Editorial Section:
I was requested to do some writing this week about speculation and the overall impacts of the activity on the game. The case in question is actually in regards to an online paper dealer and an issue of someone buying up 20 cards that were in a break out deck. For full disclosure, it was Cape Fear Games, and there was an incident lately about, well, speculating.
To summarize; someone bought 20x of a card at forty cents, which just so happened to be Renegade doppelganger which was being bought up on the heels of the new Dredgevine decks. Well, after the back and forth between a representative at Cape Fear and the impacted individual in question I had a very distinct impression of some horrible, horrible stigma being attached to a single word: "Speculator".
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Now that I've gotten that out of my system, let's talk biddness about speculators and speculative buying and the baggage involved with the word. I think we need to know a bit more about the time line of speculation and speculative buying.There is still a lot of negative stereotypes involved with speculation and those who do it. But is it all deserved? No. Not at all. The very act of speculation is a risky venture.
There are a couple, major points in the time line. The first point is the "Eureka" moment, wherein a card either become more useful or more in demand. This can range from unerrata-ing, such as what happened with flash, or a new deck like what happened with Renegade Doppelganger, or a new card coming out, like what will likely happen with Phylactery Lich as Scars of Mirrodin hits. Regardless, there's a point where a card is currently low, or soon to be undervalued, and has yet to rise. This is the crucial point where speculators flock to the card from anywhere that hasn't adjusted their prices upward to the 'new value'. After this, there's one of two options... either there is enough supply and liquid copies available to keep the price from increasing extremely fast, or there isn't and the new found demand makes the price rise even faster. Then there is the typical time where things level off and soon thereafter there is usually a 'cool off' where the speculation demand drops off and the card price stabilizes higher than the pre-eureka price. Sometimes this happens faster than others, and sometimes it wont fall for a good long while, but usually it follows that trend... now here's the fun part. MTGO and MTGP both follow the same trends of course; but MTGO allows everyone to be a virtual dealer, or at worst, a return sale to bots at-will.
As often as not it provides very little useful value for the individual, who, despite having a lot of a certain card will have little to no way of actually turning a profit on them. Without an outlet to sell them, such as an online store, they are required to sell them off to other players. This is where MTGO gives them a much more liquid and quick manner of flipping a large amount of cards within the time needed. However, what about our paper-playing brethren? Essentially they're just moving inventory from one location to another unless they have a way to off-load them. Generally this will mean foisting them onto eBay if they want to turn a profit... but once you factor in shipping from store to individual to listing on eBay and shipping on eBay the price from Eureka to profit has to increase a huge amount. Say from .5 to 2.00 each before it becomes worth the costs associated with the effort. But what if the player is trying to balance out rising costs of cards versus lower pay in their daily job/work? Is this acceptable? That really kind of depends on which side of the equation you're living on, I suppose. If you're the dealer who just lost value from someone sniping a few dozen cards that would have doubled in price by morning then it may feel a bit more like a let down, from a player's standpoint they just got a great amount of value for the effort, and likely will utilize trading with other locals in their area to help assist getting other cards needed in their collection.
The word "Speculator" has been beaten to death by the media and has gotten a hugely bad wrap based on how badly speculation demand has hurt a great many things. The base thing I try to remember, both in online and paper is that as long as a dealer is selling the cards at a profit to *someone* it could either be one person buying 20 or 5 people buying four; the cards were sold at the price before it was changed. Granted, the loss of perceived value with someone buying up cards before the price could be adjusted is a bitter pill to swallow; but it's a large part of the way that MTGO and paper MTG works with the current demand curve we always have to deal with.
Discussion Items:
MTGO Paris PTQ Schedule:
A very likely way for WotC to make some INSANE money with the Scars of Mirrodin set, and ways for many other players to have a crack at getting a trip to Paris! Hopefully Scars is a fun sealed format, since it looks like it will be getting a lot of time in the limelight!
