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Insider: Why Settle for Less

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A profitable transaction always feels satisfying. Being able to find a discounted card and flip for profit is nice – speculating on a card and watching it catch on is even nicer. It’s truly a rewarding hobby.

With this in mind, I often strive to achieve as many profitable opportunities as possible. Whether I’m trading, selling online, or selling to a dealer, I always love the gratifying feeling of making money on Magic Cards. Perhaps this satisfying feeling is the emotional motivator that keeps me going in this hobby even though I rarely have time to actually play the game.

But sometimes I wonder if this greed for profitability is a hindrance. It drives me to emotionally charged decisions, and based on all that I’ve observed and read I should not be defaulting to emotions when running the MTG Finance gauntlet. Often times the best profit comes from patience and emotional neutrality.

My propensity to snap-sell cards for profit may inhibit my absolute performance due to acceptance of lower profit margins. This easily calculable factor is a key driver for business growth and success. There aren’t many companies around the world that are content with their current profit margins – we would all like them to be greater. Sometimes there is a difficult balance between emotions and profit margins, and I want to do my very best to explain (justify?) why I settle for lower margins so often.

Time Sensitivity

Card prices are in constant flux. As Magic grows in popularity the opportunities will become more frequent, but some may also be short lived. This is especially true thanks to the modernization of Magic. With live internet broadcasting of premier events, net decking, and endless forums, many cards are exposed to their fifteen minutes of fame. The most recent example was Nivmagus Elemental, a card that saw a tad of hype for about fifteen minutes while highlighted in a Pro Tour Feature Match.

Like Nivmagus Elemental, many cards don’t maintain their higher prices. And in some cases the price drop could occur at a moment’s notice. A card like Gravecrawler has seen peaks and troughs as Zombies succeeds and fails in Standard (chart from blacklotusproject.com).

Because of these price fluctuations, I’m often quick to sell when I can profit. If I had purchased several copies of Gravecrawler at $4 back in July (I think I did, actually), I’d be inclined to sell them as quickly and as conveniently as possible as the card’s price rises. Therefore, when a desperate dealer offered $6 on the card, I was more than happy to sell. Even though the card was still on an upward trend, I was way too concerned that there would be a significant price drop. Rather than extend the risk of owning this card, I was sure to move it right away.

More recently, I jumped on two play sets of Sphinxs Revelation. Below is a snapshot of the deal I found on Amazon.com:

Within days of placing this order, Star City Games increased their buy price on Sphinxs Revelation to $6 and sell price to $13. Seeing this sudden increase, I was faced with a dilemma. Do I hold out and hope this Mythic Rare continues it’s drive? Or do I cash out, freeing up some profits for a subsequent purchase.

This card is very metagame-dependent. Now that U/W control strategies are thriving in Standard, Sphinxs Revelation is well positioned. But once Gatecrash is released, that could easily change. Rather than hope the metagame remains constant, it seems like a safer bet to expect change. With this assessment in mind, I decided to sell. Four copies sold on eBay for $41.99 and the rest were traded / sold to a local dealer to $8.

Could I have made more? Possibly. Do I feel rewarded and emotionally charged from this successful speculation? Absolutely. And emotions are likely to win in a case like this.

Opportunity Cost

The concept of opportunity cost has been discussed multiple times before on this site – both in articles and the forums. In short, owning cards locks up funds and may prevent you from investing elsewhere. If I hold fifteen non-blue Zendikar Fetch Lands in anticipation of a price rise, that equates to about $120 of funds tied up in this asset. This is cash that I can’t use elsewhere.

So, if non-blue fetch lands end up spiking significantly then my choice was a wise one (chart from blacklotusproject.com).

But if these cards only increase marginally and/or gradually, perhaps my money would have been better suited elsewhere. For example, while Arid Mesa has increased nicely since July (about $2), could another R/W land have increased more in this time window? How about this one:

Clifftop Retreat (chart from blacklotusproject.com) has gone from $4 to $7.50 in about the same time period. Not only is this a greater absolute gain vs. Arid Mesa, but the percentage gain is substantially higher. Arid Mesa has seen a 25% increase while Clifftop Retreat has risen 67% in that same time frame.

