It’s late on Saturday afternoon, and you’re wandering around the Grand Prix floor in a daze. Those first few rounds went well, but then you got bad matchup after bad matchup and now you’re out, done, finished. No Day 2 for you.
You walk up to a vendor table and try to focus on the dizzying array of prices. It’s hard to concentrate, and you’re about to turn away when you notice something funny: almost all the Standard cards are more expensive than they were last week, when the prices were already higher than they were the week before. You furrow your brow. After those losses, you clearly need a new deck for The SCG Tour® event you’re going to at the beginning of next month. Should you buy in today, or will the market drop between now and then?
I spend a lot of time talking about individual card prices, but Magic finance is mostly about patterns. Just like when you’re slinging spells, identifying a pattern and acting on it is the quickest way to gain an edge on the competition.
This week, I’m going to talk about the two biggest, overarching patterns in Magic finance: bull and bear markets. How do they form? How long do they last? Can you identify one before it begins? What should you do when the market is surging? What about when the market is dropping?
As Warren Buffett says, the secret to finance is to be fearful when others are greedy and greedy when others are fearful. But is there more to it than that? Let’s find out together.
Running with the Bulls
Let’s start simply. What, exactly, is a bull market?
In the world of high finance, a market is considered “bullish” if prices are rising and/or expected to keep rising. It’s a slightly complicated way to talk about optimism: if prices are up and you’re not quite sure when they’ll come back down again, you’re in a bull market.
Academically speaking, it doesn’t matter what causes a bull market to form. Sometimes it’s a tightening of supply. Sometimes it’s an increase in demand, like when the player base was doubling year after year. Sometimes it’s a fury of speculation, like when Modern was first announced. As long as prices are up or expected to keep going up, you’re in a bull market.
In Standard, most bull markets are easy to see coming and don’t last very long. Whenever a block rotates and a new large set is printed, there’s a flurry of easily predictable buying activity. Casual players are eager to get their hands on the latest mythics, tournament grinders rush to unlock the best competitive strategies, and speculators gobble up everything that seems even remotely good. These bull markets tend to drag the entire Standard index up about 20%, and they peak somewhere between a day and a week after the end of the Pro Tour.
This is why buying cards while watching PT coverage can be so dangerous. Sometimes you’ll hit on a previously unknown card like Dark Petition and make a killing, but if you’re wrong, you’re buying in at the absolute top of the market.
These cyclical bull markets can be difficult for normal players to profit on. First, most of the cards affected by them are from the newest set. And unless you’re buying cases to crack packs (a bad decision unless you own a retail store or large online shop), you’re relying on speculative buys during the preorder period as your primary source for cards.
The problem with this is that most preorder prices already have expected bull market gains baked in. If you guess correctly (Declaration in Stone, Westvale Abbey), you’ll do very well. If you don’t (Relentless Dead, Arlinn Kord), you’ll lose an awful lot of money.
If you’re risk-averse, the best thing to do is to focus on the Standard index as a whole. While a few individual cards will continue to rise in price after the Pro Tour (Kalitas, Traitor of Ghet and Nahiri, the Harbinger were the two biggies this time around) you can be reasonably certain that Standard as a whole will begin to drop after the PT and the bull market will come to a quick end.
It’s easy to see the underlying reasons for this. The two or three top strategies will come into focus, causing demand for the second- and third-tier cards to fall off. The latest set will keep being drafted, continually increasing supply. Speculators will start to sell off their preorder and Pro Tour weekend buys, flooding the market with whatever cards just saw the biggest spikes.
Too many people, myself included, get caught up in trying to predict the future value of each individual card in the wake of a Pro Tour. Unless you need a card for a deck or you have a strong reason to believe that it is about to break out, it’s good to just trade or sell all of your Standard cards on the weekend of the Pro Tour, even if they no-showed the event and saw no PT-related spike whatsoever. Lock in the value added by the bull market before things begin to go south.
