strategy Is the Global Economy About To Crash? What would it mean for domain investors?

Whizzbang · Sep 29, 2016

You only have to reflect on the last twelve months to see the impact of debt on the domain market. In an effort to get their money out of China and into more flexible assets many Chinese investors raised margin loans against share positions. They then took these loans off market (you can’t do this in most markets) and bid up the prices on short letter/number domains with the ultimate goal of flipping the assets into US dollars.

Last year, I attended DomainFest.Asia and upon returning home my business partner and I sold every domain we could get our hands on at top dollar rates. This year I attended the same conference and I can now buy the domains I sold last year for around 35% of the price I received for them.

So what happened? Debt combined with key market makers is what happened. This created a rapid downward spiral to the present valuations….it will be interesting to see what will happen to the price of all of the Chinese held domains in the event of a Chinese economic meltdown.

I remember writing about the crazy inflationary domain prices post the New York TRAFFIC conference. At the time key market makers pushed up prices and debt first entered the domain space (eg. companies like Domain Capital). This easy access to debt fuelled the price boom in much the same manner as the one Chinese investors just experienced.

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Whizzbang · Sep 30, 2016

London555 said:
A good indication of the "start" of trouble is the current state of the $VIX index vs $VIX futures contracts-seldom is it this wide without a correction being on the near horizon to put the "fear" back into equity holders and make them pay attention. Will this be the start of a major pullback? Who knows but we're net short this market (S@P) right here.

I agree about those two indicators.....nothing like a good dose of fear to pull things back.

John0 · Sep 30, 2016

Lookslike Deutsche Bank is having major problems and could even collapse. Lehmans all over again, this could destabilise Germany even more, Can they afford to prop it up.
Well cant say it wasnt coming after they screwed the pigs. They just kicked the can further down the road and now the can, cant be kicked any further.

nvdomains · Oct 1, 2016

good post and good discussion.

Because of "caution" we may lose some opportunities but never lose in a big way.

Thank you.

John0 · Oct 1, 2016

Just wondering is there a feeling of a bubble in the domain industry?
Eg short names, numbers are these bubbles?

Whizzbang · Oct 1, 2016

The bubble peak for short names was towards the end of last year. I sold most of mine then and can now buy the same names for about 30% of what I was paid. Depending on the Chinese stock market there may be another bubble down the track....still wanting to do the analysis. It was one of the reasons why I attended domainfest.asia.....wanted to get the temperature of the market.

John0 · Oct 1, 2016

What about stuff like brandables? To me its gibberish, and looks like a fad, (remember Im saying this as an outsider to the domain industry, ive just started)

I know, I know, it looks like it sells but for how long more?

disaac81 · Oct 2, 2016

Brandables are exactly that, brand names. As long as there are startups there will be a demand for brandables, assuming they want a brand presence on the internet, which is highly likely.

If you are interested in branding and name creation, have a look at the lexicon naming company website \ blog, it's a great read.

Kate · Oct 2, 2016

Good brandables will always be in demand, because end users like domains that are somewhat unique, and that can make strong brands. It's not a fad, and they are not new at all.

Whizzbang · Oct 2, 2016

Kate said:
Good brandables will always be in demand, because end users like domains that are somewhat unique, and that can make strong brands. It's not a fad, and they are not new at all.

What would be interesting to calculate is the year on year growth/decline of brandable domains. My guess is they are impacted largely by the growth in the world economy.....so if the global economy goes into a recession then brandable sales will drop off as well. The other question that I don't have an answer for is since the introduction of the new gTLDs whether the average price of the "stock item" brandables has fallen or not. I would be exceptionally surprised if in an environment that has massive supply that the average price hasn't declined.

Asfas1000 · Oct 2, 2016

To me the crash of the global economy sounds like a farce or something.

I mean, we, as humanity, have not been attacked by aliens

and we are not facing massive floods or extreme dryness to deprive us of food or water etc. We have all is needed to live decently.

The only "problem" we have is in distributing those goods fairly. And this looks like a problem those who can solve, just don't want to

mnjkr · Oct 3, 2016

Problem is not with the goods and services produced in the world but the problem is with the money supply and amount of debts that we have in the world economy that is creating all the problems. There seem to be too much of money supply chasing fewer goods and services. Also, the amount of debts that the countries around the world hold which they are not able to back them up with real assets or goods/services. Government is continuing to print money just to keep the currency intact. At some point of time, this debt balloon has to burst. It can happen only two ways - 1) By mutual consensus where debts are waived off or 2) the currency loses it value which leads to economic collapse. To have the former, the people, entity and government have to shed off their outlook of money and use it more as a vehicle rather than a tool to amass and hoard billions/trillions of money in the bank.

eyedomainous · Oct 5, 2016

I think its the other way around, and the question is...
When Will 'Domain Investors' Crash The Global Economy?

The Web's 'near zero marginal costs' to conduct e-commerce is rapidly transforming the global economy.
In your China example, keep in mind it was the loss of manufacturing -back to the U.S., because of the rise of information technology, 3D and on-demand manufacturing, coupled with (Amazon) delivery logistics, that drove, and continues to drive, the exodus of investments from China. In this sense, China may well be the 'canary' in the global economy 'coal mine'.

Whizzbang · Oct 5, 2016

eyedomainous said:
I think its the other way around, and the question is...
When Will 'Domain Investors' Crash The Global Economy?

The Web's 'near zero marginal costs' to conduct e-commerce is rapidly transforming the global economy.
In your China example, keep in mind it was the loss of manufacturing -back to the U.S., because of the rise of information technology, 3D and on-demand manufacturing, coupled with (Amazon) delivery logistics, that drove, and continues to drive, the exodus of investments from China. In this sense, China may well be the 'canary' in the global economy 'coal mine'.

What a fantastic video....it was rivetting!

Jon B · Oct 5, 2016

London555 said:
This world economy is headed for a real fall with Janet Yellen leading the charge to the bottom.

Hit the nail on the head right here. The Fed is being manipulated by the current administration to keep interest rates low. The US is already in an economic crisis and it's simply being covered up. Startups are nearing a 40 year low. Banks are running amok. Companies that were bailed out only 7 years ago are already speculating on other unstable businesses with huge sums of money ie. $500MM GM invested in Lyft. Google, FB, Amazon etc are gobbling up all emerging competition like The Blob. This is bad for the value of domains which relies on a robust economy and healthy competition among many different businesses. Thankfully, there are populous countries like India that are well positioned for sustained growth.

strategy Is the Global Economy About To Crash? What would it mean for domain investors?

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