luni, 29 noiembrie 2010

Seth's Blog : The one who isn't easily replaced

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The one who isn't easily replaced

The law of the internet is simple: either you do something I can't do myself (or get from someone else), or I pay you less than you'd like.

Why else would it be any other way?

Twenty years ago, self-publishing a record was difficult and expensive. A big label could get you shelf space at Tower easily, you couldn't. A big label could pay for a recording session with available capital, but it was difficult for you to find the money or take the risk. A big label could reach the dozens of music reviewers, and do it with credibility. Hard for you to do that yourself.

Now?

Now when someone comes to a successful musician and says, "we'll take 90% and you do all the work," they're opening the door to an uncomfortable conversation. The label has no assets, just desire. That's great, but that's exactly what the musician has, and giving up so much pie (and control over his destiny) hardly seems like a fair trade.

Multiply this by a thousand industries and a billion freelancers and you come to one inescapable confusion: be better, be different or be cheaper. And the last is no fun.

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duminică, 28 noiembrie 2010

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Much Maligned Bondholders Do God's Work; ECB Creates Incentive to Gamble

Posted: 28 Nov 2010 10:49 PM PST

Thanks in part to European Central Bank President Jean-Claude Trichet, German Chancellor Angela Merkel's proposal to make bondholders suffer losses from poor investment decisions was shoved aside.

Said ECB president Trichet in an exclusive interview...
"This is a victory for much maligned bondholders everywhere. I am pleased to announce we have effectively removed the word investing from the vocabulary of bondholders."

"Starting today, bondholders need not be concerned with who they lend money to, why, or what risks there are in doing so."

"Not only will this help ease turmoil in the markets, but bondholders can now think in terms of winning rather than the more mundane investing because the ECB and IMF will backstop all losses from trading bonds."
The above is a translation from today's issue of Le Monde. An official transcript will appear on the ECB's website later today.

In the meantime, Bloomberg has a few sketchy details of the announcement in an article appropriately titled Germany Drops Bond Threat
European governments sought to quell the market turmoil menacing the euro, handing debt-strapped Ireland an 85 billion-euro ($113 billion) aid package and diluting proposals to force bondholders to cover a share of future bailouts.

European finance chiefs ended crisis talks in Brussels yesterday by endorsing a Franco-German compromise on post-2013 rescues that means investors won't automatically take losses to share the cost with taxpayers as German Chancellor Angela Merkel initially proposed to the consternation of bond traders.

The first test of the twin decisions come today with markets resuming trading after speculation intensified last week that Portugal and perhaps even Spain will require external support. In a third move, Greece was told it could have an extra four-and-a-half years to repay emergency loans totaling 110 billion euros to match the seven-year term under Ireland's deal.

The German push ran into criticism from policy makers elsewhere, who called it mistimed, and from European Central Bank President Jean-Claude Trichet, who warned it would unsettle bondholders. Germany yesterday backed away from the pitch for an automatic penalty, agreeing to give the International Monetary Fund a role in determining losses on a case-by-case basis.
Bondholders Do God's Work

In a followup interview Trichet commented, "The debt crisis is over. We are willing to grant Greece and Ireland as much time as they need. If an extra-four-and-a-half years to repay emergency loans proves insufficient, we are willing to wait an extra-hundred-and-a-half years".

When asked if he meant 150 years or 100.5 years, Trichet replied, "I mean as long as it takes to make the ECB whole, forever if necessary. The important thing is for bondholders to never suffer losses. Heaven forbid we should ever unsettle bondholders by insinuating they may have to take some losses. Bondholders in general, not just Goldman Sachs bondholders, do God's work."

Incentive to Gamble

Please consider ECB's Noyer assures cagey markets over Ireland rescue
Noyer, the first member of the ECB's policy council to speak after euro zone ministers sealed an 85 billion euro ($115 billion) loan package for Ireland on Sunday, said he was confident the deal would bring down Dublin's borrowing costs to more normal levels.

