tag:blogger.com,1999:blog-1461700565722278823.post3157637209337456366..comments2024-02-27T14:44:07.868+01:00Comments on Greedy goblin: What the harvest can teach usGevlonhttp://www.blogger.com/profile/07072766785893313616noreply@blogger.comBlogger35125tag:blogger.com,1999:blog-1461700565722278823.post-51086379424874084842010-10-21T06:19:07.686+02:002010-10-21T06:19:07.686+02:00@ Kurt:
I don't think I explained myself clea...@ Kurt:<br /><br />I don't think I explained myself clearly enough in my last comment, so I'm going to have another shot at it.<br /><br />Glyphmas is not a new market. The Glyphmas effect is the result in a single market (the AH and the players on the realm) of an exogenous shock.<br /><br />The exact real life example would be the bond market before and after a central bank meeting to decide on official interest rates. The rate announcement and associated economic data and opinions represent the new patch being implemented. Suddenly, existing bonds change in value. Some are worth more/less than they used to.<br /><br />If you went into the market before the rate announcement and bought up bonds in the hope that rates would come down (value of bond increases), it's not 'arbitrage over time'. It's speculating on interest rates. It's exactly the same market, but the external market factors that influence supply and demand shift as a result of the exogenous shock.<br /><br />Is the post-GFC stock exchange a new market, or is it the same market, post-shock? How about the guy who short-sells shares before when he expects the market to crash and buys them back after? Is that arbitrage?<br /><br />I recall patch 3.3 coming out. Prior to it coming out, I sold off all my Frozen Orbs at insanely inflated prices because of the uncertainty about what the new market price would be post-patch once you could trade them for Eternals. I then bought them all back at a discount to my purchase price. Would you call that arbitrage? I wouldn't. Noone knew what the price would be post-patch. All you could do is punt (read: gamble) on what it would be. Arbitrage isn't about gambling. It's about making secure, locked-in profits.<br /><br />What I would call arbitrage is seeing the market price of Eternal Lifes for 25g, and the market price of Frozen Orbs at 20g. I need an Eternal Life, but instead of buying it on the AH, I choose to buy the Frozen Orb and exchange it for an Eternal Life. This transaction nets me an Eternal Life for 20g, which gives me a net return of 5g, risk free (barring exchange problems, i.e. WoW servers crashing and losing the Frozen Orb in the mail somehow).<br /><br />Or even just buying anything on the AH for under vendor price. This is arbitrage.Squishalothttp://www.wowhead.com/user=Squishalotnoreply@blogger.comtag:blogger.com,1999:blog-1461700565722278823.post-51441293792381657272010-10-21T02:33:39.350+02:002010-10-21T02:33:39.350+02:00@ Kurt:
"I prefer to use the term in a more ...@ Kurt:<br /><br /><i>"I prefer to use the term in a more historical sense, you insist in using only a more modern and limited definition. I think it is foolish to do so, you are being unduly restrictive with no gain in clarity, and in fact by being so restrictive as to define things so absolutely, you are creating an imaginary term with no relevance to the real world."</i><br /><br />I beg to differ. I think it's foolish to use a single catch-all term to describe everything that you appear to want to. I use two terms - speculation and arbitrage - to define risky and non-risky attempts to cash in on pricing differences. Again, what Gevlon is doing is no different to punting on the US dollar crashing.<br /><br /><i>"I contend that arbitrage doesn't exist, at all. Zero risk? Impossible. To conduct transactions in dollars, requires you to hold dollars. Those could lose their value."</i><br /><br />That's irrelevant. The risk in question is the risk in the transaction. If you buy and sell simultaneously on two different exchanges, in the same currency, there is no currency risk. Even if the dollar loses value, the joint transaction itself has no risk (other than counterparty risk, which in the real world is represented by the stock exchange, and in WoW is represented by Blizzard).<br /><br /><i>"Why are you reading this blog, if you are going to get so insulting when I attempt to say this was a useful post? It makes little sense."</i><br /><br />You're criticising my criticism of this blog. I'm criticising your praise of this blog. I'm certainly not using any more offensive language than Gevlon uses on a daily basis in his blogs. Why are you getting offended, other than for the potential reason that I am right, and the blog wasn't insightful / useful?