THE GREAT DEPRESSION 2 and its effect on the domain name market

[Donald Aquilano]

THE GREAT DEPRESSION 2

I think you're being a little pessimistic about the economy.....the 1930's are lot different than today's market. We will have a severe recession for a year maybe two is my prediction.

 

[DNP]

Times are good for value investors. The looming recession and the decreased amount of credit obtainable due to the credit crunch in the US have caused all the markets to drop presenting a great opportunity to invest.

 

[domaingenius]

I think you're being a little pessimistic about the economy.....the 1930's are lot different than today's market. We will have a severe recession for a year maybe two is my prediction.

I think that there is going to be a global meltdown that the IMF have
just announced we are at risk of. I do hope I am wrong but it could be
worse than the 30's depression.

DG

 

[Sonny Banks]

Times are good for value investors. The looming recession and the decreased amount of credit obtainable due to the credit crunch in the US have caused all the markets to drop presenting a great opportunity to invest.

Agree!

 

[lordbyroniv]

I think that there is going to be a global meltdown that the IMF have
just announced we are at risk of. I do hope I am wrong but it could be
worse than the 30's depression.

DG

I have been buying gold bars and stocking up on canned goods

Until every stockholder swears off stocks for life

Until this message board stops quoting ridiculous prices paid for garbage domains

I will continue to believe that this bubble is not over yet

I hope I am wrong

But somehow I have a feeling I am not

It may depend how the IMF handles this, but even that may not help

$ is being propped up the "Powers that Be", but this cannot last forever

Greater than 50% odds that this turns bad

Thats pretty bad odds, considering the enormity of the consequences if the banking system fails

 

[domaingenius]

Here's Sunday's news

IMF warns that markets could collapse by another 20%
David Smith and Dominic Rushe in Washington

The world is on the brink of financial meltdown, the head of the International Monetary Fund (IMF) said last night. His bleak warning came as finance ministers tried to calm the frenzy in markets that saw share prices crash by more than 20% last week.

Separately, the IMF’s chief economist predicted that shares could slump by another 20% before stabilising. G7 finance ministers pledged to take all necessary steps to support the banking system and stave off an economic slump.

Dominique Strauss-Kahn, the head of the IMF, warned that the measures so far “have not yet achieved the goal of stabilising markets and bolstering confidence”.

He said: “Intensifying solvency concerns about a number of the largest US-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown.” Countries would need to take further measures, including interest rate cuts and steps to bolster the banks.
Related Links

* Brown gambles it all on rescue plan

* There are rewards for us all in this crunch

* Financial crisis lifts Labour in polls

Olivier Blanchard, his chief economist, said stock markets had further to fall. “At the worst, the governments will need another few weeks to make the right assessment and the stock exchanges could fall by another 20%; then there will be a turnaround,” he said.

The warnings came as G7 finance ministers, including Alistair Darling, met George Bush at the White House. “We are in this together,” the president said. “We will come through it together.” Other experts warned that the instability was likely to continue.

Mario Draghi, governor of the Bank of Italy and chairman of the Financial Stability Forum, which advises the leading economies, said he was “amazed” by what was happening and that it was “very difficult” to see the end of the crisis.

“I don’t have my crystal ball here,” he said. The panic in the stock markets was partly due to the “root psychology of major investors all over the world. You are not going to change that in a day”.

Simon Johnson, until this year the IMF’s chief economist, said he was disappointed the G7 had not produced a fully worked-out plan to fight a slump. “The financial system just got nuked and they don’t understand the full extent of it,” he said.

George Magnus, senior economic adviser at UBS, said stabilising the system was still possible but that countries had to act fast: “The most charitable response is that they have set out a framework and we will see countries filling in the details over the next three to four days. If that happens we could still be okay.”

Gordon Brown will travel to Paris today to urge European leaders to copy the British bailout programme and agree a Europe-wide plan to “recapitalise” struggling banks by taking equity stakes in them. America said this weekend it plans to do that.

