The collapse of 2009. Happy New Year's!!

Morning folks!!

I started this post as just a Happy Holidays post and then it just kind of evolved.

I almost feel guilty for having such a great 2008. While I am watching so many sectors suffering and thousands of businesses on the verge of going broke, I feel a little guilty.

 

At TRAFFIC in New York City we feasted on delicacies with unlimited lobster, shrimp, sushi, drinks and a spread more grand than anything we have ever done while on the other side of the river they were in full panic mode. The contrast to the old and new economy was never more vivid. Ask anyone that was there. It was quite a moment that night. One I will never forget. One they could write about in the history books.

 

2008 for the domain industry was damn good!! Not so good if you chase registration fees for a living. But if you have a solid portfolio of domains names, damn good!

 

I always said 2008 would be challenging and it was. Survival in 2009 is going to be less about domains and more about lifestyle. If your bills are low and your income good, you will survive. On the other hand there will be many on the margins that will be washed away.

 

I have long said that 2008 will be a breeze to get through even though the news would be very bad but 2009 would prove to be the most difficult year in several generations. It's going to be ugly. Very ugly. The foundation of the world's economic system is in crisis. 2008 is like the day before the hurricane strikes. Some prepare and do what they can to protect themselves. Yet others say the sun is shining and they doubt it will be as bad as they say. My take on the hurricane coming known as 2009, it has the potential to be much worse than they say. We all hope for the best, but the best can't hurt us. The worst is definitely something to be afraid of. The worst has the upper hand.

 

In the summer there was a glut of goods on the shelves and in the pipeline. The panic has made many retailers sell for cost and below cost to try to liquidate as much inventory as possible. The first thing you will see and it has already begun is shortages. First you have a glut. Then that episode is followed by shortages. You are seeing factories shut down. Distribution is being disrupted. Folks and businesses are hoarding cash and afraid to order goods. Their shelves are about to be empty and it may be some time for those shelves to be replenished. That becomes the fatal blow. No money, no goods, bye bye.

 

We are about to see a rash of retailers go under. Some very big ones. I think one of the the biggest will be Sears. They are already hanging on for dear life from what it looks like to me. Same with restaurants, jewelry stores, spas etc. Main St and the malls are about to look a lot different. Malls going out of business? Yup!

 

The beneficiary to all this will be the Internet in general and domains in particular. Especially income producing domains as banks and TBills start paying 0% interest.

 

A domain making $10,000 a year is like having $1 Million in the bank at 1%, $500k at 2%, $250k at 4%. The safest places to put your money are likely paying close to 0%! So a domain making just $27.40 a day with a history really is an attractive investment today and one that should be exploited. Domains ARE a great long term investment. Something we as an industry have known for many years. Now others are going to be looking for safety and domain names are in their direct path.

 

But no matter how well any of us do, we too will feel the pinch. Our lives will be affected by this. Your favorite restaurant is going broke. Maybe. But it will be things like this that will happen and the quality of life may go down no matter how much money you have or make.

 

They are throwing trillions and trillions on the fire trying to get it under control. Not a single expert in the world knows if it will work. Obviously if it does not work we have created an even bigger problem and that is something almost too scary to even discuss. When you hear Warren Buffet say it is an "Economic Pearl Harbor" it is time to pay attention. Time to prepare. Time to realize this is no drill. 2009 is going to be a year I can't even write what I believe is about to happen.

 

Whatever has happened in 2008 really won't even begin to manifest itself until 2009. The fallout of all this has not hit yet. It will. It is. There is no hiding from it. Be prepared for as flurry of collapses right after Christmas and into the first half of next year. An avalanche. Like nothing any of us have ever seen. Things are tough on Main St. They are fighting for survival. It's all about buying time and the 1st of each month gives birth to another group that can't meet their obligations and collapse.

 

Meanwhile domainers are busy building, expanding, testing and breaking new ground. Parking is going thru a transformation. The traffic that domainers hold is moving around at a pace never seen before. The testing has never been more important. Optimizing each domains has never been more important. The race is on. Parking companies in a rush to improve their interface and click thrus while at the same time having to deal with traffic swings and losses that they just are not accustomed to and some may not be prepared to absorb. Downsizing is coming. Consolidation is coming. Opportunity is also coming. Those that are strong may seize opportunity. Those that are weak ARE the opportunity.

 

No question about it. We live in interesting times and I think 2009 is going to be a little too interesting. The numbers paint a picture that scares the hell out folks that understand those numbers. On my check I have my favorite self made quote. "Trust numbers, not people." which is from the saying I have, "Numbers I trust, people I don't"  or in more blunt terms, "People lie, Numbers don't." In 2009 it will be all about the numbers. No talking will change the numbers.

 

Have a very Merry Christmas. A Happy Hanukkah. And the best of New Year's! Most importantly, I hope you and your families get thru 2009 healthy and happier!

 

Rick Schwartz

Comments

[Terence Chan]

Out of clutter, find simplicity.
In discord, find harmony.
In the middle of difficulty, lies opportunity
- Albert Einstein.

Merry Christmas all!

