Starter Cash: Of Eggs and Arbitrage
The cake does not lie about profit!
Sometimes I wish that Blizzard would let us make up our own titles. Me? I’d be Bigjimm, “Master of the Obvious.” Why? Because to make gold, that’s really all I do- I master the obvious. I made my first 100k by prospecting saronite ore into common (green) quality gems (bloodstones, chalcedonies, etc). Why did this work? Because of the saronite shuffle. What was my strategy? It was obvious. I couldn’t believe I was the only person selling green gems for 2-5g each. Were those gems worth 3-5g in infinite dust each? Yes, sometimes. But not all the time. And I would have had to have gotten ugly in the enchanting mats market, and that’s a hassle I didn’t need. I had a 100% of a middle market- I’ll take that over 10-50% of a high-competition market any time. But I digress…
ANYWAYS, this post is about something that is obvious. It’s about buying something now that will be worth something more later. This is an economic phenomenon known as arbitrage, with a slight twist. Let’s talk economic theory for a sec.
Classic arbitrage is, basically, buying something in one market (Market A) and selling it in another (Market B) for a profit. Back in the day this was something as simple as buying Pork Skins (or Garlic, or Gold, or any other commodity/widget you can think of) in the New York market for $1 and selling that same bundle of Pork Skins for $1.50 in Chicago. A good example of this in WoW is when people buy a faction-specific pet for a few silver from a vendor on one side, and try to sell it for a ton of gold to the other side via a neutral auction house.*
(*For all the econ majors out there, I recognize that this is a good example, but not a perfect one. There is also an issue of access- namely, they’re often faction specific pets, so you must rely on someone from that faction for supply. So please, give me the benefit of the doubt on my hack-WoW-econ, and keep reading.)
But again, I digress. What is the item I’m talking about? It’s a stupidly, amazingly, incredibly common item. It’s been written about in almost every WoW gold blog I’ve read. It’s an obvious strategy, but it’s on that will give you 500-1000% returns. What, dear reader, do I suggest you buy?
That’s it. Buy small eggs. Buy them now. Why? Because Christmas Winter’s Veil is coming. What do you need eggs for? For a delicious chocolate cake. Why is that valuable? Because when winter comes around, people need to complete Bad Example a number of Winter’s Veil achievements. (Thanks for the clarification, Justarb!)
To complete this strategy you have to be a long-term investor. And, also, I should say upfront that Cataclysm might completely end this strat, because they might remove those achievements. However, I consider these to be relatively low risks, because eggs are cheap now. Everyone is out leveling new toons, not thinking about winter- it’s the dog days of summer! Who’s thinking about Winter’s Veil?! So, just look for Small Eggs on the AH. Every day, every time you scan, look for eggs. If they’re cheap for your market (say… 60-70% of market value), then buy them. And wait. When December comes, sell them for 500%, or turn them into delicious cakes and sell them for more.
What does this have to do with Arbitrage? Well, if you’re doing this then you’re practicing arbitrage, but with that aforementioned twist- Time. Market A, to continue the example, is your AH market today; market B is the market in six months, during Winter’s Veil. So instead of changing locations at the same time, you’re changing time in the same location. It’s not classic arbitrage, but it will do- buy something cheap now, sell it for more later.**
(**Again, for all those econ majors, I understand that this concept could also be called “speculation” or even generally “investment.” However, my goal is to inform as well to enrich, and so I thought I’d try to make people think about arbitrage, time, and cost all at once. Please, again, permit my my blogger-liberties.)
Also… it’s a middle market! It’s the market I love! It doesn’t make anything, but it let’s someone else make something, namely the cakes! You’re not making them (well, maybe you are) but you’re selling to those who will. This is a gravy-train. Selling to buyers is a hassle; selling to sellers is what I prefer. So buy eggs, sit on them, and wait for the cash to roll in.
Finally, if you’re starting out and the eggs are too serious an outlay (ie: you can’t afford to spend all of your 10g on eggs that won’t gain value until 6 months from now) then go out and FARM THEM. They drop from mobs of level 1-18. No matter what the level of your toon, you can go farm for 10 mins and get a few eggs. Try it now, sell for more later!
