a cautionary tale about investing all your money in a toy

[river41]

http://www.dailyfinance.com/on/bankrupt-by-beanie-babies-family-invested-100k-toys/?icid=maing-grid7%7Cmain5%7Cdl22%7Csec1_lnk2%26pLid%3D349423

 

 

While I know everyone will jump on me that lego is different etc. it should function as a word of caution in diversifying and not getting too much of your money in one thing.Almost everything in life is cyclical and while lego is very up now it doesn't mean it will always stay that way.  While many people here enjoy lego there will always be HUNDREDS of new lego sets on the market.Our whole business money  depends on people wanting a specific set and paying a large premium for it. SO while boys building things will probably never go out of style having a HUGE collectors market where thousands of people pay large amounts of money for a specific item when they can get a substantially similar item for much cheaper can change at some point in time and don't throw all your eggs in one basket.

[Anakinisvader]

http://www.dailyfinance.com/on/bankrupt-by-beanie-babies-family-invested-100k-toys/?icid=maing-grid7%7Cmain5%7Cdl22%7Csec1_lnk2%26pLid%3D349423

 

 

While I know everyone will jump on me that lego is different etc. it should function as a word of caution in diversifying and not getting too much of your money in one thing.Almost everything in life is cyclical and while lego is very up now it doesn't mean it will always stay that way.  While many people here enjoy lego there will always be HUNDREDS of new lego sets on the market.Our whole business money  depends on people wanting a specific set and paying a large premium for it. SO while boys building things will probably never go out of style having a HUGE collectors market where thousands of people pay large amounts of money for a specific item when they can get a substantially similar item for much cheaper can change at some point in time and don't throw all your eggs in one basket.

 

I was part of the Sports Cards/Beanie Baby market when it went bust.  I saw first hand people loose their shirts investing in Beanie Babies and sports cards for that matter.  It's food for thought.  Great find.

[TheDarkness]

I was part of the Sports Cards/Beanie Baby market when it went bust. I saw first hand people loose their shirts investing in Beanie Babies and sports cards for that matter. It's food for thought. Great find.

I got out of the card craze before it fully went pop. Hate to think how much I spent collecting Penny Hardaway cards though....

Good article though, always have to keep it in the back of the mind

[hollingsworthless]

While I think it's definitely a good idea to be cautious about investing, I think there is a distinct difference between cards and Lego. At the end of the day, even if the market crashes, you're still left with something practical, useful, and enjoyable, instead of just a piece of printed cardboard.

Of course, I'm also a small-time investor and if the market crashed, I would just open all of my NISB sets and build them.

[Huskers1236]

I got out of buying/selling baseball memorabilia cards when it was becoming obvious that the 1/1 cards weren't really that.  I bought and sold cards for hundreds, and even thousands each.  I got out and went to strictly vintage cards, but they really didn't gain much value either.  I sold everything a few years ago and funded this venture with the money.  This seems to be going well now, but my baseball card time is the main reason that I don't buy 50 of a single set.  If it goes belly up, I don't want to sit on all of that stuff.  I don't mind having 1 or 2 of a set, because I can always build, and should never really have a problem finding a buyer for a single copy, at at least MSRP, which would still be a gain. 

[Quacs]

Good advice, river41 - it can't hurt to be diversified. 

 

In learning about a number of the BP members through the forum, I think you'll find most (not all) either do this for additional income or as a hobby, and for the most part, those that do this for a living flip sets for the majority of their sales.  These members operate with the same risks as any other retail business.

 

I know a few members have portfolios worth hundreds of thousands of dollars, but of those select few, I believe they are diversified with other investments.  That doesn't mean there isn't the random member that's at risk. 

 

Re: Beanie Babies-

 

One of the major differences I see between Beanie Babies and Lego is that the Beanie Baby craze lasted a little over 3 years, a relative flash in the pan, while the Lego collector market has been around a lot longer.  Some members on BP have been investing since the Beanie Baby craze started in 1995, and 18+ years later the market is still strong (although by their admission, more difficult to make money).

 

I have a feeling that Lego may be trying to tamp down the secondary market for the same reason Ty's meteoric Beanie Baby prices spiked and crashed.  No doubt Ty helped fuel the Beanie Baby "bubble" by losing control of their distribution channels and pumping out more product to meet demand.  Eventually, the market became oversaturated at the same time people lost interest, and prices cratered.  I think TLC knows the Beanie Baby issue, and has begun asserting control over their distribution channels to head off a bubble.  TLC's explosive growth in the last five years may have them worried about an impending crash and subsequent devaluation of their product, so they're clamping down on their vendors to make sure the market isn't flooded with sets sold too cheaply.

