Dominik Mueller's Blog

Factors Of Gold Investments

Dominik Mueller — Thu, 05 Apr 2012 22:52:14 +0000

The following is a guest post by BullionVault.com.

Among investors and traders, one of the most interesting products in which to consider placing your money is gold. Gold operates, to some extent, separately from other investment markets, and is often considered apart from overall investment and value trends. However, the decision of whether or not to invest in gold is one that depends on a number of factors that you may not be used to considering with other investments. Invest in gold is definitely an idea to consider, however, if you do the proper research and find the market to be agreeable with regard to your specific situation. So, if you are new to this sort of investment, here are some of the most important factors to keep in mind as you begin considering.

• To begin with, always keep in mind that gold is a backing to monetary value all over the world. Essentially, gold equals money to the exact extent dictated by each individual economy. However, on a global scale, gold theoretically equals out to the same value everywhere (with regard, of course, to monetary conversions across different currencies). This means that the total global economy may dictate the value of the gold you invest in, while sways in an individual economy will have less impact.

• Also keep in mind that gold has an inherent edge over many other investments merely because of the psychological impact it has on people. Gold has very little practical use in the world, but is instead regarded as an article of wealth and an object in which we essentially store value. However, more or less because we have decided it holds a certain value over other metals and products, and because this value tends to be relatively stable, gold tends to be a reliable investment even in times of turbulent economies.

• Do not make the mistake of considering gold as currency, merely because gold does hold monetary value. While there have been periods of history during which all currency was backed exactly by stores of gold, gold itself can still not be considered as currency, except on a government and banking level. Thus, when you consider whether or not you would like to invest in gold, pay more attention to gold as a store of value, and as it relates to world economies, rather than as an everyday instrument of monetary value. This can help you to have the right mindset as you go about considering gold investments.

“Super Committee” fails to agree on deficit-reduction plan

Dominik Mueller — Mon, 21 Nov 2011 22:32:05 +0000

As reported by Reuters, the so-called congressional “Super Committee” failed to reach a deal on reducing the federal government’s deficits today. Following similar events at the end of July, when the American government came close to defaulting on part of its debt due to a deadlock in negotiations over a new debt ceiling, the US credit rating was downgraded by S&P from AAA to AA+ on August 5th and markets all over the world took a plunge.

Today international stock markets closed down already, probably because the bad news from the Congressional Budget Office have been anticipated. This won’t stop markets from also opening down tomorrow, however.

Copyright © 2003-2012 Dominik Mueller.

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“Super Committee” fails to agree on deficit-reduction plan

Pivotal moment for the euro zone

Dominik Mueller — Sat, 08 Oct 2011 09:46:12 +0000

Stock markets in many parts of the world closed higher on semi-positive news from the US labour market yesterday. However, the rise in stock prices over the past few days does not signal the beginning of a recovery at all. I have no doubt that stocks will plummet again in the short run. The downgrades of Italy (Moody’s, Fitch) and Spain (Fitch), the dismal situation of several European banks (most prominently, Société Générale and Dexia) as well as the ongoing foot-dragging of the ECB and European politicians all add up to what I consider a pivotal moment in the short history of the euro zone. As Robert J. Shapiro, an adviser to the IMF, and Gerhard Bläske of the German financial newspaper Börsen-Zeitung (“Flächenbrand verhindern”, 06/10/2011) recently put it, the euro zone is at the risk of finally breaking apart, if no solution will be found in the nearest future. The AAA rating of France is already being reviewed by many, and it is not impossible that Germany’s rating will come under fire, too, when ever more money will be spent on bailing out European banks and sovereigns.

