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    Throwing Money Away: Why Not Buy Everything?


     There have been many recent articles, all over the web, in local papers and on the radio. They're saying that LEGO investing is better than gold. It's sensationalist. It excites the imagination. It sounds easy. These articles point up the sets that have increased in value many times above their initial costs. Dreamers sweep store shelves expecting instant returns and easy money. Conventional wisdom says that you'll never lose money on LEGO, it will always be worth at least what you bought it for. What if it's not?

    I'd like to take a journey through the dusty backrooms of stores and the dark corners of investor's storage areas to look at some themes that proved to be so unpopular that if their demand and value hasn't remained flat, it actually got worse. These are themes that got the same market push as every other theme, but failed to capture the target audience.

    Let's take a look at some licensed themes from recent history:

    The first theme that we'll take a look at is Prince of Persia. Disney's attempt to turn a video game franchise into a profitable film franchise. LEGO released 6 Sets consisting of 7569 Desert Attack, 7570 The Ostrich Race, 7571 The Fight for the Dagger, 7572 Quest Against Time, 7573 Battle of Alamut, and 20017 Dagger Trap Polybag. All combined, this theme sold at retail for a total of $190.95 (Pre Tax of course,) the current value of these sets averages to $178.75. That's a return of 94% of the initial investment. It would be worse if not for the Polybag, which I calculated at retail of free because I couldn't find any data about cost.  (So, I assumed it was free.)

    7572-1_1262619091.jpg.1f92decd49ca538700

    The second licensed theme that we'll discuss is The Lone Ranger. (Personally, I loved these sets and wanted more. {if I could get them on steep discount.}) Disney released the Lone Ranger to poor reception and poor reviews. The days of the Western might be dead, and this theme sure did seem like a nail in the coffin. This theme consisted of 6 sets and 2 Polybags. They are 79106 Cavalry Builder set (How they can be cavalry without horses I don't know. I guess Artillery is confusing,) 79107 Comanche Camp, 79108 Stagecoach Escape, 79109 Colby City Showdown, 79110 Silver Mine Shootout, 79111 Constitution Train Chase, 30260 Lone Ranger's Pump Car, and 30261 Tonto's Campfire. The combined retail total before tax is $291.92 but when I get the average sold price for the last 6 months on Bricklink they sold for a grand total of $283. Slightly better than Prince of Persia with 97% remaining value.

    79108_500.png.7fad202e8b4d690b5b5855a15b

    It's probably not LEGO's fault that these themes died on the vine. Some might argue that if the source material had been better received, there would be greater demand on the aftermarket. It's a fair argument, but you could also point out that if LEGO had done a better job on the sets, they might have succeeded despite the failures of the original properties. If you think it's the fault of the source material, let's take a look at a LEGO owned theme that they got very wrong.

    For our non licensed theme  we'll look at the horror of Galaxy Squad. It is a continuation/expansion of the classic Space theme. Science Fiction has been popular for a long time, and little boys have always wanted to be an astronaut and kill space bugs. This theme had a whopping 10 sets and 2 polybags. The sets are 70700 Space Swarmer, 70701 Swarm Interceptor, 70702 Warp Stinger, 70703 Star Slicer, 70704 Vermin Vaporizer, 70705 Bug Obliterator, 70706 Crater Creeper, 70707 CLS-89 Eradicator Mech, 70708 Hive Crawler, 70709 Galactic Titan, with polybags 30230 Mini Mech, and 30231 Space Insectoid. That's about 4000 pieces of fun right there. All of those sets together would cost $479.38 at retail before tax. How much is Bricklink's average sold price for the entire series? $320. You're losing a full third of your initial investment if you bought these at retail and sold them for the average price.

    70703_alt1.png.00f5fa8eb08f039f1e93606e4

    Are these the only themes that have lost money? By no means. Early predictions are putting the future of Chima in the toilet. I'll let those of you inclined to do so research other past themes to see which ones should cause speculators to run for the hills.

    For those people who jumped in head first, thinking that investing in LEGO would be like printing money, this should serve as a sobering wake-up call. If you had bought any of these themes at retail, you'd have saved yourself time by handing $5 bills to random people on the street, or better yet, save the money by burying it in a coffee can in your backyard.

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    With every success story and humble brag about the times when someone guessed right, there's someone cursing the hundreds or thousands of dollars tied up in inventory, eating storage space. What can you do with all those Ostrich Races or Crater Creepers? I hear Toys for Tots accepts any toy that is unopened and unwrapped. You could break them down for parts, but that's a whole different headache.

    toys-for-tots.jpg.5a64acb703b98b33cb5ea6

    The average values that I list are not a complete indication of the value of these sets. Looking at Bricklink, many have sold or are currently available for notably less than the average. On the other hand, some bought these sets at significantly below average pricing. Prince of Persia has 2 unique animals (ostrich and camel) that have some demand on the parts market. Some people are making money on these sets. Smart money avoided these themes from the beginning, most even avoided them on clearance. Some, however, are wondering if it's possible to use these sets to make storage for their moneymaking investment. If you haven't thought about it, even if you sold at the listed average price, the amount of your return is at least 7% lower due to fees.

