Understanding Your Market

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by Matth Ward

Some of you may call this game we play “Magic.” I call it, “The most successful global market in the history of human existence.” Tall order, huh?

Not so fast, consider the “Matth.” What global economy has ever experienced seventeen years of economic prosperity without a single recession, widespread market downturn, or “market-sized” bubble bursting? I’m not talking about the microbubble that popped when your Chameleon Colossi’s value evaporated. When has the Legacy market crashed? Never, not when it was “type 1.5,” not when it became Legacy, and never since.

I hope you’ll take a moment with me to consider how incredible this is. I first ventured into Magic at the tender age of eight. Lost in my world of elder dragons, I had no idea I was investing in my first market. I continued playing Magic casually throughout my childhood, breaking for about two years and missing most of Odyssey and Judgment blocks. Thankfully, I elected not to sell my collection. When I returned, I hungered for more, and began to consider the game competitively. Although it started costing more, it also began to pay off. As of today, I estimate my total investment in the game to be roughly $6,000 (tournament fees included but travel expenses not). Despite all the bad trades, years of wear, and cards lost/stolen/ruined by giant containers of orange juice, I can say only one meaningful thing about my collection: It’s worth more than that.

Don’t worry, I’m not here to talk about my collection. Consider instead your Legacy staples--your Force of Wills, your dual lands, your Survival of the Fittests, etc. A 300% increase in value (appreciation) over the last ten to thirteen years is the baseline for many of these cards; others, like Wasteland and Underground Sea, have seen closer to 400-500% appreciation over the same period. Imagine the card Wasteland as the awesomest share of stock ever (in case you didn’t know, most stock certificates can’t destroy any nonbasic land). If you invested $1,000 into Wasteland during its reign in standard, you could have picked up approximately 250 shares of Wasteland at ~$4 per share--pricey for an uncommon. If you simply held those shares of Wasteland for ten years, your investment would have appreciated 500%. By dividing this percentage by the ten year duration, we see an APR (annual percentage rate) yield averaging at 50%. To put this in perspective: The Clinton Administration presided over the most profitable economic period in the U.S. stock market’s history. Many claim that the recession that came a few years later was the product of arrogance on the part of investors--who could believe that we could possibly maintain an 8% APR yield for investors throughout a period of this length without endangering the market’s future?

So an 8% APR in the stock market is impossible to maintain over eight years without disastrous implications (and usually a huge loss of said profits), yet we Magic players have enjoyed sustained yields of 20-50% APR for fifteen years from our investments without even trying? Do you really think that Matth at ages 8-15 had the market expertise of a hedge fund manager? Let’s not be absurd. The answer is that we’ve stumbled across something of a Magic[al] market (sorry, just couldn’t help myself). And 20-50% APR on these cards is assuming we make no moves. There are long-term traders and there are day traders. Why not be both? If we (investors) become better at predicting and exploiting price spikes in this market, there is even more money to be made in the margins. Now, a lot of cards have lost value as well; no market is without risk. But, given its stability and unbelievable yields over the last seventeen years, the Magic market has been, quite literally, an unbeatable investment sector.

This is the moment I would like to thank Richard Garfield and Wizards of the Coast for their brilliance, and Hasbro, Inc. for their wisdom and temperance in allowing WOTC to remain a mostly independent arm, and therefore an endless ATM for revenue. We’ve lost a lot of great things to corporate expansion. Thankfully, the most successful global market in modernity was not one of them.

So, accolades aside, why am I writing this article? To invite you to regard the Magic market as I do. We’ll begin with some terms:

●    Market Capitalization (Market Cap): A publicly traded company’s net worth, as determined by multiplying its stock value by the number of shares of the stock on the market. You have probably heard from someone, “Bill gates is worth $___ billion,” or perhaps, “Microsoft is worth $___billion.” The amount is determined by the applicable stock’s market cap. Bill gates owns 51% of Microsoft, which has a market cap of $224.1B. (.51)*(224.1B) = $114.29B; Bill Gates’ net worth. Must be nice. There are three categories of stocks when defined in terms of market capitalization: “Large cap,” “small cap,” and “micro cap.”

