Wesconomics - Hoarding for Profit
In last week’s article I talked about why liquidating (i.e. putting all your cards in your trade binder and being willing to trade them for value) is a more profitable strategy than hoarding (i.e. stashing away the ‘untradeables’). I discussed various pros and cons of hoarding versus liquidating but most of the article focused on the values of liquidating and why it is a more profitable overall strategy than hoarding. This week I will go into more detail about how hoarding can be profitable. It is not nearly as profitable a strategy as liquidating but depending on your goals it may be a worthwhile investment for you.
When comparing hoarding to liquidating strictly from a value perspective hoarding is the equivalent of a store owner keeping certain items in the storage room instead of in the showcase never to be seen by customers. Moreover whenever a customer specifically asks for the item in storage the store owner says “Sorry I don’t have any of those for sale.” This is a pretty ridiculous thing for a store owner to do especially when the customer is willing to pay the marked up retail price for the item. Thus hoarding is almost never a good strategy for a high-traffic trader to employ. But for a non-trader (i.e. the non-store owner) hoarding the right cards can still be quite profitable if you approach it the right way.
If you buy a certain card and hoard it with the sole purpose of gaining value the risk you are running is that the card will not increase in value or worse yet will decline in value over time. The reward you are attempting to gain is an increase in value over time. Essentially what you are doing is prognosticating that the value of the card will increase. Just like on Wall Street you want to buy low and sell high. Sometimes this means sitting on a particular stock for a while until it bears the predicted fruit; other times the fruit comes fast; yet other times the fruit takes too long or never comes at all and you have to sell at no gain or even at a loss.
As far as Magic cards are concerned there are certain categories of cards that are good for buying and selling at various times some of which show more promise for hoarding than others. Here are some of those categories:
Legacy staples such as Force of Will Wasteland Sensei’s Divining Top Tarmogoyf Underground Sea and pretty much any of the dual lands will never go down in value barring an unexpected banning (of which Sensei’s Divining Top is probably the riskiest in this regard). Legacy has experienced a tremendous growth in recent years all over the world. European Legacy tournaments have become quite popular; StarCityGames.com Opens have made the format relevant in the United States; and attendance for Legacy Grand Prix tournaments has matched those of Standard and Sealed Deck. I see no reason to believe the demand for Legacy staples will go anywhere but up in the coming years.
Even before the Legacy Boom that occurred about a year ago where Legacy cards nearly doubled in value across the board Legacy staples were slowly but surely rising in demand and hence also in value. Wasteland went from $1 to $5 to $10 to $12 throughout the first decade of its existence and then spiked to $25 during the boom. I believe there will come a time where yet another spike will occur and prior to that point Legacy staples will continue to slowly rise. If you are looking for an almost sure-thing long-term investment I would recommend hoarding Legacy staples. It’s as safe an investment as buying government bonds but with the potential for a much higher payoff. Within the next ten years if each of the above-mentioned Legacy staples does not at least double in value I would be shocked and if in 12 months any of them are not worth at least 10% more than they are today I would likewise be very surprised.
Vintage staples are rarer than Legacy staples and require a much larger investment but I believe the returns in value are comparable though slightly more risky with the potential for a much larger reward. If Vintage ever becomes a relevant DCI format where the first place prize for the event is worth more than the Black Lotus that is necessary for your deck to win the tournament I expect Vintage cards to radically spike. I doubt the DCI will ever change their no-proxy rule and I firmly agree they should not. As a result if Vintage were to ever become a format that people are highly incentivized to play the demand for Vintage staples will increase drastically. There would be no such thing as a playable condition Mox for under $400 or likewise a Black Lotus under four digits.
The problem with this investment is that such a scenario is unlikely to become a reality for a while so you may be sitting on the cards for five years or more before seeing a sizeable increase in value. Vintage cards in general seem to be only very slowly rising in value. Specific kinds of Vintage cards however have promise of rising in value even without Vintage spiking in popularity – that is Beta cards and Foils. In large part because of Legacy and also simply because you need a full play set in your deck a mint Beta Underground Sea is worth nearly $1000 and played ones rarely sell for less than $750. That is more than any Beta Mox!
