Rishadan Pawnshop #22 – Lessons: 2009
Posted by Jeremy Fuentes
December 30, 2009 | 
29 comments
With 2009 coming to a close, I took some time to sit and reflect on the year that passed and some of the lessons I learned. Today I will share some of them with you with the hope you can avoid some of these mistakes in 2010.
The game of MTG is complicated enough without factoring in the financial aspect. If you play Chess or Uno or some other game, you just pick it up and play and when you're done you just put it down and walk away. You don't have to worry about new expansions of Chess pieces coming out or your Wild Draw Four cards losing value. With MTG, all of those factors are just the tip of the iceberg. However, as with most things in life, the most valuable lessons come from experience.
Prospecting vs. Compulsion
As you all know, the recession dragged many pocketbooks through the mud this year. While I was fortunate enough to land a temp job in the county probation department, a record breaking percentage of people are still without work.
In these hard times, we should be especially strategic with how we allocate our MTG dollars. If you follow my articles regularly, you'd know that I'm a huge advocate of prospecting. Buying cards in the off-season or trying to pick out the sleepers in a new set can be extremely lucrative if you hit something like the next Tarmogoyf. However, we all know how often those come along. Now, I'm not changing my stance. All I'm saying is that it is very easy to get caught up in prospecting to the point that we start buying anything that looks like it might be remotely good somehow someway. In the end we spend lots of money on cards that don't go anywhere but down in price. This year, I realized how much money I really spend on cards that I never end up using and am slowly running out of room to put the cards can't move in trade or sale. If it wasn't significant, I wouldn't be mentioning this. Don't make the same mistake.
If you don't have extra Benjamins laying around to gamble on the next next Tarmogoyf, I would recommend you put your prospects on a "watch list." Once a week or so, check auctions and check prices on Magictraders.com or Blacklotusproject.com and figure out if they are going up or down. Generally, unless a card had a breakout performance at a PT or other large scale event, the price will go up gradually, not overnight. Though you won't be maximizing your profit by buying at the very bottom, you can hedging against loss by not investing in cards that may never go up in value.
Use your head when you prospect. If you don't have immediate plans laid out for the cards you're picking up, you might be better off just putting them on your watch list than putting them in your shopping cart. Pay a little extra attention to the market and you can minimize your losses and still not miss out on the upswing of good cards.
Play Before You Pay
I recently built a Standard deck to take to a local weekly tournament. The deck was all new and shiny and ended up costing majority of the store credit I had been saving for a rainy day (or for the day they ever got $75 foil Tarmogoyfs back in stock"¦ sigh). Having focused most of my time on Magic Online over the past months, I was excited to have a cardboard Standard deck. The thing was, I had this brand new, pimped out expensive deck and I hadn't even played one actual game with it. Sure, I read primers and tournament reports and all that jazz, but I hadn't drawn one opening hand with the deck, let alone play a decent amount of test games.
Long story short, it was only after a few events had passed (approximately twelve matches) that I realized my deck wasn't as great as I thought it was. Regardless, I was stuck with it because I had no more store credit to buy another deck and the cards in it were pretty much only useful in that archetype. Had I actually played with the deck before I purchased it, I would have realized how truly mediocre the deck is.
Thinking back, the lesson in this story is two-fold. First, it would have served me well to playtest a few games with the deck before I made the decision to purchase it or not. You can learn a lot about a deck and how much you like or don't like it by just playing a few matches. Proxies are infinitely cheaper than real cards, but the value they give you as far as gameplay and matchup knowledge is exactly the same. Second, never buy cards at the peak of their value unless absolutely necessary. I had purchased much of the deck in advance, but many of the money rares they had in stock were only available in foil and came at a very high price when I acquired them. It's not like I was playing in a GP or a PTQ and needed the cards right then and there. I should have just walked away from the tournament that night rather than blow my store credit load on a deck I now despise.
Patience is truly a virtue when it comes to finance. A deck is an investment and you should treat it as such. You wouldn't go out and buy a car without test driving it would you? On the same note, you wouldn't just go up and buy a car from the first dealer on the lot and pay full sticker price unless you were running from the mob and had to get the heck out of dodge tonight, right? Exactly"¦
Laziness is Not An Excuse
It's funny to observe how when I fail to follow my own advice it comes back around to bite me in the arse. I often tell people that laziness is not a legitimate excuse for failing to get things done. If you want to maximize your dollar for card purchases and your collection in trade, you will definitely need to put in work, paying attention on all ends of the spectrum.
