Risk Management: Modern Masters 2015
Making money feels good. Finding a $10 in a forgotten coat pocket? It's a good day. Buying a big stack of a bulk rare and watching it win a PT and quadruple in price? What could be better?
Saving money you already have in your possession is far less glamorous. Paying your credit card bill on time to avoid the late fee? Not exactly an exciting afternoon.
The thing is, for all intents and purposes, when you are looking at the big picture of finance, saving money is every bit as good as making money. The difference is merely psychological; while finding a $10 on the ground is exhilarating, paying your credit card bill can be depressing. So what does all this mean for MTG finance? Quite a bit, actually.
Everyone knows that buying Modern staples that are guaranteed to be not printed in Modern Masters 2015 is smart. People have been talking about the Abrupt Decays and Snapcaster Mages of the world for months. While buying these cards and (hopefully) cashing out for a big profit down the road is great, it isn't the only profitable way to deal with the release of MM2.
The other side of this coin is managing the risk of reprints — one of the the "paying your bills on time" aspects of MTG finance. So today we are going to look at a simple formula that can be used to analyze the wisdom/risk of holding/selling of cards that could potentially be reprinted. While in theory you can use this for any card, it works best for a set like Modern Masters where reprints are certain and it's just a matter of figuring out how likely certain cards are to be reprinted.
For this entire article we will be making one big assumption: you actually want to own the cards we are discussing. This means you have two options: either holding your cards through the release of MM2, or selling the cards now and rebuying them over the summer (probably in time for the Modern PPTQ season). If you simply don't need/want some cards that have a non-zero risk of being reprinted in MM2, you should probably just sell now.
Risk = Threat * Vulnerability * Consequences
Risk: Owning Magic cards is inherently risky; there are tons of things outside of your control that could diminish the value of your collection. Your house could catch on fire and incinerate all your Crucible of the Spirit Dragons. Your basement could flood and turn your cube into a big pile of mush. While many of the worst case scenarios like Wizards pulls tournament support, perfect forgeries flood the market, or everyone quits Magic to play Hearthstone on their iphones are unlikely, if you are holding Modern cards, one form of risk that has become more and more important in recent years is the risk of reprintings.
Threat: This is the specific event you are worried about. In our case, reprinting in Modern Masters 2015.
Vulnerability: Where is your weakness? How much can the threat impact you? There is definitely a huge difference between owning a single Emrakul, the Aeons Torn for an EDH deck and owning a big stack on spec. While the threat is the same in either case, the person with the big stack of flying spaghetti monsters is much more vulnerable.
Consequence: What is the end result? How much will you lose if Cryptic Command shows up in MM2?
Exploring Reprint Risk
Quantifying the Threat
One of the interesting things about reprints in specific is that the equation isn't all downside. While it is widely understood that reprinted cards will decrease in price (especially non-mythics), staples that manage to avoid the reprint bug can actually increase in price over time. So we need to account for both probabilities. Tarmogoyf is an easy one since it has already been spoiled. In this instance the odds of reprinting is 100%, while the odds of missing the reprint is 0%. For other cards, this is a bit more complicated. Take Remand for instance. What are the odds it gets reprinted? It seems like an auto-include, but then it was just released in a supplemental product. So maybe 75%? 60%? 90%? This is the most uncertain part of the process because it still comes down to looking at history and whatever clues are available and making an educated guess.
Quantifying the Consequences
Once we come up with probabilities, the next step is to determine what we believe will happen to the price of a card if it is/is not reprinted. Thankfully here we have price histories of similar cards and tons of information about how the cards reprinted in the original Modern Masters reacted. So while there is still some educated guessing involved, at least we have some actual data to work with.
Current Value
This is the final step. Once we run through all the numbers in the first two steps, we can determine an expected value for a card post-reprinting. For this information to be relevant, we need to compare it to what we can get for the card now. If you're not expecting to save (make) a decent amount by selling and rebuying, it likely isn't worth the hassle.
Remember, all of these numbers are mine, and as I stated before, there is a lot of educated guessing in all of this. Rather than being exactly right, I'm hoping they form a decent approximation. I took to Twitter to get some opinions on the odds that specific cards would be reprinted in MM2, and the percentage range was immense from "under 50 percent" to "lock" (which I took to mean 100 percent). The good news is you don't have to rely on my numbers — you can insert your own numbers and make your own calculations on which to base your MM2 related moves.
Why Not Just Sell Everything?
While selling anything that has potential to be reprinted in MM2 might seem like the ultimate way to minimize risk, there is one flaw with this plan: transaction costs. Every time you sell and rebuy a card, you are losing some percentage of value. If you could always get full retail prices when you sold cards, it would probably be worth it, but since you are losing a percentage off every transaction, this works out better in theory than in practice. Anyway, enough rambling, let's look at a few potential MM2 reprints.
