Ok, so this post will be a bit off-the-wall, and I'm hoping more to generate comments than anything else. The gold blog community is awash in amazing posts right now with detailed lists on items to stockpile, items to dump, items to flip, and items to avoid. I can't say it enough, that's awesome. I would not describe my forte as being able to track down or even analyze item-related trends. I don't have the time or focus.
However, something that I've been mulling for a while and has been recently quasi-confirmed, is how the future of true WoW profit will arise. To somewhat cartoon it a bit, I think there are three main levels within the WoW economy:
Commodities or "origination"
This is the bread and butter of trade in WoW. Ore, leather, etc. Ok, we all get that. You originate the materials.
Value add items
This is the second tier of production, where a commodity is modified to add value. Cutting a raw gem is a fine example, or crafting blacksmithing items. If the commodity business is the bread and butter, this is the meat and potatoes (geesh, sorry, I'm writing this while Horde is finishing another lopsided loss in Wintergrasp). No explanation needed, really.
Derivative profiteering
Most auctioneers fall into this category, on a small scale. Identify disequilibrium, profit, etc. No lecture needed for this part. HOWEVER, here's where it gets interesting. For a few months now, I've wondered when someone would string it all together and try to run an actual business in WoW. This is a truly derivative activity, and I'm not aware of it being done yet. It could take the form of insurance/annuities, or even basic savings/investment management (i.e., some poor soul who doesn't like to farm and is afraid of the AH gives you his hard earned 1k gold and you agree to pay interest on it or invest it and take a cut of the profit). The issues of collateral and counterparty risk are significant enough that I can see why this isn't common. I have read a few blurbs about it existing in another online game, but again I don't have time to research it and I'm not sure if it's an apples to apples comparison.
When I saw a post on another blog highlighting a new pay-based "remote auction house bot" that allows you to use the remote AH to buy/flip items, I thought two things: "uh oh" and "oh boy." I do not use this addon, nor can I see myself doing so. However, I think this is a watershed event. The program itself turns AHers into, essentially, day traders. Granted, the 200/day post limit is still hard-wired by Blizz, but I hope the significance of this is apparent...
Anyhow, I don't have any answers, and as stated originally I view this post as one long question. The comments I've received on this blog so far have been insightful and intelligent, so how do YOU feel about these developments? Where is WoW heading re: finance? Are there any true banks in WoW that you know of, and if not how long will it be?
Showing posts with label value. Show all posts
Showing posts with label value. Show all posts
Wednesday, November 3, 2010
Wednesday, October 20, 2010
Stockpiling for Cata as a "store of value" and hedge against inflation
As alluded to in my previous post, the guys at Call to Auction were gracious enough to field a question from me. I was a bit long-winded, but in short was trying to draw comparisons between the real world and WoW in how commodities are used as a store of value to hedge against inflation.
Store of value, you say? Hedge against inflation? Quaaid, you're going crazy and taking this too seriously! You may be right about both, but there are very legitimate (and useful) conclusions that can be drawn from the real world into Azeroth.
The Real World
The example I used in my Call to Auction question was gold...as in, the precious metal that costs something like $1,350 per ounce these days. Without regurgitating my long-winded statements/questions, the gist is that holding certain valuable commodities has two effects (for our purposes): 1) it guards against inflation, and 2) it's a safe haven. $10,000 in 1970 was a lot then, and not so much now -- in the "needing to survive" sense -- however, if you plunked that $10k into gold back in 1970, you'd be in pretty nice shape today. Alternatively, if you lived in a developing country whose currency was subject to hyperinflation (South America and Africa are ripe with examples), turning your money into gold would guard against that. Regarding the "store of value", in the real world gold is a safe haven. Go look at the price of gold since 2005 or 2008 and look at it now. One can argue this point ad nauseam, but investors frequently flea uncertainty in equity markets by putting money into gold.
