The Long Term Investor

I am obviously an ART and ANTIQUE collector. I talk about it often. I try to buy only the best item that I can afford. My view is that quality TRUMPS everything else.....especially....quantity. I found out yesterday that one of my paintings was accepted in an upcoming exhibition. I try to actively get PR for my art in any way possible. I like to promote what I think is good art.....share with the public.....and....at the same time hopefully increase the value of what I own. BUT......for us collectors......it is never a smooth ride.

After the Beanie Baby bubble burst
What happens when the frenzy ends and the world doesn’t value your valuables?

https://www.vox.com/the-goods/22870250/nft-beanie-baby-price-guide-bubble-princess-value

(BOLD is my opinion OR what I consider important content)

“It’s just so sad to see somebody spend so much money on something that isn’t real.” That’s what Karen Boeker, counterfeit Beanie Baby expert, says motivates her work: separating the valuable Beanie Babies from the pretenders. Of course, the value of the real ones is debatable, too. Honestly, if you think about it too long, the entire concept of worth can fall apart.

Boeker, 54, can’t quite pinpoint why she’s dedicated more than 25 years of her life to Beanie Babies. The frenzy around them faded long ago, as these types of things tend to do. Maybe she has an addictive personality. Maybe it’s the thrill of the chase. Maybe it’s just that they’re cute. Whatever the case, she’s kept at it. She sold Beanie Babies to pay for an emergency appendectomy about 20 years ago and, more recently, to help pay for her son’s wedding. She’s also one of three women behind a Beanie Baby pricing guide and a Facebook group for collectors with tens of thousands of members. Combined, they have several decades of Beanie experience. Their names, naturally, are Karen, Karen, and Becky.

Boeker and Becky — Estenssoro — also run a Beanie Baby authentication service, True Blue Beans. Estenssoro used to do the authenticating alone, and Boeker joined in April 2021. They charge $5 per Beanie Baby for a sticker that says whether the toy is counterfeit; for $15, they’ll put it in a tamper-resistant display case and tell you whether it’s “museum quality,” “mint condition,” and even “magnificent.”

“You get all those adjectives in there,” Boeker says. Their customers prefer that they don’t give negative marks to the Beanies, but they have to be honest. “If it’s a dirty Beanie,” they’ll say so.

When I ask what makes a Beanie Baby worth anything, her answer is a frank one: “It’s what people are willing to pay for it”

At the height of Beanie Baby mania in the 1990s, plenty of people genuinely believed the toys might be the key to their retirement or their kids’ college tuition. Some people stole litters of them, and at least one person was reportedly killed in a Beanie-related dispute. Now, when cleaning out their basements or going through bins left behind by their grandparents, some people decide to check in — just in case — to see if they’re sitting on a gold mine of ’90s relics. Most of the time, they aren’t. “I hate getting people’s hopes up, because we’re constantly crushing dreams,” Boeker says. “I don’t like that.”

It’s not that Beanie Babies are worthless — collectors in the hobby are willing to pay quite a bit of money for the right ones. It’s that the most coveted Beanie Babies today are the ones most people have never heard of.

When I ask Boeker what makes a Beanie Baby worth anything, then or today, her answer is frank: “It’s what people are willing to pay for it.” Why some people are willing to pay anything for it is harder to square.

For most, it’s unfathomable to imagine spending hundreds or thousands of dollars on a stuffed animal. Then again, it’s also unfathomable to imagine how we value most things, from personal mementos to art to blunt-smoking digital apes. It’s easy to look at the current financial landscape and recognize hints of Beanie Baby-like bubbles in, for example, NFTs. The interest in both of them has a bit of aje ne sais quoielement. But the same goes for all markets. Personal and objective worth are inevitably intertwined. There’s an unavoidable human nature to value.

The Beanie Baby craze swept the United States and much of the globe in the 1990s. The era was marked by the hunt for the Princess Diana bear, endless lines outside Hallmark stores in anticipation of new releases, people hoarding tiny stuffed toys with names like Quackers and Nip and Peanut in their living rooms and desperately protecting their tags. Boeker jokes she and her friends were “feeding all the homeless in Houston” after circling around McDonald’s drive-throughs buying Happy Meals to secure the Teenie Beanies found inside. (They did, in fact, donate the food.)

The world experienced a sort of collective delusion around the worth of what is, essentially, a fabric sack of beans. In hindsight, bubbles rarely make sense. “It’s a flaw in the human character,” says Jeremy Grantham, market historian and bubble expert. “No one is immune, no matter how smart you are.”

Beanie Babies were the creation of Ty Warner, the elusive billionaire behind toy company Ty Inc., which he founded in 1986. He launched Beanie Babies in 1993, and initially, people didn’t get it. “At the beginning, nobody really wanted Beanie Babies,” says Lina Trivedi, one of Ty’s earliest employees. Consumers didn’t seem to quite get them, and retailers didn’t think they’d fit the aesthetic of their stores. Then, she says, it felt like a switch flipped overnight. Beanie Babies took off in the suburbs of Chicago, where Ty’s headquarters was located, and then fanned out. “When you’re in the midst of it, you don’t really see the intensity escalating or whatever,” Trivedi says, “because you’re in the vortex of it all.”

To the extent he could, Warner manufactured the craze around the items — the endeavor was, after all, to make money.

Despite retailers’ and shoppers’ initial reservations, the Beanie Babies were indeed cute, and Warner’s team attached names, poems, and birthdays to them to make them more personal. Most of the original ones were written by Trivedi. The toys were accessibly priced, and at the same time, Warner was able to pull supply strings to create a sense of scarcity around them. Warner would retire certain Beanies, upping the ante even more not only on the primary market but also on the secondary market, where prices of the $5 items soared into the hundreds and thousands of dollars.

There’s also an element of inexplicability to any fad. “What sort of lights the fire, we just don’t really know,” says Colin Camerer, a behavioral economist at the California Institute of Technology.

