Welcome back readers and speculators!
Today's article was inspired by QS's own QED who brought the concept of true speculation up in the forums. After reading it and thinking about it, I wrote my response which I think deserves a stronger explanation (hence this article). It also helps that it's difficult to come up with article ideas sometimes, so I latched onto this one.
The basic issue brought to light is that with the constantly expanding MTG player base more and more people are speculating now. This has muddied the waters about the term "speculator" itself.
In the Magic community, "speculator" often carries negative connotations. These are related to the people who claim to be speculating but are actually just looking for price discrepancies (certainly one side of MTG finance) or the "shark traders" you see at many big events.
However, the true definition of speculating is (courtesy of Webster's):
- Activity in which someone buys and sells things (such as stocks or pieces of property) in the hope of making a large profit but with the risk of a large loss.
- Ideas or guesses about something that is not known.
Neither of these two activities is the same as looking for price discrepancies.
To truly speculate on a card, one must evaluate its potential, compare said potential (and thus future price) with its current price, and assume the risk of one's evaluation being incorrect by acquiring said card(s). The difference between a good and bad speculator is their ability to evaluate potentials (no matter what the item being speculated on is).
We saw this a lot back in America's earlier days. Gold speculation was rampant and people from the east coast were buying up land looking for gold out west. More often than not they failed miserably (the occasional few that hit fueled the gold lust), primarily because many had little to no knowledge about what they were trying to speculate on. Everyone assumed that gold could be anywhere, whereas modern day geologists would tend to disagree.
QED's concern is that we are entering this phase of the game. People are buying up cards left and right with little to no reasoning behind it and when one of the new prices sticks, they cry. Nobody wants to miss out on the next bulk rare that jumps to $5, so they speculate more and keep feeding the machine.
This type of player is not a true speculator as they haven't completed step 1 of the process (evaluation of said item) and just went straight to step 3 (acquisition). For ease of discussion we'll call these people "redditulators," because I see a lot of this type of buying show up on reddit (I don't want this to be a derogatory term, so hopefully it doesn't come off that way).
However, this rampant buying at the slightest suggestion leads to other issues. One, it prevents some from actually speculating because their targets disappear rapidly off the internet.
Even worse, it allows unscrupulous people to manipulate the market by picking up bad rares, herding the sheep into buying the remaining copies to create artificial demand, and then unloading their own copies at a profit. When this happens it obviously gives "speculators" a bad name.
The Good News...
There's not really any way to stem the tide of new players who want to buy cards en masse and hope to hit the price lottery. But like many smart people during the Gold Rush did, we can still make good profits off of this change.
Do you know who got rich when people started hunting for gold out west? The railroads who brought them there, the store owners who provided food and supplies, the saloon owners who provided alcohol and companionship. Unfortunately, selling alcohol requires a lot of licenses and selling companionship is outright illegal in most places, so we'll just stick to being the suppliers of the cards themselves.
Many of our store owners have mentioned how amazing pre-selling cards is because players "lock in" a price early in the hopes that they are getting the card cheaper than when it'll hit the market (or sometimes securing copies they feel they need immediately). But 99% of the time they overpay for said cards.
It's the reason even "bulk" rares pre-sell for $0.5-0.75 each and then upon release tend to plummet to bulk status. Every new set I see more and more pre-sales on eBay which just goes to show many people have realized the insatiable appetite of the "redditulators" can be turned into a lucrative profit.
The downside will be when too many people jump on this bandwagon and keep undercutting each other to sell out quickly. Another downside is that many sites with "buyer protection" allow the purchaser to just cancel their order and get their money back. Thus, these "redditulators" are now allowed to get free "put options" on any cards they want at no risk to themselves.
This is actually the sole reason I don't bother to pre-sell anything. I don't want to buy six cases in order to meet pre-sale numbers only to have a lot of the profits eliminated and be forced to find outs for the cards to cover initial costs.
Back to regular sales, I would never limit the number of a card someone can buy from me save if it exceeds the total number I have available. The reason is that I don't put cards up for sale that I've evaluated as under-priced unless they have gained enough that I find it acceptable to lock in some profits now.
Unfortunately this idea works best when you aren't a store. The store that never has any stock of cards they think will go up is the store that loses a lot of sales to people trying to speculate or "redditulate".
The other beauty is that people will pay more for something if they can buy a lot at once (usually). When buying a card en masse, people will pay a little bit more if they can order 20 copies from a store as opposed to four copies from five stores because they understand that shipping costs add up. I've done this on several occasions for my personal specs so I know it's a viable thought.
Supplying "redditulators" with cards is fine. However, and I want to stress this heavily, it's not okay to use these types of players to create artificial demand for a spec so that you can sell out for a good profit while they are left holding the bag.
I understand that some people might not see an issue with this (these tend to be the same people who trade with the mindset of "well they should know the value of their own cards") because the "redditulators" have the option to not buy and actually consider the card first--but even the smartest speculators can get caught up in hype when they see dollar signs.