The Not-Real World
So, are there any items in WoW that act like real world gold? Well, not really, or not any that would have the same impact. However, there are some items I'm going to start stockpiling over the next month. I am very concerned that my decent amount of gold now will become not-so-decent once inflation hits in Cataclysm (and, boy, will it ever).
Markco's response to my question above on the Call to Auction podcast was to listen to their last few episodes for items to stockpile. He's right. They've covered this a lot. However, my unstated point was how do you dump gold now into something that can be easily liquidated in a few months? The key point here is liquidated. The two considerations in my mind are:
1) Liquidity. Sure, you may throw 200k gold into a Swift Spectral Tiger and sell it in six months for 750k. I think that's a real possibility and honestly not a terrible idea. Yeah, the aforementioned concentration risk (see my other post from a couple weeks ago) is a headache, but I think you'd come out ok in the long run. However, I want to toss gold into something liquid, such as cloth, ore, mats, etc. and be able to recoup that amount (and then some) a month or two after Cata drops.
2) Price-per-slot. This is a real killer. The most liquid items also tend to have low absolute value. Saronite Ore can frequently be bought from the AH, turned into bars, and sold at a slight profit. That's risk free. Awesome. However, the ore essentially vendors at 12g50s, meaning you don't get much bang for your buck per slot. Sure, you could pre-smelt it into bars and then titanium, but see point #1 about liquidity.
So, the idea is to find items that are fairly liquid and yet yield a decent PPS for storing in your bank.
Things I Love
Things I Like A Bit
Oh, and because anybody that read this far probably needs a random crazy picture:
Happy Hunting!
-Q
Store of value, you say? Hedge against inflation? Quaaid, you're going crazy and taking this too seriously! You may be right about both, but there are very legitimate (and useful) conclusions that can be drawn from the real world into Azeroth.
The Real World
The example I used in my Call to Auction question was gold...as in, the precious metal that costs something like $1,350 per ounce these days. Without regurgitating my long-winded statements/questions, the gist is that holding certain valuable commodities has two effects (for our purposes): 1) it guards against inflation, and 2) it's a safe haven. $10,000 in 1970 was a lot then, and not so much now -- in the "needing to survive" sense -- however, if you plunked that $10k into gold back in 1970, you'd be in pretty nice shape today. Alternatively, if you lived in a developing country whose currency was subject to hyperinflation (South America and Africa are ripe with examples), turning your money into gold would guard against that. Regarding the "store of value", in the real world gold is a safe haven. Go look at the price of gold since 2005 or 2008 and look at it now. One can argue this point ad nauseam, but investors frequently flea uncertainty in equity markets by putting money into gold.
The Not-Real World
So, are there any items in WoW that act like real world gold? Well, not really, or not any that would have the same impact. However, there are some items I'm going to start stockpiling over the next month. I am very concerned that my decent amount of gold now will become not-so-decent once inflation hits in Cataclysm (and, boy, will it ever).
Markco's response to my question above on the Call to Auction podcast was to listen to their last few episodes for items to stockpile. He's right. They've covered this a lot. However, my unstated point was how do you dump gold now into something that can be easily liquidated in a few months? The key point here is liquidated. The two considerations in my mind are:
1) Liquidity. Sure, you may throw 200k gold into a Swift Spectral Tiger and sell it in six months for 750k. I think that's a real possibility and honestly not a terrible idea. Yeah, the aforementioned concentration risk (see my other post from a couple weeks ago) is a headache, but I think you'd come out ok in the long run. However, I want to toss gold into something liquid, such as cloth, ore, mats, etc. and be able to recoup that amount (and then some) a month or two after Cata drops.
2) Price-per-slot. This is a real killer. The most liquid items also tend to have low absolute value. Saronite Ore can frequently be bought from the AH, turned into bars, and sold at a slight profit. That's risk free. Awesome. However, the ore essentially vendors at 12g50s, meaning you don't get much bang for your buck per slot. Sure, you could pre-smelt it into bars and then titanium, but see point #1 about liquidity.