"There is no reason to doubt the recovery plans of the two countries," Noyer said in a speech in Tokyo, referring to Ireland and Greece.

The new European Stability Mechanism outlined on Sunday would make private investors share the pain in the case of a debt default or restructuring, but it would apply only to debt issued after 2013.

Noyer, who is also governor of the Bank of France, said that he believed even then it should remain only a theoretical possibility.

"As far as I'm concerned, I exclude that there will be haircuts in the future."
Lovely. Just lovey. If there is no possibility of haircuts, why shouldn't banks invest in the riskiest garbage there is?

In fact, fools like Trichet and Noyer are effectively saying there is no such thing as risky garbage, only misguided perceptions of risky garbage.

The thing is they are lying, hoping to calm the markets. If their lies work at all, they won't work for long.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List


Why Pay the Mortgage or Rent when you can have 16 Months of Free Shelter? How to Deal with this Important Question

Posted: 28 Nov 2010 05:08 PM PST

Those deeply underwater on their homes have a nice option that renters and those with equity in their homes don't. That option is to stop making home payments, effectively living in their home or condo scotfree, for as long as they can.

Millions have take the option, and with each person doing so, the longer the delays. Thus, the more who take that option, the greater the reward for all who do.

The Wall Street Journal reports that it takes 492 Days From Default to Foreclosure, up from 244 days in August 2007.
The average borrower in the foreclosure process hadn't made a payment in 492 days as of the end of October, according to LPS [LPS Applied Analytics]. That compares to 382 days a year ago and a low of 244 days in August 2007.

In other words, people who default on their mortgages can reasonably expect, on average, to stay in their homes rent-free more than 16 months. In some states such as New York and Florida, the number is closer to 20 months.

Speeding up the process won't be easy, as demonstrated by the banks' continuing legal troubles related to robo-signers, bank employees who signed foreclosure affidavits without properly checking the required loan documentation.

Millions of Americans still are paying their mortgages even though they owe more than their homes are worth. The more banks' backlog grows, the more likely they are to join it, adding to the already giant pile of foreclosures weighing on the housing market.
Imperative to Speed Up Foreclosures

Clearly it is imperative to speed up the foreclosure process. To not do so is inequitable and creates moral hazards.

However, some who do not like the current system pretend to be worried about the .0004% or whatever preposterously low number of homeowners who might be kicked out of their homes allegedly in error.

Making matters even worse, a large and growing number of misguided souls think it is "unjustifiable" to boot homeowners unless and until someone can "produce the note".

Such thinking encourages still more defaults, weighs down the courts, and does nothing to produce an equitable solution, for anyone.

Simple Undeniable Facts

The simple, undeniable fact of the situation is that anyone who has not paid their mortgage for over 90 days deserves to lose their home, except in very limited conditions I describe below.


The acid test for me is the simple question "Have the mortgage payments been made, and if not, then why not?" If the answer is no, then the home owner should be given a chance to become current or lose the house.

The "limited exception" is as follows: If a homeowner can provide reasonable evidence he is late due to fault of the lender or processor, then we need to work out a suitable remedy. One equitable approach would be to remove all penalties and late fees and fine the hell out of the processor or lender, especially if there are repeated errors, perhaps giving some of those fines or fees to the homeowner.

That's it. You either paid your mortgage or didn't, either through your fault or the fault of the lender (e.g. They misapplied your mortgage payment, jacked up late fees while doing so, and did not address your concerns when you brought them up).

Anyone care to address the percentage of loans that meet that criteria?

Otherwise, booting out the homeowners for nonpayment is an equitable solution. If the lender wants to work out other solutions, that is fine by me as long as there is no requirement lenders have to make such attempts.

If a lender thinks it is in their best interest to foreclose (providing the borrower has not made payments), then foreclosure it should be.

Addressing Fraud

A second situation arises because booting out homeowners does not address robo-signings and other errors by lenders and processors, of which some are mistakes, others clearly fraudulent.

Equity in those situations can (and should) be dealt with via severe fines, suspensions, and firing those involved, all the way to the top of the pyramid.