How did we get here? In June, I wrote in the comments to an article that Greece should be allowed to default on its debt in an orderly way or otherwise the can, which politicians and central bankers had already been kicking down the road for much too long at that time, would get heavier by the day. Well, it certainly is heavier now. I understand that the ECB wants to buy time for the government officials to find a way out of their countries’ miserable situations by purchasing ever more sovereign bonds. But that’s all it is: Buying time. It has been clear from the beginning of the debt crisis that simply pumping money into the markets would not be a solution to the problem. Unfortunately, not much has happened since then. Instead, we had to learn that the stress tests conducted to test the soundness of Europe’s banks failed: Dexia performed very well on the test, but in reality it will have to be bailed out now. As a result, France and Belgium will have to provide financial guarantees for tens of billions of euros, which comes with a risk that rating agencies will be taking into account. We will probably know more after the weekend. I am afraid, however, that too much time has gone by and that decisions will have to be made very quickly now, not leaving enough time for a thorough analysis of both the old and new problems Europe is having.

Markets await Greek Vote on Austerity Plan

Dominik Mueller — Tue, 28 Jun 2011 18:39:34 +0000

As Greek unions continue their 48-hour general strike before the vote by lawmakers on the proposed five-year austerity plan on Wednesday, markets have been slightly optimistic today. Given that European stock indices are up today (with banking stocks particularly strong), Greek 10yr bond yields are at a three-week low and CDS spreads have tightened, it looks as if the market is quietly betting on Greece’s Prime Minister George Papandreou to gain lawmakers’ support in tomorrow’s vote. The decision on whether or not to pass Papandreou’s €28bn austerity measures is a crucial one that will likely have a significant impact on the financial markets, considering that a failure to pass the plan could result in the euro area’s first sovereign default. After all, Greece will only receive the fifth €12bn installment of the €110bn bailout from the EU and the IMF if its parliament will vote in favor of Papandreou’s plan. The tranche will ensure that Greece will be able to pay creditors through mid July. After that, the country will be dependent on a new EU/IMF bailout package believed to be worth €120bn that, too, is conditional on the passage of the austerity program and the laws needed for its implementation.

Meanwhile, European banks are discussing ways of contributing to this second rescue package for Greece. French institutions announced they would be willing to roll over 70% of their Greek debt maturing between 2011 and 2014. Apparently, 50% of the proceeds from those bonds would be reinvested in new 30-year bonds with the remaining 20% to be invested in zero-coupon AAA bonds with deferred interest. It is possible that the new bonds will be placed in a special purpose vehicle (SPV) backed by the European Financial Stability Facility (EFSF) so they won’t show up in the banks’ balance sheets anymore. According to Deutsche Bank’s Josef Ackermann, German banks are looking into the French model as well as other possiblities, too. Although it was Germany’s Angela Merkel who first proposed a private sector participation, again it is Nicolas Sarkozy who seems to be getting things done. Mrs Merkel continues to appear indecisive when it comes to actually closing deals instead of merely coming up with possible strategies. Anyway, France has a special interest in Greece not defaulting on its debt, because French banks have the biggest exposure to Greek debt with €65bn in liabilities. Next in line is Greece itself with around €59bn, followed by Germany (€40bn) and the UK (€19bn). The ECB remains the largest single creditor with €49bn worth of Greek bonds on its balance sheet.

The private sector’s search for a good strategy for helping with the rescue of Greece is also made difficult by the fact that rating agencies could classify such an undertaking as a default event, depending on how it were to be executed. Fitch already said it was likely that the company would cut Greece to default if the EU were to go through with its plan to have private investors roll over their Greek debt. In any case, it is very important that the Greek parliament will back its Prime Minister on Wednesday. This will send positive signals to investors worldwide. I am not sure anymore whether Greece can be saved from defaulting, though. It is important for the EU to have a strategy in place for such a scenario. An orderly default of Greece might be unavoidable in the long run if the EU’s other member states do not want to throw ever more good money after bad.

Stock Markets Down on Fed Projections

Dominik Mueller — Thu, 23 Jun 2011 19:46:38 +0000

Stock markets are down worldwide today after yesterday’s Federal Open Market Committee (FOMC) June meeting and the release of its economic projections (PDF). The Federal Reserve projects unemployment in the U.S. to be high through the year 2013, when it should be 7 to 7.5 per cent, according to the Fed’s latest estimates (this is up from last month’s projections of 6.8 to 7.2 per cent). The wide range of projections even suggests the unemployment rate to be between 6.5 and 8.3 per cent (see image from the FOMC report below).