[Robert Fontaine]

I think you hit the nail directly on the head with your assessment of where we stand economically. Scary. Though if the worst case scenerio comes to fruition, and let us pray that it does not, there will be fewer advertisers, and fewer buyers. So ALL forms of advertising will be cheaper, and there will be much less of it. Everyone takes a hit, a big one. That said, your point is true.. as this happens, i'd much rather have a storefront that costs $7 a year then $4,500 a mo, + electricity, labor, etc, etc. The irony (or upside - if there is one) is that whenever it does come full circle, housing will become more affordable, commercial space will be cheaper, and perhaps we can get back to a space where the middle class can survive as just that. In the end, it may be that we have just redistibuted the wealth.. which is effectively accomplished when EVERYBODY is broke.
Respecting your opinion Rick, might I ask you a question?Can you envision any mortal threats to the domain name models? What i've always wonder was, what if MS changed IE so that a direct type-in of a domain brought up THEIR paid results, treating the keywords of the domain itself as if it were a search term.. circumventing direct type in? Reverse Domaining, if you will? Happy Holidays all.

[Jeff Schneider]

Rick you are spot on! Most of the things that capitalism thrives on are being systematically destroyed in an effort to right the economy.

Capitalism thrives on leverage and unbridled free open markets. These two key economic harbingers are non existent in todays market place. Capital markets respond negatively to market manipulation.

You cannot legislate away a depression or as they are now calling it the great recession. 2009 will be remembered for our lifetimes, its in the pipeline.

That being said, we are in a very kaotic and creative period where fortunes will be lost and created. The good news is that domaining has the most potential of all asset classes, in the period dead ahead.

Happy New Year everyone!

[PhilGus]

We are heading for a multi-year global recession of significant proportions. If we consider a depression as any economic downturn where real GDP declines by more than 10 percent, then we will surely be in one. In such an environment domaining and internet commerce will not be a safe haven, but it will be a buying opportunity for anyone with cash and a medium term view. Unfortunately my bank is under provisional liquidation and I lost my life savings so I will be weathering this depression on my smarts alone!

[Yaron]

Domains are Commodities!
Not virtual, but real Commodities.
and commodities are the only sane investment in our crazy world. why? because you cant print them out of thin air like dollars...
I know, ICANN can create as many TLDs as they like, but can they create another Hotels.com or Properties.com?
We are facing Hyper Inflation. You cant print trillions of dollars and avoid it. one thing is for sure - if u have some Gold/Oil/Wheat/Coffee/DOMAIN NAMES, you are going to do better than someone who doesn't.

Happy Happy Happy !

[Robbie Ferguson]

This post is spot on Rick - 2009 is going to be a very UGLY year!

I work in many different sectors from Domain brokering through to owning a coffee house, sales consultant to the construction industry and operating a home security company.

The only business that has been steady for me - Domains!

We are seeing big changes everywhere and 2009 is going to be very tough - I expect millions of jobs to disappear in the early part of 09 and being honest recovery wont start till mid 2010.

Lucky for us we have been in the domain business for a few years and know how to take grasp of change and move forward!

People and companies shall fall lets hope we dont see too many.

Sorry to be so depressing!

I wish everyone a happy new year and have a great christmas!

Regards,

Robbie

[B Hanes]

where every crisis is, there is an opportunity.

If Frank can do it during the .com crash,

we will have the best year ever in 2009!!!

[Danny Pryor]

The illustration of the Domain Industry juxtaposed with the meltdown on Wall Street, during TRAFFIC NYC, is indicative of how the entire economy has been shifting - for 10 years! I wonder if some of that bailout money the banks and Wall St. received might be better spent to BUY A CLUE for the people of Mad. Ave. and those old-school businesses that didn't follow what Steve Forbes called "the trend line". So, 2009 will be ugly; but 2010 will represent the full emergence of the domain industry as THE ECONOMIC foundation of a new age - what Mr. Forbes called "a golden age". It's coming.

[Rob Sequin]

Yikes!

This is like that scene from Terminator 2 where Sara Connor sits down and tells the scientist how his work in the present creates a world of world destruction in the future.

I also agree with Rick but think that Obama will immediately go to work to throw money at the economy with government jobs and the stock market might bounce a couple thousand points up in the Spring.

If that happens, that will be the time to sell everything.

I'm watching for a classic, long term bull market double top in Spring 2009. Many people will be surprised by this new run up in the market and the last amount of greed and speculation will kick in.

Charts shows support for the DOW has been in the 8000s and so far it has held there.

IF there's a Spring rally and a sell off, watch the 8000 support level. IF the DOW breaks 8000 the next support is in the 3000s.

I am no great technical analysis but if you are trying to prepare for the future, research technical analysis on stocks and it's pretty easy to learn about tops, resistance and where the support levels are. Technical analysis applies best to markets running on psychology rather than fundamentals and as we all know, fundamentals don't mean much these days.

Sell high and buy low :-)

[Successclick]

Nice article, Rick. It's kinda of passive/aggressive, "domains will win, everyone else dive for cover" but domainers still have to pay close attention to their portfolios and decide when to build and when to sell.

Personally, I believe when those who are filthy rich are now bathing in humble pie, new ideas and solutions will appear faster than any of us know.

Bottom line, stay the course. Stay focused and don't let fear dictate your decisions. As far as your comments about "numbers don't lie, people do", the problem with that is that people make the numbers. So, the only thing we all can depend on is ourselves. Screw the numbers, use your head, see the long term picture in short term clips.

And when in doubt, get several friends together, pour everyone their favorite drink, and pop in the "Tommy Boy" DVD. Memorize the dialogue, and learn from it.

And Rick, will we see you at Domainfest 2009?

Happy Holidays to all.