So, the idea is to find items that are fairly liquid and yet yield a decent PPS for storing in your bank.
Things I Love
- Enchanting mats and some scrolls - dusts and essences have demonstrated their ability to hold value in every expansion, and this one won't be any different. I'll be holding onto raw mats as a good PPS and liquid investment.
- Scrolls - an adjunct to the above, enchanting is a powerful profession. BoA gear creates an eternal market for old world mats as well as new world. Plus, if Cata is like WotLK, there might still be a few worthwhile mid-tier enchants that sell (e.g., sort of how Mongoose does now). These also stack incredibly well, so the PPS is through the roof. Not as liquid as I would like, but should do ok.
- Glyphs - "Quaaid, you're nuts, glyphs are still going for 40g to 50g and higher right now even a week after the patch!" Why yes, good reader, they are. They'll also likely complete their crash in a few weeks, and I imagine you can pick up some fairly cheap or just crank out your own if you have a scribe once herb prices settle down. So, it can be assumed that most players currently playing will be fully stocked on their glyphs. And what happens when all those people who quit in the pre-Cata lull come back in December? Oh yeah, they'll need glyphs. Others will get bored or frustrated and level new toons as well. That guy that rolled a DK right away when WotLK came out? Yeah, he'll be leveling a worgen too. And he probably plays enough that he's not broke, so he'll get glyphs too.
Things I Like A Bit
- Argent Tournament pets - not very liquid, but I think they'll store value really well. I've sent a few Horde pets to Alliance side and can pretty reliably net 900g to 1,100g right now. Given that Champion's Seals will dry up in Cata, and that these pets are pretty cool and should increase nicely over time. The PPS is thus awesome. I'll be fetching any that dip low enough, but this is more of a "buy and hold" item.
- Saronite Ore - sure, I just said that the PPS is low, but Saronite has so many uses I still think it's low risk enough to justify stockpiling. You can prospect it (best choice in my opinion), craft it for leveling sets, or just flat out vendor it. It's versatile enough that I will devote space to it.
- Netherweave cloth/bolts/bags - with new bags apparently available pretty cheaply in Cata, I think those doing massive stockpiling of Netherweave are in for a jolt. Yeah, it'll probably hold up ok, but the low PPS and high risk mean it's a no go for me.
- BoE items - I've read that a few people are grabbing various BoE items to sell to goblin and worgen levelers. I'm sure that'll work just fine, good luck. However, the high deposit cost for most of these items and "hit or miss" approach is extremely unattractive to me. Can you see that super leet level 49 axe for 100g? Probably. Did it just take up 8 weeks in your bags and another 20g in sunk deposits before selling? Likely.
Oh, and because anybody that read this far probably needs a random crazy picture:
Happy Hunting!
-Q
Saturday, October 16, 2010
Addons in 4.0.1, my initial patch postmortem, and tips going forward
Addons in 4.0.1
With a hectic real life schedule, and general post-patch chaos of the past few days, I haven't spent much time in-game other than to capitalize on "M&S"* (as Gevlon would say). That said, I have made a few adjustments to my addons in 4.0.1.
First, Auctioneer is out. I've used this addon for years, but it's just too bloated and too large. It's a huge memory hog, and I have performance issues as it is. Most of the features don't even qualify as bells and whistles, so I've finally cut the cord. I'll miss BeanCounter, but that's about it.
Second, ZeroAuctions and Auctionator are in. Well, to be fair, I've used QuickAuctions3 -- and ZA is the functional replacement for it -- along with Auctionator for quite some time, but mostly as a supplement. They are now my primary gold-making addons.
4.0.1 Postmortem
So, how did 4.0.1 go? Well, as with many others in the gold-making blogosphere (ugh, I do hate that term, why do I use it?), I made an absolute killing. My scribe doesn't have much of a knowledge set, and I didn't go crazy stocking up on herbs, but between pumping out Bold Cardinal Rubies and all of the glyphs I could, I've made about 30k the past few days. I know that pales in comparison to others, who have reported 50k+ in one day's worth of sales alone, but in my own little corner of the world I'm happy with this.
