Speculation in the LEGO Market: Will there be a Bubble?

Beav

I don't think that any bubble will burst, its been too popular for too long, its not a sudden craze.

But, I do think that it's inevitable that there will be a downward trend in its value, most collectibles go through up and down cycles, I think currently Lego (Minifigures especially) are on a record crest, but it can't carry on forever.

TheLoneTensor

It is not prudent to put lego minifigures and sets together in the same "bubble" comparision. Both will follow trends, only one has a potential bubble.

tom4086

Too popular for too long? Yes Lego has been around for a long time, but it hasn't always been as popular as it is today....

CCC

tensor said:

It is not prudent to put lego minifigures and sets together in the same "bubble" comparision. Both will follow trends, only one has a potential bubble.

They should definitely be separate. But there's a possibility for a bubble burst for both, if anything better than Lego came along. Far fetched, I know. But possible.

Expensive minifigs will have a bit of a bubble when quality minifig printing at home becomes more commonplace. Especially for figs made with basic parts.

nkx1

With a few exceptions, it might be reasonable to state that many people here who "invest" in Lego probably don't have $50k+ in inventory. From what I've read, many people seem to have well under $10k in inventory. Many such people seem to be of the opinion that, if the market for Lego tanks, then they'll just have a bunch of sets to have fun with. For me, I just resell to try negate my expenditure on my Lego hobby. If the market tanks, oh well- I guess I have birthday presents for relatives and friends' kids for a (long) while.

I do generally agree, though, having $100k+ in inventory would certainly not be a suitable risk for me. Then again, the stock market (with the exception of a modest retirement account or two) is not really a suitable risk for me either, so perhaps I'm not the best person to gauge suitable risk. Personally, I'd much rather use extra money to invest in rental property (which I've done). After all, people are always going to need a place to live, particularly in certain areas such as Southern California. At the end of the day, though, everyone has different risk tolerances, and given the fairly stable Lego market over the past decade+, who's to say it's much worse of a risk than the stock market? It's certainly not a risk I'd take on a large scale, but some people seem to do quite well at it.

I think the Beanie Baby family made a fatal error, and that is putting all of their eggs in one basket. Not that I'm any investment wiz, but most people will agree that putting everything you have into a single investment is generally not a wise idea.

Legofanscott

Im more worried about this new chinese factory opening than a bubble bursting.

Ive got a bad feeling when that place opens its doors

Pitfall69

This is true with any collectible/investment. The one thing that Lego has, that all collectibles don't have, are many uses. Some Lego sets make great display pieces. You can play with Lego. You can teach with Lego. You can recycle Lego. Fans of certain licenced themes will buy Lego because they have to have everything Star Wars or Harry Potter. There are Lego theme parks and Discovery Centers and Lego stores. Name one collectible that has even a fraction of the uses that Lego has?

BrickDancer

^Cars.

Pitfall69

Yes, but Lego doesn't cost much if any to maintain. You don't need a licence or insurance to collect Lego and storing Lego is a lot easier than storing a car. Also, when you buy a Lego set, you don't lose 30% right off the bat when you walk out of the store. I'm no expert, but I think most Lego appreciates faster than a collectible car does. 98% of all car lose value.

Most of all, children cannot collect cars ;)

Pitfall69

*disclaimer

Numbers and figures are just estimated values.

wrangler6915

^not true. I'm pretty sure my toy story build a zurg sets and pop sets all lost at least 30% when I walked out of the store

Pitfall69

I said "most" lol. That set is the antithesis of the UCS Falcon.

TheLoneTensor

Well, if there is a bubble for sets, it'll be much less severe. The only time I really see the set bubble bursting is if Lego overall loses appeal by something else supplanting it. That, or something else in the world goes way South, in which case, Lego boxes in the closet will be the last thing we will be giving a crap about.

TheLoneTensor

At first glance I thought this thread was going to be about LFT :)

piratemania7

What's a bubble? That's where we really need to start. There was the housing bubble where housing was way overpriced and the housing market itself became a fantasy land. The ensuing chaos and "great recession" here in the US has solidified what a "bubble" really means in the hearts and minds of people around the globe.

Now, translate that immediately over to LEGO. Is there a bubble? Was there a bubble? WILL there be a bubble? I think this is speculative at best but I think if you look at it in terms of overpriced and overvalued sets and minifigures then yes, of course there is a bubble.

I think at this time whatever "bubble" exists will soon deflate, whether soon is a year or two who knows but I think a lot of people have come out of the dark ages and bought up LEGO and got back into it and I think the market will stabilize. Remember LEGO was immensely popular in the 90's and had ebbed and flowed since then. I think we will see a correction followed by some stability.

gmpirate

wrangler6915 said:

Maybe I'm just sour grapes, but I think it is borderline crazy to spend $100K on a speculative toy craze, like these people did...and evern crazier (or maybe stupid) is that the goal was to pay for college for their kids this way!

