Categorized | Domaining Tips

Is Cash or Dot Com King?

Posted on 28 March 2019 by Andrei

Warren Buffett (in)famously said:

Today, people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value.”

… the same Buffett, however, also stated that:

“Cash is like oxygen, you don’t notice it 99.9% of the time, but when absent it is the only thing you notice.”

While the two seem contradictory to the point of some of you wondering if Warren Buffett was off his meds in at least one of those two situations, they’re actually not. Not at all.

Investors in general and domainers in particular need to understand that there’s a time and place for everything, including a nice little asset class called cash and cash equivalents… and in my opinion, we’re currently in such an environment.

I look around me and don’t see a ton of screaming bargains, warning sign #1 if you will. A lot of assets, including many domain types, seem overvalued at this point in time. Aside from this, there’s also the broader economic perspective, with the market kind of “begging” for a recession in light of the fact that we’re in record-breaking territory when it comes to the time that has passed since the last recession. Warning sign #2.

Since there can never be certainties and nobody can predict the future, it’s ultimately on you as an investor (domainer in our case) to choose how you position yourself.

After the Great Recession, for example, I was in full-on buying mode. Domain values had collapsed and I felt like a child with money in his hands in an amusement park. Again, there’s a time and place for everything, with some of my best acquisitions ever having been made after the Great Recession, when everyone was panicking. Before my time as a domainer, the same way, you had examples of people such as Frank Schilling who were snagging expired domains left and right after the Dot Com Bubble, when others thought this Internet thing was close to dead, that it was a fad all along and laughed at the many people who lost money via tech stock speculation.

Nowadays, IMO, the opposite is true.

The best play I see right now is aggressively accumulating a position in cash and cash equivalents. This means working even harder than usual so as to make more money, for domainers it can mean being more willing than in the past few years to accept offers, it might mean liquidating some of your positions in other asset classes that you consider overvalued and so on.

Of course, this attitude is not without risk.

As they say, the market can remain irrational longer than you can remain solvent and even if you’re not burdened by let’s say debt, the market is remarkably good at testing your patient to the point of wanting to make you give up.

Also, as mentioned at the very beginning of this article, you’re guaranteed to lose purchasing power as a result of inflation but if the market ultimately agrees with you and there’s a deflationary event like a market crash, asset prices will plummet to the point of making it all more than worth your while.

So, as an answer to the question that constitutes the title of this post, I for one believe that at this point in time, cash rather than dot com is king. Of course, this doesn’t mean I’m in love with this asset class, on the contrary. I operate with the big picture in mind and am looking forward to eventually turning that cash into other assets.

But, for the time being, I for one am in cash accumulation mode.

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