So if I bought a few Arid Mesas at $8.50 a few months ago and sold recently, did I maximize profits? Arguably, no. Everyone expects non-blue Zendikar Fetch Lands to follow their blue counterparts and see a significant price bump due to Modern. But to me profit is profit. And selling those Arid Mesas freed up my cash so that I can speculate in something else. This ensures high turnover in my stock and shields me from significant risk of holding cards which are not top performers.

Fear of Losses

The final motivation for cashing out prematurely I want to touch upon is the irrational fear of losses. This is the most emotional motivating factor and perhaps the most costly. I’ll describe the concept with an example that took place just this past week.

A couple weeks ago Star City Games decided Jace, the Mind Sculptor was too cheap. They decided the price should be higher and they increased their buy price to $60 and their sell price to $100. Naturally, the internet reacted immediately and the “invisible hand” of economics shifted the price up significantly.

During this bump I noticed copies of the Planeswalker were selling out all over the place. eBay cracked $80, Amazon was even higher, and of course most retailers sold out. I found a copy at Card Shark selling for $69.99. Thinking this card was surely going to hit $80 at least, I pulled the trigger.

When the card arrived things had calmed down a bit. While Star City Games hadn’t changed their pricing, eBay had at least settled down. Copies were reliably selling in the low $70’s and I couldn’t even recoup my costs by selling. This created an internal dilemma.

To hold the card was to carry a double-edged sword. If Jace were to be unbanned in Modern, for example, the card could have no price ceiling. But unbanning of Jace in Modern seems unlikely. Even if it was possible, Wizards of the Coast has made it clear they want Modern to be affordable. A reprint would surely be on the horizon.

Because I didn’t want to be stuck holding a $75 card (opportunity cost), I started pushing the extra Jace. But there were no takers. Already I had felt like I was destined for a loss with potential for greater downside. The loss was so unbearable that the first dealer to offer me $70 was the proud owner of a new Jace. (chart from blacklotusproject.com)

Here I am fairly confident the decision was not technically correct. I should have held out and sought at least a trade outlet if not an improved selling price. But I was unhappy even with losing a few bucks on the card already that I had developed an irrational fear that I may lose more. Wanting to avoid being left with a “hot potato”, I cut loose and ate the $4 loss.

Give and Take

There are some benefits to being anxious to sell. I rarely lose excessive amounts on an investment and I keep high turnover in my binder. Opportunity cost is also rarely an issue for me.

The cost of this, however, is that I must accept a lower profit margin sometimes. Being quick to sell doesn’t always ensure the greatest payouts.

This is where my emotions come in. By justifying my actions with the rationalization that profiting from a hobby is an invigorating pastime, I’ve overcome disquiet from suboptimal business. This could be for better or worse. From a logical standpoint you could say I am “not doing it right”. But if I’m making money and having a blast, I don’t really care.

Sigbits

  • Some dealers are still overvaluing Umezawas Jitte. It seems like retailers want this to be a $30 card, but that is just not the case. This weekend I sold my extra copy to a dealer for $17 even though auctions on eBay are ending in the $18-$20 range.
  • If you haven’t been following along in the forums, then you need to know that Helm of Obedience is now a $20 card thanks to Star City Games. NM copies can be sold to SCG for $10. I’m not sure if this price will stick, but I hope to unload my copies quickly. It’s worth noting that Helm is on the Reserved List.
  • Speaking of Reserved List, what is going on with Gaeas Cradle? This card is sold out at Star City Games at $80 and I don’t see very many copies in trade binders. I had my shot at a MP Japanese copy today but it’s too difficult for me to stomach giving up so much for this card when it sees almost no play outside of EDH. I passed and opted to sell my Jace rather than trade it for the Cradle.

17 thoughts on “Insider: Why Settle for Less

  1. Another good article sir. Really breaks down the concepts of what many of us wrestle with everyday such as when is the perfect time to sell or what is the right allocation of assets between short term, long term and available cash. It’s interesting that you say you wonder if sometimes you cash out too early since I wish I could do this more often. I tend to try and maximize profits and this greed sometimes causes me to lose profits.