Even the non-Legacy Beta Vintage cards like the Power Nine are slowly gaining more and more demand. For those unfamiliar with the ‘Vintage scene’ there is a slang term known as ‘pimping out’ or ‘pimpifying’ your deck which basically means upgrading all your Unlimited cards to Alpha and Beta and all your non-foil cards to foils. The basic premise of this phenomenon in my estimation is that Vintage players already made such a sizeable investment in their deck (several thousand dollars) that drawing a $0.25 Brainstorm feels pauper-ish at best. So in order to increase the value of their deck they want to play with a $30 Foil Brainstorm or better yet a rare $150 Japanese Foil Brainstorm. It also appears to be a mark of superiority among Vintage players to have a maximally ‘pimped out’ deck. While this statement may be a slight stretch it is certainly seen as a mark of inferiority to play with Unlimited and non-foil versions of cards than could otherwise be black-bordered and/or foiled. I do not foresee the demand of Alpha Beta and Foil Vintage staples losing value anytime soon and they will spike along with all the other Vintage cards if the format ever becomes widely popularized like Legacy.
Misprints and Special Promos
The demand for cards like Richard Garfield’s Wedding Promo Blue Hurricane and a Wyvern-backed Hymn to Tourach is very specific. The demand is almost exclusively generated by collectors (not players). To narrow the market even further it takes a certain kind of collector to be interested in the rarest most obscure Magic cards in existence. I only know a handful of people in this market but fortunately each of them is willing to fight the other tooth and claw to get their hands on one of these rare gems. So if there is ever one of these items on eBay placed there by a legitimate seller a bidding war will ensue between two or three of these collectors and the price will sometimes be absurdly high by the end.
It is hard to tell how much you will be able to get for certain rare gems unless you have already been quoted a buy price by an interested party but hoarding rare Promos and Misprints can be a worthwhile endeavor. I know one fellow (everyone knows him simply as 'Keith’) who has one of the most impressive collections of rare promos and miscut cards in existence. I know roughly what he will give on various cards and so whenever I come across something of this nature I pick it up if I think Keith will pay more for it. Even if you do not know where to unload such cards simply hoarding them until you find one of these Super-Collectors can make you a lot of money. Keeping them in your binder however is generally the better way to find such buyers but assuming you do not trade much putting them on eBay may be a less wise decision to holding out for a better deal.
Standard cards are in the highest demand of any Magic card. Before a tournament dealers are flocked by last-minute purchasers who need the remaining cards for their deck. Most of the hottest Standard cards (Baneslayer Angel; Primeval Titan; Elspeth Knight-Errant) have little demand outside of Standard (except sometimes Extended). Hoarding these cards is exactly the opposite of what you want to do. Once they rotate out of Standard and into Extended their price drops by about 50% across the board (with the exception of cards like Tarmogoyf and Jace the Mind Sculptor due to their playability in Vintage and Legacy). Then once they drop out of Extended their prices drop even further (see Exalted Angel and Meloku the Clouded Mirror).
Picking up Standard cards for profit is something that should be done only by the avid trader the person who seeks to liquidate everything and turn cards around as quickly as possible for profit. Holding onto such cards is like holding onto the Old Maid – if you’re the one who ends up with it in your hand at the end of the game you lose! So hoarding Standard cards is almost never a good bet unless you plan to unload them in the near future. For example I’m presently hoarding Stoneforge Mystic with the intention of unloading them once Scars of Mirrodin is released along with the remainder of the Swords in the Sword of Light and Shadow / Sword of Fire and Ice cycle. Unless you have a specific reason and time frame in mind for cashing in on the investment I would advise against hoarding Standard cards.
Speaking of reasons let’s consider a few before we move onto Extended staples and non-staples. As with the Stoneforge Mystic example above if you expect a new card or cards to be printed that will increase the value of a present card it is reasonable to stock up on them and wait for the release of the new card. Similarly if a new card is spoiled (e.g. Eldrazi’s Conscription) it is often wise to pick up the older half of the combo (Sovereigns of Lost Alara) in hopes of it going up in value (as it did from $.30 to $4.00). Also if a block is about to rotate out (e.g. Shards Block) certain existing cards may jump in popularity now that the cards that were previously keeping it in check are no longer in the format. For example without Blightning or Bloodbraid Elf in Standard some say Jace the Mind Sculptor will define the format even more than it already is. So investing in Jace for this reason may be a wise choice (in addition to the fact that Jace is a staple in every format: Vintage Legacy Extended and Standard).