    If you're buying LEGO for investment and you don't know or don't care about the themes that you are buying, chances are that you're throwing money away.

    money-in-trash-can1.jpg.e08e0760f5bd76d9

    Edited by thoroakenfelder

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    1 minute ago, tjj1984 said:

    Was there ever anyone--anywhere--advocating buying *every* LEGO set? I think you're arguing a straw man.

    Was there ever anyone anywhere who jumped into buying stuff to make money without doing research and just buying whatever was to hand? I'm looking at you pogs, baseball cards, beanie babies, comic books, etc. etc. etc.

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    16 minutes ago, Rimmit said:

    People want to pay money for things they can display.  Many people buy things to have a complete collection, but ultimately, the items that ALWAYS sell for the most are the ones that are the most displayable.  My gobs of action figures Mint On Card don't matter because you can't put them up in an office and have them be acceptable from a display standpoint without looking bad or cheesy.  Some of the nicer action figures these days do pretty well, but again, it must be displayable, not look cheap, and typically the more articulation points the better.  But again IT IS DISPLAYABLE. 

    I always use the CEO Rule.  If you can imagine this in a CEO's office on a shelf or in a glass display case, then it will likely do well.  If you can't it is not as good of a bet.  The Lego playsets almost ALWAYS do worse than the vehicles and ships simply because most adults, who are the people can afford to pay 1,000's for a set, do not want to display Arkham Asylum or a Hoth Attack playset in their office.  The Modulars do well because they are a series, and many people want to have a whole town, and to have a complete town, they have to buy the first ones, which no one stock piled at the time. As time goes on, people jump on in the middle and then need to buy the subsequent versions.

    Just out of curiosity, do you think this set is displayable?

    brickpicker_set_10215_1.jpg

     

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    3 minutes ago, thoroakenfelder said:

    Was there ever anyone anywhere who jumped into buying stuff to make money without doing research and just buying whatever was to hand? I'm looking at you pogs, baseball cards, beanie babies, comic books, etc. etc. etc.

    Right, but the sole purpose of this website is to serve as a resource for LEGO investment research. If this article is not arguing a straw man, it's certainly preaching to the choir.

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    Don't listen to the haters. I started this recently without reading articles. I was buying Lego sets for my daughter (and myself) and saw they were never on sale and older ones were more expensive used now than they were new (HP and SW was what I was tracking). I then saw the JW selling over RRP and grabbed some on the shelves and sold on eBay and made some money over the holidays. As a newbie in a moderately affluent area, there were never discounts. So I made rookie mistakes and have a few hundred dollars sunk into sets bought at >25% off that will still take time to make any money (if they haven't all been given away as presents by then). This is a great article for people starting out. Sure, people made money on dud product lines, but most people would be lucky to break even.

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    1 hour ago, tjj1984 said:

    Right, but the sole purpose of this website is to serve as a resource for LEGO investment research. If this article is not arguing a straw man, it's certainly preaching to the choir.

    I don't know if the sole purpose of this website is for investment research. I like to think of it as a community of LEGO fans, collectors, and pure investors. Some people obviously fall into multiple categories. I can think of any number of reasons I love this site, beyond doing investing research.

    I don't think it's a straw man argument because there has been a fair amount of recent, relevant media attention suggesting that LEGO investing is a sure fire way to achieve great returns. This article is simply a counterpoint to that sentiment. For the seasoned, savvy reseller, this article might seem like obvious points, but for a noobie, maybe not so much.

     

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    8 minutes ago, tjj1984 said:

    Right, but the sole purpose of this website is to serve as a resource for LEGO investment research. If this article is not arguing a straw man, it's certainly preaching to the choir.

    Obviously you haven't noticed the spate of posts recently of "I just saw that I can make money on LEGO tell me what to buy." "I want to make money on LEGO, I just bought everything on clearance I could find." "Is it a good idea to buy these Chima that I saw for $1 off? I just started buying LEGO for profit."

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    There isn't anyone here that bought GS at MSRP I hope.  LR were mostly heavily discounted near the 30-40% range pre-tax/bonus points/rewards.  So if you got say LR for 40-50% off MSRP, if you sell it for MSRP you can still double your investment.  THis is nothing new here I'm sure.  Cost basis x resale value = profit and all.