 

Will we see some softening in the secondary market?  Perhaps, but I see a lot of people coming out of their dark ages daily that can only help drive interest in the secondary market.

[thirsty]

Not saying the whole thing can't go pop, but there is only so much you can do with a stuffed doll, or a piece of printed cardboard.  Lego is unlimited, I've seen more MOC's in the last couple months that comprise more bricks in sum total than I have collected, and sometimes by multiples.. and I'm probably over a couple hundred thousand pieces mostly in large sets..  Flickr is just inundated with a whole nother world built out of Lego. These are hardcore adult enthusiasts who's appetite for the brick will more than put a floor under the market.  When I was growing up there was no such thing as a lego camp, and most kids put the brick down around 12-14 to go chase girls.  Times have changed.  I would liken Lego more to gun, or coin collecting, or even car collecting, hobbies where the business cycle is less prominent if not altogether gone.

[Sauromosis]

TLC's explosive growth in the last five years may have them worried about an impending crash and subsequent devaluation of their product, so they're clamping down on their vendors to make sure the market isn't flooded with sets sold too cheaply.

 

Exactly right...which explains the drying up of deals on Amazon, and the even higher Toys R Us prices during BOGO. 

[DoNotInsertIntoMouth]

I think there are some parallels, but Lego is a little different because they know how to not oversell, how to retire items, etc.

 

Baseball cards also largely fell off because the sport itself fell off.

[redeemed763]

Some here are right with me when I say that I have a secret hope that the Lego market will completely bottom out. No, I don't really want that to happen, I'd hate to see lego stores closing and people loosing interest in the greatest toy, but the thought of grabbing truckloads of secondary market Legos for cheap does have its appeal. 

 

Hopefully most folks who have spent a fortune on Legos have sold enough already that aren't "all-in" with 100k+ tied up without ever getting returns. However, I know the founders of this site haven't sold anything yet and they most likely have well over 100k already invested. 

[surfnut]

As long as lego stores keep opening up and lego land is still popular among kids, it will be more difficult for this product to die on its own. I believe it helps generate more AFOLs every year based on these two reasons alone.

[Anakinisvader]

Some here are right with me when I say that I have a secret hope that the Lego market will completely bottom out. No, I don't really want that to happen, I'd hate to see lego stores closing and people loosing interest in the greatest toy, but the thought of grabbing truckloads of secondary market Legos for cheap does have its appeal. 

 

 

 

I think this is almost guaranteed to happen, not with TLG, but with all the new "investors" that just entered the market since 2012 and dumped tons of money buying up multiple sets at retail or just below.  In a few years, when the prices have not gone up as much as everyone is expecting, there will be a mass "dump" of product.  (not everyone is going to open thousands of dollars worth of LEGO-some will)  It will drive prices down but it will also be an opportunity to buy product at a blow out price. (I'm not comparing this to Sports Cards or Beanies but to the collectibles/toy industry in general-yes there are differences in product but the industry as a whole is generally the same.)

[p8nt4lyfe]

I would think that as long as TLG is out there advertising their products and putting new product on shelves that the older sets will retain their value.  I'm pretty convinced that if the Lego secondary market collapses I'll be the first one picking up all of the sets that I can...and considering that to me most of the $100 sets from a few years ago are still worth at least $100 to me means that people like me are probably going to prevent any sort of market collapse.  And quite frankly, because my portfolio covers practically every currently available line, I have so many sets that I would happily keep and build myself...market be damned!

[DoNotInsertIntoMouth]

I would think that as long as TLG is out there advertising their products and putting new product on shelves that the older sets will retain their value.  I'm pretty convinced that if the Lego secondary market collapses I'll be the first one picking up all of the sets that I can...and considering that to me most of the $100 sets from a few years ago are still worth at least $100 to me means that people like me are probably going to prevent any sort of market collapse.  And quite frankly, because my portfolio covers practically every currently available line, I have so many sets that I would happily keep and build myself...market be damned!

 

If only just the UCS SW market would crash for like 10 minutes and I could grab a bunch and then it go right back up.

[LowestFormOfWit]

...but the thought of grabbing truckloads of secondary market Legos for cheap does have its appeal. 

The trick is to find out how to get truckloads of LEGO for cheap right now, while the market isn't bottomed out. ;)

[El Guapo]

Not saying the whole thing can't go pop, but there is only so much you can do with a stuffed doll, or a piece of printed cardboard.  Lego is unlimited, I've seen more MOC's in the last couple months that comprise more bricks in sum total than I have collected, and sometimes by multiples.. and I'm probably over a couple hundred thousand pieces mostly in large sets..  Flickr is just inundated with a whole nother world built out of Lego. These are hardcore adult enthusiasts who's appetite for the brick will more than put a floor under the market.  When I was growing up there was no such thing as a lego camp, and most kids put the brick down around 12-14 to go chase girls.  Times have changed.  I would liken Lego more to gun, or coin collecting, or even car collecting, hobbies where the business cycle is less prominent if not altogether gone.

