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.

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?

PTR Patch Notes, 1/11

Some things to eyeball if you have not gotten to eyeballing the PTR notes already:

• A socket has been added to all crafted epic armor pieces that did not already have one.
• The number of herbs required to create flasks has been reduced, while the Volatile Life needed has been increased slightly.
• The drops from Tiny Treasure Chests have been improved slightly.
• The Electrified Ether recipe now creates 2 to 3 Electrified Ether instead of 1.

The epic items gaining a socket is very good news as obviously it makes acquiring them more appealing. MMO-Champion is reporting that the flask change is pretty significant, going from 12 herbs down to 8 while the Volatile Life has been increased from 6 to 8. It is hard to overstate my jubilation over this change as it might, might make flasks worth the trouble of actually making now. In the meantime, stock up on Volatile Life. Unless Blizzard has a radically different definition of "improved slightly," I doubt the Potion of Treasure Finding change will amount to much - Heartblossom is a huge pain to farm since the node nerf of 2010, and Auchindoun's current market means these potions cost 84g to make just considering the Heartblossom.

The last note may not seem like a big deal, but I have been making a pretty penny out of Electrified Ether. Not just items made out of the Ethers (the new Cata pets for example), but the literal Ethers themselves. The material cost right now is two Volatile Airs for one, but I have gotten 150g+ for each Electrified Ether despite that being nearly double the cost of the Airs for an item that I can only assume is being bought by people who could make it themselves. You cannot quite make a living out of such sales, but you can very occasionally make a killing.

Alchemy and JC Synergy

How have I been making gold so far this expansion? Several ways, but my favorite is the Alchemy/JC cycle.

I originally picked Alchemy and Jewelcrafting for my main back in TBC because I did not want to rely on the AH to supply the metagems I wanted to cut and sell. The metagem transmutes back then required nine gems and four Primals and were on the Alchemy daily transmute besides. These days, the synergy between these two professions has only deepened and become refined into almost a pure cycle.

What is the cycle? You start with buying Obsidium or Elementium Ore off the AH - in my experience Obsidium Ore is preferable for our purposes, and the bot farmers have driven it down to 70g a stack on my server. Once the ore has been obtained, you prospect all of it with a goal of getting the uncommon Cataclysm gems. As mentioned in other articles, each one of these gems vendors for 5g by itself, or 9g if you cut it into anything at all. Rather than vendoring, we are going to use Alchemy transmutes to bake in some additional profit.

As with all things, you are going to want to check your own realm's AH prices to judge which direction you take the next step. The first thing I recommend is the Transmute: Shadowspirit Diamond. This transmute takes three of every type of uncommon gem, including Nightstones, which are likely to be at or around 100g apiece due to their use in leveling JC and the daily. Fortunately, the Shadowspirit transmute makes two metagems before any transmute mastery procs. Once you have these metagems you can either sell them uncut or cut them yourself if you have snagged any patterns by now.

The second option you have is to utilize the other gem transmutes to turn three uncommon gems of the same color + a few herbs into a rare gem of that same color (e.g. Transmute: Inferno Ruby). The uncut rare gem market right now is a state of flux given the lack of socketable gear for the majority of players combined with a lack of JCs with the appropriate cuts. What this means is that you are not likely to be able to make much of a profit off of selling uncut gems - this state will naturally correct itself over time to resemble what we all remember from epic gems at the end of Wrath. The good news is that cut gems are probably going for 100g+ minimum, turning those three somewhat useless carnelians into, say, Brilliant Inferno Rubies which will sell for 7-9 times as much as the vendor price.

As a sort of thought experiment, imagine that 10 stacks of Obsidium Ore at 70g a stack gives you enough uncommon gems for a single Shadowspirit transmute and two other rare gem transmutes. If you are able to sell the Shadowspirits (cut or uncut) for only 350g apiece, you come out even before considering the rare gem transmutes (cut or uncut), not to mention any rare gems gained by prospecting and/or excess uncommon gems in quantities below three. Odds are good that you will be gaining more than that, widening your possible margin and allowing you to maintain a profit in case Obsidium Ore prices higher on your server.

