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Insider: When Good Speculation Goes Bad

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We spend a lot of time on here reflecting on our successes, those called shots we’re right about and the times we make great trades (and justifiably so). Chances are you know about how the QS team was way in front of the spikes on Spellskite, Consecrated Sphinx, and how we harped on you to sell your Jaces before they began dropping, and months before the ban came.

But what about the other side of the coin? Not everyone is right all the time, and taking responsibility for leading people astray is something I’ve often taken a strong stance on.

Today I want to share with you the story of one of my recent speculating ventures that went sour and the lessons I’ve taken from it.

Remember the day the sky fell? Headlines of “JACE BANNED. STONEFORGED BANNED” screamed at you from every Magic outlet in the world. Of course, many of us took this as good news, an event to be celebrated, not decried. But, to quote Alison Krauss, every silver lining always seems to have a cloud.

In this case, that cloud was the return of Primeval Titan and Valakut, the Molten Pinnacle, back from the dead to terrorize the metagame once again.

Like any half-awake speculator, I saw the run on Titans coming. So, about four minutes after the ban announcement, I came to my senses and bought eight Titans for a good price. Had I been able to access MODO (I was out of town), I would have done as some of you did and bought up all the Titans on there and instantly flipped them. But since all I had access to was a laptop and a spotty internet connection, I did the next best thing – buy the Titans in paper.

@Chosler88: Got 4 Titans at average of 16.25 apiece with shipping. Shouldn't be too difficult to flip these for at least $20 each in the next week.

20 Jun via web

This is where the story starts to take a turn for the worse. Going into this purchase, I knew the window to sell the Titans was going to be short due to their reprinting. I figured as long as I moved them by the week before the prerelease I would be okay.

In the few days after the purchase I kept an eye on Ebay and the major sites. Before long, everywhere was sold out for under $20, the card was going for about $25 apiece on Ebay, and SCG had raised their price to $30. All was going according to plan. I even had a few people inquiring about picking them up from me on Twitter.

But the real world is very clearly not Magic Online. I had money tied up in an asset that I didn’t actually have yet. The following things had to happen before I could actually flip the cards.

-       Have my order processed and shipped;

-       Have the cards actually make it to my doorstep;

-       Find a buyer/list the cards on Ebay,

-       Have my auction come to a close.

I’ve written before about the Myth of Making Profits, and some of those factors caught up to me in this case. The cards took about five days to arrive from the dealer I purchased them from. From there, it took another couple of days for me to make it back to my mailing address to verify I received my order (splitting time between two cities sucks), and then finally place my Ebay auction. By this time, Ebay prices were already off their peaks, but still about where I expected them to be – about $20 apiece.

It wasn’t until a few days after I set up the two Ebay auctions that a terrible realization came to me – my auctions were set to expire on July 5th, the day after the end of a long holiday weekend. It’s pretty tough to get people to buy your cards on Ebay while they’re at the lake shooting off fireworks.

In addition, the fervor over Titan had abated by the time my auctions closed, and a large part of the community seemed to be in waiting for Magic 2012. I couldn’t get anyone in my area to bite, so I figured Ebay was my best option. I knew this was going to happen, of course, but the process of getting the cards sent to me, picking up the cards, and listing them on Ebay took longer than I would have hoped. To make matters worse, I couldn’t set a reserve price (a minimum price for your auction on Ebay) because demand was dropping by the day. Add in the holiday weekend and I knew it was going to be ugly.

Here’s how it turned out.
Image and video hosting by TinyPic

After I ship the cards, I’m going to end up down about $20. It could have been much worse, and I hope I (and you guys) are able to able to use this experience to correct a few of the things I did wrong.

Still searches up Valakuts, but dropping fast

Lesson #1 – Factor in extra time for processing

By processing, I mean both on the dealer end, as well as my end. It took four or five days for the order to arrive at my house – I counted on three. It was another day before I could get to the cards, and another day for my auction to start at the time I specified (which is a great tip when Ebaying, as detailed in this great article by Doug Linn)), and a week for my auction to close. In the end, I lost 3-4 days to processing, which is tough when dealing with such a small window.

Lesson #2 – Perception is Price

When the bannings were first announced, people flocked to Titans at $20-25 because they were used to it being worth $30-40. This was great for those who had Titans on hand already. Since I didn’t, people had more than a week to adjust to the post-banning world of Standard and M12, and what people thought Titan “should” be worth began to drop.

