Central Perk: 13 mai 2015

miercuri, 13 mai 2015

Mish's Global Economic Trend Analysis

Calpers Wins Pension Lawsuit, Not Good News for Chicago (or Bondholders in General)
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Dismal Retail Sales Numbers Suggest Recession Likely Underway: Overall +0.0%, YoY +0.9%, Department Stores -2.2%

Calpers Wins Pension Lawsuit, Not Good News for Chicago (or Bondholders in General)

Posted: 13 May 2015 01:34 PM PDT

Judge Rejects Bondholders' Lawsuit Over Pension Debt

In bankruptcy, the federal courts have ruled that cities can reduce pension obligations. They can, but they don't have to. In Detroit, bondholders were sacrificed to maintain police and fire pensions with minimal haircuts.

On Monday, U.S. Bankruptcy Judge Meredith Jury ruled against bondholders in favor of Calpers in the San Bernardino bankruptcy. She acknowledged that her decision is likely to be seen as unfair to the municipal bond market and might even discourage investors from buying pension obligation bonds in the future.

Please consider Calpers' Pension Hammer Forces 'Unfair' Bond Ruling by Judge.

California's public retirement fund holds so much power over local officials that pension-bond investors can't expect equal treatment when a city goes bankrupt, a judge said in a ruling that she acknowledged seems "unfair."

"What I see as unfair, and might seem unfair to the outside world, does not matter under law," Jury said, referring in part to the powerful remedies Calpers can seek if the city doesn't honor its contract.

Monday's ruling sticks with a pattern seen in the bankruptcies of Stockton, California, and Detroit, said Marilyn Cohen, president of Envision Capital Management in El Segundo, California.

Up to Cities

Federal bankruptcy courts have many times ruled that cities can cut pension obligation, but nothing forces them to.

For example, in the Stockton California bankruptcy, a federal judge ruled that Stockton could have tried to reduce its obligation to Calpers. However, Stockton chose not to do so, arguing that fighting Calpers would take too long and could endanger employee pensions.

Conflict of Interest

I believe Stockton's rationale is nonsense. Instead, I propose Stockton city officials had a conflict of interest.

City officials wanted to preserve their own pensions.

Chicago Connection

So what does this have to do with Chicago and the state of Illinois in general?

Lots, so let's tie it all together.

As a result Tuesday's Illinois Supreme Court Ruling that the 2013 Pension Reform Law Is Unconstitutional Moody's cut Chicago's bond rating two notches to junk. Moody's specifically cited Chicago's pension crisis.

I discussed this yesterday in Chicago Bond Rating Cut to Junk; City Faces $2.2 Billion in Various Termination Fees; Irresponsible to Tell the Truth.

In light of the San Bernardino ruling today, cities that have huge pension issues will see bond yields soar.

The Chicago Board of education is already paying 285 basis points more than other cities because of pensions. If bondholders keep getting hammered, those yields will rise further.

Pass a Bankruptcy Law, Give Taxpayers a Chance

A Chicago Tribune editorial by Henry J. Feinberg, says Pass a Bankruptcy Law, Give Taxpayers a Chance.

Under federal law, state governments can't file for bankruptcy. Local governments can do so if their states give them permission. A bill now before the Illinois legislature would extend that permission to Illinois municipalities, most of which now can't seek protection under bankruptcy law.

The right way is to amend House Bill 298 so people who hold Illinois bonds have a "secured first lien," the fancy words needed in the law to make sure bondholders are first in line to get their money back. Passing this amended bill would do three things that the state's local governments have not been able to accomplish for decades.

Three Reasons to Amend Bill 298

Feinberg cites three reasons to amend the pending bankruptcy bill.

First, it would bring opposing sides to the table to have meaningful discussions about how to save the borrower, in this case the local government, from financial ruin.
Second, the government could ask the bankruptcy court to modify labor contracts and order the parties to renegotiate the terms of collective bargaining agreements.
Finally, a law that puts bondholders first in line to get repaid would be a stroke of fairness that would help Illinois cities, school districts and other local governments avert a short-term solution like Detroit's. There, some people who had lent money to the city by buying its bonds lost two-thirds of their investment. Meanwhile, members of the politically powerful police and firefighter unions took no cuts to their pensions (their cost-of-living adjustment was reduced). Other workers took a 4.5 percent base cut in pensions and the elimination of an annual cost-of-living increase, The Detroit News reported.