I think it’s unsettling that unemployment is likely to remain that high until at least seven years after the start of the recession! Investors will be thinking the same, as suggested by international stock markets today. It certainly didn’t help that Federal Reserve Chairman Ben Bernanke didn’t hint at potential new steps to boost economic growth. Apparently, Mr Bernanke believes the current slowdown of economic growth to be temporary. Therefore, the central bank, which is ending its $600bn bond-buying program at this inauspicious time, will remain on hold for at least two more months before deciding about further interventions. Interestingly, the Dow Jones index temporarily jumped up yesterday right after a tweet by PIMCO’s Bill Gross saying that August would likely bring first hints at QE3. However, as soon as the FOMC published its downgraded economic outlook for the US, markets turned down again.

Today’s losses in Europe could also be due to profit taking after mostly good stock market performances on Tuesday. Charts below the fold.

Social Networking Bubble Inflating

Dominik Mueller — Wed, 22 Jun 2011 16:42:12 +0000

Technology companies like LinkedIn, Pandora, Groupon and Facebook are being valued at mind-boggling revenue multiples. In the face of relatively meager earnings, the fast-growing niche of social networking looks severely overvalued, bringing back memories of the last decade’s dot com bubble.

Over the past couple of weeks one must increasingly have been under the impression that technology history may be about to repeat itself. Again, technology companies, many of which are still in their start-up stages, are being valued at mind-boggling revenue multiples that the respective companies and venture capitalists are trying to justify by pointing to web statistics such as page views, unique visitors, registered users or even entirely new metrics they invented themselves (“income before expenses”, as they are often called). Groupon, for instance, introduced a metric called “adjusted consolidated segment operating income” (short: Acsoi). Supposedly, Acsoi is the firm’s operating profit minus its marketing and acquisition expenses. Under US accounting standards, Groupon shows a loss of more than $400m, using Acsoi this magically turns into a $61m profit.

What do these income-before-expense-metrics tell about the companies’ financial situations and outlooks? This is a rhetorical question, of course, with the answer becoming evident when looking at technology stocks in the early 2000s. What they are supposed to cover up, is that most of the new web start-ups are severely overvalued not only in terms of the 2010 revenue multiples, but also based on multiples derived from current 2011 revenue outlooks. Is it the year 2000 all over again?

Almost. This time it is not the entire technology sector that is overvalued, but it is the relatively narrow niche of social networking firms. The shares of professional networking site LinkedIn, for example, jumped more than 150% to $122.7 on the day of its IPO on May 19, 2011, only to fall back to $67.92 as of this writing. LinkedIn reported a profit of $3.4m last year, mostly from advertising and membership fees. This is a tiny profit, considering the firm’s current market capitalization of $6.4bn. Pandora, an online radio site which is valued at $4bn despite revenues of little over $100m last year, benefited from LinkedIn’s IPO too. But under its current licensing terms, the more songs users listen to, the more Pandora ends up paying in royalty fees. This deal alone lacks entrepreneurial brains, in my opinion.

Granted, social networking firms are growing fast. But as long as web 2.0 companies are not able to translate their extreme popularity and growth into sustainable profits, I prefer to remain sceptic. Advertising alone cannot be the answer to this problem. With the increased use of ad blockers and general “ad blindness” by today’s internet users, relying almost exclusively on paid ads will turn out to be a dangerous business model. Even Google has realized this by now and is beginning to branch out into new markets such as cloud computing, operating systems and telecommunications.

Unfortunately, it is not just the absence of robust business models that should caution potential investors. The aforementioned creativity in terms of financial accounting and reporting is just as big a problem. As an investor, I choose not to trust a company that is desperately trying to cover up losses and turn them into profits using non-standard accounting rules.

