Thursday, March 31, 2011

Buying Stuff: Hard to Do

I did one of the hardest things for me in the game last Friday... I bought something.

Specifically, I bought something for myself that I had no intention of trying to get a return out of it, e.g. for pleasure. *shudder*

The price tag was 28,500g bid with 30,000g buyout, and I assuaged some of my trepidation by winning it via bid. My main is Azuriel, a Prot paladin that I spec as Ret when I want to punish myself in PvP, so it was not even for my main. Who was it for? My level 83 (at the time) Warrior, or potentially my level 84 Death Knight. In other words, a total twink item for an alt I am not even 100% sure will get 30,000g worth of enjoyment out of it.

I do not bat an eye at investing 13,000g in, say, Chelley's Staff of Dark Mending and reselling for 21,000g. I am still bullish on the Strength version of Hurricane and Tsunami decks. I will (and indeed have) poured thousands of gold into power-leveling professions on my alts, including the now level 84 Blacksmith, buying all the Chaos Orb patterns even though the BS cannot acquire any just yet. To me, these are business expenses to be written off at tax time, so to speak. The cost of doing business, just like gold for repairs or the buying of mats for flasks and such.

Fury of Angerforge though? It was not particularly cheap. Even if I did resell it, the margin would probably not be that great. You do not see very many BoE trinkets on Auchindoun though, which is a point in its favor. And my mortal weakness in WoW are things that change your character model and/or debris you can set up in the game world, as opposed to pets or mounts that other people fawn over.

Dartol's Rod of Transformation, Arcanite Ripper, Ectoplasmic Distiller, Romantic Picnic Basket, Time-Lost Figurine, Piccolo of the Flaming Fire, Orb of Deception, Hook of the Master Angler, Bones of Transformation, Wisp Amulet, Brazier of Dancing Flames, Brewfest Pony Keg, Direbrew's Remote, Gnomeregan Pride, Standard of Unity, Crashin'Thrashin' Racer Controller, Alliance Battle Standard, Stormwind Banner, Crashin' Thrashin' Robot, Iron Boot Flask, Orb of the Sin'dorei, MiniZep Controller, Highborne Soul Mirror, Savory Deviate Delight (not pictured)

Why bring this up at all? Tell me... is it easy for you to spend gold in WoW?

One of the hooks of gold blogs is getting you enough gold so that "you never have to worry about gold ever again!" While it is true that I never really glance at how much repairs are after a night of wipes, I feel every individual gold piece evaporate any time I spend it on buying flasks instead of making them, or essentially anytime I am trading money for time. Do you have any expectation that your accumulated gold meter will reach 0g by the time you hang up your WoW hat? Or is gold really what it objectively is: play money in a finite, virtual game? Am I alone in feeling miserly despite not needing to be? Is there not some point at which a person cannot rationally justify making more gold without gold becoming its own game (e.g. you have to spend a significant effort to even give it all away)?

Let me know in the comments below. I'm especially curious to hear from other gold bloggers and/or people with 250k+ about this one.

Monday, March 28, 2011

OT: First Tier Vs ICC

More and more, I think Gevlon over at the Greedy Goblin has gone off the deep end. In his latest post, he asserts that a Wowprogress chart proves that Cataclysm Raids are as easy as ICC. Here is the chart:

He goes on to say:

I placed some dots on the chart. The green dots represent the current situation of Cataclysm early bosses, the red dots are Cho'gall, Al'Akir, Nefarian. What?! More people killed Nefarian than the Lich King?! Cho'Gall is easier than Sindragosa?! There are 4 bosses (Halfus, Valiona, Magmaw, Omnitron) who are easier than PP?! What the hell is happening here?
What is happening here is that Gevlon has pulled a Nietzsche, staring a bit too long into the M&S Abyss only to have it gaze back at him. As we all know, aside from Gevlon himself apparently, is that ICC was gated content. As you can see from the very chart he posted, Lich King was not even available until almost halfway through the compared time period. If we actually shift the lines back to the beginning to simulate un-gated ICC, the chart suddenly demonstrates in graphics what everyone already knew:

I did not bother listing all the same bosses as Gevlon, because in his bizzaro-world more people hitting 4/12 this tier than 9/12 last tier after the same amount of time is some kind of coup to the argument that Cataclysm started too hard. That's dumb. What's missing from that chart? The lines for Marrowgar, Deathwhisper, Lootship, Saurfang, Festergut, Rotface, Blood Princes, and Dreamwalker, any and all of which were easier than Magmaw or Halfus, and got peoples' feet in the raiding door. That top green hash mark is Magmaw, by the way. If you have killed Al'Akir and/or Nef by now, you should have been able to kill 10m Lich King at 0% buff. By the April 5th line in the graph, the ICC buff was 10%.

