Through The Roof

Today, financial author Chas Andres takes a look at the ethics and future of speculation, both inside the Magic community and outside of it.

Most of the time, we in the Magic community believe that actions within our sphere are separate from what goes on in the rest of the world.

And why not? We have our own scandals, our own media, our own lawmaking body, and even our own economy. While external pressures may determine how many people play Magic and to what degree they commit themselves, the real world is generally content to leave our little oxbow alone. While the Magic community can be cruel at times, it is generally a happy and creative place. If we didn’t like to spend time with each other, we’d likely stop playing. No game—not even the best one ever created—is stronger than the sum of its players.

I have read a lot of articles on Magic speculation, but I have yet to see one linking the practice to the problems that commodities speculation has caused in the real world. The ethics of speculation is a touchy issue in the Magic community, sure, but it is an absolute firefight of an issue in today’s finance community. Thousands of vitriolic words have been spilled about it over the internet, and both sides have points worth considering.

Today, I am going to take a look at the ethics and future of speculation, both inside the Magic community and outside of it.

Before I do, though, I’d like to make a disclaimer so that you can get a sense of where I’m coming from and what I’m trying to accomplish with this line of discussion.

First, the parallels between Magic speculation and international commodities speculation are interesting but flawed. At the end of the day, volatility in the food market may indirectly result in the starvation and death of thousands of people. Volatility in the Magic card market may inconvenience a few people who want to play a game. It is important to remember that the stakes in our own little economy are infinitesimal compared with the world as a whole and to take everything with a little humor and a lot of skepticism.

Second, it is important to realize up front that this is a partisan political issue. By and large, left wing economists are in favor of taxing and regulating commodities speculation while those on the right prefer a hands-off laissez-faire approach. As all of you should know, it is very hard to get unbiased information about controversial issues, even from sources that appear reputable. I am a writer, not an economist, so I cannot entirely vouch for the information I am going to be discussing. I will try to present fact as fact and opinion as opinion, but I suggest doing your own separate research if this is an issue you would like to know more about.

As for my part, I will be neither praising nor condemning Magic speculators in this article. I have wrestled with my own ethics on this issue for a while and have yet to come down strongly on one side or the other. In the interest in full disclosure, I personally partake in card speculation, generally to the tune of $500 dollars per year, and I don’t consider it a bad thing.

This article, then, is not intended to be a preachy pile of nonsense designed to defend the honor of speculators, nor is it trying to eradicate the practice. Until Magic card speculation is federally regulated (something that will never happen), people are allowed to buy and sell as they like.

What I will be doing is exploring speculation as a whole—both inside and outside of Magic—and examining its influence. Regardless of where you stand on the issue, it is important to become informed on how speculation affects an economy. All actions, especially in a community as small as ours, have consequences.

Speculation vs. Investing

A mantra I have heard time and time again is that Magic cards are not an investment. Usually, the people who espouse this philosophy are upset about the rising price of cards, either because they sold their collection too soon or they’re just starting out and are struggling to afford a good deck.

In truth, anything can be an investment. If you firmly believe in the future of monkey droppings and decide to purchase equity in a zoo waste disposal service, that’s an investment. Of course, it’s not likely to be a very good investment, but that doesn’t invalidate the strategy.

The problem with investing in Magic cards is that they retain much of their value because of manufactured scarcity. It’s well known in the antiques and collectibles world that anything produced specifically to be a collectible is probably a lousy collectible. The reason that baseball cards from the 1950s are worth money is that people back then didn’t hoard them or keep them in good condition. Baseball cards from the 1990s are worth nothing because a ton of them were produced and kept in mint condition by people who thought they would appreciate in value the exact same way. ‘Investors’ have been losing their shirt on ‘collectibles’ like this for years, buying everything from Beanie Babies to commemorative plates.

For the past twenty years, Magic cards have been a solid investment. The Magic card market has risen steadily for a long time now. Even though it isn’t indexed, anyone paying attention knows that prices have by and large gone up. Anyone with a large Magic collection is probably happy that they haven’t sold it.

The biggest difference between speculation and investing is how far down the road you’re looking in terms of making a profit. For example, many of you probably have 401k accounts that are currently invested in a long-term mutual fund. These funds are designed to rise along with the market; if the economy as a whole does well, so do you. These funds mostly help combat inflation over periods of many years and are solid investments.

The line is a little blurred when looking at individual stocks. Some economists consider buying shares in a single company to be speculation no matter what. Others believe that this can be an investment if you’re in it for the long haul. For example, if you purchased 100 shares of Facebook stock last week because you believe in the company’s long-term future and you think that it will one day perform like Apple stock, that’s an investment. If you bought 100 shares of Facebook to try and flip at a profit during the initial IPO flurry, that’s (poor) speculation.

While investing allows you to rise along with the market, speculation attempts to beat the market. It does this by attempting to profit on quick market fluctuations, and speculators don’t much care what causes them as long as they can make some money.

In Magic terms, then, investing is your long-term collection. These cards rise and fall along with the Magic market as a whole.

