What's Wrong With A Little Bit Of Speculation: Part II

April 21, 2016

At 11:59 pm., on May 3, 1999, I braved the fierce crowds at my local Toys “R” Us store located in Wyomissing, Pa. Looking back at the event now, I know my time would have been better spent elsewhere (or at the very least sleeping). It was on this date that Hasbro Toys and Lucasfilm released the very first wave of toys and merchandise for the first new Star Wars film in well over 20 years. "Star Wars: Episode I: The Phantom Menace" would be released on May 19, 1999 and open to mixed reviews while still setting multiple box office records in the process.
Almost 20 years later the toys and action figures released on that sleepless night are still worth less than what they originally retailed for. Compared to the dramatic price rises still occurring on the original toys and action figures based on the original three films released back in 1978 this has left a lot of uneducated collectors and speculators scratching their heads while well experienced collectors already knew the fate of those new toys before they even hit the shelves. They were destined for the bargain bin the minute they were overproduced and bound to stay there for all eternity.
In my last article, I gave readers an in-depth look at the modern nature of today's speculative collectibles trade. A trade where $249.99 Lego Star Wars sets are routinely hoarded along with $59.99 Nintendo video games. A place where any would be speculator can find praise just by joining one of the many websites based on speculative hoarding and so-called investing. If it is a widely popular collectible that is mass produced, chances are there is a corresponding Internet forum devoted to it. Unfortunately, some of these forums are extremely biased and tend to back up a would-be speculator's desire to make money rather than deal with topics that show just how hard the life of a speculator can be.
As a longtime collector and enthusiast of a lot of popular mass produced toys and collectibles, I have a habit of buying almost two of everything; one to play and use and the other to keep in factory sealed condition. Growing up this practice drove my mother and father crazy. From Nintendo games to action figures to toys I almost always bought two of everything. By the time I started college I had a steady and growing collection of a lot of popular items and various collectibles from my youth. Most of these items were about 10 years old by this time and most had yet to even appreciate to any significant value over their original retail price.
In fact, a very scary trend had started to develop. Aside from a few choice items most of the items I was holding in brand new factory sealed condition were worth significantly less than what I paid for them. Time and general obsolescence had rendered some of these items almost worthless. It would take almost another decade or more for anything worthwhile to develop a true value on the secondary market. It was also at this point in time I had to look at getting more storage space for the items I was actively collecting. Renting a climate controlled storage unit seemed like a good idea, but at well over $100 a month it was sure to be an expense almost unwarranted. Still, I wanted to keep the items I cherished so I decided to go along with this plan. It was during this time I was also buying and selling various antiques and collectibles on the side so part of the cost could be written off on my taxes as long as I used a large percentage of that storage for my side business. Almost 20 years later and I still rent a climate controlled storage unit (or two) at a cost of about $130 a month and I'm still running out of room.
Ironically, some of my biggest critics who argue in support of speculation continually point out that I have in my possession some highly coveted items from my youth. I do not dispute these claims. Instead, I merely point out that I have literally spent well over $30,000 in climate controlled storage costs alone. This usually silences my most vocal critics. And when these same critics argue that it was my choice to pay for storage I routinely have to remind them that even the smallest collectible has to be preserved and maintained in near mint to mint condition to be worth anything. This is especially true of mass produced items less than 30 years old. The costs of insurance, storage materials, plastic storage bins, and shelving cannot be minimized. I venture to guess I have over $5,000 to $10,000 invested in storage materials alone. Insuring all these items has taken a considerable amount of funds as well. I spend roughly $1,000 to $2,000 a year to insure my vast collections and while this includes more valuable antiques as opposed to the majority of my mass produced collectibles sitting in storage it is a still a necessary expense that few speculators take into consideration or risk going without. When I attempt to lecture some of these speculators on these basic costs they attempt to minimize them.
Even still, none of these costs have yet to take into account the cost of inflation or the opportunity costs associated with tying up one's money in mass produced items instead of income producing assets like stocks, bonds, and real estate. Even with the horrible market crash that occurred in 2007, even I would have fared much better if the money spent on most of these items was invested in an indexed mutual fund instead of mass produced toys and games from the 1980s and 90s. In fact, I consider myself very lucky because I had assets in the stock market during this time and only because of my own tenacity to ride out the economic storm did I eventually prosper while some of my impatient friends and acquaintances chose to cash out their holdings. Some of these investors are now increasingly scared of the financial markets as a whole and are looking to so-called alternative asset classes.
Is this same group of like-minded investors driving the current speculative boom we are seeing in the modern day collectibles trade? Are they the ones driving the media to report on stories about so called Lego investing and Amiibo hoarding? Time will tell, but I would not be betting my golden years on how many new collectors of vintage factory sealed Lego sets are coming into the market. I would hope readers know better too. And before I get an endless amount of emails on this topic I should note that I am by no means criticizing the amount of legitimate and experienced businesses that cater to reselling these items. I am merely arguing against mass hoarding and speculation of the items in question. I am sure I will revisit this topic soon and to answer my original question, there appears to be a lot wrong with just a little bit of speculation in today's collectibles trade!


 

More Articles