It's all relative. Crazy to you, maybe for them, a small percentage of someone else's business assets.

I guarantee you that $100k+ in Lego sets is very common for a lot of people. Tough to make much of a go of it with less than that -- at least from a business perspective.

Legofanscott

piratemania7 said:

What's a bubble? That's where we really need to start. There was the housing bubble where housing was way overpriced and the housing market itself became a fantasy land. The ensuing chaos and "great recession" here in the US has solidified what a "bubble" really means in the hearts and minds of people around the globe.

Now, translate that immediately over to LEGO. Is there a bubble? Was there a bubble? WILL there be a bubble? I think this is speculative at best but I think if you look at it in terms of overpriced and overvalued sets and minifigures then yes, of course there is a bubble.

I think at this time whatever "bubble" exists will soon deflate, whether soon is a year or two who knows but I think a lot of people have come out of the dark ages and bought up LEGO and got back into it and I think the market will stabilize. Remember LEGO was immensely popular in the 90's and had ebbed and flowed since then. I think we will see a correction followed by some stability.

Wasnt Lego pretty popular in the 60's 70's and 80's too?

Its just that back then there was no internet No MOC sites, no forums no blogs no websites no nothing so there really wasnt much of a way for fans to communicate with each other back then.

piratemania7

@legofanscott oh yes you are absolutely right. I guess I was referring in my case to themes like pirates that became so popular and since have gone away...

Dougout

I think the gains in the aftermarket may be decreasing a bit, but I wouldn't say a bubble is forming. The main problem with the beanie baby bubble that this family didn't see is that no one actually plays with beanie babies meaning they have no value other than the aesthetic aspect.

You also can't market things to mass consumers solely on the fact that they are collectible which is what beanie babies did. Beanie Babies only got popular because around 1990 when their early ones would retire they would become very valuable and thus more people started stocking up. More people getting into them caused TY to start selling them everywhere rather than the original Mom&Pop shops that they started in. TY saw the craze for what it was and decided to milk their consumers for their money. They still sell beanies even though they released beanies called "The End" when they saw the craze dying off and tried to separate themselves from the bottoming out of the market.

I guess TLG could be milking the collectible craze with Mr. Gold and the series minifigs and they might even try to keep modulars out longer so resellers can stock up, but this is far different than what TY did. If the value of the aftermarket went to 50% MSRP that would mean the pieces aren't worth as much either and thus LEGO itself has taken a dive in value. They want people to value their product as much as resellers do.

Basically, collectible items need to be useful or have some sort of value other than their "collectibility" (made up word) or they will run the risk of losing any kind of value at all.

nkx1

gmpirate said:

I guarantee you that $100k+ in Lego sets is very common for a lot of people.

I really don't understand this statement. Among the general population of Lego fans and resellers anywhere, I can virtually guarantee the opposite! Perhaps you intended to apply this statement only to serious Lego investors? But even then, I would guess that there are no more than a few dozen of these people in the entire U.S., if that. It's a total guess, admittedly, but a loosely educated one gauging by ebay and Amazon listings of retired sets.

The US Census Bureau reports that the median household net worth for the richest region (northeast) was just over $90k as of 2011. While I do agree that $100k means more to some than others, people (individuals) with $100k of Lego inventory are probably quite rare.

Source: http://www.census.gov/people/wealth/files/Wealth Highlights 2011.pdf

doriansdad

wrangler6915 said:

Maybe I'm just sour grapes, but I think it is borderline crazy to spend $100K on a speculative toy craze, like these people did...and evern crazier (or maybe stupid) is that the goal was to pay for college for their kids this way!

That is precisely why I never use my own capital to make risky investments.

peterlinddk

I don't know if Beanie Babies even exists (or existed in the 1990ies) here in Europe, but I've only heard of them as a "collectible craze", and never as just a toy.
LEGO is different, in that most people (more than 90% according to TLG) buy LEGO as a toy for playing with. People have kept their old sets in storage, not for resale, but for toys to their own children. By some strange coincidences, some LEGO sets have been highly sought by collectors, and therefore has tremendous value - other sets are just toys for playing with.
However, any LEGO set is always a collection of bricks, and therefore never completely worthless - but the number of people who thinks of LEGO as a possible investment, compared to e.g. Action figures, are very, very few.

So it won't be the fate for LEGO to completely lose its value, but if you go and spend $100.000 you probably won't make a profit, but you won't lose everything either ... LEGO bricks are always, and will always be, worth "something".

doriansdad

The only bubble is Lego's own image that they insist on tarnishing by selling chase figs, rehashing UCS sets, pursuing too many licensed themes and laying off Danish workers to expand Chinese production. Ultimately they will have to shutter some doors down the track as they expand too quickly but their classic sets will forever remain highly collectible and increase in value appropriately....ironically if they ever do go bust their sets will skyrocket in value even further.

