miercuri, 14 octombrie 2015

Mish's Global Economic Trend Analysis

Wal-Mart Shares Plunge 10 Percent; Retail Price Wars On the Way? Capital Investment Financial Engineering
Rate Hike Odds For March 2016, Fall Below 50%; GDP Forecast Slips to 0.9%
Business Sales Fall Sizable 0.6%; Inventories Weak with Last Month Revised Lower
Autos and Restaurants Positive in Overall Weak Retail Sales Report; Last Month's Sales Revised Lower

Wal-Mart Shares Plunge 10 Percent; Retail Price Wars On the Way? Capital Investment Financial Engineering

Posted: 14 Oct 2015 10:23 PM PDT

Wal-Mart Shares plunged 10% Wednesday on profit warnings, the biggest one day decline in 25 years. The company blamed higher wages, e-commerce competition, and lower prices.

Wal-Mart Chief Executive Doug McMillon said a $1.5 billion investment in wages and training, including raising the minimum store wage to $10 an hour from $9, were needed to improve customer service and would account for three-quarters of the expected 6 percent to 12 percent drop in earnings per share next year.

Wal-Mart also announced a $20 billion share buyback but the drop in its share price wiped out close to the same amount in market value, and the 10 percent drop was the worst one-day percentage performance since January 1988.

The world's largest retailer by revenue said it would invest several billion dollars to lower prices over the next three years. That sparked worries of a price war, and shares of rivals including Target and Home Depot also fell.

The company is building out a network of warehouses to handle e-commerce, a costly move Wal-Mart sees as essential to stopping Amazon and other rivals from stealing its best customers.

At the same time Wal-Mart projected slower growth in new stores, with 85-95 of the smaller Neighborhood Markets format planned for the fiscal year ending in January 2017, down from 160-170 planned for the current fiscal year. Supercenter openings would slow to 50-60 in fiscal 2017 from 60-70 this year.

Price competition was one reason for the slower growth. Foran said that Wal-Mart could not compete with local grocers in some markets, a factor that has played into its scaled back expansion plans for smaller stores.

Capital Investment Financial Engineering

In a press release Wal-Mart announced "Capital investments will be approximately $11.0 billion for fiscal year 2017 and will remain flat in fiscal years 2018 and 2019. This is below the revised fiscal year 2016 estimate of approximately $12.4 billion, primarily due to a moderation of physical store expansion."

Wolf Richter took Wal-Mart to task for that statement in his appraisal The Chilling Thing Wal-Mart Said about Financial Engineering.

Wal-Mart will goose "capital investments" by $11 billion in Fiscal 2017, on top of the $16.4 billion it's spending on "capital investments" in fiscal 2016. This will maul earnings per share. In 2017, they're expected to drop 6% to 12%, when the analyst community had forecast an increase of 4%. But 2019 is back in the rosy scenario of earnings growth.

These capital investments aren't computers, buildings, or new shelves. They're largely "investments in wages and training," which isn't a capital investment at all, but an ordinary expense.

"Seventy-five percent of next year's investment will be related to people," CEO Doug McMillon clarified. That's why they'll hit earnings right away. A true capital investment would be an asset that is depreciated over time, with little earnings impact upfront.

Then there was the announcement of a $20-billion share buyback program.

Share buybacks, usually funded with borrowed money, have been among the most powerful forces behind the multi-year stock market rally. It has been the most successful method of financial engineering. It worked practically every time. It didn't matter that revenues and earnings were going to heck as long as the share buybacks were big enough.

If that scheme has lost its appeal, and if Wal-Mart is a harbinger of how financial engineering fails to boost share prices of revenue-and-earnings challenged companies – which includes much of the S&P 500 – then more stocks, one after the other or perhaps together, will fall off their precariously swaying perch. In this era, once financial engineering fails to prop up stock prices, all bets are off.

Retail Price Wars On the Way?

It appears so, as Wal-Mart clearly intends to go head to head with Amazon. That's good for consumers of course, but the Fed will not see it that way.

Consumers actually need price relief given rents are soaring out of sight and are seriously under-counted in the CPI.