Maureen Laughead, a relatively early collector from Pennsylvania, recalled her daughters selling three politically themed Beanies — Righty, Lefty, and Libearty — to a local ice cream store in exchange for $1,000 and a Princess bear, which was released after Princess Diana’s death in 1997. The Princess bear was the “it”Beanie of the era. “If I tried to sell those three now, I’m sure they’re not worth anything,” she says.

At its most basic level, value is how much someone is willing to pay for something, given all the other stuff they could pay for instead. It’s how much worth they ascribe to the thing based on what they feel they get out of it. But there are different ways of thinking about the concept. In Marxist terms, there’s use value — the extent to which something fulfills a want or a need — and there’s exchange value, the proportion to which it can be exchanged for something else.

At the height of the Beanie Baby craze, the use and exchange value that people were ascribing to the stuffed animals became completely untethered. The market was completely distorted.

“It becomes a bubble when it disconnects from the value,” Grantham says. “Prices spiral up.”

An entire media ecosystem of Beanie Babies emerged, from early-stage blogs to magazines to trade shows. Estenssoro was one of the first avid collectors with her neighbor, Becky Phillips, in the Chicago suburbs. “At first, we didn’t know it was going to be this big old thing,” Estenssoro says. Once the toys began to catch on, the pair began documenting them and building early collections, eventually launching the first Beanie Baby price guide.

Beanie Babies were among the first big internet fervors, and their rise coincided with eBay’s. In May 1997, eBay auctioned off $500 million worth of Beanie Babies, accounting for 6 percent of its total annual sales. When the platform went public in 1998, Beanie Babies accounted for 10 percent of total company sales. That same year, the New York Times Magazine chronicled the proliferation of Beanie-related crimes, declaring, “A world gone Beanie mad!”

Perhaps the most emblematic photo of the Beanie Baby bubble was one snapped of an estranged couple named Frances and Harold Mountain — a judge ordered them to separate out the animals on a courtroom floor during divorce proceedings. “It’s ridiculous and embarrassing,” Frances Mountain complained at the time, before, as the Los Angeles Times reported, “squatting on the courtroom floor alongside her ex-husband to choose first from a pile of stuffed toys.” The image came to epitomize the moment — grown adults were swept up in a baffling belief that these stuffed animals were highly valued possessions.

But the lore around the photo isn’t accurate: The moment wasn’t about the money, it was about revenge. Frances had been awarded primary physical custody of their children as part of what was an “ugly, disputed divorce,” recalls Frank Toti, an attorney who worked for Frances on the case. Harold asked to take half of the Beanie Babies “out of spite,” Toti says. “It had nothing to do with Beanie Babies, it had everything to do with the father being upset about not being awarded custody.” After selecting a few of the Beanie Babies from the pile, Harold gave up and said his ex-wife could have the rest.

The Beanie Baby bubble burst at the turn of the century; the “animal spirits” — a term coined by British economist John Maynard Keynes — driving the market fell away. The toys were mass-produced, so beyond those from the earliest generations, few were actually rare. Price declines begat more price declines, and the Beanie Baby smoke, in a way, lifted. And so millions of Americans were left with millions of Beanie Babies in their basements; forgetting the passé toys except for, now and then, the errant consideration of what to do with them.

Looking back at a mad rush around often-colorful, often-cutesy, questionably useful odds and ends, it’s hard not to see what’s currently going on in the NFT market and wonder whether it’s Beanie Baby-esque. There’s a similar level of unbridled optimism and a rush to claim ownership over relatively arbitrary items in the belief that their value will go up. The nascent arena is also plagued by scams and potential crimes.

Many NFT aficionados refute the suggestion that they’re dealing in digital Beanie Babies. They say Beanie Babies didn’t have the same sense of community (they did), that they weren’t as high-profile (they were), and that NFTs have a much more tangible utility than Beanie Babies (up for debate). However, Arthur Suszko, a collector of both Beanie Babies and NFTs, embraces the comparison. “There’s a lot of parallels between what’s going on with NFTs now versus Beanie mania in the ’90s,” he says.

“There’s a lot of parallels between what’s going on with NFTs now versus Beanie mania in the ’90s”
Suszko, 34, was into Beanie Babies as a kid and began collecting them again as an adult. His current project is to create NFTs of his Beanie Babies, where people could buy the NFT and therefore ownership rights, but his company would still hold onto the physical item unless the buyer later traded the token back in. It would essentially separate ownership from possession. “It’s a merger of my childhood dreams and modern passions coming together,” he says. Still, he’s aware the NFT moment is likely fleeting. “Nobody’s going to care about random jpegs that might be selling for hundreds of thousands of dollars right now.”

The market for Beanie Babies didn’t vanish entirely after the crash, but today’s market does look different — and indeed, the vast majority of them aren’t worth much. There are still expensive Beanie Babies out there, they’re just nowhere as well-known as, for example, the Princess bear. “It’s funny, because sometimes the ones that are actually worth a lot of money, they don’t realize are worth a lot of money because they’re not talked about, because they’re rarer Beanies,” says Karen Holmes, the other Karen of Karen, Karen, and Becky. She maintains the price guide website, where a series of ebooks laying out the costs of Beanie Babies and other Ty products are available starting at $5.95.

According to the scarcity principle, things become more desirable when they are in limited supply. In the ’90s, Ty used the illusion of scarcity to drive the urgency around Beanie Babies. People were made to believe they were in short supply when in actuality they weren’t, and once they realized that was the case, some of the allure faded. In the aftermath, the scarcity principle still applies, perhaps in a more real fashion. If everyone’s selling the same Beanie, it’s not a hard-to-find Beanie, and therefore it’s probably not expensive. Indeed, the priciest ones are those most people have no idea even exist. Some were never sold in stores at all.