Crowkillers

LOL.. I remember my dad sold 2 of my younger brother's beenie babies at a toy show for $2,700.00 it was Digger the crab and Web the spider... I don't think they are worth anything now...

khmellymel

^ I think I have the McDonald's version of the crab somewhere...

Pitfall69

There's medication for that ;)

fy222

the risk is lego co. went to the fringe of bust, and inject volumes of products into the market, increasing the supply.

how you are going to compete with that to stop your inventory from depreciating?

retired retired license sets might do slightly better.

cheshirecat

as has been said the intrinsic difference with lego is the basic value of the pieces. so long as lego doesnt completely fall out of favour (not going to happen any time soon) then there will still be some value there. However, the further a set, sets or figures get away from that baseline the more the risks go up.

one possibility though is that the current trend is driven by adults with money remembering their childhood. Im from an age where my indoor play was dominated by Lego. there wasnt much else and what there was (early video games for example) hasnt aged well. I have little interest in replaying elite on my bbc master or frog bog on the intelivision (ive tried, it wasnt good) By contrast lego sets are much the same today as before, better perhaps but fundamentally the same. will todays kids feel the same or is lego to them just one of many pasttimes? Equally there were many sets i craved as a child but were always outside my grasp. space monorail for example. if my kids wanted a similar priced set now they'd have it. I do wonder if that element of being able to have now what we couldnt have as kids is a big, even main, driver for many afols. i just dont think its going to be there to anything like the same extent for the current kids. I can see a decline in afoldom over a period of time for these reasons but not a bursting bubble.

There are regional differences too, for example, outside of the US it seems comic books are going through a fairly temporal popularity. Marvel/DC havent been forever popular over here, at least from what ive seen, and its entirely possible they could fall out of favour again and their value fall. it may be that theyre value in the us is more robust though.

jasor

nkx1 said:

gmpirate said:

I guarantee you that $100k+ in Lego sets is very common for a lot of people.

I really don't understand this statement. Among the general population of Lego fans and resellers anywhere, I can virtually guarantee the opposite! Perhaps you intended to apply this statement only to serious Lego investors? But even then, I would guess that there are no more than a few dozen of these people in the entire U.S., if that. It's a total guess, admittedly, but a loosely educated one gauging by ebay and Amazon listings of retired sets.

The US Census Bureau reports that the median household net worth for the richest region (northeast) was just over $90k as of 2011. While I do agree that $100k means more to some than others, people (individuals) with $100k of Lego inventory are probably quite rare.

Source: http://www.census.gov/people/wealth/files/Wealth Highlights 2011.pdf

It's easier than you would think, even as a passive collector. My first year out of the dark ages, I purchased around 4K (worth, not physically) of Lego. Just because some people have 100K in Lego, doesnt mean they've SPENT 100K in Lego.

There are many many many many AFOLs who have collected for 20+ yrs. The numbers would probably surprise you. There is the Brickset effect, as well, however. It's something new forum joiners should be warned about.

They go into "pokemon mode" with GOTTA CATCH EM ALL!!! Gen pop have that much $$ tied up in Lego? No. "A lot" of people with over $100K in the hobby, whether for business or pure collecting? It's really not a stretch.

pillpod

I'd say its definitely more than a few dozen with $100K invested/have $100K worth of lego. Just look at all of the big BL stores, ebay sellers, etc. A bunch of them easily have $100K worth of lego.

If you only collect what you like and enjoy, the potential bubble burst is actually good for you. That's the category I fall into; it doesn't mean I'm rooting for a bubble to burst, though.

wrangler6915

The point about $100K is that there is a difference between having a collection you intend to keep and enjoy that is worth big money, versus plopping down $100K to buy inventory with the intention to re-sell. If you collect, then you are most likely not intending to sell or perhaps only as a means to fund your hobby or if you need the money for something else. It's enjoyment of a hobby vs. a speculative "investment".

Ronyar

So the open question really is how many people out there have $100k tied up in "investment" Lego? Does anyone know how big the really big Bricklink stores inventories are? Would they be a good representative sample of all resellers, or only those that are willing to part out sets?

BoiseState

I had about 10k once, and I thought that was a lot. Down to about 1k now, and will stay there.

FollowsClosely

I have never had over 50K in my resell stock at one point. However, I am by no means a large fish in the pond of resellers.

TheLoneTensor

BoiseState said:

I had about 10k once, and I thought that was a lot. Down to about 1k now, and will stay there.

I bet you sleep a little better now :)

CCC

Bricklink parts sellers are not typical of all resellers, especially ones that sell sets. They are two very different games.

doriansdad

Ronyar said:

So the open question really is how many people out there have $100k tied up in "investment" Lego? Does anyone know how big the really big Bricklink stores inventories are? Would they be a good representative sample of all resellers, or only those that are willing to part out sets?

I would say those that have employees have well over 100k in inventory. I don't know how many operations use employees but I can guess at least 20-30 in the USA. I know of one reseller in the NW that has well over 1 million in retired Lego sets but he sells many more collectibles than just Lego and has a huge warehouse operation.