For details on rents, please see Hooray! Huge Rent Hikes Coming; How Will It Affect Price Inflation?

Weakening Economy

Regardless of how one views inflation, this economy is getting weaker and weaker.

Following two weak economic reports on Tuesday, the first on retail sales, the second on business sales, Rate Hike Odds for March 2016, Fell Below 50% as GDP Forecast Slipped to 0.9%.

Mike "Mish" Shedlock

Rate Hike Odds For March 2016, Fall Below 50%; GDP Forecast Slips to 0.9%

Posted: 14 Oct 2015 09:24 AM PDT

3rd Quarter GDP Forecast Slips to 0.9%

Following today's retail and business sales reports, the Atlanta Fed GDPNow Forecast for third quarter GDP slipped 0.1 percentage points to 0.9%.

Evolution of Rate Hike Odds

I don't think the Fed will hike this year and neither does the market. In fact, the market now thinks the Fed will not hike in March.

The above chart created with numbers from CME FedWatch.

Hike adds for March are now down to 47.6%. In fact, going all the way out to July 2016, the Fed Fund Future sits at 99.645 implying an interest rate of 0.355%.

Related Reports

Retail Sales: Autos and Restaurants Positive in Overall Weak Retail Sales Report; Last Month's Sales Revised Lower
Business Inventories and Sales: Business Sales Fall Sizable 0.6%; Inventories Weak with Last Month Revised Lower

Mike "Mish" Shedlock

Business Sales Fall Sizable 0.6%; Inventories Weak with Last Month Revised Lower

Posted: 14 Oct 2015 08:43 AM PDT

As a follow-up to today's weak retail sales report (see Autos and Restaurants Positive in Overall Weak Retail Sales Report; Last Month's Sales Revised Lower), today's business inventory and sales report is downright anemic, also with negative revisions.

Bloomberg Econoday offers these comments on business inventories.

There's evidence of economic weakness coming from inventory data where inventories are being kept down but are still building relative to sales. Business inventories were unchanged for a second month in August while sales fell a sizable 0.6 percent, driving up the inventory-to-sales ratio to 1.37 from 1.36.

Inventory downscaling is underway in manufacturing which is being hurt by weak exports. Manufacturing inventories fell 0.3 percent in both August and July against a major sales decline of 0.7 percent in August and a 0.2 percent dip in July. There's less inventory downscaling, at least right now, among wholesalers where inventories rose 0.1 percent but sales at wholesalers are even weaker, down 1.0 percent in the month. Retail, the third component, is not immune with sales down 0.1 percent but inventories up 0.3 percent.

Inventories are looking heavy which could limit production and employment growth and could emerge as a new concern for the doves at the Fed.

It's not just the doves who will have concerns over today's reports.

By the way, note the very lagging nature of these business reports. It's October 14, and we are just now discussing business inventories and sales for August.

Mike "Mish" Shedlock

Autos and Restaurants Positive in Overall Weak Retail Sales Report; Last Month's Sales Revised Lower

Posted: 14 Oct 2015 07:44 AM PDT

Retail sales came as expected in today's release, but up only 0.1%. And last month was revised lower, from a 0.2% gain down to 0.0%. Once again autos were the strong point.

Looking on the bright side, as is typically the case, Bloomberg Econoday explains it like this.

Weakness at gasoline stations, where low prices are depressing sales totals, continues to exaggerate weakness in retail sales where the headline inched only 0.1 percent higher in September. Gasoline sales fell 3.2 percent in the month, excluding which the headline looks far more respectable at plus 0.4 percent.

And there are plenty of tangible positives in the data including a third straight solid gain for motor vehicles, at plus 1.7 percent in September, and a second straight outsized gain of 0.9 percent for restaurants. Both of these are discretionary categories and point to underlying consumer strength. Clothing stores are also posting strong gains, up 0.9 percent despite negative price effects from lower import prices.

Price weakness is not only pulling down gasoline sales but also sales at food & beverage stores which fell 0.3 percent. But there are signs of consumer retracement in the September report with the general merchandise category, which is very large, down 0.1 percent, and with health & personal care stores unchanged. Building materials fell 0.3 percent with electronics & appliance stores down 0.2 percent.