Any cards you buy because you think they will go up in price relative to the rest of the market is speculation.


For years, the copper industry was the bellwether of the commodities market. Copper prices could be depended on to mirror the ever-changing relationship between supply and demand as the production of manufactured goods waxed and waned around the world.

Then the speculators showed up.

As the internet got faster and the world’s markets became more interconnected, it became possible for fewer people to control more of the market. In the case of copper, the numbers are almost unfathomable. In 2010, according to this article, every pound of copper mined from the earth that year was traded SEVENTY-ONE TIMES OVER.

By and large, these trades aren’t being done by weekend warriors with a Quicken account. Most of the speculators that have a major effect on the market manage money for a major bank or brokerage firm. These are individuals with the ability to move tens of millions of dollars with a single click.

But so what? Why do we care what rich men in darkened rooms do with their money?

The problem with too much speculation is that it makes the market impossible to predict.

In an ideal free market, prices are determined solely by supply and demand. If more things that require copper are being built, more copper is needed and the price goes up. If industry slows down, the price will fall and allow more people access to those materials. This process is at the beating heart of capitalism, and it is what good investors rely on. Successful businesspeople in the financial sphere have long used this basic principle to help determine when to buy and sell both stocks and commodities: get in when demand is low and get out when demand is high.

When price becomes entirely decoupled from the market forces of supply and demand—for example, when a commodity is traded 71 times over from speculator to speculator—predicting the rise and fall of a price becomes a total gamble. Once speculators control the market, the entire system becomes closed off and insular. Speculators start reacting almost exclusively to each other, and prices rise and fall recursively. Check out this chart from late 2010 showing the affect that speculators have had on the copper market.


Market volatility due to speculation is problematic enough for solitary investors, but it can be downright disastrous for those who require those commodities for their business to function. After all, who is going to start a copper mine if the price can fall $200 in a single day based on nothing but the whims of a few dozen traders? How can businesses plan ahead and properly fill production orders if the market is fluctuating so rapidly? In the world of commodities, it is easy to link rampant speculation with decreased productivity. A few people are making a lot of money, but it is at the expense of global industry.

Even worse is food speculation. According to articles like this, this, and dozens more I came across, a massive increase in food speculation has led directly to a decrease in food availability in poor sections of the world. While inflation and an increase in population are undoubtedly going to keep food prices rising, the major spikes in price due to speculation are far more problematic. After all, everyone in the world needs food to survive. If a small group of people with a lot of money can keep enough of it out of the hands of hungry people, they are almost assured that their investment will pay off. Many politicians in the US and worldwide are attempting to address this issue, and there are proposed taxes and regulations designed to combat the rampant food speculation we’ve seen over the past couple of years.


In the global commodities market, there are three major kinds of speculators.

The first are the gamblers, who attempt to make personal fortunes based on fluctuations in the market. These are the guys you picture when you think of a speculator: a young man with a nice haircut sitting in front of six screens pressing a button every half second. They don’t care what they’re dealing in as long as they make money at the end of the day.

In Magic, their analog is the sort of person who generally reads this column. They refresh Twitter every ten seconds during every GP and Pro Tour, hoping to discover some new tech. When they do, they’ll buy StarCityGames.com out of as many copies as possible. At any given time, these speculators will own between ten and a few thousand copies of a single card.

The second are hedgers: people who are actually interested in using the product they’re buying and want to make sure they’re not crippled by massive fluctuations in the market. If a pipe manufacturer sees the price of copper dipping low, they might speculate a bit and buy more than they have to in order to make sure they’re not sunk the next time the price goes up. This type of speculation has been going on forever and is generally harmless in all markets.

In Magic, these are the people who buy playsets of cards they think will go up in the future. If you’re planning to play Restoration Angel in Standard next year and you think that the rise of U/W Delver decks is going to drive the price up in the short term, you might speculate on a playset that you want to have but don’t need right now. This kind speculation also covers preordering small numbers of cards that you think will rise.

The third group of real-world speculators have the backing of major banks or mutual funds. These are the guys with back rooms devoted to reading a given market, and they’ll spend billions of in a single trade. These are the players who set the market, and they’re the ones responsible for most of the vitriol directed at commodities speculators. If these guys and their big-pocketed allies didn’t play the game, it’s likely that neither regulation nor taxation would be being considered.

So far, Magic finance doesn’t have any sharks operating on this caliber. If they’re out there, they haven’t made themselves widely known. The closest analog I can find to these people is Ted Knutson, who did something called ‘the big spec’ last year that involved dropping thousands of dollars on digital dual lands. (A few quick and dirty calculations show that Ted likely made a small profit from this, but the prices on those cards are still about where they were when that article was published.)

Is Magic immune, then, from being majorly influenced by speculators in the way that copper and food are? While the big investors with back rooms seem to be staying away, the Magic market is far smaller than those commodities. Copper, after all, is a multi-billion dollar industry. It takes a massive amount of money to influence that market, and very few individual speculators have that kind of cash.

But a single Magic card? Especially an older one? That’s a very different story.

