Last Friday the S&P 500 and NASDAQ hit all-time highs. The former closed 0.03% higher to close at a record 2415.82 while the latter moved 0.08% higher to close at 6210.19. Both of these indices have had incredible runs over any timeframe you care to look at.
To an outsider unfamiliar with Wall Street, this would appear as though economic outlook for the U.S. was the greatest it has ever been. You may even go so far as to deduce that major blue chip stocks must be soaring as consumer confidence grows.
This is only partly true. In fact, when you peel back a few layers of the onion you will immediately find that underneath, the structural integrity of this rally isn’t as robust as it would appear at first glance. It would seem that much of it is buoyed by a few concentrated names, such as Apple, Google, Facebook, and Amazon.
Meanwhile, there are many household names that have sat out of this rally—some have even sold off despite of the run to all-time highs. Examples include Ford, IBM, and General Electric.
It seems there is a real split between the haves and have-nots in the world of stock investing. Thus one of the toughest investing question arises: “Do we stick with what’s working or do we cash out of the winners and buy into the losers?”
The MTG Finance Parallel
Sometimes I temporarily forget that I’m writing for a Magic: The Gathering site and not a general finance site. I focus heavily on Wall Street, so it’s easy to get sidetracked. In this case, however, I do have a parallel to draw. It won’t be perfect, but it will end up at the same final position.
Consider this: Magic finance may seem robust to an outsider. If someone had taken an index of key relevant cards to track across the entire game, I suspect the graph would largely go from bottom left to top right. It would be bumpy and imperfect, but I genuinely believe a non-weighted index would be rising over the years.
Like stocks, however, should one lift open the cover of this index to glimpse the details within, I believe the rhetoric would have to alter. Since 2015, this index would be buoyed in much the same way by powerhouses such as Black Lotus, The Tabernacle at Pendrell Vale, and Juzám Djinn.
Power, dual lands, Old School cards, Reserved List staples, and Commander foils would all show strong signs of growth over recent history. Imagine if you had bought one foil copy each of every card in the Atraxa Commander 2016 deck—I’m sure you would have made out quite well!
A basket of these cards would have led to tremendous gains.
On the other hand, there are some noteworthy areas of weakness that would also come to light under sufficient scrutiny. Just look at Gideon, Ally of Zendikar for example—it’s one of the most played cards in Standard (fifteenth most in fact) and it is the most played mythic rare in the format. Historically, the most played mythic would be worth $30-$50; in the days of Jace, the Mind Sculptor and Baneslayer Angel this could climb as high as $100. Yet once enough supply hit the market post-release, Gideon struggled to crack the $30 mark.
Similarly, Force of Will, the most played card in Vintage and second most played card in Legacy, has seen a dramatic sell-off over the past year due to its reprinting in Eternal Masters.
With this dichotomy, it leads me to ask myself: where is a better place to park new money if I want to invest in Magic? Clearly Standard has some systemic issues that I won’t delve into, but there could be merit to a strategy of buying into beaten and battered Modern and Legacy staples after they bottom in price from a reprint. Would this be a more sound strategy than, say, pursuing already-expensive Old School staples and Commander foils?
The Million Dollar Question
Just like in the stock market, this same debate of trash vs. treasure can be had in MTG finance. Of course the fundamentals differ completely between the two, so the comparison stops here. The answer to this question in the stock market could be very different from the answer in MTG. Then again, there really isn’t an obvious answer for either and I could see compelling arguments made on both sides. However I will do my best to share thoughts on where I stand today when it comes to Magic.
Magic is in a strange place right now that leaves me somewhat uncomfortable. There is a very obvious effort by Wizards of the Coast to increase sales—the player base isn’t growing like it once was, yet corporate leaders still want to see improvements to the top and bottom line. Therefore Wizards of the Coast was left with finding alternate means of tapping the market:
- Commander products tap the Commander market.
- Conspiracy products tap the draft market while also accessing the secondary market (reprints).
- The Masters sets tap the Modern and Legacy secondary markets.
- The Masterpieces tap the Standard market by taxing Standard players further via reducing the value of their cards.