Looking at adjusted year-on-year rates helps clarify the trends. Excluding gasoline stations, retail sales are up a very respectable 4.9 percent which is well above the less impressive 2.4 percent gain for total sales. Sales at gasoline stations are down a year-on-year 19.7 percent. Leading the positive side are motor vehicles, up 8.8 percent, and restaurants, up 7.9 percent -- both robust gains. Core sales, that is ex-auto ex-gas, the year-on-year rate is a moderate plus 3.8 percent for a 1 tenth decline from August.

One of the very biggest positives for the consumer right now, aside from strength in labor demand, is the weakness in pump prices, which however in this report, where dollar totals are tracked and not sales volumes, turns into a negative. Still, the headline is weak and will likely lower third-quarter GDP estimates -- but for Fed policy, because the weakness is skewed due to gas prices, the results are harder to assess and may prove neutral.

Third quarter GDP is just at 1%. Given the downward revision last month, I would expect today's report will knock a couple ticks off the expectation.

There have been other reports since the Atlanta Fed updated its model forecast, and one is coming today. so we will see.

But even if flat, is the Fed really going to hike looking at GDP of 1.0%? I highly doubt it.

This report was nowhere near neutral.

Mike "Mish" Shedlock

Damn Cool Pics

The Hippo Roller Is The Perfect Solution For People That Need To Move Water

Posted: 14 Oct 2015 01:24 PM PDT

The Hippo Roller is an invention that's making many people's lives easier. The device can hold 24 gallons of water and it's making it possible for people who live far away from a water source to transport their liquids quickly and with little stress.

People Who Wore The Perfect Shirts While Meeting Celebrities

Posted: 14 Oct 2015 12:47 PM PDT

When it comes to celebrity meetings, they don't get much more perfect than this.

Why You Should Use Adjusted Bounce Rate and How to Set It Up - Moz Blog

Why You Should Use Adjusted Bounce Rate and How to Set It Up

Posted by RobBeirne

We need to talk about bounce rate.

Now, before I begin ranting, I'd just like to put on the record that bounce rate can, in certain cases, be a useful metric that can, when viewed in the context of other metrics, give you insights on the performance of the content on your website. I accept that. However, it is also a metric which is often misinterpreted and is, in a lot of cases, misleading.

We've gone on the record with our thoughts on bounce rate as a metric, but it's still something that crops up on a regular basis.

The problem with bounce rate

Put simply, bounce rate doesn't do what a lot of people think it does: It does not tell you whether people are reading and engaging with your content in any meaningful way.

Let's make sure we're all singing the same song on what exactly bounce rate means.

According to Google, "Bounce Rate is the percentage of single-page sessions (i.e. sessions in which the person left your site from the entrance page without interacting with the page)."

In simple terms, a bounce is recorded when someone lands on your website and then leaves the site without visiting another page or carrying out a tracked action (event) on the page.

The reality is that while bounce rate can give you a useful overview of user behaviour, there are too many unknowns that come with it as a metric to make it a bottom-line KPI for your advertising campaigns, your content marketing campaigns, or any of your marketing campaigns, for that matter.

When looked at in isolation, bounce rate gives you very little valuable information. There is a tendency to panic when bounce rate begins to climb or if it is deemed to be "too high." This highly subjective term is often used without consideration of what constitutes an average bounce rate (average bounce rate for a landing page is generally 70-90%).

There's a school of thought that a high bounce rate can be seen as a good thing, as it means that the user found no need to go looking any further for the information they needed. While there is some merit to this view, and in certain circumstances it can be the case, it seems to me to be overly simplistic and opaque.

It's also very important to bear in mind that if a user bounces, they are not included in site metrics such as average session duration.

There is, however, a simple way to turn bounce rate into a robust and useful metric. I'm a big fan of adjusted bounce rate, which gives a much better metric on how users are engaging with your website.