<br /><br /><i>"The insight is that it's arbitrage, that you are removing goods from a market where it's less valued, and placing it in a market where it's more valued. This explains the utility of "short term speculation", and explains why it persists despite the negative effects that Gev detailed in his post. It's not a magical insight, but it's something that many people don't keep in mind, so it's a useful one to make. I notice you didn't talk about that, you only quibbled about semantics, as is your wont. I suppose I shouldn't have expected more from you."</i><br /><br />Anyone who reads Gevlon's blog understands buying and selling across markets. They appreciate that you can take items from Horde AH to the Alliance AH and sell for profits. Is this speculation? Yes. Is this arbitrage? Not by any classical definition of the word. Just because a whole lot of morons bastardise technical concepts doesn't make their usage of it any more correct. That's a classic M&S mistake, you know.<br /><br />And I find it amusing that you have such double standards. "Why are you reading this blog"? You're implying that only educated or non M&S people will read this blog. In which case, they know the 'speculation' insight that you're referring to, rendering your affirmation of how useful this insight is meaningless.Squishalothttp://www.wowhead.com/user=Squishalotnoreply@blogger.comtag:blogger.com,1999:blog-1461700565722278823.post-14504704527867401432010-10-20T23:44:38.057+02:002010-10-20T23:44:38.057+02:00I observed an interesting thing on my server regar...I observed an interesting thing on my server regarding the prices of herbs/flasks and glyphs leading up to and following the glyph boom.<br /><br />Flower prices were in decline for quite a while leading up to the boom, naturally flask and potion prices deflated as I am assuming either more people were entering into the crafting activity of alchemy or the competition was trying to do something with the stocks of herbs they had.<br /><br />The week leading up to the boom, glyph prices slowly rose from the absurd 90s/glyph that many were selling for to the 7-8g per mark. Still my glyph sales were in the order of 100g/day because I honestly was not trying very hard and was just selling a few stragglers left in my bags.<br /><br />The night before the boom, glyph prices skyrocket, no herbs can be found and those that can be (Talandra’s rose, deadnettle and other sub-optimal herbs) are listed for anywhere from 60-800g per stack.<br /><br />Flask prices remain deflated.<br /><br />The boom hits and the phenomenon of the glyph harvest plays out on my server much as it has on Gevlon’s. I manage to get roughly 95k before the time cost to profit ratio and my laziness drive me to other things (like playing my class and learning new abilities etc.)<br /><br />Despite the absolute disappearance of affordable herbs on the AH owing to the inscription industry, flask prices remain low.<br /><br />The only explanation I have for this is that there are one or more alchemists who did the same as I did and bet primarily on flasks for 4.0.1, rather than putting those same flowers into glyphs. <br /><br />Admittedly, had I diverted 80% of my herbs from flasks to inks, I could have easily doubled my harvest.unnamedhttps://www.blogger.com/profile/04020639752290310769noreply@blogger.comtag:blogger.com,1999:blog-1461700565722278823.post-47703465448588275752010-10-20T20:14:32.611+02:002010-10-20T20:14:32.611+02:00@squishy:
"This speculation is not risk free...@squishy:<br /><br />"This speculation is not risk free, and is nowhere near 'low risk'. If it was 'low risk', Gevlon would have had a low probability of having excess stock, along with everyone else on the server who was playing the market. Otherwise, you would have to argue that anyone who buys things on sale and sells them on eBay are arbitrageurs - they're not!"<br /><br />Ok, at this point we're no longer discussing WoW, we're discussing arbitrage in the real world, and disagreeing as to what it is. I can find countless examples of people referring to people buying things at yard sales and selling them on ebay as arbitrageurs with a few seconds on google. I prefer to use the term in a more historical sense, you insist in using only a more modern and limited definition. I think it is foolish to do so, you are being unduly restrictive with no gain in clarity, and in fact by being so restrictive as to define things so absolutely, you are creating an imaginary term with no relevance to the real world. There is no such thing as perfect zero-risk in the real world. As alluded to before, the attempt to construct zero-risk formulas was a major component in the last crash.<br /><br />"The glyph market is like an international steel mill buying iron ore (herbs), converting it into steel (glyphs) and onselling to people who need it."