Dr. EJ on Economics - Part 1

Posted by Markco at 8:00 AM

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