To all - O.T. (but maybe not as totally O.T. as one might think) (we need to consider the huge "flow of funds" that could be "un-leashed" into financial assets)
September 25, 1998
Ready for a Bear Market? Some Worry
That the Beanie Baby Craze Is Going Soft
By RICHARD GIBSON
Staff Reporter of THE WALL STREET JOURNAL
With Asian economies shrinking, the Russian ruble collapsing and world stock
markets swooning, little noticed have been the dark clouds gathering over
another high-profile market: Beanie Babies.
Since bursting onto the toy market in 1994, the little stuffed critters, selling for
about $5.95 at retail, have turned into an instant and volatile collectible market.
Magazines, Web sites and books have sprouted to chronicle Beanies as
investments, with some changing hands for hundreds of dollars each.
Small children began to believe in the reported prices as actual value -- turning
them into pint-sized images of their stock market-crazed parents.
But now, as with nearly all such crazes, there are signs that Beanie Babies may
be headed for a steep price decline. Princess, a teddy created in memory of
Britain's Princess Diana, was offered on a Web site at $45 Thursday, down
40% from a $75 price quote last May.
The so-called American Trio of Beanies -- Lefty the donkey, Righty the
elephant and Libearty the white bear -- has tumbled to $899 at Frankie's
Produce in Dunelin, Fla., where the set sold for as much as $1,299 earlier this
year, manager Deborah Grant says. Some young collectors also are sensing a
slowdown. In Boulder, Colo., 12-year-old Whitney Wilson sold most of her
Beanie Babies after the store at which she bought many of them closed down.
Also, "my friends don't talk about them any more," she says. Using the
Internet as well as word of mouth, the seventh-grader netted "a little bit over
$1,000," most of which she put in her bank account.
And Warman's Today's Collector magazine wondered recently: "Beanie Babies:
trash or treasure?" Warman's went on to conclude that prices should stay high
-- unless collectors start to sell. A market in which people don't sell, of course,
is no market at all.
"They're all bubbles," Robert Z. Aliber, professor of international economics at
the University of Chicago, says of such instant collectibles markets. The
informal nature of such markets helps propel prices up and can delay inevitable
plunges, he notes. "There is no New York Stock Exchange for this stuff" for
immediate and widely shared price information. "It's like real estate instead of
stocks."
By all accounts, Ty Inc., the Oak Brook, Ill., maker of Beanie Babies, has done
a masterful job of extending what could have been a one-season splash for
Beanies, in the process ringing up hundreds of millions of dollars of sales. Ty,
privately-held, doesn't disclose its sales or profit figures.
A collapse of the secondary market for Beanie Babies could hurt Ty's retail
sales, of course. But the company has been rolling out other toy lines -- a new
one featuring bears is anticipated soon -- and company founder Ty Warner has
impressed competitors with his marketing acumen as well as his innovative
designs. The company couldn't be reached for comment.
Ty has "retired" some models to make them scarcer, simultaneously bringing
out new ones that many collectors felt they had to have. There are more than
225 Beanie varieties to date. "That extends the run," Professor Aliber says.
"But eventually the kids get bored."
Many Beanie believers, however, don't buy that. "Lots of people are still
coming into the market," says Sarah Nelson, overseer of a Beanie Web site.
"That's what gives me hope."
Bull Mentality
Who knows? This could merely be a blip. Maybe Beanies will appreciate in
price forever, and collectors will end up swapping three Tabascos (a red bull)
some day for a Picasso or Monet. Then again, $5.95 doesn't seem an
unreasonably low price for a very small, though cute, stuffed toy, especially
when there are already millions of them crammed into American closets.
A Beanie market collapse would provide an exquisite yet painful lesson in the
power of the law of supply and demand. Two Naperville, Ill., mothers known
in the Beanie world as "the two Beckys" have each compiled what they believe
is a complete collection of the little critters. And each Becky -- Becky
Estenssoro and her neighbor Becky Phillips -- values her Beanie hoard at
between $90,000 and $100,000, sort of a 401(k) Beanie.
Mrs. Estenssoro says they intend to sell one of the complete sets eventually,
though not right away, to help pay for college educations for their children.
Amassing their collections wasn't easy. Market savvy, the Beckys loaded up
on new Beanies and then, when Ty "retired" certain characters, the women
would trade suddenly-more-valuable Beanies they held for ones they hadn't
been able to buy. "Two Tabascos for one Kiwi [a multicolored toucan]," Mrs.
Estenssoro recalls of the process.
Of course, even if Beanie prices collapse, the Estenssoro and Phillips children
may make it to college; the Beckys authored the "Beanie Mania Guidebook,"
publish a Beanie magazine, a newsletter and a weekly market analysis and
pricing guide that appears on the beaniemom.com Web site. In their spare
time, they speak at Beanie seminars.
In a market unregulated by the U.S. Securities and Exchange Commission, the
quality of information varies widely. The Summer 1998 edition of "Collector's
Value Guide" for Ty Beanie Babies -- "not affiliated with Ty Inc.," notes its
publisher, Collectors Publishing Co. Inc., Meriden, Conn. -- provides the
following values: Brownie, an original Beanie whose name was changed to
Cubbie in 1994, is worth as much as $4,600; Bronty, a dinosaur issued in 1995
and retired in 1996, as much as $1,150; Zip, the cat, issued in 1995 and retired
in 1998, worth as much as $2,250 if all black -- with the white paws, about
$575.
At those prices, Internet stocks seem cheap.
Marketing the Market
Collectors Publishing says it gets its price quotes off the Internet, from Beanie
dealers and retailers. Such price lists "fuel the whole collectibles industry,"
says marketing manager Josa Weatherwax. "People get excited by the idea that
they could sell a Beanie for more."
There could be plenty of excitement if prices decline, too. John Orozco,
president of UCC Distributing Co., a toy and collectable handler in Carlsbad,
Calif., lost "a ton" in stocks earlier this year and took "every penny I've had in
the market and put in into Beanies."
Mr. Orozco, who is still long in Beanies, says that based on market prices,
"I've recouped everything [lost on stocks] in the last month and a half." He
won't say how big his Beanie position is.
The stakes are high for others, too. Tina McKee's two sons, ages seven and
10, need bicycles, "so my husband and I threw out the idea of selling some of
their Beanie Babies," the Naperville, Ill., mother says. "They were all for it."
Mrs. McKee "has no idea what they might be worth." But she adds: "This will
be a good way to find out." That's 100 more Beanies headed to market.
"They've already lasted longer than I thought they would," Steve Ellingboe,
editor of Today's Collector, says of Beanies. He predicts a gradual sputter,
though, not a crash and burn.
Harry L. Rinker, a collectibles researcher in Emmaus, Pa., says that already he
has noticed, on recent weekend trips to antique malls in North Carolina and
Ohio, that the number of Beanie stalls is "down 50% to 70%." The toys from
the expected 1999 release of the next "Star Wars" movie could further hurt
Beanies, he adds.
"I think it's on the postpeak,'' says Karen Akin, owner of Apples and Zinnias,
an upscale florist and gift shop in Dallas. Her chief Beanie competitor dropped
by the other day and remarked: "I see your Beanies are backed up also.'' And
what goes up this high has a long way to fall before it hits bottom, Ms. Akin
says. "There is still a lot of business to be done even if you're on the other side
of the peak.''
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