Dr. EJ on Economics - Part 1

For today and tomorrow, I have two ideas for two very different types of people. They are the ones who have little more than two copper, and the ones who don’t have time to count all their gold. We’re going to apply free market principles here and end up with a strategy that each group can use. Here goes!

First, we have the poor. Have you ever heard of business cycle frequency? How about the business cycle? Still no, huh? Alright well, a business cycle begins with a market growing, then the market stops growing, then it falls, and then it stops falling. This is a full cycle at which point it simply repeats. Business cycle frequency is how many times a cycle occurs in a given time frame. Some real world cycles complete every 10 years, others 5, and others daily. In WoW, every market fluctuates up and down with some kind of regularity; though some cycles will be longer than others, and some will end down a little while others end up slightly.

As a pauper, it is your goal to first find out what the average frequency for a market is and then simply hop on board at the right time. So pick a market and observe it for a while. Buy when the market predictably stops falling. Remember, a rising tide raises all ships, so buy something, anything, (even if you can only afford one of something to start) and watch the growth begin. While this works, remember that when a big player pulls the plug out of the bathtub, all ships will fall regardless of their actual value, so here’s the part that takes some nerve: do NOT watch the market to determine your next move, but instead sell at a predetermined time and price, according to the cycle you have observed. Once you have bought or posted, watching each individual move in a cycle makes you vulnerable to try and press your money too hard or sell too early.

You’ve been watching this market cycle regularly, therefore you know it will be coming back, even if it falls a little right away, so don’t panic. You should know what time to sell and at what price based on how the market has cycled before. Watching it can only make you panic.

Let’s take a lesson from the real world: the little guy gets crushed in investing unless he rides the coattails of the big guns. You don’t have enough money to try and move markets, so don’t try. Doing so will get you burned. Simply know when to buy and when to sell. You’re not looking to maximize returns right now since you don’t have the cash to invest and can’t afford any substantial risk yet. Right now, just play it safe and make a little money. Don’t get greedy! There’s an old saying on Wall Street: Bulls make money, Bears make money, Pigs get slaughtered. In other words, you can make money in good markets and bad markets, but if you get greedy, you’re gonna’ lose.

Now don’t you worry Rockefellers – your post will be on tomorrow. Till then, happy riding on the rising tide.

Loremaster Ej

4 comments: on "Dr. EJ on Economics - Part 1"

  1. Well, the easy first cycle is the weekly one, from server maintenance to server maintenance.
    This is an easy cycle to follow

    The second cycle is the daily one, there are 24 hours in a day, figure out at what time it is best to buy stuff or to sell it, kudos if you can combine it with the first one.

    The third cycle involves patches and expansions, if you know a certain ore that's worthless now, will be prospected into epic gems, then you stock up before the patch and cash in after. Same goes for gems, they may be worthless now, but if they fill in leveling-stretches they'll be worth lots after the xpac arrives, while the epics that are worth lots now, will be worthless then.

  2. i would absolutely love to sit in the economic theory coming to cataclysm.

  3. Agree with Anon.

    The weekly cycle on my server is amazing. The botters, gold farmers, and casuals all sell on the weekend, driving prices ridiculously low by Sunday.
    Consumables bought on Sunday can usually be marked up 30-100% by Thursday.

    Of the patches and expansions, the most reliable one I've found is actually the start of the arena season.

  4. Yes, as more details are released about Cataclysm, I would love to throw out theories on making money with it. I think the bigger the cycle, the more money there is to be made. At least when you look at the daily, weekly, per patch, and per expansion.

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