Investing in Extended cards is more risky than investing in Standard cards since the format sees a lot less play overall. However the best two times to pick up Extended cards are (1) just before the Extended PTQ season begins and (2) right at the end of the Extended PTQ season. The former will set you up for the increase in demand during the PTQ season assuming you pick up the right cards (e.g. Cryptic Command Figure of Destiny Reflecting Pool Mutavault etc.). The latter will set you up for the following Extended season since you will be getting the ‘end of the season’ bargain deals from everyone looking to unload their useless Extended cards.
The problem with this latter approach is that since Extended is so narrow in scope now (two blocks plus Standard) there is really only one block worth of cards that you can pick up in anticipation for the following Extended season. Moreover it is not even a guarantee that Extended will be a PTQ season next year just as Block Constructed rarely is a PTQ format anymore. So the latter may be too risky. Nonetheless picking up Alara Block cards at bargain prices from people who only care about Standard will pay high dividends once the Extended PTQ season rolls around. Keep cards like Maelstrom Pulse Noble Hierarch and Bloodbraid Elf in mind as people look to trade off all the rotating cards from their Standard decks.
Sometimes there is an opportunity for large profit margins if you are willing to sit on a card long enough while monitoring it for the anticipated spike. For example there was talk about the unbanning of Grim Monolith in Legacy which in my estimation was credible and would impact the format enough to merit a large price spike comparable to the Entomb spike. I invested about $500 in Grim Monoliths figuring I would sit on them for a maximum of three years before unloading them as a failed venture. I figured picking them up for between $3 and $7 was safe enough that even after three years if they were still banned in Legacy I would be able to move them at a price comparable to my initial investment – maybe slightly less.
To my joy within six months the card was unbanned and it spiked to $35-40. I doubled my entire initial investment by selling off less than half of the acquired Grim Monoliths. I still have plenty of Grim Monoliths (anyone need any?) and now they have dropped to around $20-25 in value (as expected until a deck running 4 does well in a premier Legacy tournament at which point they will likely spike back to $35-40 or more). The bet was relatively low risk but with a less than 50% chance of turning any profit at all in the allotted window. I happened to guess correctly and it turned out to be one of my most successful individual card investments of the year.
Another card worth investing in I believe is Hermit Druid. You can currently buy the card for $.40 to $0.75 retail and pick them up in trades for less than $1. The play value of the card if it every gets unbanned in Legacy or becomes legal in a new semi-casual format (or if EDH picks up as a non-casual competitive format) is much higher than the dollar value presently indicates. This is one of those cards whose value is what it is solely because of its illegality in tournament play. It would be worth at least $10-15 (and likely more) if it ever got unbanned in Legacy so investing $50 in 100 Hermit Druids is an investment I believe is worth making as it has little risk and potentially a huge reward. Even if the card simply goes up to $1 you will have doubled your investment. How many cards can do that for you?
There are various ways to profit from hoarding. Hoarding should be done not so much by the avid trader since liquidating in general is by far the more profitable strategy. However for someone who has capital and wants to invest it semi-long or long-term in Magic cards hoarding the appropriate cards can be quite lucrative. Certain professional poker players hoard Beta Dual Lands and will likely make a sizeable profit and potentially control the market when the time is right and the demand is high. Likewise investing in Legacy staples is a relatively safe bet for those who have less capital to invest. Also investing pre-season in Extended cards can turn a quick profit (and right now is a perfect time to start doing that if you haven’t already). Lastly sometimes hoarding cards at the ‘bargain’ price when they are about to rotate out of Standard can yield a substantial profit as long as the cards you are hoarding will be sought-after staples in the coming Extended season. Hopefully this article does justice to the concept of hoarding and enlightens you as to when and why to invest in particular cards if hoarding is your strategy of choice. Although liquidating is the more profitable of the two hoarding has its utility even for a Magic trader whose primary goal is to turn a profit.