Spellskite
Odds of Reprinting: 90 %
Potential Loss from Reprinting: 45 %
Post Reprinting Price: $14
Potential Gain if not Reprinted: 60 percent
Not Reprinted Price: $40
Current Buylist Price: $17.75 (cash) $23.07 (credit)
While it is foolish to say anything is 100 percent "in" before the set is spoiled, Spellskite is as close to a lock as it gets for Modern Masters 2015. Beyond the fact that Spellskite is currently the eighth most played card in Modern, this is basically Wizads's one chance to reprint phyrexian mana cards en mass. While Maro only ranks the mechanic a five on his "Storm Scale", a one to ten system he uses when fans ask how likely a mechanic or card is to return to Standard, phyrexian mana was widely seen as a major a violation of the color pie. I mean, should Mono-Green really have a Dismember? As such, out of all the eligible rares, Spellskite is among those I believe most likely to be in MM2.
Figuring out the numbers is tricky. In the original Modern Masters, staple rares decreased across the board, generally between 30 and 100 percent. On the other hand, none of the rares from the original Modern Masters were played anywhere near as much as Spellskite is now. While it isn't a four-of, it is consistently a two-of in just about everything, so I would expect Spellskite to decrease less than some of the other reprinted cards.
Let's take a closer look at these numbers, which are just my educated estimates. So you are the proud owner of a playset of Spellskites. You use them on occasion, but you don't play Modern all that often right now. You do know, however, that you are planning on PPTQing this summer and that you will want your Spellskites then. What should you do? You have two options. You can either hold onto your set come hell or high water so you will have them for PPTQ season, or you can sell your set and plan on buying back your copies in two or three months.
If you hold onto your copies, two things can happen. Spellskite could be reprinted in MM2 (which we have as a 90% chance) and drop to $14, or it could miss MM2 (the 10% chance) and increase to $40. If we put all this information into a simple equation (0.1*40 = 4, 0.9*14 = $12.6, $4 + $12.6 = $16.60) we can see that the expected value of holding onto a Spellskite is $16.60.
On the other hand, you can sell Spellskite now to a buylist for $17.75 cash or $23.07 credit. Since you already know you are going to rebuy your Spellskites in a couple months, there is pretty much no downside in taking the higher offer. So, by these numbers, you would make $6.47 per copy, or nearly $26 per play set by selling now and buying back in post-MM2.
Splinter Twin
Odds of Reprinting: 50 %
Potential Loss from Reprinting: 60 %
Post Reprinting Price: $11
Potential Gain if not Reprinted: 40 %
Not Reprinted Price: $40
Current Buylist Price: $18.75 (cash) $24.38 (credit)
Splinter Twin is an interesting case because I don't think the odds of a reprinting are all that high. We already had the Pestermite combo in the original Modern Masters, so it's hard for me to imagine the limited archetypes in MM2 being a rehash of 2013. There is also a possibility that the combo piece is on the "watchlist" for banning, and while it could still slip into the set and get banned. If Wizards had any inkling they might want to ban the card back when they were designing MM2, it's possible it was left out just to avoid the embarrassment of a reprint/immediate ban situation (see: Stoneforge Mystic. So while it is definitely possible that Splinter Twin shows up in MM2, it's no sure thing and I've got it pegged as a coin flip. So how does being less certain impact the numbers and the decision on whether to hold or sell? Let's see.
Our projection gives Splinter Twin a 50 percent chance of being reprinted and falling to $11, and a 50 percent chance of missing MM2 and increasing to $40. Altogether, this would make the expected value of holding a Splinter Twin $25.50. Since the best you can hope to sell for at the moment is $24.38 in store credit, you are actually losing a dollar per copy by selling out now.
This is assuming you agree with the 50/50 odds on reprinting (as well as the before/after prices). If you think there is a 75 percent chance that Splinter Twin is in MM2, the expected value falls to $18.25, meaning you are better off selling now and rebuying your copies in the future. If you flip the projections the other way and give Splinter Twin a 25 percent chance of being in the set, the EV increases all the way up to $32.75, meaning you should not only be holding your copies, but it might not be the worst idea to pick up a few more.
Serum Visions
Odds of Reprinting: 75%
Potential Loss from Reprinting: 50 % (uncommon) 75 % (common)
Post Reprinting Price: $2
Potential Gain if not Reprinted: 20 %
Not Reprinted Price: $10
Odds of Banning: 15 %
Post Banning Price: $2
Current Buylist Price: $4.91 (cash) $6.28 (credit)
If I was just going by my gut on Serum Visions, I would have pegged it in the 90% plus range in terms of likelihood of being reprinted. But after talking to a bunch of people on Twitter and having a few mention that it's not impossible that Serum Visions could be banned, I'm not so sure. While the thought of having the third best cantrip in Modern banned made me throw up a little bit, they do have a point. Wizards hates one mana card selection spells and seems to look for any excuse to ban these type of cards. Based on this, I bumped my percentage down to the 75% range.
