The Credit Crunch - How will it affect us?

[GoneWalkabout]

The recession looks to be biting a lot harder than most expected.

I've heard nothing but economic bad news, crisis, closures, job losses, and general doom and gloom on the TV, newspapers, internet, etc - but here on the TV forum it seems many are less affected than one might have imagined.

Are we bucking the trend by being in the right place and doing the right thing at the right time - or are we heading for a bigger fall than everyone else by pig-headily believing the recession won't strike here?

I would love to hear peoples views on how we might be affected - good and bad.





My own belief is that recessions- although always painful - do seem to favour those who are genuinely good at their chosen profession and are prepared to work even harder and smarter through the difficult times.

I also think that as more people adjust to their new financial circumstances and centre their lives more towards the home, there will be bigger opportunities in internet/home entertainment.

But what do I know - I'm not Ben Bernanke!

 

[jehnidiah]

I'd love for a recession to hit the domaining world -- give me an opportunity to purchase some great names at great prices to resell when the economy picks back up.

Just joking. I think that the economy in its current state will have an affect on the domaining world the same as it has elsewhere, but it depends on the approach that people have coming into domaining. In other words:

1) people looking at it as a safe investment -- there will be more of these types of people, the "investment type," and this will drive the higher-end domains upward

2) people who are domain hobbyists -- these will go down as expendable income decreases. With little money to "waste" or "play with," there will be fewer players

3) another type of domain buyer that I forgot while typing 1) and 2), and which I'll come back on here and edit in due time.

So, IMO, the "credit crunch" as you call it will have an impact on us, but in several different ways, likely furthering the divide of the prices of amazingly expensive domains and the cheaper, crappier domains (like those that I deal with, hehe).

 

[Spade]

Despite everything in the economy thats going on, I havnt felt the economy tightening up. Business seems to be, if anything, more constant than it was earlier in the year. I have more offers this past couple months then I've had in some time.

 

[JamesDavid]

This is my view on the economy and talk of a recession right now:

A few weeks ago on Thursday night I went to a restaurant TGI Fridays. The place was packed and I had to wait for a table which tells me people still have money to eat out.
Then Friday I went to see IronMan on opening night at the late late show. I was there 45 minutes early and it was sold out which tells me people have money to spen don entertainment...
I work as a full time Network Administrator during the day and do side jobs at night for extra cash, side jobs have been more in demand then ever which says people are spending money at their small business / home.
My buddy puts inground pools in for a living and says he was totally booked for the summer earlier than he ever has been which tells me just because people aren't buying houses doesn't mean they are not throwing money into them....
My father in law owns a car dealership and i was just talking to him the other day and he said SUVs are selling just as well as his economy cars which tells me people arent that worried about gas prices and their mpg.
Also this has been the best year domaining for me yet... both buying and selling..

Bottom line IMHO is that people find a way to make it work. they don't want to give up their lifestyle so they find a way....

Do I think things will get worse? Yes for sure I saw $4 gallon of gas coming and I am sure its not the end of higher gas prices. Also for people who have a brain and a knowledge of history and business they could have seen the whole mortgage crisis coming too.... I mean don't give loans to people who can't afford it, and just like the "TECH bubble" the "housing bubble" popped too..

Am I worried? NO, like someone else said those people that are good at what they do and have street smarts will come out of it alot better and richer than they went in. For instance I just bought a house for about $50,000 less than appraisal and cheaper than it has previously sold for. People where laughing at me when I sold my house in the peak of the housing boom and rented a town home, everyone said I was throwing my money away on rent..... well lets see I spent about $12,000 on rent in a year, but saved about $6,000 on property taxes so really i only spent 6,000 on rent... then i sold my house at the peak of pricing and paid $50,000 less for a house that once things come back around will be worth alot of money plus I made $50,000 in equity in one day..... If I wanted to the banker said I could take out a home equity loan which I may do if the housing market gets worse to buy another house for rentals to rent to people who got foreclosed on....

 

[gpmgroup]

The sales forums are worth paying more attention to, there is a better ratio of good names at better prices. More are not holding out for that "lottery win" sale price.

 

[Barts]

I'd like to know if USA sellers notice an increase in overseas sales. For example, do you sell more to EU located buyers? It would make sense, but does it also really happen?

 

[accent]

There was the .Com Bubble.

There was the Real Estate Bubble.

And coming soon ..... The Oil Bubble!

I mean it folks, and note that you heard it here first. Oil is a market like anything else. Fear and Greed reign supreme.

The price of a barrel of oil was $25 not so long ago. Think about it - Has demand gone up that much? Have you heard of massive global oilfield failures? Intense regulation strangling production worldwide?

