New Phyrexia Stock Exchange: Speculating on Data vs. Emotions

It goes without saying that for most players there is a name that instantly comes to mind when somebody asks, “What’s your favorite card?” I know for me, the first card that always comes to mind is “Spellbook” – the flavor text hooked me as a young person who was interested in fantasy  fiction, “Everything the wise woman learned she wrote in a book, and when the pages were black with ink, she took white ink and began again.”

Spellbook is a decent card and was even an auto-include for me back when I brewed casual EDH decks. I think it’s safe to say that no investor can argue that Spellbook is a bad card, but they can certainly make the determination that it’s not a good investment item. I want to illustrate a very important point today – speculation decisions should primarily be made on reasoning that’s backed up with data and not on emotions. 

In this article I’ll go over some ways you can objectively decide the quality of a card, how to interpret pieces of market data, and one of my mistakes with gambling on emotions. As always, this article doesn’t replace professional financial guidance.

 

Cards that we think are good aren’t always great

One of the most diversifying aspects about the game of Magic is that through 25 years of printing there are virtually limitless decks that can be built with the available card pool  – more or less so depending on the format. Due to this, some cards are considered strictly “good”, some strictly “bad”, and then there are the vast majority in the middle that come down to certain situations or combinations.

Financial speculation is one of the few areas in life where it actually matters what the hive mind thinks as that is the driving force behind market fluctuations. Referring to the Spellbook example, I happen to have a lot of personal emotional investment in the card from my early days of playing where I used a lot of fringe on-hand cards to build decks; it reminds me of my roots in Magic and this nostalgia distorts my general evaluation of the card. As mentioned earlier,  Spellbook really is not a bad card, but it is not nearly the best at what it does.

If you’re a big EDH player you might have cringed when I said I used Spellbook as an auto-include because the much more obvious staple is a card like Reliquary Tower. Going deeper into EDH, Venser’s Journal could prove to be even better if you consider the Ivory Tower-like secondary effect. These are just a couple of examples that illustrate how a good card can end up in the shadow of a great card though none of these cards are particularly valuable.

My method is simple – I let the competitive Top 8s and historical data tell me what the great cards are.

 

Market price and list price are different things

Even outside of the realm of Magic within the world of finance, there is a concept of list prices and market prices for marketable commodities. To use a car dealer as an example, the list price is what the dealer posts on the window and the market price is what vehicle consumers consider it to be worth which is generally based on an aggregated guide like the Kelly Blue Book.

This may seem simple to some but to those who have only paid retail price for cards from a limited selection of retailers, it may not be so obvious that there can be quite a bit of variance between what cards list for and what they truly sell for (and therefore their “worth” in the market).

I generally operate under the thought that there is no true market price for a card. There are general floors and ceilings that cards won’t exceed – especially as it relates to commons, uncommons, bulk rares, and the like. For this reason, when determining the current “value” of a card I tend to think of a range rather than a specific value. In order to determine such a range I will browse listings on TCGPlayer and listings that have recently sold on eBay.

So what about list prices for Magic? Those are the prices you see on websites that sell their own stock of cards as opposed to being a marketplace. For example’s sake let’s take a look at a card that’s hot right now – Cavern of Souls from Avacyn Restored. At the time of this writing, eBay shows Near-Mint (NM) “Sold” listings ranging from $61 to $76; TCGPlayer shows a market price of $75 but shows NM listings from $71 to $80; ChannelFireball lists a NM copy for $90; CardKingdom also lists a NM copy for $90.

With this information, I would ideally try to pay $61 or less and would not pay more than around $75 as there are plenty of copies on eBay selling for around that price. That being said it is important to examine the price trend overall of the card. To me, the current price seems to be at a ceiling as it is already a very popular card that’s used in some top tier decks. For this reason, I would not be trying to buy any of these cards in the hopes of the price going up significantly to resell later and the price data would influence what I would pay for copies I want to play with.

 

Understanding cause and effect with market price fluctuations

Market fluctuations are an effect and always have a cause. What can take time is learning how to separate the different causes. One of the easiest things to be fooled by when beginning to invest are price fluctuations due to a sudden decrease of supply, also known as “buyouts”.

A buyout usually happens when some investor is speculating on a card that they think is undervalued and will attempt to buy all available stock. This tends to artificially increase the market demand while actually decreasing the market supply thereby causing the market price to rise or even spike in some situations. Before jumping into a spiking card it’s important to evaluate why it might be spiking.

Like I hinted at in the section about evaluation a card, I’ve seen a few different methods around the internet but a basic one involves checking deck lists from major competitions and seeing if any off-meta cards were in a top deck which can also cause spikes. If it’s a buyout, you must be wary of why it is being bought out. If it is just a legitimately good and undervalued card then it might not be a bad idea to jump in. However, I have seen schemes which involve buying out a card to artificially spike the price, then reselling those cards to investors at the higher inflated price who think they’re getting in early only to find that there is no real demand while the price drops. This is what is referred to in the stock trading world as a “pump and dump” scheme.

It may not be completely possible to determine why a card is spiking which is when we come back to the risk/reward evaluation. How much risk are you willing to take for a potential reward? For a cheap $1 card that is spiking, I might buy a few copies due to the low risk. I would be much more averse to jumping into a card that is spiking in the hundreds of dollars.

 

Learning from your mistakes

I’ve made bad decisions on investments and there’s a good chance you will too – it’s part of the game after all. The blunder I’ll share is Birthing Pod. Around Spring of 2014 I bought a few copies of Birthing Pod because I noticed it had been spiking over the past two or so weeks. I didn’t do too much research on it and I had always thought it was a good card so I bought in quickly. Unfortunately for me, I bought in near the top of a spike and paid around $12-13 per copy if memory serves correct. It hit $16 for just a moment and very quickly came back down to around $8 each. To this day, it hasn’t moved much more beyond that though it is worth mentioning that it did survive a ban in Modern.

Hopefully this article gave you a bit of extra insight into how you might evaluate cards for investing in. Do your research before making purchases! Feel free to leave your comments and questions down below. You can also reach out to me on my YouTube channel’s twitter account: @mtg_vc

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Mike VC

Mike VC

Mike started playing Magic around 2005 - starting with the Kamigawa block. His favorite format to play right now is Pauper which he regularly plays on MTGO. Mike is a Magic YouTube content producer who specializes in sealed product openings; you can find his content under MTG Vintage Crack. Find him on Twitter @mtg_vc.

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