After my unexpected month-long vacation from writing, I thought a macro article would be a good way to start again. Today I’m going to explain why I think it will be difficult to make money speculating on Magic in the future.
I’m using the term “speculation” here to mean buying cards you believe will increase in price at retail and then selling them at the new higher price if/when that price is achieved. Successful speculation is dependent on the retail price of a card increasing substantially (you need around 20% just to cover fees).
This is the type of thing that many of us do on the side, not to be confused with what stores do. Stores buy cards at buylist prices and sell at retail, which is a model that will always be viable and does not depend on increasing card prices.
The pillar that has been propping up Magic speculation for the last few years is the general upward movement in Magic card prices. The influx of new players (and their money) has consistently pushed card prices higher over this time period. Those with some insight into the game were able to pick the cards that benefited most, but just about everything was a reasonably good buy five years ago.
I’m starting to see cracks in this pillar, though. Here are my concerns.
1. Wizards is catching up on reprints.
Two years ago, Wizards was woefully unprepared for the success of the Modern format. They clearly did not have a plan to get more copies of key Modern cards into circulation when they created the format. After three years, it appears that they are finally getting their feet under them.
Yes, it is laughable that we still don’t have fetchlands, but all signs point to that being corrected as soon as this fall (the omission of Onslaught fetchlands from Vintage Masters is telling).
Fetches aside, we now see a more aggressive reprint plan coming to fruition. Modern Masters was a big first step and the consensus is that we will see the sequel next summer. Wizards has replaced half-hearted casual Core Set reprints like [card]Nantuko Shade[/card] and [card]Serra Avatar[/card] with Modern relevant cards like [card]Mutavault[/card] and [card]Scavenging Ooze[/card]. This year, [card]Chord of Calling[/card] and [card]Urborg, Tomb of Yawgmoth[/card] continue the trend. The previous two fall sets have also featured reprinted Modern staples in the shocklands and [card]Thoughtseize[/card], and I expect to see more of these in the future.
On top of this, Wizards has more supplemental product than ever. The now-annual Commander product is perfect for reprints because there are no format, balance, or even thematic concerns. You can drop literally anything into those decks. We also can’t forget about Duel Decks, we did just get a [card]Remand[/card] reprint there.
Even Legacy got some reprint love this year between Conspiracy and the [card]Jace, the Mind Sculptor[/card] reprint in From the Vault.
Wow, that’s a lot of reprint outlets. Can you think of anything reprintable that wouldn’t fit in at least one of those products? No, neither can I.
The increased threat of reprint makes speculation a lot trickier. If you are good at predicting the Standard meta you will always have that, but holding Modern and Commander cards is now substantially riskier. Cards like [card]Abrupt Decay[/card] and [card]Sphinx’s Revelation[/card] – cards that I would normally be loading up on during rotation – could very well end up in Modern Masters II (or a Duel Deck, Commander deck, etc.) in the next 18 months. As a speculator, I can’t be sure that is enough time for the cards to appreciate.
It’s a risk I’m not sure I’m willing to take. Picking winners is hard enough without having to dodge the barrage of reprints.
2. The market is being flooded with new products.
Not flooded as in overly large print runs, but as in a huge number of new products.
Journey into Nyx, Conspiracy, Vintage Masters, M15, Commander 2014, From the Vault: Annihilation and Khans of Tarkir are all going to hit in a 6 month span. I’m not complaining about this, I think it is great, but that is a ton of new product. The finance issue is that there is only so much money to go around and these new products are going to suck up a lot of the money that might have gone into the secondary market in the past.
It’s even more concerning when you combine this with the reprint issue. Players usually have to choose between buying cards on the secondary market and buying new product. If the new product includes reprints of the cards they need anyway, there is no decision. Why buy [card]Stifle[/card]s from a store when you can draft Conspiracy and probably end up with one?
All this cash being diverted to new product is going to make it harder for cards to maintain their prices in the secondary market.
Magic Online offers a great illustration. Standard prices tanked when Vintage Masters came out. Why? Because people wanted to play VM and needed to sell Standard cards to raise the money to do that. I know the upcoming client switch is playing a factor, but there’s just not enough money to go around.
From Wizards perspective, this is not cannibalization. The new products are not fighting with each other for money (well, they are to some degree) as much as they are fighting with the secondary market for money. Wizards makes zero dollars when an Onslaught [card]Polluted Delta[/card] gets sold at an LGS. They are going to make a boatload of dollars when people are furiously cracking Khans packs in search of [card]Polluted Delta[/card]s (I think). This is a great strategy for Wizards and I’m not sure why it took them so long to cash in on their assets. Speculators, unfortunately, don’t get a cut of any of this.
3. There are no new formats on the horizon.
One of the biggest drivers of secondary market prices over the past few years has been the rise in popularity of new formats, specifically Modern and Commander. When these formats started gaining momentum, it prompted players to go out and buy a lot of cards they would not have otherwise bought.
Most people have their Commander and Modern cards by this time or have consciously decided not to play those formats. Now what? Sure, the continued growth of the player base will put some upward pressure on card prices (barring reprints), but we’re talking 30% annual player growth in a good year. Speculators are dependent on cards doubling (that’s 100% growth, kids) in much shorter time periods.
The days of pulling formerly-bulk rares that are now $20 out of your collection may be behind us unless something new comes along. I don’t see it yet.
The market has stabilized quite a bit. This is good for players, but the problem for financiers is that we have been living on market volatility for the past two years.
As I said, Standard speculation is still a fine place to be if you are good at it. It was never a good place to be if you aren’t. As for Modern, I expect a pretty quiet year. Shocks to the system (surprise reprints, bannings and unbannings, new cards that impact the format) will still be important, but I think there will be far fewer cards spiking out of seemingly nowhere. Holding Modern cards is becoming increasingly risky and less likely to pay off. I’m drawing my stock down.
Reserved List cards are an option, but I’m not sold. People perceive the Reserved List as a “flight to quality,” but I’m not sure they are right. That’s another article.
Sealed product is going to be hit as well. The baseline price for sealed product is always the expected value of the cards inside, and reprints hurt that. There is a draft premium, but there are literally three current draft formats I want to be playing right now (Theros block, Vintage Masters, Conspiracy) with M15 on the way, so why would I pay $160 for a box of Innistrad? Why would I pay $400 for a box of Modern Masters when I can play Vintage Masters now or just wait for Modern Masters II next year?
It looks to me like most of the easy money is made. I remember thinking in the middle of all those Modern spikes, “this has got to stop.” Well, it has.
Thanks for reading.
2 comments on A Bearish Outlook for Magic Speculation
Very interesting and well thought out article. I’d love to know just how strong you expect the effect to be, especially on sealed product. What do you expect a box of Conspiracy to cost in a year’s time?