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Creating Your Portfolio

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In lieu of Russell Tassicker's weekly column, which has been postponed due to illness, Dave Heilker of 02drop.com brings us a fantastic piece of financial writing that'll surely be required reading for everyone new to this site!  Let Dave know in the comments below how you liked his first piece on DS! [KBR]

I’m Dave Heilker, "Dave Rockstar" to the great majority of people who know me, and I run the site 02drop.com.  Before we start talking about the meat of how to create your portfolio, here are some things you're going to need.

  1. A Bankroll - For this column, I’ll always assume you’ve started with $100.00, today, right now.
  2. An unwavering faith in my advice - We’re assuming a $100 investment, if that’s not a number you’re comfortable with, use less, but if I tell you to buy something, buy it. If I tell you to sell it, sell it. I have not since my return to Magic spent a dollar that wasn’t earned via the sale of cards.
  3. A credit card, or a paypal account - you'll be depositing about half of your bankroll into your PayPal account to conduct business online.
  4. Geographic knowledge of where the local store with the best stock is located. Preferably they price only occasionally and use some archaic system, like print media. Advantages of a store like this are obvious, the distinct disadvantage is they usually don’t downward adjust their prices either (e.g. They are currently selling Lotus Vale for $15.00 each).
  5. A dumping station - I also recommend you have access to an eBay account or a very up-to-date dealer who is usually in the market to buy hot cards for cash. It’s obviously no use to you if you can pick up cards for super good prices and then be stuck holding on to them when the bubble bursts. The best place for this sort of dumping is local tournaments.
  6. A Twitter account. I’ll put a list of people you must follow at the end of this article. You don’t need to know how to use all the lingo etc of the twitterverse, but you need to know how to read. Knowledge is power, and more knowledge is more power (with apologies to Tim Allen).
  7. A sense of “self” – You’re going to need to embrace your personal quest to make money trading and selling cards. If you disseminate your information to anyone who asks, you’ll end up flooding the market. Keep the mentality that everyone has more money than you and everyone is out to screw you over.  [If they want the insider knowledge, tell them to read DS.com! -KBR]

Let me get into that last part briefly. It sounds paranoid, to be sure, but if you’re anything like me or most of the writers on this site, you also enjoy playing competitive Magic. Let’s imagine you’re at a PTQ with your buddy, Jimmy. Jimmy sucks at the game, but is a pretty astute trader. If you’re busy  grinding it out in round 5, and he’s been trading with all the 0-2 drop folks for the last three-and-a-half hours, it stands to reason he has cornered the market. Jimmy has also probably created a false-bubble for the card in the microcosm that is the PTQ.  He’s asking all the dealers for what is probably an obscure card, piquing their interests, and asking players to pull what is likely an EDH card they’ve not been asked about in months. Once people figure it out (especially if Jimmy is daft enough to have told them why he wants it) they’ll start valuing it higher, disabling your ability to get any that day.

If only there was something that just tapped to draw a card...

Let’s get into the building of our portfolio. We’re going to start with a card which has been loudly whispered about in recent weeks. The card is Exodus’ Mind Over Matter and is part of a two card infinite combo with the M11 card Temple Bell. For the uninitiated, for each card that you discard to Mind Over Matter targeting the Bell, you’ll draw a card. Eventually, you’ll deck your opponent (forcing him to die in his draw step) or throw in an Emrakul the Aeons Torn to ensure your ability to rebuy.

The parameters of a combo like this are several-fold. Firstly, it’s Legacy. This is the most explosive format for value gain differences, because the card pool is so deep. The cards that fall out of favor fall way out of favor and bottom out at low prices. A great example of this is Lim Dul's Vault. LDV as recently as last month could be had anywhere on the internet for about a buck a piece. In an unrealistically conservative environment, you can’t find these suckers for less than $5 a copy. There isn’t a stock that you could buy and confidently assume a 500+% return, yet anyone who’d ever played with the Vault could tell you it was a safe bet. What kept the price on that card down for so long? Not even joking: too much text. It wasn’t that it was competing with Mystical Tutor It was that people didn’t want to read it, or take the time to read Doug Linn’s article lauding the card. People don’t read nearly enough.

