TA Theory re Land and Premium Residents

I use TA Theory in the day job sometimes. Quite often its only to search for confirmation an idea of mine is either tenable or non tenable. For those who have not heard of TA Theory a short explanation is that it is based on the mass behaviour of individual events AND that movement has memory and can be predicted.

If we take a look at this chart (the links are below) we can see that growth in new premium accounts within Second Life is showing an almost perfect head and shoulder formation. There is a second link that explains the pattern and subsequent action after the trend line falls below the neckline, which essentially is to short the stock or indices concerned

Given that the actual combined graph also shows the number of premium residents, could one argue/debate that this is a lagging indicator and will shortly show the same price movement history?

If these assumption are correct we could see a further very sharp fall in the cost of average land, and a sharp fall in the value of the Linden dollar against the US dollar (and other First Life currencies) as people cash out of the game.

Does anyone else have any views, especially from anyone who uses TA, and the use of TA to analyse Second Life price movement history?

http://secondlife.com/whatis/economy-graphs.php

http://www.incrediblecharts.com/technical/head_and_shoulders.htm

Ah. A chartist! Well, it's easy to misread as "head and shoulders" the early stages of a "cup with handle." *winks*

While not familair with TA (I ahve looked into it, but not studied it), I have watched the SL economy in reguards to land and the L$.

The "head" you mentioned would indeed be the influx of new Residents. This was due to LL going more "public" with SL. Hitting the mainstream with Yahoo/Amazon/Google was a bit step. As was the ad campain with the UK media.

Before this, we had seen a marked drop in the value of the L$. However, land prices, to this point, had stayed fairly consistant.

Now, the main influx as ceased back to the regular trickle. Though this "trickle" is a higher number, the % is about the same based on the larger population we now hold. Retention rates have plumeted, however. This is based on LL's lack of stability on the grid, and the myrid of potentionally harmful bugs/glitches. (ie inventory issues and all the payment problems).

The value of the L$ has nor really been impacted by this, and the value of land is, apparently just like gasoline. It goes up, but doesn't come down. As the economy is truely driven by the land within SL, I do not see the downslide, or the opposite "neck and shoulder" of the TA graphing, that you speak of.

This :http://secondlife.com/whatis/economy-graphs.php is a farse. It uses data not relevant as LL is trying to pump up their PR for companies. Basicially they are "lieing" by giving data that should really be corelated to the number of Residents. By % these numbers do not look at ALL like their graph.

A broader picture would show a marked incline (initial conception of SL), then a platau a things stabilized, followed by slow decline, then an explosive growth, followed by another platau, and now a slow decline.

So yes, I do think there is a pattern. However, to say things are dropping back to the lower levels? No. I see a steady climb with sharp jumps, levels and then periods of slow drops just before new jumps.

This is due to LL's lack of forsight. Only fixing things, or introducing hurried "features" when things look like they are sliding backward. A more controlled management, and focus on customer service looking towards fixing/adding components desired/needed by the customers, would go a long way to reducing the declines. While this would also remove the "jumps" it would actually look better graphed as it would simply show a steady onward and upward climb.

As LL trys to tell us is what is hapening. *smirks*

~Jessy

LL has stated they want cheaper land prices and they are supporting that by releasing a lot of sims to encourage new premium accounts. So, I don't think you need a head and shoulders pattern to figure that land prices are headed down. I know a few avs who spend days camping just to meet the price of a 512m green lot while vast new sims of recently auctioned land just sit there. Sure, there's a land baron who is paying the tier on that land, but by pricing it beyond the budget of the average newbie(because the auction price was so high), it serves as a block to premium accounts. Not that land baron's are bad, they are just functioning according to the current land system. The cheapest land I see now is in the $4K range for a steeply sloped lot next to a casino and an ad farm.

I think people are anticipating lower prices and are holding off on upgrading to premium until land prices come down. Why should you pay for a premium account if you don't have land? It's a shame that there can't be a way to simply grant new premium account holders a 512m plot as soon as they sign up--then premium accounts would skyrocket.

I think there is a way to support a natural market land system while still providing cheap or even free 512m plots to newbies. Plain, flat green land can go directly to newbies, while waterfront or other types of more interesting lands with additional features can still go up for auction for premium prices.

i think .....due to the great amount of land-dealers, who will all run to own any parcel below 10L$ , the landpricings are artificialy kept up.

We see Their margins are coming down, i guess they need atleast 10000 new premiums (with interrest in more then 512sqm) in the next few months to sell their land, something i dont see happening.

my 2cents..

I think the difference with the grid is that we are anything but a free market.

To give some idea of how powerful a control over the economy the Company has, notice that the LindeX doesn't move more than a point or so any more.

Even when for a time huge numbers of people couldn't buy $L easily for technical reasons the $L sales market slipped only from 265 to 266, maaaybe 267 if you were impatient.

It seems pretty clear that grid land is controlled much in the same way the LindeX market is. Bottom line, it's not *that* expensive for the Company to roll out empty sims and let them sit.