For whatever reason, despite the fact I know it's not a good excuse and even tell others that it's not a good excuse, I get lazy when it comes to managing my collection. As I said before, I realized how much money I waste and how much I'm running out of room because of all the extra cards I've purchased with no particular plan in mind. Part of this was due to my obsessive compulsion and overzealousness when it came to prospecting. The other part was due to my laziness in managing my collection properly on the sale and trade end of things.
If you don't want to overpay on your new cards, seek out the best price and the lowest auctions. Be patient and vigilant and you should be able to find what you need at the price you're looking for. On the other side, more importantly, make sure you get rid of cards when the timing is right. You accumulate tons of cards from draft and sealed and random purchases and trades. Don't let them just sit there past the rotation to the point where they are worthless. If your cards are peaking and you're not playing them, sell them or at least trade them in for store credit. Windows of opportunity close quick in the financial sector of Magic and you have to act decisively if you want to be at the head of the pack.
In order to manage your collection with the most efficiency, you will need to keep close tabs on what you own and how long it will be Standard legal (since we are working on the premise that most cards peak in value while they are in Standard). Some cards will have a second life come Extended season, but there will always be at least some initial dip in price. I would only recommend hold cards through the rotation if you know 100% for a fact that you will be playing them again in Extended and you feel getting them back would be an extraordinary amount of trouble. Even then, you're probably just being lazy. And laziness is not an excuse.
Most of these lessons have a few common threads, most notably timing and patience. You can't treat collection management like a get rich quick scheme. This is a grind. You have to have a plan in mind, but also be able to improvise and act quickly when the time comes for it. Overall, the most valuable lessons you learn will be from your own personal experiences. Hopefully, my experiences have given you a little something you can take away and use down the road.
It's been fun, 2009. We had a good run, but now it's time to go. Have a safe and blessed New Years, everyone!
Peace
Jeremy
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Winterhalter says: December 30, 2009 @ 9:39 pm
I’m surprised you write financial analysis of the Magic market given the number of glaring deficiencies in basic understanding of how markets price goods on display in this article.
drew says: December 30, 2009 @ 10:16 pm
Hey Winterhalter, cool story.
Jeremy Fuentes says: December 30, 2009 @ 10:23 pm
care to elaborate, Winter?
nitpicker says: December 30, 2009 @ 10:28 pm
@Winterhalter: Do you want to point out those deficiencies, or leave your post intentionally vague? I would be very interested to hear you debate the particular points you take issue with. I am not interested in seeing you resort to ad hominems.
Trackback MTGBattlefield says: December 31, 2009 @ 12:35 am
Rishadawn Pawnshop #22 – Lessons: 2009…
Your story has been summoned to the battlefield – Trackback from MTGBattlefield…
Eryk H says: December 31, 2009 @ 1:49 am
First off Whaaaaa??? to the first post
Second off thanks J-Fuent this has been a solid year for your column and just as a reminder of how true it is to be patient I shall insert my own example. I have been holding off on the Baneslayers for the last few months, as I passed on them when they were $20 a piece, then again when they were only $40 a piece, I cam to the realization that it would be relevantly pertinent to pick up a set once I saw them being played relatively often in extended and they were now upwards of $60+. So I checked in on about 10-15 auctions on everyone’s favorite bay and finally got one at $165 for a set of four after shipping $170 I got a set at August/Septembers prices for a card that may be still climbing in value as M10 gets no love from the pack cracking society. So patients really is a virtue in every aspect of life…YAY dad was right all along?!
camoseven says: December 31, 2009 @ 1:54 am
Hey just wanted to say that I really enjoy your articles. Happy new year! May your prospects always go up in value and your packs always contain mythics!