Better Living Through Alchemy

There are two transmutes you need to be doing whenever possible, if you have not been already:

Transmute: Living Elements - Volatile Life x15 (in Uldum)
Transmute: Inferno Ruby - Carnelian x3, Heartblossom x3

Like a lot of people, I imagined that Transmute: Truegold was going to be the king of the cooldowns. Maybe it is on your server, but on mine Volatile Air fluctuates between 65g-85g apiece which shoots the minimum price of Truegold to somewhere around ~1300g in mats in order to break even, let alone make a profit. If you can sell your cooldown to someone else at more than 800g, then by all means do that instead.

As far as Inferno Rubies go, you do not even necessarily need to have a JC character depending on the price of Carnelians in the AH, although obviously prospecting Obsidium/Elementium Ore itself brings the greatest returns. For example, Carnelians are around 45g on my realm's AH, Heartblossom is 150g a stack, and Inferno Rubies fly off the shelves at 195g. Pressing a button with no cooldown and collecting 37.5g an hour later for each time I pressed it? Yes, please.

I would normally caution the flooding of items like Inferno Rubies, but there is little actual downside at this stage of the game. The stat consolidation post-Shattering has made stacking primary stats like Strength and Intellect even more of a no-brainer to most class/specs, so you can expect heavy demand for Inferno Rubies (and the epic equivalent later on) for pretty much the entire expansion. The best thing is that your market for Inferno Rubies includes not just people looking to socket their newly grinded Justice Point gear, but also the JCs trying to recoup their ~1500g cuts (since they could have sold the JC tokens for Chimera Eyes) under heavy competition.

Forecasting Cataclysm Trends: Elementium Ore

The Elementium shuffle has already begun.

Within the first 24 hours of Cataclysm going Live, prices on Auchindoun for Elementium have gone down from the 550g/stack I was selling them at to 100g/stack, which is almost the price one would expect Elementium to stabilize at once the dreaded "Cata inflation" is properly taken into account. The reality is I am finding it entirely possible Elementium will reach near-Saronite levels within the next month based on its ease of acquisition in Twilight Highlands alone - I am talking in the neighborhood of 40-50g a stack. Unlike Saronite, Elementium Bars vendor for only 7.5g/stack, which means its price will only be buoyed by the Shuffle itself, which is great news for us.

Speaking of the Shuffle, if you have a Jewelcrafter and are not buying Elementium Ore at 200g/stack, you are probably giving gold away; at 100g/stack, you can literally buy 200g with 100g. The new uncommon gems should be going for 50g apiece minimum, and likely quite a bit more given their necessity for leveling JC. It takes 475 JC to prospect Elementium, so you will have to either start buying said gems or prospect some likely more pricey Obsidium Ore to get to that threshold. Once there, each stack of Elementium Ore is four uncommon gems minimum, which means you hit a profit at any point you get an extra gem (possibly a rare!).

Incidentally, the uncommon gems vendor for a whopping 5g apiece, which sets their deposit fee at a ridiculous 3g 30s whereas rare gems vendor for less (3g). The irony here is that none of the uncommon gems are useful in of themselves* since they require ilevel 285 gear to be socketed into, and there is basically zero gear rewards until the endgame that even have sockets. The uncommon gems vendor for 9g apiece when cut, so to a JC the True Vendor Price of Elementium (and Obsidium) Ore is 36g a stack minimum, although you can probably bank on 45g.

*Obviously the gems are good for leveling JC and making jewelry to be disenchanted. Uncommon gems are also used in Alchemy for transmuting 3 of the same color gems plus some herbs into the rare gem of that color, i.e. Transmute: Inferno Ruby. And, of course, to transmute the one-size-fits-all metagem. One additional thing to keep in mind: these gems transmutes have no cooldown. The herb cost is basically immaterial, so the rare gems should always be pegged at uncommon gem price, e.g. Carnelian x3 = Inferno Ruby.