Let me describe something that happened to me at Grand Prix Columbus this past weekend. The experience may give us a glimpse into what is going on with all these Reserved List buyouts.

I arrived on site first thing Friday morning, fifteen minutes before the doors opened. The motivation for being so punctual was simple: first in the doors gets dibs on anything priced incorrectly at the dealer booths. With the multitude of price fluctuations these past few weeks, there were bound to be some hidden gems in the event hall.

Surprisingly, things weren’t really that attractive. Vendors had mostly kept up with the new price spikes—Gaea's Cradles were tempting but still not a slam dunk; Mishra's Factory was priced competitively but not grossly under the market price; a $25 Yavimaya Hollow caught my eye, but upon closer inspection I discovered its condition was well under par. Pass.

The only card I ended up buying Friday was a Moderately Played Winter Mishra's Factory for $150.

An underwhelming Friday. But things were about to get even more interesting the next day.

Mox Diamond Spike

Saturday morning I can’t sleep in, and I’m up and showering before my alarm was set to go off. As usual, I checked MTG Stocks’s Interests page first thing to see what happened the night before. Not surprisingly, nonfoil copies of Mox Diamond had spiked, following their foil counterparts.

This was a perfect sequence of events. I remembered seeing plenty of played copies in the $175 range and suddenly these copies would be more attractively priced than the day before. With any luck, I’d be able to grab a copy or two, list them on eBay right in the event hall, and have myself a $20 profit before even getting home from the tournament.

Once again I arrived at the venue before the doors opened. With renewed excitement, I waited patiently for my chance to get back to the vendor booths and browse for the new cards. It didn’t take long before I found a stack of Mox Diamonds priced at $175. They looked Moderately Played, but whereas the day before this was a hard pass, suddenly this seemed like a solid pickup. I immediately asked to review the stack (they had 8-10 copies in a penny sleeve).

Much to my chagrin, the vendor’s reply to my inquiry implied a repricing was imminent before I could review the copies. Perhaps I should have expected this outcome, but what really made an impression was two specific aspects of this interchange. First, the agility of the vendors is really unprecedented—clearly they had a read on MTG Stocks as well and noticed the price correction. This is probably a permanent fixture of live events now, so we should adjust our strategies accordingly.

The second, and more shocking, observation was that the vendor was so reluctant to sell their cards. Just ten minutes beforehand this same vendor was commenting on how slow buying and selling was throughout the day Friday; they were struggling to break even on the event. They had a stack of $175 Mox Diamonds, which they surely paid much less for, sitting in their case. They could have sold for slightly higher, maybe around $190, to move these copies and recoup a reasonable chunk of their booth investment. Instead, they reprice their stack for $250 each!

By the end of the day, they hadn’t sold a single copy.

Buyouts: The Dealer’s Speculation Angle

This experience yielded a bit of insight that I wanted to emphasize this week. Speculators are running amok, scooping up Reserved List cards without much discrimination. There is no doubt about this.

But what I realized through this Mox Diamond discussion is that vendors are contributing to these price spikes in their own indirect way. When they aren’t moving copies of a card, and then they increase their prices in tandem with buyouts, they are accelerating the price action taking place. In the case of Mox Diamond, this vendor had enough copies to supply the demand of most the room if they were willing to accept their (still-profitable) price of $175. But instead, they chased the price higher.

The result: even though the demand wasn’t there at $175, the vendors still increased their prices because of a buyout on TCGplayer. I understand their thought process—why sell at $175 if the cheapest online price is $300?—but there’s a miss somewhere here. The supply/demand curve goes out of whack. The price jumps too high, the demand curve doesn’t adjust, and you are essentially left with an artificial price floor that creates a surplus. This is basic economics 101.

Mox Diamond isn’t the only instance of this from last weekend, either. That $25 Yavimaya Hollow I mentioned earlier was repriced at $30 on Saturday. Again, I understand what the vendors are doing, but don’t they want to actually sell their cards? I bet you that MP card is still in their case sitting there, whereas at $25 it probably would have sold.

The other egregious price adjustment throughout the weekend was on Gaea's Cradle. I saw a couple played copies across the ten or so vendor booths in the $275 range. These seemed well-priced, and I nearly pulled the trigger on one myself. But being strapped for cash, I passed. Simply put, the copies were too played and there was no immediate out to flip for profit.

The next day, I walk along the vendor booths and discover one vendor has a near-$300 buy price on Cradle. Hmm…that’s a large increase relative to the start of the weekend. I browsed each vendor booth again and found most of the Gaea's Cradles still in stock. Only this time, prices were all over $300 with some repricing as high as $400.

Again, this baffled me. Don’t these vendors want to sell their cards? If they are profitable at $275, why would they reprice so much higher? I thought the purpose of running a booth at a Grand Prix was to buy and sell in volume in order to cover the booth charge. Jacking up prices on high-end cards seems counter to this purpose.