New Extended a 'failure'?:
It seems that there's not a whole lot of demand for the newly formed Extended. I would chalk that up to people's aversion to joining a rotating format and the hate for Tarmogoyf's across the table... both are present with new Extended right now. Which of course will be changing soon enough with Scars of Mirrodin.
M11 redemption IN STOCK!:
As mentioned, it should usually be about 30 days from the on sale date of the set in the MTGO store to when it's redeemable... and they managed to be pretty darn close to the mark on this one.
Price Discussion:
As we mentioned previously, the speculation demand curve can be seen in two cards this week; one is (Serra's Ascendant) and the other is Renegade Dopps. both of which are cooling off this week as inventory distribution and excess supply are catching up with short term demand. There are also a lot of indicators that there is a hot new Eldrazi deck in the works right now, with All is Dust, the Mega-Eldrazi, and Eldrazi Temples all going up this week. Look for some silly big spell decks there!
As for droppers this week... the M11 Mythics have been taking some major pressure downwards as many, many, many drafters and sealed players are liquidating cards. Also, the first few PTQ Paris events will be using M11; so expect that to fall further and further for a while until it switches to Scars of Mirrodin.
Price Tables:
Price Graphs:
all is dust chart
gaea's cradle chart
ulamog, the infinite gyre chart
vampire nocturnus chart
show and tell chart
doomsday chart
sovereigns of lost alara chart
lodestone golem chart
ranger of eos chart
kozilek, butcher of truth chart
eldrazi temple chart
steel overseer chart
lodestone golem chart
sovereigns of lost alara chart
tectonic edge chart
emeria, the sky ruin chart
day of judgment chart
perish chart
ground seal chart
reaper king chart
primeval titan chart
inferno titan chart
time warp chart
baneslayer angel chart
obstinate baloth chart
vengevine chart
frost titan chart
grave titan chart
mox diamond chart
serra ascendant chart
avatar _ steel overseer chart
destructive force chart
renegade doppelganger chart
obstinate baloth chart
inferno titan chart
frost titan chart
phylactery lich chart
font of mythos chart
serra ascendant chart
leyline of the void chart
38 Comments
I divide speculators into two camp.
The first does like you said. They attempt to read trends and make a profit by buying low and selling high. I don't think there is anything wrong with that.
The second finds a rare but popular card and buys enough copies of that card in order to further limit availability. By reducing supply they artificially increase the scarcity of the card driving up the price. Once that's done they offload all their copies at the higher price flooding the marketplace and having price fall once again. While legal (at least within MTG) I don't think this is right.
It's a shame both types of speculation get lumped together and the second taints the first.
8 sounds reasonable. I am probably least impacted by any of this as I rarely ever want to buy even 4 of any single card. But it does seem an unfair burden to place on the market when someone comes along and basically cleans it out.
"My question is who do speculators benefit?"
Oh I'd like to answer this. (And would welcome Heath's response, if he wants.)
The answer is easy (even assuming the implied "... besides themselves"). They benefit you, the seller. And we know this because it's an arms-length transaction into which you enter willingly. If there wasn't a net benefit for you in some way, you wouldn't do it. (If I'm wrong and you are willing to make sales that don't benefit you, I'll take 4 Primeval Titan's for $5, please, and I expect you to be miserable about it. ;) )
The tougher questions are "How does it benefit the seller, why would a seller not be happy after making the sales that they offered, and what role do speculators play in the market as a whole?" Let me answer those roundabout.
Much of the reaction to speculators is that we usually only hear the hindsight success stories. They bought low then sold high and everyone else thinks "that could have been me!" (Buyers wishing they'd bought low, sellers wishing they'd sold high.) And hey, I'd sign up for omnipotence and time travel too. But you have to take the deal as it's offered beforehand.
So, anyone rushing off to buy all the Necrotic Plagues? Only $0.08 each! Or does it seem like a waste? And Heath, if I wanted to buy all 32 of your Cranial Extractions (listed at $1 each), isn't a big part of you thinking "Thank God, I thought I'd never get rid of that crap!" This is the world the speculator enters into: one where the cards aren't moving.