I agree with Feinberg on all three points. Bankruptcy is the only real solution for many of these plans and many cities as well.

Beware the Tax Man

Tax hikes cannot possibly address the shortfall. As discussed on May 4, in Beware, the Tax Man Has Eyes on You, the potential hike for Illinoisans is staggering.

Nuveen estimated 50% property tax hikes would be necessary. Those hikes were just for Chicago. They did not include money to bail out other Illinois pension plans. Nor did it address the $9 billion budget deficit for the state.

Finally, Nuveen's estimate assumed pension plans would make their plan assumption of 7% returns or higher.

Stock Market Bubble Will Hit Pensions

I believe another serious decline in the stock market is likely. So do some of the biggest fund managers in the world.

Please check out Seven Year Negative Returns in Stocks and Bonds; Fraudulent Promises.

Pension promises were not made in good faith.

Rather, pension promises were the direct result of coercion by public unions on legislators, mayors, and other officials willing to accept bribes because they shared in the ill-gotten gains of backroom deals at taxpayer expense.

Illinois taxpayers cannot be held accountable for coercion of public officials by public unions.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Blog Comments Down

Posted: 13 May 2015 10:52 AM PDT

I have posted on this before, but many people missed it.

JS-Kit/Echo went under. Along with that development, the comment system on this blog no longer works.

I am looking for a replacement but have not been able to get Disqus to work. I also need to strip out all of the Echo code, but have not done so because some of it I may need to handle peculiarities of this blog.

If someone is familiar with Disqus and blogger and is free to help, I would appreciate it.
Thanks.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Dismal Retail Sales Numbers Suggest Recession Likely Underway: Overall +0.0%, YoY +0.9%, Department Stores -2.2%

Posted: 13 May 2015 09:10 AM PDT

Economists were surprised by the dismal retail sales report this morning. That's not surprising because economists are nearly always surprised.

The Bloomberg Consensus retail sales estimate was a rise of 0.2%, but sales came in at 0.0% and the details were ugly, emphasis mine.

Consumer confidence may be strong but it still is not translating to strength for consumer spending. Retail sales were unchanged in April vs Econoday expectations for a 0.2 percent gain. Excluding autos, sales did rise but only barely at plus 0.1 and below expectations for 0.5 percent, while excluding both autos and gasoline, sales rose 0.2 percent vs expectations for a 0.4 percent gain.

The surprising part of the report isn't the weakness in motor vehicles, which was signaled by weak unit sales and which fell 0.4 percent in the month, but weakness in some of the core readings including department stores which fell a very steep 2.2 percent and electronics & appliances which fell 0.4 percent for a 7th straight decline. Both furniture and food & beverages also show declines.

Year-on-year rates show just how weak growth in the retail sector has been. Total retail sales are up only 0.9 percent year-on-year, down from 1.7 percent in March. This is the lowest rate since late 2009. Excluding motor vehicles, year-on-year sales are unchanged, again the lowest reading since late 2009. Ex-auto ex-gas, sales are up a respectable 3.4 percent but, compared to 3.9 percent in March, are going in the wrong direction.

Estimated Retail Sales

The Census Department offers this Table of Retail Sales.

click on chart for sharper image

Note the huge patch of negative numbers this month. At least people are still eating out and drinking more.

Also note the negative numbers in the November 2014 through January 2015 column.

Economists expected the decline in gasoline sales (down 7.2%) to translate into increased sales elsewhere. It didn't.

I am scratching my head over Bloomberg's statement "consumer confidence may be strong ...". What the heck is Bloomberg talking about?

Does Bloomberg even read its own numbers? Here is a snip from the Bloomberg Consumer Confidence Level Report for April 2015, released on 4/28/2015.

Consumer confidence has fallen back noticeably this month, down more than 6 points to a much lower-than-expected 95.2. This compares very poorly with the Econoday consensus for 103.0 and is even far below the Econoday low estimate of 100.5. The weakness, ominously, is the result of falling assessments of the jobs market, both the current jobs market and expectations for the future jobs market. The second quarter, which is expected to be much stronger than the weather-depressed first quarter, isn't likely to get off to a fast start, at least as far as this report goes.

