Everything is Awesome (for Lego Collectors)!

LEGO, sometimes referred to as the Apple of Toys, is one of the most popular toys in the world. Some fun facts: the plural of LEGO is LEGO and the name is derived from the Danish word leg godt, meaning "play well." The 83 years old company also happens to be the world's largest producer of rubber wheels, making more tires per year than Bridgestone, Michelin, Goodyear, etc.! 

Well, now there's another reason to be interested in LEGO (if that was even necessary). They apparently make pretty good investments, too! That's the finding of a study by Victoria Dobrynskaya and Julia Kishilova: LEGO - The Toy of Smart Investors. LEGO are collected by thousands of adults and has a thriving secondary market. The authors tracked the returns of 2,322 sets over 18 years and found that they had an average return of 18.5% p.a., with a standard deviation of 35%. The authors then constructed a LEGO price index from a hedonic regression of coefficients. The LEGO index outperformed large stocks, bonds, gold, and alternative investments in the sample period 1987–2015, yielding an average return of at least 11% (though LEGO underperformed the CRSP index consisting of all stocks in the NYSE, AMEX and NASDAQ exchanges by about 100 bps p.a.). 

Source: Dobrynskaya and Kishilova (2018).

They also found that LEGO returns were not significantly exposed to market, value, momentum, and volatility risk factors. Only the Fama–French size factor demonstrated significance, suggesting that LEGO investments perform similarly to small stocks. The LEGO return index had a correlation of just 13% with the S&P 500 and exhibited a positive skew (0.7). The uncorrelated nature of the LEGO market is reflected in its strong performance through the "dotcom" bubble and Global Financial Crisis.

The main reason for such high returns on the secondary market is diminishing supply over time. LEGO releases new sets each year and retires existing ones periodically. This sets ups interesting pricing dynamics. In the study sample, the returns on individual sets varied from −53.61% to 613.28% p.a. (with the average return of 18.5% p.a., as noted earlier). Very large sets, those with 1200+ pieces, and small sets, those with <340 pieces tended to perform better. Returns also varied dramatically by theme. Out of 44 themes identified by the authors, the 5 best performing were: Ideas, seasonal, superheroes, Minecraft and Friends (averaging 50% returns p.a.); the 5 worst were: Simpsons, Prince of Persia, factory, TNMNT, and space (averaging 2% returns p.a.).

         Source: Dobrynskaya and Kishilova (2018).          

                    

   

                                                                                        Source: Dobrynskaya and Kishilova (2018).

So, from now on always buy two sets of LEGO. One for the kids (or grownups) to play with and one for the investment! Who knows that new set could be the new Lego Millennium Falcon which retailed for $500 in 2007, and today sells for $9,000 on eBay.

How Safe is Your Password?

Using an easy-to-remember password is convenient but risky. And if people have to choose...well, they generally choose convenience. According to Statista, 123456, picture1, password, 111111 and 123123 were the world's most common passwords in 2020; all of which could be cracked in less than a second by bots. However, as Statista's Katherina Buchholz notes, even little tweaks can make passwords a lot more robust: "adding even one upper case letter to a password can already dramatically alter its potential. In the case of an 8-character password, it can now be broken in 22 minutes instead of instantaneously in one second...A 12-character password with one uppercase letter, one number and one symbol is almost unbreakable, taking a computer 34,000 years to crack."

How? Combinations and permutations. There are 26 lower case letters in the English alphabet. A password of eight characters has 26^8 or ~209 billion possible combinations. Adding the uppercase, we already arrive at 52^8 or ~53.5 trillion combinations. With the numbers (0-9) in there, it’s 62^8 or 218 trillion combinations. Symbols add another great potential for security, but since only the handful displayed on computer keyboards are convenient to use, this ups the number of combinations once more to around 90^8 or 430 trillion combinations.

If you're still wondering how much of an effort you need to make, the below graphic provides a useful convenience-risk guide.

Also, if you can see your password from this weighted list of the world's most common ones, it really is time to change to something else.

Jaws of Life?

Nearly 50 years after they first terrorized the folks at Amity Islands and got their own week-long TV programming block on Discovery...are sharks becoming our allies? A new study in Nature Communications, reported by the Daily Beast, suggests shark proteins can act as antibodies against COVID and its variants. According to the report, researchers at the University of Wisconsin-Madison ("UWM") have discovered a protein unique to sharks that is small and nimble enough to "get into nooks and crannies" of Covid-19's spiky structure that human antibodies cannot, which allows them to recognize coronavirus proteins more effectively than our own antibodies. As a result, they are better able to neutralize the COVID-19 virus. The proteins, called VNARs, are produced by shark immune systems naturally and are about one-tenth of the size of human antibodies. 

That's promising news with Delta, Omicron and other variants possibly on the way. Oh Jaws...frenemies?

Squid Game: South Dakota Edition

Teachers in South Dakota competed in a "Dash for Cash" game that was reminiscent of the mega-hit Netflix show. Perhaps that was the point, life imitating art. The teachers, wearing hockey helmets, "crawled into the pile of cash, frantically stuffing the bills into their shirts as an arena of spectators hollered and cheered until every dollar was snatched up." 

According to Kelo, the Sioux Falls Stampede, a local hockey team, hosted the event using money donated by CU Mortgage Direct, a Sioux Falls lender (of course!). It was billed as an opportunity for teachers to gather money for their classroom needs, with the rousing tagline: “put it in their shirt, pants, wherever... they can take as much money as they can grab during the time that we have during the intermission.”

A clip of the event went viral over the weekend and critics said the image of teachers on their hands and knees, scrambling for low-denomination bills, was “dehumanizing” and even “dystopian,” especially as teachers are paid relatively small salaries in South Dakota. In fact, according to a recent report from the National Education Association, South Dakota teachers in the 2019-20 fiscal year earned an average annual salary of about $49,000, behind only Mississippi. The state ranked 38th in terms of per-student spending, having spent about $10,800 per student in the fall term of that year...Are you not entertained?

Time's Person of the Year: Emperor Muskimus

Time's Person of the Year honors, like the magazine itself, doesn't carry nearly as much cachet as it used to, except maybe to one person. Still, be it tradition or nostalgia, the PoY edition does manage to garner a disproportionate amount of media attention, like the US News & World Report's college rankings. Time's purported criteria for PoY is “the person or persons who most affected the news and our lives, for good or ill, and embodied what was important about the year.” But you gotta sell magazines too. And so, in keeping with their annual buzzy-but-not-really-meeting-their-own-criteria choices, this year Time went with retail trading folk hero, SNL guest host, and noted EV evangelist, Elon Musk.

Time helpfully lays out its exhaustive methodology for the choice of Musk, the world's richest man and future ruler of Mars: 

"An army of devotees hangs on his every utterance. He dreams of Mars as he bestrides Earth, square-jawed and indomitable...He tosses satellites into orbit and harnesses the sun; he drives a car he created that uses no gas and barely needs a driver. With a flick of his finger, the stock market soars or swoons." But most importantly because "Lately, Elon Musk also likes to live-tweet his poops"...Hmmm. But please continue...“Just dropping some friends off at the pool,” the 50-year-old zillionaire informed his 66 million Twitter followers on the evening of Nov. 29, having previously advised that at least half his tweets were “made on a porcelain throne.” After an interval—21 minutes, if you must know—an update: “Splish splash.” Cool Time, you're so hip; maybe Elon will buy you now.

Ok, ok it's still something to be proud of (we're posting about it, aren't we?). Almost up there with when a budding multi-millionaire Elon got a chance to pitch Tony Stark all those years ago.