While the MTG market was cooling down late last year, one mantra was repeated over and over again to give speculators hope: “Prices will rebound once tax season comes and everyone gets their refund check.”
Well, here we are. It’s early February and the tax refunds should start pouring in. It’s still early, but I recently noticed subtle signs of life on Card Kingdom’s hotlist. For example, some Reserved List cards once left for dead are slowly trickling back into play. The top six cards on their list fall into this category:
- The Tabernacle at Pendrell Vale - $1440
- Mishra's Workshop - $1120
- Nether Void - $395
- Drop of Honey - $385
- Volcanic Island - $270
- Gaea's Cradle - $240
Granted these buy prices are a far cry from their peak and other stores are likely paying better, but it’s encouraging to see Card Kingdom’s focus to get more in stock. It gives reason to be optimistic, if nothing else.
But optimism doesn’t mean we should start buying without restraint. Just like in the stock market, people tend to become euphoric all at once and this inflates prices to unrealistic levels. This week I want to share three important strategies to keep in mind as we navigate a (hopefully) fruitful time of year.
Strategy 1: Profit Is Profit
If only I had a nickel for every time I bought a stock, watched the stock go up into euphoria, and then watched it come all the way back down again. Better yet, I wish I learned the discipline to sell a stock into strength to secure the profits! Most recently I’ve gone through this with Domino’s Pizza stock (ticker symbol DPZ).
My entry point into this stock was well timed, and throughout November I watched its price climb. Then it came crashing down below where I initially bought in! Luckily it has rebounded, but I’m left wondering if I should sell this time around?
Similar charts can be found on Magic cards though sometimes it occurs on a different time scale. Volcanic Island had a hot start to 2018 but gave up much of its gains the back half of the year.
The moral of this story: sometimes taking profits is perfectly fine. We all dream of finding that 10-bagger that Peter Lynch talked about in his book One Up On Wall Street. Buying a Magic card for $10 and selling for $100 is every speculator’s dream. But I have bad news for those who cling to this dream: it happens very rarely.
But that’s okay! We can’t always expect massive gains with every card we buy. Sometimes MTG finance is about hitting many singles and using some sacrifice plays rather than swinging for the fences (forgive the baseball analogy). Profit is profit; if you’re selling cards for more than you paid, you’re doing just fine. I like the quote by Jim Cramer to remind me that you don’t always have to sell at a peak: “Nobody ever went bankrupt selling for a profit.”
Strategy 2: Don’t Turn a Trade Into an Investment
When I invest in stocks, I tend to focus my money on larger companies with an established pedigree. If a company is in its infancy, losing money while it continues to grow, I won’t touch it. It’s a personal rule of mine.
Occasionally, I get the itch to make a more speculative trade. But trading should not be confused with investing. I’m perfectly willing to trade any stock, even if the company is bleeding money left and right. The intent is to make transactions on a much shorter time scale, so the company’s profits are virtually meaningless—all that matters is market sentiment and momentum.
But like every trader, I sometimes (too often?) make a bad trade. My timing is off and I end up buying at the top. That’s not the end of the world as long as I’m willing to cut my losses. Sometimes people recognize they’ve made a bad trade and then decide to keep the equity, justifying it as a new long-term investment. This mindset is just as precarious with Magic cards as it is with stocks.
This is why it’s important to remember why you acquired a certain card and stick to your strategy. If you’re purchasing cards for arbitrage, make sure you’re selling them as planned. If you think a particular card is going to break out in Standard as a new set is released, make sure you follow the metagame closely those first few weeks. If you believe prices on Reserved List cards will climb as tax refunds kick in, make sure you have an exit strategy when/if the euphoria returns.
It’s very important to stick to your thesis. If a Standard card doesn’t pan out as hoped, it can be painful to sell at a loss. But it could be far worse if you decide to keep the card in the hopes it breaks out in Modern, for instance. You could see that trade gradually go to zero.
Or if you purchase a card in the hopes of flipping to a buylist for arbitrage, and that buylist drops, you could hold the card in the hopes that buylist rebounds. But this is also risky—the card may have already peaked. You may end up holding that card, tying up resources, for months or years while you wait for it to rebound.
