Saturday, December 4, 2010

For the Hoard!

Cataclysm is out in three days, and if you do not have three guild banks full of Eternals and Saronite Ore and Abyss Crystals and old newspapers/pizza boxes then you may as well submit to a life of poverty and panhandling for the next two years... right?

Not so much.

The concept of investments and speculation in World of Warcraft is fine, but precious little consideration has been given to the concept of time horizons. Most people understand "the flip" where you buy something at 50g and relist it at 100g - that is easy money indeed as you realize the profits immediately with a time horizon of zero. Hoarding Eternals and Saronite Ore and Abyss crystals for sale at potential profit six months (or more!) from now is something else entirely. Will you even be playing WoW six months from now?

No, really, this is a serious question.

Time Horizons
I do not care if you have been playing since WoW Friends & Family alpha, each and every one of us has conditions under which we would no longer find the game worth playing. There are about five people who are the only reason the in-game song and dance continues for me, for example, and if IRL concerns take one or more of them away the whole house of cards will come crashing down, taking all value of gold with it.

Not that I am recommending some hedonistic spending splurge which ends with you living day-to-day and taking Payday Advance loans to cover your repair bills (41g per wipe in Cataclysm, by the way). What I am recommending is that you do a little self-analysis before following "investment" advice from people with obviously longer-term time horizons than you.

Speaking of "investment" in air quotes, allow me to play the other side for the moment. After the jump I will analyze some of the investment advice being given out in preparation of Cataclysm.

The following items are being suggested to stockpile for Cataclysm on the basis of either low-risk and/or high-reward gains:

Saronite Ore
Abyss Crystals

Saronite Ore
Half a stack of Saronite Bars vendors for 12.5g, thus buying up a bunch of Saronite Ore below that price is "guaranteed profit." There are 98 slots in a tab of a guild bank, and thus if you filled them up with Saronite Ore you are looking at 1225g in vendor goods. Minus, of course, what you actually paid for 98 stacks of Saronite ore. Even if you bought it for the absurdly low price of 6g a stack, that guild bank tab is worth a whopping... 637g after AFK smelting for over 17 minutes (1029 seconds). The more likely scenario is that you paid around 11g for the stacks, meaning you have a floor profit of... 147g. For an entire guild bank tab. The idea, of course is that Saronite Ore will be worth a lot more in Cataclysm, as Blacksmiths and Jewelcrafters and even Alchemists will be more willing to spend gold to buy the mats to powerlevel their professions.

Yeah, maybe. At its height on Auchindoun, I saw Fel Iron Ore going for 60g and Adamantite Ore around 40g a stack during Wrath. Saronite is the Adamantite equivalent, so let us assume it hits similar prices: your 11g/stack Saronite goes to 40g/stack and your guild bank tab is worth... 2842g. Six months (or more!) from now. Two days ago I sold a Savory Deviate Delight recipe I got farming level 15 mobs for 10 minutes for 750g. There is an argument here that you could do both, but that is sort of my point. One of these two options is 26% as profitable as the other, with a much shorter time horizon. And you get 98 bank slots back.

Going back for a moment to Blacksmithing, Jewelcrafting, and Alchemy. According to Wowpedia, a Blacksmith will need 205 Saronite Bars, or about 21 stacks of Saronite Ore. Oh, and 330 Cobalt Bars (16.5 stacks of Cobalt Ore). Jewelcrafting will need roughly 65 uncommon Wrath gems, ~60 Eternal Earth, and five rare gems to go from 350-425. If we assume 1.5 gems per Prospect, JCs need maybe 11 stacks of Saronite Ore. Alchemists learn Transmute Titanium at 395, with it staying orange until 420 and yellow until 430. That means ~32 transmutes with 8 Saronite Bars apiece, or 256 Saronite Bars. Might sound like a grand-slam for supplying Alchemists, but they can also go 395-425 with 10 Deadnettle, 5 Talandra's Rose, and three stacks of Icethorn (15g/stack at the moment).

Will Eternals prices inflate in Cataclysm? It is really hard to say. Right now Eternal Earth is flirting around a JC-enforced vendor price of 1.82g apiece (two Eternal Earth = Stoneguard Band = vendors for 3.65g)... but there are several stacks of Primal Earth on my AH for 1g apiece. Eternal Fire is actually going for 35g apiece, and I am dumping what stock I have to capitalize on that price - there is not a whole lot of Primal Fire up for sale, but the upper limit on price seems to be 23g. Eternal Water and Primal Water are both jokes. Eternal Air is ~12g while Primal Airs have consistently sold for 50g-60g the entire duration of Wrath. Of course, Primal Air is a component to the +15 Agility to gloves twink enchant, which is probably the buoy force to its long-term value.

Abyss Crystals
What about Abyss Crystals? Sometimes the market is truly dumb, as I too have recently bought 10g Abyss Crystals when the going rate of Greater Cosmic Essense is still 8g. But what really are the odds that Essense and Infinite Dust will explode radically in value? The price of Greater Planar Essenses and Arcane Dust was largely, and perhaps completely, propped up by virtue of Mongoose still being a good enchant for endgame tanking (and DPS shortly after the AP change in 4.0.3) after all. Based on what we know of Cataclysm enchants, there does not appear to be any still-good Wrath enchants. Which means all that Infinite Dust and Essenses are useful for the just the people leveling Enchanting from 350-425. How much would they need? Let us look at some of the power-leveling guides that people may be using:

So the first guide has 603 Infinite Dust, 5 Greater Cosmic Essenses, 10 Crystalized Water, 30 Eternal Earth. Also 6 Greater Planars, 6 Arcane Dust, and 1 Eternium Rod to make the Runed Eternium Rod. The Runed Titanium Rod will take an additional 40 Infinite Dust, 12 Greater Cosmic Essences, and 8 Dream Shards. Meanwhile, from the same guide, getting from 300-350 takes around 330 Arcane Dust and 15 Greater Planars. So roughly double the amount of TBC mats, which leads credence to stable increased pricing in the future. That second guide recommends 356 Infinite Dust and a whopping 115 Greater Cosmics to go 350-425. It is pretty safe to say that Wrath enchanting materials will retain their value into Cataclysm despite not having a "killer app" in the form of TBC's Mongoose.

The take-away from all of this is two-fold. First, whenever you hear someone talking about investments, the thing to keep in the back of your mind is what your realistic time horizon consists of. You may think your time horizon is only three weeks into the future and you end up playing for five years. That is okay! Time horizons are personal things and there is no way to get them "wrong." You can (and will) make gold with a time horizon of zero.

The second thing to keep in mind is the simple principal I used when it comes to "investing" via the AH: never invest in something you would/could not end up using. I did half a dozen or so Battered Hilt flips back in the day and I never once worried about losing gold on them because in the back of my mind I knew that I could end up being satisfied with a Battered Hilt purchase at 6000g or whatever if I could not sell it at 12,000g. If you plan on having 98 stacks of Saronite Ore in the guild bank, that is fine, but you will feel a lot better about that investment if you had a backup plan of, say, making 100,000 Saronite Bombs. Any investment is never a total loss if you could end up using the investment itself for another purpose.

[This entry submitted to Not So Secret Society's Best of the Month Blog Carnival for December]

1 comment:

  1. I never liked the idea of stocking up on saronite. Always seemed like a waste of time dealing with logistics of moving everything around and a waste of guild bank space. If everybody stocked as much Saronite as they claim to have done, then prices may never really go back up.

    And then what do you have? 3 hours of time lost smelting it down to recoup a 4k investment? I hope it works out for those who stocked up; I really do. Not my cup of tea though.