It is for us, maybe, paying full sim tier but that's not what they pay. Like Raymond says, it's pretty logical that there is a target price for land, and when the cost exceeds that they print more land. I watch my own land market and operate similarly.

Some day a collapse might come due to a competitor, but I think the days of letting the economy drift are pretty much over.

There's too much money to be made suppressing the economy, then selling $L and land in proportion to what it takes to hold the market in an iron grip. Supply Linden's $L sales, Governor Linden's unsold land reserves (if ever needed), and new sims ready for release at a moment's notice are cheap, handy one-way buffers.

Thanks for the input so far folks.

Jessica has a point, in other words there are graphs, stats, and being economical with data.....

Desmond also thanks, as you say it does cost little to have new sims online and empty given you have the spare physical building to hold them, unless you are paying third party hosting rentals.

(PS have not had much time to log in and spend hours on line recently, will drop by Caledon sometime in the next few weeks when my workload is less...see you then)

Two further points that occurs to me with land ownership, one is that land barons will continue to pay tier on land and hold out for a price, even if in some cases they lose money.

Another point is that not all premium residents own land, and possibly some basic residents own land via Island Estates. Therefore perhaps a more meaningful way of measuring the economy is the number of residents with payment information registered, who have purchased Linden dollars

However I still think currently that new premium account client acquisition is falling away

I love this kind of stuff! Thanks for posting, John.

I think the model does not really work here because "God" ie. LL can manipulate so much. By simply withholding the release of new sims in the last week, they caused land prices to rise 5%. That's 5% in one week. So if prices started taking a serious dive, they could do what they did last November: take a month or two off and let prices double.

Also, they can make premium memberships attractive again, if they so choose. I am on record as saying I think L$10 a meter is there target base. We have not drifted too far below that since they stated they wanted land prices to go down. I think they meant from L$16 a meter to L$10.

Actually, it looks more to me like a "tombstone" pattern than a head and shoulders. A tombstone occurs when a price series remains in a limited range for a long time, then suddenly leaps to stratospheric levels, often in response to a dramatic rumor that may or may not have been planted. The expectation behind the jump does not pan out, and the price just as suddenly drops back to its previous levels and stays there. It is called a tombstone because it marks the financial graves of the people who bought at the top.

Technical analysis does have some predictive value, sometimes, but it is probabilistic, not certain. Definitely not certain. It labors under a serious weakness: It charts the ebb and flow of demand in a marketplace, but says nothing about the real-world factors behind the movements, and the latter can sometimes ape the patterns a TA chart would call bullish or bearish without ever following through. It is useful for calling your attention to a case where price trends SEEM to be changing when there is no known "fundamental" reason for it. Then you either find out what the reasons are; or you take precautions against an unpleasant surprise in the works; or take a speculative flier, if you like, on the chance something good is working its way to the surface. Sometimes, it is the only warning you are going to get.

In this case, though, there are well-known, strong fundamentals that seem to explain the behavior very adequately: The media hype some months ago of SL as an easy road to riches led to a spike in eager new arrivals, who discovered it is not easy (and maybe not even possible any more) to be another Anshe Chung, and are now making their exit. Also, as people have argued in other threads, there is not all that much advantage for most people in having a premium account any more - and premium accounts is what this chart is measuring, not the overall growth of SL. All points to a "tombstone" outcome. Since the preexisting level was a growth rate exceeding 10% per MONTH, even when using premium accounts as a proxy, that does not look like a bad outcome at all. (Personally, I like to note whether concurrency rates are growing, and lately, after having plateaued a while, they are. I haven't tried to chart them, however.)

There are fundamentals that could fulfill your bearish construction anyway: Unstable grid performance makes it risky and perhaps unusable as a business platform; so do recurring bugs, some of which can be crippling; poor customer relations are off-putting to a lot of people and seem to be getting more so; failure to deal with certain abuses, particularly spybots, of which landbots are a subspecies, is a festering problem that could become very dangerous to SL's health; and we have already seen that RL legal and political problems can and likely will impinge on SL as it grows larger and more noticeable. If these factors continue to worsen, they could ultimately prove fatal. But continuation or worsening of these factors is not a certainty; it just sometimes feels that way.

Finally, note that the chart you are considering is not a price chart, but a rate-of-change chart. Though related, they are mathematically entirely different kinds of phenomena, and I'm not sure it is valid to equate the two using TA. In fact, I'm quite dubious: It is the norm for growth rates of virtually everything to slow down as the entity growing becomes larger - successive doublings simply become increasingly difficult to pull off, at least in the known universe. But the underlying actual growth is arithmetic, and so the absolute numbers can actually accelerate even while the rate of change is declining. So, in interpreting this chart, I think extreme caution is indicated before drawing conclusions.

I was just about to post the exact same thing.
Wow, insightful. I like it when great minds come here and talk about stuff. Keep it up, folks.