The Market from Top to Bottom

Written by Corbin Hosler on . Posted in Finance, Magic Culture

The Market from Top to Bottom

Corbin Hosler

Corbin Hosler is a journalist living in the hotbed of Magic that is Oklahoma. He started playing in Shadowmoor and chased the Pro Tour dream for a few years, culminating in a Star City Games Legacy Open finals appearance in 2011 before deciding to turn to trading and speculation full-time. He writes weekly at QuietSpeculation.com and biweekly for LegitMTG. He also cohosts Brainstorm Brewery, the only financial podcast on the net.

First off, I want to thank everyone for the feedback on my last column here. It was a very personal article for me to write, and I’m glad it seemed to have a little bit of an impact.

Of course, not all of the feedback generated by that article was positive, and that’s fine. In fact, I think it’s actively a good thing, since it served as a kickstarter for a conversation that needs to happen.

I’ll summarize that discussion briefly here, and for a much more detailed exploration of the topic, Ryan Bushard (@CryppleCommand), Marcel (@Marcelmtg), and I (@Chosler88) talked about it on Episode 9 of Brainstorm Brewery, a weekly financial and deck-brewing podcast you can find at BrainstormBrewery.com.

In short, the argument was made that traders add no value to the community as a group, something I wholly disagree with. That said, I understand where this notion comes from, and the truth is there are a ton of unscrupulous traders out there who create this stereotype.

As you may have realized by this point, I tend to get a little fired up about this topic, so let me be clear: I hate scumbags just as much as you. There’s a world of difference between a successful floor trader and a scumbag, and after a little time “in the wild” you will easily be able to make the distinction.

Many of you who are on Twitter probably know who Dr. Jeebus is, and if you follow him you know he has a strong opinion about how bad “value traders” are for the community. He invited me onto his podcast Jinxed Idols last week, and he and I had a very good discussion about how you can “value trade” and still manage to sleep at night.

I bring this up because of the things I learned in my conversations with people on the subject is that many people simply don’t understand the intricacies of how the secondary market works. There’s nothing wrong with this, of course, since it will rarely directly affect you as a player, but the market functions as a top-down ecosystem that needs every piece working in unison to flow smoothly. Traders, too, are a vital part of this system and always have been, though in the old days before the focus on finance became such a large part of Magic they were an almost invisible cog.

I believe understanding how the market works is vital for anyone who hopes to benefit from a financial article like this one. My colleague Joe Spanier laid out of some of the basic principles, or groundwork, a week ago, and I want to do the same here.

With that said, let’s work our way down from the top of the Food Chain, so to speak, and lay out how interconnected every party is. Later, we’ll break down how traders play into each rung on the ladder. And yes, it is a day for sportsball references. #ThunderUp

The Kevin Durant bracket: The Dealers

Dealers are where it all begins, and usually where it all ends. The important thing to know about dealers is this – they don’t make their money from you, the tournament grinder or trader. They make most of their money from the casual players who buy sealed products or boxes when new cards come out. More importantly, those players also buy up the randomly expensive stuff like Captivating Vampire, Doubling Season, Vampire Nocturnus and the like.

Dealers are at events to buy cards. Yes, they sell cards while they’re on-site, but it’s the exposure to be able to buy up a lot of cards at once that really can make a dealer’s weekend at an event like a Grand Prix. Star City Opens are a great chance for SCG to buy cards to fill their case and online database.

The James Harden bracket: the “semi-pros”

By this I mean those guys constantly plugging away at this PTQ or that PTQ and chasing the Pro Tour dream to Grand Prix all over the country. Like James Harden, they’re very good but not quite All-Star level. What’s the common thread of all of this for many in this group? Many of them are younger, usually in college, and have more free time on their hands, but not much money. I’m not trying to over-generalize here, but a basic demographic profile shows that those in the 18-25 range have a much lower disposable income than their older peers.

What does this mean for the secondary market? In short, it means these players don’t have a lot of money to blow at a dealer booth for that new Planechase product, nor are they usually willing to splurge on buying up a ton of singles. That’s not to say that this group isn’t important to the market, because they are, but oftentimes their money isn’t going directly into the hands of a dealer. Any of you who are constantly on this grind know what I’m talking about. You have a network and friends and you all share cards with each other to make the decks you want, rather than dropping hundreds at once at a dealer booth to get what you need.

