Why You'll Pay 2,000 Gold For Gems in Warlords of Draenor

     I hate to be a doomsayer for anyone used to buying gems for under 300g, but it looks like we have some changes coming in WoD. At the same time, I'm not sure if this is good news or bad news for those who decided to keep Jewelcrafting as a profession or not. But it looks like we're going to see 2,000 gold gems in Warlords of Draenor.

Get shocked now, so you can prepare later, and share in the wealth. :)

     Did a little talking about this on the YourWoWMoney podcast, but I just ran some numbers. The rare gems for WoD cost 50 Taladite Crystals, 10 Sorcerous Air, and 5 Warlord of Draenor Herbs. Taladite Crystals at max level are crafted from 20 Blackrock ore and 10 True Iron, yielding 10 crystals. So, essentially you'll get 1 crystal for 3 ore. Sorcerous Air is a byproduct of crafting, so it's worthless and it's price will be entirely dictated by demand, competition, and server size. Expect prices to be pretty high initially, and settle in somewhere in the 10g-200g range depending on your server. Ore routes from my testing give 600-900 ore per hour, so we'll see about the same prices at the start of the xpac, in the 2g-5g range, maybe leveling out back to 1g or maybe not (we don't know enough about long-term demand yet to figure out that equilibrium but we can assume what people will put the ore up for at release).

50 Crystals = 150 ore = @2g, 300g  @5g, 750g
10 Sorcerous = @10g, 100g  @200g, 2000g
5 Herbs = 10g
Total ~ 410g-2760g

Currently, with the prospecting mechanic we all know and love are used to, you can generally get 1 rare gem from 20 ore. In MoP, we're seeing gems at 100g to 300g with a mat cost of 20g for a stack of Ghost Iron. When Lore first announced that Jewelcrafting and Gem prices would be higher because Blizzard was reducing the number of slots in gear, who would have thought they were going to do it by increasing the mat cost  x10? Share this with any JC friends and let me know in a comment what you think.

Long story short, on a high pop server, we're looking at gems that cost a minimum to craft of 400g, and a maximum of almost 3000g.  And depending on where sorcerous prices stabilize at (I'd expect 25-40g personally), you should be expecting gem prices in the 1,000g to 2000g range FOR THE ENTIRE EXPANSION. Start saving.

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What You Should Know About the Alliance and Horde AH Merger

We have a bombshell, ladies and gentlemen. That's right, come 6.0, the neutral AH is being abolished and the Alliance and Horde Auction Houses are going to merge. I'll give you a minute to freak out, run around the room with your arms flailing, and then come on back and we'll figure out what this faction AH merger means.

     Ok ok, this breaking news is a couple weeks old aleady, but I did want to do a full blog post on it, and I'm sure some of y'all may not know. First, yes, it means you will be able to buy and sell things to the horde if you're Alliance, and vice versa. What it DOESN'T mean is that the world is ending, WoW is exploding, or the Auction Housing are going to be destroyed. So, what have we got here?
     On every realm, we'll essentially be going through a realm merger, where population increases and competition increases, pushing down prices of most markets slightly. Raise your hand if you've been through a realm merger. Wasn't as bad as you thought, was it? If you haven't, essentially, the few days beforehand, everyone gets nervous, the auction house starts to go a little crazy, and then the merger happens. The three days after the merger, everyone yells at each other to "GET OFF MY REALM," makes awkward one-word combinations of the two realms' names, while the AH is adjusting to the increased competition. Eventually AHers get tired if bidding wars and buying each other out to prove who is top dog (aka. someone runs out of money). After four days...everything is fine.

Will prices fall?
     Yes, but not necessarily on everything, it won't be anything to worry about because you might actually be making more profit in the long run. So, if you're a miner or herbalist, chances are you already have a lot of competition. Even on a low-med pop, 6-10 farmers are out and about. So, a merger doubling 8 miners to 16 won't affect the market as much as Blacksmithing, where the number would double from say 3 major competitors to 6. Of course you'd have the smattering of 10 or 20 half-hearted posters, but I'm talking about the people who run their professions like they own it. (People like you, the kind are prepared and read blogs)

But Why Would I Be More Profitable?
     So, prices generally fall according to the inverse log of the number of people on the server. Blah blah blah, math, what this means is that if you double the number of people, the price won't be cut in half, but less than that. If you triple the people, prices will be less than a third of what they were. Taking Sky Golems as an example, on the day they were released, on low pop realms, they were selling for 300-400k gold, and on high pop realms like Stormrage, they were at 60-80k within a few hours.