At that point you are incurring other risks. What if there’s a reprint? What if the card is outdone by something new? What if your card is no longer the flavor of the month? These are considerations you may not have taken while planning your arbitrage. An unfortunate shift could suddenly become a terrible investment.
Don’t get caught holding the bag, turning a small loss into a large, time-consuming one. Unless you have thoroughly thought through a shift in strategy, it’s best to stick to the plan.
Strategy 3: Timing Is Everything and Nothing
I make this paradoxical statement about timing because the importance of timing really does depend on your strategy. But there are two important points you need to consider when talking about market timing.
First, it’s impossible to time peaks and valleys, so don’t bother trying. The old mantra, “leave the last 10% for the next person,” comes to mind here. You could grind out a little more value if you try to time the market perfectly, but you could just as easily miss the chance to sell for profit at all as a card’s price drops back down to earth. As I mentioned before, profit is profit.
It’s equally important to remember this on the buying side. We all want to buy our cards at the very lowest price. This can be reckless, especially as momentum accelerates. You could be shopping around for the best price on a card while everyone else is sniping copies right out of your cart. In these situations, trying to time the market perfectly is a fool’s errand. We all know how rapidly a price moves during a buyout.
The second point can contradict the first one: timing can be everything. If you ignore timing altogether and buy and sell cards when it’s convenient, you could potentially be putting capital at risk for a long period of time. Opportunity cost is important to remember here.
I once heard a phrase that resonated with me: “If you’re early, you’re wrong.” Buying a card and having to wait three years for it to appreciate may feel like a win—and it could be perfectly fine if you’re using that card to play with—but from the standpoint of cash flow management, it’s far from a perfect strategy.
Wrapping it Up: A Case Study
Let’s use the recent release of the Mythic Edition set as a case study. I bet you many people are violating my strategies with this set.
I wonder how many people purchased this set with the intent of selling it immediately for profit, only to find the price on the secondary market is somewhat soft. Right now, TCGplayer has a market price of $340 on the set. Subtract out 10% for fees and $10 for shipping, and your margin may be razor thin. Some are probably adopting the mindset that the product will likely appreciate over time so it’s fine to hold for a while.
This decision flies in the face of all three of my strategies. Firstly, there’s nothing wrong with a razor-thin profit. Deciding not to sell because profits were juicier the first time around is a terrible strategy. If you’re in the black, take your profits and be happy about it. The last thing you want to do is hold in the hopes of a better exit point only to have the product rot on your shelf for months.
Second, you are turning a trade into an investment. If your hypothesis was, “I’ll buy this product, receive it, and immediately flip it for profit,” then I suggest you do just that. If you intended to hold the product all along, then I’m not trying to talk you off that strategy. But don’t flip from one thesis to another without thinking long and hard about your rationale. If you are doing so simply because you’re averse to taking a small loss, then your motivations are misplaced.
Finally, you’re ignoring timing with this decision. You may have bought in too soon and now you’re stuck with the opportunity cost associated with this product. This may still be a fine long-term investment, but if you had additional capital to put to work would you purchase more of these sets? If the answer is no, then why are you holding them in the first place?
The bottom line is that we need a strategy when we deal in Magic finance and it’s crucial to stick to the plan unless you have a well-thought out reason to change it. Flip-flopping haphazardly can lead to some very suboptimal trades, and may discourage you from Magic speculation altogether. While I’m sure some folks in the community would embrace this, it’s rather counterproductive to the purpose of this website. Keep these strategies in mind, and you’ll be better equipped to handle both the ups and downs in this volatile market.
- Let’s see what else has suddenly reappeared on Card Kingdom’s hotlist recently. For starters, Old School gem City in a Bottle is back, with a strong $200 buy price. It probably isn’t the peak, but it’s good to see this market is finding its footing again after some significant price retraction.
- Card Kingdom has a $150 buy price on City of Traitors, which seems fairly strong. It’s a Legacy staple, and will continue to appreciate over time as long as Legacy receives support. That’s very likely given the popularity of team events. And it’s highly unlikely the land ever gets outclassed.
- Another popular Old School card, Thunder Spirit, appears to be rebounding as well. Card Kingdom’s buy price is back to $100 on the Reserved List Legends card. This underscores the importance of a card’s utility in its respective format. A solid Old School card with real demand will rebound in price more quickly and deliberately than something with minimal demand.