Liquidating Titansteel

After our post analyzing the state of the post-3.1 economy we had a few readers ask us about Titansteel Bars and, more specifically, how to get rid of them. Obviously, dumping more than 2 or 3 in the market at once will send prices downwards but, as we pointed out in our the post, prices are already on a steady decline so holding on to the bars seems equally fruitless. What should we do then, if the goal is to get out of the Titansteel Bar market as painlessly as possible?

Understand Fair Value

Fair value, as opposed to nominal value, is the worth of a commodity or good based on the price(s) of components required to make that item at a specific time. That is, fair value is the worth of an item at the time of the potential trade. This price may (and probably will) differ from the price at which the good was initially bought or sold. One example might be a currency. The dollar bill may say it is worth one dollar as printed across the front of it. That is the nominal, or par, value. Trading that dollar for a foreign currency, however, will reveal that the value of the theoretical dollar fluctuates based on market pressures including but not limited to inflation/deflation, supply and demand and the strength of other currencies.

Though it sounds simple, many WoW players that we run into have a very difficult time understanding this concept. The thing that people seem to get caught up on is thinking that an item is worth what they paid for it. This is, in fact, false. The worth of an item at any given time is the amount that it is selling for. Moreover, the fair value of an item is the amount of the price of the components of that item. While emotionally the item may seem like it is worth more or less, we don’t trade on emotion, we trade on fact.

As applies to Titansteel Bars, add up the current market prices of the materials required to craft the bar and you’ll arrive at the fair value of the bar. So long as the bars themselves are selling for more than the cost of materials, it makes sense to craft them and sell them. If the bars are selling for less than the materials, then don’t craft them. The only factor at play is that of the materialopportunity cost– how else you might be more profitably using those materials if you hadn’t used them to craft a Titansteel Bar. There is, in this case, no opportunity cost associated with your time spent since the time investment in using the smelting skill is minimal.

In our post-3.1 assessment when we tested Titansteel Bars on four servers on both Horde and Alliance sides, in every instance the going rate of the bars was always greater than the going rate of the sum of the materials. Thus, our finding was that the bars still have crafting-for-sale value.

But What if You Already Have Titansteel Bars Stockpiled?

If you’ve still got the bars stockpiled then you’ve got a decision to make. If you assume the bars are going to go back up in price than you can hold on to them and hope. Otherwise, it is time to start strategically selling them off. If you only have a few this is as straightforward as listing them in the AH. However, in quantities of 10 or more you have to start thinking about unwinding the trade (wherein you make counter-trades to offset potential losses from your initial trade) and to do this we have to get creative…

Sell the Cool Down for Bars you Already Have

The best, most profitable way we’ve found to offset is to ‘sell’ your ‘Titansteel cool down’. Offer in /trade chat- or wait for one of the many messages the pop up requesting this cool down- to sell your daily cool down. Now, you’re not really going to sell them a cool down technically because you’re actually going to simply give them one (or hopefully more) of your bars for the materials required to craft it. Further, you’re going to charge them a premium for use of your ‘cool down’. The charge for use of the Titansteel cool down is usually between 10 and 15 gold. If you can do this with all of the bars you want to get rid of, instead of selling them outright on the market, you’ll not only recoup all of the materials that you used up in initially crafting the bars but you’ll make a small profit as well. The only real cost to you is now the opportunity cost of not having used those bars, or the materials, in another more profitable way during the time you were stockpiling. Either way, there’s no actual monetary loss if you liquidate in this fashion.

We are aware that this is a complex trade. Complex trades are not for everyone. Most people want to simply buy low and sell high. However, as with all aspects of finance you are sometimes thrown a curveball. The most successful traders are not those that make only good bets (those people are called either flat out liars or scam artists). No, the most successful traders are those that know how to handle the curveballs as they come.

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4 Comments

Filed under WoW Economy News, WoW Gold Making Tips, WoW Market Commentary

4 responses to “Liquidating Titansteel

  1. Anonymous

    The currency analogy is flawed; currency by it’s nature is a store of value. The factors you mentioned were intrinsic-micro, currency vie currency is valued based on international Fischer factors, delta expectations in inflation, interest rates and country risk. The idea being is that there is measurable purchase price parity between stores of value for the same goods (e.g. A big mac in France and a big mac in the us is related by these factors).

    I agree with the rest of your article, just making a micro product based argument supported by a macro currency analogy just doesn’t ring right

  2. Pingback: Recovering From a Bad Trade « WoWenomics

  3. Pingback: Hot Item of the Week- (Reluctantly) Titanium « WoWenomics

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