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Making the BIG Money!

20190329_debt Is the world using the credit card too much?

I just read a newspaper article that suggested the “R” word is starting to be used in financial circles around the world. What’s the “R” word you may ask? Recession. If the world heads into a recession, then is this going to have a significant impact on domain investors earnings? You bet it will!

I remember reading an article posted by an industry blogger (not me) just post the Global Financial Crisis of 2008 that outlined that it was great being a domain investor because we were immune to the global meltdown. I must admit that I scratched my head and posted my own article that rebuffed this position.

The domain industry IS part of the global business community and in fact, in many respects we underpin much of it. When businesses are suffering then guess what! They spend less on advertising which depresses earnings per click rates and spend less (or not at all) as much on acquiring domains as they protect their cash.

Just this past week the German 10-year bond rate went negative. What this means is that you have to pay the government to look after your money. This sounds crazy until you realise that the recent issue was oversubscribed by 2.6 times. This suggests there is a flight of cash away from riskier higher yield paying countries (eg. Italy and Greece) as investors are more concerned about keeping their money rather than receiving earnings.

The white horse of China is looking increasingly shaky as the dragon of debt continues to climb and the trade war with the USA bites home (on both their economies). The Institute of International Finance places China’s debt to GDP ratio now at 300%!

This means that China’s massive load of debt now dwarfs its entire economy. Some people suggest that this isn’t a problem and that China will grow its way out of the problem but at the very least it must be acknowledged that this mountain of debt is like a boat anchor for the economy. What concerns me the most is that despite the best efforts of the Chinese government the economy is still fuelled largely by debt.

If that doesn’t make you worry, then maybe Japan’s 396% debt to GDP ratio will. There is always Belgium, Canada, Portugal and Greece to consider having also reached the 300% club. This is quickly followed by France, Norway, Netherland, Sweden, US, Denmark, UK, China, Spain, Euro Zone, Italy, Australia and Korea that all are above 200%. The basic underlying problem is that the world economy has become hooked on debt.

What should domain investors do? For a start, get some good advice that is particular to your situation. I would begin ferreting away a little bit of cash each month for future opportunities that always arise from a financial correction. In the last financial crisis, I picked up some great assets for a song because people were suddenly faced with the prospect of having to sell in a fire sale.

This is an important point. Those that prepare prudently for a downturn look on these events as opportunities rather than disaster. The time to make BIG money is when everyone else is selling and you’re in a position to buy.

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Wednesday, 07 December 2022
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