Greetings, Instigators!

Last week I wrote what was, apparently, one of my most contentious articles to date. You've probably read it, but go back real quickly and do so now if not.

The thesis was all about being aware of the difference between low volume of a card on a particular site due to demand and a low volume due to novelty or rarity. If a card goes from 200 copies to 5 in a week, pay attention. If a card goes from 5 copies to 5 copies in 6 months, maybe there being "only" 5 copies is much less significant.

We covered how to not buy cards in those sorts of situations, a very, very useful MTG finance technique that goes overlooked in a lot of situations. Some people will accuse you of being overly risk-averse, but others will applaud you for using your brain and not following the rest of the lemmings over the cliff, so it's a wash.

The thing about MTG finance is there are so many buy opportunities that missing one is usually not as bad as tying your finite resources up in one that is a struggle to profit from. I don't think it's overly cautious to take a little bit of time to evaluate your situation. If you're refreshing the page and watching the number of copies drop every minute, then maybe you want to take a risk and buy in. If you have no idea how many copies there were yesterday, take a breather. Buying when you're panicked is silly, buying when you're the one who created the panic is even sillier.

Still, I could see why some might think the advice of "Don't buy in this situation" taken to its logical conclusion would be a column titled, "Avoid losing money in MTG finance by not buying anything, ever". I mean, they're wrong but I can absolutely see why someone would think that.

There's wisdom in discussing when not to buy. However, there's no reason we can't talk about how we should buy in those situations. We do this by following my rules of MTG finance.

Jason's Rule of MTG Finance

1. Don't $@^% Magic up
2. Only send Near Mint cards to Strike Zone's buylist

That's pretty much it. Follow those two rules and 90% of the heavy lifting is done. Rule #2 is very, very easy for most of us to follow, but Rule #1 is a little trickier. Should we listen to my advice on Rule #1? Maybe. Sigmund and I are in the process of breaking Rule #1 forever.

So, I wrote my article about a tweet and Sigmund wrote a tweet about that article which inspired this article on Monday which inspired the article you're reading now. Is this article going to make things worse? I don't think so. We're going to avoid breaking Rule #1 from now on.

Sigmund's article inspired an interesting comment from Greeno.

"Why does everyone assume that financial players ONLY increase price discovery in the situations where the price is going up? They completely ignore the fact that the most successful financiers are pulling copies out of their stock, selling into the ‘hype’ and assisting the Invisible Hand find the right price. They’re able to do this, not because they are dirtbags who hoard all the cards, but because they evaluated the fundamental factors around that particular card, and decided that it was more likely to increase in price than to decrease in price.

I believe the biggest factor that can be blamed for the precipitous spikes that have been occurring recently is basic psychology. People hate to miss out on the next big thing, this is what is causing these divergences from what economists call “rational action.” For most of us, it is clear that the marginal cost of $50 Judge Foil Command Towers exceeds the marginal benefit of owning the card. But, to the average MTG player with little-to-no understanding of economics, all they are worried about is claiming ownership of a card before it’s “gone” or “too expensive.” When they don’t understand why a card increases or decreases normally, they don’t understand how to identify when a rapidly spiking price is a result of true demand instead of just hype.

So many more people fall victim to the ‘post hoc ergo propter hoc’ fallacy that all they can see is that you tweeted first, and the price rose after that. Trying to convince these people that other factors exist has been, in my experience, painful and hopeless. I have my own theories as to why that is the case, but they don’t advance the discussion and are really just my own musings on social psychology, backed up with absolutely no data, so I’ll leave them out."

Is he right? He's right insofar as Sigmund isn't to "blame" for a sarcastic tweet that caused someone to spend a relatively small amount of money, and a lot of people (especially outside of finance) to complain.

Anthony is one of the interweb's best finance writers in the humble opinion of the guy who hired him to write finance articles. He understands how to not break Rule #1, but he also understands how things that are perceived as "buyouts" are going to make some people outside of finance feel kind of fwowny.

And why not? If they want a foil Command Tower, they have to pay $50 now (now meaning "for now'') and they see a tweet about a low supply, then they see the supply drop to 0, then they see the price go up. That's going to make some people pretty sad.

