The Great Beanie Baby Bubble 🐻

The Great Beanie Baby Bubble

Predicting the future is a paid skill in markets, which makes them fertile ground for out-of-control bubbles and fads. ‘Beanie Babies,’ once 10% of all eBay sales, are perhaps the best case and point!

If we’re going to talk about Beanie Babies, we need to talk about Ty Warner, an American who took off to Italy after losing his job as a toy salesman. That’s where he had his lightbulb moment. Instead of finding a new job, he decided to start his own line of teddy bear-like stuffed animals. They officially released as Beanie Babies in 1993.

Warner was a bit of an eccentric, so he was undeterred by the Beanie Babies’ lukewarm reception. Instead, early struggles brought out Ty’s inner perfectionist. He was known to have spent two-and-a-half hours positioning Beanie Babies for a photoshoot, for example. And one day, he decided he wasn’t happy with the deep royal blue color of ‘Peanut’ (a Beanie Baby elephant!). He preferred a lighter blue, and that’s how the fad was born!

Royal blue Peanut was discontinued, and as any investor in commodities will attest, that has the potential to make it very valuable. Sales skyrocketed for the elephant plushy, and Ty Warner became the accidental architect of a brand new fad. He cottoned on, and repeated this process of discontinuing random plushy toys.  Before long, frenzied customers were waiting in line for hours to buy plushy stuffed toys, not as gifts, but as investments of all things!

People would pass up on savings accounts, stocks, and bonds because they thought little stuffed animals made a better investment. The most obsessed folk would pay thousands of dollars on eBay and feel like they walked away with a bargain. There’s even a famous photo of a couple dividing up their Beanie Babies in a divorce court!

Ty became the 65th richest person on the Forbes list (he’s only 887th today) with an $8 billion fortune, but people remain divided on whether he was an unethical or genius businessman. Probably both! Very quickly, people saw this fad for what it was. Except for Peanut, most Beanie Babies don’t fetch ten bucks now.

Whatever next? By definition, the next fad hard to miss!                                 

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A kid’s brokerage account is more accurately called a custodial account. This is a brokerage account that parents or legal guardians can open on behalf of their child.

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