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Insider: Rationality and Other Boring Facts of Life (More Thoughts on Safe Money)

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Welcome to my Introduction

 

Well hey folks. I hope everyone had a good time with Christmas and the other trappings of the holiday season, but a new year has come, and it’s time to delve into some of the most important months of trading and moneymaking in the MTG finance business.

This week, I’d like to discuss why I never went deep on Thundermaw Hellkite, why I don’t trade heavily in Jaces, and why mythics like Bonfire of the Damned never caught my fancy.

Consider, if you will, the reason why you go deep on a card- usually it’s because you expect the card to go up. At least, I’d hope so. If the card is worth 30 dollars, however, you need it to go up quite a bit before it’s worth the investment.

If a 30 dollar card goes up to 40, that’s a 1/3 increase in price. This is a big deal, and would usually get a lot of hype in financial circles. Consider a card jumping from 10 dollars to 15, a greater ratio of increase, allowing for a greater profit margin on the same input, and a much lower actual price increase.

I have problems with 30 dollar cards. When the average price of a playable rare is relatively low, a card that’s significantly above that is inherently less likely to increase in value- pointing to examples like Bonfire doesn’t make me incorrect, by the way, since the vast majority of cards in that price range inevitably plummet. Most planeswalkers come to mind.

I Do Love an Underdog

A ten dollar card, however, gives me a warm fuzzy feeling. At ten dollars we know the card is a rare, and played. Ten dollars usually doesn’t mean it’s played in everything, however, and the jump to 15 retail is often a matter of as little as being bumped to 4 copies in a deck rather than 2. Ah, I feel better about that- if the card is good, I’ve played it and I like it, and it’s not being played as often as it should, it’s easy. For a card to go from 30 to 45 it has to go from being massively played to almost universally played. A good card going from unplayed to played in one deck is more likely than a great card becoming ubiquitous.

Sure, Bonfire was a good bet, but in a vacuum I never bet on the good bets if they’re as expensive as Bonfire was. I like certainty to an almost unreasonable extent, and a card like Arid Mesa gives me certainty in a way that Bonfire never did, let alone Thundermaw Hellkite. Mesa’s now worth twice what it was a few months ago, something we take for granted, but Thundermaw doing the same thing is almost mind boggling- we all knew Mesa was going up, but Hellkite gained 20 whole dollars on its price sticker. Twenty dollars! That’s a lot of money! Nevermind that if you’d bought two Mesas on m13 release day when Hellkite looked awfully similar to an Andrew Jackson,  you’d be no worse off now.

This brings us to another danger of investing in the flashy, explosively powerful cards- what happens when we’re wrong? Let’s assume for a minute that you are not the perfect oracle of card prices. We can include that neither am I, or Doug or Sig or anyone else you might consider a trader. Everyone gets it wrong. If you put money into Bonfire and it crashed, you lose massive quantities of cash, especially if you have a playset, two, three. By the same token that we aren’t perfect, however, we’re also not stupid- you least of all. If you read this site and bought into something as big as Bonfire, it’s because you believe in it, and probably because many of us believed in it too. It didn’t drop, and anything that generically powerful wasn’t likely to. What if it just didn’t gain as much as you wanted? What if Hellkite went to 30 and stopped?

This isn’t out of the question. In fact, most savvy guesses regarding the future of a given card don’t involve explosions in price, but rather a noticeable increase with room for profit but not necessarily a doubling of money.

Biggest Isn't Always Best

If, instead of buying into Bonfires when you saw them angling towards a million dollars right before states you put that money into other stock, what would happen? Having 50 per card invested in a playset might make sense if you can guarantee the upswing, but I find it better to put my money into a variety of things I have a lot of faith in. Perhaps I miss out on the more mind-boggling price swings of cards, but only because I’m covering my bases- I even had Bonfires at one point. But I sure as hell didn’t have 8, and I didn’t feel the need to go so deep on a card that wasn’t a guaranteed win, for all the hype it was getting.

When I started becoming interested in investing in general, I wanted to be that guy who picked out a stock and Blammo! Made it rich. Turns out that’s not how the stock market works, and it’s incredibly dangerous to overexpose yourself to one particular asset. I was taught to put specifically controlled amounts of my account into several different stocks I felt comfortable with- if they went up, great, but what I was dealing in was consistency. These stocks weren’t the splashy ones that could make me for life or shatter my hopes of graduate school forever, these were the ones that wouldn’t lose. They were the fetchlands of the stock market, and I got a nice spread.