In an unusual move, President Nicolas Sarkozy has invited Brown to join a meeting of eurozone heads of government to explain the merits of the UK model. A source close to the French presidency said eurozone leaders would take Britain’s initiative as a reference. “There are two competing models,” he said. “The American model, which no one wishes to draw inspiration from, and the British model. This is what everyone is talking about.”

The prime minister will first meet Sarkozy, Jose Manuel Barroso, president of the European commission, and Jean-Claude Trichet, president of the European Central Bank. Brown will then make his pitch to the leaders of the 15 countries in the euro currency area.

A spokesman for No 10 said: “This is clearly an important moment. It is very important that Europe acts together and works together. What we have set out is a comprehensive plan which tackles the three issues of liquidity, funding and capital. Any action must now be taken internationally.”

Today’s meeting is the last opportunity for European leaders to show they are taking the necessary steps to support the banks before the markets open tomorrow. Germany has indicated that it is prepared to adopt elements of the British plan by putting capital into its banks. One sticking point may be the lack of a comprehensive guarantee for the banks.

Tomorrow the first of the British banks to be bailed out by the government’s £400 billion rescue plan will reveal how much money they want. Royal Bank of Scotland (RBS), which has seen its market value fall to under £12 billion, is to ask the government to underwrite a £15 billion cash call. HBOS, Britain’s biggest provider of mortgages, is demanding up to £10 billion, while Lloyds TSB and Barclays require £7 billion and £3 billion respectively.

Although existing investors will have the right to put up the new capital, and some may do so, the rescue could leave the government owning 70% of HBOS and 50% of RBS. Crisis talks were taking place this weekend between the Treasury, the Financial Services Authority, the Bank of England and the heads of the four retail banks to decide final details.

A YouGov poll for The Sunday Times suggests the crisis has boosted Brown’s popularity. Support for Labour has risen by seven points in the past month to 33%, its highest since January. The Tories are on 43%, down three points.

The prime minister’s rating is at its highest since March, while he and Darling are regarded by voters as more trusted to deal with the crisis than David Cameron and George Osborne.

Allies of Brown have suggested this could be his “Falklands moment”, a reference to Margaret Thatcher’s rise from huge unpopularity in the early 1980s as a result of the successful war with Argentina.

Additional reporting: Nicola Smith

 

[lordbyroniv]

I know

gulp


everybody is whistling past the graveyard . . .

for now

 

[DomainsInc]

I have been buying gold bars and stocking up on canned goods

Until every stockholder swears off stocks for life

Until this message board stops quoting ridiculous prices paid for garbage domains

I will continue to believe that this bubble is not over yet

I hope I am wrong

But somehow I have a feeling I am not

It may depend how the IMF handles this, but even that may not help

$ is being propped up the "Powers that Be", but this cannot last forever

Greater than 50% odds that this turns bad

Thats pretty bad odds, considering the enormity of the consequences if the banking system fails

Gold is seriously overpriced. Too bad you didn't buy a year or even six months ago. Its value will go down for sure. Also, if paper money is worthless, gold will be too. I don't know why people think gold is so safe. Its worth is just based on something that doesn't even really exist.

 

[lordbyroniv]

Gold is seriously overpriced. Too bad you didn't buy a year or even six months ago. Its value will go down for sure. Also, if paper money is worthless, gold will be too. I don't know why people think gold is so safe. Its worth is just based on something that doesn't even really exist.

If u say so

 

[000]

I don't know why people think gold is so safe. Its worth is just based on something that doesn't even really exist.

The price of gold is typically expressed in monetary units but gold has intrinsic value that would survive even if all money disappeared and people simply bartered goods and services for other goods and services. Gold's intrinsic value is based on its unique and useful material properties. This is not a buy or sell recommendation, just stating the obvious.

 

[domaingenius]

I think that the problems we now have is for a large part due to the media
who spread the word that "times are bad" and then "you and I" and everyone
else stop spending and waiting to see whats going to happen. Then we have
the financial types who have been given bonuses for past decade that
were coming from a then unbeknown (to us) non existent "profit" and we the
taxpayers are now having to pick up the whole tab.

