Traderous Instinct – Crashing the Legacy Market

Bubble, bubble…

Back in 1999, tech stocks were doing some seriously absurd things.

I was in seventh grade, and I was weirdly fascinated with making money. I played a “fantasy stock market” game on Yahoo, where each month you were given $100,000 in fake money to invest, and the winner was the guy or gal who made the most dough by the 30th.

I threw my money at eBay, Oracle, Nortel, and pretty much every other company with an ‘e’ before its name. And you know what? I didn’t lose. For months on end, I’d end up doubling my “investment.” At a certain point, my dad took notice and started throwing real money after my fake money.

That’s pretty much when the bubble burst.

Looking back, it seems so obvious that the whole thing would come crashing down. The truth was that there were a few solid companies – Google, for example – that had gone from nothing to running the world in seconds flat. The problem is that no one really knew who the bums were, so for every Amazon there was a Pets.com and for every eBay there was a uBid.

Does this mean that all tech stocks were bad? Of course not. When the bubble burst, everything fell. Even the good companies. It was only when the true gems emerged from the rubble that we began to have a sense of who had staying power. Even if you were a smart investor who only invested in the best stocks, you took a bath if you bought in at the wrong time. When the bubble bursts, everyone gets hurt.

This past weekend, I spent the day on Saturday hanging out at SCG LA and talking to tons of players and traders. Invariably, most conversations turned to the hot topic of the week: Is Legacy experiencing a similar sort of bubble? Should you buy in now expecting the price to go up, or is a $50 Wasteland the same as a $90 share of flybynight.com?

Why Play Legacy?

Before getting in to the value of Legacy, we should take a few minutes to examine why the format has become so popular. Here is what seems to me to be the most compelling reasons to shuffle up those duals and get playing:

1) Decks don’t rotate, and rarely does a deck go from awesome to unplayable overnight.

In the world of $50 standard mythics, you can safely invest in Legacy cards without the risk that your deck will suck next time you want to compete. It also means that you can do well at a Legacy tournament even if you’re not hip to the latest tech. This is invaluable to the Magic player that graduated college and suddenly realized that their 60-hour-a-week job doesn’t give them much time to play anymore.

2) The format is more like “old school Magic,” where spells and combos rule.

As opposed to the creature and spot-removal battles of now, Legacy is a trip down memory lane to the kind of Magic you played “back in the day.”

3) No matter your play style, there’s a deck for you.

Love combo? Control? Aggro? Linear tribal strategies? Getting a big monster into play? Messing about with graveyards? Whatever deck you love best, there’s probably an analog somewhere in the Legacy metagame.

4) Fewer mirror matches and dominant decks.

The variety of the format is unparalleled. Compare to standard or, say, Scars of Mirrodin sealed, where it’s always the same few cards.

5) As the format gains in popularity, more and more people are playing.

Just like a snowball rolling down a hill, the fact that the format is more popular makes it more popular. I carry a Legacy deck around FNM and can generally get 2-3 games in with different people most weeks. A year ago, that would never have happened.

Demographics and Pricing

Looking up at that list, it becomes fairly easy to identify Legacy’s target audience.

It is the maturing gamer, usually 25-35, who has either been playing for years or used to play heavily and then gave up. These are people for whom the weekly shifts of standard are starting to become too much – they still love Magic, but they have a life outside of it.
These people would rather have one really nice deck that they know inside and out than 7-8 decks that shift from week to week. You can’t call them casual – they’re hardcore competitors and can be obscenely talented – but they’re no longer grinding the PTQ circuit.

Legacy players are also usually fairly nostalgic about certain decks, strategies, and eras of the game. They want to be playing a modified, more powerful version of their all-time favorite deck, not chasing the latest and greatest tech.

That is NOT to say that all Legacy players are like this. There are also a lot of people who just love to play Magic, and Legacy is just another sweet way to do it. But if Legacy were to disappear tomorrow, it would be our core demographic that would consider abandoning competitive Magic altogether.

It is also impossible to examine Legacy without considering the affect that Duels of the Planeswalkers and the amateur circuit have had on its popularity. Duels has been a massive help at recruiting people who played during the original “Force of Will era” back to the game, while having a cash tournament in a different city each week means that everyone in the US is a day trip away from high level competition each year. Much like one could build their standard season toward regionals each year, you can now play Legacy toward the date the circuit hits up your city.

This leads us to our current predicament. The format has exploded in popularity, mostly due to a massive amateur tournament being available every week courtesy of a large online retailer. That same retailer, hoping to capitalize on the fact that the format keeps growing in popularity, has decided to exploit the fact that so few of those older cards are still available by single-handedly moving the price point on them. And, naturally, all of the other large online retailers have followed suit by either matching or beating their prices.

