Overview

What is the Magic: The Gathering Reserved List?

The Reserved List is a list of cards printed in the 1990's that Wizards of the Coast (WOtC) will not reprint in future sets, ever. What areas does this cover economically? Interestingly, the Reserved List creates deflation, the opposite of what seems to be plaguing the western world: Inflation. The way this is done is through artificial scarcity. By saying these cards will never be reprinted, Wizards of the Coast (WOtC) has done the MTG equivalent of ceasing any further printing of the one-dollar bill.

But what inspired the reserved list? Well, in the Summer of 1995, WOtC released Chronicles, a set that reprinted many many cards and a set that was printed into oblivion. This worried investors because they couldn't invest in any card with confidence that said card will maintain value. Additionally, this gave fear to gaming stores across the nation because they lost many incentives for customers to return. The combination of pressures from these sources caused WOtC to create the Reserved List, comprised of a few hundred cards that would maintain value over time despite any new sets like Chronicles released in the future.

Nowadays, there are plenty of cards that maintain a high price tag despite the fact that they are not on the reserved list.

Why I Chose this Topic

I chose this topic because I have been playing Magic: the Gathering for a little over five years and felt the impact of the reserved list existing. It has seemingly held me back from certain formats because of the price tag on some of those cards. I also want to find the full image of what the reserved list is because many other Magic players I know hate the list.

Research Question

How does the MTG Reserved List continue to affect investors?

Throughout research, I expect to find how the artificially created scarcity created in 1995 incentivizes investors in the modern market.

Buyouts occur and increase price drastically due to minuscule supply.

What is a Buyout?

Let's first start off with what a buyout is in the context of the MTG market. For all intents and purposes, a buyout is when someone buys as many copies of a single card they can find on the internet from as many different vendors as possible, such as Tcgplayer, Card Kingdom, Starcity Games, and Channel Fireball, Ebay, and Amazon, for a fairly low price, then immediately puts them on the market for the price a few hundred, (or in some cases, like Narwhal, a few thousand) percent of the price they bought them for.

The problem with many buyouts

Let's continue with the example of Narwhal (above). For almost every buyout, the price goes down from the initial spike and settles to somewhere that is still above the pre-buyout price, but not by much. This isn't really an issue for the investor who bought out the card because they are still making a profit. Or are they? The problem lies in the fact the demand for many cards is so small it's practically non-existent. No one really wants to buy Narwhal because by most measures, it's a really terrible card.

Why buyouts are really a gamble at heart

There only a few cards that see any play in any format that are on the reserved list, and for these cards, a buyout is a great thing for investor because demand for them actually exists. For example, Lion's Eye Diamond currently hold a near $300 dollar price tag, that is due largely to two buyouts. In just 2011, you could buy the card for less than $50, then a buyout occurred in early 2016, but the price settled significantly higher (about $50 higher at $130). Afterward, another buyout occurred raising the price again to around $250, but the price actually settled to lower than after the first buyout at only around $121. Why is this?

At the heart of buyouts, what's really important is whether a buyout occurs on a card that is truly under-valued. An investor made the bet that Lion's Eye Diamond was undervalued at $80 dollars, was correct, and made a huge profit. Another investor made the bet that it was still undervalued, and turned out to be very very very wrong. Moreover, even though that investor was so incredibly incorrect, another investor made a very similar bet, and this third buyout had the card settle around $100 dollars more, which means the card was not undervalued at $130, then a few months later it was, which is INSANE.

Conclusion

I was actually quite surprised buy my research. Initially, I was under the impression that a buyout did not end with the bought out cards being put back on the market, but I was quite wrong. The other interesting thing I learned is that buyouts are not always profitable, something that most players make them out to be. I think this is because it's much easier to make investors the boogeyman of Magic when they succeed every time they buyout a card rather than when they sometime swing and miss. For me, this research was really valuable because it taught me just how volatile investing in the reserved list is, even when the cards are knowingly never going to be reprinted. Even under the circumstance of artificial scarcity, investment is still a gamble because it doesn't entirely remove demand from the equation.

Another valuable lesson is that investors can help each other when they buyout the same card multiple times. For example if I decided to buyout Narwhal now, suddenly, the original investor who bought them out would have made a profit instead of losing money.

Overall, what I found to be most chilling is that a buyout can be profitable or not based solely on when that buyout occurs. For me this shows that it is a gamble more than anything else.

By Nicholas Booth