The key point is there are two separate and distinct issues that do not have to be solved simultaneously, regardless of how many misguided souls try to portray two issues as one.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List


Unthinking Economic Parrots and Deflation Fighting Madness

Posted: 28 Nov 2010 02:52 PM PST

The ineptitude of Japan's policies hoping to combat deflation is staggering. Worse yet, unthinking economic parrots talking about the "economic damages of deflation" have no idea what they are even saying.

Please consider Japan passes new $61bn stimulus package
Japan's parliament has passed a stimulus package worth about $61bn (£39bn), designed to kick-start the country's fragile economic recovery. The stimulus was designed to create jobs, Prime Minister Nato Kan said, through measures to help small businesses and boost consumer spending.

Earlier, figures showed that Japanese consumer prices fell for the 20th month in a row in October.

The vote in favour of the latest stimulus measures represents a victory for the government, which has struggled to get the package through parliament. The move is in marked contrast to European governments' policies, which are focusing on cutting spending to secure growth.

Japan has been struggling with weak growth, a high yen and deflation.

The core consumer price index fell by 0.6% in October compared with a year earlier, official figures showed. This was a slight improvement on the 1.1% price falls seen in September.

Deflation is particularly damaging to economic growth as consumers delay purchases until prices fall further.
Idiotic Premise

I stopped quoting the article on the frequently repeated premise "Deflation is particularly damaging to economic growth as consumers delay purchases until prices fall further."

I wish economic writers had the ability to think rather than parrot ideas espoused by Keynesian clowns.

Series of Questions

  • If your refrigerator conks out, will you buy a new one or wait 6 months to take advantage of lower prices?
  • If the transmission on your car fails will you wait 6 months to get it fixed?
  • If your pantry is bare, will you wait 1 month to buy food even if you expect food prices to drop?
  • If you need a new winter coat, will you wait and if so, how long?

The answer to that last question is "Perhaps for a bit, but you will not wait 3 years even if you expect prices will be even lower 3 years from now."

Short of assets like stocks, bonds, and housing (and except for periods of hyperinflation) it is tough to cite any examples where inflation expectations mean a damn thing.

Unthinking Economic Parrots

Yet week in and week out, articles like the above parrot misguided ideas about inflation expectations. Worse yet, they spew forth nonsense that falling ideas are a bad thing.

Ask anyone on fixed income if falling prices are a bad thing. Ask students or those on minimum wage if falling prices are a bad thing.

Think you will have many takers? From either group?

The only people who say falling prices are unwelcome are the bankers, the stock brokers, government and economic parrots who misguidedly trumpet economic claptrap from the bankers, the stock brokers, government, all of whom benefit from inflation because of rising taxes and/or because they have first access to money.

In effect, parrots serve as pawns for the wealthy, for central bankers, and for government officials who wants a bigger piece of your paycheck via rising sales taxes, rising property taxes, and rising income taxes.

In reality, inflation is theft from the middle and lower classes for the benefit of government, the wealthy, and also public union workers who have inflation adjusted benefits written into many of their contracts.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List


To Ireland With Love

Posted: 27 Nov 2010 11:39 PM PST



IMF's Trojan Horse Gift to Ireland

I believe we have all heard the story and know how it ends.

Iceland is No Ireland

Inquiring Irish minds just might be interested to see how Iceland fared after they told EU bankers to go to hell. For the answer, please consider Iceland Is No Ireland as State Kept Free of Bank Debt
Iceland's President Olafur R. Grimsson said his country is better off than Ireland thanks to the government's decision to allow the banks to fail two years ago and because the krona could be devalued.

"The difference is that in Iceland we allowed the banks to fail," Grimsson said in an interview with Bloomberg Television's Mark Barton today. "These were private banks and we didn't pump money into them in order to keep them going; the state did not shoulder the responsibility of the failed private banks."