Mind Over Matter is at a low enough price that anyone can get in. This isn’t like Show and Tell or Recurring Nightmare. Mind Over Matter is ground floor Apple stock right now. This means that nearly any gain on this card is significant. If you pick up 10 at $2.50, and they go up to a dealer buy price (DBP) of $3.50 that’s a 110% growth in your portfolio, inside of a very short time-span.  What could cause a Legacy combo card to shoot up in price?

Grand Prix Columbus. It’s knocking on our doors. If you’re already going, you can go armed with Mind Over Matters that you picked up for $2.55 each, and have a commodity that at the very least will be worth $5 to people who need them on site. Imagine if Gerry Thompson once again defines a format and builds the deck that sweeps all the LCQ grinders and it features the combo. Imagine the gains from that. Here’s the first portfolio recommendation.

Mind Over Matter

$2.40-$3.50 Recommended Buy Price (RBP).

Allocate somewhere between 15-20% of your bankroll to this card. At the stated RBP, you will have 6-8 “shares” of MOMa, which is a good place to be when the value hits what I feel to be its Low Predicted Price (LPP) of $7.00.

In GP Columbus, if you are attending, I would set a “put price” on these at about $8 DBP, and I wouldn’t trade them in Columbus for less than $10, regardless of the actual price. These will be in fairly short supply at GP Columbus, and we must take full advantage of basic economic theory if we are to realize maximum profitability. I am making fairly conservative recommendations on MOMa, but one could certainly expand his risk/reward by allocating 30% of bankroll to Mind Over Matter.

If you’re not going to Grand Prix: Columbus, the more conservative recommendation is certainly one to stick with. I wouldn’t want to field the hate mail I got when this card doesn’t move up as I expect it to, but I’m strictly confident that if you go to Columbus, you can change the $20.00 you invest into $40.00. This is further evidenced by the eBay median price on MOMa, which is right around $4.30 for completed listings. If you are NOT going to Columbus, I’d recommend a quick-move strategy of selling these on the ‘bay for about $18 for a playset (BIN), and reinvesting the principal (keeping the profits as liquid back into your bankroll).

Now, not to be contrarian to what I’ve already said, but I really believe this is a blue chip, and one that will see better gains if you hold on to it longer. Because we’re dealing with “day-trader” style turnarounds, I will extrapolate future portfolios based on the assumptions laid out in this article.  Simply put, I’m going to recommend you sell it, but if you’re comfortable holding on to it, I think the gains are worthwhile with a negligible risk.

TL: DR - Pay some life, tutor up anything.

I’d also recommend Lim Duls Vault as a strong pickup for about 10% of your portfolio as a hold. This will mean roughly 1-2 LDV’s picked up (far more if you’re able to get them from the abovementioned arcane card shops). These are a good hold, as we’ve seen the upper limit of staple-uncommon cards from Alliances. There are so few cards from that set that see regular play that the obscurity leaves a lot of room for gains, even at the current price of $6-8 each.

A note: This column is titled “Flash of Hindsight” for a reason. I have a pretty stringent Magic budget, which doesn’t always allow me to invest in cards the way I would like. This means, as much as I wanted to buy Lim Duls Vault’s at $1.50, I didn’t have the liquid capital to do it en masse (the only way to mitigate the proportionately very high shipping costs). The solution is the real bread and butter of how to make a quick buck “day-trading” Magic cards.  The way one can accomplish this is not unlike a day trader on the stock market, who is glued to his ticker for the trading day, often with a coffee pot and mini-fridge stationed within reaching distance of his setup. While card-slingers don’t have to be quite as meticulous, we need to know the signs of a snap-pickup and when to do it.

The first sign is that the card has recently appeared in 1 or more top 8 decks where it had not previously appeared. This is for marquee events, such as SCG Opens and other $5K tournaments, Grand Prixs, Nationals and Pro Tours. Eureka, Show and Tell, and Lim Duls Vault are fine recent examples. When you see this, and you see a low cost on the card (though it will often be sold out), BUY BUY BUY! The best way to do this, I’ve found is to hit up magiccards.info.

Click Image for Large Version

After looking up the card, you can click on the price above it as pictured to the left.  This takes you to TCGPlayer’s store, which lists a bunch of their “approved vendors.” Once there, click on a vendor who has an excess of the card (remember, we’re trying to save on shipping), and buy ‘em up. I find it’s not a bad idea to not buy them out of stock, principally, we’re trying NOT to alert these dealers that there could be a run on these and to hold on to them (instead of shipping your paid-for order). The some insipid dealers will do this, so I recommend picking one or two and sticking with them whenever you can.