Remember the missing guilds from Wrath I was talking about? Yeah, the graph proves they're still gone. Speaking of missing...

WarcraftRealms is, well, WarcraftRealms, but it is showing less player activity now than back in April of last year. Remember back in October? Nothing much to do, ICC super stale, etc? Same level of activity right now. I am not trying to say WoW is dying or anything, just that if Firelands comes out at the same difficulty as this tier (or higher!), well... it might be time to start spending a bit of that fortune of gold you have just wasting away in your bags.

Thursday, March 24, 2011

Crafting Paradigm Follow-up

The following is a portion of the comments replying to the New Crafting Paradigm article.

[...] The constituent parts of a combo sell at a higher a la carte price than the combined cost of the combo. This is done to move more product than they otherwise would.

And your loss leader explanation is exactly my point. For example, let's say embersilk bags sell for 300g per unit. Let's say that the current AH price of embersilk cloth is 3g per cloth, but there is so much cloth on the market, and I know my competitors have so much stockpiled, that to move any amount of cloth in quantity, I'll have to keep on undercutting and so will only average about 2.5g per cloth. Let's also say that hypnotic dust is 6g per dust. A naive person might say "The raw mat cost of the bag is 75*3 + 15*6 = 225 + 90 = 315g, therefore I shouldn't craft it". A more wily person might say "In order to extract 3g per cloth, I will sell some of it raw on the AH, and I will package some of it in groups of 75 with 15 hypnotic dust @5g per dust (acting as my loss leader) by crafting embersilk bags and selling it for 300g".

This was a good example... had the topic been solely focused on why people make/sell flasks (etc) below the market price of mats. As I noted in the article though, there could be any number of reasons why people do that, and it is not entirely relevant anyway since we can never really know what price our competition is getting mats at. But that is not really the point of the article - the point is that depending on the volatility of the raw materials, it may never make sense to make any finished goods compared to simply warehousing them.

Let's look at the given Embersilk Bag example, since that is more tangible.

First, it was established that Embersilk Cloth is 3g/each, but will probably need to sell at 2.5g/each to push our supply; Hypnotic Dust at 6g/each, but 5g/each to push. The market price of the final product, Embersilk Bags, is 300g.

Market Price (Buying Mats) = 75*3 + 15*6 = 225 + 90 = 315g
Market Price (Selling Mats) = 75*2.5 + 15*5 = 187.5 + 75 = 262.5g
Market Price (Selling Bag) = 75*3 + 15*5 = 225 + 75 = 300g

So... is this a 37.5g profit or a 15g loss?*

It was never specified what it cost to get the Embersilk Cloth/Dust to begin with, so calculating profit is impossible. It is also debatable how much sense it makes to call something a "market price" when you cannot realistically sell items at that price, but nevermind that for now. My point to you is that if Embersilk is 3g today but 5g tomorrow, that Embersilk Bag better be getting crafted at a 150g profit margin or you were better off holding onto the cloth. Or even if it goes from 3g --> Xg such that you can push your supply at 3g.

Meanwhile, the Embersilk Bag market isn't likely to move from 300g even if it suddenly costs 1000g to make one. We cannot even say "no one would make any new bags at that price" because we don't know how much mats someone may have squirrelled away (and not chosen to sell at the higher prices), or if perhaps the bags have already been created months ago, etc etc. 

The Anonymous commenter is absolutely correct that "locking in" Embersilk at 3g each via making bags > selling Embersilk at 2.5g. He is also correct in that selling mats in a package (e.g. any crafted item) allows you to conceivably move more product than individual listings - it is difficult to move Hypnotic Dust at any price on Auchindoun some days, so having the opportunity to "sneak" some into Embersilk is better than not selling any. The issue I wanted to highlight yesterday is this: "locking in" cheap mats into a finished product does not save you gold, it saves you bank space. If crafting something makes economic sense, craft and sell it. Do not craft more than you (believe you) can sell today though, unless you know that the price of your mats will not increase (beyond X% of the profit margin of the crafted good) tomorrow.