"How far can we ask ordinary people -- farmers and fishermen and teachers and doctors and nurses -- to shoulder the responsibility of failed private banks," said Grimsson. "That question, which has been at the core of the Icesave issue, will now be the burning issue in many European countries."
Vote the Bums Out and Tell the EU and IMF to Go to Hell

Unfortunately, the idiots running Ireland's government, especially Minister Brian Cowen, don't see it the way Iceland's president does.

However, Iceland's government did not see it that way either, but the citizens of Iceland took matters into their own hands and voted the bums out, rejecting "Icesave".

Regardless of what deal Cowen signs, I see no reason it need be binding on the next Irish Parliament. Indeed, I recommend to to citizens of Ireland that they firmly tell their representatives that if they vote for Cowen's proposed budget, they will be voted out of office.

That may be all it will take to stop this nonsense right here right now. Should I be wrong, the remedy is simple: Vote the bums out and vote in a Prime Minister and Parliament who will tell the IMF and EU to go to hell.

Just Who The Hell Do You Think You Are?

Nigel Farage in a speech before European Parliament says "The Euro Game Is Up… Just Who The Hell Do You Think You Are?"



Words alone cannot describe that video. Please play it.

ANY Rate is Onerous

In case you missed it, please consider In Rare Agreement with Krugman; Onerous "Bailout" Rates of 6.7% Denied; Don't do Stupid Things; "Tell the EU and IMF to Shove It!"
All these questions "Is the rate 4.7%, 5.2%, or 6.7% and if so for who long and on what portion?" are complete silliness.

ANY Rate is Onerous.

Except for those who participated in the property bubble (and they will be adequately punished), the people of Ireland are not at fault, at least in general.

Should Irish Prime Minister Brian Cowen manage to hang on long enough to get the votes for an onerous bailout, I would encourage Irish voter to elect someone who campaigns on a promise to renege on the deal and default.

Irish citizens cannot afford to rescue German, UK, and French banks stupid enough to bet on bubbles in Ireland. It should be the creditors' problem not the problem of Irish citizens.
There is much more in the article so please give it a look if you haven't done so already.

Structural Reforms Needed

Bear in mind Ireland does need structural reforms. Those reforms must include some sacrifices such as lower minimum wages and reduced public sector employment.

However, it would be foolish for Ireland to raise corporate income taxes or pay one penny to bail out UK, German, French, or US banks.

Iceland told its creditors to go to hell and is better off for it. Ireland can do the same.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List


Seth's Blog : Unwarranted fear of claim chowder

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Unwarranted fear of claim chowder

John taught me this fabulous term. Claim chowder is what happens when you make a prediction about the future and you end up being totally and tragically wrong. Like Steve Ballmer on the iPhone, "There's no chance that the iPhone is going to get any significant market share. No chance."

While I wouldn't encourage anyone to go as far as Ballmer in this endeavor, it turns out that no one ever got a terminal illness from claim chowder. While it might be frightening to imagine, it's not so bad in practice. Try it.

Have an opinion. Defend it. It will make you smarter.

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sâmbătă, 27 noiembrie 2010

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


"Seems Like Old Times" as Black Friday Shoppers Storm Malls, But Do They Buy Anything? In Black Friday Bust, Sales Increase .3%

Posted: 27 Nov 2010 03:58 PM PST

It's too early for actual store numbers, but the hoopla surrounding Black Friday has been enormous. Check out these headlines:

Shoppers Storm Malls

Shoppers Storm U.S. Malls as Black Friday Indicates Sales Jump
Shoppers snapped up 500 gift cards in 15 minutes yesterday at the Mall at Robinson, a shopping center about 10 miles outside Pittsburgh.

Last year, it took two hours to hand them out, said Shema Krinsky, the mall's marketing director, who added that the parking lot was 90 percent full by 8:30 a.m.

"We expect this to be what the rest of the holiday has in store," Krinsky said in a telephone interview.

Across the U.S., stores reported heavier traffic than last year as Black Friday, the biggest shopping day of the year, got off to its earliest start yet. Foot traffic at the Mall at Robinson increased the most in five years, Krinsky said. At Macy's Inc.'s flagship store in New York's Herald Square, many people were shopping for themselves for the first time in two years, Chief Executive Officer Terry Lundgren said.