There was a little line in one of the articles I read that stuck with me.  It basically said that a bubble exists when people who purchase an item do so with the idea that it will increase in value.  Lego is different, as most of the purchases are made because the buyer wants to play with the bricks.  If it was ONLY investors buying up the Lego (like in the Beanie Baby fad) then we would be in trouble.

[spener90]

One comforting thing about this investing site, is quite a few of us have posted to the "What Lego set did you build today" part of it.

[Alcarin]

One comforting thing about this investing site, is quite a few of us have posted to the "What Lego set did you build today" part of it.

 

 

Yeh not to mention some (like me) did not even mention it in the thread.

 

 

I think for now its rather safe... but its getting more and more hard!

[Anakinisvader]

There was a little line in one of the articles I read that stuck with me.  It basically said that a bubble exists when people who purchase an item do so with the idea that it will increase in value.  Lego is different, as most of the purchases are made because the buyer wants to play with the bricks.  If it was ONLY investors buying up the Lego (like in the Beanie Baby fad) then we would be in trouble.

 

But, isn't that what this site is all about?  Yes, most of us are end users but also investors none the less.  Investing in the last year has caused a spike in LEGO sales.  I'm not saying there will be a bubble, I'm just saying its time to be very very cautious. 

 

Also in the BB fad, there were many end user buyers mostly women.  At the end of the day they quit buying because the prices got too high (secondary market) on certain beanies, TY got greedy and cut off a bunch of retailers, then TY increased production and flooded the market.  I was right in the middle of it. 

[exciter1]

I lost a boat load when I invested my whole wad in a new doll line:

 

[TheOrcKing]

I lost a boat load when I invested my whole wad in a new doll line:

 

Oh lord, please tell me that's a fake?! Oh wait, I just found the Huffington Post article about that. Good grief, who in their right mind could come up with this stuff?

[El Guapo]

But, isn't that what this site is all about?  Yes, most of us are end users but also investors none the less.  Investing in the last year has caused a spike in LEGO sales.  I'm not saying there will be a bubble, I'm just saying its time to be very very cautious. 

 

Also in the BB fad, there were many end user buyers mostly women.  At the end of the day they quit buying because the prices got too high (secondary market) on certain beanies, TY got greedy and cut off a bunch of retailers, then TY increased production and flooded the market.  I was right in the middle of it. 

Sorry...here is the actual quote "If the largest reason bringing people into the market and driving a price upward is price speculation and the hope of future profits, then it is very likely an asset bubble."  http://theweek.com/article/index/247125/the-great-beanie-baby-bubble.   (BTW...what are those stuffed Tiger's doing in that picture?)

 

I think most people on here are buying at or below MSRP then holding and looking to sell at a later date.  To me that is much different then someone buying the Imperial Flagship for $500 and looking to sell it later for $1200.  The people that are paying the higher amounts are typically end users, who just want to build the sets, as opposed to speculators who are betting on it continuing it's current rate of return. --- I take this back...this is how I do it, and many of you I have spoken to, I shouldn't try to speak for everyone on this site. 

 

You are absolutely right though...caution should always be the name of the game.  People should have an idea of what the set is going for on Ebay, what it is worth parted out and how long it has been for sale (or an expeceted EOL date if possible) when they are making purchases.

[scottjs]

Unless TLG starts pumping out sets and allowing anyone to purchase any amount, the latter of which is being stopped right now through Lego, I just don't see a crash happening, just slower growth. There would have to be a ton of stock sold at a cheaper prices (the B-Wing May 4th sale for example) and then not enough demand which would really only effect that specific set. Even with the B-Wing since the sale was North America specific the worst that could happen to investors would be having to sell them off to other countries and breaking even. TLG would have to considerably ramp up production of all sets worldwide and then another major global recession would have to hit causing them to slash price just to get rid of stock. At that point I think most investors will have more to worry about.

 

Oh and I want one of those pole dancing dolls, that's just good clean fun lol.

[Anakinisvader]

I lost a boat load when I invested my whole wad in a new doll line:

 

Did you buy the doll or just throw all your money on the stage?  BTW, that doll looks under age. 

[beeblet65]

one rule to remember.....never invest more than you are willing to loose

 

an hey, if the market went bust, i would have fun for months after!!! lol