The Serge Ibakas: “casual-serious”

This probably encompasses many of you. You play FNM and make the trek out to PTQs or Grand Prix occasionally. Like Serge Ibaka, you’re on your way up and are a very solid player, but no one’s going to mistake you for the best player on the floor.

People on this level tend to either be on their way to the James Harden Bracket or on their way out of it. You buy a box or two when a set comes out and play seriously, but aren’t necessarily making eight-hour PTQ trips or staying up with the hottest tech week-to-week. Many people in this group also play EDH or more casual games along those lines, though you still play to win.

While people in this group tend to still want the hottest Standard cards and so forth, they’re also interested in stuff like Bribery or Kozilek, Butcher of Truth. This is an important bridge between the gaps, and often allows cards to move from casual players up through the chain.

Derek Fisher: Playing just because I can (Casuals)

If you want the backstory, Derek Fisher is a journeyman, wily veteran who came to the Thunder at the trade deadline. This happens every year, when older players who can still contribute but are no longer stars look to go to a team that gives them the best chance of winning a title (Think Shaq’s last five years in the league).

Like Casual Magic players, they’re playing because they can, and because they love the game. The money isn’t as important as being in the right situation. Many Magic players skew toward this group as they get older, usually because they don’t have time to grind tournaments or are simply weary of it. They show up to a prerelease every few months, buy a box or a duel deck and jam games at home with their friends.

Because of the demographic trend we noted earlier, older players have more disposable income at their discretion, and often make these larger purchases from dealers.

But it’s not just older players. One of the interesting things about the Magic market is that many members of this group are also younger players, middle or high school age. They can’t travel to grind PTQs, but they are also not yet cut off from Mommy and Daddy’s money and can spend more money on their decks. The “EDH group” at my LGS is made up almost entirely of kids in this bracket, and all they want is the latest Planechase product or special EDH card for their new deck.

Speaking of Shaquille O’Neal…

The Shaq bracket: Now appearing on TNT

Also known as the “moving on to bigger and better things” group. Or, in Magic terms, retired players. They have some nice cards, maybe duals, maybe even Power, but most likely just bunches of Chronicles or Homelands cards sitting in their basement.

I’ve seen many of these people with literally boxes upon boxes of old Magic cards sitting in a room. These people often don’t know they can cash out to dealers, nor do they even have the inclination. This is part of the natural attrition of cards and takes copies out of the market. Think Candelabra of Tawnos. These cards just cease to exist after a certain number of years in the wild, depending on the print run.

That covers the major parts of the market, and hopefully gives you a feel for the basic demographics you can break players down in to. Now let’s look at how the “value trader” fits into the market. Remember, there are plenty of people out there who legitimately cannot fathom any manner in which traders benefit any of the above groups.

Traders and dealers

Some people think that traders and dealers are mortal enemies. After all, don’t the traders just take all the cards the dealers want? Why would anyone want to give their money to a professional trader when they could give it to a dealer instead?

This couldn’t be farther from the truth. Traders and dealers are best friends. After a day out on the trade floor, a trader has to have somewhere to get rid of their cards in order to actually realize a profit. Some people use Ebay, but most just cash out to dealers they know.

It’s easy to see where traders get theirs in this exchange, but what can the Kevin Durants of the Magic world get from traders?

Remember how I said dealers are at events for the large amount of buying they can do? No one’s easier to buy from than a trader. When a regular player sits down at a dealer booth, many times for the first time, the dealer has to scour through their binder, give them a number on a ton of cards, often to just have their offer rejected because misinformed players think all their cards are worth the price they see on SCG or CFB.

That doesn’t happen with a trader. Traders know what their cards are worth in cash value, and you make quick and efficient transactions, saving both time and frustration on both ends. Traders also know how important card condition is, and a dealer doesn’t have to waste time examining a deck someone has played with for a year to see if any of the cards are even worth buying.

Traders and “semi-pros.”