So the benefit a speculator provides to the seller is volume and revenue. That's no insight. Less obvious is that the role they play in the market: risk absorber (a.k.a. sometimes they're wrong). Anyone who holds a commodity with the intention to resell is taking the risk of price movement. Today it's worth $2, tomorrow it could be $0.50 or $5.00. Dealers are no stranger to this role, but that's no surprise because a store is a middleman itself. The difference is that dealers manage their risk through breadth while speculators do it though information.
So why a dealer would dislike speculators, despite trades made on their own terms, is that the speculator is playing the role of competitor - one using a different set of rules. As the MTGO Community's leading singles supplier, MTGOTraders wants to have availability for anything the community could want. For this reason I suspect Heath might have some reservation about my hypothetical 32 Cranial Extractions order even though he knows the cards aren't moving. If I come and buy them all that's $32 in his pocket to go spend, but with it comes the risk of a disappointed customer later. That potential buyer now has to find their way to Speculator Amar. And whether I sell to them at $2, $1, or $.10 doesn't even matter so much because I've interfered already interfered with the store's role and reputation.
This is why a 8x rule makes a lot of sense. In fact it's imperfect because I and 3 of my friends could accomplish the same thing and he's right back in the same spot. In an ideal world a dealer could have per-transaction pricing as happens on the stock market. (If you see AAPL trading at $256 and place a market order for 10 million shares immediately, you're not getting them all for $2.56 billion. The price will go up as you're buying.) But it's impractical for the dealer and frustrating for the public to deal with prices that change so dynamically, so the volume limit is a reasonable proxy.
To sum up:
* Dealers dislike speculators because both are middlemen and speculators are fast and specific while dealers are consistent and broad.
* People in the general public dislike speculators because they are whiny babies who think they should never have to pay for anything or take any risks and make no mistake they'd turn on dealers in a heartbeat as well with their what-do-you-mean-you-buy-for-1-and-sell-for-2 nonsense. (I may be editorializing this point a little.)
Very good comment and a very good explanation. Could you address the difference between speculating and scalping?
Sure. I would say that a Scalper is breaking a rule, while a Speculator is (worst case) breaking the market forces.
When you buy a ticket to a concert/sporting event/etc, there's a rule that you're not allowed to sell it for more than you paid. If you break this rule, even with only one ticket you'd been intending to use personally, that's scalping.
When you buy some commodity (cards from a dealer in this case), it's fully expected that you'd like to sell it for more. There's nothing wrong with that. The problem only arises if they do it a lot. If one acquires so much that availability to other people becomes sorely limited, then they have the potential to act like a monopoly. A monopoly seller doesn't have to compete with other suppliers so they sell as high as demand will allow them to.
A lot of places have backed down on punishing scalping, because these resellers have a vested interest in ultimately selling the tickets and putting butts in the seats, which is what the venue cares about in the first place. They just want to ensure no scalper has enough of a monopoly to ALSO play that speculator type role.
Speculators I think make easy targets, to the extent that 2 years ago many people openly complained about speculators but couldn't really explain what one was. In theory a speculator could do all the bad things a monopoly would do, without the "virtue" of actually producing anything. But that theory is often pretty far from reality, because buying so many to create a monopoly pressure is very difficult. Sometimes it's possible, but more often they were just smarter to get in before a price move and then they're blamed with causing something that they merely predicted.
And don't forget, in both cases the speculator/scalper is trying to ultimately sell as many as they buy. So they don't really change supply/demand. The key phrase is "underlying value" or "intrinsic value", and no trader can create that, they merely ride it.
Attempting to take someone's scalp for payment is scalping. Let is not get too caught up in the semantics of ticket sales where scalping has been basically legitimized. The term originally comes from the custom of some highway robbers practicing scalping to imitate native Americans in order to throw off blame.
The bottom line of the scalper is to take the buyer for all they are worth if possible (as in highway robbery in case you didn't make the connection.) Speculators tend to work towards a price point and while they are happy to sell higher than that point they are almost never going to want to sell below it. This does not automatically make them scalpers. It is when they attempt to corner the market or cause a shortfall (via hording or flooding) that they come under a bad light.