I think the worst thing is the now lack of trust between banks in
all Countries and it is like a car without oil in it, you can keep
driving it until eventually without oil it will seize up, like our
whole World economy will if we are not very careful.

I do hope someone does something soon ,such as banning betting
on shares going down as I read short sellers are going to target
more banks !!.


I think that what is going to happen medium to long term is that the US
and Europe are going to lose "power" and those in other regions of the
World are going to gain power and influence, kind of like a shift in the balance.
Africa will eventually become the new "middle east" and will become a power
house in next few decades or so mainly from oil and mining etc.zzzzzzzzzzzzzz

Anyway now back to buying and selling domains, and praying.


More news: THE government will launch the biggest rescue of Britain’s high-street
banks tomorrow when the UK’s four biggest institutions ask for a £35 billion financial lifeline.

DG

 

[lordbyroniv]

Now that we have this Presidential Election out of the way, we can get back to business of discussing the future Global and American Economy and its likely negative impact on the speculative domain name market


A credit crater too big to fill?
As the movement of money across borders comes to a grinding halt, governments can only manage the decline. Don't be surprised to see markets roll back to 1995 levels -- or lower.

By Jon Markman
Despite a weeklong surge in stocks, it's becoming increasingly clear that credit has suffered a catastrophic setback.

It's as if a set of asteroids hit Manhattan, London and Tokyo, carving a massive hole in the architecture of finance. The initial buildings in the impact crater, Lehman Bros. (LEHMQ, news, msgs), Bear Stearns and Northern Rock, were quickly incinerated. But now the toxic rain and tsunamis that were kicked up are rolling onto the survivors in waves and cutting off their air supply.

New data from world money centers suggest the movement of money around the globe has simply ground to a halt, as institutions in the United States, Europe and Asia that are receiving taxpayer dollars from governments are socking it away to shore up their balance sheets, reserve against liabilities expected in the near future and sustain their unprofitable operations.

"Governments are not really trying to save the system anymore," said Satyajit Das, a banking expert in Sydney, Australia. "They now realize that's impossible. They are just trying to manage the decline."

How low will it go?
As a result, once the current rally interlude is over, it's not hard to see the Dow Jones Industrial Average ($INDU) sinking to around 4,000 -- a level it last hit in 1995, before debt started to play such a large role in corporate and personal finance.

That would entail a decline of 70% from its 2007 peak, or about the same amount the Japanese stock market has fallen since 1990 in the wake of its own debt unwinding. Or the amount the Nasdaq Composite Index ($COMPX) dropped from 2000 to 2002. Or the amount the Russian market has plunged since June.

If that seems too harsh, well, the math is pretty easy to explain. Figure you have a well-regarded multinational company that earns $10 a share and sports a price-earnings multiple of 25 when the U.S. economy is rolling along at its long-term trend rate of 4%, or about twice its normal growth rate.

Multiply 25 times 10 and the stock is worth $250. But now take away half the financing of customers, the stock buybacks done with borrowed money, the high-yield cash-management systems of the corporate treasury, the leveraging that allows raw materials to be bought with borrowed money and the leveraging that allows its customers to buy with credit cards and layaway plans.

Then ratchet back U.S. economic growth to 0%, which is about the best forecast now for 2009. Figure the company now earns 25% less than at peak (an optimistic estimate), or around $7.50 per share. Because of the slowing growth environment, the market is likely to take the price-earnings multiple down to around 10, which is still more than twice the company's forecast growth rate. Now multiply $7.50 by 10, and the stock is projected to trade at $75, or around 70% lower than the peak.

The problem is that this scenario might be too sunny. The economy is losing around 200,000 jobs a month. Just last week Yahoo (YHOO, news, msgs), Merck (MRK, news, msgs), Chrysler, Xerox (XRX, news, msgs), Goldman Sachs Group (GS, news, msgs) and National City (NCC, news, msgs) announced layoffs.