Left:  Graph showing inverse log function.
Right: Google related image search. Nailed it, Google. Nailed it.   -_-

So, let's say you've been selling 10 gems a day for 150g each. 1500g in revenue. Well, when the population doubles, if you stay on your game, you can expect 20 gems a day, but prices won't be cut in half. So, 20 gems a day at (for instance, but realistically) 100g each, which would total to 2,000g in revenue.

But That's Just Revenue. What About Profit?
     Yah, this eats into low-profit-margin crafted professions a lot more that it does other trade professions,  true. Miners could essentially mine forever, since small servers are now medium pop and mediums are now large. However, with WoD, they're changing the structure of professions to be higher priced on average. Fewer gem sockets, by itself, raises the price of each individual gem. With items like Sorcerous Earth, and the Alchemical Catalyst, there seems to be incentives to deplete materials by selling goods to other profession users rather than using them yourself (or building up your Garrison or course). Either way, this expansion should not be a "dump all raw materials from Halfhill on the AH." The professions you know and love now are being altered to sell for a higher price in the future. Still, it's early. It's Beta.

     So, am I worried about this? A little bit, but not really. There will be a pretty significant adjustment, especially for people on servers who have 15% Horde and 85% Alliance where the Horde prices would plummet, but in reality, most of those server have been merged already and won't be drastically affected. Furthermore, if you've already been through a server merge, pat yourself on the back, because you know what this is going to be like, except this time, you don't have to deal with all the BS in Trade chat. :P

Thanks for reading my little WoW blog! You can follow me on Twitter here and Google+ Here. Visit my YouTube channel or just subscribe.  I recommend that all goldmakers download the TSM Suite and the UndermineJournalGE addon and you can read my setup guide for that if you'd like. And remember that the key to making gold in WoW is just to

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<Prev: Alliance Zone and Profession Guides                                      2,000 Gold Gems in Warlords: Next>

The World of Warcraft 2014 Q1 Subscription Numbers Are In!

     I was on the conference call with the Activision Blizzard gang yesterday and things are looking great. I don't invest with them but I like to stay up to date on the business side of things. New games are coming out, profits are up, even Kevin Spacey is on board as the villain in Call of Duty Advanced Warfare. But no one reading this cares about First Person Shooters, amiright?! So lets get to the meat and potatoes and get talking about some Blizzard products.

Diablo 3
     Mike Morhaime got on the mike (get it?) and started off with Diablo 3. It's broken records as the top selling game of 2014 so far and had 2.7 million purchases in its first week alone. Mr. Morhaime said "We attribute a lot of the game's success to a focused effort on listening to player feedback and making improvements to the game based on that feedback." While that may sound like a pretty obvious course of action, it can be an expensive one, and was seemingly ignored for a majority of Diablo 3's release until recently. Thank goodness this has changed because things are gamers are getting involved again. Players can look forward to content updates that include Tiered Rifts, which will be Rifts that increase in difficulty and give greater rewards based on that difficulty, as well as "The Ultimate Evil Edition," a console edition of Reaper of Souls.

Hearthstone
     As far as numbers go (which y'all know I'm big on) 10 million people downloaded and played the game even before the official launch of the game, which is phenomenal. With the launch of the IPad version, even more people have joined and Blizzard has earned a top rating on Metacritic. However, they claimed it was too early to talk specific numbers of the IPad launch, which I kindof don't buy, but whatever. The big news is the upcoming expansion of the Curse of Naxxramas "The Naxxramas content will be released over several weeks. To celebrate the launch, the first set of content will be free for a limited time, while the subsequent ones will be unlockable through in-game gold or real money." This is great news because it gives alternatives to Arenas for those who don't like that content, and it gives players another option to spend gold, since once you have all the cards you need, gold is essentially worthless.
     Personally, I've always had a problem with companies that say "we released this product on 'so-and-so date' when they had an massively marketed open beta months or years prior. Other than that sneaky little bit of finagling, Hearthstone is going great, and is a fantastic game that I love playing. I can get lost in it when I feel like it, or can spend 10 minutes if I'm in a rush and just want to knock out a daily quest. Great job, Blizz.

Heroes of the Storm
      Again no numbers were released on this product but they're super excited about the combination of MOBA/Team Brawler and the iconic blizzard characters. It's in Technical Alpha right now but will be opening up to larger audiences soon, but no word on whether or not this will be an open beta. At the PAX East event though, people stood in line for 2 hours just to play. Pretty phenomenal. Blizzard, if you're reading, I wanna invite! Let me innnnn!