    One thing I would be interested in hearing is when to convince yourself that you’ve “missed the boat”. I find it difficult to lay off a card that is hot even though I know in the back of my mind that I’m probably buying it too far into it’s upswing. Just wondered if you had any thoughts on this!

    1. Jim, thanks for the kind words and the comment!

      I find that there are two opposite approaches to timing a speculative buy. Sometimes it’s best to buy cards when they are cheapest if you think they have potential. This kind of speculation seems to be risky but can yield greater profits. Those who bought deeply into Craterhoof Behemoth a while ago are singing and dancing with this recent jump. The other approach is to buy a card as it’s on the way up. That’s the area I like to operate in because as long as you’re fast enough, your investment should net you profit – just less of it.

      The cutoff of buying before you’ve “missed the boat” is tough to pinpoint. I normally use data from other sites. When SCG finally has more than, say 4 copies of the card in stock then this is a good indicator their price is stabilizing. Also, when copies stop selling like crazy on eBay this could also be a good sign that the run on the card has petered out. This could be a whole separate article of course! 🙂

    1. Yes it sure is! I’m not selling mine. I have a set for Legacy and as long as I enjoy Legacy I’m keeping my set. If there’s a threat of a major reprint I may consider otherwise but for now, Jace seems financially safe.

  2. I also noticed that. I bought a Jitte for $14 on eBay, and Troll and Toad offered $18 to me at GP Chicago. I was flabbergasted, and basically threw it at them. They also gave me $20 on a Snapcaster, and $5.50 on Tezzeret, Agent of Bolas. I was pretty happy with the offers that day.

    1. It always seems there are certain cards that dealers are convinced are worth more than they actually are. Maybe these dealers are low on stock of a card or something. But a card like Jitte is seeing so little play nowadays, I’m not sure who keeps buying them from the dealers!

  3. I think that many Legacy cards are overpriced by dealers relative to their intrinisic price on Ebay. I think for floor traders the ideal thing and what I do is pick up Legacy staples at regular prices and flip them for standard stuff at a premium. Much more money than holding onto them and trying to sell.

    1. They didn’t, but the mailserver broke down. It was still available in the forums, where the card had been identified as a target for quite some time. I would highly recommend following the forums anyway.

      Sigmund can’t help this btw.

    2. Thanks for the comment, Pi.

      We always try to blast out relevant information as fast as possible. Sometimes technology doesn’t cooperate, and sometimes our staff goes to the forums with new ideas. In this case it sucks that the mailserver was down, but the forums were a big help.

      Also while not a QS service, following the QS people on Twitter should also alert you to developing specs. Sorry for the inconvenience this time around!

  4. I actually recently traded a Gaea’s Cradle 1:1 for a Jace, when he was on the way back up but not at his current (temporary?) plateau. My reasoning:

    1. Jace is played more across all formats and in more quantities.

    2. I realized when I got him that he was not done going up, and I didn’t know where he would stop. Also, while Gaea’s Cradle will probably continue to go up long term, it’s not a card that’s as subject to high price increases.

    3. Potential (probably nonexistent actually) unbanning in Modern.

    4. Any future premium (FtV, Judge foil, etc.) are unlikely to affect the price of the original, if at all (see foil Dark Confidant vs Judge foil Dark Confidant). I might be concerned if he gets a future Modern Masters reprint, but i highly doubt he is actually unbanned in that format.

    5. I already have 5 Cradles :-p

    At this point, I’m confident enough in Jace that I would even trade played duals (excluding Sea or Tundra) into Jace.

    1. Justin – a very fair assessment. I was very close to making the trade myself but decided against it for 3 key reasons.

      1) the Cradle was in Japanese and I want and English one.

      2) The Cradle was MP and I didn’t like that – it would be harder to move should I decide to sell it.

      3) I paid cash for the Jace and wanted cash in return. Plus, with the $70 I got for the Jace I can go to eBay and buy an English Cradle in better condition for less than $70.

      The two cards are very close in value. I just feel Cradle is on the reserved list and won’t really see much of a drop whereas Jace can be in some annoying Dual Deck or Commander product and get hit hard value-wise. It may not be likely in the short term, but the possibility will always be there.

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