Investing In Lego Bricks For Fun But Mostly Profit 98
First time accepted submitter theideabulb writes "Just as stock investors have portfolios of all different sorts of stocks, Lego investors hold massive collections of Lego sets and can make annual profits that beat stocks. This article is a looking into the world of the little plastic brick that makes money for LEGO fans and a website that helps track peoples' collections to help them track their profits."
Um ... excuse me ... (Score:4, Insightful)
... but these people haven't made a "profit" until they have SOLD their holdings.
Who to? Other investors? What if they all sell at once?
This is basically a pump and dump scheme now... (Score:5, Insightful)
High risk, low return (Score:5, Insightful)
As for this article, being that it came long after many "investors" have bought their stocks, it smells oddly like just a run-of-the-mill pump-and-dump scam. Except that instead of posting it on obscure investment "advice" sites, they used the Lego brand nerd attraction to post this BS somewhere mainstream.
NOT a commodity (Score:4, Insightful)
"These things are gold," Jeff says.
A huge mistake in that comparison.
Gold is produced by a zillion miners all over the world at a more or less long term stable labor cost
Gold can be repurposed / recycled / remanufactured pretty much infinitely
Gold at least fundamentally has a long term "drain" to the market in industrial processes and electronic connectors, etc, and a medium term "drain" as in give a girl a piece of gold jewelry and it "probably" won't be melted down for a lifetime or at least a little while anyway. So the market has both a source and a drain (no gate, so its not a FET (sorry)) and its got both short liquid traders and long term non-liquid owners. Those combined make a stable long term market.
Lego is the opposite of all of those characteristics of gold. For example, nothing stopping Lego Inc from buying short futures on the price of the classic millennium falcon, and shipping a million $50 made-in-china clones imploding the price, making serious bank off the futures and selling new identical sets to all the suckers.
He is correct that lego from an inflation standpoint is an adequate stand in for any other generic commodity. It is, fundamentally, a refined petroleum product. Made out of oil, shipped by oil... So on a long term basis should track oil, more or less. The imaginary govt propaganda inflation numbers don't count energy prices in order to keep the figures low... no great surprise that an oil surrogate product is rising in price faster than the propaganda inflation number. For a very small time investor its a pretty good commodity oil surrogate, can anyone think of a better one? Better as in a more "pure" surrogate or higher weight/volume cost density?
Possible profits. Certain risk. (Score:5, Insightful)
This is the same as other collectibles like Beenie Babies or Magic: The Gathering cards. Yes you can make money at it but it is a tiny market and carries a lot of risk, particularly inventory risk, liquidity risk, and demand risk. It's one thing to buy Legos at wholesale and sell at retail. It is quite a lot more difficult to make money trading on volatility and relative scarcity. Furthermore this only works if there is a relatively small number of people doing it who have knowledge of the market that is not widely known. If it becomes a Beenie Baby craze, people will jump in and turn it into a bubble that will inevitably pop.
Re:High risk, low return (Score:4, Insightful)
I think if Beanie Babies have taught me anything, it is that toy collecting is extremely volatile, and if people think they can buy something for collecting or investing, chances are, it will never increase significantly in value. As for this article, being that it came long after many "investors" have bought their stocks, it smells oddly like just a run-of-the-mill pump-and-dump scam. Except that instead of posting it on obscure investment "advice" sites, they used the Lego brand nerd attraction to post this BS somewhere mainstream.
The real problem with the strategy is not someone trying to run a pump and dump but that there is no liquidity in the LEGO market. Just because a set went for $400 on Amazon doesn't mean your set is worth that; you still have to find a willing buyer at that price. There is simply too little volume to accurately assess value. Add to that the limited size of the collector's market and it's not a real scalable solution - just because LEGO sells xx sets at $100 and a year later a few are sold at $200 doesn't mean the rest could be sold at $200.
Finally, returns should not be calculated based on a few sales and the estimated value of the rest of the sets; rather look at the actual cash received less outflows for insurance / storage/ etc. divided by the invested capital. Compare that ROI to other investments and see if the potential is worth the risk.
Sure, you can make a few bucks off of LEGO, especially for high end limited editions, but it's not a strategy that would work for any sizable portfolio. When you add in the risk of LEGO deciding to reissue a piece or continue to make it so there is no secondary market and the risk/reward ratio may not be so favorable.
One word: Barbies (Score:5, Insightful)
Barbies apparently do appreciate in time, but it's because they intentionally manufacture limited runs/editions. Not so Legos: if something is selling well, they make more of them. You can still buy brad new Death Star kits.
My sister used to buy Barbies for my niece, and I came to visit once, and there were these boxes of barbies over her bed. She had never been allowed to take them out and play with them. hat day, I immediately went down to the store, bought several + outfits, and ripped them all open, stuffed them in a cardboard box so nothing remained of the original wrapping, and brought them over to my niece so she could finally play with the damn things. To this day, I am her favorite uncle.
It's OK to invest in toys for known to be limited runs (i.e. generally not Legos, whose meaning for "Limited Edition" is "sold only at the Lego store and one or two other chains, not everywhere"), but don't torture your kids with the things, that's all I've got to say.
Re:I want to say one word to you. Just one word. (Score:2, Insightful)
I get the reference, but what I came to say is...
Of all the companies that I can think of, I would say Lego is most vulnerable to a 3D printing boom. It may start with printing replacement pieces. It'd be a long slow decline though, a la CD, as I can't see 3D printers becoming ubiquitous that soon, nor can I see them being capable of producing all the pieces (transparent plastics, etc).
Actually Lego is pretty damn safe from 3D printing. IIRC Lego molds are broken and replaced every 1000 bricks to conform to the rigid Lego standards.
This is a huge reason why all of my 30yo Lego bricks still fit together with the satiating Lego "snap".