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    25 minutes ago, phat64 said:

    There isn't anyone here that bought GS at MSRP I hope.  LR were mostly heavily discounted near the 30-40% range pre-tax/bonus points/rewards.  So if you got say LR for 40-50% off MSRP, if you sell it for MSRP you can still double your investment.  THis is nothing new here I'm sure.  Cost basis x resale value = profit and all.

    The problem with your statement is: who are you selling this to for MSRP? 

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    I'm sitting on 75% off GS that when it hits 25% off MSRP I still won't break 100% return after shipping and fees. Things like this helped me leave stacks of 40% off creator and friends sets the last month or two

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    4 hours ago, Phil B said:

    The problem with your statement is: who are you selling this to for MSRP? 

    You completely missed my point, which was that you buy sets based on your cost basis times what you think is your future resale value.  So there can be money to be made on terrible lines. Some people were easily able to buy GS/LR sets at 50-75% off.  They clearanced these sets heavily.  So, @ resale 50-75% of MSRP you still can double your money. 

    Reading comprehension bro.

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    6 hours ago, phat64 said:

    You completely missed my point, which was that you buy sets based on your cost basis times what you think is your future resale value.  So there can be money to be made on terrible lines. Some people were easily able to buy GS/LR sets at 50-75% off.  They clearanced these sets heavily.  So, @ resale 50-75% of MSRP you still can double your money. 

    Reading comprehension bro.

    I'm still not there ... explain yourself further (and without the pejorative undertone please). What I understand from your statements is:

    - You buy at 50-75% off.

    Then either (your second post):

    - You sell (quote "@ resale 50 - 75% of MSRP") for the same amount and double your money? Makes no sense to me.

    or from your first post:

    - (quote " if you sell it for MSRP you can still double your investment") you sell it for MSRP. This makes sense, but that's where I posed my (semi-rhetorical question): Who is going to buy this at MSRP, if every retailer had to discount the line to 50-75% of MSRP before it got bought? You need someone who is willing to pay this, and with most of the lines mentioned, those buyers are far and between. So the more realistic scenario is that you sell at 20-25% under MSRP, and then take into account fees and shipping you don't make much money.

    Of course there are people who do their homework on market research, know where, when and how to sell these sets at MSRP and make good money that way, but in the spirit of the article, this is not something a newcomer to investing and selling will automatically do right.

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    17 hours ago, Rimmit said:

    Legos are NOT a fad.  Even though Legovesting is more popular now, it is still not a FAD.  There are not groves of people lining up outside stores so they can invest in Legos.  People do not call every store in the area so they can buy legos.  Not only are Lego's not a fad, but the number of Lego fans grow worldwide EVERY YEAR.  Lego's are universal and loved in every country. 

    I've given this point a fair bit of consideration the past couple years.  While I certainly agree with your overall points (particularly the instrinsic value of collectibles being their display value, and Lego's enduring popularity), I do think there are some risks to "Lego investing" that I fear many of us don't fully appreciate.

    If you take the longview, and a true investment mindset, it's indisputable that we're in a bull market.  The 2000's were a horrible decade, when Lego's product was so shody and popularity in a "recession" - the amount of money trading hands on the secondary market was a fraction of what we are seeing now.  The Lego Movie was a massive succuess and kind of rang the bell to set the bulls running - Lego rose to the top of kid's Christmas Lists once again.  Combine that with The Lego Group putting and end to the missteps of the 2000's, and you have two major forces at play.  Add in Disney's purchase of the StarWars and a trio of films, and suddenly we're finding ourselves in the midst of a Lego boom.

    But as an investor, that screams to me that the market is in record territory, and potentially at a peak.  Can it go much higher?  It's tough to imagine demand growing much higher, and we're already seeing signs of a peak in terms of high ROI sets becoming tougher to come by as bargains get snatched up ever faster and ever-growing resellers drive down the market rates on selling. The mere fact it's getting tougher, not easier, to attain high yeilds is a red flag of the market being near its peak.

    All in all, Lego will certainly endure.  But what seems clear is the market is trending *away* from an "easy money investment".  Which really just means people diving into "better than gold" media hype Lego investing right now are likely poised for a sizable amouny of dissappointment - only the vest astute, committed (dare I say "fanatical") investors are currently making a sound ROI.  And that isn't likely to change anytime soon.

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    22 hours ago, Rimmit said:

    Lego's are like the Apple of the toy world, and as such are able to command higher prices than the average toy.

    Have to confess that I was wondering who was paying the super-high prices for UCS and the like, so this gives me some insight.