After denying themselves in the wake of the recession, many American consumers seem ready to spend this holiday season, says Neil Stern, senior partner at Chicago-based consultancy McMillan Doolittle.

"There's no question that there is pent-up consumer demand that will drive retail growth this season," he said in an interview yesterday. "America is still a consumer-driven society, we just haven't had the means to indulge."
"Seems Like Old Times"

Yahoo!Finance says What recession? Shoppers eat up Black Friday deals
For one day at least, you could almost imagine the recession never happened. Millions of the nation's shoppers braved rain and cold to crowd stores while others grabbed online bargains on what could be the busiest Black Friday ever.

Early signs pointed to bigger crowds at many stores including Best Buy, Sears, Macy's and Toys R Us, some of which had earlier openings than past years or even round-the-clock hours. Minnesota's Mall of America and mall operators Taubman Centers Inc. and Macerich Co. also reported more customers than last year.

But the most encouraging sign for retailing and for the economy was what Americans were throwing in their carts. Shoppers still clutched lists and the buying frenzy was focused on the deals on TVs and toys, but many were treating themselves while they bought gifts for others, adding items like boots, sumptuous sweaters, jewelry and even dresses for special occasions.
Online Too!

MarketWatch says Black Friday shoppers spill over online as Bargain-hunters rely more on mobile devices and social networking
As malls and department stores overflowed with Black Friday shoppers, online retailers also saw a boost in sales as more Web-oriented bargain hunters avoided the crowds.

Online sales for possibly the biggest shopping day of the year jumped nearly 16% from a year ago with average order values up 12% to $190.80 from $170.19, according to a Saturday report from Coremetrics, an IBM unit that tracks online traffic.

Having the biggest impact were affluent shoppers, rebounding from last year's recession environment. Jewelers alone reported a 17.6% increase in Friday online sales.

"While the percentage of visitors arriving from social network sites is fairly small relative to all online visitors — nearly 1% — it is gaining momentum, with Facebook dominating the space," the research firm said.

Use of mobile devices on Black Friday as a shopping tool surged 26.7% compared to a year-ago, albeit off of low levels, Coremetrics said. Nearly 6% of people logging onto a retailers' Web sites did so with the use of a mobile device.
Black Friday Bust?

Stores overflowing, online sales up 16%, people loading carts, and with all the images of people camping out overnight floating about all over the internet, one might have thought sales would 5%, 6%, or even 8%.

I suspect we will not really know until next week but this Wall Street Headline sure caught my eye:

Black Friday Sales Rise .3 Percent

Please consider Black Friday Sales Rise, But Only Slightly
Black Friday sales rose only slightly from a year ago even though more shoppers visited stores, retail traffic monitor ShopperTrak said Saturday, setting the stage for another uncertain holiday season for retailers.

Sales increased 0.3% to $10.7 billion, according to ShopperTrak, which installs monitoring devices in stores to gauge traffic. Traffic rose by 2.2%, ShopperTrak said.

The smaller than expected increase is due in part to discounts offered earlier in November as well as online-only promotions, ShopperTrak founder Bill Martin said.

"The reality is we have a deal-driven consumer in 2010," Mr. Martin said in a release. "The American shopper has adapted to the economic climate over the last couple of years and is possibly spending more wisely as the holiday season begins."

Although much has been made about the role of cell phones in the new retail landscape, the share of people who use those devices to shop remains small. Only 5.6% of people logged onto a retailer's website using a mobile device, according to Coremetrics.

According to ShopperTrak, the Northeast and the Midwest regions of the country showed the strongest gains in sales, with 1.7% and 0.4% increases, respectively, over last year. The West posted no increase, while the South saw sales fall 0.3%.
Black Friday Bust May Be Caused By Earlier Discounts

24/7 Wall Street suggests Black Friday Bust May Be Caused By Earlier Discounts

Huge discounts offered to consumers in early November may have hurt Black Friday sales, and the trouble may not be over. Research from ShopperTrak shows that Black Friday retail sales at the store level rose so little over 2009 that the increase is barely perceptible.



