The Triad Perspective

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Crazy, Baby, Crazy

I recently stumbled across an article about Beanie Babies. I remembered the phrase vaguely. Beanie Babies. Some kind of doll, right? People collected them? It was a craze, right? I guess I slept through the whole thing. I've done that before.

Savvy marketing by Ty Warner--who scored $1 billion hawking the Babies--and collector frenzy created a nationwide mania for Beanie Babies during the 1990s. Twenty-five years after debuting in 1993, Beanie Babies are still regarded as one of the collecting world's biggest bubbles.
In hindsight, collecting BBs to sell at a higher price down the road was destined to fail. The BBs were marketed as collectibles. So, what happened? Parents, with dollar signs in their eyes, bought BBs and promptly put them away, anticipating a big payday, someday. BBs didn't get worn out or destroyed by eight-year olds playing with them. So, the rarity factor just didn't happen. The world is still drowning in used BBs.

Some people believed that BBs could be a great investment. One dealer remembered a $500,000 deal for 28,000 BBs in the mid-1990s; today they're practically worthless. Had that $500,000 been invested in the stock market, well, it wouldn't be worthless. It would be worth over $3 million. Ouch. A divorcing couple actually divided their Beanie Babies collection in a courtroom!
I'll tell you who did make out well from Beanie Babies. Ty Warner! According to Forbes magazine, he's worth around $2.7 billion, having wisely diversified his fortune near the top of Beanie Babies mania, into high end real estate in Manhattan and California.
The lesson is obvious. Most of these "collectibles" are really "forgettables." Who remembers Pogs? Cabbage Patch Kids? Pokemon cards? Sports cards? McDonald's Happy Meal Toys?  Hot Wheels? Comic books? Thomas Kinkade paintings? Hummel figurines? There's more, but you get the idea. As the bible says: "many are called, but few are chosen."
Sure, once in a long while, someone gets lucky and buys a baseball card or a Princess Diana doll that becomes a truly rare and valuable collectible. People also buy lottery tickets, but that doesn't make them good investments. If a person collects for enjoyment, and it doesn't consume their budget, that's fine. Just don't expect a big payday.
It's particularly sad because too often the people who fall for these get rich quick schemes are the folks who can't afford to "invest" in this stuff. So, do yourself a favor the next time a "hot" collectible comes to market. Put that Beanie Baby back on the shelf, go for a long walk, and think instead about investing that money for your retirement, your kids, or your grandkid's education. Or, donate the money to charity. At least you won't own a bunch of dust-collecting Beanie Babies.
-John Heldman, CFA

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