You can invest in your Hellkites, your Bonfires, your Jaces, and you could have some good stories- but you’ll also be setting yourself up for crippling failure. Why not move into a diverse collection of lower priced cards with more places to go, and know that regardless of how the market turns you’ll be ready. By buying into cards that would be good in a control meta, an aggressive meta, a board lock meta, you set yourself up for success regardless of what WoTC prints next.

Unplayed Cards Can't be Played Less

Another thing to keep in mind- while Bonfire did go up from the 20 it was at originally (a LONG time ago), where is it now? The more flashy a card is, the more room it has to fall. If you pick cards you like that are seeing very little play but still have solid prices, what’s the worst that could happen? Obviously the market for them is being supported in some way or the price wouldn’t be up, so if you anticipate the card being played and you fail, you’re no worse off than you were before. Bonfire, on the other hand, was a speculation target when it was already seeing a lot of play. In the face of meta changes it was just as likely the card would be played less as it would be played more, so there was danger in the pickup. Lucky for investors this didn’t turn out so bad for them, but just because it went your way once doesn’t mean it will again. Diversify, gentlemen, and be careful about it.

 

Thanks to Sigmund, I had torturous writer’s block until I read his article, and without it I would not have a coherent thought for this piece or the next. As always, if you have any questions comments or snide remarks, I look forward to your comments!

 

-Tucker

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Tucker McGownd

Hi, I'm Tucker McGownd. I'm a low risk trader that spends most of my time in Minnesota, where I go to school, play magic, study for school, play Ultimate for my college team, study for school, and read. I've been playing for a long, long time (I first played during Mercadian Masques block, and first bought a pack in Urza's Saga). I was incredibly lucky when I cracked packs until I learned how much cards were worth, at which point I proceeded to open Thoughtlace in every set until Scars, where I picked up more than my fair share of molten psyche. I'm currently looking forward to the inevitable reprint of Chimney Imp.

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12 thoughts on “Insider: Rationality and Other Boring Facts of Life (More Thoughts on Safe Money)

  1. I don’t follow your reasoning on the flashier card having more room to fail. Isn’t the flashy card the one to hold value through the season? Snapcaster, thragtusk, Sword of war and peace, etc. It is all perceived value, and with out hype, there is just card board. Sure post rotation they all drop, but of you avoid investing because of a far off eventuality, then how do you make money? grinding out $1 value? ain’t nobody got time for that.

    1. But what if you don’t want to hold value? What if you want to make money? If you invested in Jace the Mind Sculptor at 90$, it went allllll the way up to 105. You made a 16.66% profit on the single most stable standard card in the history of the world- but what if you’d taken that same 90 dollars, and invested in 18 copies of seachrome coast instead? One of the few dual lands in the format in one of the most popular color combinations available in the single most incredibly versatile deck available. Following worlds when CawGo was first released, seachrome didn’t actually gain that much value… even when it started gaining traction and popularity it didn’t go up much. But the shell was incredibly powerful, and all it needed was 1 or 2 cards to make it brutally strong. Investing in the most necessary pieces, the lands, was a very good bet in a way that investing in the inherently stable J:tMS wasn’t.

      While high priced cards are very, very stable (In the short term), so was seachrome coast. it bottomed out at 4 dollars and was unplayed. It began to be played heavily and slowly started the climb past 5. At 5 dollars, you can look at it and say ‘this card has a price floor of 4- worst case scenario, I lose very little. But it’s a land in a relatively unpopular set that needs to be played as a 4 of, and in a deck that is positioned to be very popular too.’ That’s what I try to do, because while there’s no risk in jace, there’s also no real upside. There’s some risk with the 10 dollar card. It might fall to 7- but the upside is comparatively massive. I would submit that grinding value out of high priced cards is inherently more difficult than low priced cards, just because of the much lower chance at price jumps.

      Does that make sense? Thanks for reading, and I look forward to hearing your thoughts on this in the future!

  2. I feel that I come off in my post as not acknowledging the rollercoaster that is hype. I do understand it, that is how you have to approach speculation in the short term, though. Riding those peaks and Valleys in the optimal easy.

    1. No worries, I think I understand what you’re trying to say! Thanks for reading, I think hype is incredibly important, but I also think that if you hype two cards a similar amount via similarly prominent people the less expensive card has more potential for price increase.