There is exactly one scenario in which it might make sense to turn all your mats into crafted items today, rather than crafting only when necessary: Alchemy specializations. It costs 150g to change between Potions, Elixirs/Flasks, and Transmute specs, and it typically is not profitable to, say, make flasks without being Elixir-spec'd - competiters having a 15% competitive advantage over you is massive, and the market itself is generally priced in such a way that the 15% proc bonus is assumed. So, if I wanted to crank out some Mythical Mana potions, it makes the most sense to go ahead and make as many potions as possible after switching specs if I plan on going back to Elixirs afterwards. Transmuting via daily cooldowns is generally profitable enough in of itself that you do not need to be specialized, but... transmuting a bunch of rare gems and/or metagems? You definitely will want to switch.

Incidentally, transmuting rare gems is an example of where locking in prices actually works out most of the time. Uncommon gems typically have extremely low margins compared to their rather massive listing fees such that being able to lock-in a price that works out to be higher than 9g/each has no real downside... provided the rare gem itself doesn't plummet to 15g or something ridiculous.

Hopefully the topic makes a bit more sense now.

*Exploring the concept of paper profit vs paper loss and the realization of both will be the subject of a seperate post.

Tuesday, March 22, 2011

New Crafting Paradigm

I have been thinking a lot on various comments made both here and over at Cold's blog (specifically his Opportunity Cost Part 2 posting), all related to the variance between the market price of mats and of the market price of finished products. It seems like a no-brainer to say the market price of finished products moves independently of the price of mats - even beginning auctioneers can pick up on the fact that, say, cut gems generally go for more than uncut gems, or that profit can be made on making flasks at certain herb prices, and so on. It makes intuitive sense that by adding work to an object, i.e. turning apples into applesause or herbs into flasks, you increase the value of the object.

But... how do we thus explain when the finished product ends up being valued below the cost of materials? We already answered that question: the market price of finished products moves independently of the price of mats. The only real connection we could have is that when, say, flasks go "underwater" (e.g. become worth less than the mats needed to craft them), it becomes less likely that more flasks would be created. I say "less likely" because there is no real way of knowing what price points other Alchemists bought their herbs at, or if they are the type of people who overestimate the 15% Elixir Master bonus, or perhaps the people that sell whatever they have at whatever the current going rate is regardless of "paper profit."

What this is leading me to do is codify a new crafting paradigm for myself, putting numbers and words to a concept I was subconsciously doing anyway.

Twilight Jasmine = 4.32 - 10.5 | (x8) 34.56 - 84 (avg 59.28)
Azshara's Veil = 4.4 - 10.65 | (x8) 35.2 - 85.2 (avg 60.2)
Volatile Life = 8.07 - 12.5 | (x8) 64.56 - 100 (avg 82.28)

Draconic Mind = 132.54 - 241.55 (avg 187.04)

Highest End Mats = 269.2
Lowest End Mats = 134.32
Avg Mats = 201.76

60 flasks = 12,905.76 flasks (60 + 15%) - 12,105.6 mats (60) = 800.16 = 11.6 per flask

To put it into words, on average, you only ever make ~11.6g in profit making a Flask of Draconic Mind as an Elixir Master alchemist based on the last two weeks of TUJ numbers. Profit is increased when you buy mats below average and sell flasks above average, obviously. However, in comparison, the profit you would make buying 60 flasks' worth of Azhara's Veil at it's lowest price of 4.4g/each (2112g) and selling at it's average price of 7.5g/each (3600g) is immense: 1488g profit before the AH cut. Buying Azshara's Veil at 88g/stack and selling it at 150g/stack is on average more profitable than making flasks, without even considering the price of the other herbs.

Almost a "duh" moment, right? Flipping a 88g item into 150g is a 62g return that no one would miss, let alone the opportunity to do that with a bunch of stacks of herbs. As I mentioned though, this is a new crafting paradigm for me, or way of looking at things. Alchemy is one of my go-to professions, and thus I have an unconscious bias towards making things even when it appears to make no economic sense. Why even bother having professions if you are not going to use them, right?

