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Just a bit of heads-up to those looking at domain sales (currently down) economy (also down) and who still don't know what to expect next.
Will it be good, will it be bad, will be a soft landing or a hard landing?
I'm not a prophet. But there are things clearly visible already, and we can make some rather well educated assumptions based on them.
But first, why do I ask (myself) such a question? Well, my own livelihood depends on domains (although just partially in my case) and I assume yours might as well, otherwise you wouldn't be here reading this. So yeah it's freakin' important.
There's good and there's bad as well, so let's look into it. (note, feel free to share what you know as well)
The good part? We can already draw some conclusions based on existing data.
So here are some ideas in no particular order:
- We're in the midst of a global crisis (meta-crisis, on many levels), That part is quite clear now for almost everyone. It is also clear that this crisis will affect domain sales, as it will everything else. It already did.
- NASDAQ went down abruptly in the last few months (currently -32%). Since this index is directly related to tech and finance, and since most domain sales come from this area, yeah. It matters.
Note: I am assuming that domain sales are down overall by at least that % or more. (Funny thing, my own sales are actually up significantly - huge sigh of relief from here - but I know not everyone else might be that lucky right now, including those who I talked with).
Also, if it matters, my Afternic rep also confirmed that indeed overall sales are down in significant numbers on the platform.
- Multiple bubbles have already burst. The general tech bubble, and also the crypto bubble. (funny thing, browser spelling doesn't know what "crypto" term is right now and wants me to correct to "crypt").
Tech investors are already spooked. Also your crypto domains might not be in that much demand right now. As a side note I always had the gut feeling crypto domains aren't solid do I stayed out of most of it. I'm happy I did. Just have a few stake names.
- Real estate bubble is already popping. Now this might only be perceived as a small decline at this moment, but it's not. Here's what's happening, and why this is important.
Important tip: If you haven't watched the Inside Job documentary, I suggest you do it next, it's free on Youtube. Excellent one. It will make some of the things I'm mentioning below, and ahead of us in the near future, much more obvious.
So what's going on is that the queues at mortgages have disappeared already and prices are GOING DOWN. Which hasnt' happened since the 2008 crisis.
In my own home country in Eastern Europe, house building output is up 38% (those guys are getting desperate to sell some stuff soon otherwise they'll be bankrupt, many can't even deliver what they contracted due to material costs); prices are moderately down right now, but demand has fallen overall 70% last month in comparison with one year ago. So yeah, the bubble has gotten a needle pinch and is already deflating.
People are getting scared all over the world, as they're losing their mortgages due to variable rates. They won't buy a house right now, as they already have figured it's the worst timing ever.
That's happening in the US, but also in Europe as well. Next thing - credit will dry out for most companies, small or bigger, because it will become too risky to loan someone but mostly too risky to get a loan for anything. So we're heading fast into that.
As @bmugford (Brad) said once, first months of 2022's economy have been just a bit of dead cat bounce.
- It already happened in China. See the big construction firms in default (google search for "Evergrande" but I know there are others as well)
- The next level burst, unfortunately, is insurance. Which is the backbone of everything.
The 2008 crisis has never been fixed, only minor patches applied. The same things went on although maybe with a different coat (cloak) at times. Now when the chicken comes to roost (as the in the Wolf of Wall Street movie), insurance will have to cover the risk. And they can't, because everything is over-leveraged (read: greed) and therefore they can't cover the losses from a bubble burst. And when that comes, a whole shitstorm is going to happen. (note, browser spelling also does not know the word shitstorm, well perhaps it's about time to add it to the dictionary...?)
- War. Famine in Africa and potential of influx of millions refugees to Europe and perhaps elsewhere as well.
- Booming energy prices. My power bill has just tripled. Gasoline is 50% up where I live. I don't even want to know about natural gas / winter heating prices next. With the potential of Mr. P shutting down the pipe altogether.
- Breakdown in global transportation. There is a potential for more defaults looming, for example land-based transport in Europe due to increasing fuel pricing. I won't talk about sea shipping as we all know about that.
And so on (there are others I haven't mentioned).
