Some beautiful music to read the blog with

Sunday, 20 April 2014

Eve Forum Market Discussions

For those that may not know, on the Eve Forums there is a dedicated section to discussions on all things market related.  From players asking for loans, attempts at setting up new banks, discussions on prices etc.

Worth a look.

I have included the Link in my "Useful Links" section on the right >>>>

Wednesday, 16 April 2014

Inflation in Eve Online

Below is the great youtube video of the Eve Economy Lecture given by Dr Eygo at the 2013 Fanfest where he talks about the Eve Online economy and notably about inflation within the economy.  It is 52 minutes long and well worth listening to if you want to see what inflation is in Eve (or at least how Dr Eygo views the inflation).

[short answer is: over 10 years none, over last 7 years positive inflation].

As ever, inflation is in the eye of the beholder and different for everyone (my government tells me that UK inflation is 2% and yet i know my cost of living is going up by more each year!).

The main chart CCP appear to follow, which is below, is the "Main Price Indices of New Eden".  Updated to end February.  It shows the (using the definitions in the last Quarterly Economic Report which was in December 2010!):

  • the Mineral Price index (blue line): price index of the 8 minerals
  • the Primary Producer Price index (red line): price index of manufacturing items used for the production of other manufacturing items.  I.e. drone compounds, moon materials, planetary commodities and items used in invention.
  • the Secondary Producer Price index (green line): contains production materials and other production items that are used in the manufacturing of consumer goods, i.e. goods included in the Consumer Price index
  • the Consumer Price index (purple line): measures the overall price changes of consumer products. This is not limited to consumables such as fuel, ammunition or Plex, but also includes assets such as ships, modules, implants and starbase structures. In summary, anything that is not produce other goods in this index.

For most players in Eve the main measure of Inflation will be the Consumer Price Index - i.e. what it costs to replace items blown up by others and to maintain their activities of blowing up others.

If logic were to reign - then the Mineral Price Index would lead the Primary Producer index which would lead the Secondary Producer index which would lead the Consumer Price Index.

In other words, if Minerals rise / fall in price then the other indices are affected in turn as the change in the price of the minerals flows through the chain.

Alternatively, the Consumer Price index would lead - i.e. a rise in demand for Consumer items leading to a rise in their price would place greater demand on the manufacturing chain leading to a rise in the price of minerals at the end.

Saturday, 12 April 2014

Team Security - a nice ISK sink.

We had a very interesting blog post by Team Security where they talked about their war on Bots and RMTers.  The blog post talks about why they do it and what players can do in-game to help.

What interested me was how much ISK they had seized since September 2013.  As shown below in their graph, they have seized 19trn ISK, with 4.2trn ISK seized in March alone!

This is perhaps a major ISK sink in the game.

Though, to put this in perspective, back in March 2013 the size of the Eve Online economy was (called Gross User Product by CCP, or the value created) was about 135trn ISK [source is the Eve Online Economy lecture at the Fanfest - youtube video starts at the correct place on this link].  Hard to know what the economy has done over the last 12 months but perhaps safe to say that in March 2014 Team Security took 4% of the economy out of action.

Wednesday, 9 April 2014

Plex as an inflation hedge

Since i started focusing on earning ISK last May (2013) there have been two facts that have required overcoming.

Firstly, because i don't want to spend more than 30 to 45 minutes a day focusing on ISK activities i have found that i have had surplus ISK which i can not invest, peaking at 35bn ISK in January 2014.  There are only two things i know about that ISK in my wallet: 1) It will be there tomorrow; and 2) it has no chance of earning more ISK whilst it is stuck in my wallett.

Secondly, there is inflation in EVE.  Prices are rising over time.  Player base is rising / more activity in the game gathering ISK / increasing wealth in the game . . . . . i have another post discussing this at a later date.

Hence, this ISK in my wallett is actually failing to keep its purchasing power.  It is worth less to me tomorrow than it is today.  Inflation is the silent thief of my wealth.

To solve this problem i ideally need to find something to invest my surplus ISK in to at least ensure it keeps up with inflation and so retains its purchasing power.