The thing is, whoever bought those five copies didn't actually make out as well as they think, and they certainly didn't make out as well as they could have. Even if they bought in at $20 and got out at $50, they only have five copies. There has to be a better way to do things. You made a small amount of money after fees relative to the tumult you caused in pricing.

What exactly was the wrong play, here? Buying on TCG Player was the wrong move, clearly. Lots of websites sell cards. Lots. There are eBay merchants, Amazon merchants, countless retail websites and obscure sites like CardShark.

Seriously, CardShark vendors haven't changed their prices since like 2007. You can find good deals on cards at CardShark, but no one ever does because they look for copies there after they or someone else buys all of the copies on TCG Player. What's the difference between buying out CardShark and buying out TCG Player? Only one of those actions will signal the market.

Don't Tip Your Hand

TCG Player gets a lot of eyeballs on it. People can all agree that the open marketplace pricing based on multiple vendors competing for sales makes TCG Player the best and most fair rubric for pricing and the TCG Player price is used as the fair market value. This is fine with me, but it's also not without liabilities.

Pretend there are 500 copies of a card evenly distributed across the internet. Buying 495 copies will make a few people notice as dealers talk to each other about how someone bought them out of all but five copies of their card. Buying the last five copies on TCG Player will alert the entire internet and the price will go up on those other sites even if you didn't buy their copies.

If you believe in a card and think that there are only five copies on TCG Player because the card is the real deal, don't break Rule #1. If you really want to be in a position to benefit from the upward price correction you believe the price is due, get more copies. Buy from other sites, the more obscure the better. Avoid high-traffic sites with lots of eyeballs on them where your buying behavior will get more scrutiny.

Is this scumbaggy? I put it to you that it's more scumbaggy to conspicuously buy out TCG Player and make everyone pay attention. No one has time to differentiate between an orchestrated "buyout" (I hate that word and how it's misapplied more often than used appropriately) and real, sustainable demand; everyone has to act with a window shrinking.

Some people will go into binders and boxes and list copies they had sitting around. The stores that people didn't buy from will be notified and raise their prices and make more money on the cards when people come looking for them. Even if they aren't quick enough to change their prices, most stores have demonstrated a willingness to cancel orders and restock at the new price.

Would these stores have cancelled the order if it seemed to come out of nowhere and TCG Player still had copies of the card? Doubtful. Either way, they're not selling for the old price. A card that may have trended upward slowly, getting the correction you correctly believed it was due will suddenly shoot up then trend down to settle at its new price once the furor has died down. It may go down even farther if the demand isn't real.

Meanwhile, not signalling the market means you can amass copies and the market will be signalled by actual demand. If Tiny Leaders raises demand for foil Command Tower, you can be reasonably sure that Tiny Leaders players will buy those copies and the price will go up. Who has copies for them? This guy; the guy who bought the other 495 copies and left the 5 copies attached to the mousetrap alone.

Is it unfair to ascribe this much sway over the market to TCG Player? No, because they don't have any sort of power, just lots of eyes on them. There are some sites where your buys will be noticed and some sites where your buys will go largely unnoticed. When you buy from a site where the buy will be noticed, you can signal the market.

The whole point is to not do this. You obscure the actual amount of demand, rob yourself of the opportunity to get more copies as other people scour the internet and stores cancel your orders--and you make the price go up a lot faster than it would have ordinarily, possibly past where it should have.

Rule #1

If you're not actively trying to wreck the price of a card artificially, avoiding buying out TCG Player and tweeting about the low supply should be relatively easy. Remember, MTG finance isn't about creating unsustainable demand by signalling more demand than exists and trying to profiteer. What we do is we get ahead of trends that are coming and we sell into hype. We make a lot more money when the demand is real and sustainable.

So when demand is real, those copies on TCG Player are going to sell without us buying them or tweeting about them. Buy quietly, give yourself time for the copies to show up and don't signal the market. QS Insiders are good judges of demand, so when we buy cards there is a good chance the cards will get there on their own. Eventually, someone else will buy the copies on TCG Player (or another prominent site like Star City which has its own tendency to signal the market) or someone else will tweet about how many requests for a card there are on Pucatrade.

Noticing low supply on TCG Player and buying somewhere else is the best possible play. We're trying to make money, not make the people who see the price shoot up on TCG Player hate financiers. There's no reason why we can't have both.