Sales per purchase appear to have dropped because total "U.S. foot traffic increased 2.2 percent on Black Friday which points to a shopper driven by various sales and promotions." The increases in store visits is larger than overall sales growth.
The reality is we have a deal driven consumer in 2010 and that consumer responded to some of the earliest deep discounts we've even seen for the holidays."
Once again I caution we need actual sales numbers, but for all the hoopla, even +2% would be a disappointment. Right now, it appears sales were flat.

Should that prove to be the case, it's a good thing. Consumers need to improve their balance sheets.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List


S&P Rating vs. CDS Implied Rating of European Sovereign Credit; Huge Flaws in the Bond Rating Methodology

Posted: 27 Nov 2010 09:03 AM PST

An interesting article by Index Universe shows how Ratings Differences Highlight Eurozone Risk.

The article compares risk as measured by a Standard and Poor's rating vs. a CDS rating that is calculated based on credit market derivatives. A table highlights the differences.
Where the CDS-implied rating is better than that given by S&P, the difference is a positive number. When the CDS-implied rating is worse, a negative number is the outcome.
Some of the differences are enormous.

For those interested in various Bond ETFs, there's much more information in the three page article. Here is the table from page two.

Ratings Key
CDS-implied
rating
S&P Domestic
rating
Difference
AAA 1 Denmark AAA AAA 0
AA+ 2 Finland AAA AAA 0
AA 3 Germany AAA AAA 0
AA- 4 Norway AAA AAA 0
A+ 5 Sweden AAA AAA 0
A 6 Switzerland AAA AAA 0
A- 7 Austria AA+ A -1
BBB+ 8 Czech Rep. AA+ A+ 3
BBB 9 Slovakia AA+ A+ 3
BBB - 10 Slovenia AA+ AA 1
BB+ 11 Netherlands AA+ AAA -1
BB 12 Estonia AA+ A 4
BB- 13 UK AA+ AAA -1
B+ 14 Poland AA A 3
B 15 Turkey AA BB+ 8
B- 16 France AA AAA -2
CCC+ 17 Russia AA- BBB+ 4
CCC 18 Belgium BBB AA+ -7
CCC- 19 Bulgaria BB+ BBB -2


Croatia BB+ BBB -2


Italy BB+ A+ -6


Lithuania BB+ BBB -2


Iceland BB BBB -3


Romania BB BB+ -1


Latvia BB BB 0


Hungary BB- BBB- -3


Spain BB- AA -10


Ukraine B+ BB- -1


Portugal B A- -8


Ireland B- A -10


Greece CCC- BB+ -8

Huge Flaws in the Bond Rating Methodology

In Steer Clear Of Bond Ratings Paul Amery for Index Universe writes ...
Ratings agencies are too slow to react to deteriorating creditworthiness, and when they do react, cuts tend to come in one fell swoop. In Greece's case, the ratings cut to junk by Moody's in June was one of four "notches" in one go, for example (from A3 to Ba1).

With Ireland's rating brought down yesterday by Standard and Poor's from AA- to A (two notches on the scale), the issuer is now only four grades above junk status (Moody's, by the way, still has Ireland at Aa2, three levels above the equivalent S&P rating). Since pressure on government finances is increasing everywhere, you can expect several other issuers to face downgrades, risking the sudden removal of more bonds from ratings-based benchmarks.

Finally, and perhaps worst, ratings methodologies are not consistent across the markets. It's easy to find lower-rated issuers with bonds offering a higher yield (and higher risk, theoretically) than higher-rated ones, something that doesn't make sense.

The worst abuse of the ratings system, of course, was the widespread grade inflation in structured finance securities during the credit bubble, with the AAA label incorrectly attached to bonds that both risked and then produced a severe loss of capital.