Perception is driving this decrease in price. Fundamentally, there’s no reason Titan shouldn’t still be selling on Ebay for $25-30 right now. There is more demand for it than there’s been in months, and there hasn’t been a single one reprinted since then. In short, demand is up but supply is steady, which typically leads to a run-up in price. But with reprints coming, people know the card is going to drop in price, which suppresses pent-up demand until more supply floods the market.

My mistake was in assuming that prices would at least stay relatively steady until more supply actually hit the market. Instead, after the initial run on Titans post-banning, the floor dropped out from underneath the card’s price. Since most action on Ebay auctions doesn’t take place until the final few hours of an auction, it doesn’t matter what the average price was when you started – all that matters is where it’s at when you’re finished.

Lesson #3 – Exhaust all options before moving to Ebay

I did spend some time in my area looking to unload the Titans, but I could have and should have put in more effort to move them. I could have made some calls to some contacts rather than simply talking to the people who were at the shops I visited.

I also should have put more effort into moving the cards through Twitter. Twitter’s been good to me in the past, but I didn’t want to get into a wait-and-see on Twitter when the clock was ticking. In retrospect, I should have at least given it a day to try, since my cards sat in Ebay limbo for nearly a day anyway before my auction was scheduled to start.

Lesson #4 – Know when to quit

At least this is something I practiced. I knew when I listed my cards I was in danger of not covering my costs. I could have set a reserve on the auctions, and if they didn’t meet a certain threshold set by me they wouldn’t sell. While this is appealing because it means you’re sure to hold onto your auction if it doesn’t net you a profit, I knew in this case it was no use. With the price dipping lower by the day, I didn’t stand to gain anything by relisting them a week later. It’s better that I lost $20 this week as opposed to $30 next week or holding onto eight Titans to play or trade that are plummeting in price.

So there it is – that’s how a “no-lose” speculating situation goes terribly awry. Had I been able to sell my cards even a week earlier I could have easily profited from the exchange. The line can be razor-thin, and hopefully this will help you stay on the right side of the margin in the future.

Next week I plan on looking back at the Prediction Tracker’s first two months and highlight some of the successes of the QS team. The Prediction Tracker has accomplished what I hoped it would when we created it, and I’ve found it to be a very useful tool. As always, let me know if you think there’s any way I can improve it and I’ll take it into consideration.

Thanks,

Corbin Hosler

@Chosler88 on Twitter

Corbin Hosler

Corbin Hosler is a journalist living in Norman, Oklahoma (also known as the hotbed of Magic). He started playing in Shadowmoor and chased the Pro Tour dream for a few years, culminating in a Star City Games Legacy Open finals appearance in 2011 before deciding to turn to trading and speculation full-time. He writes weekly at QuietSpeculation.com and biweekly for LegitMTG. He also cohosts Brainstorm Brewery, the only financial podcast on the net. He can best be reached @Chosler88 on Twitter.

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5 thoughts on “Insider: When Good Speculation Goes Bad

  1. Great article as always sir, glad to see you updated with M12 stuff and that we jive on most prices. Part of learning is making mistakes and im glad you are not afraid to display them for others to learn from.

  2. Amazing article, thanks for all the tips Corbin! This was a refreshing read because opposed to highlighting success stories, it spotlights the possible pitfalls of speculating. This is some important information that not many people touch on, and understanding BOTH sides of the possible win/lose scenarios will def help out in the future! Thanks! Carl

  3. This is a good article, and an important subject. Anyone who wants to be taken seriously should follow this example. I've made some explicit calls in the forums recently and I intend to revisit them in the Fall. At that time, measuring their success or failure will be a great way to analyze and improve my strategies.

    As a side note, it was amazing to see the MTGO market for Primeval Titan's the day after the banning. Prices were all over the place! My normal vendors had taken their buybots offline, the classifieds were full of humans selling and buying Titans, and there was a steady decline in the price people were willing to sell at. Anyone who wasn't on top of things gave away tix by the hour.

  4. That sucks that the titans did not work out for you. I was fortunate and sold my 12, that I purchased at 16$ each, at 26 + 2$ ship on buy it nows. Granted ebay scams more money on buy it nows but I still made a solid profit. I feel bad now that I encouraged you to buy them. It is so horrible when your order gets delayed. That happened to me with New Phyrexia. I didn't get my preordered boxes until two weeks after release and it killed my profit margin. I look forward to more speculation from you though.

    Go Consecrated Sphinx, you can do it! (14 and counting)

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