Of course, not all bull markets are short or easy to predict. While Standard rarely sees bull markets that aren’t short and based around a new set, Legacy and Modern have both experienced long-term bull markets caused by a confluence of other factors. Legacy had a couple of massive bull markets in the early 2010s, and Modern has had at least one bull market each year since its creation.
A few factors that have led to Modern or Legacy bull markets in the past:
1) Significant player growth. This always affects older cards more than newer ones because the supply of those is far lower; newer sets are printed to match current demand, while older sets were printed to fulfill the demand of a smaller player base.
2) Large, well-attended events with significant innovation encourage player interest.
3) An Eternal PTQ/PPTQ season that causes a temporary demand spike.
4) The release of a reprint set like Modern Masters. They increase the player base, and every relevant card that wasn’t reprinted goes up in price thanks to player and speculator demand.
5) A significant ban or unban, with bonus points if this actually shakes up the format instead of just threatening to do so.
6) A shift in the secondary market raises scarcity concerns; this tends to happen when a major dealer raises their prices significantly or there’s a rash of buyouts.
The biggest bull markets occur when several of these things happen at the same time. For example, there was a period several years ago when the player base had just doubled, it was Modern PTQ season, a Modern GP was around the corner, and several major dealers all raised their buy and sell prices at the same time. For three or four weeks, Modern prices were on fire and it looked like there was no end in sight.
When might Modern experience its next bull market? It could happen this summer. Eternal Masters will be released on June 10, supply should be very limited, and I doubt many of the major Modern staples will be reprinted. In addition, it’ll be Modern PPTQ season from July 16 through October 9. If prices rise a bit once we learn the contents of Eternal Masters and that rise occurs in conjunction with people building their PPTQ decks, we could see sustained Modern growth all summer long.
Or perhaps not. Player growth has been relatively stagnant for a while, and the loss of the Modern Pro Tour hurts a little. The important thing to remember is that some of the signs are there. If prices do start going up, you’ll know why.
What should you do in a bull market? If you identify one early enough, you want to buy, buy, buy. Imagine having bought in on Modern staples the night the format was announced, or even cards like Collected Company and Kalitas, Traitor of Ghet right before Shadows over Innistrad was released. This is why it’s important to know when a bull market might be forming.
What about later on in a bull market? The short answer, obviously, is “sell.” But while this is useful advice in a vacuum, its practical application is difficult. Magic cards aren’t stocks; selling them is time-consuming, you generally have to undercut the market, if you use a venue like eBay you need to pay fees, you have to factor in shipping costs, etc. In addition, there can also be an emotional price to pay when selling a card. I know there are several cards I’m never going to part with.
Here are a few guidelines I like to use for making my selling decisions during a bull market:
1) Am I likely to want these cards as part of my long-term Magic collection? There’s no need to buy and sell and buy and sell your set of Thoughtseizes over and over again unless you really love squeezing value out of your cards and have a lot of extra time on your hands. On the other hand, a hot card in a “deck of the moment” that you are never likely to play should probably be sold as soon as possible. Ditto for spare copies of rising staples.
2) How likely is the card to experience significant future growth, even if it drops in price over the short-term? A Reserved List Legacy staple will probably see many more bull markets in the future, so who cares if it drops off a bit between now and the next one? A hot Standard card might never be higher than it is now, though, so you should prioritize selling it.
3) How high has this individual card spiked? I’m much more likely to sell a specific card into a buyout or spike than a card that has merely risen along with the rest of the market. When a card is bought out, there are a few days when you might be able to get an artificially inflated price for it that is far above what the market will bear. If you can sell into that spike, it’s rarely a mistake. Cards that just keep going up are at risk for future spikes, so you might be missing out on significant value by selling them too soon.
4) Am I gaining any additional value by making this deal right now? This is really only a consideration at the trade tables, but you can often get people to swap their “boring” cards in another format for your “exciting” cards during a bull market. If you can lock in additional value without having to deal with selling fees, you’re in great shape. If you can trade bull market cards for Reserved List staples like dual lands or power that seem to weather all markets, even better.