Enter Chef Robuchon, which was created in 2006, years after the ’90s bubble burst. The light brown bear wears a white chef’s hat and embroidered jacket with a French flag-themed collar, and the Beanie Babies price guide values it at up to $6,500 if in mint condition — up to $8,000 with the case and invitation. Ty Warner handed out the bears to celebrate the opening of a restaurant helmed by chef Joël Robuchon at the Four Seasons hotel in New York, which Warner owned. The toys were given to food critics and journalists, most of whom probably never gave them a second thought, and many have been lost. “When it was given out, nobody really knew about it because it was given to foodies,” Holmes says, “not to Beanie people.”

Beanie people would have known better than to brush off a Chef Robuchon bear.

As a general rule in the Beanie trade, the older and rarer, the better. What’s on the tags, and how the tags look, matters. It’s not entirely intuitive. What seems like the tiniest thing can mean a hundred- or even thousand-dollar difference to those in the know. A regular Libearty — a white bear with an American flag on it — in top condition isn’t generally worth much more than its original $5 price. But if it’s got a Summer Olympics tag on it, Boeker says, its worth can jump up to over $1,000. Ty apparently didn’t have permission to use the official Olympic trademark in 1996, and so for most of the Beanies, the mark was removed. A light blue Peanut the elephant can go for up to $100; one made in a darker royal blue could fetch up to $1,500.

“It’s all in the details,” Boeker says. In a sea of tiny red heart-shaped tags hanging off the toys, a star or the curvature of a letter matters.

It can feel like the people deep in the hobby almost speak in code, referring off-hand to generations of hang tags and tush tags and naming off the toys like familiar characters, in the way you or I might mention, say, Mickey Mouse or Batman.

Caleb Riley, 26, learned to crack the code thanks, in part, to Boeker. His mother collected Beanie Babies years ago and finally handed them over to him to try to sell. In those efforts, he’s learned more about the stuffed animals than he’s ever cared to know. In 2021, he posted a MasterCard Beanie Baby to the Facebook group the Beanie Baby ladies run. The bear had a brown nose instead of a black nose, and that difference garnered him what he says were a dozen offers in a single day. Boeker warned him not to sell it for under $1,500. “It was like mania,” he says. He sold it and a handful of other Beanie Babies for $5,000.

Of course, Riley’s experience is the exception. Plenty of people who are sitting on mounds of the plushes aren’t Beanie Baby thousandaires. Holmes estimates that of the roughly 3,000 variations of Beanies out there, one-third are worth more than they originally retailed for, though often not by much.

There are generally three stages of collecting in consumer culture: acquisition, possession, and disposition. In the current zeitgeist, Beanie Babies are stuck in limbo between phase two and phase three. Most people aren’t super jazzed about the Beanies they’ve got on hand. They’re not really in a hurry to get rid of them, either.

There are, however, still people in the acquisition phase of collecting, such as James Hamblin, a 42-year-old father of two who lives in Massachusetts. When I first spoke to Hamblin about his Beanie Baby collection, he blamed it on his daughter. “Of course, the kids want the harder Beanies to find,” he says. When I asked him whether she was allowed to play with the Beanies, he cracked. “I mean, I do buy some for her, but then the ones that I buy are pretty high in price,” he says, chuckling at the acknowledgment that it’s much more of a dad hobby than a daughter one. “She gets some of the crumbs.”

Demographically, Hamblin isn’t unique in his interest in Beanie Babies. Just as the most coveted Beanies today are not the ones you might think, neither are the identities of the people collecting them. I came across a lot of men in their 30s and 40s, especially in the high-dollar market. It’s sort of equivalent to the My Little Pony enthusiast Bronies — call them Beanie Bronies.

Hamblin says he really has no idea why he got into Beanie Babies, joking that maybe it’s a midlife crisis. He finds the chase addicting and gets a rush out of finding a Beanie Baby he’s been on the hunt for; his goal is to collect all of the first- through third-generation Beanies (essentially, the early ones). Thus far, he’s amassed about 200 toys in total and thinks he’s spent about $50,000 on the endeavor, the priciest being a third-generation royal blue Peanut with a German tag at $2,500. While other people have a “deep love” of Beanie Babies, Hamblin insists it’s not the case for him. “I don’t really have any sort of attachment to them, I’ve just set myself a goal,” he says. “Hopefully, one day I’ll either sell them or I’ll display them properly.”

Hamblin has met similarly enthused Beanie Bronies, like his friend Joe Mancuso, 35, who says he was offered free Beanies in exchange for intimate pictures of himself (he declined), and Nick Rosato, 32, who began selling Beanie Babies, in part, to help keep his family afloat when he was out of work. “We ended up making ends meet any way we could, which unfortunately involved selling off some of my collectibles,” Rosato says. “But you do what’s best for your family.”

The men of Beanie world aren’t just suburban dads. Nearly everyone I spoke with for this story referenced one young man, a startup co-founder based in New York, who is an extremely well-connected collector and dealer in the field. He helped Boeker secure a Russian exclusive bear she’d been after, and Riley says he was the buyer of the MasterCard bear. He deals in exotics and prototypes. “If you want a Beanie Baby,” Hamblin says, “he’s the one I’d go to.” The collector declined to speak on the record for this story, though he was also very concerned that I get my facts straight. Even this market still has its whales.

The Beanie Baby world might not be what it once was, but it’s by no means quiet. There’s excitement: accusations of scammery, disagreements around what it means to certify an item’s value and who gets to decide.

Take a quick spin around the internet and it’s quite easy to come across a list of Beanie Babies that are allegedly worth thousands of dollars. On eBay, you can almost always find a Princess bear for sale with an asking price higher than the typical house. The thing is that you can list anything on eBay for anything. The other thing is that there are a lot of Princess bears out there. While they were a hot commodity in 1997 when they first came out, in the year 2022, not so much.

“A lot of people are still looking at clickbait articles that say Princess is worth half a million,” Holmes says. “It’s not.” Many Princess bears on eBay are being sold for under $20.