Serum Visions provides a good example for our discussion for two reasons. First, unlike the other cards we have discussed so far, it is pretty much guaranteed to be a common or uncommon (if it's reprinted), which means the potential loss from reprinting will be even more severe. In the best case scenario it loses half of its current price and falls into the $4 range, but hitting $2 is probably more likely. Second, you don't really stand to gain that much if it misses MM2. Even disregarding the potential of a banning, it's hard for me to see Serum Visions at much higher than $10. Maybe it could hit $15 is we are having this same conversation when the next Modern Masters set is due to be released, but from my perspective, not being in MM2 would be a pretty huge warning sign that the card could be banned. That's why I added another category to our risk assessment: odds of banning.
So here, we actually have three possibilities, but two are remarkably similar. Serum Visions could end up in MM2 (75% chance) and be worth $2, Serum Visions could miss MM2 but get banned (15% chance) and be worth $2, or Serum Visions could miss both MM2 and the upcoming B&R announcements (10% chance) and be worth $10. If you run through the math, you end up with something like this:
MM2: 0.75*2=$1.50
B&R: 0.15*2=$0.30
No MM2/B&R: 0.10*10=$1
Total expected value: $2.80.
Since you can sell your copies now for up to $6.28 in store credit and you can expect to make nearly $3 by selling now and rebuying in the future, selling now seems like a very obvious choice.
Leyline of Sanctity
Odds of Reprinting: 25%
Potential Loss from Reprinting: 70 %
Post Reprinting Price: $10
Potential Gain if not Reprinted: 22 %
Not Reprinted Price: $38
Current Buylist Price: $20 (cash) $26 (credit)
Leyline of Sanctity feels like an unlikely reprint. It's pretty bad in limited, and while it is getting expensive, it's just not an exciting card to open (even compared to something like Doubling Season which is at least flashy and cool). If you look back over the rares from the original Modern Masters, you'll see exactly one card that is neither a maindeck Modern staples or important to a limited archetype (Blood Moon), so unless Leyline of Sanctity finds its way into this slot, it most likely will be left on the sidelines. Plus the entire cycle is generic and not so powerful that it can't come back to Standard, so there really isn't any need to shoehorn it into MM2.
Given its sideboardy nature and its lack of casual appeal, Leyline of Sanctity feels like the type of card that will lose significant value if it is reprinted, but not gain a ton should it dodge MM2. While I expect it would creep upwards, it's not the type of card that people are waiting anxiously to drop in price so they can build their dream deck. It seems unlikey there will be a wave of pent-up demand sending prices skyward.
Based on my numbers, the expected value of Leyline of Sanctity post release is $31 — almost exactly the same as its current price. So at least on its face, it seems unwise to sell. Of course, this changes significantly if you think the odds of reprinting are higher than 25%, in which case selling would be preferable.
Discussion
A few weeks ago right before the start of Dragons of Tarkir spoilers, I sold all of my Zendikar fetchlands on Magic Online. While I was (wrongly) worried about a reprinting in DTK based on some rumors that were swirling around Twitter, my idea was I would be able to manage my risk. If fetches were spoiled in DTK, prices would drop almost instantly and finding a buyer at the old price would be close to impossible. This had happened to me before — most notably when Flooded Strand was spoiled in KTK — and I just didn't want to risk eating such a huge loss. On the other hand, if fetches didn't show up in DTK, I figured I could buy them back for about the same price minus transaction costs, which are lower on Magic Online. In this instance, I didn't use any formula or crunch any numbers. I knew from previous experience that a reprinting would send my 30 tix Scalding Tarns into the 7 tix range and was willing to spend a small amount of money to make sure this didn't happen to me again.
I realize that going this in-depth isn't for everyone, and the good news is you really don't have to do a bunch of math to save yourself a lot of money. But you do need to at least consider minimizing your risk and exposure. Think of it as a way of insuring yourself against the worst outcome. You can spend a little bit of money now (in transaction costs) to potentially save yourself a bunch of money in the future (when you hold cards through a reprinting and they decrease massively in value).
In short, when cards you own are reprinted, you are almost always going to lose value, at least in the short term. However, by managing your risk, you can lose much less. And not losing money is just as good as making it.
Conclusion
Anyway, that's all for today. What do you think the odds of reprinting are for the cards we talked about today? How about for other Modern staples? What do you do to manage your risk in Modern, a format that has quickly become the Wild West of reprints? As always, leave your thoughts and opinions in the comments, or you can reach me on Twitter (or Magic Online) @ SaffronOlive.