Last, you have to be okay leaving money on the table. The number one thing that will keep you from selling during a bull market will be the nagging feeling that you aren’t at the top of the mountain yet, that if you just hold out a little longer the prices will keep going up and up and up.
And you’ll find anecdotal evidence from your own past to support this: that staple you sold at $20 that eventually peaked at $50, or that time you got rid of all your Tarmogoyfs once they hit $100 because surely they couldn’t go any higher than that. This is what causes bull markets to begin with, a general sense that prices are going to keep rising, so why sell now?
Ultimately, you just have to trust the patterns. If you have a hard time with this, I suggest keeping records. Note the price you sold or traded each card, and then note the price again one, two, three, and six months later. The human mind is very loss-averse, so you’ll remember your big “losses,” cards you sold too soon, a lot more than you’ll remember your “wins,” the cards you sold at just the right time. That’s why math is such an important tool. Your brain will lie to you, but your numbers won’t. Listen to them.
Wrestling Bears
I’m sure you can guess what a bear market is even if you’ve never heard the term before. Bear markets are the opposite of bull markets; they happen whenever prices are falling and confidence is waning. If you have no idea where or when the bottom might reveal itself, you’re in a bear market.
Much like with bull markets, bears easiest to identify and deal with in Standard. In Magic’s most popular format, bear markets tend to form whenever a large set is being heavily drafted after the Pro Tour, prior to a major set rotation, during the summer (many Magic players attend school), and during the holiday season.
Professional economists might argue that these aren’t true bear markets since they’re cyclical and easy to predict, but they count for our purposes here. For several months of the year, you can assume that almost all your Standard cards will drop in price.
Unlike the Standard bull markets, these Standard bears are fairly easy for us normal folk to profit on. You definitely need to identify them early, and you need to be aware that some cards will always defy them; whatever format staples are driving the hottest deck will almost assuredly buck all the bear market trends save the rotational ones. You can still do well for yourself selling or trading your significant Standard cards at the start of the bear and buying back in at the bottom of the market.
The big trick here is a willingness to give up perceived value in order to get out early. If you know the bear market is coming, you can price your cards to move and feel confident that your deal will look a heck of a lot better a few weeks down the line. Buying back in is fairly simple as well; look at price charts and wait for the downward trend to flat-line and you know a card’s value has hit bottom.
Legacy and Modern have bear markets too, and these tend to be both longer and scarier. Here are a few major factors that can cause an eternal bear market:
1) A long period without a relevant tournament or tournament season.
2) A stagnant or oppressive format, usually the result of a single deck being too good for too long.
3) Major issues with MTGO causing frustration as it drags the entire market down.
4) A general climate of uncertainty surrounding the future of the game: significant and problematic OP changes, counterfeiting fears, etc.
5) Multiple exciting Standard formats back to back (fewer people play Eternal formats when Standard is great).
These larger bear markets are hard to predict and even harder to take advantage of early on. They rarely start with a major crash—I can’t think of a time when, say, the entirety of Modern had a colossal overnight drop—and it can be easy to mistake them for the normal fluctuations of a healthy market. Obviously you want to sell your cards at the beginning of the bear market and buy back at the bottom, but how can you tell when it starts? And how can you know if prices will ever rebound?
Again, this is where I like to turn to price charts. If a significant number of cards in a given format are dropping week after week, you’re probably in a bear market.
There’s an even better way to figure this out if you regularly travel for events, though: befriend a couple of vendors. They’re on the front lines, and they tend to know very quickly whether prices are starting to rise again or continuing to fall.
Unfortunately, human psychology is working against your best interests during bear markets as well. Your mind will not forget the “high” price you could have gotten for your collection during the height of the bull market, and it will urge you to hold your cards until they reach those peaks again. Much like during a bull market, I recommend thinking about each card systematically and rationally:
1) Are you likely to want these cards as part of your long-term Magic collection? Again, unless you are constantly buying and selling cards, you should hold your personal sets of staples through bulls and bears alike.
2) How likely is the card to experience significant future growth, even if it drops in price over the short-term? This bear market will end. Do you really want to dump your Reserved List staples because they dropped 10% over the past six weeks?