The result? Wasteland was $30 two weeks ago and is $50 today. And confidence in Legacy is still at an all-time high. In fact, most MTG financial guys I’ve talked to are encouraging us to buy in further before the prices get even more insane!

In the rest of this article, I am going to attempt to throw rocks at Legacy in an attempt to crash the market. I am going to explore as many likely scenarios as I can in the hopes of trying to identify whether or not our continued financial investment in the format is justified.

But first, we need to talk more about…

Confidence

By far, the most important thing to the survival of a financial market is confidence.

Believing hard enough may not make Santa Claus real, but it sure does help keep the global economy afloat. Take a look at the cause of any depression or recession, and you will quickly see that it goes hand-in-hand with a mass crisis of confidence. That’s not to say that the underlying reason for the loss of confidence isn’t important, but there is a significant causal relationship between confidence and market stability.

This happens all the time in Magic, and not only on the financial side. With information being disseminated through the community on a daily basis, cards and decks rise and fall in popularity almost instantaneously. All it takes is an expert saying that a certain build has a poor matchup with the format’s top deck, and people will begin losing confidence in it. And that sort of thing can snowball until the deck is “rediscovered” months later by someone else that goes X-0 with it at a tournament and everyone is thoroughly shocked.

Confidence in Magic varies depending on the format. In standard, the overall confidence level in any specific strategy is fairly low and volatile. The format is rich with innovation, and everyone understands that tech needs to move at the speed of light. People are used to cards see-sawing wildly in value, and it has become an expected part of the game. Sure, Caw-Blade is good now, but would you be shocked if the deck took a dive in the coming months?

In Legacy, confidence is fairly high and stable. Decks really only fall out of favor post-banning, and the format is otherwise fairly cyclical. Goblins, for example, was a dominant deck 5-6 years ago. Then it spent several years in tier-2 obscurity before recently emerging as a top deck once again with very little change. To date, no matter when you bought in, you probably haven’t lost any money on any Legacy deck you’ve acquired with the lone exception of Survival of the Fittest, which everyone saw coming. Even Reanimator has mostly survived the Mystical Tutor banning, and Patrick Chapin wrote an article on revitalizing the deck just last week.

Further, Legacy has the unique position of being the popular format that Wizards has the least amount of control over. Because most of its staple cards were printed years ago and won’t be coming back, the Renton crew would have to make massive changes in order to overhaul Legacy. You can’t really print new cards that obsolete Force of Will and Wasteland without destroying standard, and banning every expensive card would lead to outrage and a bunch of other cards stepping in to fill the void.

So what could Wizards do that would cause our confidence in the Legacy market to crash? Let’s take a look at some nightmare scenarios:

Nightmare Scenario #1 – The Massive Re-Printing of Legacy Staples

Let’s imagine that Wizards announces tomorrow that they will be issuing a box set with premium versions of all the best Legacy cards that aren’t on the reserve list. Force of Will, Wasteland, Aether Vial, Sensei’s Divining Top, Tarmogoyf…they’re all there. And better yet, the product will be widely available! You can buy four of ‘em for $30 each at Wal-Mart.

While there is the potential for this to happen, it is highly unlikely. People like to say that Wizards doesn’t make any money off the secondary market, but they actually do. Higher secondary market prices lead to more overall excitement in Magic and more packs of the latest set sold. If Wizards attempts to crash Legacy all at once like this, it will make people less likely to buy a box of the current set to find that chase rare knowing its value might keep going up for years to come. All confidence in their brand is a good thing.

It makes more financial sense to do what they’re currently doing: keep releasing FTV and Premium Series products that contain at least one very valuable chase rare. Of course, in some cases (Aether Vial, Sensei’s Divining Top) the price of the card wasn’t affected in the slightest by the availability of the premium version. In other cases (Berserk, Chain Lightning) the value lost by that card was more than offset by other “hidden gems” of the format either rising from obscurity or getting unbanned.

You may have lost money last year on your set of Chain Lightnings, but what about all the dough you gained on your Time Spirals, Peacekeepers, Llawans, Ancient Tombs, and everything else you had kicking around?

Even if Wizards did decide to release the big premium box o’ Legacy staples, that would only drive the prices of the other cards in those decks higher. If Vials suddenly became readily available, the prices of other chase cards in vial decks would go up in response.

Conclusions: We are unlikely to see a mass re-printing of Legacy staples. The re-printing of one or two staples a year won’t affect the price of the format much at all.

Nightmare Scenario #2 – Ban it! Ban EVERYTHING!

Technically, Wizards could draw a big “X” over Legacy, banning all the format staples for being exceedingly degenerate. You can make a case that so many of the pricey cards in the format are entirely unfair.