A second sign of a card’s increase, which often happens after the first, is that the card (suddenly) appears on StarCityGames’s buylist. Star City Games is the largest buyer and seller of Magic cards online. If they’re suddenly buying something, it’s time to trade for them or buy them for less than SCG’s buy price. This happened fairly recently with Ranger of Eos, which was a fringe card until it appeared in Tom Ross’ Naya list.

The third and final indicator of a card’s impending increase is Twitter. There are some people who reveal cards that are poised to skyrocket without even knowing it. Karakas is a great example of this.

@magicprotour said, the morning of GP Madrid:

(Tim) #gpmadrid It turns out that Karakas beats Iona. Legacy is a fun format.

As a result of that Tweet, I picked up literally five Karakas at $5-$10 in trade that day (the morning of the Richmond SCG Legacy $5K). I sold all but two since then for no less than $30 – often to dealers!

Evan Erwin (paraphrasing here) said that Vampire Hexmage and Dark Depths was a sick combo literally the day of or after Zendikar was spoiled. Twitter is such a real-time, split-second resource, and a list of people you are required to follow will be included at the end of the column today.

Having this information, and just as importantly, knowing where to find it, is paramount to being successful at rapid-turnaround trading and buying/selling for the maximum value. A data-enabled phone (at the very least, one which gives you real-time access to Twitter) is an invaluable tool in this process as well.
I realize this is getting a little lengthy, but I want to make sure that you get top dollar out of any and every transaction.

I’m asking you to trust me with $100 of your hard-earned duckets in a pretty poor economy.  I want you to come out with at least $150 by the end of the year, which is pretty bold, considering a good ROI is  8-10% annually.  I’ve only got 5 months to make five times that return for you.  Here's a recap of the resources you should have access to.

Magic Speculator's Startup Kit

  • $100 split between a paypal account and cash that is earmarked for Magic purchases.
  • Access to a local store with singles.
  • A Twitter account. You should be following these people, at a minimum:
  • A phone with access to Twitter and preferably the web (the app I recommend is called “echofon”).
  • The willingness and drive to work hard, act fast, and succeed.

Current Portfolio: At the end of today, I expect you to have spent about $35, and obtained about 7 Mind Over Matters and 1-2 Lim Duls Vaults. This leaves you with a liquid $65, approximately.

Current Performance: Static.

Feel free to ask me questions, or to review cards for potential gains. Leave a comment below, or email me at DAVE at 02DROP dot COM. I look forward to hearing from you all.  Until next time, may your favorite color be Green!

33 thoughts on “Creating Your Portfolio

  1. Great article. I can't find Mind over Matters ANYWHERE, but I'm applying these principles to some standard cards to see where they go.

    There's a local store here that still prices his singles according to some ancient issue of Scrye, so I'm going to head over there and see what their stock is like.

  2. This was . . . amazing. This is exactly the type of article I would expect to be behind a premium wall. If DS can provide a steady stream of articles like this, you all have my money.

    Query: Is it possible to have something similar to this, but focused on MTGO?

  3. Very nice article with great explanation in details of the speculation process. I have been buying during pre-sales (usually very reasonable up until lately) and selling (via eBay) for decent profits until eBay and PayPal fees eating up profits. But after reading your article it sounds like I must utilize twitter more and drive to ptqs and dealer shops more often as that is not something I have been able to do. Thanks for the good article and more would be great as well.

  4. Thanks for the feedback fellas. As far as MODO, I dunno, I don't or rarely play on magic online.
    RE: doing this with standard cards, this isn't meant to be a "how-to" as much as a "what-to" so with unrecommended cards YMMV.

  5. Oh, totally, I'm well aware I'm on my own as far as the cards I'm speculating on. You're selling yourself short on the how-to, though. Maybe it's because this is the intro article to a series, but everything but the particulars on MoM seem pretty blanket applicable.

  6. Great article! But less than 24 hours after this article posted, no stores are selling Mind Over Matter for under $3.50. Probably will increase more soon. I think this will be a challenge for Doubling Season, as people will only have a short window to take advantage of good advice.

  7. @Thoughtlaced
    In my article last week, "Hunting the White Stage" I alluded to fact that Mind over Matter was positioned for a spike and I showed you the combo. If you would have bought Mind Over Matter at that time they would have been easier to get 😉

  8. Thoughtlaced, this is something that I think the team hopes to waylay by means of a premium subscription. This is also where you would want to hook up with one of the local stores I spoke of. I'm going to, in my next column, discuss these stores, and how when something is happening, it's a good time to take a coupla hours and do the ride-around to the local shops.