World of Warcraft
     Alright, so things dropped off a smidge from 7.8 million subscribers to 7.6. With no new content released, this slight falloff was to be expected, and in the call, he said that before Warlords of Draenor is released, things will probably fall off a little more. From my perspective, while games like Wildstar may nibble away at the MMO market share, any doomsayers out there that think a 200k sub drop is worth prophesying the end of the world, should just relax and join a Flex raid. We all lived through one Cataclysm. This is the end of expansion blues. As Mr. Morhaime relates "Overall, we're pleased with the ongoing stability in the player base but look ahead cautiously given seasonality and the late expansion cycle dynamics." They know what they're doing and have done this five times before. They're prepared.
     On the other hand, even though WoD is still 7 months away from it's 12/20/2014 scheduled release date, it already has 1 million presales. These come with an automatic lvl 90 boost, which I used to level my Pacifist toon to 90 (yes, I gave up on the goal to level it through mining and herbalism alone, although I still haven't killed anything after several hours of farming ore and herbs in Valley of the Four Winds). You can also purchase level 90 boost for $60, and those seem to be going better than expected, and I really wish they would have released some numbers on how people purchased these 90 boosts, but no luck. That was the call though, hope my wrap up was informative!

Thanks for reading my little WoW blog! You can follow me on Twitter here and Google+ Here. My YouTube channel is growing and has lots of great guides over here. I recommend that all goldmakers download the TSM Suite and the UndermineJournalGE addon for all goldmakers. You can read my setup guide if you'd like. And remember that the key to making gold in WoW is just to 

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<Prev: Should We Sell Glyps in Warlords of Draenor?

Are Role-Playing Servers Better For Transmog Sales?

     Someone on my YouTube channel left a comment yesterday claiming that transmog is worthless. While some people just rage that "lol greenz can't sell for 500g!" his basic point was more thought out; while transmog will sell on any server, it's only really a viable market on a Role Playing server where there are enough people transmogging to drive sales. As goldmakers this is an important thing to consider and I think we would all agree with that on the surface, or at least we would agree with the general rule of thumb that "Transmog sells better on RP servers." However I don't know of anyone who has delved into the topic analytically to find out if it's actually true or if it's just hearsay. So let's do that now!

If you aren't reading the Daily Blink, you should. 

     Before we see how many individual pieces people buy, let's look at actual mogs they wear at any given time, which is the driving force of the issue. We'll study how many people actually take each slot of their gear and transmog it and then see if there a significant difference on Role Playing Realms. While there are 11 moggable slots if you include the duel wielders, some classes only single wield, so I lumped together "Weapon" into one to simplify for a total of 10 moggable slots.  i.e.Fury Warriors who only mogged one of their two maces got counted as having a total weapon mog.

     I looked at a large sample of toons on each of four different servers: my home realm Tanaris (PVE- Ally pop 54,000), a large pvp server Darkspear (PVP - population 171,000), and then two popular Role playing servers Earthen Ring (RP - population 48,000), and Moon Guard (RP - Ally pop: 89,000). Before we get into the important analysis, there are a couple unimportant things that I learned inspecting a couple hundred toons, like:

• You'd be surprised how many mog just the hands
• You'd be surprised how many mog just the belt
• Heroic raiders go all the way or nothing at all
• PVPers never bother mogging their equipment (except of course for their weapons)
• The majority of moggers actually have a pretty decent sense of style, or I have none.

Results

     Ok, on to the good stuff. after looking at all these toons, the total mog rate is higher on average  for RP realms (some rates were the same or lower on Earthen Ring). Combining everything, 43% of the population on PVE/PVP didn't mog anything at all, while RP servers had only 23% completely unmogged. Interestingly though, when you take those people out of the sample, both RP and PVE/PVP players both mog exactly 54% of their available slots. and those that mog do so in the following priority system:

1. Weapon 80%

2-4. Head/Shoulder/Chest 70% (RPs order is Shoulder/Chest/Head with head devalued but let's call it a tie) 

5. Hands 62%

6. Legs 58%

7. Waist 53%

8. Boots 52%

     Something missing from the list? Oh right! Well the Legendary cape quest chain absolutely KILLED the cape transmog market; only 6% of people have a cape mog right now. Come to think of it though, cool cape transmogs might be something to stock up on for Warlords of Draenor that a lot of sellers might not have once everyone starts hitting 100 and the 608s become obsolete. #SadDay

Conclusion

     Moggers mog the same no matter where they are, however there may be more of them on RP servers, although not as overwhelmingly so as the grapevine may lead us to believe. If you're looking to enter the transmog market, focus on things near the top of the list and ignore capes and bracers, and be wary of boots and belts. Don't server transfer to take advantage of the phat mog markets on another server though, because that is mostly a myth. Although, we may need to do another test looking at sales data...