In other words, in this paradigm it is not enough that a profit could be had by purchasing mats at X price and crafting something to sell at Y. The price at which I can sell Y has to be higher than the highest price of X, or I was probably better off just warehousing the mats until their market value swung higher.

I say I have been doing is subconsciously, and the reason is basically my Foundation article on Finding the Margin. By keeping my personal margin relatively high, I was inadvertently keeping myself from jumping into "profitable" albeit volatile markets which were prone to going underwater. With a personal margin of 30g, I would avoid making flasks at 11.6g average profit and thus expose myself to less risk. When mats are really cheap and flasks are really expensive, that margin increases up to 100g per flask - an obvious market signal that I should move in and set up shop... for a while at least.

One thing I wish I could do is be able to present this data in a graph or picture form, but I have no idea how to do so.

Friday, March 18, 2011

Cleaning the Bank

One of my first posts in PVSAH dealt largely with throwing a wet blanket over the long-term investment craze in Wrath commodities like Saronite Ore and Abyss Crystals and such. As I went to collect my proceeds from selling stacks of Cobalt Bars for 300g today, it occurred to me that I should perhaps revisit the advice.

(12.1g per Saronite bar, 3.66g per two ore)

(13g per Cobalt Bar, ~1.1g per ore)

First, just to get it out of the way: go check your bank. I did not mean to stockpile 15 stacks of Cobalt Bars to sell later, it just sort of happened that way on my rarely used Blacksmith alt. Every stick of non-BoP debris in your bank has a constantly fluctuating gold value attached to it, and it certainly can pay to reevaluate how important it is for you to have, say, 2000 Deviate Fish (selling at 13g each on Auch) taking up space. Ironically, I was cleaning the bank out to make room for all the Pyrite Ore I have been accumulating for less than 70g a stack.

Secondly... I do not really feel I made the wrong call here. Time Horizons are an important concept when it comes to investment, and I guarantee that there were people playing three months ago that are not playing today. But let's ignore that for a moment and assume you had stockpiled a full guild bank page (98 stacks) of Saronite back then for 11g/stack. Your 1,078g three months ago is now worth... 3,586.8g. Assuming, of course, you can actually release 98 stacks of Saronite Ore into the economic ecosystem without depressing the price.

The real big news here is 4x-10x return I can apparently nab for simply smelting ore. Your 98 stacks of Saronite Ore looks a lot more impressive on paper when it is suddenly at 11,858g in bar-form. But, again, nearly 50 stacks of Saronite Bars? Not likely to all go for 242g a stack.

In any case, I highly suggest going out there and doing what might otherwise seem like a no-brainer, e.g. making sure you aren't sitting on a pile of gold.

Tuesday, March 15, 2011

(Nearly) The Last Post You'd Ever Need

I have been slow to get on the The Undermine Journal "bandwagon" for several reasons.

First, I'm just edgy like that. You know, fighting the system, railing against the establishment by shopping at Hot Topic, and so on. Totally a counter-culture warrior.

The second, more serious reason? I had no idea, no idea, that it is as absurdly useful as it is. Other bloggers have done posts about notifications and such, but that sort of thing does not appeal to me. What appeals to me is basically a single website giving targeted, pin-point data on what is profitable and what is not based on practically real-time price captures of my specific faction's AH. I would not believe this without pictures, so here are a few:

So what you are looking at is the Auchindoun-Alliance page on TUJ. Before you go further, I highly recommend you find your own Realm on TUJ's main page, clicking the correct faction, and then bookmarking the website, preferably in your Firefox Bookmark Toolbar (assuming you use Firefox). Now, what you should look at next is Enhancements and Consumables dynamic "tabs" which break down like follows when you mouse-over:

As you can see, it breaks all of the professions down. When you click on, say, Alchemy, you get a page that theoretically puts all of us gold bloggers out of business.