Holmes, Boeker, and Estenssoro view their mission, in part, as one of educating people about what is and isn’t valuable in Beanie Babies. Boeker has expertise in looking out for counterfeits, which were quite common during the bubble. The trio frets about rumors that errors on tags mean they’re especially valuable, even though most of the time they mean nothing at all. (Plenty of errors were also mass-produced.) They speculate that some of the eBay listings are money-laundering schemes, or at least say they think they used to be.

“Somebody else mentioned drugs,” Boeker says. “They would put up a Beanie Baby and then they would sell them drugs, but it looked like they were buying a Beanie Baby. I don’t do drugs, so I don’t know.”

In 2018, the trio got Business Insider to correct a video on Beanie Baby valuations that featured Lori Ann Verderame, known professionally as Dr. Lori, a television personality and antiques appraiser. In the video, which was removed from most platforms, Dr. Lori, who also markets herself as a Beanie Baby appraiser, declared a certain Valentino bear worth $100. Business Insider’s correction notes its actual value is more like $5 to $10.

The Beanie Babies price guide ladies are hesitant to say much about Dr. Lori — after all, they are rivals. And most Beanie Baby people are, well, nice. Boeker says that while Dr. Lori does know about art and antiques, she is not an expert on Beanies. “She’s a smart woman,” she says. “But I don’t know of a single collector who respects her.”

Dr. Lori, for her part, tells me that she appraises thousands of Beanie Babies a week. She acknowledges that there’s a lot of confusion around value, though when I asked for a more concrete sense of what makes a Beanie Baby valuable, she was relatively scant on details, insisting instead that people just get her appraisal. “You could have the winning lottery ticket, and a lot of people [do],” she says.

Boeker says that they sometimes have people come to the Facebook group who have gotten appraisals from Dr. Lori for much higher than what other people are generally willing to pay. “Rarely are the prices she gives accurate,” Boeker says. “She’s making money, good for her.”

Karen, Karen, and Becky don’t typically do appraisals; so many people have common Beanies, it’s not really worth it. The price guide costs money, though, as does the authentication service.

Most collectors trust them, but to a point. Leon Schlossberg runs a website dedicated to Ty and has with his daughter Sondra collected nearly 19,000 Beanie Babies, which they hope to someday put into a museum. He says that Boeker is “extraordinarily knowledgeable” about Beanie Babies and that the Beanie Babies price guide is the only one that’s legitimate out there, though he has quibbles with it. Still, he doesn’t love the idea that the women are both tracking the prices and selling — or at least, Boeker is. “You have to look at somebody who sells those for a living and wonder if that’s the person who should be making the value guide,” he says.

The point isn’t lost on Boeker, who brought up in one of our conversations that it’s a bit of a conflict of interest for her to sell Beanie Babies while at the same time working on the price guide and authentication. From time to time, there are flare-ups in the women’s Beanie Babies Collectors group on Facebook where potential sellers accuse buyers of undercutting prices in an attempt to later flip the Beanies. Boeker reassures me there’s no trickery going on — but she’s definitely come across some Beanies in the wild that are worth more than the asking price. “Let’s just say I’ve gotten some good deals,” she says.

The problem with bubbles is that even if at some point it becomes clear what’s going on, it’s impossible to gauge when the bubble will burst. If bubbles were predictable, people would start to sell early, and the bubble would self-implode. Obviously, they don’t. And what was in the bubble really never goes away. The objects themselves don’t disappear. They become zombies.

“Beanie Babies are mostly not going to get tossed in the trash, they just dissipate out,” says Camerer, the California behavioral economist. “The technical definition of a bubble is that prices are above some fundamental, but that just begs the question of what is the fundamental? What’s the value?”

For people into Beanie Babies now, the fundamentals don’t really matter. If the world moves on from something and you don’t, you don’t for a reason.

Most of the Beanie Baby collectors I spoke to couldn’t specifically identify the impetus of their interest in the toys. Maybe a neighbor had one, or they saw it at a store, or their kids got into them. Many point to the economics and investment properties, but not all of them. Some collectors want cats or dragons or tie-dye bears not because they’re particularly valuable but simply because they like them.

Many collectors insist that there’s no real personal attachment to their Beanies, even though it’s impossible to imagine there isn’t. People don’t spend hours and hours learning the intricacies of any market for nothing, let alone a market as cold as Beanies. They like the hobby, but they also recognize it’s a bit silly — multiple people were skeptical that I might make them look bad in print. On the spectrum of habits, collecting stuffed animals is a healthy one; it’s also one where you might recognize others could think you’re a kook.

If you think about it, the way we value anything is sort of strange. Value is, to a large extent, ineffable. The most valuable things in my life aren’t actually worth a lot of money. Are yours?

Estenssoro says beyond a handful of Beanies she has “in a box somewhere tucked away,” she no longer collects them. The same goes for Holmes, who sold her collection about 12 years ago before having open-heart surgery because she wasn’t sure she’d make it through. She got two Chef Robuchons off her hands at the time.

Boeker, however, hasn’t been able to give the hobby up. She had to sell off her collection some 20 years ago to pay off medical bills after having an emergency appendectomy while uninsured. “It was awful, back when I sold it,” she says. “I was in tears, I’ll admit that.” Slowly but surely, she’s built her collection back up.

Recently, she sold some of her Beanie Babies, but for a happier reason: Her son got married, and she was able to turn about a dozen pieces in her collection into $15,000 for the occasion. “When you can do things like that, it’s worth it.” (In gratitude, the bride and groom allowed her to decorate their table with a pair of Love Birds Beanies.)

Boeker has a self-effacing nature that’s disarming in conversation. She delivers some of her commentary with a metaphorical eye-roll, even though she clearly cares and has encyclopedic knowledge about Beanie Babies. “I know, shoot me,” she says when we first talk about her decision to start buying Beanies again after first selling her collection. Weeks later, she told me having to sell off her collection was probably one of the best things that ever happened to her because of the relationships she’s built over the years upon rebuilding it. “If you would have told me 25 years ago that I’d still be doing Beanies, I’d have called you crazy,” she says. She has no intention of getting out of the hobby anytime soon.