GL! /bow
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Tags: cake, chocolate, delicious, small egg, starter cash, theory, winter's veil
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July 27th, 2010 at 11:37 am
One small correction: Small Eggs are used to make Egg Nog and Gingerbread Cookie for the Winter Veil Gourmet achievement and Gingerbread Cookies for the quest Treats for Great-father Winter during Winter Veil. The Bad Example achievement is during Children’s Week. ;^)
July 27th, 2010 at 12:05 pm
You are 110% right. Thanks for the correction. It’s already corrected in the article, w/full credit given. It wasn’t a small mistake- it was a large one. I’m sometimes not the best on details (look at some previous starter cash posts for similar boners), and I always appreciate the help.
July 27th, 2010 at 1:13 pm
Small eggs are amazingly profitable if you hold on to them like you’re suggesting. Even if you farm 1000 eggs they will all be gone in December.
July 27th, 2010 at 7:32 pm
If you feel like (shudder) farming them yourself, or you’re starting on a new server around December, the dragonhawks around Silvermoon have an extremely high Small Egg drop rate.
July 27th, 2010 at 9:47 pm
Here’s some more detailed looks at Abusing In Game Holidays as well as some details about Children’s Week Profits.
July 30th, 2010 at 3:17 am
You really shouldn’t be using the term arbitrage in any of this. Despite the disclaimers, the uses in the article severely abuse the term arbitrage and provide a completely misleading impression of what it is. Arbitrage is useful conceptually to inform and educate, but I think it is a disservice to misuse the term like this.
The KEY characteristic of arbitrage is that it is risk free. Not ‘low risk’, not ‘minimal risk’, not ‘you’re more likely to be struck by lightning’. The transaction must be risk free or it’s not arbitrage.
July 30th, 2010 at 6:39 am
I disagree. http://en.wikipedia.org/wiki/Statistical_arbitrage
Consider the entire point of this article to be “go long on small eggs right now.”
July 30th, 2010 at 9:16 pm
1. Then use the term ‘statistical arbitrage’. Arbitrage = risk free. Statistical arbitrage =/= arbitrage.
2. Going long on small eggs still isn’t statistical arbitrage. The concept of statistical arbitrage is building portfolios which are risk-neutral cumulatively; the whole point behind it is to have many assets with different risk profiles which collectively cancel each other out (in expectation). Going long in a single asset is investment/speculation. I agree that investing in small eggs is great for a winter veil payout, but it’s just not arbitrage.
August 4th, 2010 at 3:59 pm
I totally agree with the precious post… There are no true arbitrage options in WoW eccept one.
The only there is (that i can think of) is to buy something out of the AH and then sell it to a vendor for profit. This is totally risk free as the vendor will not change it’s price and will not be removed during the time it takes to transport it from oyur mailbox to the vendor.
Though there are situations that got situations simular to arbitrage or got a low risk to waht profit there is. This is not true arbitrage though and should just be considerred a good deal. What would expand the possibility for arbitrage is if there are options to set a price for what you are willing to buy for a specific item.
In todays wow AH this is only one way as there are a seller price but no biding price so the true market price is hard to come by. The only mark you true hint of what the real price is that it is somewhere between the lowest BO and the vendor price.
August 6th, 2010 at 12:38 am
I think you’re right about the vendor options, but I disagree w/r/t other arbitage options. A good example is frozen orbs-> eternals. On my server, the price difference regularly gets as high as 10-15g, ie: you can buy an orb for 20g and sell it as an eternal fire for 30g. There are other examples in the market as well, if you look for them.
August 18th, 2010 at 11:16 pm
I used this technique during last year’s winter veil, only I did not buy the eggs in advance, I farmed them. Where? Right outside silvermoon city there are a bunch of neutral flying mobs (can’t remember their name) but they have a 100% drop rate on the small eggs and will often drop 2 at a time. It’s easy to farm stacks and stacks of these in no time at all. It’s a bit of a hassle to get there if you’re alliance but if you’re like me and have a level 80 engineer, you can park your toon there, get a bunch of eggs, bring up a portable mailbox and mail them to your bank alt. I was selling pages and pages of single eggs for 6-7 gold each the first couple days of winter’s veil. AFter that the supply skyrocketed and the price dropped to only 1-2 G for a couple eggs, but I made an absolute killing those first couple days.