Unemployment, now skimming along at a relatively tame 6.5%, is expected to mushroom at least to 8.5% if not 9% or higher by the end of next year. With stock and home prices in a tailspin, consumer net worth is already on track to decline 14.7% year over year this quarter, a record plunge.

Credit card revenues have sunk to their lowest level in five years, and a JPMorgan Chase (JPM, news, msgs) official was quoted this week as stating that "loan volume will keep going down as we continue to tighten credit."

Holiday sales are expected to be weak, with same-store sales in November and December projected to sink 2.2% from last year. The lone good news: A decline in the price of gasoline of nearly 50% since June, to around $2.15 per gallon nationwide, will roughly equal a $210 billion tax cut.

ISI Group analysts said that when these factors are totaled and sifted, corporate profits are on track to decline 10% in 2008, and that if U.S. gross domestic product stays flat next year, corporate profits are likely to fall 13% more in 2009. That would be the first back-to-back decline in profits in the post-World War II period.

Meanwhile, Europe, which is responsible for a third of world GDP, is in no better shape, with manufacturing falling off a cliff. Volvo (VOLVY, news, msgs) reported last week that truck orders are off 55%. Greece is staggering as rental rates for its key shipping industry are down 90% since June. Emerging East European countries such as Ukraine and Serbia are seeing their currencies blow up along with their economies. Ditto India, Argentina, Brazil and even China, where growth is slowing from the low double digits to around 7%.

Trying to fill an expanding hole
To counter all these effects of credit extinction, the United States, Japan and the European Central Bank are cutting short-term interest rates, injecting taxpayer money directly into the capital structure of banks, providing hundreds of billions in low-interest loans, guaranteeing deposits and more, on an unprecedented scale.

So why isn't it working? A couple of reasons. First, early in this debacle, the Federal Reserve and Treasury Department apparently decided that they would declare war on the so-called shadow banking system. These were the hedge funds, structured investment vehicles (SIVs) and other nonbank entities that had grown up since around 1995 to create, leverage, re-leverage and distribute roughly $10 trillion in debt.

Continued: The 'global liquidity factory'

Pimco co-chief Mohamed El-Erian has called this the "global liquidity factory," but no matter the name, these unregulated entities created oceans of money that flowed luxuriantly to everyone from credit card users in North Dakota to bankers in Iceland and builders in Thailand.

The shadow banking system worked so long as everyone at the base of the system paid their loans on time, but economic stresses of the past year have tested that concept, and it has flunked. Governments have closed the liquidity factory by ordering the SIVs and conduits onto banks' books, smothering the hedge funds by extinguishing their key prime brokers, Bear Stearns and Lehman Bros., and through the September short-selling ban that led to mind-blowing losses.

This may have seemed like a good idea at the time, but the government has now been forced to spend taxpayer money to fill in the gaps where private money used to rule. And as it does so, banks are so concerned that they will not have enough money to meet the demands of angry customers of leveraged products wielding return receipts that they're hoarding it.

Example: Imagine that a Mr. Watanabe in Tokyo was sold a high-yield collateralized debt obligation in 2007 at $10 million by Merrill Lynch (MER, news, msgs). Since other similar CDOs have traded lower, he's now carrying it on his books at $8 million. But if he were to sell it on the open market he could probably get only $2 million or less.

Pressured by his own regulators to button up, he tells Merrill to buy it back or never expect to get any business from him again. Merrill then agrees to buy it at $4 million. Now new Merrill owner Bank of America (BAC, news, msgs) has to both pay the cost and reserve bank capital against it.

There are hundreds of Watanabes and as much as $3 trillion to $5 trillion in similar deals coming back onto bank balance sheets from CDOs, SIVs, currency swaps and the like, according to banking expert Das, so you can see that governments' effort to recapitalize banks experiencing a run of deleveraging is not trivial. They will back up banks to the minimum required for solvency, but not anywhere close to their previous free-lending glory. This is why capital is at a standstill and why any business plan dependent on credit is now suspect.