<br /><br />That's the normal glyph market, that is completely irrelevant to this discussion. One could have "speculated", as you would put it, on the glyph market in this instance by merely buying glyphs on monday, and selling on tuesday. Many did exactly that. Was there risk in holding glyphs overnight? Yes, as illustrated by the epic gem debacle, sometimes the patch information ahead of time is inaccurate. Was there risk in the old days, in buying goods in one city and selling in a nearby city? Yes, but I still understand that to be arbitrage. <br /><br />In the end, under your theoretical definition of arbitrage, I contend that arbitrage doesn't exist, at all. Zero risk? Impossible. To conduct transactions in dollars, requires you to hold dollars. Those could lose their value. That is a risk. I'm getting tired of debating semantics here, I'll move on to a different question and call it quits on this topic.<br /><br />"Buying low and selling high, being better at predicting the future will help you make profits. Thanks for the protip. You can probably get an MBA with that sort of insight!<br /><br />Really though, that's plain useless. It's repeating garbage that everybody knows - if you have perfect knowledge of the future, you can make money. That's not insightful, that's bloody obvious."<br /><br />"thanks for the protip"...Why are you reading this blog, if you are going to get so insulting when I attempt to say this was a useful post? It makes little sense.<br /><br />Did I say it was insightful that you can make money from knowledge of the future? No. That's not what I said the insight was. The insight is that it's arbitrage, that you are removing goods from a market where it's less valued, and placing it in a market where it's more valued. This explains the utility of "short term speculation", and explains why it persists despite the negative effects that Gev detailed in his post. It's not a magical insight, but it's something that many people don't keep in mind, so it's a useful one to make. I notice you didn't talk about that, you only quibbled about semantics, as is your wont. I suppose I shouldn't have expected more from you.Kurthttps://www.blogger.com/profile/08064568916740238502noreply@blogger.comtag:blogger.com,1999:blog-1461700565722278823.post-400130944293006262010-10-20T15:12:08.764+02:002010-10-20T15:12:08.764+02:00"This time I overstocked and so others, makin..."This time I overstocked and so others, making waste."<br /><br />If you made a lot of gold without forcing anyone to do anything they didn't want to, or producing some kind of negative externality on people not involved in your transactions (hard for me to imagine how that would happen in wow), then on balance you were almost certainly helpful rather than hurtful.<br /><br />Your gold reward might be out of proportion with your social utility, but it's very difficult to make money in a true free market (which wow is a lot closer to than real life) without being on-balance more useful to others than not.The Gnome of Zurichhttps://www.blogger.com/profile/03203965173625552516noreply@blogger.comtag:blogger.com,1999:blog-1461700565722278823.post-24113823824742383982010-10-20T12:11:02.570+02:002010-10-20T12:11:02.570+02:00The gold cap is now 1 million, here is a new chall...The gold cap is now 1 million, here is a new challenge for you Gevlon!Anonymoushttps://www.blogger.com/profile/15746607908870489120noreply@blogger.comtag:blogger.com,1999:blog-1461700565722278823.post-90404733200277042792010-10-20T01:08:09.191+02:002010-10-20T01:08:09.191+02:00@ Task - indeed, speculation is the correct word, ...@ Task - indeed, speculation is the correct word, thankyou.<br /><br />To those criticising my comments on the use of the word 'arbitrage':<br /><br />This speculation is not risk free, and is nowhere near 'low risk'. If it was 'low risk', Gevlon would have had a low probability of having excess stock, along with everyone else on the server who was playing the market. Otherwise, you would have to argue that anyone who buys things on sale and sells them on eBay are arbitrageurs - they're not!<br /><br />'Arbitrage-over-time', without fixed prices and/or volumes, is not arbitrage. As Task said, it is simply speculation. The US dollar is at historically low levels at the moment. You can buy US dollars now, because you know they're underpriced, and are highly likely to revalue upwards once the US economy picks up again.<br /><br />Is this 'arbitrage-over-time'? No. Is this speculation? Hell yes.<br /><br />@ Kurt: <i>"Technically, yes, but the essential insight, that predicting the future better than others opens up possibility for something similar to arbitrage, is a good and useful insight."</i><br /><br />Buying low and selling high, being better at predicting the future will help you make profits. Thanks for the protip. You can probably get an MBA with that sort of insight!