Hence, the ideal characteristics of such an investment would be:

  • Price linked somehow to the rising wealth in the game though i also want the price to be independent of individual specific items
  • Controlled supply - i want the supply of my investment to be limited or restrained so that as a scarce resource its value can grow as wealth in the game grows
  • Readily converted to ISK no matter what the environment - come war, peace, patch, expansion, you name it i want my investment to be recognised by all players at all times as something of value
  • Sufficiently liquid to convert to ISK in a short period of time - i.e. i can sell my investment very quickly into the market for a fair price
  • Power Proof - i don't want any player / alliance power base able to control the price of my investment
  • Patch / expansion proof - i don't want my investment to be materially reduced in value on the whim of a change in a patch or expansion.
In many ways, the only item in the game that i can think of which meets all these criteria is Plex.

Hence, i have started to invest my surplus ISK into Plex.  I aim to keep a float of 10bn ISK in my wallett and invest the rest into Plex.

I appreciate CCP has stated they will intervene if the price moves to their disliking but i believe over time the price of Plex will rise.

I suspect that this is not what CCP had in mind for Plex and indeed these actions, assuming others do the same, will start to distort the Plex market over time (the price of Plex in ISK will be higher than it should be given investors are entering the Plex market to buy and hold rather than buy and consume).

There are a number of things the Eve Central Bank could do to combat this such as charging a rental tax to hold Plex (5% tax for Plex held longer than 3 months, for example) though i can't think of anything that would not put downward pressure on Plex in the short term.

The best solution i would have is for Eve to end the issue of the current Plex and launch a new Plex (call it NewPlex).  The current Plex in issue will still be viable and can still be sold on the market.  The NewPlex would then carry that rental tax if held for over 3 months.

Saturday, 5 April 2014

March Update

Despite being away from Eve for 2 to 3 weeks in March my wealth increased by 8.9bn ISK to 92.8bn ISK, which is an average of 289m ISK per day.

I had expected nearer 7bn but my holding in Plex generated a further 1.9bn increase in wealth - more on that further down.

I expected February, March and April to be slow given real life commitments.  Indeed, i did not log in much during March until the final week.

Therefore, during these months i am only selling the T1 items i manufacture and only trading other items where i make at least 15m ISK profits and 20% margins - though in the week here and there that i am around i am willing to drop my profit target to 10m ISK.

My strategy is to focus on low volume but high margin items that i either manufacture or buy (off sell orders) in Jita to sell in Dodixie / Hek / Rens / Amarr.

I don't have any standings of note.  To reduce my costs of trading i have trained all my alts that post sell orders to Broker 4 and Accounting 4.

For those able to devote much more time to Eve, one way of reading this blog is to see how little time is required to generate sufficient ISK to plex your own account.

I have 2 accounts with 6 alts in total.
  • One one account: I have a trader at Dodixie and a trader at Hek which sell items that have been hauled there from Jita; and I have a manufacturer in the Lonetrek region that sells items in Jita and sends items to the traders in Dodixie, Hek, Amarr and Rens to sell.
  • On the other account: I have a buyer in Jita that is is only there to buy items in Jita to send to the traders in Dodixie, Hek, Amarr and Rens; I have an alt that is skilling up in Invention which currently sits in Amarr to sell the items manufactured by my Lonetrek manufacturer; and i now also have an alt that sits in Rens to also sell the items manufactured by my Lonetrek manufacturer.
All my hauling is done by third parties, namely PushX Industries - the time required to haul items from Jita to my traders in Dodixie and Hek would take up too much time.  Better to let these third parties do the hauling (for a fee, of course) whilst i am offline.  All my hauling is "Rush Jobs" and generally takes no less than 5 hours (often in under an hour) to haul from Jita to my four locations in Dodixie / Hek / Amarr / Rens (which are also the other trade hubs).  On average i pay 25m ISK per haul but it is well worth it given i can get those items bought in Jita onto the market in the other trade hubs very quickly and the hauling costs make up 1 to 3% of my sales price.  Not much given i aim to make 20% margins before all costs (hauling, broker fees, sales taxes).  I wrote a post on Rush Jobs which details why it is more profitable paying up.

