Round and Round, Here We Go . . .

Where it stops, no one knows.
Hmmm! Seems we saw this drum recently. "Where?", you ask? Well, right here (or there) on eBay. Yes, Seller (here) vintagecolectables4u (let's call her/him "4u"), was the winning bidder at eBay auction no. 350071358053 closing last Thursday, June 26, 2008 at $200.00. 4u was the only bidder. The seller (alderferauction) at that auction listed the address of the auction to be Hatfield, Pennsylvania.

In 4u's auction of the same drum, (eBay item no. 120277963406), 4u lists his/her address as "down by the sea, United States". Hatfield is more than 200 miles for anything that could even remotely be described as "sea". So, I am going to assume that 4u was not at the auction and has not yet taken possession of the drum. It's even possible that 4u has not even paid for the drum and that the drum has not been shipped 2 4u and that the drum is, instead, waiting until 4 u pay 4u 4 the drum. 4u apparently would like to be able to instruct the alderferauction to ship directly 2 u, if you become the buyer from 4u.

I'll explain. Here it is, Sunday, June 29, 2008, and the very same drum as 4u bought three days ago is now listed for sale by 4u 4 sale on eBay. I doubt that 4u has taken possession of the drum. And, and it's possible that 4u has not yet even paid for the drum. 4u could be simply waiting 4 u 2 pay 4u 4 the drum that 4u bought 4 u and have u pay 4u more than 4u paid 4 the drum (including, of course, recovery of shipping charges and a 20% buyer's premium). 4u will need about $275 just be break even, I suspect.

What's the deal here? Is 4u a collector, a trader or an arbitrageur? In this case, the evidence points to trading which 4u is trying to convert into something close to arbitrage by trading the drum 2u even before payment is due.

Where do we see this all the time, every day? In the stock market and commodity markets, for examples. Let's take the oil trading business. In that field, "traders" (people skilled at taking very expensive risks with lots of other people's money) buy and sell oil by the barrel (actually 100,000 barrel lots). Over the phone, they buy and sell oil and various types of refined gasoline -- of which they usually never take delivery -- hoping for a swing in the market price before selling that which they've just bought, or buying to cover that which they've just sold).

Sound confusing? Well, just think of it as buying with the hope of selling at a profit. The difference is that in oil trading, buyers never (usually never) actually take delivery of the 100,000 barrels they buy (unless they are buying for their own consumption, e.g., as a distributor or utility company, and have a place to store it when they take delivery).

Here, the commodity is a single drum. But the principle is the same: buy with the hope of selling at a profit, and possibly even avoid shipping charges, handing, taking delivery and storage.


What is Arbitrage? Arbitrage is a transaction that makes a profit without risk, as when a buyer buys at the same time that the buyer has another buyer waiting for the good/service at a higher price. Well, we don't quite have that situation. There is some risk that a buyer will not come forward to pay more than the transaction costs that 4u paid in acquiring the drum. But, I think that the risk is small, for the reasons discussed below.

Here 4u has agreed to purchase the drum from alderferauction (eBay auction no. 350071358053), at a live auction. I (and I think other eBayers) tend to stay away from live auctions because of past experience that it's usually a floor bidder who takes away the prize, or someone willing to hang out on-line and play the game live. eBayers, I believe, who buy drums prefer to place their bid and wait. Some snipe. But hanging out live on-line is the preferred mode of bidding in our little community. Thus, I believe that 4u underpaid for this drum and that the value is indeed more than $200. I also think that alderferauction would have done better with a straight eBay auction that a live auction, at least as to this drum.

So it was, I think, that 4u came to own this drum. And, not being a collector but a trader (or a "collector 4u"), the drum was bought 4u. Now it's up 2u 2 buy it from 4u. Let's see if u do.