Will says: December 31, 2009 @ 5:26 am
I didn’t see anything too bad from a real world Econ perspective. A few things were way off from an Econ 101 view point, but that’s supposed to happen since Econ 101 if full of simplifications to make it easy to learn. It’s not supposed to match the world in anyhing more than a general sense
SKETCH says: December 31, 2009 @ 9:39 am
I learned the lesion of buying cards before testing long ago and that's a great tip to give anyone that gets the feeling of "I need to get these cards now." Test you ideas first before spending one cent! I choose to look at each card and make the decision at that point weather or not it is a chase rare or not. I have extensive knowledge in T2, extended, legacy, or vintage to know if a card will be good enough to warrant buying it right now or to wait two to three weeks after a set comes out. I watch the price trends change and know if it will affect one card VS another. My only problem is that I end up with no capital to buy cards with at the time I find the gems. I new that Tarogoyf was going to be a high dollar card when I saw it. By the time I had money to buy 50 of them they had jump in price over night I seems. I could have made a killing if I would have been able to buy them at $3.00 each! Same thing with Bane Slayer! Vampire Hexmage is another that peeked my interest, one day Dark Depths is 3 to 5 and the next it's 25 to 30. My finances just do not line up with set releases. So now I have a set-a-side fund just for that occasion when I need the money now because I know that tomorrow the prices are going up! My suggestion to anyone buying cards from new sets is read each card carefully and check the gatherer for cards that work with it. Out of the last six or seven sets I have picked out the best cards and didn't have the money to get them when they where inexpensive. It will not happen again!!
The_Engineer says: December 31, 2009 @ 11:09 am
I’m thinking that Winterhalter has studied economics and forgot about the exceedingly large number of assumptions that go into theorhetical economic work. The real market doesn’t have perfect information. There are costs associated with bargaining etc. The things that Jeremy is saying in his articles generally take advantage of these flaws in the system rather than actually using conventional economic wisdom. His point is not all EBay auctions end up at the same price, and he’s right- there is more variance in the real world than there is in the world of numbers and averages.
As an Econ major and a long time Magic player, I can conclusively say that most of what Jeremy says is helpful to people with some level of understanding of how to manage a collection. Some of it, I figured out myself over the years, but much of it I’ve learned from his articles. These articles are for the REAL WORLD only, and no, they do not rely on the conventional notions of how markets “should” work, because they instead rely on the reality of how they do work.
For people in general: Don’t listen to the guy who clearly just took Econ 101. He’s just not had enough courses to realize the different ways to treat situations in the classroom vs. the real world. Don’t hate him for repeating what he’s learned, as I’m pretty sure he thinks he’s being quite correct, not just randomly flaming, as it seems.
Have a happy new year, everybody!
sti says: December 31, 2009 @ 11:22 am
I always enjoy
You are wrong- no reason.
Jeremy Fuentes says: December 31, 2009 @ 12:00 pm
@Nitpicker: I had to look up “ad hominem” in the dictionary… haha, but thanks for having my back.
@ Eryk: Thanks.
@ Sketch: Everyone has a woulda coulda shoulda story… (Tarmogoyf is by far the most common). I’d like to hear your thoughts on the sleeper cards next time I do a set review. Post in the comments! Called shots are always so much more sweet when you call them out loud. haha =)
@ Engineer: Thanks, I REALLY appreciated that… I was a Finance major in college because I loved econ so much. I re-read my article and didn’t see anything “glaring” as the poster mentioned. As a writer, it is very rewarding to hear feedback such as yours. Thank you, again. Happy new year!
@ sti: Right?
@ Winter: I’d still like to hear what you felt was wrong with the article. Whether I was technically flawed or if it was a communication misunderstanding, I’d like to comment on it…
Lyle says: December 31, 2009 @ 12:20 pm
Thus far, my only really big story was Baneslayer Angel. I took a break from Kamigawa through Alara so I missed Tarmogoyf, but knowing me, I probably would have missed it too, since I wasn’t a tournament player until shortly after I restarted in Alara.
Of course, my “big story” was an “I didn’t catch it” story. I got 1 Baneslayer when I split a box with a friend, and then traded it away at a value of $25 (2 Birds and something else). To be fair, though, this was when Angel was actually *worth* $25.
Anyway, great article. I have a question, though: As a University student, I’m trying to be frugal with my Magic. I understand Tarmogoyf is probably an investment and not an expense, but I’d just feel so awful about spending $50-60 per card on Tarmogoyf. What do you recommend for someone like me who just flat-out can’t bring himself to spend that kind of money on a per-card basis?