●    Large Cap investments: These are your Apples, your Googles, your Microsofts and Citigroups. Everyone has heard of these guys; high share value, tons of shares constantly trading hands. In the Magic market, these are your Jace, the Mind Sculptors, your Primeval Titans, your Force of Wills, and your dual lands. These are high value, low risk, moderate yield investments. We should always remain mindful of set rotation, however, as it’s one variable not easily relatable to other markets.

●    Small Cap investments: These are the smaller “established” companies trading on the market. Because they lack the giant capital and widespread investment of your Microsofts (or Jaces), you haven’t heard of many of them, but action still happens. If you’re lucky enough to catch a small cap investment expanding to large cap status, you can make a bunch of money. A current “small cap” card with a bullish trend is Memoricide. One that just moved from “small cap” to “large cap” is Frost Titan.

●    Micro-Cap investments: Your tiniest startups and companies, with feeble value but a big heart. These are commonly known as “penny stocks.” You can get them for almost free, because they usually go nowhere. But when they do, you stand to make more money here than anywhere else in the market. These are your Grindstones, your Dark Depths, your Flash, or in different terms, your Thada Adel, Acquisitor. Big dreams, small successes. So far.

●    Bullish trend: Something that’s trending up.

●    Bearish trend: Something that’s trending down.

●    CDs: Certificates of Deposit. You can buy these at any bank. You “lock in” X dollars at Y interest rate for Z amount of time. When you cash them in, you’re guaranteed to make a little money. This is the lowest-rung of the ladder in terms of investment risk, because there is none. Therefore, yields are low. Although there are no real CDs in Magic, I consider investing in power to fall into this category. An Ancestral Recall bought today for $400 will probably be worth $450 in a few years. We know this, but we also know that we can probably make much more money elsewhere.

I hate to leave you hanging, but I hope I’ve piqued your interest. I started thinking about Magic in this way just after the 2008 recession started, when it dawned on me that my most stable investment in life has been Magic. If I had a million dollars today, I would invest it in Magic before I invested it in the stock market, real estate, or “the next big film.” Those investments ultimately fall into the hands of others to use or abuse. In Magic, the investment is in your hands. You’re your own broker. Better still, you’re a broker with the power to explode your own investment with a tech deck you build.

The Magic market is one that has never crashed, and although it could, it has remained stable for seventeen years at extraordinary yields, something no other investment sector in the world can boast. In my next installment, I will examine small and micro-cap card trends and suggest how you, too, can find yourself profiting from the next Frost Titan. After all, investing in any market is Simply Matthematics.

13 thoughts on “Understanding Your Market

  1. We think one of the reasons that the Magic Cards as Stocks analogy doesn't work, and also a reason why Magic hasn't crashed is that there are fairly significant liquidity issues involved once we try to make substantial volume-based profits. In your Wasteland example, suppose we bought 2,500 shares of Wasteland twelve years ago for $10,000, which not at all an unreasonable serious investment in a "stock." Now, we would have $50,000 or more worth of Wasteland, which seems like a great profit, but how do you propose on liquidating that into something more useful? Are you going to trade 625 playsets of Wastelands? It'd be hard to move that at more than maybe more than a dozen a time if you wanted "retail value" out of them. To be sure, you can buy 20 Wastelands and move them just fine, but then your 50% APR isn't very impressive anymore in terms of dollar value.

  2. @Yan & Kirby: While it's true that 625 playsets of something cannot be moved, getting your hands on 625 playsets of Wasteland would have been quite a task as well, not to mention it would be a head-scratching move to invest five figures into a card not on the reserve list. If you take individual quantities to this extreme, then yes, you are correct. But a $10,000 investment could be in multiple playsets of dual lands, force of wills, FNM foil Swords to Plowshares, Rishadan Ports, and Vengevine, filled in with opportunistic speculative purchases like Frost Titan, Stoneforge Mystic, Bitterblossom, Burning Wish (following the banning of Mystical Tutor), Memoricide, Etched Champion, and the like. That kind of setup could be liquified in a week, and appears a rather diverse and stable portfolio. Speculative purchase stock should be shifting with the winds, with short-term speculative gains being rolled either into more speculative purchases, or into more of the high-yield stable staples listed prior, thus compounding your interest.