I am now buying 2 Plex a month to finance my two accounts.  Up until December 2013 i had only needed to buy 1 Plex per month.  So, 1.4bn ISK per month costs going forwards.  I do occasionally benefit from some kind soul upgrading their account having used the link to the right >>>>>>>>>

Plex: my next post will look at why i hold Plex.  But as of the end of March i held 44 Plex at a cost of 28.9bn ISK which at 690m per Plex was then worth 30.4bn ISK.  In other words, the rise in the value of Plex increased my wealth by 1.5bn ISK.

My biggest headache was that i was sitting on too much ISK which was not invested in the market.  I had up to 35bn ISK in my wallet which was dead money.  At most i need to hold 10bn ISK to finance my business, the other 25bn or so is surplus to requirements.

I know two things about that ISK.  Firstly, it will be there tomorrow with no chance of making a profit (or a loss).  Secondly, there is inflation in Eve so in effect it is not keeping up with the cost of living in Eve - in other words, its value to me in the future is lower than its value to me today.

So far, Plex is the best item i can find that (in the medium to long term) is the best asset to keep up with inflation in Eve - as i hope to detail in my next post.  I expect to continue to invest all profits made each month into Plex from here.

Dodixie trader: Life remains good and consistent

Items for sale fell back from 22bn ISK to 20bn ISK which more reflected some sales made on the last day of the month.

I sell T1 manufactured items that my manufacturer makes in Lonetrek, and any item i can find that makes profits of over 15m ISK, has a profit margin of over 20% and is a slow seller.  I.e. ship equipment, implants, ship modifications, a few skillbooks and a few blueprints.

The alt is currently using 76 of the 141 trading slots.

This alt pays 0.80% broker fees to post an order and a further 0.90% sales tax on a successful sale.  No longer training.

There are no medium term goals for this alt – for now i will focus on the manufactured items from my alt in Lonetrek and selling expensive items hauled from Jita.

Hek trader: Life remains good and consistent

Items for sale rose to 15.6bn ISK from last months 14.2bn.

Much like the Dodixie trader I sell manufactured items that my manufacturer makes in Lonetrek, and any item i can find that makes profits of over 15m ISK, has a profit margin of over 20% and is a slow seller.  I.e. ship equipment, implants, ship modifications, a few skillbooks and a few blueprints.  Other than the manufactured items, there are very few common items i sell in Dodixie and Hek.

I use 74 of the 129 available sell slots.

Pays 0.80% broker fees to post an order and a further 0.90% sales tax on a successful sale.  No longer training.

Amarr Trader: Going well though slowing

Only really fully started up in mid December and focuses solely on items manufactured by my alt in the Lonetrek region.  During February this alt's sales were 4.8bn ISK vs prior months 5.6bn ISK and i suspect the profits were 2.4bn ISK vs prior months 2.8bn ISK.  The decrease is because of competition reducing the profit margin on some of my manufactured products and so i no longer sell several of these items in Amarr.

Items for sale at the month end rose to 10.9bn ISK vs prior month of 9.7bn.

I now use 23 of the 45 available sell slots - when i have time i am looking for a few other items to sell in Amarr.

Pays 1.0% broker fees to post an order and a further 1.1% sales tax on a successful sale.  Currently training Accounting to Level 4 and Broker Relations to Level 4 to bring those fees down further.

The main aim of this alt is to train up for Invention, and here the training goes on.  Needless to say, with being busy in rl this whole invention thing has been on the back burner!

Rens Trader: third full month and getting better

Started just before xmas and also focuses solely on items manufactured by my alt in the Lonetrek region.  During March this alt made sales of 4.5bn ISK (2.1bn prior month) and i suspect profits of 2.2bn ISK vs prior month of 1.0bn.  Items for sale at the month end were 7.7bn ISK, up from prior month of 6.7bn.

Rens is a slower trade up so i did not expect to see great things - but this is much better than i thought.  I was hoping for this alt to earn the Plex per month for this account but is infact earning 3 Plex per month.

I have no plans to expand into selling other items - i will stick to selling the items my manufacturer produces.

I trained this alt to give me 53 open sell slots and currently i use 39 of them.

Pays 0.8% broker fees to post an order and a further 0.9% sales tax on a successful sale.

No longer in training.

Manufacturing alt: This alt does all my manufacturing from the Lonetrek region which is within easy access to Jita.  Not much has changed since November.