My current strategy is to buy boxes of new sets and trade for cards that look like they have utility. Currently, I’m trading for fetchlands, because they’ll be playable for at least the next 6 years, if not longer in Legacy, and borrowing the older, expensive cards that I missed from friends.
merl says: December 31, 2009 @ 12:36 pm
Don’t worry about the troll Jeremy.
About the only ‘flaws’ were yo pointing out when you had failed to take your own advice.
Some of your ideas were a bit mixed up however. I realise that you are a person and not a bloodless machine, but what relevance is there to the story for you to talk about how you mostly play modo, have store credit, are waiting to buy foil tarmogoyfs etc etc. Yes, I understand that it explains why you didn’t have inf cards on hand and thus had to buy cards, and the opportunity cost of the.
Here’s some potential topic areas that I think you could focus in articles:
1. How to get good deals on MODO (bots/traders/players/buying tix)
2. The different ways to acquire cards (drafting/trading/shop/website), how to bargain hunt each of them, and what the benefits of each approach are? (actually, this is such a rich topic you could put together more than 10 different articles)
3. How to tell which cards are going to go up and down in value (you cover this pretty well almost every week, kinda)
4. The mindset of a dealer or different types of players, or how to have a win/win interaction with them when trading/buying/selling cards
5. How to get together the cards for a big tournament without paying for all of the cards (with a bonus ‘why proxying is good’ section, much like you randomly did here)
6. How GPs, Pro Tours etc affect card prices
7. How modo tournament results affects modo card prices.
I think that the different articles you write should pick a theme like the ones above or something similar and then mine them out. Otherwise it feels like you are waiting for a new set to come out so that you can second guess Ben Bleiweiss and write the same article as him. Also, your articles feel are a little diluted when you talk about a subject like one of the above themes but them randomly have a sentence about alot of the other topics as well. Sure, each sentence is correct, but you’re not plumbing each topic in enough depth (and in effect, each weeks article shares 25% of it’s content with every other article you write).
I’d put down more, but this post is long enough as it is. It’s intended to be entirely constructive, so please don’t take this as an attack on you. It’s not meant to be that. If you would like to discuss this further, doing it offline is probably a better way (I’ve included my e-mail in the post field, so LSV can get it for you), particularly to flesh out the topics you want to cover. That way you can have a ‘Pawnshop academy’ type body of work, and hopefully have more timeless articles?
Winterhalter says: December 31, 2009 @ 2:05 pm
Sorry for the brevity; I’ll expand. A lot of your recommendations show a failure to understand the effect of market efficiency on Magic cards. Prices in the secondary market are set by experienced institutional retailers who transact at considerably greater volume than any individual attempting to trade. These prices reflect all publicly known information about all cards at all times. When you purchase a card when the intention of prospecting, the price at which you acquire the card already accounts for anything you might believe you know about its later consumption, either by competitive or casual players, discounted for uncertainty. Thus, when you purchase a card with the intention of arbitraging it, all information you understand about that card is already included in its price. As you observed over the course of the past year, if you purchase many cards that you cannot consume, you’re forced to accept a loss. It’s very likely that this will be true because it is very unlikely that you individually as a trade understand anything about the markets for these cards that the rest of the market, and especially its institutional traders, does not. It should come as no surprise, then, that most of your prospecting attempts are losses. It has nothing to do with patience or laziness; it has to do with the inherent nature of the markets in which you’re operating. In addition, this form of market efficiency means that if you do realize a gain, it is very unlikely that is because you understood something in advance of the market; rather, you were the beneficiary of an upswing in demand generated by an exogenous market trend.
In addition, there are numerous points in the article where you imply that past prices are a reasonable indicator of future trends, which is just false. Prices of highly liquid assets exhibit random walk behavior, and no amount of knowledge of past price trends for any individual asset will allow you predict the price of that asset in the future.
Suffice to say that making money in Magic markets should only be attempted by highly select individuals with a deep technical understanding of the game, or those with significant economies of scale. For the most part, others who profit by trading are either taking advantage of local mispricing of assets due to poor understanding by other individual traders (this is pretty common at prereleases, for example) or simply running hot.