The most important Beanie to her is, unsurprisingly, one I’ve never heard of: Billionaire Bear No. 3. According to the price guide, just 650 of those No. 3 bears were given out, and only to Ty employees. Boeker thinks she knows which employee hers went to. It’s worth an estimated $400 to $800, which is money, but not Chef Robuchon money. So why that one? In part, because Boeker bought it from the other Karen, Karen Holmes, who is her friend. “It’s special to me because it was owned by her.”"

MY COMMENT

I see this is EXACTLY the same as the NFT markets. Owning some little bit of electronic, digital, image is worthless to me. BUT....to others...not so much. Time will tell if any of this is real. Worthless or not....I would much rather own the REAL THING compared to a digital image of whatever it is. Is that one of a kind digital image really worth anything....who knows. It is all in the MIND......or INSANITY.....of the beholder.

At least I dont own any Beanie Babies. Now.....My Little Pony...that is another matter....one of my kids had just about all of the early ones....hundreds of them......in MINT condition with all accessories.....many were very limited. She gave them all to Goodwill before they came back in value. Who knows how many hundreds of thousands of dollars were in that giant toy box of Pony's. We will never know.

 

I agree with much of your commentary Zukodany.

On collectables market....yes. Continues to be hot, hot, hot. And as usual it is all about quality. Just avoid the CRAZY FADS like BEANIE BABIES. Stick with established collectables, art, antiques, etc, etc, that have proven themselves in the AUCTION MARKET.....versus the internet FAD market. Comics and sports items are definately PROVEN in the auction markets at this point.

I have not looked at the unemployment data or anything else today. I have a show tonight and have been putting off charting four songs.....one of which is very complex. I will need those charts on January 22. So I took the morning today to knock out three of them. I will do the forth more complex one on Sunday....although i do have part of it roughed out.

I dont have much doubt that the FED will increase rates this year. The only question is how many times. I think most of the predictions of three or four rate increases are about right. Each increase will....."probably"....be 0.25%. They need to give plenty of notice to not freak out people....so....I am thinking that the first one will be in March and than each of the others will follow on about a three month schedule. I am not sure the markets will totally FREAK OUT......in the past when I have seen time periods of rising rates there is a reaction....but....it usually only lasts for a week or two....than.....it is back to whatever the market was doing prior to the rate increase. The reaction this time might be more of an aberration.....since....there are so many new and young investors that have just about NEVER seen a rate hike or invested through a time period of rate hikes.

I am sure wee will follow the NORMAL course and see at least 1-2 corrections this year. By corrections I mean drops of 10-20%.

I will personally stay fully invested all the time as usual. When I have money to invest.....like the $5000 that I just did and the $5000 to $10,000 that I will have in Early February....I will simply put it all in all at once.....regardless of what the markets are doing. I will.....as usual....follow the research that this is the best way to do it and beats trying to market time or wait for a market drop. It is counter-intuitive.....and most people can not bring themselves to do it this way....but the research shows that the PROBABILITIES favor this way of investing.....especially over the longer time period since the default market direction tends to be UP. Waiting for a drop to invest........is market timing......and.....it is just as likely that the markets will go up and by the time there is a drop....you are still investing at a higher level than what you could have had just going all in all at once when you had the funds available. BUT.....this sort of thing is just personal preference. The main thing is to continue to invest and add funds when you can.

 

Being a long term stock market BULL......the long term market direction is ALWAYS UP.....I agree with this little article.

Surprise! This Bull Market Survives 2022...And Beyond..

https://www.realclearmarkets.com/ar...s_2022_-_and_beyond_-_pre-pricing_811830.html

(BOLD is my opinion OR what I consider important content)

"Stocks routinely do what is both least expected and surprisingly rational afterwards. While I only forecast one year at a time, what nobody expects now—hence, what is likeliest—is two or three more great bull market years. Before you reject this, let me explain.

First, my 2022 forecast: A sideways, often scary global stock market through summer, followed by a strong autumn and winter, delivering double-digit 2022 gains.

Last January I told you 2021 looked great for US and world stocks—fueled largely by America’s political cycle. Since 1925, stocks fell in about half of US presidents’ inaugural years. The other half? Usually up huge. That was 2021, with the S&P 500 soaring 28.7% and world stocks up 21.8%. Markets saw past myriad scare stories past and present--to welcome approaching normalized economies and lowered legislative risk.

Presidents’ second years were similarly down in roughly half of history—but averaged 21% in USD when positive, boosting stocks globally. This bifurcated history makes forecasting second years risky—when wrong, you’re quite wrong. Forecasters envision stocks being up slightly or flat. But stocks routinely do what few fathom.

Today’s muted sentiment is far from early 2021’s excess optimism. Last January, I also detailed that excess market ebullience was a risk. Investors had gonzo-itis for all manner of crypto and faddish non-fungible tokens (NFTs). Initial public offerings (IPOs) were surging—headlined by wild SPAC-ulation of flimsy Special-Purpose Acquisition Companies. Echoes of Sir John Templeton’s famous observation that bull markets “die on euphoria” began reverberating.

That is all over now—one reason stocks should defy tepid expectations and roar later this year. Crypto’s rollercoaster 2021 jolted speculators. SPACs, too. GDP growth expectations tumbled from sunny early-year outlooks. Equity fund inflows slowed sharply. Evolving COVID variants, inflation and energy price fears, vaccine mandates, vaccine Omicron failures, rate hike hype, Trump trauma, Biden blunders and more zapped euphoria.

These cumulative fears will generate more widespread worry-hunting in 2022’s early months. That ghoulish ghost hunt should drive a choppy first-half slog. That is bullish! Stocks don’t need gangbusters growth or exploding earnings to rise. They merely need reality to top listless expectations. Today’s messy skepticism/optimism mix makes that easier to attain.

