an asset class it offers utility in other ways.

Modern Portfolio Theory (Markowitz 1952) values one thing very highly and that is diversity. With comics you’re investing in a piece of pop culture history that is completely detached from the stock market. Buying “Amazing Fantasy #15” in 1960 where Stan Lee and Steve Ditko daringly debuts our friendly neighborhood Spider-Man would have cost a few cents at your local newsstand. Shortly after Sam Raimi brought Toby Maguire to the big screen as Spider-Man in 2002, the price of this comic book escalated by over 80% and now if you have a copy in excellent condition nearby, you’re sitting on a $1 million asset.

The value of Spider-Man is derived from cultural and historical significance and not whether Marvel or DC are good businesses or whether the industry is expected to earn above-normal returns.

From a Modern Portfolio Theory perspective this is the definition of “not putting all your eggs in one basket” and represents a good strategic investment decision. Perhaps comics are not your thing? The same rule applies to any of what are called “alternative” asset classes that bear these same characteristics. Naturally it is always critical to make these investment decisions with the help of your financial adviser.