This alt sells its items in Jita and contracts to Push Industries to haul items to the traders in Dodixie / Hek / Amarr / Rens to sell.

I have a list of 59 items i focus on to sell, currently selling 27 of them in Jita and 40 in Dodixie, Hek, Amarr and Rens - though perhaps less now in Amarr given competition has increased.  The other items that i watch have too low a profitability.

I own 44 blueprints worth over 1bn ISK, most of which have already comfortably paid for themselves.

This alt may have plateaued at 6 to 8bn ISK sales per month for now.  During the month it made sales of 6.7bn (vs 7.9bn ISK in the prior month) and estimated profits of 3.3bn ISK.  It currently has 7.3bn ISK of sell orders.

My expansion into manufacturing has been a great success so far.  I am now training this alt up to manufacture T2 items and i am in the process of manufacturing my second T2 item - lets see how it goes but so far T2 items are not as profitable for me as the T1 items.

And all this takes is 15 minutes update time a day.

The current near term goals is to find other T1 items to sell as well as expanding into T2 items.

I have seeded a new market in Lonetrek - lets see how that goes.  It is slow at present but so far i believe i have made sales in March of 700m ISK leading to profits of c400m ISK.

Outlook: April is going to be busy for me in RL, hence i suspect i will be back to making 7bn ISK per month.  The month of May could perhaps be better though June back to being busy again in RL.

Current Wealth:

Expected business purchases in the next 30 days
  • Plex x1 = 0.7bn ISK

I don't count assets I use in the course of my business such as ships, fittings etc nor do I add back any expenses such as skills purchased etc.  The wealth I disclose is made up of items that are ISK or are in the process of being converted to ISK.

* I take a 20% provision against the items I am selling.  Eve calculates wealth by adding up the value of the sell orders hence it is possible to increase your wealth by buying an item for 100m ISK and putting a sell order for 120m ISK (in this case your wealth would increase by 20m ISK).  For me, I want my wealth to be calculated at cost until i finally hold it as ISK.  I know that the value of my sell orders will likely fall over time as I update my orders downwards as competition reduces their prices before my items are sold.  Hence the 20% provision is my best guess as to what cost is or at least the maximum reduction I would need to make to my sell orders as a whole before they are sold.

Wednesday, 2 April 2014

Finding new items to sell in the Trade Hubs

I was away for most of March and as time goes by the items i am selling in the Trade Hubs tend to fall to very low profit.  Hence, i am in continuous need of finding new items to sell.

It is a sort of cycle my Trading Business follows: Find new items to sell to replace existing items that no longer make profits.

So, with that, it is well worth reminding everyone how i go about finding new items to sell (and i am all ears for other ideas on this!).

For this exercise, all i use is Eve Central and a spreadsheet - but for our purposes we shall focus on Eve Central.  The spreadsheet merely make the searching task easier once i have the data from Eve Central.

Eve Central is a website which records the price of items on the Eve Market in all locations.  However, and here is the key point, it records the items by players automatically uploading the prices to the website via a small piece of software which monitors the Eve market as they browse it.

Therefore, the prices are only as complete and timely as those players browsing the Eve markets.

What i find is that the Jita prices are mostly complete and recent.  The Trade hubs also though to a lesser degree.  And then things start to deteriorate.

The Set up: Lets assume i am looking for new items to buy in Jita and to sell in Dodixie.  As always, i buy from sell orders in Jita - i don't put up buy orders myself.

I normally have my alt in Dodixie open - that is so i can check the Dodixie prices and volumes.  The Eve Central prices in Jita are normally correct.

The Method:

Firstly, open Eve Central and you will be presented with the Home Page as shown below:

Secondly, press the "Trade Finder" button as shown - this will open up the next page.  At the bottom of that page is the "System and Region Price Comparison Tool" as shown below:

Thirdly, because i am comparing prices in Dodixie to Jita i fill in the fields as shown above and then press the "Compare" button which, after some computing, brings up the final page which lists all the items in order of profit.

Finding the Items to sell:

At this point i copy the entire page to a spreadsheet and then look for items where the profit is at least 20% and the price to buy in Jita is above a certain value and below another value (in other words i don't want to be buying very lowly priced items but at the same time i don't want to by buying items priced over 2bn ISK).