Political shrillness that normally erupts as midterms begin will be doubly blaring this cycle. Once-a-decade redistricting based on 2020’s census will fan those flames. In route, note: First-half choppiness typifies presidents’ second years. Stocks normally meander early on then. Since 1925, US stocks averaged gains of under 3% in second year’s first nine months. Only 57% of quarters in those stretches were positive. Slogging. Joyless. Unrewarding. Dour. Perfect because just when most unexpected…..just then….things flip. Stocks gained in 83% of history’s second-year fourth quarters. Expect a supersized 2022 version.

Here is why: By autumn, today’s fears will have fizzled or become so old as to have no market power. Globally, inflation will ease. This isn’t some political or ideological statement. It is based on present price rises’ primary fundamental driver—supply constraints—likely subsiding sooner than most expect.

Ebbing inflation should render long-term interest rates benign. They may even decline—despite the Fed and ECB slowing (or “tapering”) their respective quantitative easing bond purchases and the Fed being widely expected to raise short rates all year. Why? Because markets already pre-priced central banks’ 2022 moves. Note, the history of long-term interest rates in the 12 and 24 months after a first FED rate hike is exceptionally benign, a point almost no one seemingly sees (surely tied to cognitive bias). The surprise is positive.

Omicron? It’s better than Delta for markets. Pretty much lockdown free. We probably get a new variant soon--one even more contagious and even milder, the most common mutation path of viruses. A year from now we will likely have learned to live with endemic, flu-like COVID. Stocks will pre-price that.

The president’s party routinely loses relative clout in mid-term elections. Democrats’ Congressional edge is near-zero now, the least in over 100 years. This fall it takes almost no gains for the Republicans to take the House of Representatives at a minimum, maybe the Senate. Either creates hardcore gridlock. Hardcore gridlock ushers in a government incapable of passing big legislation—and with it relatively unimaginable and, hence, surprising governmental calm and quiet. A surprise stocks just love, always.

As that approaches stocks will begin pre-pricing that gridlock which should spark a strong fall rally. It routinely does with mid-terms. Confirmation bias causes everyone to disbelieve this ever happens, so it reappears like magic regularly—one of this last century’s recurring head fakes. And that causes the strong double digit full-year 2022 returns I expect. And it doesn’t stop there.

Gridlock’s magic effect typically keeps steamrolling into third years—that being 2023—and then possibly even 2024. The S&P 500 gained in 92% of presidents’ third years, with no negative years since 1939 (and even then fell just -0.9% as World War II unfurled). Fourth years? 83% were positive, with 11.4% average returns. These domestic political drivers typically reverberate globally—with varied, parallel strains overseas.

In early 2023, investors belatedly embracing the notion that significant bull market probably remains likely spurs greedy, “don’t miss out” buying—creating a potential final, euphoric sprint into 2024.


Investment success comes from fathoming the unfathomable. In 2022, that means seeing this bull market has room to run—before others do."

MY COMMENT

Sounds good to me. The little phrase in the headline......."And Beyond".....of course reminds me of Buzz Lightyear. SO.....my stock market MANTRA of the day and for 2022 is.......TO INFINITY AND BEYOND.

Of course when you are reaching for infinity....you often encounter some big nasty......BLACK SWAN......blocking you way for a while. I put that as the greatest market danger this year......just like any year. The BIG unknown world event is a typical danger that investors face al ALL times. Just part of the reality of being an investor.

 

When I looked today for the first time....about 30 minutes ago.....my account was mixed and slightly down. I had six stocks down and four up at that time. I also had a small to moderate loss for the day.......not that I really care. I do believe that earnings are going to be great but that the above little article has it right. The first half of the year is going to be very ERRATIC and stocks and funds will struggle.

 

As to the employment data that Zukodany mentioned above.....

Jobless claims: Another 230,000 Americans filed new claims last week

https://finance.yahoo.com/news/weekly-unemployment-claims-week-ended-jan-8-2022-233140248.html

(BOLD is my opinion OR what I consider important content)

"Initial unemployment claims unexpectedly jumped to total 230,000 last week, but still remained low compared to their pandemic-era averages.

The Labor Department released its latest weekly jobless claims report Thursday at 8:30 a.m. ET. Here were the main metrics from the print, compared to consensus estimates compiled by Bloomberg:

• Initial jobless claims, week ended Jan. 8: 230,000 vs. 200,000 expected and an unrevised 207,000 during prior week
  
• Continuing claims, week ended Jan. 2: 1.559 million vs. 1.733 million expected and a revised 1.753 million during prior week
  

Despite the rise in filings for first-time unemployment claims, jobless claims have held near or below their pre-virus levels for more than a month, underscoring the continued slowdown in firings and other involuntary separations as employers retain their existing workforces. New claims had averaged around 220,000 per week throughout 2019. And in early December, weekly claims had improved to come in below 190,000 for the lowest since 1969.

"The underlying trend is still falling; we expect new lows at the end of the month," Ian Shepherdson, chief economist for Pantheon Macroeconomics, wrote in a note earlier this week.

And meanwhile, continuing claims tracking the total number of Americans claiming benefits on regular state programs fell to a multi-decade low in the latest weekly data. At 1.559 million, the number of continuing claims was at its lowest since 1973.

The latest weekly jobless claims data comes amid a bevy of labor market prints showing demand — and leverage — for many workers remains strong. Last week's monthly jobs report showed a bigger-than-expected improvement in the unemployment rate to 3.9%, or the lowest level since February 2020. And though monthly payroll gains have slowed, many economists have attributed this to a lack of available workers to fill vacancies, rather than a lack of desire for additional workers.