Thanks for reading my little WoW blog! You can follow me on Twitter here and Twitch here. My YouTube channel is growing and has lots of great guides over here. I recommend that all goldmakers download the TSM Suite and the UndermineJournalGE addon for all goldmakers. You can read my setup guide if you'd like. And remember that the key to making gold in wow is just to 

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<Prev: Gold Raid 2014 Announcement                                  Heroic Siegecrafter-What is Heroic Raiding Like? Next>

The Long Strangle: What Options Traders and WoW Players Can Learn From Each Other

     At Columbia, I learned a bunch of fun and excitingly mathematical ways to evaluate companies and securities. In short, I learned an overview of the ways people with PhDs make money on Wall Street, and looking at the WoW markets, there are some interesting parallels to the superb traders. My favorite strategy I learned in school is a form of arbitrage, called the "Long Strangle," and hopefully, by the time I'm done explaining, you'll understand the concept of the trade. While you probably won't want to get out and execute one right then and there, hopefully I will have convinced you to sign in to World of Warcraft and "execute" on your warrior.

It's funny cause they sound the same.

     If at any point you want this post gets too Econ-y for you, feel free to read my Guide to Blackrock Caverns or Guide to Leveling Battle Pets for Profit. The first step in this is to understand what a Call Option is. Let's say everyone thinks Twitter stock is gonna stay at about $50 a share but you somehow know it'll go up to $100.  In essence, you pay $2.70/share in order to buy a option contract that gives you the right to sell 100 shares of Twitter next month at NEXT month's prices that you buy at THIS months prices. If prices go above $50, you can redeem/exercise your contract, and if they don't then you lost $270 bucks. If you hit your goal of $100 though, then you make $5000 minus your fees because 100 shares x $100 (final selling price) - 100 shares x $50 (initial purchase price).

No money, no money, no money, MONEY!

     So, this has risk involved, since you don't really know that Twitter is going to hit $100. or even stay above $50, where the call options become valuable as you see in the chart. What if you're "Bearish?" Then we use a Put Option. If you think Twitter is going to cease to exist in a month (lolz), then buy a Put at $50 for (it won't be the same price but it's usually close) $2.70. It does the opposite; it allows you to buy a share at next months prices at this months prices rather than sell them. So, everything is essentially the same, but you make money when prices go down. If Twitter went down to $20 dollars a share, in a month, we would exercise the option for 100 shares x $50 (initial purchase price) - 100 share x $20 (final selling price) = 3000. If the price went up, we'd lose our initial $270.

Money, money, money, No money....  :(

     Again, we got a lot of risk, and here's where I start to get excited (and where I start to peak my head into the World of Warcraft, almost there guys!) Y'all have heard about battle pet arbitrage? Well here's my favorite for of arbitrage IRL. When you combine these two and buy a call and a put at the same time, you have something called a straddle, which works ok; it pays off if the price moves but you lose a lot if the price doesn't. My favorite though is the "Long Strangle." Since options are markets too, what you do is search for under-priced calls and puts. So for instance, sometimes you'll find the aforementioned $2.70 at say $1.00. In the above examples, we bought both options at the same "strike price" of $50, but you can buy an option at any price you want to (The math changes, but I'll keep the example simple.) So, rather than buying both of them at $50, the you buy a Put at a higher one, of $80, and a Call at a lower price of $40. The two then add up to form a flat positive return (equal to how undervalued they were), and they give increasing returns beyond $40 and $80. Neat, huh?

...Money, Money, Money, Money, Money,...

     Just to be clear, the above graph is not realistic as the calls and puts pictured would have dramatically higher prices IRL, and thus much lower returns, but the shape and general idea is the same:

You are combining two otherwise risky techniques in order to provide security and make positive income no matter what you do.

     Now, if you were absolutely waiting for a form of arbitrage in Warcraft (that's not what I'm here to talk about) fine, here's a form or low-risk cross-market trading. Buy a battle pet that you get a really good deal on. Then, start a level one toon on another server (not a high population server as pet prices are low on those). Cage the pet and sell it there. Take your gold and buy as many other underpriced pets with your earnings as you can. Addons like TheUndermineJournal GE are great for giving tooltips for this. Sell the purchased pets on your home realm. If you started with a pet you bought for 3,000g and sold it for 4,000g. Then you bought four pets for 1,000g each and sold each of them for 1,500g on your home realm, then you started with 3,000g and finished with 6k. May take a couple days but really it's just logging in and out for a couple minutes.

BUT!

     That's not the point. What I wanted to say after explaining the long strangle, is that in WoW you should combine different techniques, professions, and strategies so that you're not only always making money, but so that you're risk of being broke and thus unable of making money in the future is reduced. We've all been inundated with ads showing how to get rich quick with penny stocks or how to win in the Forex or options markets. They'll show you the ins-and-outs of calls but buying them will always have risk. Similarly, if you focus on Jewelcrafting alone, you're at the mercy of your competitors. One person with too much time and gold on his hands (and a guild vault of gems) can come in and completely bottom out the market, and keep it that way for as long as he/she likes. If you don't believe me, go to Stormspire.net and read some of the horror stories. That's why I love both low-risk strategies (hard to go wrong with mining) and diversity of income sources.