<br /><br />Really though, that's plain useless. It's repeating garbage that everybody knows - if you have perfect knowledge of the future, you can make money. That's not insightful, that's bloody obvious.<br /><br />@ Zurich: <i>"The huge-volume trading done today that comes closest to old-style arbitrage is of exactly the nature of glyph harvesting in wow -- using your knowledge and a massive bankroll to essentially offer insurance in a particular market."</i><br /><br />That's not true. As I said, old-style arbitrage is to sell things in trade that you're buying off the AH in real-time and profiting off the two different markets. The glyph market is like an international steel mill buying iron ore (herbs), converting it into steel (glyphs) and onselling to people who need it. While it can be profitable, you can also make significant losses if your steel/glyph demand dries up, because you're stuck with raw materials and inventory that are worth less than cost price. It's not arbitrage. It's just business.<br /><br />Real-world arbitrage still exists and still occurs. Some forex traders out there spend hours a day, scouring the international currency markets looking for gaps and pour billions of dollars through simultaneously on both sides to make a few thousand bucks. International equity investors might simultaneously buy and sell dual listed stocks in New York and London to cash in on the difference in pricing. Now <b>THAT</b>'s arbitrage!Squishalothttp://www.wowhead.com/user=Squishalotnoreply@blogger.comtag:blogger.com,1999:blog-1461700565722278823.post-18163117203070486692010-10-19T23:12:12.389+02:002010-10-19T23:12:12.389+02:00@Kurt:
"They aren't "investing&quo...@Kurt: <br /><br />"They aren't "investing" in anything, they are reacting quickly to news of a natural disaster and engaging in short-term arbitrage to capitalize from it."<br /><br />Huh? So your proposed analogy is that the 4.01 patch is like a natural disaster? A natural disaster that we had months of notice for? That's an absurd comparison. 4.01 was not some lightning bolt out of nowhere which wrought sudden changes that everyone had to immediately adjust to. Blizz publicized the glyph changes. We had weeks to prepare. Bloggers wrote articles galore describing on what to do. <br /><br />Stocking up on glyphs and inks in anticipation of a price increase is good investment strategy, not arbitrage.<br /><br /><br />"Because those tools do not exist in WoW, it it ridiculous to extend academic definitions based upon their availability into this arena."<br /><br />It is more ridiculous to try to cram what you can do within the game into the term by warping the fairly clear definition. There's no harm in saying that it cannot be done in WoW with the tools available.<br /><br /><br />"Mystique and glamour in arbitrage? What world do you live in? In any case, as I explain above, you offer no better way of talking about the situation, so are easily dismissed."<br /><br />Pure arbitrage does have a lot of mystique and glamour- it represents a true "Free Lunch" of positive gains at no risk. It is the gold standard of pure profit. It's a compelling concept, and the label has power- just like calling a big company a "monopoly", or a merger you don't like "anticompetitive". People are eager to slap the "arbitrage" label on things which aren't.<br /><br />You're sure spending a lot of electrons on something so "easily dismissed." Calling this arbitrage severely distorts the well accepted, financial and economic meaning of the term. The concept of predicting a price change and acting appropriately is so fundamental that it doesn't need additional explanation. It's smart. It's profitable. It's not arbitrage.Strumnoreply@blogger.comtag:blogger.com,1999:blog-1461700565722278823.post-52399339283628127612010-10-19T23:11:31.647+02:002010-10-19T23:11:31.647+02:00@strum:
"And the analogy is on point. Gevlon...@strum:<br /><br />"And the analogy is on point. Gevlon's definition: "Arbitrage-over-time means you buy items now and sell it later." That's pretty much the definition of going long. Long in a stock, long in commodities, or long in a glyph: it's buying and owning the item."<br /><br />Buying stock one day, and selling it the very next day, is not the traditional long position. If you buy goods one day in London, and sell them the next in Paris for a different price, taking advantage of the different markets, that is arbitrage, not going long in that good. I think the problem here is the term "arbitrage over time", that's not the term I would have chosen. It connotes that the profit comes from the passage of time, which is traditional investment. The profit in this case happened overnight, due to a change in conditions. "arbitrage over predictable rule changes" isn't quite as succinct, but it's what is happening here. I'm not going to keep pointing out your errors, if you persist in calling holding stock for 1 day, in a world where the traditional commodity futures mechanisms do not exist, "going long in glyphs", I'll just laugh at you in private. The fact that you made 40k on this event only proves that you knew it was sure profit, not a risky investment.Kurthttps://www.blogger.com/profile/08064568916740238502noreply@blogger.comtag:blogger.com,1999:blog-1461700565722278823.post-19842231424846046302010-10-19T23:03:13.322+02:002010-10-19T23:03:13.322+02:00@Kurt