In a way, Wizards has cleverly accessed profits from the secondary market without ever mentioning it directly. This, of course, is helping their sales in the short term, but it could have unfavorable consequences in the future. As players continuously get burned by reprints, they may be less inclined to actively pursue chase cards. They may abandon competitive play in favor of the much cheaper casual scene. And even though it’s amazing what the Commander products have done for their target format, Wizards can’t really market more products to that audience more frequently than they already do.
These trends have made me uneasy, and it’s why I have concentrated my MTG positions in “safer” positions like Power, Old School, and Commander cards. However many other people are doing the same exact thing, which is making this trade a bit overcrowded. It feels secure now to hold a card like Beta Mind Twist, but it may be greedy sitting on something that has done nothing but go up over the years.
Much like Amazon stock, a compelling case could be made that these staples are overpriced and should be sold. On the other hand, the only thing that is outpacing Amazon’s sales growth is the growth in the Old School player base.
I know I’ve made general bearish comments about Magic in the past, and it’s not my intent to do so again here. I maintain positions in Old School and Vintage cards because I believe in their long-term trajectory. However there is something to be said of the stagnation of many Old School staples after their initial hype. A similar trend happened with Legacy and Modern, although on a much longer time scale. Once the player base growth tapers off, we see a flattening of prices. This remains the norm until the next growth spurt occurs…if it occurs.
In the meantime, I will focus on three strategies:
- Continue to hold a core selection of Old School and Reserved List cards as the backbone of my collection.
- Add to positions in Commander foils based on metagame shifts according to EDH REC—the release of Commander 2017 will likely open up tremendous opportunity as new tribal theme decks are launched. Keep a close watch as there will definitely be money made.
- Churn and burn other cards with short-term potential (Pro Tour hype, low TCGPlayer stock, arbitrage). The intent here is to hold these cards for no more than a couple of weeks.
This strategy will keep me in the game for the long haul, generate some short-term profits (hopefully), and offer some mid-term potential for spikes. It covers all my bases without overexposing me to some of the greatest risks associated with the game right now: reprints, player base stagnation, and Standard exhaustion.
Wrapping It Up
Do I stick with the winners or do I move into “value” by seeking some of the underperformers of the market? This is an age-old question that comes up time and again on Wall Street. While fundamentals differ greatly in Magic, the same question can be asked.
While it’s impossible to answer this question with guaranteed success, I believe sticking with what’s working is the right move in Magic. This includes Old School staples, Reserved List cards, and Commander foils. Meanwhile some of the weaker performers—Standard cards and Modern/Legacy reprints—should be avoided. They may present a seemingly attractive opportunity on the surface, but peeling back a few layers I think there’s risk here that’s not worth taking. Especially when there are so many other opportunities on the horizon that won’t carry that same risk level.
Lastly, I want to add one word of caution around speculating on Commander foils. Sometimes the stock on these cards is extremely low. That’s great for triggering price spikes, but it can also lead to some emotional buying and lost money. Just because something jumps 200% on MTG Stocks doesn’t mean the card is truly selling at the new price. This is always the case, but it’s especially true with rarer Commander cards. Make sure you evaluate the card’s utility for yourself before deciding where to make your purchases, and never follow the hive mind that is “MTG finance.”
Thinking for yourself will be your greatest ally going forward!
- In the past when a Legends card spiked, the Italian version followed suit; not in the same magnitude, but at least the same direction. Lately Winds of Change jumped in price and Star City Games is sold out at $9.99. I wonder if the Italian version will get some love as a budget option going forward. SCG has just under a dozen copies in stock with NM listed at $1.99—let’s see if those move or not.
- Not long ago I spoke negatively about Predict, citing its recent price run as nearly complete. I need to double back now and alter my stance. With the banning of Top in Legacy, this card may become more relevant as Miracles players seek out alternatives. Star City Games is sold out of nonfoils at $2.99 and foils at $24.99. With just the singular printing, this card can definitely go higher.
- Portent has become an attractive target to pull out of bulk as another alternative for Legacy Miracles. SCG is sold out of these too (albeit with a $0.15 price tag). I guarantee this gets restocked at a higher price. Especially given that Card Kingdom is paying $0.21 on their buylist!