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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.)

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    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.

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    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.

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    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.

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    Edited by thoroakenfelder

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    On February 12, 2016 at 3:58 PM, Darth_Raichu said:

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

    brickpicker_set_10215_1.jpg

     

    No,  I do not view this as a displayable set, or I guess I should say at least one that would appreciate or command a higher price point.  Why?  Because the design is forgettable.  I do not get emotional when I see it, and the average person would have no idea what it was.  A lot of what causes a set to rise is the EMOTION you get when you see it.  That emotion is what causes someone to want to spend a ridiculous amount of money to get it.  That emotion is what causes the level irrationality in bidding wars.  The Imperial Shuttle, Star Destroyer, Millennium Falcon, Super Star Destroyer, all give most sci fi people that emotion.  The Delorean has that emotion.  Ecto-1 has that emotion.  This is a forgettable design that evokes no emotion.  Despite AT-AT's being remade 3 times, each time it retires it quickly commands a higher price point.  Why?  Displayability and the emotion you get when you see an AT-AT.  I do not foresee any of the TFA sets to ever appreciate to the heights of the Original Trilogy, simply because there is less emotional attachment than that of The Original Trilogy.  Over 30 years, maybe the Sequel Trilogy will be able to evoke that emotion, but it will be a while before nostalgia sets in.  

    23 hours ago, varmintt said:

    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'sck 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.

    Sadly, it only took me 30+ years and many missteps for me to finally develop a system of picking sets and collectibles in which I rarely miss.  I still have an occasional miss, but it is very rare these days.  I am highly selective on what collectibles I buy to resell, and often times it is based on past experience which allows some degree of future prediction.

    I first started to notice this trend when I noticed Harry Potter which was a very popular IP could never command the same prices of the Star Wars ships, and could definitely never command the same return as a UCS ship.  A couple times I bought some Harry Potter sets on huge clearance, only to get home research the prices, and just end up returning them. (This was before the days of smart phones when you could research right in the clearance aisle).  Eventually, I realized that not even all UCS sets were created equal, as I noticed that the Darth Maul bust and Yoda Statue would never command a good price like the UCS X-wing and Interceptor.  As such I dumped all my money into UCS Snowspeeders and UCS Y-wings at the time.

    There was no way to predict the Millennium Falcon as it was the first time lego EVER made a set that big, and as such there was no previous precedent.  It was huge, heavy, cost a ton to ship, and most people on the forums at the time (I believe the only place the I was aware of back then was fbtb.net) didn't think the market would tolerate a 500 dollar ship, and couldn't imagine it going up much more.  It was CONSTANTLY on sale for 400 at LEGO Shop at Home.  It was practically on permanent discount to 400.  However, as we know now, the market will tolerate a ship that big.  It has to be the right ship.  It has to be a ship that evokes emotions and memories.  It has to be ICONIC.  There are few truly iconic vehicles, but that is one of them.  I think a UCS Cinderella's Castle would do super well due to the Disney popularity along with a UCS Space ship earth (golf ball at disney).  I question if a UCS titanic would do well simply because while iconic, it does not have a rabid following.  It would probably due well with female AFOLs, but I question how well it would do aside from that.  A Lego UCS Enterprise would do AMAZING in the after market.  It would likely not be a top seller during it's lifespan, but the aftermarket would be ridiculous, but the problem there is that Mega Bloks has that license.  A lego Original Cartoon version of Optimus Prime would do extremely well.  It would have to be the original, and not the movie version however.  In reality, there are very few truly ICONIC vehicles in movie history.  When I think of Avatar, I cannot come up with one vehicle design.  Same for Hunger Games, Indiana Jones, Matrix, and most movie franchises.  There are few things that conjure true emotion when you see it.  The fast and furious series has too many vehicles to count and nothing truly iconic.  The Enterprise is probably the most iconic thing Lego has not made, and will not make due to licensing issues.  

    On February 13, 2016 at 2:27 PM, guiriman said:

    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.

    I happen to have pretty good insight into who is buying these sets at such a high price, as quite honestly, I am one of them, and many of my friends are too.  There is a very small select population that is ridiculous enough to pay the prices that can push a set to a UCS Falcon or Taj Mahal level.

    On February 13, 2016 at 9:56 AM, AirborneAFOL said:

    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.

    Lego has been in a bull market since the mid 2000's at least as that is when I was into this hard core.  It was a bigger bull market then IMO as paypal and eBay fees were SO MUCH LOWER and USPS rates were also SO MUCH LOWER.  I think if I remember right, I always viewed paypal and eBay fees as around the equivalent of sales tax, at least KY sales tax which was 6%.  It was SO much easier to flip a set for a profit.  I had a friend who was the Vice President of a large law firm in Columbus, OH who even started flipping legos as he saw just how easy it was to make a profit on them back in the mid 2000's. He would flip legos as a way of making extra cash to fund his sons lego habit.

    These days it can still be done, but it is so much harder due to constantly rising fees and shipping costs.  Plus, as you said, the increase in resellers.

    Ultimately, there truly is no such thing as easy money, and as new investors will find, while Lego is a relatively safe bet, in today's climate, it takes a while to turn a reasonable profit, and if you don't have the capital to tie up for likely years, many people might jump ship pretty fast.  This is no Video Game launch where you can make a 100-200 a system in a quick flip.  There is money to be made for a patient investor.

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    Fair points - I'll confess I didn't come out of my "dark ages" until around 2013.  My impression of the 2000's is probably a little distorted by TLG's struggles during that period.  No doubt the bulls may have started running in the mid-2000's.

    Either way, seems we can all agree the market is showing signs of being near its peak at present, and the "easy money" days are long gone.  Still money to be made, but the margins have become leaner and risks increased considerably.  Seems the "better than gold" mantra is based on an outdated market assessment.  And is painfully prone to overlooking the "keys to ROI":

    1. Acquiring sets at around 50% (or less) MSRP.

    2. Acquiring those sets/themes that are reasonable limited in production and/or have considerable "display value".

    3. Maintaining a means (Ebay store, Amazon presence, etc) for SELLING them at a fair market rate (IMO, too much emphasis is placed on the acquisition of "investments" and not enough consideration on how to offload them).

    4. Ensuring a diverse portfolio such that you're active selling is keeping pace with active acquisition.

    Those 4 things are crucial (IMO) to being successful at Lego investing - but the "better than gold" articles seem to spur people to simply acquire everything they can get their hands on, which ultimately just creates more buyers (and a bunch of folks sitting on thousands of dollar of product in their closet, no ROI in sight).

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    14 hours 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.

    Blog articles aren't just to inform current BP members.. they help inform future members, help promote BrickPicker on other websites that may reference a well written blog article and they help provide content that Google is happy and able to properly index for it's search engine.

    As always, some perspective for the noobs. ;)

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