Also you're conflating vastly profitabl...@Kurt<br /><br />Also you're conflating vastly profitable with arbitage. How much you make on the transaction doesn't define whether or not it's arbitage. Buying real estate then selling during a housing boom, isn't arbiate no matter how much you make. Versus being able to cash in on variances on stock prices even of only a few cents is arbitage. Scale of profits doesn't matter, the definition only cares about risk.csdxnoreply@blogger.comtag:blogger.com,1999:blog-1461700565722278823.post-59235738155204935272010-10-19T22:01:37.287+02:002010-10-19T22:01:37.287+02:00I think it's interesting that today's post...I think it's interesting that today's post seems to be saying that Goblins make money because they're smart, or they educate themselves and take calculated risks.<br /><br />However, just after "Glyphmas" your conclusion was that all your customers were M&S and ignorant.<br /><br />You speculated. You took a calculated risk. You read the tea leaves correctly. Excellent job.<br /><br />But using your success as evidence to prove that others are stupid...isn't that just being a poor winner?Bristalhttps://www.blogger.com/profile/11849907713604626977noreply@blogger.comtag:blogger.com,1999:blog-1461700565722278823.post-32072476452174270822010-10-19T21:17:18.275+02:002010-10-19T21:17:18.275+02:00@Kurt:
I made 40-50k, with 1 posting session a da...@Kurt:<br /><br />I made 40-50k, with 1 posting session a day.<br /><br />And the analogy is on point. Gevlon's definition: "Arbitrage-over-time means you buy items now and sell it later." That's pretty much the definition of going long. Long in a stock, long in commodities, or long in a glyph: it's buying and owning the item.<br /><br />People were idiots by buying on Tuesday instead of Monday. Producers were idiots manufacturing on Tuesday instead of Monday. And prices definitely shot up on Tuesday.<br /><br />All still not arbitrage. Profitable investment opportunity, yes; arbitrage, no.<br /><br />If you think prices are going up tomorrow, then by all means, buy it now and sell it later and make a pile of gold... just don't call it arbitrage. Predicting the increase in demand and making a lot of glyphs is not arbitrage any more than is predicting a poor wheat harvest and filling your silo. Being Nostrodamus doesn't make you an arbitrageur.Strumnoreply@blogger.comtag:blogger.com,1999:blog-1461700565722278823.post-27260966079773695622010-10-19T21:06:14.509+02:002010-10-19T21:06:14.509+02:00@strum:
"I agree that you can make a killing...@strum:<br /><br />"I agree that you can make a killing if you can predict the future better than your competitors, but I see no reason why we should label that "arbitrage","<br /><br />Your proposed alternative analogy, to investing in google or apple, is utterly horrible. Massive profit, over a few days, with almost no risk, versus less profit, over years, with more risk. Arbitrage is the closer analogy, because it most closely fits the facts of the matter. Real world analogies, where for example people learn of a natural disaster and move money accordingly, you would call "investment profits"? That is equally nonsensical. They aren't "investing" in anything, they are reacting quickly to news of a natural disaster and engaging in short-term arbitrage to capitalize from it. The sense in which this fails to be arbitrage, is not in that the situation doesn't fit, but that the appropriate tools are not available in WoW for players to properly hedge their actions to eliminate the risk completely, to satisfy the technical, academic definition. Because those tools do not exist in WoW, it it ridiculous to extend academic definitions based upon their availability into this arena. <br /><br />I.e. if WoW had a futures market and allowed short-selling, then people could actually engage in the activity that you wish to restrict Arbitrage to. Since WoW doesn't, your definitions, and those of the others who have made similar points here, are inapplicable.<br /><br />""Arbitrage" is thrown around alot, and the concept has a lot of mystique and glamour. But ultimately not every low risk, positive expected return transaction is arbitrage."