     By low-risk strategies, I mean traditional profession crafting and posting. The simple professions crafts like current PvP crafted armor are a lot easier to price and sell than rare Burning Crusade gem cuts. For posting strategies, if someone posts a flask for 10g less than everyone else on Tuesday, I probably won't undercut them, and will instead post above them since my goods will sell anyways, but doing that increases the risk of not selling out my inventory, as does buying someone out. Higher-risk strategies that I avoid are things like market takeovers, where you control an entire market for an extended period of time. I also avoid large-scale resets in areas like gems, glyphs, (and now blacksmithing, cause that didn't end up going very well), because, like in options, while you stand to make a large profit if it all goes well, maneuvers like that carry needless risk if you can get rich either way.

My answer and recommendation to goldmakers is to use multiple progressive income streams.
1. Have your initial source of income be from professions. It's how the game is designed.
         How I recommend setting up TSM for professions
2. From there, you can branch out to farming your favorite dungeons and raids for battle pets and transmog.
         YouTube: 17,000 Gold Per Hour in Feralas?
3. Level an alt for more professions. You've got a stable income by now, so make the first part bigger by leveling an alchemist, tailor, engineer, or inscriptionist.
4. Find something fun you want to do and incorporate in. I like leveling and selling battle pets. You can be a master of halfhill though. Work around in the TCG market or play around with old crafts like Fortune Cards. Or do your research and become a master of the high-risk strategies that I so vehemently avoid so that you can implement them without as much risk. Fun little niche markets like this are great ways to keep learning and increasing your gold income while doing so.
        Easy Trick For 25% Experience Boost to Leveling Pets


I'm gonna leave it at that though. Thanks for reading my little WoW blog! You can find me on Twitter Here, and on YouTube Here. I strongly suggest you download the TradeSkillMaster addon and the UndermineJournal GE Addon. My brief setup guide is here, feel free to email or tweet any questions. And remember that the key to making gold in WoW is just to

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<Prev: 5 Ways to Make Gold With Justice Points


*I don't own Twitter stock and am not promoting or bashing the company.
Also, for the love of Garrosh, this is not financial advice. I am sharing with you what I read in my textbooks to enlighten and entertain.

Is It Really Better to Buy Ore than to Go Mining?

     "Only Noobs mine ore." We've all heard it a million times in various forms. The more experienced and less snobbish goldmakers will tell you that it's just more profitable to do just about any other gold making action in-game. Personally, I've had at least one gathering toon for years and enjoy it immensely. For me, it's relaxing to just fly around mining while listening to Alanis Mori... I mean Snoop Dogg. Unfortunately, many new Jewelcrafters or Blacksmiths who choose mining as a secondary profession will still occasionally be hazed on goldmaking forums, since "it's OBVIOUSLY much more profitable to buy ore off the AH." While there's been a lot of talk from different screen names I haven't seen anyone do a breakdown of whether or not the above statement is actually true or not, and I like testing game-changers analytically, so let's do that now (note: general consensus is usually correct, but I learn a lot with my testing). This is hopefully going to be a little more mathy that most of my posts, so for anyone who doesn't want to read all the mumbo jumbo, just scroll down to the conclusion at the bottom for a nice, easy wrap up. Ok, so, once and for all, is it really cheaper to buy ghost iron ore or bars off the Auction House, or should you mine them yourself?

 "He sure has the reach advantage, and she has...What the?!...Is that a rack of blunderbusses and greatswords?!"

Guess:
     While a bunch of people say that it's always more profitable to buy ore off the AH, I'm gonna have to go with a hypothesis of, "It depends." The times that I would rather be lazy and buy ore are the moments when I don't have very many gems to cut; the miscellaneous flight time seems more weighted when you're only farming 5 or 6 stacks of ore versus the massive 200-stack grind sessions. So, I naturally feel that it's better to farm ore for bigger stacks than smaller stacks. But enough guess work. On to math!

Calculations:
     First off, we'll start with the basic profit equation of Profit=Revenue-Expense. In this case, our revenues are the gold earned from selling gems or armor. The expenses are going to have to be monetary, but the big problem with mining, or the blessing, depending on how things turn out, is that it is pure profit from trading in time and prospecting ore. So, we'll turn the time spent mining and prospecting on both sides into an expense. Jewelcrafting should be more fun to play with than Blacksmithing, so let's focus on that profession, ok? The process for buying will be 1) purchasing ore for gold, 2) spending time prospecting which we will convert into potential gold lost, and then 3) selling cut gems. The process for mining will be 1) mining ore (Duh), 2) spending time prospecting, 3)and then selling the gems. Alrighty, here we go duhn du-duh-duhhnnnn: when is it more profitable to buy ore?