According to Ted in his article, it would only take $25,000 to buy every copy of Tundra currently for sale on Magic Online. This massive decrease in supply would certainly cause the price to go up—at least in the short term—and a lot of theoretical money would be made. Of course, getting out of all of those Tundras without crashing the market—and then converting the Magic Online tickets to US dollars—would be difficult and time consuming.

In paper Magic, manipulating the market is even easier.

Let’s take a look at two cards that have been making waves recently: Sneak Attack and Scroll Rack.

In the case of Sneak Attack, the release of Griselbrand (and other metagame maneuverings) has caused Sneak and Show decks to dominate the Legacy scene. A deck running 4x Sneak Attack won the latest SCG Legacy Open, and the card’s price has surged to a retail value of $39.99. This card’s price increase is based almost entirely on supply and demand. Because the deck is good, there simply aren’t enough copies of the card to account for everyone who wants to play them.

Scroll Rack, on the other hand, jumped from a retail price of $8-$12 up to a sold out value of $29.99. If you look for them on other retail sites, they are currently being listed in the $40-$50 range. This price increase is due almost entirely to speculation.

Two weeks ago, a rumor circulated in some speculation circles about a sweet deck in Legacy that a well-known pro had built utilizing Scroll Rack and miracle cards. The speculators then bought every copy of Scroll Rack online; not a hard feat, considering that the card was already a reasonably pricey rare from a very old set that had a lot of casual appeal. Once the retailers were sold out, several of them let it slip that Scroll Rack had sold out everywhere.

The price immediately tripled.

Now, the interaction between Scroll Rack and miracle cards isn’t exactly proprietary information. I also believe that the speculators were operating under good faith that their tip was good information and the card would start to see play. This likely was not a ‘pump and dump’ scenario where someone bought in on a useless card and then spread false rumors about it in order to inflate the price for a quick profit.

But looking at this scenario, it’s almost surprising that we haven’t started to see that happen. These days, it doesn’t take much to influence the teeming throng of personal speculators who are eager to get a piece of the pie. Wolfir Silverheart, remember, is still valued at $7.99 almost entirely because of speculation from the last Pro Tour. All it would take is the surreptitious purchasing of a card that’s always been reasonable but hasn’t quite found a home and a few well-placed tweets by the right person.

I’m telling you this not to encourage people to pump and dump cards, but to try and foster a climate of rationality and long-term thinking in the Magic investor community. Right now, the climate in Magic finance is one of wild short-term swings and ludicrous valuations. Everyone is so eager not to miss ‘the next big thing’ that prices double half-based on rumor and whispers.

Remember the run on Personal Tutors about a month ago? Many Legacy pros had to come out and address the mess that the speculators had created, stating quite firmly that the card was still a poor metagame choice. By the time a ‘smart’ speculation target reveals itself, the card has already been pushed past its limit by rumors and hope. At this point, then, speculators are gambling on peaks and valleys that they are creating themselves.


Magic cards are not essential for survival, nor are they essential for the manufacturing of goods. Sharp swings in the price of Magic cards don’t halt the gears of production, though it can hurt players looking to incorporate last minute tech into their decks in the hours before a tournament.

Massive price fluctuations are a mixed bag for players on the outside of the finance sphere. If they pay attention to values when trading, they may get excited when a card goes up in price and end up with a tradable asset that they hadn’t previously had. In most cases, though, players just tend to get upset when a card they traded away goes up in value later on.

For those heavily involved in the Magic card market, rampant speculation is good for those with a quick finger and an eye on rumors. If you’re willing to take a quick gamble and you’re fast enough in both buying and selling, you can make some real money on a card’s value spike. If there are enough speculators, it doesn’t matter whether a card is ‘good,’ just whether it is ‘hot.’

Those who are hurt the most are generally stuck in the middle. They know enough to buy in on a card on the way up, but they lack the connections to get out of their inventory quickly enough. Assuming that a speculation-fueled spike (like Scroll Rack) is the same as a demand-fueled rise (like Sneak Attack) can be a very costly mistake. For the most part, you need to have your speculation purchases sold before the cards even get to you in the mail.

The increase in Magic speculation is going to get more intense before it slows down. Because there are so many amateur speculators out there and the pool of available copies of a given card is so small, smart Magic speculation is far less risky than, say, the stock market. Anyone with a couple hundred dollars can get some skin in the game, and the only other things you need are time and a Twitter account. Until enough of these speculations turn out poorly, more and more people will flock to this as a way to grow their collection.

Riding these artificial spikes might seem reasonable at the moment, but the more people are involved the harder it is going to be. The more copies of a hot card go to speculators as opposed to players and collectors, the quicker the price is going to crater when everyone decides to sell. Things will get harder, and people will lose money. Some people will lose a lot of money.

While it may cost you some money on missed chances, the advice I have for you is simple: only invest in cards you personally believe in. Don’t just buy into a card because you saw a rumor somewhere that it might be good. Think fast, but always take a moment to think about what you’re doing. Magic speculation may not be as high-stakes a game as international commodities trading, but the money is still just as real.

Until next time —

— Chas Andres