  3. Thank you so much for the shout-out! I often find cures for writer’s block in unexpected places. 🙂

    I like the point you’re conveying here. When I first started this whole finance thing, I thought I needed to have a page or two full of the $30 hottest Mythics. But really, that’s not the job of the speculator – that’s the retailer’s job. Let them carry all the hot $30-$40 Mythics. We’re much better served buying into cards when they are under-appreciated. A great example right now is Razorverge Thicket. No one likes the poor land, including retailers. They aren’t exciting. But guess what, they will double WAY before Bonfire will ever even have a chance at doubling. This is where the money is. Buy the powerful, ubiquitous cards when no one else is looking at them.

    1. Absolutely. If you know a card is played, has the legs to gain a lot of value and has virtually no chance of going down in the future, why put your faith in the next big planeswalker? I can almost guarantee that the razorverge thicket of the bunch will make you more money than Gideon of the Veil 3.7.

  4. Tucker,

    I really enjoyed your article and wanted to bring up the point of looking at speculating with regards to % increases as opposed to just $ increases, I believe this is important because it shows another point to your argument. If you have a 20 dollar card you think might go to 27 dollars or a 10 dollar card that will go to 15 dollars then given your overall investment capital is a fixed sum (let’s say 100 dollars). You’d gain the most actual value buying 10 of the 10 dollar cards (selling for 150 in the future) instead of buying 5 of the 20 dollar cards but only making 135 in the future. I too tend to avoid buying the flashy mythics, but that’s mainly because while they have the most oppurtunity for massive profits, they also have plenty of oppurtunity for massive losses (here’s looking at you Vraska), one must understand their threshold for risk.

    1. I absolutely agree. I’m a massive believer in the power of the ratio. Penny stocks can be by far the most lucrative investment you can make, despite the relatively low value. Keep in mind, however, that while 10 dollar cards are good, in the interest of selling cards eventually the trick is to get to the 20 dollar cards and no higher. 20 dollars is a very, very stable price point, and has a buylist price that’s consistently good when compared to far more expensive cards. I often make my money by increasing the retail value of my binder through 10 dollar investments, and then trading these spiking cards with relatively low buylists for teh 20 dollar cards I need and crave.

      Thanks for reading, and if you have any questions let me know!

  5. Kind of confused on this article. I think you are basically saying “don’t buy into $30 mythics” which, well, makes sense. Bonfire started at $10, and shot up to $40-50. Anyone could realize that they missed the boat when it shot to $30. Same with Thundermaw.

    To me, speculating is buying into a card when its cheap and has lots of room to grow, not when a card has already shot up (even if it may go up a little more). If anyone was buying into Thundermaws at $30 and Bonfires at $30, they are doing it way wrong (even though you could have made money on $30 bonfires, it was still incorrect in my book). Buying Thundermaws when they were 10-15 or Bonfires when they were 10 is where the speculating should have been.

    Also, if you buy into a card at $10 (assuming you mean retail price) and it goes up to $15 (again retail), you are likely only breaking even unless you have an outlet to sell at retail or close to it. If you are like me, I mostly buylist, and I can reasonably expect at $15 card to fetch $10 on a buylist. You really need it to hit $18-20 to actually make any money.

    1. Buying into doesn’t necessarily mean actual cash investment for me- because of the way my stock works, if I dedicate hundreds of dollars in trade to obtaining bonfires that’s money I can’t use somewhere else. It’s necessary for me to make my collection as profitable as possible, and when it comes to buylists 15-20 dollars is the point at which buylists stabilize. Above that most cards don’t increase buylist value by an appreciable amount, at least not relative to their retail price, so having a 50 dollar card is only marginally better then having a few 17 dollar cards, and less versatile if you want to sell.

      As for speculation on thundermaws and bonfires, too often I see new traders trading for cards just because they know the card is worth money- they often trade away potential risers, like birthing pod before its explosion in popularity, or your war and peace example, for cards that they know are very valuable. While this increases stability, this is inherently damaging to profit. In the end, the most simple explanation of the point I’m trying to make is this: If you know bonfire has rocketed up to 30, that’s not the point to buy into it. You are correct when you say speculating when the price is low is the only real way to speculate, but for every thundermaw there are handfulls of urabrasks, cards with enormous potential that never really got off the ground. While the correct play is to pick a card up early in its cycle of value, when it starts to increase and before it peaks, if you have a choice between strong cards that have potential, aren’t played, and are still valuable and a large flashy card that has recently become the biggest card in the format, always go for the former.

      Does that make sense? If not, let me know where I’m being unclear. Thanks for reading!

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