Profit(Buy) > Profit(Mine)

Revenue-Expense(Buy) > Revenue-Expense(Mine)

GemSales-[(#Stacks)(Price/Stack)+(#Stacks)(ProspectTime/Stack)] > Gemsales-[(#Stacks)(MiningTime/Stack)+(#Stacks)(ProspectTime/Stack)]

     Gem Sales (the only revenue) are the same on both sides, so that cancels out. The awkwardly named MiningTime and ProspectTime are in terms of "gold/stack." We can put in variables to make all this shorter and easier to read as well. Also, the inequality flips when we subtract out Gemsales and divide by the -1, my least favorite algebra trick that I always forget to do.

GemSales-[(#Stacks)(Price/Stack)+(#Stacks)(ProspectTime/Stack)] > Gemsales-[(#Stacks)(MiningTime/Stack)+(#Stacks)(ProspectTime/Stack)]
X: #Stacks,  Y: Price/Stack, Tp: ProspectTime/Stack, Tm: MiningTime/Stack
XY+XTp < X(Tm+Tp)

X(Y+Tp) < X(Tm-Tp)

Y+Tp < Tm-Tp
Y < Tm
Ore Price < MiningTime/Stack

     So there ya go, we have a surprisingly simple and obvious answer after almost everything cancels out. in short, it's cheaper to buy ore if your time is more valuable than time it would take you to farm. That's not 100% the right interpretation though, as we'll go over quickly in the conclusion. Also, I'm ignoring small miscellaneous time costs like buying from the AH, mailing between characters, and flying to the Valley of the Four Winds, since most of those can be reduced to almost nothing with addons like TradeSkillMaster. Basically, this should answer a bunch of the questions you might have been having about the process.

Either way, when you mine, lookout for that one stupid tiger that always freakin aggros.

Conclusion:

     It is only more profitable to mine when ore is more expensive than other alternatives. It essentially comes down to the age old question of "is mining a good profession." Assuming, you know what you're doing and can farm up 40 stacks every hour, at current US prices of 3.49 g/ore that comes out to about 69g per stack or 2,800g per hour. There are many other farming options and dungeon runs that can net 4k+ per hour, but the question is, are you going to do them? Mining remains a fantastic option for trading time for profit. 

      To give an example of this all, one hour of mining would yield 40 stacks of hour, giving you about 7 of each rare gem and 40 of each uncommon after prospecting (for values, hover over the number in the % column on any prospecting tab of WoWhead). Prospecting takes about 13 seconds to work through a stack of ore (2 second cast w/avg 1.25 seconds of looting), so at least 8 minutes just doing that in this example.

Profit(Buy) > Profit(Mine)

Revenue-Expense(Buy) > Revenue-Expense(Mine)
11,400g - [(40stacks)(69g/stack) > 11,400 - (4k+)
11,400g - 2,760g > 11,400 - (4k+)
8,640g > 7,400g
[Buying ore is 1,240g/hr more profitable than mining.]

     The trick to all this though is that if you DON'T go run dungeons, or if you just buy up ore on the AH, prospect it, and log off, when you would have been willing to go and mine it, you're losing that potential profit, and mining would have been the way to go. Here's why. That opportunity cost varies according to what you would have done in that specific hour. In other words, if you would have sat around in /G talking about how overpowered holy pallies are, then you're making zero gold and MiningExpense/OpportunityCost/last-part-of-the-formula, changes considerably.

"Logging off after Buying n' Prospecting" Scenario

Revenue-Expense(Buy) < Revenue-Expense(Mine)
11,400g - 2,760g < 11,400g - 0g

8,640g < 11,400g
[Mining is 2,760g/hr more profitable than AHing.]

     So, as you can see, either course of action can be more profitable depending on the mining expense - whether or not you make gold in ways other than Jewelcrafting. My concluding thought of all of this is that it's only better to buy ore if you, in the same session (or some scheduled time), go out and make up the debt you've accrued by purchasing that ore rather than farming it, because you've cost yourself 3k in potential profit if you do nothing. Don't be that guy. On the other hand, if you're super busy, raid's about to start, you have four other professions to manage, and you just don't have that much time to spare, then don't worry about it, you're still making 8,000 gold for 8 minutes of prospecting, a little bit of gem cutting, and a quick cntl+scroll on TSM 2.0. So, grats!

     Thanks for reading my little WoW blog here! Subscribe to my Twitter for future updates, and until next time, remember that there's no secret to making gold in the World of Warcraft, all you have to do is just

Search. Craft. Post.
Ever Day.