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    My two cents are that there are no sure things.  Sound bets, yes, sure things no.  UCS B wing being an recent example, measured from retail which is the consistent price point for those kinds of sets.  I am slowing down considerably and choosing much more wisely.  I passed on a good 30 sets yesterday.  I would have bought two years ago.  Not anymore.  People better be wise or the money will burn.  My ROI has been quite good too, after all fees averaging 90% plus.

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    7 minutes ago, waddamon said:

    My two cents are that there are no sure things.  Sound bets, yes, sure things no.  UCS B wing being an recent example, measured from retail which is the consistent price point for those kinds of sets.  I am slowing down considerably and choosing much more wisely.  I passed on a good 30 sets yesterday.  I would have bought two years ago.  Not anymore.  People better be wise or the money will burn.  My ROI has been quite good too, after all fees averaging 90% plus.

    I'm fairly new to the Lego game but have sold on ebay for years various things from baseball cards to lp records to antiques and like a lot of people bought legos on clearance and moved them for a decent profit...I've just now started to invest in legos full time and i realize from my brief purchases and extensive research reading hundred of articles and posts on this site that the exclusives seem more solid than buying random legos at your local retail MSRP or even at a discount...

    I look at Legos like i do investing in the stock market.....I love finding great deals on sale and clearance as well as getting stocks on the low end like everyone else but i also believe you should pick and choose wisely......And getting advice from people is great as well (No charges on here unlike previous stockbrokers of mine...LOL) but at the end of the day i think everyone has to do what is best for them regardless if you're buying Legos, Stocks, or the next sure thing to come along (I know many who have dropped thousands into POP Funko...All i'm saying)

    Bottom line is to have fun and be smart and don't go bankrupt or maxing out credit cards....Only spend what you can afford and realize not everything is a winner!

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    On 2/12/2016 at 0:39 PM, Rimmit said:

     

    I always use the CEO Rule.  If you can imagine this in a CEO's office on a shelf or in a glass display case, then it will likely do well.  If you can't it is not as good of a bet.  The Lego playsets almost ALWAYS do worse than the vehicles and ships simply because most adults, who are the people can afford to pay 1,000's for a set, do not want to display Arkham Asylum or a Hoth Attack playset in their office.  The Modulars do well because they are a series, and many people want to have a whole town, and to have a complete town, they have to buy the first ones, which no one stock piled at the time. As time goes on, people jump on in the middle and then need to buy the subsequent versions.

     

    You just put into words exactly what I've been coming to realize but unable to verbalize so succinctly.  Lot of wisdom in that paragraph right there.  Newbies should take notes.  If I had understood this concept when I got started I'd be sitting on a pile of black pearls that were selling for 80 bucks a piece during Target.com's Black Friday sale that I passed on (still kicking myself).  I did however load up on x-wing 9493 that year which have done very well, again supporting your point.

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    On 2/12/2016 at 5:20 PM, Deadfraggle said:

    I don't know if the sole purpose of this website is for investment research. I like to think of it as a community of LEGO fans, collectors, and pure investors. Some people obviously fall into multiple categories. I can think of any number of reasons I love this site, beyond doing investing research.

    I don't think it's a straw man argument because there has been a fair amount of recent, relevant media attention suggesting that LEGO investing is a sure fire way to achieve great returns. This article is simply a counterpoint to that sentiment. For the seasoned, savvy reseller, this article might seem like obvious points, but for a noobie, maybe not so much.

     

    I'm new around here, so I'll concede the fact that I may have misinterpreted the intent of the website, but the tagline is "LEGO PRICE AND INVESTMENT GUIDE."

    I thought the article was well written, but I still don't think it was a point that needed to be made to this audience.

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    On 2/13/2016 at 8:04 PM, Phil B said:

    The problem with your statement is: who are you selling this to for MSRP? 

    Do you mean that you doubt that LR sets can be sold for MSRP at the moment? 

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    1 hour ago, tjj1984 said:

    I'm new around here, so I'll concede the fact that I may have misinterpreted the intent of the website, but the tagline is "LEGO PRICE AND INVESTMENT GUIDE."

    I thought the article was well written, but I still don't think it was a point that needed to be made to this audience.

    I'd concede, and most of the discussion backs up the point, that most of the audience of the website doesn't need to have this point made. However, a certain percentage of the users, ones who signed up recently, are not doing the research and are asking to be spoon fed how to do this do need it. There's a certain population that needs to be faced with the hard reality that they need to be discerning and do the research.

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    Do you mean that you doubt that LR sets can be sold for MSRP at the moment? 

    No, my comment was more directed to Galaxy Squad, and was more generic to buying sets on discount "just to because they are on discount". Without understanding who your buyer is and why they might want to buy from you once a set goes EOL, especially if you need them to pay MSRP, you might be in for a surprise, and not a positive one.

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