The solution: adjusted bounce rate

Essentially, you set up an event which is triggered after a user spends a certain amount of time on the landing page, telling Google Analytics not to count these users as bounces. A user may come to your website, find all of the information they need (a phone number, for example) and then leave the site without visiting another page. Without adjusted bounce rate, such a user would be considered a bounce, even though they had a successful experience.

One example we see frequently of when bounce rate can be a very misleading metric is when viewing the performance of your blog posts. A user could land on a blog post and read the whole thing, but if they then leave the site they'll be counted as a bounce. Again, this gives no insight whatsoever into how engaged this user was or if they had a good experience on your website.

By defining a time limit after which you can consider a user to be 'engaged,' that user would no longer count as a bounce, and you'd get a more accurate idea of whether they found what they were looking for.

When we implemented Adjusted Bounce Rate on our own website, we were able to see that a lot of our blog posts which had previously had high bounce rates, had actually been really engaging to those who read them.

For example, the bounce rate for a study we published on Facebook ad CTRs dropped by 87.32% (from 90.82% to 11.51%), while our Irish E-commerce Study dropped by 76.34% (from 82.59% to 19.54%).

When we look at Moz's own Google Analytics for Whiteboard Friday, we can see that they often see bounce rates of over 80%. While I don't know for sure (such is the uncertainty surrounding bounce rate as a metric), I'd be willing to bet that far more than 20% of visitors to the Whiteboard Friday pages are interested and engaged with what Rand has to say.

This is an excellent example of where adjusted bounce rate could be implemented to give a more accurate representation of how users are responding to your content.

The brilliant thing about digital marketing has always been the ability of marketers to make decisions based on data and to use what we learn to inform our strategy. Adjusted bounce rate gives us much more valuable data than your run-of-the-mill, classic bounce rate.

It gives us a much truer picture of on-site user behaviour.

Adjusted bounce rate is simple to implement, even if you're not familiar with code, requiring just a small one-line alteration to the Google Analytics code on your website. The below snippet of code is just the standard Google Analytics tag (be sure to add your own tracking ID in place of the "UA-XXXXXXX-1"), with one extra line added (the line beginning with "setTimeout", and marked with an "additional line" comment in the code). This extra line is all that needs to be added to your current tag to set up adjusted bounce rate.

It's a really simple job for your developer; simply replace the old snippet with the one above (that way you won't need to worry about your tracking going offline due to a code mishap).

In the code above, the time is set to 15 seconds, but this can be changed (both the '15_seconds' and the 15000) depending on when you consider the user to be "engaged". This '15_seconds' names your event, while the final part inside the parenthesis sets the time interval and must be input in milliseconds (e.g. 30 seconds would be 30000, 60 seconds would be 60000, etc.).

On our own website, we have it set to 30 seconds, which we feel is enough time for a user to decide whether or not they're in the right place and if they want to leave the site (bounce).

Switching over to adjusted bounce rate will mean you'll see fewer bouncers within Google Analytics, as well as improving the accuracy of other metrics, such as average session duration, but it won't affect the tracking in any other way.

Adjusted bounce rate isn't perfect, but its improved data and ease of implementation are a massive step in the right direction, and I firmly believe that every website should be using it. It helps answer the question we've always wanted bounce rate to answer: "Are people actually reading my content?"

I firmly believe that every website should be using adjusted bounce rate. Let me know what you think in the comments below.

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Seth's Blog : When in doubt, draw a bell curve

When in doubt, draw a bell curve

"All men are created equal." But after that, culture starts to change things.

Almost nothing is evenly distributed.

Some people seek out new technology in an area they are focused on... others fear new technology.

Some people can dunk a basketball, others will never be athletic enough to do so.

Some people are willing to put in the effort to be great at something, most people, by definition, are mediocre.

We're puzzled when we see uneven acceptance or uneven performance, because it's easy to imagine that any group of people is homogeneous. But they're not.

And the distribution of behaviors and traits is usually predictable. Most people are in the middle, but there are plenty of outliers.

Here's one for technology.

And for stories.

And for medicine.

Treat different people differently. Not because they're born this way, but because they choose to be this way.