No more domain names

Dominik Mueller — Tue, 19 Oct 2010 12:41:44 +0000

Dear readers,

As many of you will know, I quit brokering domains a while ago – and I stopped actively trading domain names altogether in late 2009. Since then, I haven’t published a new article on my blog and only sporadically did I comment on the pieces posted on other blogs. So I guess it makes perfect sense to officially announce that I am no longer in the domain business. Therefore, this blog will no longer be covering domain names. However, the more than 500 articles I wrote during the past few years will be archived in the “Domain Names” section on this blog, so you will always be able to go back and read them, if you wish to. Thanks for your understanding and thank you very much for having been a reader of my blog.

Cheers,

Dominik

28% of one- & two-letter .DE domains grabbed by one company

Dominik Mueller — Sun, 25 Oct 2009 14:00:38 +0000

Last Sunday I commented on DENIC releasing one- and two-letter domains as well as pure number domains, which were previously impossible to register. This Sunday I will have to comment on the actual results of the allocation process.

As it stands now, 28% of all one- or two-letter domains that were claimed and registered during the initial registration phase were acquired by one company only, Tec-Media-Service. The company successfully registered 193 of the short domain names. Realtime.at came in second with 48 domains and Key-Systems secured 19 domains at least. Most other DENIC members, however, were not successful. Even United Domains, which belongs to United Internet AG, was only able to register three short domains, two of which I wouldn’t denote as premium domains. The newly released pure number domains, most of which are longer than two letters, were more uniformly distributed.

Why is it that most of the valuable domains ended up in the hands of a few selected domain registrars only? One answer is that those companies have been experienced in dropped domain catching, a task that requires a similar infrastructure as the registration of domains during an initial registration phase. More importantly, however, the lucky registrars knew how to play the system. Especially Tec-Media-Service had a good strategy in place: It worked together with 1API GmbH, a domain registrar located in Germany. 1API GmbH is accredited for all major gTLDs as well as the 80 largest ccTLDs (country-code top-level domains) and offering its domain registration services to other companies through its entities HEXONET GmbH (Germany) and HEXONET Services Inc. (Canada). Tec-Media-Services and 1API then cooperated with an estimated 20 to 30 DENIC accredited registrars by acquiring and pooling their domain registration queries. In order to ensure a fair domain registration process, DENIC only allowed a maximum of four domain registration queries per minute per registrar. By pooling the resources of up to 30 different registrars Tec-Media-Service and 1API have been able to indirectly send as much as 120 queries per minute. It is not known how much Tec-Media-Service paid for the other registrars’ domain registration rights, but I have already heard rumors of registration rights having changed hands at prices around €10,000. Apparently, many smaller DENIC accredited registrars thought that selling their queries would result in more cash than establishing an expensive infrastructure of their own. In retrospective, this reasoning might have been correct. The numbers make it clear that only companies with the most advanced technological and organizational solutions have had a realistic chance of successfully registering the extremely sought-after one- and two-letter .DE domain names.

Domain marketplace Sedo took a similar approach by pooling the registration queries of an unknown number of registrars. But of the 3000 domains Sedo put up for auction on its website, it could only secure between 300 and 600. Most of those have been number domains of lower quality. Domains Sedo auctioned off include TV.de (€279,499), PC.de (€158,700) and DE.de (€144,277). None of these was later registered by Sedo, though.

Looking at the results of the initial registration phase, one can understand why many domain investors believe the allocation process was unfair and that insider trading was taking place. But according to DENIC, the pooling of registration rights is not illegal. Personally, I have to agree. It was foreseeable that most companies or investors would not be able to actually get the domains they wanted. As is always the case with valuable commodities, the buyers with the largest amount of cash on hand prevailed.

DENIC to make million-dollar domains available for the first time

Dominik Mueller — Sat, 17 Oct 2009 22:50:44 +0000

DENIC, the registry of Germany’s .DE top-level domain, has announced that it is going to make one- and two-letter .DE domains available for registration in a few days for the first time. In addition to these, it will then also be possible to register pure number domains such as 123.de, which, unlike under .com, could not have been registered so far. As per DENIC’s rules, it was not allowed to register domains without any letters or domains shorter than three letters under the .DE TLD. Those rules are now about to be changed after a 2008 Frankfurt court ruling involving Volkswagen has finally been confirmed by Germany’s Federal Court last week.