3) What is the realistic floor for this card’s price over the next six months? Assuming Magic doesn’t die, an assumption I am still happy to make after 23 strong years, could this card lose a quarter of its value? Half its value? Two-thirds? This biases me toward selling cards that are either likely to be reprinted soon or are only played in one or two fringe decks. I’m probably never going to sell my power.
4) Can I trade this card for something that isn’t currently experiencing a bear market? While I don’t recommend trading Legacy staples for Standard cards unless you have a real need or you can flip them fast, there’s something to be said for getting out of a bear market during the early stages. Some Standard cards—ubiquitous staples, lands, etc.—can be viewed as stable medium-term holds. If you trade often enough, this can be a lucrative way to lock in value before things get too dire.
Once a bear market drags on long enough, an even more important question begins to emerge: at what point does it make sense to start buying? Again, consulting charts or your dealer friends helps a lot here. Every bear market comes to an end, and at some point prices will start to rise. It is at the end of these long bear markets when the best long-term deals are found. Remember: smart Magic financiers don’t panic during a bear market. Extremely smart ones use them to build their collection equity on the cheap.
This Week’s Trends
There was a minor furor last Saturday when Mark Rosewater appeared to indicate on his blog that cards could come off the Reserved List in the near future. A couple of hours later, he chalked it up to a Tumblr error—apparently he was attempting to answer a different question, and it just so happened that the answer matched the Reserved List question as well.
The conspiracy theorists among us have gone into hyper-drive. Perhaps Rosewater jumped the gun on an official announcement and WotC Legal told him to walk it back for now? Could the installment of the new CEO lead to the end of the Reserved List? This is all possible, and I think we can safely say that it is slightly more likely today than last week that the Reserved List’s days are numbered, but the most likely scenario by far is that Rosewater was telling the truth. His Tumblr has been known to malfunction in exactly that way many times in the past, and I cannot believe he would be so careless as to spill something he knows is so important to so many players in a random blog answer. For now, sadly, I think it’s correct to assume that the Reserved List is still very much a line WotC is unwilling to cross.
Unlimited copies of Fork are up a bit this week and the Internet is mostly sold out of them. This is due to the card’s unrestriction in 93/94 Old School Magic. (Remember, this is a format that doesn’t allow cards from Revised and up.) While it now has a theoretical price tag of at least $100 and likely closer to $150, I’m not sure there’s any real demand beyond a couple of eager Old School players who probably have their set already. If you’ve got any of these kicking around, feel free to sell if you can find a buyer.
Someone bought a lot of Golgari Grave-Trolls but not, like, all the Golgari Grave-Trolls; they missed most of the Duel Decks copies and forgot to buy out many of the secondary marketplaces. It’s possible they’ll get around to finishing the job and the card will end up doubling in price, but it’s more likely (considering I haven’t seen a lot of renewed competitive interest in Golgari Grave-Troll decks) that the person who bought everyone out just ran out of cash or steam before they could finish their uninspired attempt at market manipulation. Sell if the spike actually happens, I suppose.
Standard risers this week: Nahiri, the Harbinger; Kalitas, Traitor of Ghet; Collected Company; Dragonlord Atarka; Languish; Ob Nixilis Reignited; Hissing Quagmire; Part the Waterveil; Dromoka’s Command; Dragonlord Silumgar; Wandering Fumarole; and Secure the Wastes. This is the normal post-PT consolidating of power into a couple of top-tier decks. Overall, I don’t want to be holding too many Standard cards at the moment.
In Modern, Celestial Colonnade; Academy Ruins; Mystic Gate; Infernal Tutor; Elesh Norn, Grand Cenobite; Stomping Ground; and Darkslick Shores are all slowly trending up. Orzhov Pontiff was the major Eternal spike this week. It sees a decent amount of play, and the Magic finance community noticed that supply was getting very low. Considering Mark Rosewater wrote yet another article recently about how haunt will likely never come back, the buyout was fast and the price almost doubled.