The problem? The super power cards are what people love about Legacy, and Wizards knows it. Banning all of them would take the teeth out of an amazingly popular format, and I don’t see how they would be able to justify it. Furthermore, they’d have to do it in one fell swoop, because the format is so well balanced right now. Removing just one of, say, Force, Wasteland, or Vial would lead to one or more strategies being entirely unviable. It seems unlikely that Wizards would do this just to deal with the fact that cards are kind of expensive.

One thing they might do, however, is to ban the original 10 dual lands. It is easy to make the case that these cards warp the format around them, and they do provide by far the largest bar of entry to the format. Furthermore, their removal would not radically change the metagame. It would make multiple color decks worse in the short-term, but with modern mana-fixing being so good it is doubtful that any single deck would either gain too much or lose too much if those cards were instantly disallowed.

Of course, it would be wrong to assume that banning the duals from Legacy would send their prices spiraling too far. Remember when Wizards axed the Ravnica duals from extended and you could pick them up for $3-$4 in trade? Well, now they’re back to trading at their old ~$8-10 price point simply due to casual and collector interest. Survival of the Fittest, too, is bought by most stores and online retailers for more than it was worth before Vengevine saw the light of day.

In most cases, cards banned for power reasons become that much more attractive to casual players. Considering Wizards will never print more Revised, I doubt a ban in Legacy would completely destroy the value of duals.

Conclusions: We will not see a massive ban of Legacy staples. We may see a ban of the original duals, which would probably lower their prices by 30% at most. Even that is highly unlikely to happen soon.

Nightmare Scenario #3 – Overextended

For those who are unaware, overextended is the name for a theoretical format that would fit in between Legacy and extended, stretching from Masques block to present day. In this scenario, Wizards would announce that overextended would be a preferred format to Legacy.

The problem? Overextended doesn’t fill the same niche as Legacy and it certainly doesn’t appeal as much to our core demographic. Overextended might be sweet, but it doesn’t currently provide the nostalgia factor that is so huge to serious Legacy buffs. These people want to bust out their Mazes of Ith, not their rebel chain decks. So unless Wizards de-sanctioned Legacy when creating overextended, people would go right on playing Legacy. Remember: our core demo wants to play with the cards from their youth. In a few years, that might be Masques onward, and at that point Overextended will make sense. For now, it would only succeed in making a ton of collections obsolete.

Furthermore, the retailers running the amateur circuit have no reason to support overextended over Legacy. Remember: they’re the guys raising the prices on Legacy staples! The reason they’re doing this is because the higher the price, the higher their profit margins. They’ll make more money overall buying Wasteland at $30 and selling at $50 than they did buying at $18 and selling at $30. Unless they want to try and make Ravnica duals worth $60 each, they won’t make nearly as much for the new format.

Conclusions: Overextended won’t touch Legacy unless Wizards announces the end of Legacy at the same time. Which they won’t do.

Nightmare Scenario #4 – Mass Acceptance of Proxies

I’ve heard varying schools of thought on whether proxies help or hurt vintage. Some say that the format would have died off completely without them, while others claim that the lack of available sanctioned tournaments means that no one takes it seriously.

Regardless, it seems like proxies were necessary to keep the format from going completely extinct. If owning a full set of power plus the other goodies (workshops, time vault, etc) were 100% necessary to play Vintage, I wonder if Gen*Con would host the only US Vintage tournament of the year.

I do suspect that this will be the year where we will start to see 10-proxy Legacy events crop up and small-to-medium stores, but it will not be widely adopted. In fact, now that Legacy and Extended FNMs are going to be possible, I would expect an INCREASE in small, sanctioned Legacy events! I would guess that in areas with multiple stores, one or two of them might try to cater their FNMs to the eternal crowd in an effort to increase attendance.

Of course, if the prices of Legacy cards keep skyrocketing, proxies will have to be considered. But even the most expensive deck in Legacy right now pales in comparison to a Vintage deck. The day for proxies hasn’t come yet. And if it does, it won’t affect prices too much because they’ll all be absurd by then.

Conclusions: Not anytime soon and not a big deal.

Nightmare Scenario #5 – Affinity Risen

No one knows the exact figures, but it is estimated that FNM attendance dropped by about half when Affinity took over standard during the original Mirrodin block. The deck was so absurdly dominant that it only made sense to either play it or decks that could beat it. And there weren’t too many of those. Then Wizards banned the deck, which made everyone who had invested in it mad as well. And then we all had to endure Kamigawa block as penance. Woof.

So what would happen if a similar plague were to take on Legacy? The format wouldn’t be so much fun, if, say, one very specific strategy headlined by an old, hard-to-get card ruined everyone’s fun….