<br /><br />Mystique and glamour in arbitrage? What world do you live in? In any case, as I explain above, you offer no better way of talking about the situation, so are easily dismissed.Kurthttps://www.blogger.com/profile/08064568916740238502noreply@blogger.comtag:blogger.com,1999:blog-1461700565722278823.post-81388452041078503642010-10-19T20:22:46.070+02:002010-10-19T20:22:46.070+02:00For over a week before the patch I was buying glyp...For over a week before the patch I was buying glyphs from my competitors. Then the day before the patch, I bought out every glyph that was priced below 20g.<br /><br />I got whispers from multiple competitors that I was in over my head, I was taking too big a risk.<br /><br />Since the patch I've made WELL over 300k gold. No, that's not a typo. That's an honest assessment of how much I have profited from my work.<br /><br />This is without touching my own inks, and that's accounting for the over 100k that I invested in the week prior to the glyph changes buying out and controlling the market. I got whispers from competitors that perhaps I was investing too deep.<br /><br />I made an alliance auction character, transferred over about 35k from my horde main, and bought items there. Money on alliance can be used to buy materials and the neutral auction house will allow me to transfer it. (I've done this in the past to buy abyss crystals cheap on alliance, and then made a profit on horde reselling them.)<br /><br />So, the question, "How could we know?" ... WE KNEW. I did not run out of stocks, the only way I could have captured money is by spending more time buying out low level glyphs.<br /><br />Now I am spending time looking for big ticket items that will continue to be worth purchasing after cataclysm hits. Every increase in levels will bring an increase in gold earnings. So inflation will make your gold's purchasing power lessen, so invest in a few things now before you find out that 50k has the buying power of 20k or less.Daniel Chapmanhttps://www.blogger.com/profile/11206113247985853824noreply@blogger.comtag:blogger.com,1999:blog-1461700565722278823.post-15540900345126112662010-10-19T19:27:32.301+02:002010-10-19T19:27:32.301+02:00@Anti
The point was that the patch made it cheaper...@Anti<br />The point was that the patch made it cheaper to get a dual spec so it 'gave' players over nine hundred gold to spend on overpriced glyphs.<br />The opportunity costs of investing in both dual-spec and glyphs was greater pre-patch.<br /><br />PS The question was rhetorical but it is nice to know that people aren't too vulgar to mention how much gold they may (or may not) have got.Bobbinsnoreply@blogger.comtag:blogger.com,1999:blog-1461700565722278823.post-4187273924552644872010-10-19T18:49:50.528+02:002010-10-19T18:49:50.528+02:00Talking about arbitrage, there are 2 possible scen...Talking about arbitrage, there are 2 possible scenarios for cash flows:<br /><br />1) you invest zero your own money (=borrow) today and ensure that you have a non-negative payoff in the future.<br /><br />2) you realize a gain today and ensure that in the future your cash flows cancel out.<br /><br />Thus, I would also say that this is not a case of arbitrage. It's a risky investment.moznoreply@blogger.comtag:blogger.com,1999:blog-1461700565722278823.post-13109758299559225622010-10-19T18:48:54.985+02:002010-10-19T18:48:54.985+02:00@strum
"The major idea behind arbitrage is r...@strum<br /><br />"The major idea behind arbitrage is risk-free profit by taking advantage of price differences between markets."<br /><br />For example, the difference between 1 ink per glyph on Monday, and 3 inks per glyph on Tuesday? <br /><br />"Going long on a stock or commodity maybe be a good idea; it may be a very profitable idea. But merely buying up Google or IBM stock to sell in the future is not arbitrage, and neither is what Gevlon describes."<br /><br />this is perhaps the worst analogy I've ever seen. Let me ask you...how much gold did you make from glyphmas?Kurthttps://www.blogger.com/profile/08064568916740238502noreply@blogger.comtag:blogger.com,1999:blog-1461700565722278823.post-50635815146162596942010-10-19T18:44:53.341+02:002010-10-19T18:44:53.341+02:00@Kurt: "Technically, yes, but the essential i...@Kurt: "Technically, yes, but the essential insight, that predicting the future better than others opens up possibility for something similar to arbitrage, is a good and useful insight."