As we know, this group of players doesn’t have a ton of money to throw around. But one thing they do have is Magic cards. A lot of them. From sealed events to drafts to winnings, they have a lot of cards. But not necessarily always the ones they need. This is where trading enters the picture, and has since the inception of Magic.

Here’s the problem. If Player A is playing Wolf Run and is short a few Slagstorms, they take to the trade floor asking for them. Say they find Player B, who’s playing Esper and needs a Terminus or two. If both players have what the other needs, that’s great, and a trade is made. But what if Player B doesn’t have the Slagstorms, even though Player A has the Terminus he needs? No deal is made.

Now let’s try a trader in the position of Player B. Player A comes up asking for Slagstorms and a trader has them. He pulls them out and looks through Player A’s binder. As a trader, he’s not looking at any particular cards; he’s just working off of buylist values. This means that, instead of just a few cards in Player A’s binder mattering, all the cards are on the table. He can take out literally anything from that binder, as long as the numbers are right.

This is a service to the community. I cannot emphasize that enough. Without this trader, Player A might never find the cards he needs, and as we’ve established he may not even have the funds to buy them from a dealer. That’s usually worth a few dollars in “value” to Player A, who walks away happy because he got the card he needed.

But why wouldn’t Player A simply trade into a dealer instead? Let’s look at this from Player A’s perspective. Trade with a dealer, and we can say he probably loses 20% of “value” through this transaction. Instead, he trades with a professional trader, who he only loses, say, 10% to. Yes, he loses 0% if he finds another grinder to trade with, but we’ve already covered the problems with that.

This doesn’t even touch on the fact that since traders work on buylist values, a trader can “win” in buylist even if the trade is dead even in retail price. So sometimes, from his or her point of view, Player A does actually “give up” 0% when working with a trader.

Traders and the “casual-serious” crowd

Much of the same from above applies, but this is actually the group I like to trade with most as a trader. These “casual” cards like Elvish Piper or Glimpse the Unthinkable actually buylist to dealers for a much higher percentage than a Standard-only card does. This means I can “make” even more money from trading with them, even if the retail values of our cards are the same.

Traders and the Fishers (Casuals)

Casual players love getting casual cards, and like we discussed above, value often means a little less to these players. This allows the Casual player to walk away happy (by getting the card they need) and the trader walks away happy by gaining value.

Traders and retirees

What happens to all those cards in basements? They sit there. Usually for a long time. Traders are willing to front some cash to get these cards out, and they’ll put in the work to flip them; something the retired player who’s been out of the game for years doesn’t know anything about. Frankly, it’s probably not even cost-efficient for them to look up thousands of cards. A trader, on the other hand, knows what they’re looking for.

Yes, traders flip these cards and make money from doing it. But a funny thing happens when a trader flips these cards. They’re returned to the pool of cards.

We can all agree that things like Duals and Wastelands and Force of Wills are expensive. Now imagine what price they’d be if every copy of those cards that sat in a basement hadn’t been pulled out somewhere along the line by a trader. I think it’s safe to say Legacy Opens would have fewer players in them.

The same principle applies to cards like Sanguine Bond. Most players don’t have any idea what the card’s worth ($6), so it rots in their binders. Maybe they take it to a dealer at some point, but probably not. That means it rots away, reducing the number of copies on the market and driving up the price, all unbeknownst to the player with it in their binder. Since it’s never drawn any tournament play and isn’t a recognizable EDH card, there’s no reason a tournament grinder would ever need to know what it’s worth unless they happen to stumble across it.

But a trader knows, and they pull it out of that player’s binder, and at the end of the weekend flip it to a dealer, putting another copy into circulation and increasing the supply, thus keeping the price more affordable. The same is now true of Modern cards, something like Steelshaper’s Gift or Serum Visions.

This interaction is often invisible to the market at large, because it’s just one of the background pieces working in unison to make the market as efficient as possible.

Like I said at the outset, most people don’t (and don’t need to) know how the market works. It just does, and that’s the way it should be. But if you think traders aren’t an integral part of that framework then maybe you should take a little time to better understand the market. I hope this piece helped in that.

Thanks for reading,

Corbin Hosler
@Chosler88 on Twitter

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