The biggest problem, however, is money printing. Trillions, "with a T" as Mr.T would say. Quantitative easing, just a fancy name for money printing - which is the historical end factor of all empires during history. Until all that printing has been sucked into prices and everything and things normalize, which will take time, we're in a shitstorm.
- The FED has just increased the monetary rate policy by a whopping 0.75%. Which hasn't happened since 1994. But they also announced a potential similar increase in a month's name. Which hasn't happened in such fast succession since... I don't know when. Note, there's still however a lot to go and whoever thinks rate will stop at 2.5% is kidding themselves. (side note it's 6% and going to 7% where I live)
- The FED also has mentioned that they expect to be able to stop the inflation by the end of 2024. Which appears to be a more or less correct timeframe if you ask me. But it also means we're 2.5 years to go, still. If you expect it to end sooner, tough luck. Only in 2020, 40% of the dollars in existence has been printed. That load of paper takes years to "gulp in".
- Whoever tells you a depression is still avoidable, is a politician. And might have some skin in it. (Just like one known fellow with a name starting with B. )
Now the question we have to ask is, will this be as bad as the Great Depression of 1929 or not?
I can't answer that question. Nobody can, not even the economists. Each economy crisis is different from any other, so all we have are educated guesses.
I can only share my own educated guess, which is as follows:
- The inflation and its effects will take roughly 3 years to counter. So by 2024-2025, we might no longer see inflation. On the contrary, it might be down at the time.
- But the problem is that by then, all credit will have come to an end. Companies will no longer have access to it in an years' time from now. Note: I already feel this as I have just signed my last credit agreement for years to come. Which I'm prepared to repay should chickens come to roost. If you can't do that for your own credit, you might already be out of luck.
- Economy is like a large ship. Right now that ship is running hot at max speed and icebergs are spotted ahead. What they are trying now is to make it slow down. But the inertia is so big, it takes a lot of time and reverse thrust to put it to a stop.
- But once you do that. the problem is that now it is full stopped. So recession (which already started) will not stop at that point. Will continue to go further, as the economy will now be dry of credit, of reserves, of energy and investor trust. This will also take a similar number of years (at least) to restart.
So if you'd ask me, we are looking currently at a 5 to 6 years recession ahead. Not less.
( Later edit: You will also see a lot of bankruptcies, repossessions and unemployment (in 2 digits %) . Many of those who have left their jobs in the current rush during the pandemic will come to regret it, I think. )
If you overlap this by the ratio of indexes dropping and making your best educated guesses, what could happen is:
- The domain sales will likely continue to decline for the next few years. I'd say that there is a solid chance of a 70% decline in overall sales over the next 1 to 1.5 years. Which means it will be like 2-3 times as worse as right now.
Edit: Some investors which are into far more $$$ figures than me, have confirmed me they're seeing their own sales down as well.
- However some sales will continue to be there. Some prices will reduce, but I don't expect a big reduction there as investors will have huge losses if selling too cheap, as the renewal and registration prices are still high. Rather, the number of sales will be smaller. (Takeaway: don't sell too cheap as that is not going to help you and none of us overall)
- Some investors with a lot of cash might be buying great names for cheaper, prepared to keep them until the sun comes again and they will be able to sell them for great $. Good for them. If you're liquid right now, might be the time to buy the dip.
- (which has been said already): The better names you have, the better off you will be. The smaller your portfolio and the better / high priced / high demand names you have, the better you will be.
- I can safely assume that wholesale domainers and xxx range domainers will be affected mostly, and fast.
There are a lot of similarities with other crisis years in the past but I won't go into that right now as its too speculative though quite solid at times. Instead, feel free to share whatever information you have below and comment.
Thanks!
P.S. If you wondered about my latest sales: I've improved my skills and portfolio by a LOT lately, so I am experiencing great sales currently, but I am just like a surfer riding behind a fast wave ( huge one ...) so I don't know if, and for how long I will be able to ride ahead of that wave, with my own sales. I am moderately hopeful for the next couple years ahead but prepared for the worst. So should you, I'd say.
