Adventures in Domain Names: Follow the Typos

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One of my favorite places to wander about to get a sense of what’s hot at the fringes of the economy is domain name sales. For example, Fred Wilson argues today that startup domain prices are escalating rapidly, which is an interesting indication of what’s happening in the early-stage investing market.

Looking back a few years you can see something similar. Finance-related domains were all the rage in 2005 and 2006, from credit to mortgages and everything inbetween. One of my favorite examples came in 2006, however, when the number 25 domain sale of the year, which went for a whopping $240,000, was the “mortage.com&rdquo.; Note that it is a typo: The buyer was counting on making enough money from selling ads on a site that wasn’t even people’s real destination (maybe “mortgage.com”?) that they anted up that much money counting on oodles of typo traffic.

So, when we we see Groupno.com, Zinga,com, etc., all start changing hands for big bucks, you’ll know where you are in this cycle. Near the end.

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An editor’s comment in the latest FAJ is a dry but devastating critique of buyers and sellers of tail risk. As the piece points out, while buying tail risk insurance cut drawdowns during the crisis, it came at a high price.

Here is a table from the piece showing how various strategies for hedging equity risk performed through the crisis. Even during that period you were better to be a seller than a buyer of tail risk, with strategy 4 having the highest returns with only a limited impact on maximum drawdown.

Fairly remarkable. Then again, it shouldn’t be too surprising if you look at the investment banks doing most of the selling of the insurance, and the illiquidity of the market.

More here,

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Spotted this in a Munich Re release about recent development in cat bonds. Highlights are mine:

Major traditional investors entered the catastrophe bond market, their share rising from approximately 5% in 2009 to over 20%.

In the course of the year, the range of risks transferred to the market broadened. In the first half year, mainly US hurricane risks were securitised and as the year advanced other risks such as Windstorm Europe and Tornado were added.

The share of the catastrophe bond market held by traditional investors — read pension funds — soared just as we headed into the worst tornado season in a long time. There are going to be some serious bills coming due for some managers that can ill afford them.

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Keynes vs Hayek Round Two is like economics itself: Nice production values, but mostly economists talking past one another.

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Alright, this mostly amused me, but you have to wonder that the EIA (Energy Information Administration) doesn’t have committed to memory U.S. oil imports. Confusing billions and millions of barrels per day is non-trivial.

From a release today on the largest sources of U.S. oil, this first paragraph. Check the highlighted section. Billion? No.

More here.