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What Brexit Means For Domain Investors

What Brexit Means For Domain Investors

Well, the news is out! Britain has just exited the European Union and the global financial shockwaves are only rumbling through the markets. It’s only been hours since the announcement but what does this mean for Domain Investors?

For a start, the forex interest in the event has been so enormous that popular website XE.COM crashed. I spent the last ten minutes trying to get any sort of activity and finally gave up. My guess is that it’s experiencing the impact of a very real DDOS (Distributed Denial Of Service) attack from genuine requests rather than a large botnet.

After flipping across to Yahoo Finance I was able to see that as of this article the Pound has dropped over 12.65% against the USD. Likewise, the Euro has fallen by 3.6% and this will mean a possible boom ride for European domain investors.

The majority of the online advertising market is still in the United States and so any advertising dollars earned will need to be converted to Euros or Pounds. If a UK based domainer earns $US1 they will effectively get an additional 12.65% free of charge.

What it will also mean is that European investors will baulk at the idea of buying US based domain assets as they will be paying more for them.

I must admit that I’m pretty happy with the Australian dollar crashing by nearly 4% against the USD and nearly 3% against the Euro. The majority of our expenses at ParkLogic are in AUD and so this means we have more to pay the bills.

What we don’t know as yet is whether these rapid movements in the forex markets are a precursor to something else. Is this just the rumblings before the major quake? Remember, the majority of the European countries are so debt leaden that a decline in both the Euro and Pound is going to place a lot of pressure on their finances as debt payments come to term.

The currency interactions to really watch is the USD/CNY (US to China) exchange rate. It’s already increased by nearly 0.5% and with China’s massive debt this may be the straw the breaks the camel’s back. China is really caught in a difficult situation where they need a high currency to pay off their debt and a low currency to keep the economy flourishing with exports.

The CNY is also appreciating against the pound by 9.07% and this will mean the Chinese economy will be that much less competitive exporting to the UK and Europe. This will have a flow-on effect to the Australian commodity based economy that many economists are suggesting will cause the AUD to fall to around $US0.64.

All in all, I think we are in for a really interesting ride and US domainers are getting set up to be in a really strong position. With a strengthening USD bargains can be snapped up from around the world while living in a parity environment within the US. What is certain is we’re all going to be in for a really interesting time as the global financial markets rebalance on the news of Brexit. The question is whether the rest of the EU will begin to break apart…..time to get the popcorn out!

Sorry.....just edited the post and couldn't resist adding the following chart for the movement of the gold price over the last few hours. You'd think that something was happening in the global financial markets wouldn't you!

Gold price

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Wolftalker on 24 June 2016
Interesting piece

Thanks for an interesting take on it Michael

Thanks for an interesting take on it Michael :)
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