When i come across an item that looks promising i use my alt at Dodixie to check the price of the item to make sure it is real (not inflated or an outlier) and also to make sure that the item does sell at least once every three days.

The most common issue i find is that there is no volume at the price stated - in otherwords, items on for sale at the recorded price are unlikely to be sold.

An example of one that may not work:

On the webpage there was a Federation Navy 1MN Afterburner which you can buy from Jita for 55m ISK and sell in Dodixie for 85m ISK.  And sure enough the prices check out - there are 4 sell orders up for 85m ISK.

However, there is no volume at this price, as shown below, and so it is not worth do this trade.

An example of one that should work:

On the webpage there was also a "Large Anti-Thermal Screen Reinforcer II" which could be bought from Jita for 32m ISK and sold in Dodixie for 39m ISK.

The 17 sell orders up at this price as shown below - so the price is real:

And, as shown below, the volumes are good as well!  Looks like we are seeing an average of 3 sold a day - that is bang inline with what i look for.  I could make profits before taxes of 7m ISK by spending 32m ISK and the price is stable because the volumes are low enough to mean that the high volume undercutters stay away.

Saturday, 29 March 2014

Seeding a new market

I have decided to seed the Lonetrek market with the items that i manufacture.

I honestly don't know how this will go, it is not a trade hub.  But if it fails i know i can move the items to another area or send them to replace items i have sold in one of the current trade hubs.

I am hoping i will intercept buyers coming in to Jita and so allow them to make purchases instead of having to try to get to Jita.  Well, that is the plan anyway!

The Lonetrek region one jump out of Jita and so i am using my manufacturer to put the sell orders up.

In all, i have set up 38 items in Lonetrek (as per usual they are slow moving but high margin) which i would hope to sell for c3bn ISK making me a profit of c1.5bn ISK.

My strategy is to put 1 of each item up.  As an item sells, i will be replacing it with 3 of that item.

So far, i have made sales of c700m ISK.  Slow going to date.

Wednesday, 26 March 2014

CCP - 2013 Results

The CCP 2013 results are out - not the full Report & Accounts where we can learn all about subscribers etc - only the financial statements.

  • Revenues up 17.5% to $76.7m
  • Large write-off of $21.5m Research & Development work
  • EBITDA [earnings before interest, tax, depreciation and amortisation] (ignoring this write-off) rose 20.5%
  • Operating losses of $8.0m, ignoring this write-off
  • Post tax profits of $0.1m thanks to a tax credit., ignoring this write-off
  • Net cash spent during the year of $2.6m
  • Net debt rose to $16.5m
  • Net debt to ebitda 1.0x (vs covenants of 1.5x)

Revenues up most since 2009: Against what i was expecting the Revenues where slightly less than hoped, though after a rise of +7.1% in 2010, +10.2% in 2011 and no rise at all in 2012 then a rise of +17.5% in 2013 is most welcome.

Revenues in CCPs largest market, the US, rose 11.6% to $37.4m whilst Europe showed a much faster growth of 17.9% to $29.6m.

We don't yet know how much came from China though Asian sales rose from $2.4m in 2012 to $5.2m in 2013 - i would assume c75% of that is from China (Australia is not counted as part of Asia).  We know that Chinese subscriber numbers doubled over 2013.

Most costs under control: Most of the costs such as Publishing, Marketing and G&A seem to be under control.  In fact, G&A (General and Admin - so read as all costs not associated directly with programming, marketing, publishing, selling) was actually down 1% which is very impressing given the rise in revenues.  It looks like salaries in G&A fell by almost $1m from $9.8m to $8.9m which suggests some lay offs.

Profitable only because of a tax credit and tax to be deferred: CCP has a subsidiary based in the US state of Georgia which has a film tax credit which can be sold to third parties.  This year this generated $3.5m income (vs $2.5m in 2012).  The remaining $6m benefit came from the tax to be deferred into future years on underlying losses and the R&D amount written-off.