Tips for the coming week
Although my primary purpose in this blog is to present theoretical and strategic approaches to WoW profiteering (again, I will never purport to be a master of finding little tricks and flash-in-the-pan techniques), I understand that if I'm to expand my reader base I need to offer concrete suggestions. So, with that in mind, there a few areas in which I anticipate a surge:
Herbs - highly speculative, but I suspect the latecomers looked at glyphs and went "hmmm, time to crank those out!" So now they're buying up anything and everything...without realizing that glyph prices are crashing. If you have a stockpile and can get good prices, sell the herbs. Or farm them, depending on prices on your server. In general I steer away from farming, but there could be some niche opportunities
Enchants - with players returning to test out new talents and abilities, along with preparing for Cataclysm, I've seen a boost in demand for all sorts of enchants. The good news is that the underlying materials are still cheap, especially if auctioneers stocked up on eternals assuming the gem transmute cooldown was being removed (take that, everybody), so if you have a jewelcrafter just crank out rings/necklaces and disenchant them. You'll have cheap mats that you can turn into scrolls to sell. Dream shards and abyss crystals are still cheap as well, and I've found high end weapon enchants are still moving.
Meta gems and nightmare tears - I am shorting (i.e., expecting a decrease) in epic gems, so am trying to cash in while I can. However, meta gems and nightmare tears have been flying off the shelves. I suspect it's related to players returning and also reconfiguring their gear.
Hope this was a useful post. If it was -- or more importantly, if it wasn't -- please add a comment so I can work on improving.
Happy Hunting!
-Quaaid
*Just to save you the Google trouble, Gevlon is a prickly but entertaining blogger who runs the Greedy Goblin. You can see his blog linked via my site, but M&S stands for "morons & slackers." In this context, those who waited until Tuesday to address 4.0.1 needs in regards to gems, glyphs, etc.
With a hectic real life schedule, and general post-patch chaos of the past few days, I haven't spent much time in-game other than to capitalize on "M&S"* (as Gevlon would say). That said, I have made a few adjustments to my addons in 4.0.1.
First, Auctioneer is out. I've used this addon for years, but it's just too bloated and too large. It's a huge memory hog, and I have performance issues as it is. Most of the features don't even qualify as bells and whistles, so I've finally cut the cord. I'll miss BeanCounter, but that's about it.
Second, ZeroAuctions and Auctionator are in. Well, to be fair, I've used QuickAuctions3 -- and ZA is the functional replacement for it -- along with Auctionator for quite some time, but mostly as a supplement. They are now my primary gold-making addons.
4.0.1 Postmortem
So, how did 4.0.1 go? Well, as with many others in the gold-making blogosphere (ugh, I do hate that term, why do I use it?), I made an absolute killing. My scribe doesn't have much of a knowledge set, and I didn't go crazy stocking up on herbs, but between pumping out Bold Cardinal Rubies and all of the glyphs I could, I've made about 30k the past few days. I know that pales in comparison to others, who have reported 50k+ in one day's worth of sales alone, but in my own little corner of the world I'm happy with this.
Tips for the coming week
Although my primary purpose in this blog is to present theoretical and strategic approaches to WoW profiteering (again, I will never purport to be a master of finding little tricks and flash-in-the-pan techniques), I understand that if I'm to expand my reader base I need to offer concrete suggestions. So, with that in mind, there a few areas in which I anticipate a surge:
Herbs - highly speculative, but I suspect the latecomers looked at glyphs and went "hmmm, time to crank those out!" So now they're buying up anything and everything...without realizing that glyph prices are crashing. If you have a stockpile and can get good prices, sell the herbs. Or farm them, depending on prices on your server. In general I steer away from farming, but there could be some niche opportunities
Enchants - with players returning to test out new talents and abilities, along with preparing for Cataclysm, I've seen a boost in demand for all sorts of enchants. The good news is that the underlying materials are still cheap, especially if auctioneers stocked up on eternals assuming the gem transmute cooldown was being removed (take that, everybody), so if you have a jewelcrafter just crank out rings/necklaces and disenchant them. You'll have cheap mats that you can turn into scrolls to sell. Dream shards and abyss crystals are still cheap as well, and I've found high end weapon enchants are still moving.