(edited for clarity, sorry but it appears as a non-native English speaker I'm writing it fast with my feet)
Will it be good, will it be bad, will be a soft landing or a hard landing?
I'm not a prophet. But there are things clearly visible already, and we can make some rather well educated assumptions based on them.
But first, why do I ask (myself) such a question? Well, my own livelihood depends on domains (although just partially in my case) and I assume yours might as well, otherwise you wouldn't be here reading this. So yeah it's freakin' important.
There's good and there's bad as well, so let's look into it. (note, feel free to share what you know as well)
The good part? We can already draw some conclusions based on existing data.
So here are some ideas in no particular order:
- We're in the midst of a global crisis (meta-crisis, on many levels), That part is quite clear now for almost everyone. It is also clear that this crisis will affect domain sales, as it will everything else. It already did.
- NASDAQ went down abruptly in the last few months (currently -32%). Since this index is directly related to tech and finance, and since most domain sales come from this area, yeah. It matters.
Note: I am assuming that domain sales are down overall by at least that % or more. (Funny thing, my own sales are actually up significantly - huge sigh of relief from here - but I know not everyone else might be that lucky right now, including those who I talked with).
Also, if it matters, my Afternic rep also confirmed that indeed overall sales are down in significant numbers on the platform.
- Multiple bubbles have already burst. The general tech bubble, and also the crypto bubble. (funny thing, browser spelling doesn't know what "crypto" term is right now and wants me to correct to "crypt").
Tech investors are already spooked. Also your crypto domains might not be in that much demand right now. As a side note I always had the gut feeling crypto domains aren't solid do I stayed out of most of it. I'm happy I did. Just have a few stake names.
- Real estate bubble is already popping. Now this might only be perceived as a small decline at this moment, but it's not. Here's what's happening, and why this is important.
Important tip: If you haven't watched the Inside Job documentary, I suggest you do it next, it's free on Youtube. Excellent one. It will make some of the things I'm mentioning below, and ahead of us in the near future, much more obvious.
So what's going on is that the queues at mortgages have disappeared already and prices are GOING DOWN. Which hasnt' happened since the 2008 crisis.
In my own home country in Eastern Europe, house building output is up 38% (those guys are getting desperate to sell some stuff soon otherwise they'll be bankrupt, many can't even deliver what they contracted due to material costs); prices are moderately down right now, but demand has fallen overall 70% last month in comparison with one year ago. So yeah, the bubble has gotten a needle pinch and is already deflating.
People are getting scared all over the world, as they're losing their mortgages due to variable rates. They won't buy a house right now, as they already have figured it's the worst timing ever.
That's happening in the US, but also in Europe as well. Next thing - credit will dry out for most companies, small or bigger, because it will become too risky to loan someone but mostly too risky to get a loan for anything. So we're heading fast into that.
As @bmugford (Brad) said once, first months of 2022's economy have been just a bit of dead cat bounce.
- It already happened in China. See the big construction firms in default (google search for "Evergrande" but I know there are others as well)
- The next level burst, unfortunately, is insurance. Which is the backbone of everything.
The 2008 crisis has never been fixed, only minor patches applied. The same things went on although maybe with a different coat (cloak) at times. Now when the chicken comes to roost (as the in the Wolf of Wall Street movie), insurance will have to cover the risk. And they can't, because everything is over-leveraged (read: greed) and therefore they can't cover the losses from a bubble burst. And when that comes, a whole shitstorm is going to happen. (note, browser spelling also does not know the word shitstorm, well perhaps it's about time to add it to the dictionary...?)
- War. Famine in Africa and potential of influx of millions refugees to Europe and perhaps elsewhere as well.
- Booming energy prices. My power bill has just tripled. Gasoline is 50% up where I live. I don't even want to know about natural gas / winter heating prices next. With the potential of Mr. P shutting down the pipe altogether.
- Breakdown in global transportation. There is a potential for more defaults looming, for example land-based transport in Europe due to increasing fuel pricing. I won't talk about sea shipping as we all know about that.
And so on (there are others I haven't mentioned).