Winterhalter says: December 31, 2009 @ 2:15 pm
How many of you criticizing me think you could make it as daytraders with your current skillsets? If you couldn’t turn a profit trading in public securities markets, what is it about your technical understanding of Magic that allows you to value assets with a considerably lower margin of error than the rest of the market participants, in particular experienced buyers and sellers with considerable advantages over you in economies of scale?
Colin says: December 31, 2009 @ 2:17 pm
I’d have to say my best call was Knight of Reliquary. Wasn’t playing in Tarmogoyf era, totally whiffed Baneslayer, totally whiffed Dark Depths.
If you could do an article on Magic Supply and Demand as opposed to real world, examples:
Baneslayer’s enormous price tag: Not much M10 being busted.
Dark Depth’s enormous price tag: Not much Coldsnap busted.
Regal Forces 10 online price tag during elf combo: Not much online eventide busted.
Maybe a list of the sets that weren’t opened much, because thats where the large price booms seem to take place
Winterhalter says: December 31, 2009 @ 2:19 pm
@The_Engineer: You noted that “The real market doesn't have perfect information. There are costs associated with bargaining etc.” Both of these mean that watching market trends as an individual trader with the intent of taking advantage of a perceived informational edge on the market are *even harder* than it would be than if Magic card prices were not sticky and transaction costs were 0.
4wallz says: December 31, 2009 @ 3:41 pm
Remember that scene in Good Will Hunting where Matt Damon totally pwns that guy who is trying to show off dizzying intellect to Minnie Driver’s character because he read one book about it? That’s how your coming off Winterhalter.
You say that “experienced institutional retailers” set the secondary market value of cards. Or if you weren’t trying to impress us all with your plethora of intelligence, you would have said, storeowners and ebay sellers sell a lot more cards than you so they set prices based off market trends. You could have said that, and you’d still be wrong. Just because someone (even an institutional retailer!) sets a price, doesn’t mean those people have a corner on the market either. Check out magiccards.info sometime. Some cards have a huge discrepancy in price from one seller to another. And compare 5 different sellers and you will get 5 different prices. So obviously these wizards of the economy that we have aren’t so infallible as you imply.
You’re statement that ‘past prices indicate future trends is false’ is wrong too. Cards are definately based on there past trends. A prime example would be Tarmogoyf. While the card was played in standard it was a juggernaut and a high dollar card. Once it rotated out of standard it dropped drastically in price. Went from around 50 to about 25 a card. Now according to you someone would be an idiot to buy the card because an uneducated player of Magic who doesn’t own a store couldn’t possibly understand that the card would go back up in value. Well guess what. It did. And I, just a humble Magic player will give you some sold advice you can take or leave. If Baneslayer Angel rotates out of standard it will probably drop in price. If it goes anywhere near the 30 dollar mark you should consider that a good investment and pick it up. Because it will rise again. Oh and FYI Tarmogoyf is running at almost 60 right now.
I agree with you that someone should have a good technical understanding of the game to make calls on card value, espically future value. But once again you arrogently state that this should be done by only a select few individuals. I’m sure you consider yourself a part of that group too…. (insert incorrect buzzer sound here). I know many smart Magic players who make good decisions based on cards and make a decent profit on them. Now I’m not saying that an everyday individual would be able to make a living on Magic, I wouldn’t even try personally. But at the same time you make broad assumptions that everyone else including the author are just a bunch of fools. No I couldn’t be a day trader on the Stock market (and you must have some experience there because that is a really stupid thing to say) but I understand Magic pretty good since I have been playing it for about 10 years.
Next time you reply try to come up with some comments with some actual depth not just try to impress all us peasants with your enormous vocabulary.
Adam says: December 31, 2009 @ 4:30 pm
Overall I think you gave some good general advice for your average joe. IMO the best point you made was not to compulsively buy cards. It can be a difficult thing not to do, for new or experienced players alike, considering all the cool and shiny things available for purchase lol. I have been analyzing the Magic market more extensively as of late and my efforts have paid off here at channelfireball.com. I needed 4 living wishes and saw that they were on sell so i got a DCI Judge Foil Living Wish for $8, 1/3rd its regular* value. Now it’s back up to $25 only two weeks later! (*by regular I mean the price its been at roughly since it was first printed to present date).