A Rampant Issue

Today as I check Card Kingdom’s website I see their buy price on Gaea's Cradle is now $350. So those $300 MP copies on site at the GP are probably worth buying now. Except if I had to guess, I’d predict their prices were now set to $350+. They seem to be chasing prices higher, but doing so in a way that is inefficient for this market.

This phenomenon manifests itself online as well. At one point Card Kingdom was aggressively buying Juzám Djinn—their Near Mint buy price was $980! I thought about cashing out at that moment, but decided I would hold off. Quickly, Card Kingdom got a ton of copies in and they adjusted their buy price all the way down to $715. Today they have 12 copies in stock that they're having a difficult time moving at the “new price.” Did they have to buy so aggressively? I would wager they went too far with their buy price and a number around $800 would have been a better balance.

But now they are in a situation where their buy-in is high, their asking price is a bit above the market, and they are stuck with $14,000 in Juzám inventory. Because there’s something of a floor in price, the market now sees a surplus at this website. Demand is robust for this Old School staple, but demand at Card Kingdom’s price is still a bit weak.

Shahrazad is another example: their price is too high on the card, and so they are sitting on 18 copies of inventory. If I had to guess, I’d say they would prefer not to have so many copies of a card that sees minimal play. Other than collectibility and the occasional Old School player, the demand for this Reserved List card is very thin. Charging above going prices in an attempt to chase the market will result in this inventory surplus. It’s the Mox Diamond scenario all over again.

Wrapping It Up

The key takeaway here is that vendors are also participating in the hype that is affecting Reserved List prices day in and day out. They may react to varying degrees, but in the heat of the moment the reflex is to move prices higher in tandem with MTG Stocks.

This action creates an unintended consequence: it creates an approximation of a price floor, which basic economic theory predicts will lead to a market surplus. That is, there are more goods out there at the higher price than there are buyers who want to pay that price. I’m not sure this is a healthy place for the market to operate. In the short term it is probably fine, but the long-term impact could hurt companies with large inventories. There’s a loss in operating efficiency within the market: a deadweight loss.

What should we be doing about it as speculators? Well, for one, I’m going to approach these crazy buyouts with a touch of skepticism. Whereas before I may have chased all of these Reserved List buyouts with vigor, now I am holding my MTG funds a bit closer to my chest. I want to see vendor supply dropping in tandem with market supply in order to believe in a card’s higher price.

One example of this is Chaos Orb. That card has skyrocketed these past few weeks and decent copies now sell in excess of $600.

This move is 100% real. Why? Two data points. First, I didn’t see a single copy in vendor booths at Grand Prix Columbus. No Alpha, no Beta, no Unlimited, no Collectors’ Edition. None. One vendor had a $600 buy price on the card—I bet you they acquired zero over the weekend.

Second, vendors are sold out online while auctions end at higher and higher prices. See the difference here? When Mox Diamond spiked, vendors with a dozen copies just upped their price. But with Chaos Orb, there are minimal copies in the hands of vendors. Thus there’s no surplus—the higher price is real.

Other cards with surprisingly low stock in Columbus were Serendib Efreet from Arabian Nights, Mirror Universe, and Eureka. I didn’t see many of those. Nor Guardian Beast for that matter. I saw a bunch of Juzám Djinns at the new price, which tells me the price is going to be stagnant for a while.

But some of these other cards that haven’t spiked quiet yet—these may be on the move imminently. That’s where I want to be putting money to work. Not in the cards that are spiking today, but in the cards with low stock that could spike tomorrow without much vendor inventory to create a surplus.

This is my major takeaway from the weekend. The observations were insightful, and they give me better confidence in my investing strategy going forward.

…

Sigbits

• After last week’s spike, Card Kingdom adjusted their buy price on foil Mox Diamond from $130 to $210. This is a large increase, but merited given the market’s current price. Still, I would watch that buy price closely. If it starts to drop, it means they’re getting bites. They could rapidly acquire a dozen copies and then sit on inventory until the market truly catches up to the higher price.

• One disappointment from GP Columbus were vendors’ underwhelming buy prices on dual lands. I really thought these would be much higher given the run on them these past few months. I couldn’t move them profitably, despite the fact that TCG low continues to rise steadily and Card Kigndom’s buy price has risen right alongside. $200 for Tropical Island, $185 for Tundra, and $170 for Bayou all catch my eye, and I don’t think the increases are done just yet.

• Let’s talk about a random Legends card for a moment: Angus Mackenzie. Being the most expensive Legends legend, I have been watching this buy price at Card Kingdom for a while now. Recently it jumped from $100 to $140—a 40% increase! Keep an eye on all these Legends creatures because some haven’t risen much recently and are due for a bump. Use Card Kingdom’s stock and TCGplayer listings as a guide to identify which have potential to pop.