Thursday, July 7, 2016

An overview of MTG Finance and Speculation

So, unlike many people. I'm going to actually answer the individual's rather reasonable question because he's asking something that is pretty obviously known and he'll figure out with a few months anyway.

Magic: The Gathering is based on a totally unregulated marked which is almost entirely at the mercy of the company that prints the cards, Wizards of the Coast, a division of Hasbro.

Cards are printed for play in four major formats, one which rotates every 18 months, one with every new card since 2003 (Modern), one with cards from the inception of the game with a firm list of restricted very powerful cards (Legacy), and one in which most every card ever is legal (Vintage).

Card prices fluctuate based on the release of new cards, the various power levels of cards in these formats, and their rarity. Such that a card worth $0.30 today could quickly rise to as much as $10 over a few years. But such a quick rise is based on it's play and availability.

The exception to this is cards placed on the Reserved List between 1996 and 2002. Wizards of the coast has repeatedly expressed that they are not going to reprint any of the cards on the reserve list. There is argument as to if there is any legal precedence for them violating this decree but it's been 20 years and it hasn't happened yet. Meanwhile, the prices of many cards on the reserve list continue to rise. These cards conceivably could be reprinted but it would cause a major disruption in the market and a loss of millions of dollars in value.

Even with reserve list cards the rise is based on power level and use in the Vintage and Legacy formats. Among these are the famed Power 9 cards which are generally held for collection purposes rather than plying purposes, though there are locations where events are played with these cards. It's unclear exactly what kind of price the market will bear for these cards. Black Lotus's have seen consistent increases as a collectors item and it is unclear of exactly what the plateau is. Meanwhile, lesser cards such as revised Dual Lands have seen fairly steady increases from the few dollars a piece in 1996 to ranging between $100-$300 today.

My basic advice in anyone looking at investing in Magic cards is that either you need a lot of understanding of the game to make sense of the waxing and waning of cheaper cards, or you need a lot of money to invest in reserve list staples. So far there hasn't been reserve list staples that have ever seen a significant loss in price with the exception of sudden price rebalancing where a card may spike to double it's current price then drop to settle around one and a half times once people decide to bring more copies to the table.

Currently it's fairly easy to spike the market on certain cards in which there's moderately low supply. A $300 card today could become a $900 card in a few weeks if all available copies are made unavailable. But also be aware, you can't just offload the new cards at $900 immediately. Your only reliable buyers are the vendors such as Channel Fireball and Star City Games may only end up offering you $400 on your $900 card. If you show up with 50 of them, they aren't likely to be buying.

The honest picture here is that you can work the Magic market to your favor and there's some old cards that you can directly effect the price on. I'm not sure what buying up fifty $15k Black Lotuses will do long term. It's likely to cause a spike to $20k but that doesn't mean you'll find fifty buyers at that price. If you do pick up a bunch and hold them for five years, history has shown that they will increase in price. But how much, how fast, and if you're better off sticking that into Tesla stock isn't totally clear.

If you have any other questions please feel free to contact me at casuallyinfinite at gmail dot com.

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