     P.S. For anyone calculus inclined, I apologize, I was hoping the math would get exciting, too, but it all just cancelled out all nice and purdy. If you really want to play with derivatives or whatever, find the minimum hourly profitability of a dungeon run to make buying ore better. Honestly though, the answer is right there on the other side of the equation. Whamp whamp. I'll find something more fun next time.

Explaining Inscription Arbitrage (Glypher to 80!)

I think I can officially say that I'm an altoholic now. Funny thing is, I've only ever considered myself to have had one toon, my warrior. I leveled my bear when I found out about the JC/Enchanting shuffle, and he got raid geared somehow. And today, got my priest to 80 finally after discovering inscription arbitrage a while back. But I officially have 3 toons over 80! :)

C'mon...she's a Draenei, how was I supposed to xmog her?

Oh what was that, you ask? What is inscription arbitrage?

Well, arbitrage is just a fancy word for taking money and making more money with zero risk. Buying low and selling high on the AH (or the stock market) is not arbitrage because there is risk involved: prices can fall, people might not buy, or you might repost so many times that posting fees are more than your profit. However, an example of arbitrage is finding something on the AH that vendors for more that you could buy it for. In short, it means absolutely zero-risk profit, however minimal that profit is. Auctioneer has a search function for this (oddly it's not the one titled "Arbitrage;" that tool is for cross-faction trading, which is not true arbitrage. It's the "Vendor" one.) This is also a great way to get start-up cash for a fresh toon on a new server.

Arbitrage at its purest. Immaculate Scepter: Bid-23g. Vendor-26g.  

The Inscription arbitrage, the one I leveled my priest for, is pretty awesome, has been around since 5.0 launch day, and in essence, sets a price floor on the price of herbs. It keeps them in check and ensures that herbalism is always a profitable profession. It's not new, but it's a great tool if you aren't aware of it.

The way it works: any time herb prices drop below 1g 50s per herb, inscriptionists can mill the herbs, turn them into inks, and then craft any of the blue shoulder enchants. The cool thing is that rather than auctioning them, you vendor them since their vendor price is so high. You'll come out making a little bit or a decent amount more than you started with, depending on whether you're in a level 25 guild or not.
Note: As of 5.3 this strategy no longer works. Shoulder enchants vendor price have been reduced from 18g to 1.8g. Whamp whamp.
 Best thing is that you don't have to deal with the hassel of auctioning, so it's immediate profit. The gravy, or arguably the main course, is that you'll have several stacks of Starlight ink out of the deal. As you can tell from the link, these sell for between 50g and 150g each, so a stack is about 1000-3000g. Wowhead claims that the milling yield for misty pigment is a 25% chance at between 1-3 (24%, 0.6%, 0.6%, respectively). In short, blah blah blah "expect about 1 Starlight ink per stack you buy."

Shh. get on with it.

So, in order to do this, you need to have an inscriptionist at lvl 80 with inscription at lvl 540. 

My results:

Over the course of my leveling, I've scanned the AH while waiting on Tank queues and was able to buy 150 stacks of green tea leaves at between 1.5g and 2.0g. I use TradeSkillMaster Destroyer, with even stacks unchecked, it's a great search tool that puts all the herbs in one place. While, I had some rain poppy and other miscellaneous herbs, really, the green tea was exactly 150 stacks: 3000 herbs on the button. How perfect was that for testing?!

I did this in two milling sessions, and must have crafted something that required starlight ink out of boredom unfortunately, because the numbers there just seem off, but in all, the test was a success. She milled 107 misty pigments, which I split and posted half as ink and half as pigments, for a total of about 7500g. She also crafted 248 shoulder enchants, which vendored for 4,600g.

Revenue

     Pigment     7383g

     Enchant     4649g

     Total                   12032g

Cost         (150x40g)

                                (6000g)

Profit                        6032g

ROI= 101%

There's a really interesting lesson here though that I haven't read anywhere else. If I want to do this long term, and assuming I can find buyers/uses for starlight ink, I am willing to pay much much more than 1.5 for herbs. Granted, it's goes out of the realm or classic arbitrage beyond that price point, but call me a greedy risk taker. In fact, from the ROI above we know that, combined with the cost assumption that I paid 2g/herb (that's the "150x40g" thing), I'm willing to pay 100% more than that, or 4g per herb, which, although ridiculous sounding for green tea leaves makes sense when you consider the idea that, with this process, every stack of herbs gives you one free starlight ink. In short, the question everyone should be asking is, "how much more would I pay for a stack of herbs if every stack gives me a free rare Ink?"

Anyways, hope this helps and gives perspective, and when looking at my numbers, please remember that my pigment/rare ink numbers were about 50% less than what they should have been, for whatever reason. i.e. I was expecting an ROI of about 160%.