Still, with the size of the civilian labor force still down by more than 2 million individuals compared to pre-pandemic levels, the labor market has some distance. still left before achieving policymakers' target of full employment. And while the job market has shown an encouraging improving trend throughout last year, persistently elevated inflation could be one factor threatening to derail further progress, according to some key officials.

"High inflation is a severe threat to the achievement of maximum employment," Federal Reserve Chair Jerome Powell said during his renomination testimony before the Senate Banking Committee on Tuesday. "If inflation does become too persistent — if these high levels of inflation get entrenched in our economy and people’s thinking — then inevitably that will lead to much tighter monetary policy from us, and it could lead to a recession, and that would be bad for workers." "

MY COMMENT

Yes.....the labor and employment markets continue to be distorted as are many aspects of the economy. Just part of what we have to SLOG our way through for the next year or even two. I pity the small businesses. EVERYONE has help wanted signs out.

 

No. But once in a while I do get bored.....or distracted.....LOL. I find myself playing unconsciously....thinking about what I am going to eat when I get home....or something else.....and than realize that I dont even know what key we are in...I am just playing on automatic pilot.

I try to keep that to the minimum.....by focusing on the fact that at my age.....you never know when a show will be your last one. So....I try to stay.....IN THE MOMENT.....and not take it for granted.

For me it is all about trying to avoid any and all conscious thinking while playing.....and just being in the music, with the audience, and in the moment. In other words....IN THE ZONE. Overthinking or over analyzing is a bad thing.

It is kind of like investing.....simple is best...but the human brain is constantly trying to make things complicated. So....it is hard to simply be in the ZONE.

I am sure you know what I mean Emmett.....as an actor.

 

This little article is kind of a long winded way of saying what I try to do in investing. I go for the BIG CAP.....EXTREME....of QUALITY.

Fama and French: The Five-Factor Model Revisited

https://blogs.cfainstitute.org/investor/2022/01/10/fama-and-french-the-five-factor-model-revisited/

(BOLD is my opinion OR what I consider important content)

"Eugene F. Fama and Kenneth R. French introduced their three-factor model augmenting the capital asset pricing model (CAPM) nearly three decades ago. They proposed two factors in addition to CAPM to explain asset returns: small minus big (SMB), which represents the return spread between small- and large-cap stocks, and high minus low (HML), which measures the return spread between high book-to-market and low book-to-market stocks.

Fama and French’s initial framework has since undergone many alterations and evolutions as other researchers added their own factors and put their own spin on the duo’s insights. For their part, Fama and French updated their model with two more factors to further capture asset returns: robust minus weak (RMW), which compares the returns of firms with high, or robust, operating profitability, and those with weak, or low, operating profitability; and conservative minus aggressive (CMA), which gauges the difference between companies that invest aggressively and those that do so more conservatively.

So how well has Fama and French’s five-factor model explained returns over the decades? According to our analysis, only one factor has truly held up over all time periods.

To gauge a factor’s performance, we constructed a $1 portfolio and then tracked its growth as if we were an investor going long on the factor in question. For example, the SMB portfolio represents $1 invested in 1926 in a portfolio that is long a basket of small-cap stocks and short one of large-cap stocks.

The SMB or size factor performed extremely well up to about 1982, generating returns of about 600% over the time period. Then from 1982 to 2000, the pattern reversed and large-cap stocks outdid small caps. The factor rebounded a bit thereafter but has largely stagnated over the last 10 or 15 years.

SMB Cumulative Returns



Though causation in these instances is difficult if not impossible to establish, this falling and plateauing performance warrants an explanation. And there is ample speculation as to the causes, macro or otherwise. After all, global markets have undergone many an evolution since the Roaring ’20s. But if we accept Occam’s razor that the simplest explanation is often the likeliest, Clifford Asness’s theory may have the most appeal: “There Is No Size Effect.”

The HML factor’s plight is well documented. Value investing — buying high book-to-market firms and shorting their low book-to-market peers — had an historic run from 1926 to 2007. Over this time frame, a long-short HML portfolio generated over 4000% returns.

But the tide has turned. Since 2007, the results have completely flipped. Following the Great Recession, this same long-short portfolio lost about half of its value as growth stocks took off. Indeed, many have written the value factor’s obituary.

HML Cumulative Returns


But Robert D. Arnott and his co-authors have offered a different narrative: “Reports of Value’s Death May Be Greatly Exaggerated.” They attribute the value factor’s recent underperformance to two phenomena: the HML book-value-to-price definition, which they contend does not adequately account for intangible assets, and the plunge in valuations of value vs. growth stocks.

The CMA factor’s trajectory somewhat mirrors that of HML. Backing companies that invest conservatively worked well for more than 40 years. But since 2004, the power of this factor has dissipated. In particular, since 2013 the stocks of firms that invest aggressively have only netted 20% excess returns.

CMA Cumulative Returns



Which brings us to the quality factor, or RMW. RMW is the single factor that has consistently delivered excess returns. Over all economic cycles since 1963, going long high quality stocks, or profitable firms, and shorting their low quality, unprofitable counterparts has been a great investment strategy. And the power of the factor has not diminished.

As Jason Hsu, Vitali Kalesnik, and Engin Kose have written, the definition of quality has proven rather malleable, but “Profitability and investment-related characteristics tend to capture most of the quality return premium.”

RMW Cumulative Returns


Of course, when Fama and French proposed their three-factor model, the hunch was that the SMB and HML factors would consistently deliver value over time just as the RMW has. That hasn’t panned out. Whether RMW continues to be the gem factor that always delivers excess returns going forward remains to be seen. But it’s worth remembering that sometimes this time really is different.

Still, the key lesson of Fama and French’s five-factor model and recent market history is simple if not especially revelatory: Investing in profitable companies has been a sound and time-tested strategy.'

MY COMMENT

I invest in businesses that are......AMERICAN......BIG CAP......ICONIC......WORLD WIDE MARKETING......DOMINANT PRODUCTS......WORLD WIDE MARKET LEADERS.......OWN A LICENSE TO MINT MONEY......GREAT MANAGEMENT......often DIVIDEND PAYING....companies. It can be summed up in one word......QUALITY. QUALITY across the board in every way that you can rate a business.