The screen that appears has a lot more information on it than what I have shown above, but I want to specifically show you the Flask section. Namely... look at it. The Undermine Journal automatically tabulates the current market price of mats AND shows you the current market price of the resulting product, all tailored to your realm's faction AH. Are you still sitting down? Haven't fallen out of your chair? I highlighted the Flask of Steelskin as an example of a market in which I can probably net a profit rather easily by purchasing AH mats and turning around and selling the flasks at a mark-up. We can see that there are only 2 Steelskin flasks up currently, but that actually works in my favor for the most part. Meanwhile, I could probably make more profit selling Draconic Mind mats than the actual flasks at the moment.

Outside of some philosophical posts or patch speculation, what could any gold blogger actually tell you that TUJ could not? That is an open question.

I decided to browse the Leatherworking section, and again, I found elegantly tabulated data clearly demonstrating a market I have been a bit too lazy to dabble in, much to my own economic harm. 150g profit margins on the blue leg armors? Yes, please. The Leatherworking section includes crafted epics and the PvP gear and so on as well, so you can check out the pricing fluctuations and competition before deciding for yourself whether to jump back in X market. As far as the crafted epics go, just keep in mind that since Chaos Orbs are BoP, their price is not included in the material cost column.

Did I mention that all of the items listed through TUJ are Wowhead-enabled, meaning you can mouse-over the items for a description or click on them to go to their specific webpage?

One thing that TUJ cannot do (yet) is the sort of AH meta-game that results in Obsidium Shuffling, or figuring out that disenchanting the epic Engineering helms might net a profit. But that aside, if you were ever stuck wondering what you should potentially be doing to make gold under current market conditions, look no further than The Undermine Journal. It is very nearly the last gold blog post you would ever need.

Thursday, March 10, 2011

OT: Firelands, Difficulty, and Cataclysmic Malaise

As you have no doubt heard by now, Firelands has been delayed until patch 4.2. A lot of people are looking at the delay as a good sign, or perhaps dismissing it as irrelevant considering 4.2 is scheduled to hit (the PTR) "soon after 4.1 goes live," thus looking at it as though we are getting ZA/ZG early rather than the next tier of raiding late.

From my perspective, this announcement is the unequivocal admission that Blizzard has screwed up the difficulty of this expansion.

Tuesday, March 8, 2011

The Case Against Bot Farmers

Remember when I was talking about how bot farmers can be a healthy part of the marketplace? Yeah...

That is over 110 stacks of Elementium Ore below 40g/stack, and 143 stacks at 64g. Heartblossom is below 60g, Heartblossom, and you get a complementary stack of Whiptail whenever leave the Mage Tower in Stormwind (even the Horde!). The Auchindoun AH is simply getting tanked and spanked hardcore by botting, with no real sense that it will be addressed anytime soon.

So why am I not all excited and buying all that cheap ore up to vendor the gems at a minimum? I simply do not have the mental bandwidth. Addons and AFK-time aside, I actually want to spend maybe an hour doing my AH thing and be done with it. Going down the road of prospecting 200+ stacks of ore will only lead to burnout for me - knowing your own limits is crucial to staying in the gold game, especially considering once you start hating your playtime, the relative value of your gold goes to zero.

To give you a better idea of how warped the botting has become, look at this:

Let me do the math for you.

In other words, 46 stacks of Pyrite Ore at an average price of ~59g a stack. I did happen to find the mental bandwidth for that, let me tell you. 

That said, I honestly do not know how to approach the AH market anymore. The prices of all things related to these ultra-cheap raw materials are themselves being tanked down by all the sellers smelling blood in the water, making the vendor-option the only real (albeit slow) avenue to profitability. So outside of this Pyrite killing - which I intend to bank for a while as my Blacksmith is not level 84 yet - I have not been doing much of note, other than big-ticket items like Darkmoon cards and flipping BoE epics.

Is anyone else seeing this kind of bot madness?

Thursday, March 3, 2011

Sunk Costs & Investment

Take a moment to muse on the following thought experiment:

Yesterday there was 10 stacks of Whiptail for 60g/stack and 5 stacks of Cinderbloom for 55g/stack. You bought them all for 875g and made 100 Mythical Mana Potions using all of the herbs, with the intention of selling them for 25g apiece. Today, the price of Whiptail is 110g/stack and Cinderbloom is 90g/stack.

Question: Is there a difference in profit between a sold Mana Potion yesterday and a sold Mana Potion today?