  9. Yeah. To be honest, this combo is something that even the most amateur or casual legacy players know/knew about. John is a pretty seasoned vet, and I often will consult him before picking stuff up.

  10. There are still a few places on the web that are selling for under $3. I just picked up a couple playsets of MOM 5 minutes ago. The best part is the thrill of the hunt… I'm off to scope out the local stores.

  11. A good lesson:

    I was able to purchase four Mind Over Matters from two different stores for about $3 each today. These were local stores (not online).

    One of them also had four Lim-Dul's Vaults. I was calling ahead so that I wouldn't have to drive to no avail. They said they had the four priced at $1. By the time I got there the person behind the counter had spoken to someone else about its recent price jump and said that he could sell them for $7. I was able to get them for $4.50 each, which still isn't too terrible, but I essentially lost out on $14 because I called ahead.

    Thoughts?

  12. As a store are they bound to whatever price they quote me at? Or do they have the right to decline a transaction, even if it's an unethical business practice?

    Because this place is the premier legacy hotspot in the city I am from and their trading/buying/selling practices are handled with respect to the market and not what they thought the market was.

    Kind of a crappy situation. If I hadn't called and just said I want them there, and had they not looked up a price quote online upon asking, I could have gotten them for a buck each. I feel I might have missed that one, though, since I already left and what not. hmph.

    1. They have no obligation to do anything, period. They can do whatever they want. But esp if they have competition or are small, an irate customer can spread a lot of ill word, and fast. No one wants to have a reputation for being a bait-and-switch. You should have said "I was quoted $1 on the phone. I don't want to cause an issue, but I'd not have driven down here if they were $4." Then let them know that you're happy to tlel other customers to "Just be careful" and such. There's a reason my customers in my store always tell good tales; because I don't do crap like that.

  13. I considered calling ahead to a few store but I was worried about tipping them off. I guess I will stick to making the rounds and hope for the best.

  14. So what's the secret to actually dumping the cards at a profit? I've got a bunch of Lim-Dul's Vaults that I've been accumulating ever since the card gained steam, but it seems impossible to actually move. It's "worth" $7, but most stores seem to be buying it at $2, eBay is $14/playset minus fees.

    What's the point of buying cards low, having them appreciate, but then essentially taking a loss when you need to sell?

  15. Dave,

    Great article. As a returning player and one who decided to move from the casual arena to the envelope chasing one all while trying not to go broke buying cards, this is exactly the kind of article I was looking for.

    The question that came to mind is what are your feelings on a joint bankroll? Do you think multiple players contributing to the same bankroll have a greater chance to maximize returns due to the larger liquid capital or are the potential benefits negated by the potential for shared loss?

  16. Also, Tyler, while I agree with Kelly regarding "being more assertive" if something like this happens again, I really don't recommend ever calling ahead; even the daftest of shop-owners will usually double-check the internet *before* they quote you a price.

  17. After reading this article, went to the local comic shop and picked up 3 LDV for $1 a piece and then to my local card shop for a MOM for $3.

  18. @Don: My guess is the biggest issue is going to be regarding how you handle profits. Does the group use the profits to reinvest? To fill out personal portfolios? Are the profits split evenly, or does each person keep what they make? Are losses split evenly, or is the person who made the bad trade responsible for recovering what they lost? What happens when one person wants to leave the market/situation?

    Yes, you have more buying power, but it's going to be very easy to get into a sticky situation unless your group is able to make some tough decisions and stick to them.

  19. This was a great article and I can speak from first hand knowledge that Dave does practice what he preaches. Also he wears the sexiest pajama pants which might be where he gets such good deals on cards.

  20. Hey just got 2 revised underground sea at a very low price one is fair the other excellent what would be your advice on moving these since a large legacy tournament is in a couple weeks

  21. The mind over matter combo, can someone explain to me how it is better than leyline/helm of obedience or painter/grind? Leyline Helm is about the same price range too, and doesn't require you to run any dead cards to reshuffle (and also doesn't auto-lose to emrakul decks)

    Definitely agree with lim duls vaults though, I picked up a playset back when they were 50 cents each. Fantastic card and will likely see more and more play with mystical out.

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