Nope. There has been increased demand, sure. Maybe even increasing faster than demand has in the past. And Peak oil is no myth. But markets often over-react. An as vital as the oil market is, at the first sign of upward pressure lots and lots of corporations will buy on the futures market to protect themselves. (Fear) This creates a price spike which brings out the speculators (Greed). Which feeds on itself.

I have been seeing stories in the news that institutional investors are moving into the oil market. Such stories, designed to bring in the sheep for shearing, are a good indication that the peak (of the bubble) is near.

What goes up will go down.

 

[DomainTalker]

Just a few personal thoughts on uncertain times.


The last real recession was 1991/92...Anyone in the Western economies, under, say, 35 today, has never really been in the working world during recessionary times.....they've probably only ever experienced rising asset prices, and relatively prosperous times, with occasional very minor pauses in the upward trend...

I remember the 'oil shock' price effects of the 1970's...the high inflation years of that period...the several recessions....the stagflation (rising inflation/falling prices)....the credit rationing....the business failures...the unemplyoment....the Oct 1987 sharemarket crash...the near paralysis of Japan's economy for some 11 years, until very recently (in 1987, before the sharemarket crash set off a chain of bad events, the Imperial Palace in Tokyo had been valued at more than the entire state of California!!)....It wasn't an easy 13 years, or so, globally, between, say, 1972/3, and about 1985/6.


We don't know what effects we'll see out of the current situation...


On the credit side, we have the China & India economies booming - and, with it very strong economies that supply them with the raw materials to feed the growth....We have central banks around the world that will work hard to keep financial liquidity in national economies to keep the world moving, as credit tightens....And, we have globally interconnected economies that can - to an extent - compensate each other.


On the debit side, we do know we have rising oil prices, falling property asset values, some upward inflation trends, uncertain financial markets, and tightening credit markets....We see likely recession in the US - and slowing economic activity in Europe....And, we've seen how the US sub prime mortgage crisis began as a local US issue last year - and suddenly exploded around the world through the international banking system within months.


In the past, at the early signs of instability, there was typically an early 'denial' phase....A business as usual mentality, for awhile. Its takes time for the effects to work through - sellers of assets typically ask high (good times) prices for quite awhile as demand, in fact, is falling away.....Then, the penny drops this ain't a 'glitch' - and, when it does, the effect can be fast...and down...Buyers largely disappear, assets become illiquid.


At this point, there was typically an initial flight of capital to perceived 'safety' (in 1988, after the 1987 sharemarket crash, it was to property)...and, to gold....to oil futures...to...to...anything perceived as safe.

If the tough times are short-lasting, then things stabilize fairly quickly....If they don't, then even the 'safe' investments fall in value - quickly....In tough recessions - almost every asset falls in value, in the end.

The best position to be in, in uncertain times, is to be cashed up, if possible.....'Cash is King' is very real, when cash is in short supply. Assets, while good to have, don't pay the food bill, the gas bill, and the mortgage....


So, what's the best way to go in today's situation?


(i) Recognise things are uncertain, in a real sense. Unpredictable.

(ii) Preserve cash in these times, as much as possible....Offload 'weaker' assets.

(iii) Reduce debt, as much as possible....Get leaner.

(iv) Watch for the signals that matter....Eg Availability of credit, rising/falling unemployment, corporate profit announcements (up or down, as trends) & any announcements of major downsizing, or bankruptcies etc...

Try to note what's happening in the small business sector - an excellent barometer of what's really happening at the sharp end.

(v) Note the level of real competitiveness for assets, or not (all assets, homes, shares, and, yes, domains) (which shows whether demand is rising, or falling)

(vi) Avoid being too influenced buy the occasional 'Big Win' announcement....Rather, see if it is one of a series of Big Wins, or just a one-off, for maybe special reasons...

(vii) Do your research well, if contemplating any investment....Know why you are investing - allowing for possibly very slow times ahead....Gut feel is always good - but, make sure its not based on 'wishful' thinking, in the face of reality.

(viii) Be prepared (and be able) to hold assets for a longer time, for a profit, if necessary.

(ix) Assets that were good in good times, may not be good in tough times...ie smarter investments may be in variations of what was good times good.

(x) Bargains are likely to be had. But be sure that bargain is true quality. Marginal quality is likely to cost you.

(xi) Be bold - if you're game to back your judgement. Boldness today, can be riches tomorrow - if you get it right.

(xii) Always remember (if things do get bad) - everything goes in cycles. In good times, it always feels as if good times never end....They do....In bad times, its the same - we feel they'll never end.....They do.


Just a few thoughts.

.

 

[heroes]

A well thought out post Chris - Rep added