Don't level at 3AM. Your scribe eats your ink.

Standard Deviation, WoW Gold Making, and You!

NOTE: ONLY DOUBLE-DIGIT ADDITION IS INVOLVED IN THIS POST  :)

I’d like to start off the blog with a question many guildies have asked me. On TheUndermine Journal, you may have noticed Standard Deviation listed. Sooooo, what does that mean? I won’t teach you the math, but I will show you how you can use Standard Deviation to save time, money, and prevent noob mistakes. What is it though? As Wikipedia says “For a finite population with equal probabilities at all points, we have:"

Yah, thanks for simplifying for us there, buddy. Big help.

Sure some of us might remember something vaguely from highschool “blah blah square root…blah blah sum of squares.” Don’t worry about it. A big standard deviation means prices are all over the place (think pet or transmog markets), whereas a small standard deviation means everyone agrees where prices should be (ore, herbs, fish). You don’t have to do statistics though to use standard deviation! Nonetheless, memorizing three numbers will earn you a lot of gold that you’ve been giving away: 68, 95, and 99.7 (or if you don't care about rounding, 70%, 95%, and 100%).

SCARY GRAPHS!

Let’s explain, by using an example. You ran a few dungeons and have a few stacks of Windwool Cloth that you want out of your bags. You don’t necessarily care what price it sells at, but you still want the most you could get, otherwise, you would just vendor them. Well, how much would it sell at without having to repost? Turns out, Standard Deviation gives you that answer. The Undermine Journal says that the mean price for Cloth on my server is 2g 20s (the “mean” is the average), and that standard deviation is 50s.  Well, here’s where the three numbers from earlier and the ugly graph above come into play. The big middle part makes up about 70% of the graph, and the range of that middle part is the mean plus/minus one standard deviation. In short, 70 percent of the windwool prices will be between 2g20s - 50s = 1g 70s, and 2g20s + 50s = 2g70s (Statistics majors, just shhhh, I know). In other words, you can reasonably expect to be the cheapest at some point soon, if you post in that range. If you for sure want to sell, post on the lower end. If you don’t mind reposting once, post on the higher end. Since you aren’t in a bind, in this example, you just throw it up for 2g 70s and call it a day. Viola! It sells (cause it will) and you make an extra 20-30 gold over what you would have if you just undercut the 2g 20s current market price. Personally, for cheap items, I don’t worry too much about this, but if you were selling an expensive crafted item like a 496 chest piece, you might want to consider the higher end of the spectrum, since someone who is willing to pay 20k will probably also be willing to pay 23k, and capturing that extra 3,000 gold is just smart posting on your part.   

So, you’re saving you time and money from posting within +/- 1 standard deviation. Great! Now, what about preventing noob mistakes? If you had a battle pet listed for 99g, and someone whispered you offering 97g, you’d accept the offer, right? Why? Because 2% doesn’t really matter. People lose a lot of money to 2% though through excessive undercutting.

For this example let’s say you’re a strength user and got some Flasks of the Warm Sun in LFR bags. You need gold fast because you wiped 30 times and don’t have the gold to repair your armor. On my server, these flasks sell for a mean(average) 80g, with a standard deviation of 10g.  Look at the graph above again. The middle part +/-oneSD was 70%. Well, the larger section is +/- twoSD and is 95% of the total, and the largest section is +/-3 SD and is 99.7%. Without going too mathy on you, that means that if you undercut by two SDs, you’ll have almost 100% of the future flasks be more expensive. This means it’ll sell fast; your flasks are the cheapest people will see for a while.

My assumptions in this post make statistics majors angry. Ignore them.

The thing is though, the chance of it selling are practically the same chance as if you undercutted by more, and yet people undercut for less than 2SDs all the time! Don’t do that! If you just need gold right now, and need something to sell immediately, what this shows is that you never want to undercut by more than two standard deviations, because it will be just as good of a deal for buyers as a bargain basement price where you drop your pants and give away all your profit. Specifically, in the Warm Sun Example selling the Flasks at 70g might take a bit, but 60g would sell just as quickly as 50g.

Takeaways:

1. Download The Undermine Journal addon.
2. Try to post between the mean +/- 1 std dev.
3. For items you don't mind reposting, post at mean+1std dev
4. Never post for less than mean-2 std dev.

Thanks so much for reading my first real post, I had a blast putting it together, and I look forward to writing more for y’all.

As a bonus, for anyone who retweets this, I’ll show you one-on-one how to automate all this standard deviationing so you don’t have to do the math for every item you try and sell. And remember, while this helps, all you really have to do to make gold is

Search. Craft. Post. Every Day.

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