Volkswagen has long been fighting to be allowed to register the domain name VW.de, because the company is commonly known under the acronym VW in Germany.

Only three two-letter domains had been registered by German companies during the short time frame before DENIC disallowed the registration of short domains years ago. Those three domain names were IX.de, HQ.de and Deutsche Bahn’s DB.de. Following the court ruling in June 2008, I already speculated about DENIC relaxing its rules at some point in the future. It was only a matter of time until companies would be able to register all other short .DE domains.

Now that Volkswagen won against DENIC, the registry decided to completely do away with its rule instead of only allowing the car manufacturer to claim its domain name. I think that was the right decision, although it is still not clear how the domains will be made available exactly. It is expected that there will be a rush for these highly valuable domains, but chances of actually getting one of them are very low. It is also expected that major corporations will try to take possession of their short domains through legal actions. About all two-letter combinations are trademarked, so lots of companies will undoubtedly go after their acronyms with the help of their legal departments. The case of Volkswagen has shown to what lengths large companies will go to protect their brands on the Internet.

What surprised me and domain industry insiders, is that DENIC is going to expand the German name space on October 23, 2009 already. That is only five days away from this post and it leaves registrars with very little time to prepare for the thousands of domain registration queries they will be receiving for these sought-after domain names. For this special occasion all DENIC-accredited registrars were given a limited number of queries they may send to DENIC per minute in order to ensure equal opportunities for everybody. But smart companies are trying to play the system already. Domain marketplace Sedo, for example, has partnered with selected registrars in an effort to pool those limited domain registration queries and increase chances of successfully registering a domain. Sedo started a special online auction for the most valuable .DE domains that will be made available. Interested parties can place bids on the domains they want. The highest bidder of a domain will then get it if Sedo and its partner registrars are successful in registering it on behalf of the bidder. Bids on most two-letter .DE domains are currently in the low to mid four-figure range, but there are still more than four days to go until the auction ends and the domains will drop on the open market.

It will be most interesting to see how all this will play out, considering the high amount of money ready to be spent on these rare domain names. As said, the exact process is still not entirely clear. I hope DENIC will explain things better in the coming days, so that all interested companies and private investors will know how to best go about applying for the domain they want.

Tim Schumacher kommentiert den Domainhandel

Dominik Mueller — Sat, 19 Sep 2009 14:04:25 +0000

In einem Gastkommentar auf der deutschen Webseite von Dow Jones kommentiert der Sedo-Geschäftsführer Tim Schumacher die jüngsten Entwicklungen im Domainhandel. Schumacher zitiert darin unter anderem einige hochpreisige Domains, die Sedo kürzlich vermittelt hat. Zum Beispiel sind das Call.com für 1,1 Millionen US-Dollar oder Kredit.de, die für nahezu 1 Million Euro verkauft wurde.

Interessant ist vor allem seine Sicht auf die aktuellen Verkaufschancen von Domains, denn Sedo kann hier natürlich auf eine große Datenbank mit Domainverkäufen zurückgreifen und damit aktuelle Marktentwicklungen verlässlich analysieren. In diesem Zusammenhang schreibt Schumacher:

In den letzten Jahren hat sich der Domain-Sekundärmarkt, also der Kauf und Verkauf von Domains, sehr positiv entwickelt. Im Jahr 2007 wurden über 27.000 Domains über unsere Plattform gehandelt, 2008 waren es knapp 37.000. Für 2009 gehen wir von einem Wachstum von über 10 Prozent aus. In den letzten drei Quartalen hat sich jedoch eine deutliche Tendenz zu Niedrigpreis-Domains gezeigt.