In a sense anyone who buys cards at all with the idea of selling them later at a profit is a speculator. You are gambling that the price will rise not fall.
Heath, being a dealer is an easy shot, because as much as we revere the almighty buck we tend to revile anyone who seeks to profit by it openly, in our society. Store owners have overhead, future earnings to consider. (Ongoing viability in business is as important as current profitability.)
If the road is going to be rocky ahead he needs to know that now. Which means in some senses yes he is a speculator in the same boat as mr "I am buying 400 of x card in the hopes that it jumps to 400% of it's current price so I can be suddenly richer". The difference is availability. The dealer makes cards available just in case someone wants them. They take a risk on margins and buffer that with volume. They don't corner the market. They don't need to. They have a built-in market comprised of their loyal customer base. As long as they keep that base happy they will have some safety from the perils of the fluctuation of prices. I think adding limits to the amount a single person can buy (well above the amounts needed by the average player) is a reasonable step towards ensuring this.
Heath,
Maybe you should limit the number of cards from 8 to 4.
How was this guy able to buy 20 if the cap is 8 anyways?
If a dealer sells all of their say as this is the current example Renegade Doppelgangers to a buyer then they are making a profit which at the end of the day is the idea of having a shop.
The whole idea of running a shop by selling collectible items is a risk as you have to keep up with the current market 100% of the time. In the world of Magic its easier than most as you can spot trends on MTGO before the paper players start buying so you have a small amount of time to adjust your prices.
Speculators will buy from online stores and sell on ebay as its a bigger market and they will make about 50% on the cards they buy if they are on the ball. The other thing is they could be buying for a group of players and in that case dropping to 8 cards means they will only be able to buy 2 play sets.
Restricting to 8 cards will stop some speculators but it means you wont make as much money from that person in the future as they will buy from other sites instead.
A point hammy made is that its not easy to turn paper cards round as fast as online but this isn't true its just timing from purchase to sale.
I agree with you Heath as you have a community and a "real" shop rather than being a purely online dealer. Which means your community should come first before "online" buyers if you see what I mean.
At the end of the day it all depends on what you want from your business and how you run it. I have the same view point as you where I would rather sell to 8 happy customers than one speculator any day of the week.
Hey Hamtastic and Erik,
The thing with speculators. You can't really blame them.
The successful ones are annoying when they're making money without contributing anything to society. But then that's the economic system we continue to support/tolerate/love/can't do a darn thing individually about.
I'll agree that we could and should adapt our economic system to favor profit derived from actual contribution to the community instead of any old way people can figure out how to jigger society to take without giving. Again however I won't blame the speculators for taking advantage of whatever opportunities they can to do as well the next guy.
It is a highly imperfect world.
Xaoslegend-
I dont have a side to either, but I will say this; you did previously price the cards at a price point that you were happy with and, I assume, were making money on them. Back when I had a store and Betrayers came out, I had a stack of Jittes marked at $4 per. Then the weekend hit of the tournament when everyone realized just how good they were. I was more than happy to sell out to the "speculator" that got them first, I had $2 per into each. I adjusted my buy price to the current demand and went on. From the consumer side, could they not argue as to why when something is "hot" why does the dealer have to make more money on it? For example, when Star City pre-sells a box, usuallly $89 I believe, if it is hot, they jack the price up, even though they are still paying $65 per box and dont have them in stock yet. Should the buyer be angry? Kind of like these cards, you had $x into them, were happy to sell them at $y, but someone got the jump, you still make $z profit, but were unhappy that is wasnt $zx10(I just picked a number here). Now in your arguement, do you limit the amount that someone can buy and still sell the product at $y? No, you will raise the price to what the market will bear and sell it at the same price the speculator does. Either way, the consumer will still pay the same price, just who holds the profit at the end is different.