As for winterhalter he makes some good counter points, i.e.- past prices don’t necessarily influence future prices. I picked up on this in the movie Pi where the protagonist attempts to make a computer to detect and predict patterns in the otherwise chaotic stock market. Anyways great article Jeremy keep it up!
rei says: December 31, 2009 @ 4:37 pm
@winterhalter. You are that guy who gives answers to questions that no one asked. Wanker
Vhaerun says: December 31, 2009 @ 6:39 pm
As an impartial bystander, I found it humourous that Winterhalter was pounced upon for his comment (which is explicitly requested by the POST COMMENT button after each article), only to offer the clarification requested (brilliantly I might add) , but Rei to chime in with ignorance.
Thanks Fuentes for your article. I like your series for what I can glean from them.
dis7 says: December 31, 2009 @ 7:58 pm
i didn’t really care too much about the article, but the discussion after the article is a pretty good read. without winterhalter’s comment, there would not have been a discussion, so thanks winterhalter for bringing it up and taking your time to elaborate on it!
Jeremy Fuentes says: December 31, 2009 @ 9:15 pm
When you purchase a card for prospecting, the price indeed encompasses everything everyone currently knows about the card. It is the “market price”. However, the reason why it is “prospecting” is because you believe that the card has the potential to perform above what it is currently performing at as far as tournament play. Just like buying penny tech stocks. Not all of them are going to become the next Microsoft, but if you do in fact hit that one, then you’re golden. All of them could have potential and all of them could fail. But should one realize it’s fullest potential, you would have been there at the bottom to reap the benefits.So, if you theoretically made a conscious effort to say “i think Tarmogoyf is better than what everyone else does at $4 and i’m willing to put my money where my mouth is and buy 100 of them” i’m pretty sure that your realized gain is of your own understanding and not solely reaping the benefits of an upswing in demand generated by and exogenous market trend. Aka, you didn’t just get lucky, you were simply just correct in this instance. Conversely if you said “i think that Colfenor’s Plans is better then everyone thinks and i’m going to buy 1000 of them” your money going down the crapper is your own damn fault. You weren’t just unlucky. You made a decision and the outcome was poor.
And it is true, that in economics, it is wrong to say past prices indicate future trends. However, we are dealing with predictable, seasonal goods here. Is it wrong to predict that the demand for umbrellas will be more in the winter? And the demand for swim shorts will be higher in the summer? Why then is it wrong to say the demand for Tarmogoyf will be higher in Extended season, a DCI sanctioned, internationally played PTQ season?
The difference with those analogies is there are infinite number of companies making umbrellas and shorts, so the supply is there to meet the demand. However, there are a finite number of Tarmogoyfs in existence and therefore we can predict that the price will go up once the season of demand comes along. The supply will always be the same (if not less) and we can quite accurately predict the demand (barring the release of a 1 casting cost Supergoyf), therefore, I think it’s pretty safe to say we have a good idea of where the price will go.
And you’re definitely right about the “money making” and “day trading” too. Not many, if anyone here, are trying to make a living by predicting Magic card prices. But like I’ve always said before, if you could earn your PTQ entry or trade up to earn the money that would pay for your flight to the next GP, wouldn’t it be worth it to pay a little more attention?
Thanks for your response. Your economics aren’t wrong, I just think that you need to bridge the gap a little between the economics and the real life application. Not everything in the world operates as perfect free market. Like you said, most who profit from trading are the beneficiaries of local mispricing or lack of understanding from a trading partner. I write my articles with the hope that my readers gain the knowledge of card prices and understanding of the MTG market to earn an edge in their trades and purchases.
And to everyone else, take it easy on Winter.. It’s the holidays! =) He felt he had a point to make and I explicitly asked him to come out and say it, so his response wasn’t unwarranted.
@merl: Thanks, constructive criticism like yours is ALWAYS appreciated around these parts… and you just gave me a really good idea for a series next year =)
@4wallz: Great post. Thanks.
Happy New Year Everyone! (3 hours away for us, but the ball apparently already dropped in New York! [as i was writing this long response... =/ ])
Bug says: January 1, 2010 @ 12:48 am
When I heard that Land was going to be a major set mechanic in Zendikar, I immediately traded for market priced $3 KotR, and now they are $8-9. Another way to beat the market is to simply act before sellers (and more often traders) are aware of the increased demand.