These sorts of companies are of course....very rare. I think that the ten companies that I own hit most of these marks. I think that their place in the SP500 as calculated by market cap is an indicator. This is what I mean by....riding the wave. I try to ride the wave on an individual business level and also on a general market level.

The odds that I or any investor is going to find some RARE up and coming company through fundamental research and luck that is undiscovered and make a fortune....are close to ZERO. The odds that I can identify a business that is young but already on the way to being one of those ICONIC businesses is much greater and much less work and luck. So.....that is what I....."try".....to do. As long as I get close to this goal....it works out well.

The second factor that is necessary in what I try to do....to take maximum advantage of the sorts of companies that I try to invest in is......LONG TERM INVESTING. Once you find those sorts of companies you want to let them do the work for as long as possible. That means being TOLERANT of times when they may not be as HOT as the latest and greatest companies on everyone's radar.

Amazon is a perfect example right now....their one year gain is about +1.5% right now. Over the past year they are at about +2.18%. NOT....real great numbers. BUT.....over five years they are at +300%.......and....I can cut them some short term slack based on their past performance and their future promise. No business just goes straight up all the time. I see what they are doing with their money to invest in the business and I like it. I also see the every growing promise of their web services business. ETC, etc, etc.

Of the businesses that I own.....Probably HONEYWELL is the weakest......but I have no plans to sell that stock.

 

I suspect that this had something to do with the markets today.

Lael Brainard, picked for No. 2 Fed spot, pledges to use 'powerful tool' on inflation

https://finance.yahoo.com/news/bide...use-powerful-tool-on-inflation-191439281.html

(BOLD is my opinion OR what I consider important content)

"Lael Brainard, President Joe Biden’s pick for the number two spot at the nation’s central bank, said the Federal Reserve stands ready to quell inflation through higher interest rates.

“We do have a powerful tool and we are going to use it to bring inflation down over time,” Brainard told the Senate Banking Committee in her confirmation hearing Thursday.

Brainard is currently a Fed governor, where she has served since being appointed by the Obama administration in 2014. If confirmed by the Senate, she would be moving up to the role of vice chair, a spot currently occupied by Trump-appointee Richard Clarida (until tomorrow).

Brainard, who also served in roles at the U.S. Treasury, told the Senate that the Fed’s “most important task” is high inflation. Government data released Wednesday showed prices in the United States growing by 7.0% between December 2020 and December 2021, the fastest year-over-year pace of inflation seen since June 1982.

Higher rates coming

The “tool” that can address that inflation is its benchmark for short-term interest rates called the federal funds rate.

When the pandemic triggered economic shutdowns en masse, the Fed lowered the federal funds rate to near-zero. The idea: near-zero borrowing costs would buoy demand through the depths of the pandemic.

The Fed is only now starting to entertain the idea of raising those borrowing costs as policymakers come around to the view that its easy money policies may be too easy.

“We have projected several [interest rate] increases this year,” Brainard told the Senate Banking Committee, adding that the Fed has “a responsibility to bring inflation down.”

If confirmed, Brainard would continue to work with Fed Chair Jerome Powell to see that through.

Powell had his reconfirmation hearing for a second term as Fed chair on Tuesday.

“If we see inflation persisting at high levels, longer than expected, if we have to raise interest rates more over time, then we will,” Powell said.

Although they are only two of up to 19 officials on the policy-setting Federal Open Market Committee, the Fed chair, vice chair, and the head of the Fed’s outpost in New York have historically made up a “troika” known for its power in steering consensus on the committee.

Brainard was pressed on a number of other topics as well. Although she has pushed for greater attention to climate-related financial risks in the banking system, Brainard said she was not advocating for “stress tests” on individual banks.

The Harvard-trained Ph.D economist also answered questions regarding her $750 campaign donation to Hillary Clinton’s 2016 presidential campaign, a rare move from senior officials at the independent central bank. Brainard said she cleared the donation with the Fed’s ethics office but admitted it was “not something that I would have done” if she had realized the abnormality of such a move.

Brainard is expected to sail through to confirmation. No Republicans on the Senate Banking Committee appeared to strongly oppose her nomination. In 2014, she secured a 61-31 confirmation vote for her Fed governor appointment, with support from senators in both parties.

MY COMMENT

I dont have much faith in this lady. She is the type of FED person that I think of when I see the FED......BRAINLESSLY...... pushing us into a recession. I believe she is much more political than she lets on. I ALSO see her as EXTREMELY power hungry.....and....if I was the FED chair I would not trust her to have my back. BUT.....in the secondary roll as vice Chair.....she will be tolerable. Not that we have any choice anyway.

 

I dont even have to wait for the close today. It will be a.......MEDIUM PLUS...... level LOSS in my account. It seems to be the SAME result that we were having in all the negative days so far this year. Same type of down day....same result. We were able to SHAKE off the pattern for a few days....but now we are right back with the same sort of negative day we have seen early in this year.

The HOPE for tomorrow is the big bank earnings that come in before the bell. Perhaps that will put some focus on earnings. BUT....being bank earnings there will be much talk about interest rates in relation to those earnings.

 

As expected a definite RED day. My only positive holding was Honeywell. AND.......as anticipated....I got hammered by the SP500 by 1.02%.

 

The Covid data from.......THE WORLDS MOST BRUTAL AND UNTRUSTWORTHY COMMUNIST DICTATORSHIP.....are about as accurate as their economic data and their company fundamentals.

 

No....when it comes to COVID....I dont trust anyone but original sources. I simply do my own Medical Literature research of the studies and original content. Disinformation is RAMPANT. For OMNI....I have been using South African medical and news sources since the start. Much more trustworthy than American media.

 

Well said Zukodany.....EXACTLY.