The most striking weakness in April is the assessment of future conditions with the expectations component down 8.5 points to 87.5 for the weakest reading going all the way back to September. And the most striking weakness among the sub-components is employment, where fewer see more jobs opening up 6 months from now and more see fewer jobs available. This spills over into income where fewer see an increase ahead and more see a decrease.

But also weak is the present situation component which is down more than 2-1/2 points to 106.8 for its weakest reading since December.

The Fed is not looking at those numbers either. In the latest FOMC report the Fed specifically stated "consumer sentiment remains high".

I mocked the Fed on April 29 in Fed Cites Weather, "Transitory" Factors in FOMC Statement; What About Consumer Sentiment?

Autos Only Reason YoY Sales Are Positive

Autos are now the only thing keeping retail sales positive year-over-year. And auto sales are driven by subprime loans. How long is this party going to last?

Who wants a car, needs a car, can afford a car, and can get a car loan?

Retail Sales Flashbacks

January 14 - Economists Still Upbeat: Retail Sales Drop Seen as "Blip"
February 13 - Economists Blame Weather: Retail Sales "Unexpectedly" Decline; December Revised Lower, GDP Estimates Follow.
April 14 - Experts Confounded: Retail Sales Rise First Time in Four Months, But Weaker Than Expected.

Household Spending Growth Expectations Plunge; Recession Already Started?

Every month the Fed does a Survey of Consumer Expectations for inflation, earnings growth, income growth, and consumer spending growth.

Yesterday, I stuck my neck out regarding consumer spending projections: Household Spending Growth Expectations Plunge; Recession Already Started?

Downloading data from the Fed, I produced this chart.

click on chart for sharper image

This is what I said yesterday...

Spending Analysis

In spite of rising earnings and income estimates, "median household spending growth expectations retreated significantly from the last month" in the Fed's words.

Should these spending projections prove to be correct, a US recession that few if any economists see coming, has already started.

The Fed's own survey shows spending sentiment is weak. The data shows how weak. Amusingly, the Fed says "consumer sentiment remains high".

And Bloomberg does not believe its own sentiment numbers either.

Following today's report, I move my position from a recession may have started to a recession is now likely underway.

I suspect economists and the Fed will still believe it's "transitory". If so, look for the term "technical recession" because no one seems to believe it. Heck, they do not even believe their own data.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Damn Cool Pics

12 Huge Mistakes You Never Noticed In Famous Movies

Posted: 13 May 2015 11:12 AM PDT

It's easy to get sucked into a movie and not notice the small details. But these big mistakes were right in front of your face the whole time and you probably didn't even notice them.

What The Comic Book Avengers Look Like Compared To Their Film Adaptations

Posted: 13 May 2015 10:51 AM PDT

Sometimes characters have a tough time making the transition from the comic books to the big screen but The Avengers look like they jumped right off the page.

Hulk – Mark Ruffalo

Thor – Chris Hemsworth

Captain America – Chris Evans

Nick Fury – Samuel L Jackson

Scarlet Witch – Elizabeth Olsen

Iron Man – Robert Downey Jr

Vision – Paul Batteny

Black Widow – Scarlett Johansson

Hawkeye – Jeremy Renner

Quicksilver – Aaron Taylor Johnson

Inverse Document Frequency and the Importance of Uniqueness - Moz Blog

Inverse Document Frequency and the Importance of Uniqueness

Posted on: Wednesday 13 May 2015 — 02:13

Posted by EricEnge

IDF content uniqueness

In my last column, I wrote about how to use term frequency analysis in evaluating your content vs. the competition's. Term frequency (TF) is only one part of the TF-IDF approach to information retrieval. The other part is inverse document frequency (IDF), which is what I plan to discuss today.

Today's post will use an explanation of how IDF works to show you the importance of creating content that has true uniqueness. There are reputation and visibility reasons for doing this, and it's great for users, but there are also SEO benefits.

If you wonder why I am focusing on TF-IDF, consider these words from a Google article from August 2014: "This is the idea of the famous TF-IDF, long used to index web pages." While the way that Google may apply these concepts is far more than the simple TF-IDF models I am discussing, we can still learn a lot from understanding the basics of how they work.

What is inverse document frequency?