 

Oh. Right.

So far, Wizards has proven to have a quick but deft hand in managing the format. Instead of giving people more chances to dethrone Survival, they axed it before it became too problematic. Poof – crisis gone before it had hit the point of no return.

And even if you had invested in that deck, you didn’t lose out too much. Vengevine held most of its value due to standard play, and Survival itself is still worth more than it was pre-banning due to casual play and increased interest in the card due to it having been a powerhouse. The rest of the staple cards from that deck have only kept trending upwards.

Conclusions: This already happened and the format is healthier than ever.

Nightmare Scenario #6 – The Great Recession

What if the economy at large takes a huge dive? What if 10-20% of Americans lose their jobs, and we enter a long, languid depression? What if no one has the money to spend on Magic cards any more?

Oh, wait. That already happened, too. And Magic is healthier than ever.

Conclusions: Nothing to see here, folks.

Nightmare Scenario #7 – Star City Opens No More

It is no secret that the Star City Open series is the major engine driving the price of Legacy right now. What if they announced tomorrow that Legacy opens were no more? Maybe they had become unprofitable or wanted to pick up Extended instead in the hopes of reaching more people.

If this were to happen, then I think you actually would see a large short-term confidence drop in the Legacy market. Prices would drop overnight. Since Legacy will probably never be a PTQ format, people’s largest outlet to play would disappear.

Of course, I think the chances of this happening soon are slim to nil.

Look – there’s a reason that Star City could afford to start buying up every Wasteland ever printed at $30 in the hopes of shifting the price to $50: they are making A TON OF MONEY on their Open series! Much like Wizards with current sets, Star City has quickly become the ‘parent company’ of the eternal formats, providing both the cards to play and the tournaments to play them in. Furthermore, they would in no way abandon Legacy in favor of Extended – the older and deeper the format, the more money there is to be made. I would guess that is why they started doing Legacy Opens in the first place.

It is far more likely, in fact, that other large retailers would try running an amateur circuit than Star City would abandon theirs any time soon.

Conclusions: Other than Wizards folding, this is the biggest danger to Legacy’s future. But it makes no sense to worry about the end of something that is still in the process of being hugely successful.

Wrapping Up

Look – this can’t last forever. If Force of Will hits $200, Legacy will either die or be changed drastically. But that has very little bearing on whether or not you should buy in or sell out now. And in the end, I can’t come up with a reasonable justification for why Legacy prices will fall anytime soon.

Wizards won’t massively restructure the format without serious backlash, and I doubt a rash of bans would affect it all that much. I personally believe that it is unlikely Overextended would meet or exceed Legacy in popularity unless Wizards tried hard to push it as the new face of “eternal.”

That said, the people raising the prices aren’t stupid. If they try to push Wasteland to $80 next week, the backlash will be quite severe and people will start to abandon the format.

So they’ll wait a year. Until we’re used to $50 Wastelands.

And then – bam! – The price will go up again.

They’ve done it before, like last year, when Force jumped from $20 to $40. And as long as Legacy remains hot, they’ll do it again.

Remember: Legacy can survive for years without any new blood in the player base as long as those who are currently playing it keep going. And since the core demographic of the format is made up of people who are drawn to its stability and longevity, I doubt there will be a mass exodus.

The comparison between Magic cards and other forms of investment like the stock market, baseball cards, or Beanie Babies only goes so far.

If you stop trusting the stock market, you’ll just put your money into bonds, or gold, or your bank account. The same is ultimately true with other “collectable” fads where rarity and perceived value drive prices sky-high. A royal blue Peanut the Elephant Beanie Baby was worth almost $3000 in 1998 because lots of people wanted them and there were only a few. But once you had one, it was pretty much only good for bragging about or re-selling.

Underground Sea, on the other hand, is valuable because there are five or six top Legacy decks that need them. If you want to play those decks, you’ll need Underground Sea. The ‘collectable’ value of the card is – and always has been – secondary to its utility value.

As much as it pains me to say it, I think these new high prices on Legacy staples are here to stay. Stay informed, but in my mind your investment will be safe.

Pick of the Week 3/27/11 – Skithryx, the Blight Dragon – $10.99

Over the past few weeks, ol’ Skittles has proven himself as a capable player in standard. Now that we know “Action” is New Phyrexia, I can only guess that the remaining pieces to make poison control a viable tier-1 deck are on their way.

I see a near-term floor of $7 for this card due to casual interest, but I wouldn’t be shocked if it broke $20 soon, either. Don’t run out and pay cash for these, but trade for ‘em at retail when you can.

Until next week –

– Chas Andres

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