Meta gems and nightmare tears - I am shorting (i.e., expecting a decrease) in epic gems, so am trying to cash in while I can. However, meta gems and nightmare tears have been flying off the shelves. I suspect it's related to players returning and also reconfiguring their gear.
Hope this was a useful post. If it was -- or more importantly, if it wasn't -- please add a comment so I can work on improving.
Happy Hunting!
-Quaaid
*Just to save you the Google trouble, Gevlon is a prickly but entertaining blogger who runs the Greedy Goblin. You can see his blog linked via my site, but M&S stands for "morons & slackers." In this context, those who waited until Tuesday to address 4.0.1 needs in regards to gems, glyphs, etc.
Sunday, October 3, 2010
Arbitrage
Arbitrage (pronounced arb-eh-tr-ahj, btw) is a term tossed around on gold blogs quite frequently, but I don't think there's a firm grasp of what it means. It's included in some addons as a basic price point comparison, but there are many forms.
In the real world -- and I hope that this blog ultimately touches on economic concepts beyond WoW so I can both educate and learn from other players -- arbitrage is most easy to understand from a market standpoint. If Sam's Club sells boxes of Snickers for $10, and the corner store sells that equivalently for $18, an arbitrage opportunity exists to exploit the difference and sell for $17 a box outside the corner store. You'd pocket $7 per box and likely get your face stomped in pretty quickly. Not a wise choice. Plus, it's probably technically illegal anyhow, and you'd be evading taxes.
The case above is an overly simplistic example of market disparity, but arbitrage also exists on stock markets, foreign exchange markets, and elsewhere. On one hand, stocks can be priced differently from one exchange to another or versus their derivative instruments (i.e., futures). There is also tax or regulatory arbitrage in some cases.
So what does this have to do with WoW, and how have you made it this far without falling asleep? If you've read my previous posts (and nobody has), you should be rewarded with actual advice!!! I believe there are two major forms of arbitrage in WoW, namely conversion and market arbitrage. I don't count laziness arbitrage, i.e. buying pets in Netherstorm and reselling them, although I suppose I should.
1) Conversion arbitrage
Look at your AH. Now look at the price of Borean leather. Now look at the price of Arctic fur.
60 Borean leather = 10 heavy Borean leather = 1 Arctic fur
Such a simple example, but highly illustrative. On my server, at a randomly selected time (well, as of this post), it's not even a particularly opportune moment for purposes of my demonstration and would STILL yield a nice profit. About 14g per stack of Borean leather and 60g for one Arctic fur.
This can be done with almost all ore into bars, provided you have someone who can smelt. Also, always keep an eye out for frozen orbs into eternal fires. If the price of frozen orbs deviates from the price of eternal fires significantly, buy 'em, convert 'em, and repost 'em.
It's an oyster with two tickets to that thing you love.
2) Market arbitrage
Hypothetically this should increase proportionally with any population imbalances between Horde and Alliance for your server. Mine is pretty Alliance-heavy. If you can orchestrate a circumstance where a friend can babysit the neutral AH with you (or if you have a second account), do some scans of your respective Alliance and Horde AHs. Both large ticket and small ticket items should have a disparity. If that disparity exceeds a percentage sufficient enough to make it worth your time, likely 20%+, then try to move items cross-faction. I know many pro auctioneers make a killing at this. Due to various constraints it's something I've dabbled it marginally, but am looking to really take up in the near future.
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