I think another important thing to remember is that dealers are speculators too. They buy cards from players at 50%-70% of their current market prices and hope to resell them at a higher price in the future. When a card goes from .05 to 2.00 online there really is not much of a difference to the market between a speculator holding 20 copies of the card and a dealer holding 20 (or more likely many more) copies of the card in inventory. So if we are not mad about dealers holding more than 8x copies of a card (and I assume we are not as I personally love dealers) it makes no logical sense to get mad about a speculator doing the exact same thing as there is no real difference between the two.
and I'm totally with you on that. Dealers perform a very valuable function to pretty much everyone. I was just pointing out how silly it is for people to get up in arms when some random guy is holding 20 copies of a card (which is not enough to make any difference in the price of the card), but not care at all when cardbot has 100 copies.
I made my serious point above so I just want to tongue-in-cheek mention here that you're coming dangerously close to a "too big to fail" statement. :)
There is a big difference. When dealers, such as MTGOtraders, hold cards they are still available to the community. That inventory is available for purchase at any time. When speculators hold cards the cards are not available to purchase and removed from the community until the price reaches a point where the speculator wants to sell. Only then are they again available.
I didn't know about the max 8 purchase rule because I don't ever buy more than a playset. I like that a lot, I'm sure it helps me find the cards I want to buy. Thanks.
but this is assuming that a dealer's entire inventory is always on sale, and that they never hold anything back. I'm not sure if this is actually the case, but I would be very surprised if it were. Can you shed some light on this, Heath?
I know some paper dealers, and their entire stock is never on sale. They always hold some big movers/power cards back so that they have some to sell in case there is a run on the card/major price increase. Which is fine, but that is also speculation.
I agree, BUT, one could make an agruement for the millions of reasons that speculators do what they do. Feed their family, pay for college, pay their bills, etc. Bad ones can be made too. Wow, $73 bucks! I closed 2 years ago, and we were right at $65per, but we did buy about 4 pallets worth of product for each new set. quick question too, what about another dealer that speculates and buys from other dealers?
Speculation is only harmful when dealing with necessary goods. TCG cards are fully a luxury item, thus this is captitalism at play. They (the speculators) take the risk, and can reap the rewards if correct.
Also, in this day and age, the internet has widened the supply side such that brick-and-mortar stores have already adapted to its presence. The shrill cry of "whatever will happen to my store" has been beaten down by Star City Games, Ebay, et. al. - everything else is just whining.
Where do the online only dealers fit into this are they in the same boat as speculators as they don't have the option of running events etc.
I don't really see what the big deal is.
Heath is trying to keep cards in stock so that he can keep his regular customers happy. Ultimately, it's the regular customers that are going to keep him in business and not speculation purchases. Therefore his actions seem perfectly reasonably to me.
Yes this makes sense of course but when you offer your entire stock to the world then you will be putting pressure on the number of cards you can keep in stock for your shop customers as you customer base is nearly infinite via the world wide web.
Very interesting topic. I can see both sides of being a speculator and a dealer. Since I don't know the details on running a store, nor am I a speculator, I will add only one comment. It seems that both could be considered legitement arguements and ways of doing business. I guess it depends on whos shoes you are in.
This is a great topic to talk about, for paper and for MTGO. I owned a store for 8+ years, so I do have some persceptive on it. One of the catch-22s in this, especially for paper, is that nine times out of ten the speculators can also be your biggest customers. You REALLY dont want to upset these guys, they can be the ones who end up paying your bills. It is great to make sure you have the cards in stock when customers have them, but making sure you have a couple $2 cards for people it a lot different than making sure the guy who spends $1k a month stays happy. Something you have to balance.
I think it comes down to this.
Speculators have the right to take advantage where they can(to a limit, actually trying to corner markets and create artificial price inflation is already illegal in the stock market, and might be for other tradable things as well though I don't know the details of the laws exactly).
Dealers have the right to try to stop speculators anyway they can.
I like dealers a lot more than speculators so if the speculators lose the balance of the fight I won't be crying any tears for them.
illegal in theory and illegal in practical terms are different things of course, and without enforcement it creates the same moral hazard as if there were no law, ie the least moral profiting and reproducing tactics and power with the most moral getting creamed.
