The AH/JC Experiment – Don’t Lock Up Your Capital

Today, I present you with a screenshot:

kurios-albums-random-picture1895-3days-guildbank-after-gatherbuddy

Now, who can tell me what is wrong with this pic?

Yes, that is right people – he has WAY too much stuff stockpiled.

Just in AH value of ores, he has 5k, and that is unprospected.  Prospected, I imagine he can pull an easy 10k out of it (including gem cuts, crafting/de’ing, and selling titanium powder).

A big mistake I see people make is to horde a ton of materials.  I desperately searched, but could not find, for a pic that showed an entire bank tab – one column was filled with epic gems, the rest with blue quality gems.  Then there was three tabs full of the green gems.

What in the world are you thinking?!?!?   That material alone could easily bring down 100k.

Especially if you are new to the whole AH game, do not ever stockpile that much.  Why?

The first answer is that you don’t have the cash on hand.  Lets say that you are relatively new to the game.  You have 5k worth of gold, but you stockpiled three tabs worth of ore.  You decide that you want epic flying on an alt, and easily breeze through the 4.5k (assuming rep discount).  That leaves you 500g.  Great!   Tonight is raid night, you have no consumables (flasks, food, etc…).  So you spend another 100g just on that.  Down to 400g.  Your guild is working on hardmodes, and suffers a bad night of wiping.  After repairs and reagents (from all the buffing) you are down to 100g.  While licking your wounds of defeat, a seller pops into trade chat with a wicked cheap deal on eternal earths.  120g/stack and he has 5 stacks.   What are you going to do?

When you hold a large stock, relative to your actual capital (gold), your value is only as much as you can sell.  Lets say that you have 20 stacks of titanium ore.  In order to sell it, you have to post it at a price that is attractive, and you have to find a buyer with the money to purchase it.  That can take time.   That means that your money is locked up into that ore until you sell it.  In the case of the above situation, it means that you don’t have the capital to take advantage of the great deal, and a loss on profits.

Another thing that holding stock makes you susceptable to is market volatility.   After the big MMO-Champion “how to’s” the price of ore on my server went up – by about 15%.  This was great for those of you who stockpiled it.  Eternal earths were the real winner – they doubled in price (they have recently slipped down to about 150% of the original price).

But for those of you who had a massive stockpile of gems – blue quality gems slipped in price – anywhere from 10-25%.  Cosmic essences slipped almost in half.  If you were stockpiling any of those, your net worth went DOWN.

The point is that since you have product, you have to sell the product in order to release your capital from it.  And since you have to go to market to sell it (there are no micro or specialized markets in WoW – like in real life – so you are unlikely to have a monopoly), you are subject to the forces of the market – be it up or down.

However, that is not to say that you shouldn’t take advantage of a great deal in trade chat when you see one.  Just make sure that you can, with relative speed and ease, re acquire your capital back from the investment.  One of my guildies makes money this way.  She picks up frost lotuses and ore exclusively in trade chat (and any other stunning, outstanding deal).  Then she resells them.  In the case of ore, she usually picks up 2-3k or ore at a time, because she knows she can resell it to me.  In the case of frost lotuses, she can either sell them individually, or craft them to flasks.

So the next time you see an awesome deal in trade chat, pick it up.  Just make sure that you are not over-extending yourself.  Don’t hold three tabs of product.  Sell it.  I usually have no more than 4-5 epic gems on hand at any one time, and no more than 2 stacks of each color blue quality gems.  I have one tab dedicated exclusively to green-quality gems.  Whenever I find eternal earths cheaply, I craft out of that tab, and make sure there is a constant rotation going.  If I ever have more than that tab, I look to liquidate my stock, even if it is at a slight discount.  Because I don’t want my money to be holed up in three tabs of gems.

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