<br /><br />I agree that you can make a killing if you can predict the future better than your competitors, but I see no reason why we should label that "arbitrage", which has very specific connotations, and instead just call it what it is: very good investment opportunities. <br /><br />"Arbitrage" is thrown around alot, and the concept has a lot of mystique and glamour. But ultimately not every low risk, positive expected return transaction is arbitrage.Strumnoreply@blogger.comtag:blogger.com,1999:blog-1461700565722278823.post-2902515538403303642010-10-19T18:17:53.043+02:002010-10-19T18:17:53.043+02:00re: arbitrage, I agree with Squish that the term i...re: arbitrage, I agree with Squish that the term is being badly mis-used here. <br /><br />Saying that you're comparing today's market vs a future market and "arbitraging" between them is just another way of saying that you're investing and hoping/expecting that the price will go up. <br /><br />The major idea behind arbitrage is risk-free profit by taking advantage of price differences between markets. In practice, you can't eliminate all risk (e.g. counterparty default), but the risk of basic price fluctuations is moves this idea right out of arbitrage and into normal investment/speculation. <br /><br />Going long on a stock or commodity maybe be a good idea; it may be a very profitable idea. But merely buying up Google or IBM stock to sell in the future is not arbitrage, and neither is what Gevlon describes.Strumnoreply@blogger.comtag:blogger.com,1999:blog-1461700565722278823.post-15778284091601335632010-10-19T17:59:47.934+02:002010-10-19T17:59:47.934+02:00One thing I didn't see coming was the change i...One thing I didn't see coming was the change in enchant vellums. They are now very cheap to make -- basically you can put any enchant on an armor vellum 1 now, and the rest got converted.<br /><br />I am wishing now that I'd made fewer weapon vellums and armor vellum IIIs ahead. but I'm *most* glad that my stockpile of weapon IIIs was fairly low. I had a giant pile of ink of the sea and I was intended to convert a bunch to weapon IIIs for my enchanter -- glad I didn't do that. Especially now that ink of the sea is selling for 6-8g apiece in large quantities. With glyphs crashing down to the 10-30g range now and my glyph book not being all that great or well setup, I've decided to sell ink rather than craft a bunch of glyphs right now. I won't bother carfting more glyphs until the post-glyphmas hangover ends and I see which ones are profitable.The Gnome of Zurichhttps://www.blogger.com/profile/03203965173625552516noreply@blogger.comtag:blogger.com,1999:blog-1461700565722278823.post-11732069909516030282010-10-19T17:30:55.453+02:002010-10-19T17:30:55.453+02:00"and by definition, should not be described b..."and by definition, should not be described by the word 'arbitrage', which is taking risk free advantage of the price difference between two markets."<br /><br />It's pretty common to use "arbitrage" to refer to investments with a very high probability of positive return and a very tiny probability of negative return.<br /><br />Usually it's modified by another term, such as "risk-arbitrage" or "merger-arbitrage". Everybody realizes (or should) that these things are not arbitrages in the classic sense of pure profit with zero risk, but the fact is that pure arbitrage plays are almost non-existent these days outside of insider trading. <br /><br />The huge-volume trading done today that comes closest to old-style arbitrage is of exactly the nature of glyph harvesting in wow -- using your knowledge and a massive bankroll to essentially offer insurance in a particular market.<br /><br />Two companies merge -- there's an implication of the value of the component stocks post-merger that is generally higher than the current price. So there is usually an "almost arbitrage" available by some combination of buying one and shorting the other, or buying both. But the reason the spread exists for more than a split second is that it is not truly risk free! The merger might not go through for any number of reasons. If the market is truly perfectly efficient, then you are really doing nothing different than playing a martingale -- taking a tiny chance of a big downside that does in fact balance the small profit that you make 99% of the time. But if the market is not efficient, and there is a case to be made that in such cases it is not always so, you get some arb profit out of it. <br /><br />It's hard to know for sure, and the calculation depends crucially on the estimate of how often the merger blows up. <br /><br />But to some extent, it's an arbitrage.<br /><br />Even old style arbitrage was never totally risk free. There's always some risk that the price gap closes before you can complete both trades causing you to lose money. <br /><br />IMO, the key factor that makes something an arbitrage is that some current non-market factor (i.e. being able to move something between two different markets) makes two different market prices not make sense in a way that someone can make a profit off of it.<br /><br />I think time-arbitrage qualifies when it can be predicted with as much certainty as some of the changes following a wow-patch.The Gnome of Zurichhttps://www.blogger.com/profile/03203965173625552516noreply@blogger.comtag:blogger.com,1999:blog-1461700565722278823.post-23536219678468756502010-10-19T16:20:32.179+02:002010-10-19T16:20:32.179+02:00"How much did you spend on dual spec?"