In simple terms, it's a measure of the rareness of a term. Conceptually, we start by measuring document frequency. It's easiest to illustrate with an example, as follows:

IDF table

In this example, we see that the word "a" appears in every document in the document set. What this tells us is that it provides no value in telling the documents apart. It's in everything.

Now look at the word "mobilegeddon." It appears in 1,000 of the documents, or one thousandth of one percent of them. Clearly, this phrase provides a great deal more differentiation for the documents that contain them.

Document frequency measures commonness, and we prefer to measure rareness. The classic way that this is done is with a formula that looks like this:

idf equation

For each term we are looking at, we take the total number of documents in the document set and divide it by the number of documents containing our term. This gives us more of a measure of rareness. However, we don't want the resulting calculation to say that the word "mobilegeddon" is 1,000 times more important in distinguishing a document than the word "boat," as that is too big of a scaling factor.

This is the reason we take the Log Base 10 of the result, to dampen that calculation. For those of you who are not mathematicians, you can loosely think of the Log Base 10 of a number as being a count of the number of zeros - i.e., the Log Base 10 of 1,000,000 is 6, and the log base 10 of 1,000 is 3. So instead of saying that the word "mobilegeddon" is 1,000 times more important, this type of calculation suggests it's three times more important, which is more in line with what makes sense from a search engine perspective.

With this in mind, here are the IDF values for the terms we looked at before:

idf table logarithm values

Now you can see that we are providing the highest score to the term that is the rarest.

What does the concept of IDF teach us?

Think about IDF as a measure of uniqueness. It helps search engines identify what it is that makes a given document special. This needs to be much more sophisticated than how often you use a given search term (e.g. keyword density).

Think of it this way: If you are one of 6.78 million web sites that comes up for the search query "super bowl 2015," you are dealing with a crowded playing field. Your chances of ranking for this term based on the quality of your content are pretty much zero.

massive number of results for broad keyword

Overall link authority and other signals will be the only way you can rank for a term that competitive. If you are a new site on the landscape, well, perhaps you should chase something else.

That leaves us with the question of what you should target. How about something unique? Even the addition of a simple word like "predictions"—changing our phrase to "super bowl 2015 predictions"—reduces this playing field to 17,800 results.

Clearly, this is dramatically less competitive already. Slicing into this further, the phrase "super bowl 2015 predictions and odds" returns only 26 pages in Google. See where this is going?

What IDF teaches us is the importance of uniqueness in the content we create. Yes, it will not pay nearly as much money to you as it would if you rank for the big head term, but if your business is a new entrant into a very crowded space, you are not going to rank for the big head term anyway

If you can pick out a smaller number of terms with much less competition and create content around those needs, you can start to rank for these terms and get money flowing into your business. This is because you are making your content more unique by using rarer combinations of terms (leveraging what IDF teaches us).

Summary

People who do keyword analysis are often wired to pursue the major head terms directly, simply based on the available keyword search volume. The result from this approach can, in fact, be pretty dismal.

Understanding how inverse document frequency works helps us understand the importance of standing out. Creating content that brings unique angles to the table is often a very potent way to get your SEO strategy kick-started.

Of course, the reasons for creating content that is highly differentiated and unique go far beyond SEO. This is good for your users, and it's good for your reputation, visibility, AND also your SEO.

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Seth's Blog : Imperfect substitutes

Imperfect substitutes

One of the driving factors in setting prices is understanding the issue of substitutes. If there are four kinds of bottled water and one is half the price of the others, guess which will generate all the sales? They are quite close to perfect substitutes, so take the cheap one.

Even though all the movies at the multiplex cost $12 a seat, you can't often substitute one for another to save money. You don't go to Mall Cop merely because it's $2 less. Movies aren't commodities, and the substitutes aren't perfect at all.

Last year, I asked a photographer to license a photo for a project. The photographer asked for too much—he had every right to, it was his photo after all, and if I wanted that photo, I had to pay him. But the thing is, I didn't need 'that' photo, I just needed 'a' photo. The available substitute was imperfect but acceptable.

The reason that ebook prices are less important than in many other industries is that the substitutes for Makers or In Search of Excellence are quite imperfect--if you want to know what that book said, the only way to really know is to read it.

Your job then, isn't to merely set your price low enough to keep people from seeking substitutes. It's to create a product or service unique or connected or noteworthy enough that the other choices are ever more imperfect.