Even though the structured finance market is now comatose, contradictions abound in the way simpler (bullet) bonds are rated. For example, Russia (rated Ba2 by Moody's) is paying a yield of around 4.75% on its ten-year dollar debt, while Aa2-rated Ireland (that's nine credit ratings better than Russia, according to Moody's) has a current yield of 9.15% on its ten year euro-denominated bonds. Something's badly wrong here. You need to adjust (slightly) from a dollar yield curve to one in euro when making this comparison, but a glaring inconsistency remains.
I have pointed out many times before that Moody's, Fitch, and the S&P are horrendously slow in modifying debt ratings.

Moreover, enormous discrepancies between Russia and Ireland bond yields shows political bias by the ratings agencies.

Inconsistencies between the "Big Three" make matters even worse.

Break Up the Credit Rating Cartel

The current rating process is fatally flawed and the only way to fix this mess is something I bring up at every opportunity: It's Time To Break Up The Credit Rating Cartel
The rating agencies were originally research firms. They were paid by those looking to buy bonds or make loans to a company. If a rating company did poorly it lost business. If it did poorly too often it went out of business.

Low and behold the SEC came along in 1975 and ruined a perfectly viable business construct by mandating that debt be rated by a Nationally Recognized Statistical Rating Organization (NRSRO). It originally named seven such rating companies but the number fluctuated between 5 and 7 over the years.

Establishment of the NRSRO did three things (all bad):

1) It made it extremely difficult to become "nationally recognized" as a rating agency yet all debt had to be rated by someone who was already nationally recognized.
2) In effect it created a nice monopoly for those in the designated group.
3) It turned upside down the model of who had to pay. Previously debt buyers would go to the ratings companies to know what they were buying. The new model was issuers of debt had to pay to get it rated or they couldn't sell it. Of course this led to shopping around to see who would give the debt the highest rating.

Government sponsorship of organizations and intervention into free markets always creates these kinds of problems. The cure is not an executive shuffle, third party verification or half-measures and more regulation that mask over the issues by splitting functions within an organization.

The SEC created this problem by creating the NRSRO. The problem is easily fixable. It's time to break up the cartel by eliminating the rules that created it. Moody's, Fitch, and the S&P should have to sink or swim by the accuracy of their ratings just like everyone else. Ratings would be a lot better if corporations had to live or die by them. Free market competition, not additional regulation is the cure.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List


SEOmoz Daily SEO Blog

SEOmoz Daily SEO Blog


How Google's New Local SERP Affected Your Ranking

Posted: 27 Nov 2010 12:20 AM PST

Posted by number1george

As you probably noticed, last week Google did a pretty big makeover of its local search results page, incorporating the local results directly within the organic results. In some cases it appeared that the old “7-Pack” was just given larger real estate on the SERP. In others, it just looked like the websites were just given links to their Places page. And sometimes, it just looked like an entirely new SERP, different than both the original organic rankings and the lettered, local results. But what was the real effect this change had on local search results?

How I Got My Data

Visually, the new local search results page includes information from the both website and the business's Places page. The title and description are taken from the website but select information from the Places page is also included as well as a direct link to the Places page in Maps. Here we see an example of a search for "tanning salon seattle wa" and how the combined results are displayed.

An example of a new local SERP in Google

To find out the effects of combining the results, I grabbed the rankings of 50 somewhat random websites we’ve been tracking. As an initial criteria, I tried to use sites we’d been tracking for at least 2 months. I also eliminated sites with substantial fluctuations in their rankings within the prior few weeks since there would be no way to attribute those changes to any particular factor. Lastly, though I originally intended to use a completely random sampling, I eventually skipped over several sites that had no change since several of these were in non-competitive areas where they pretty much dominated all other websites for their searches.

After I had my sample, I did some quick research, comparing the organic rankings of several websites prior to the change to their rankings after the change. I then performed the same search in Google Maps in order to determine how their Places pages were ranking individually.

Example of Google Maps SERP

With a few exceptions, the top 7 ranked results in Maps are what were displayed in the old 7-pack for the same search. These listings were ranked independently of the organic results beneath them. By comparing their former organic ranking to their current organic ranking, I was able to see if a change could be correlated to their Places page's ranking in Maps.