..."How much did you spend on dual spec?"<br /><br />hunter, mage, mage, warrior, pally, rogue, druid, 71 priest.<br /><br />so 8k. only toon of any significance without dual spec is my 68 DK scribe who is only 68 to get alchemy mastery.<br /><br />they also all have epic flight. most of them when it was 5k so thats another 40k.<br /><br />at least half of them paid 1k for epic ground mount too.<br /><br />but i have money. the only time it was an effort was the first time i had to save 5k for flying. between then and when i decided to go for goldcap i usually had 10k - 30k in reserve.<br /><br />thanks to glyphmas i now have close too 400k reserve headed into Cata.Antinoreply@blogger.comtag:blogger.com,1999:blog-1461700565722278823.post-45151864546298914222010-10-19T16:20:23.920+02:002010-10-19T16:20:23.920+02:00@squish: "In principle and in academic use, ...@squish: "In principle and in academic use, an arbitrage is risk-free; in common use, as in statistical arbitrage, it may refer to expected profit, though losses may occur, and in practice, there are always risks in arbitrage, some minor (such as fluctuation of prices decreasing profit margins), some major (such as devaluation of a currency or derivative). In academic use, an arbitrage involves taking advantage of differences in price of a single asset or identical cash-flows; in common use, it is also used to refer to differences between similar assets (relative value or convergence trades), as in merger arbitrage."--wikipedia<br /><br />This is the 10 millionth time that someone has attempted to describe a particular kind of investment over time as analogous to arbitrage over time, and the 10 millionth time that someone has piped up "but arbitrage is by definition risk free". Technically, yes, but the essential insight, that predicting the future better than others opens up possibility for something similar to arbitrage, is a good and useful insight.<br /><br />It is even more applicable when you consider that the people to which Gevlon makes a real world analogy sold these incredibly risky papers as RISK-FREE, due to their flawed insurance based on a flawed risk determination formula derived by an academic--a practical demonstration that the risk-free theories of the academics are not very useful in describing the real world, where there is always risk.Kurthttps://www.blogger.com/profile/08064568916740238502noreply@blogger.comtag:blogger.com,1999:blog-1461700565722278823.post-68772037794930064142010-10-19T16:19:27.442+02:002010-10-19T16:19:27.442+02:00@Anti: Yes I´ll try it that way. I´m into buying s...@Anti: Yes I´ll try it that way. I´m into buying some of the Shadowmourne-Quest Items (mount, tabard, Box etc. got the offer at a neutral forum a few houres ago) I´ll do the ah-switch at 3 o´Clock, don´t want to loose a item to some speedy auctioneer (happy with my 3 accounts). Transferring my gold by reselling promordial saronite is ab bit out of range for the big part of the gold. At the actual prices on our server that would be 48 stacks and I don´t want to sit on 48 stacks of saronite, I´d never get rid of them.Visalyarnoreply@blogger.comtag:blogger.com,1999:blog-1461700565722278823.post-33685562420555986982010-10-19T16:08:48.652+02:002010-10-19T16:08:48.652+02:00@Squishalot and Gevlon
I believe the word you wer...@Squishalot and Gevlon<br /><br />I believe the word you were looking for is 'Speculation'.Tasknoreply@blogger.com