'Forcing them to pay through the nose'
Credit analyst Brian Reynolds offered a few shocking examples from recent bond deals. Coca-Cola Bottling (COKE, news, msgs) issued debt in July at a spread of 1.69 percentage points over Treasurys. By this week, the spread had widened out to around 3.40 points, a move of historic proportions, Reynolds said.

When the company wanted to make another deal this week, bond investors made the bottler pay a stunning 4.68 percentage points over Treasurys.

Reynolds notes that the same has happened with telephone giant Verizon Communications (VZ, news, msgs). In April 2007, it issued 10-year debt at 0.95 percentage point over Treasurys. In April of this year, it issued 10-year debt at a spread of 2.60 points, a historic move considering the worst spread for a big phone company had been 3.00 points in 2002. That record was shattered last week, when bond investors made Verizon pay 4.88 points over Treasurys.

And the kicker: Reynolds said the bond community was speculating that troubled MGM Mirage (MGM, news, msgs) would have to pay as much as 12% for a bond deal this week, but when it was priced, demand was so weak that the company was forced to pay 15%. And the deal was secured by the company's New York-New York hotel and casino in Las Vegas. Moreover, Reynolds said, the company isn't using the proceeds for growth but instead to pay down another credit facility.

"In other words, loan shark bond investors are forcing them to pay through the nose and put up collateral just to keep the balls in the air," he told clients in a note Friday. It's like a consumer who uses a credit card costing 15% a year to pay off a debt owed at 9%.

This is the new world companies face -- and you wouldn't know it by just looking at stocks.

Das said the bottom line is that deleveraging is like an epic flood. Governments can't hold it back; they can only channel it. The public expects them to actually save the day just as they did after the 1987 equity crash, the 1991 real-estate crash and the 1994 junk-bond crash, yet none of those blowups involved an equity, credit, commodity and currency crash all rolled up in one.

It will literally take a miracle to solve this mess. Cross your fingers, and hope that a rollback to 1995 is as bad as it gets.

At the time of publication, Jon Markman did not own or control shares of any company mentioned in this column.

 

[IngvarG]

I own GreatDepression.ca. Any thoughts on how to develop/sell? It's not parked or anywhere to be seen so far.

Ingvar.

 

[domaingenius]

Personally I think we are in the midst of a self fulfilling prophesy. The more coverage
in the media this bank thing got the more people stopped spending, and then
the media started covering the fact people were'nt spending so more people
stopped spending and so it grows and grows and becomes self fulfilling.

Just be happy, keep spending and buying and all will be ok.

DG

 

[Vijaya]

lowfare.com sold for 365k - on greatdomain.com

Be Happy!

 

[lordbyroniv]

lowfare.com sold for 365k - on greatdomain.com

Be Happy!

Yes, but dangerous.com could barely garner $15,000

 

[DaddyHalbucks]

Look on the bright side, Obama's big government social and bailout programs are going to fix everything for us, just like the Community Reinvestment Act fixed homelessness.

 

[Raider]

They say were already in a recession and I believe we are, IF Obama follows through with his plans for the economy, it can get only get worse before it gets better.

BTW, What happened to; This is the worst depression since the Great Depression? Oh, that was before election day.... LMAO.

 

[fab]

Look on the bright side, Obama's big government social and bailout programs are going to fix everything for us, just like the Community Reinvestment Act fixed homelessness.

You didn't seem to want to post to much politics in the political section, so I guess that's why we're discussing it here.

 

[DomainsInc]

They say were already in a recession and I believe we are, IF Obama follows through with his plans for the economy, it can get only get worse before it gets better.

BTW, What happened to; This is the worst depression since the Great Depression? Oh, that was before election day.... LMAO.

Look at it this way...in the great depression a democrat passed into law the new deal. There is no way if a republican was in power, such a thing would of been passed and it would of taken much longer for America to get some much needed relief. People have way too high of expectations as to what Obama can do but I don't believe the republican ideology would do anything for the current situation.