Dream Shard Speculation

Dream shard prices are crazy low. Demand is irrationally low. I use my usual strategy of selling a full stack and then individual shards as well, and I only sold one. The expansion is still very new, so the economy has a lot of stabilizing yet to do. But surely the enchanters on my realm needed more than one dream shard from me. Small shards aren’t much better. So everyone that took the strategy I’ve been preaching for the last week or so is sitting around with a crap load of shards they can’t sell at a decent price. I’ve bought 20,000g worth of armor/weapons to disenchant, with about half of that being Northrend gear. I am about back to even with tons and tons of inventory to still go through. My return on investment last week was over 100% and I expect the same for this week, but these dang shards are piling up.

I’m not worried about it at all though. In fact I think it is very good. I’ve been buying up other people’s dirt cheap dream shards for 10g a piece. I am going to be plowing as much gold as I can into them. There are so many uses for these shards. I can’t imagine these low prices being an equilibrium level.

As a side note, what the crap is up with the abyss shards? The droprate for high level wrath items is 1% according to enchantrix, but I haven’t gotten one yet. I know someone has because there were four of them on the auction house for 500g a pop.

How to Fight Northrend Inflation

The WoW Economist has an interesting post about inflation in Northrend. In it they asked a question about whether the mechanisms in Wrath will be able to safeguard the buying power of that gold. They talked about the issue in terms of regulating the amount of currency in the game, which is essentially monetary policy. This is only half of the picture.

First off, I think it is important to note that while economists that deal with monetary policy have the twin tools of interest rate and money supply manipulation, those aren’t the only economists that deal with macroeconomic policy.

Blizzard’s control of the money supply in WoW has to do with droprates and spawnrates. It would be inaccurate to say that there is an unlimited amount of gold in the game, because you can only skin or mine or kill so fast. Blizzard knows on average the value in gold of one person logging in for one hour. Let’s say that value is 50g. They can reduce that amount or increase it by changing spawnrates and droprates.

Our Blizzard Overlords control fiscal policy as well in the WoW economy, which is the other half of the economic toolkit. In the real world this would be collecting taxes and spending money. It is here that I believe that gold sinks can enter the analysis.

Large gold sinks act as a luxury tax. The ridiculous 20,000g mount is a great example of this. It is a status item that would be really tough to justify as an expense, but it will be popular for reasons that fascinate me.

The smaller gold sinks act as a regressive income tax. Everyone pays the same rate for repairs, training, mail service and flightpoints.

These gold sinks are used to reduce aggregate demand, which is the fiscal policy tool used to maintain price levels. People have less gold than they would otherwise, which keeps prices ideally from rising at all, but realistically it will keep them from rising as much.

In the real world some people benefit from inflation. If I owe you $10,000 this year, and next year the purchasing power of $10k is half of what it is this year, in effect my debt is reduced by half. But there is no debt in wow. So there are no real winners when our currency is inflated. But some people lose a lot less than others.

The big losers are the casual players who vendor a lot of white and green drops that they get while questing. These players will have far less purchasing power in wrath than they did in BC.

The smaller losers are people that read blogs like this one. If you have large reserves of gold you should be cringing a little bit, because your purchasing power is being reduced as well, but at least you have the power to fight it. You need to invest in mats that will only increase in relative value rather than keeping vast sums of gold.

The trick is that who knows what investments are good and what investments are bad. What we do know for sure though is that the value of gold will continue to decrease.

Disenchanting Primer

A few people have asked me to analyze exactly what disenchanting I do and how I go about it. I am hesitant to give explicit numbers since no two servers are exactly the same. I have a friend who I may be going into business with and because of that and my desire to turn this experience into some sort of academic project I have an excel sheet of disenchanting guidelines I use. The prices below are in gold. This is all the juicy stuff:

Item Level	Max Price	Expected Value	Minimum Profit
36-40 Armor	2	4	2
36-40 Weapon	4	6	2
41-45 Armor	2	4	2
41-45 Weapon	5	10	5
46-50 Armor	2	3	1
46-50 Weapon	5	8	3
51-56 Armor	4	14	10
51-56 Weapon	10	17	7
64-70 Armor	4	6	2
64-70 Weapon	7	11	4
71-75 Armor	11	16	5
71-75 Weapon	11	16	5
76-80 Armor	20	40	20
76-80 Weapon	20	40	20

As a general rule the value of the materials your piece of armor or weapon will disenchant to changes every 5 levels or so. There are significant caveats to this analysis, but for now lets just look at the chart. I don't fiddle with anything below level 36, because in most cases the profit is less than 1g. The max price is obviously the most I will pay for the item. The expected value is approximately how much the piece is worth after it has been disenchanted. I always round downward to be safe, and because there are more items than I have time to buy. Minimum profit is the least I expect to make from the item. These values are on my server based on the enchantrix price from scanning the auction house regularly.

To access the different items what I do is go to the browse window in the auctioneer advanced and specify the level range I want to work with and change the rarity to uncommon. You also want to arrange the listings by bid price. I bid on all items that meet my requirements too. Just because the buyout price it out of my range doesn't mean the bid price is. I have plenty of time. I don't mind waiting for it.

As you can see from the chart the new wrath items are the most profitable. However those numbers represent aggregate expected value for the level range. Sometimes you get better stuff when you disenchant than others. I assure you, it balances out.

Some general advice though, stay away from non-wrath blues. Strangely enough they are usually worth less than the greens and cost more.

This gets even more complicated however. In addition to level requirements, armor/weaons have ilvls. Where the ilvl changes sometimes can be very valuable in wrath. When you search for items from 64-70 you'll see some items with ilvl 130 and up. Those are wrath items which are worth considerably more than BC items. There is another switch at ilvl 151. Items at that ilvl are worth around 40g a piece and can sell for as little as 5g.

The problem is that disenchanting takes time. For me it is no big deal. I buy all the items with one character, send them to another and read a book while I disenchant. I can also do it on my laptop at work. Since it only gets 10fps when I move, it's the perfect activity.

I will be adding screenshots and more information to this post later. Feel free to ask further specific questions in the comments and I'll try to update this post to address them. I'd like to make this post as complete and as valuable as possible.

Update 12/8

Prices for Northrend mats have cooled down a bit in the auction house. Remember to always use your data. My data is only useful to me and other players on my server. Hopefully, none of those people are reading this. What follows is a screenshot of me using auctioneer advanced and the information that is posted there. I know some people are still having trouble with the new version. If you would get used to the newfangled layout, I promise you'd like it better. You need to click to enlarge it to get any detail.