So, Was There Any Change?

Of the 50 websites examined, 30 of them had an improvement in the new, “combined” results while 6 of them dropped. In most cases, this shift in their ranking could definitely be attributed to the performance of their local listings.

The Good

First, let’s look at the ones that improved. I did eliminate 4 outliers but, for the most part, you can see a direct correlation between the sites’ improved ranking and their local ranking in Maps. Obviously, I can’t publish any actual websites or keyword searches, but the searches all used a typical local query consisting of “business/service city st”.

Local searches with a positive change

Generally, it can be said that sites performing well in both organic and local perform even better in the new consolidated SERP. In several cases you can directly see how a well-performing Google Places listing now pulls up your organic ranking.

In some instances, the combined performance of a business with both a decently ranking website and Places page was enough to push it up a rank or two in the new results. In others, it appears that a well-optimized Places page was able to significantly improve a decently performing website and increase its ranking by several spots. Basically, your local listing’s performance appears to be a significant ranking factor in the new organic results.

The Bad

Since a business’s local listing has the ability to positively affect its website’s performance organic results, let’s look at the ones that dropped in ranking to determine if there is a negative factor associated with the new SERP.

Example of searches with a negative change

First, the fact that the sample size I was able to obtain was so small already implies that a poorly performing business listing doesn’t seem to have much of an effect on a website’s performance. Looking at the original rankings, you can also see that 3 of these sites weren’t doing that great to begin with. In fact, it would probably be fair to assume that their drop was due to an already negative trend. But what about the websites that were doing well but dropped after the update?

Digging deeper into these, I soon discovered that this wasn’t really a direct result of the poorly performing business listings dragging the websites down, but rather that, due to the local results being buried so deep in Maps, Google didn’t associate a business’s Places page with their website. As a result, other websites that did have strong Places pages were ranking higher. So, while having a poorly ranked local listing didn’t penalize the website, it was a whole category of optimization that the website was lacking. Almost like having a great inbound linking strategy but no content structure.

Other Observations

While going through dozens of various local searches, there were a few things that stood out:

  • Directory listings appear to be showing up more frequently in local results, in some cases taking up the top 3 spots in results.
  • The 7-Pack, or rather one-line business listings similar to the old 7-Pack, aren’t gone entirely. Lettered results still tend to show up when Google isn’t entirely sure you’re trying to do a local search. Typically, this happens in searches for smaller cities or regions.
  • When using rank-checking tools, the one-lined, lettered listings won’t be counted - just like before. The larger results being discussed here, however, are treated just as normal organic results prior to the change, completely disregarding the letter and local information assigned to it.
  • Lastly, while I encountered plenty of websites on the first page without a Places page, I encountered very few Places page ranking on the first page without a website. Prior to the change, it was not uncommon to regularly see local listings with no associated website ranking in the 7-pack. Now it appears that, without a website, it is nearly impossible to be in the first page of Google’s general SERP for most searches.

What Does This Mean?

So what can we learn from all this? Basically, it’s just what Google said all along - everything is important. Your best bet is to have both a terrifically optimized website and an optimized, claimed Places page to associate with it.

Not only does Google seem to use a Places page as an organic ranking factor, but having one also gives you nearly twice the real estate devoted to your business in the results. Instead of just having a few words in your title tag and meta description to sell your business, you now have your address, phone number, reviews, lists of other websites that mention you, and even a picture to draw attention to your website.

Bottom line: all those old debates about whether it was better to have the top-ranking website in organic or have your business at the top of the 7-pack are over. Even if this isn’t the final layout, it’s clear that Google intends to make both count.


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Seth's Blog : Your noise is still noise

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Your noise is still noise

I was talking to a colleague about all the noise out there in the world, all the messages, ads, announcements, pitches and friend requests. "And you're sending even more every day into that maelstrom."

"No we're not," she said. "Ours isn't noise."

Yes it is.

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