    My intent is not to suggest that Magic is the only market one should be investing in, either. But if you are considering said not-at-all unreasonable serious investment of $10,000 in stock, perhaps part of that investment should be made in the Magic market. It cannot be traded with a mere button click, but this seems (to me) more than offset by the extremely high rates of return on prescient investments.

  3. MTG cards trade a lot more like commodities anyway (since that's what they are). I've always felt that Pre-selling cards was kind of like short sale, or maybe selling a futures contract since every dealer knows the overall value of the set is dropping as more and more cards hit the market.

    For the record Bill Gates has sold most of his holdings. He currently holds 618M of MSFT's 7.12B share public Float (shares trading). What is interesting is that nearly 65% of the float is held by institutions. We see this a lot on MTGO where certain bots might be buying and hoarding cards to reduce the amount in circulaton (either to redeem, or to speculate). I wonder what other examples of artifical scarcity there are.

    I'm wondering if WotC which knows exactly where every digital object on MTGO is looks at those stats when determining which products to print, for instance the new Legacy Starter Deck Series comming out which essentially caps the value of quite a few staples.

  4. ^above poster is obv. NOT Ben Blue-eyes 😛

    I enjoyed your article, Matth. Particularly interested in your comment above regarding "rolling liquidated cards into more speculative investments". Particularly, when you CAN'T roll the money over – what do you do now? In real life, we stop investing in 401k and use the money on Food and Shelter and save into our crappy Savings Accounts from too-big-to-fail banks (hehe).

    -John V. sup dude, lol

  5. Here is what I like about this article. Many people have a tough time understanding the processes of the stock market. These sorts of articles provide a comprehendable anology to help those who understand magic. Using previous experiences to connect new information is a great way to learn something new. Nice work.

    As for the Wasteland thing, I'm pretty sure this was a hypothetical situation, as I think we all know it would be pretty dumb to invest 10k into a single card. Some people just take everything so literally though…

  6. the closest thing to a market crash for Magic was probably when Chronicles was released and everyone was upset that their cards were reprinted and lost value. I feel that probably should have been mentioned in the article, but other than that it was an ejoyable read.

  7. I came to post what 'thehordling' said: there was actually a huge crash in Magic when Chronicles came out. Cards like Carrion Ants went from $25 cards down to nothing in a matter of days. The Elder Dragons, previously the most valuable cards in the game outside of power, saw their value dip by over 1000%

    Also, comparing the APR of one card to the APR of the entire economy is apples to oranges. When comparing Wasteland with another high-performing stock over the same time period (say, Google) you start to get a better picture.

    1. @Chas:
      Thank you for your post. You and TheHordling both picked up on a fact that my 8-year old self was too distracted by Fallen Empires (only $.99 per pack? But that means I can buy 10 of them!) to notice. Sorry for the oversight.

      Regarding your second point, I will concede this point if you'll concede that there are then like fifty times more Googles on the Magic market than there are in the stock market. Almost every set seems to bring a new Google. Yes, two markets are never absolutely equal- this is an analogy I'm making, not an equivocation. I felt the overlaps were significant enough to warrant mention, and that the outlook in the card market could be lucrative, so I chose it as the subject for my first Magic article.

      Thank you all for taking the time to read, consider, and respond to my thoughts.

  8. while I agree magic has been in a 17 year uptrend, there have been loser recently. power prices are waning and legacy cards are on the uptrend. just look at underground sea vs. like time walk or something.

    i work as a stock trader so I am very observant to such trends.

    i feel the next cycle of magic will be a huge push toward art…

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