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Recap of Alpha Competition December 2010

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Sunday, December 5, 2010

Playing the Auction House at Cataclysm Launch

A lot has been written in the gold-blogging universe about preparing for Cataclysm.  The most consistent theory is that the Cataclysm launch will be an opportunity to make a small fortune by farming tradeskill items from new content and selling them for exorbitant prices.  The second most espoused theory suggests that if you can beat your competition to manufacture the new must-have widgets and wendigos with your profession of choice,  you could enjoy several days of monopoly pricing.  What I've not read much about is whether there will be opportunities for speculators to flip items.  My thoughts:  Absolutely!  And it will be the wild-wild west(fall?) where if you aren't watching your back, you may end up naked by the horse trough.

Volatility in a market is created by many factors.  One of the big factors at the beginning of a World of Warcraft expansion is that a whole new set of items hits the market that nobody has a solid idea of valuation.  For a shrewd investor, this is the classic opportunity to buy low and sell (ridiculously) high.  Player's heads will be spinning with the various opportunities in the new expansion, and anyone with gold in their account isn't going to be afraid to spend.  The problem is that you can get burned very quickly in a market like this, especially given that prices on most items absolutely will fall with time.  It's the natural progression of an expansion cycle.  Anything you buy for resale on day one better be off the books by day two or there is a good chance that you are going to be standing naked by the horse trough, as mentioned earlier.

And remember, even if you do find a can't-miss, ridiculously under-priced item on the Auction House for just 5g that you expect should sell for 500g, don't sit on it!  You may think that because you found it for 5g that you could sit on it for a month, sell it for 250g, and have a 245g profit under your belt.  By the books, you do.  But economically, you just cost yourself 250g by holding an item that could have sold for 500g today.  It's so hard to do, but what makes a trader truly great is the ability to throw away the "purchase price" and only look at an item's inherent present value.  Yeah, you purchased it for 5g.  But it is *worth* 500g.  500g is its economic value.  Don't let its economic value slip like the sands through the hour glass of the days of our lives.

My plan in tinkering with the new economy will be as follows:

  • Don't be afraid to take some risks
  • Watch closely for trends, buy for the purpose of testing markets to see just how liquid they are
  • Snag any Blue or Purple non-profession items if they fit the "this helps to level" paradigm
  • Do homework on finding "chokepoint" and "niche" items.  For example, Nerubian Chitin was very easy to farm and sold for incredibly high prices at the beginning of the Lich King expansion due to its niche use in Nerubian Leg Armor.  What's more, many players didn't realize its value, so it was constantly priced very inexpensively on the Auction House.
  • Use 12-hour Auction postings to save on Deposit fees.  Things *will* be changing that fast.

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