Big Baby Business
By James Laube, senior editor
From out of nowhere, my neighbor Mike announced that he and his family had started a collection--not of wine, but of Beanie Babies. Unless you've blocked out the news this year, you know that passion runs high for these tiny stuffed toys. To kids (and a few big kids), Beanie Babies sell almost as fast as this year's hot new wines, and many are in just as limited supplies. My neighbor's collection has swelled to more than 100, including some in particular that people are crazy about. He's built a handsome wood and glass case to house his novelties. The family even subscribes to a Beanie Baby magazine!
Some of Mike's Beanie Babies are rarities that he bought for $5 but are now worth more than $100. Frenzied buying at recent Beanie Baby auctions is driving prices even higher--up to $200 to $300 apiece, he reported--and he has been wondering if now is the right time to sell his collection.
As I listened to him, I couldn't help but think about parallels with wine collectors, folks who've been lucky enough to grab a few of the high-flying, coveted wines that are ascending in value.
New wines with no track records for aging sell for $50 to $75 a bottle and increase tenfold in price within weeks of release, seemingly making brilliant market strategists out of the customers who get these wines at release prices through the wineries' own mailing lists. Many people who own these wines and are staggered by their apparent value want to know the same thing as my neighbor does: "Should I sell?"
Of course you should sell. If you can make $100 on a $5 Beanie Baby or $1,000 on a $50 California Cabernet, you'd be crazy not to. These prices are already inflated. They won't last forever. Not for the Beanie Babies or the wines.
When it comes to sizzling wine prices, we're talking about extremely small quantities of wine. People are selling one or two or three bottles of these cherishables to a tiny pool of well-off collectors. Money to them is no object. Obtaining the wine is. They're willing to pay whatever it takes to secure this year's star. Trouble is, there's always next year, when this year's star is another year older and perhaps a bit faded. Then there's a new darling waiting to be found and courted.
Handicapping what will happen to your wine investment is like working with a fractured crystal ball. Sometimes the picture is sharp and clear, other times fuzzy and blurred. I've watched star wines lose their allure for no other reason than that they're no longer the new kid on the block. One key factor in their demise is directly related to their initial rise in popularity. These wines appreciate in value faster than the market's willing to pay. As prices reach lofty levels, the pool of potential buyers thins.
In the case of the Beanie Babies, I think my neighbor should sell at least a portion of his collection. Even though he and his family think those cuddly Beanie Babies are charming, I sense that he sees dollar signs in the future, not just the fun of having a collection. Emotionally he's not prepared to admit as much. No one wants to appear greedy over kids' toys. But as long as he keeps referring to the value of his collection, I'm convinced he'd like the money and intends to wait the market out for a higher price.
That's the catch. No one knows where the Beanie Baby market is headed. My guess is that Beanie Babies are a fad: here today, gone tomorrow--just like the Pet Rock. If my neighbor really wants to drive a deal and make some money, now is the time to sell--at least a few--when someone is willing to pay him an inflated price.
If he waits too long, I'm afraid he'll be staring at his glass case of Beanie Babies years from now, thinking of a way to clear out a corner of the garage where he can move them until it's time to hold a garage sale.
Much the same is true with collectible wines, though today's faddish wines have a better chance of holding their value than Beanie Babies, which in the end are just stuffed toys.
The important thing is this: If you want to capitalize on a trend, sell when the buyers are hungry, when the cash is burning holes in their pockets. Not when they're bargain-hunting, sifting through your castoffs.
This column, Unfiltered, Unfined, features the opinionated inside scoop on the latest and greatest in the world of wine, brought to you each Monday by a different Wine Spectator editor. This week we hear from senior editor James Laube, in a column also appearing in the Oct. 31 Wine Spectator. To read past Unfiltered, Unfined columns, go to the archives. And for an archive of Laube's columns, visit Laube on Wine.