So while yes, it is important to have a knowledge of the game, you do need to beat the market to it, if you can. I agree with many of the points in the original article, and winter isn’t correcting applying what buying and selling and trading MTG cards in real life is, as compared to theoretical economics.
shoeboxtony says: January 1, 2010 @ 9:05 am
hey jerm! you get my 1st EVER post (something lsv, josh, or web can’t even boast), but unfortunately I wish it were under better circumstances. I just find it slightly irresponsible for a person that is supposed to be providing financial advice in the business, to be pointing out ‘basic’ mistakes in the value side of the game. I was pretty floored when you told your readers you foiled a deck you hadn’t even played with. maybe your addressing this flaw to warn very new players to the game but it really did nothing for my confidence in your advice. seriously who doesn’t own a sharpie and basic land? an expensive lesson I’m sure.
Winterhalter says: January 1, 2010 @ 9:36 am
LOL, I don’t understand the vitriol, especially the negative judgment about my vocabulary, although it’s psychologically interesting that people think I’m trying to impress anyone. I’m making a (rather elementary) economic argument and pointing out logical mistakes that I saw in the article. That Fuentes understands this and some of you seem not to is to his credit, though, so perhaps my initial assessment was too miserly.
Winterhalter says: January 1, 2010 @ 10:04 am
Fuentes,
Your argument about off-season prices is fallacious. When you purchase a card in the off-season on the assumption that it will see play in a later season (buying Tarmogoyf in July 2009, for example), the pricing as set buy institutional traders accounts for the potential for the card to be consumed in a later season, minus an uncertainty discount. When you purchase off-season, you’re hedging on the institutional seller’s setting the uncertainty discount too high. Are you claiming you are better at this than the managers at, say, StarCityGames? You can’t just buy Tarmogoyf at $30 in July, sell it in January at $50 and claim you outsmarted the market. If you bought at $30, what was your estimate of value of Tarmogoyf come extended season? What was your margin of error? Did you calculate your market-neutral position size, e.g. if you were willing to buy 10 Tarmogoyfs at $30, you’d purchase an 11th if the price dropped to $28? Did you sell off portions of your position as the price rose? Are you adjusting these prices for inflation and time-preference on cash?
In short, it doesn’t matter that you can predict the general price trend, nor that supply of Magic cards is finite. Supply of stock is also finite (only X shares are authorized by a given SEC filing, and the creation of more shares later dilutes the value of existing shares pro rata); that doesn’t means prices are set inefficiently. Granted, if we’re talking about someone who is also interested in *consuming* Tarmogoyf for extended season, I’d concede the point. Obviously these players should take advantage of predictable season variation in pricing. But buying Tarmogoyf at $30 for the extended deck you know you want to play is very different from buying Tarmogoyf at $30 because you think you can make money trading Tarmogoyf.
Notice I am not saying that average traders can’t take advantage of informational edges, recognize price stickiness, or exploit local mispricing – they can and should. I’m just asking that we be realistic about most people’s cognitive limitations, and recognize that their opportunities for profit are likely very limited. I think I make money in Magic cards almost exclusively by barter and arbitrage opportunities at events with large numbers of casual players.
RandomForeigner says: January 1, 2010 @ 4:19 pm
Loving an intelligent discussion like the one displayed here.
Thanks Winterhalter for the food for thought and Jeremy for taking the time to respond in depth. /shoo at the hating sheeple
To me atleast the discussion here has lead me thinking about the broader picture. Perhaps it would be interesting article material to lay out the events in 2010 that will have big impact on card prices. Extended has been handled, but what about applying some of the economic lessons learned here to let’s say Classic and dare I say legacy on MTGO (it doesn’t exist yet, but with the rise in popularity in the ‘ real world’, surely it’s due to make an appearance online in the foreseeable future).
Is it worth investing in let’s say Tropical Islands online, since they’re played in so many Legacy decks. Seems like a bet without any risk; it’s hard to imagine dropping them much lower than the current 12 tix. Actually, I guess this is a perfect example of a card for the watchlist: As soon as wizards announces a program to revive classic formats online, prospect away!
I’m rambling.
Anyway, happy 2010 and keep up the good work!