The biggest problem, however, is money printing. Trillions, "with a T" as Mr.T would say. Quantitative easing, just a fancy name for money printing - which is the historical end factor of all empires during history. Until all that printing has been sucked into prices and everything and things normalize, which will take time, we're in a shitstorm.
- The FED has just increased the monetary rate policy by a whopping 0.75%. Which hasn't happened since 1994. But they also announced a potential similar increase in a month's name. Which hasn't happened in such fast succession since... I don't know when. Note, there's still however a lot to go and whoever thinks rate will stop at 2.5% is kidding themselves. (side note it's 6% and going to 7% where I live)
- The FED also has mentioned that they expect to be able to stop the inflation by the end of 2024. Which appears to be a more or less correct timeframe if you ask me. But it also means we're 2.5 years to go, still. If you expect it to end sooner, tough luck. Only in 2020, 40% of the dollars in existence has been printed. That load of paper takes years to "gulp in".
- Whoever tells you a depression is still avoidable, is a politician. And might have some skin in it. (Just like one known fellow with a name starting with B. )
Now the question we have to ask is, will this be as bad as the Great Depression of 1929 or not?
I can't answer that question. Nobody can, not even the economists. Each economy crisis is different from any other, so all we have are educated guesses.
I can only share my own educated guess, which is as follows:
- The inflation and its effects will take roughly 3 years to counter. So by 2024-2025, we might no longer see inflation. On the contrary, it might be down at the time.
- But the problem is that by then, all credit will have come to an end. Companies will no longer have access to it in an years' time from now. Note: I already feel this as I have just signed my last credit agreement for years to come. Which I'm prepared to repay should chickens come to roost. If you can't do that for your own credit, you might already be out of luck.
- Economy is like a large ship. Right now that ship is running hot at max speed and icebergs are spotted ahead. What they are trying now is to make it slow down. But the inertia is so big, it takes a lot of time and reverse thrust to put it to a stop.
- But once you do that. the problem is that now it is full stopped. So recession (which already started) will not stop at that point. Will continue to go further, as the economy will now be dry of credit, of reserves, of energy and investor trust. This will also take a similar number of years (at least) to restart.
So if you'd ask me, we are looking currently at a 5 to 6 years recession ahead. Not less.
( Later edit: You will also see a lot of bankruptcies, repossessions and unemployment (in 2 digits %) . Many of those who have left their jobs in the current rush during the pandemic will come to regret it, I think. )
If you overlap this by the ratio of indexes dropping and making your best educated guesses, what could happen is:
- The domain sales will likely continue to decline for the next few years. I'd say that there is a solid chance of a 70% decline in overall sales over the next 1 to 1.5 years. Which means it will be like 2-3 times as worse as right now.
Edit: Some investors which are into far more $$$ figures than me, have confirmed me they're seeing their own sales down as well.
- However some sales will continue to be there. Some prices will reduce, but I don't expect a big reduction there as investors will have huge losses if selling too cheap, as the renewal and registration prices are still high. Rather, the number of sales will be smaller. (Takeaway: don't sell too cheap as that is not going to help you and none of us overall)
- Some investors with a lot of cash might be buying great names for cheaper, prepared to keep them until the sun comes again and they will be able to sell them for great $. Good for them. If you're liquid right now, might be the time to buy the dip.
- (which has been said already): The better names you have, the better off you will be. The smaller your portfolio and the better / high priced / high demand names you have, the better you will be.
- I can safely assume that wholesale domainers and xxx range domainers will be affected mostly, and fast.
There are a lot of similarities with other crisis years in the past but I won't go into that right now as its too speculative though quite solid at times. Instead, feel free to share whatever information you have below and comment.
Thanks!
P.S. If you wondered about my latest sales: I've improved my skills and portfolio by a LOT lately, so I am experiencing great sales currently, but I am just like a surfer riding behind a fast wave ( huge one ...) so I don't know if, and for how long I will be able to ride ahead of that wave, with my own sales. I am moderately hopeful for the next couple years ahead but prepared for the worst. So should you, I'd say.
(edited for clarity, sorry but it appears as a non-native English speaker I'm writing it fast with my feet)
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