Obwohl also in jedem neuen Jahr mehr Domains über Sedo verkauft wurden als im vorherigen, ist zu beobachten, dass in Zeiten der Wirtschaftskrise Druck auf die Preise einzelner Domains entstanden ist, so dass die durchschnittlichen Verkaufspreise deutlich gesunken sind. Als Referenz führt Tim Schumacher den durchschnittlichen Preis einer .de-Domain an, der 2008 noch bei 1.200 Euro lag, nun aber nur noch ca. 800 Euro beträgt.

Dies sollte keinen Anlass zur Panik geben, denn qualitativ hochwertige Domainnamen werden immer noch zu Top-Preisen gehandelt. Aber insgesamt dürfte die Anzahl dieser Top-Verkäufe etwas zurückgegangen und dafür Domains im Niedrigpreissegment gefragter sein. Ebenfalls ist wahrscheinlich, dass Domain-Verkäufer jetzt eher bereit sind, ihre Domains zu niedrigeren Preisen zu verkaufen, um zusätzliche Cash Flows zu erzeugen. Das aktuelle Klima sollte also vor allem Käufern von Domains gefallen, die fast überall gute Internetadressen zu günstigeren Konditionen erwerben können als noch vor der Krise.

Besonders gilt dies meiner Erfahrung nach auf dem US-amerikanischen Sekundärmarkt. Gerade als Europäer kann man dann doppelt sparen: Zum einen sind die Domainpreise real gesunken, weiterhin ergibt sich noch ein zusätzlicher Vorteil durch die Stärke des Euro.

Zwar mag dieses Kaufklima den ein oder anderen ermutigen, kräftig auf Shopping-Tour zu gehen, aber es muss auch weiterhin auf Qualität statt Quantität geachtet werden. Denn nur sogenannte Keyword-Domains haben einen langfristigen Wert für potentielle Endkunden, der auch in den folgenden Jahren noch bestehen wird. Gerade diese beschreibenden Domains sind es, die durch Type Ins reliable und für den Besitzer wertvolle Besucherströme generieren. Dies spricht Schumacher in seinem Kommentar auch an, indem er eine kurze Rechnung formuliert, die ich in ähnlicher Form bei Verkaufsgesprächen oft erfolgreich genutzt habe:

Der durchschnittliche Klickpreis (Pay-per-Click) für das Suchwort „Kredit“ bei Google, Yahoo oder MSN liegt aktuell in den oberen Rängen bei circa 4,50 Euro. Ohne die Domain müsste man [Anm.: für 5.000 Besucher] pro Monat 22.500 Euro an Werbeausgaben investieren. Diese Ausgaben kann man sich sparen, indem man die Domain kauft. Bei einem Kaufpreis von 892.500 Euro hätte sich die Domain schon nach etwa drei Jahren refinanziert. Und danach besitzt man die Domain kredit.de noch und sie generiert weiter Besucher, während beim üblichen Pay-per-Click-Modell das Geld als Werbeausgabe unwiederbringlich ‚verloren’ ist.

Traffic-Domains haben eben deshalb einen so großen Wert, weil sie regelmäßig und über sehr lange Zeiträume hinweg neue potentielle Kunden liefern. Diese Nachhaltigkeit und die zumeist hohe Qualität des Traffics stellen einen starken kompetitiven Vorteil dar, den generische Domainnamen mit sich bringen. Auch helfen Domains dabei, die Abhängigkeit von Suchmaschinen oder Online-Werbung – wie zum Beispiel PPC-Werbung – zu reduzieren und so langfristig Kosten einzusparen. Hochwertige Domains vermitteln somit nicht nur Neukunden, sie bieten auch ein erhöhtes Maß an Planungssicherheit. Weiterhin positiv zu bemerken ist, dass Domains im Zweifel wieder verkauft werden können, wodurch sich sofort große Zahlungsströme erzeugen lassen. Domainnamen haben sich in den vergangen Jahren als höchst zuverlässige, alternative Anlageform erwiesen, wobei Investoren auch von hohen Wertsteigerungsraten profitieren konnten.