So basically you have to support the people made sheriff by circumstance: Dealers. If you want more moral people to succeed over less moral.
Xaoslegend-
Is it just me or are we missing the care factor here?
If a card increases in value it's not anyone's fault. The card just had been undervalued or an increase of demand has taken place.
If you ask me all i can read is jealousy for the small amount of people why try to make some profit.
What they don't see is that same amount of people have (for example) 50 untouched liliana vess in their binder, whom they bought at a higher price then its current value.
On the trend day (where a card skyrockets because it's been in an article) you can try to beat the fanatics to the card, but why would you? is your life really going to suck if you don't play the deck?
I think that fluctuations in prices are normal, been there for years and shouldn't be something we feel the need to control.
This may come off as trolling, however, that is not my intent. I believe "heath" is simply being a sour pus over the whole thing. A dealer is a speculator. I know its different because they call themselves "dealers" so they get special privilages.
The "speculator" that "wrongfully" bought those Renegade doppelganger wasnt doing anything different than what you do for a living. You were able to obtain the same information that he used(i.e. nationals coverage)which in this market, you should be doing.
As for the comment about it hurting your business: if speculators are consistently buying out on all of yours cards to the point where its hurting your business then you are doing something very wrong. The simple fact that you are a dealer to me menas that you must watch the market and plan accordingly. With the issue of the doppelganger, you made profit on the transaction. You could of made more but failed to "speculate" on the market.
Now I've never been to your shop any maybe its the best around, but to complain about missing profits on a card sound rather silly to me.
I think alot of peoples issues are not on speculating but on hoarding, which I agree is frustrating. One last note, With all these articles coming out about trading/profit, I predict that you will see an upraise is "speculators" and an increase in people calling themselves "dealers".
You're absolutely right... That does come off as trolling... >:{
Somebody buying 8 or 20 copies of a card is not a speculator, unless you are talking about power, black lotus, etc. This is a piker looking to turn a couple bucks into a couple more bucks. A real speculator would be buying up every single copy of a card on the market, which could very easily cause an increase in price, and for very good reason. If this is true, then the market is not sophisticated and is way too easy to exploit, and will continue to be exploited in this manner until it adjusts. The "value" of a card is what someone is willing to pay for it, the actual value of a card is linked directly to its rarity, and all rares have the same actual value, which is worthless. The amount that you as a consumer and the dealer or whomever is choosing to sell you the card agree upon is the intrinsic value of the card. If a dealer thought that he/she is getting ripped off they simply will choose to sell the card for a price higher than the "speculator" was willing to pay. Dealers are speculators in their own right, they buy cards for less and try to sell them for more, and while they serve a much broader purpose, speculators serve a purpose as well. Also lost in this conversation is the instances where a speculator would hoard a rare from dealers and the catalyst to move the card higher never happens, burning the speculator and leaving the dealer with his profits. Now the speculator has served a very nice purposes for the dealer, in buying up his/her entire stock of a card in short order (for the price that the dealer was advertising and willing to sell the card for) on a card that may have taken months to move if being moved at all. This is a collectible card game, if you want it to just be a card game then you have to take away the collectible nature of the game, and the game dies overnight.
the 8 of rule is not hard and fast either. I have bought plenty of cards from mtgotraders in larger than 8x quantity. I got around 16 illusionary masks for 25 cents to 40 cents each and sold them for $1 each. Man, the big whopping like $10 I made was so bad for the market. Same like when I bought 75 foil textless lightning helix for 14 from another dealer and came out ahead by $3 when all was said and done. Most speculators are small time speculators like myself looking to make a few bucks here or there to buy more cards. I know I should have bought vengevines at $11 and lotus cobras at $8 in large quantity, and mutavaults at $7, but I can't afford that much $$. I am glad I have a few spare liches that are not getting traded until after scars.
It is not like the dopplegangers are really that expensive of a card. I really don't see the problem.
Also, try yourself some EDH. IT is awesome. Make sure to buy yourself a from the vault deck so you can get some staples.