Drama in the R&D department: The two stand out items were the write-off of R&D of $21.5m and the increase in underlying R&D from $16.5m to $35.1m, as shown in the table below:

From the notes in the statement we know that the write-off of $21.5m occurred in Iceland (sort of suggests Eve Online or Dust514 related).  We can but speculate what this related to but personally i would put it down to either World of Darkness being canned (this has programmers in Iceland?) or much of the Dust514 capitalised costs being written-off - the latter is looking likely.  The accounting rules only allow R&D costs to be capitalised if the profits from the sale of the product over future years are expected to cover these capitalised costs.  We will learn more when the full Report & Accounts come out but i am leaning towards an accelerated write-off of Dust514 capitalised costs - more below.

The general rise from $16.5m to $35.1m is due to Dust514 coming online and so those prior capitalised R&D costs are now being amortised.

In 2012 the amortised R&D related almost entirely to Eve Online = $11.2m.  Therefore, the increase in amortisation to $25.4m reflects the inclusion of Dust514 for 6 months only.

In the first 6 months of the year, the amount amortised was $7.6m which related to Eve Online and therefore that would indicate that the full year amount for Eve-Online $15.2m.  This would suggest that 6 months of Dust514 amortisation was $10.2m ($25.4m - $15.2m).  Hence, the indicated full year rate for Dust514 is $20.4m.  Therefore, the annual amortisation charge would now be $15.2m + $20.4m = $35.6m.

Firstly, that is a very high annual amortisation amount for Dust514 ($20.4m) and feels like CCP has decided to accelerate the write-off period (they can choose to write-off the capitalised costs in anywhere from 1 to 6 years).

Secondly, the entire remain capitalised R&D is now $59.6m vs an underlying P&L R&D cost of $35.6m pa - that suggests that the entire amount would be written off in under 2 years.  However, the Eve Online costs that are being capitalised i suspect will be written-off over the full 6 years and so i suspect most of the remaining $59.6m is now Eve Online / Valkyrie related and so i would be expecting a much lower R&D cost in the P&L going forwards.

In all, i suspect CCP has decided that a large amount of the capitalised Dust514 R&D is unlikely to be covered by future profits from Dust514 hence the write-off and all the R&D spent in 2013 on Dust514 was put straight through the P&L.  Note, this is not the same as saying Dust514 will be scrapped - just that prior costs can no longer be justified.

Hence, i suspect the Dust514 related R&D as at June 2013 (i.e. before it was reduced) was $10.2m + $21.5m = $31.7m at the upper end to $21.5m at the lower end.

None of this R&D written-off is cash related in 2013 - it instead relates to cash that was spent in the years leading up to 2013.

What is cash related though is the $30.5m salaries pa spent on R&D people (for that i assume programmers etc).  In 2013 $20.1m of that was capitalised - it will be interesting to see what will be capitalised in 2014.

. . . . . . as a final comment, the convertible bonds which are listed on the Nordic Nasdaq did not move an inch - infact, as far as i can tell, not a single bond has been bought or sold since they listed in June 2013.

Saturday, 22 March 2014

Eve Online Music

Just a short post to remind everyone, and tell those that do not know, that the Eve music can be found at soundcloud.

My current playlist is:

I have included it in the "Useful Links" section of my blog on the right which includes the Urls to Push Industries, Eve Central and the Eve Online Server Status Monitor.

Saturday, 15 March 2014

Margin Scams in Local Chat

The famed "margin scam" - this is what it is all about.

In the local chat window in Amarr the below comment appears:

and clicking on the link brings you to the market window:

So, on the face of it i could buy this item for 1.5bn x2 at this station and haul it to another station in the same solar system and sell for 3.0bn x2, and so netting me a profit of 3.0bn before taxes in under a minute.  Notice the minimum volume that i have to sell for 3.0bn is 2 items.

Unfortunately, that is somewhat unlikely.

What has happened here is that the buy order is likely set up on margin and the character that set it up will not have the funds to complete the buy order.  In other words the character has only had to put 600m ISK as escrow and the ISK remaining on the character is nil.

The scam part is because the same player has another character that has put the two items up for sale - most likely bought for much less in the first place.

The victim will buy those two items for 1.5bn and attempt to sell them for 3.0bn each and the sell order will fail leaving the victim with 2 overpriced items in their inventory!

The Scammer will then have sold 2x 1.5bn for the cost of 120m ISK purchase price + 600m ISK escrow.

and to prove the point, the character in the comment is barely 9 days old: