Feeling lost or listless, like your head is in the sand? It's clear what you need: a monthly action plan! What with all the resources available to SEOs these days, it can be hard to stay on track and maintain a campaign without getting bogged down in minutia and losing track of the big picture. Well, for this week's Whiteboard Friday, Rand is here to help! Just as Superman needs to vacuum the Fortress once a month, SEOs need to make sure they check up on their campaigns regularly by reviewing their diagnostics and metrics and researching their keywords and link profiles. It's like being Superman, but more fun! Unless you like vacuuming.
This week we're going to be talking about building a monthly SEO action plan. You can see we've got lots of action graphics up here. It even says "more action" on both sides. So, you know it's going to be very actionable.
Basically, Danny Dover, who does SEO for us here at SEOmoz, and I were kind of talking about how a lot of folks in the sphere, eventually you get to this point where you've kind of fixed a lot of the problems that exist on the site, taken care of some of those missed opportunities, and you're more in the groove with SEO. Now, you're thinking, how do I build, how do I expand, how do I go beyond? What's my kind of monthly to-do list as an SEO? This action plan is here to help.
Step one, we're starting with some diagnostic stuff. At the beginning of every month, or depending on your lifecycle of doing this type of work it could be every week, you want to be running some diagnostics. I mean diagnostics like error checking and looking for problems and opportunities in your site. Things like, oh, we have these pages that 404. We blocked these pages with robots.txt. These are 302 redirects instead of 301s. All these types of things that you want to keep your eye on so that in case someone in engineering or development rolls out some new pages or there are some new things happening inside your website that you don't know about or something broke, you can identify those quickly and get them fixed up before they cause you massive trouble in the SERPs.
Step two, once you've gone beyond that, taken care of those, you want to collect some key metrics and measurement. This is probably a once a week kind of thing on a light level and maybe each month you might go a little bit deeper with some of these metrics. So, things like at a top level measuring visits from each search engine, the number of pages that are receiving traffic, the keywords that are sending those traffic, how many of those there are. Comparing that to the last few months and seeing how your progress is doing. How is that matching up against your goals? If SEO is a big part of what you are doing, are you hitting those numbers that you want to be hitting? Maybe watching some rankings as well. You could be doing things like competitive intelligence. I'm not just watching my site. I'm also watching these two other competitors through a rank tracking system, through software.
You could do this for links, for all sorts of competitive data as well. Just be kind of keeping tabs on, "Wow. Hey, my competitors are really accelerating their link growth. Where did those links come from? Oh, they've engaged in this type of a link building activity." Maybe they've been blogging a lot more. Maybe they've been producing some viral content. Maybe they've been engaging in PR. They've been speaking at events. Whatever it is that they are generating, you want to be seeing how they're doing it and what they're doing so you can keep tabs on it and know, maybe I need to bring that back to my organization.
So, these metrics or measurements should be going into sort of a standardized format that you're producing reports either internally for yourself, for your boss, for your clients all the time.
Then you can move on to step three, which is kind of trying to recognize some of these keyword and content opportunities. I might be looking here, let's imagine that maybe my site is Australian focused for example. Maybe I'm looking for keywords like wallaby catcher. I'm not ranked for that. There's some search volume around that. Vegemite sculptures, that's moderately interesting. I guess I'm glad I don't have to see one of those. It seems like it would have to be cold out before that would hold together. And those kiwi rascals over in New Zealand. There are lots of people searching for that. So, I definitely want to target that one. That's going to be an important keyword. So, you can go through that kind of keyword list. There might be new keywords that you'd like to rank for that have emerged as being popular. Your business could be entering into new areas where you say, "Boy, we weren't in the wallaby catcher business last month, but this month we're starting to go in there, so let's do some keyword research around that, see if there's content we can build." Once you have these keyword targets, you're going to need to set some content goals for yourself. Like, "Hey we're going to need to produce content around this." Landing pages, blog posts, downloads of white papers, articles. Whatever the content is that matches up against that content, you're going to need to get that on the website.
Then step four, you're kind of going to be worrying about social/public relations, link building, all that outreach and engagement kind of stuff that's hopefully going to bring value, both branding value and awareness value as well as direct links back to your site. You might be looking on places like Twitter or in the blogosphere or in the press and media world or inside your own industry, internally. You might be looking at trade organizations or business listing directories, those kinds of things. Saying, who do I need to engage at those places? How do I connect with them? Where should I engage? So, you know, this kind of a question can be things like, boy, you know, there is this new forum that's getting a lot of popularity, or there's this new blog that's really taking off, or there's a new Q&A site that's kind of going wild in my sphere and I want to make sure that I'm sort of in at the ground floor participating in those places. When Twitter came out, you want to be there. Now something like a Quora is out, maybe you want to be there. Maybe even something like Namesake, right, which is kind of getting some traction in the Web 2.0 Silicon Valley space. You want to be on that. Or Foursquare, Gowalla, these kinds of things. Particularly if you are location based.
Then you need to be asking questions as well, like, "What can I do to stand out and get noticed?" There's a lot of people who are going to be participating in all of these places -- bloggers, PR people, people who own websites who want to get links from. They're all going to be getting pitches from people like you, and you need to find a way to get noticed, to be unique from that crowd. That means identifying things. I think the easiest way to do that, unless you're an extremely creative person, is to see what works for other people in other places. If I wanted to get a blog post to go popular on Hacker News or on Reddit or get a lot of StumbleUpon traffic, I would look at what are those sites covering? What are people voting on at those sites? What does TechCrunch cover? What does ReadWriteWeb cover? What does my local newspaper cover? Find what those things are. See those stories. After a couple weeks or few months of reading that, you'll have a great sixth sense about what content that is.
Then, finally, are there existing initiatives that need some SEO help? This can happen quite a bit actually, where there are people in your organization who are doing things around PR and engagement, who are doing technical things around the website, who are producing new kinds of content, but they're not necessarily thinking like you are. They're not thinking about, "Oh, right. The links and the anchor text, that's important." And, "Oh, right, the keywords, I need to worry about what the page content is, do some keyword research, and make sure the focus is right." Or, "Oh, wait, I should be making sure that these pages aren't redirecting improperly or carrying the wrong kinds of display codes or using JavaScript to link to everything instead of straight HTML." It's your responsibility to keep up with all those existing initiatives inside the organization. That's why an SEO needs to be well plugged in to everything that's happening at the company.
All right. Hope you've enjoyed this SEO action plan and that you'll join us again for another edition of Whiteboard Friday. Take care.
In the latest edition of White House White Board, Austan Goolsbee, Chairman of the Council of Economic Advisers, discusses the President’s tough decisions on the American auto industry in light of the General Motors IPO. Watch the video.
Entrepreneurs Fueling Innovation November 18, 2010 Assistant Secretary for Energy Efficiency and Renewable Energy at the U.S. Department of Energy Cathy Zoi visits the first public curbside electric vehicle (EV) charging station in Washington, D.C.
Vetrepreneurs: Helping Our Vets Start Their Own Businesses November 17, 2010 The Department of Veterans Affairs is working closely with the Small Business Administration to help Veterans break down barriers and start their own businesses.
Moving Ideas from the Lab to the Marketplace November 16, 2010 Secretary of Commerce Gary Locke outlines ways the Commerce Department and the Obama Administration are helping entrepreneurs turn ideas and inventions into new products and businesses.
How The Recovery Act is Boosting Small Biz – and Ice Cream Production – Across America November 15, 2010 Vice President Joe Biden calls the owners of The Penny Ice Creamery in Santa Cruz, CA -- a business made possible by the Recovery Act -- to thank them for sharing their story in a video and to congratulate them on the success of their business. Watch a video of the call.
Since search engines aren’t fond of paid linking and social network voting websites are on the decline, publishers have to look for new ways to get attention and links. While it may seem at first glance to be a bit old school, doing things that are “press worthy” are still an effective, legitimate method of getting links.
When I talk about being press worthy, what am I actually talking about? There are a few different options which I’ll take a look at.
Research and Whitepapers
This is probably one of the oldest but still effective methods for getting attention and links. The problem is that doing good, interesting research takes time and energy, and most publishers are looking for a quick, easy hit. What are some examples that I consider good? Look at Trendwatching: every month they put out an in-depth, thoughtful piece of work about a current trend or topic. Yes, it takes a bit of work, but it’s very interesting and extremely link worthy. Another example: OK Cupid put out a post about pictures on dating sites. One of the interesting conclusions they reached was iPhone users typically had more sexual partners than other users. While you can debate the good/bad aspects of the research, there is no denying it’s link worthy.
Unless you have some extremely draconian privacy policy, you should be able to use your internal customer data to come up with something interesting. Just be sure to use it in aggregate and anonymize it so no one is personally identifiable. If you’re an affiliate or ore middleman without customer data, you’ll just have to get creative. Try taking a survey on Facebook giving everyone who fills out the survey a chance to win a prize or gift certifificate. If that doesn’t work, try looking at other related sites for interesting things. For example, if you run a video game site, look at what related items stores recommend with video game purchases. Last year Amazon was recomending the fleshlight (nsfw) to people who where buying World of Warcraft.
Contests and Sweepstakes
Contests and sweepstakes are another well established method of being press worthy. You will have to be careful because contest laws vary wildly, so do some research first. Try to choose a prize that will get users who are interested in your subject. For examole don’t give away an ipad unless you are a website about ipads. Another example: I used to run a reality tv show website. At the beginning of every season of Survivor, we would give away a DVD box set from the previous season.
Reviews and Demo Units
Giving away reviews and demo units is another long standing method of getting press. To be honest this can be a bit of a tight rope walk. Google is perfectly fine with giving out free phones and free google tv service as a press building event. However, I have first hand experience with them profiling SEO’s for the exact same behavior. My advice: avoid the linking issue, don’t bring it up, and let people do what they want on their own. Secondly do not involve an SEO at all.
This type of behavior isn’t reserved for people who make or produce physical goods. Software and service producers can use it as well. You could try randomly giving away free units to people who tweet they would like to try your service.
Discounts and Promo Codes
When you are first starting out one of the quickest ways to get new customers is to offer a discount. It gets people on board and talking about your product or service. A lot of companies will give discounts to people they meet at trade shows or other real world events. If you are physical real world business, services like groupon are another possibility. Just remember there are good and bad aspects of Groupon, so do your homework first.
Controversy and debate
While it does have some negative aspects, picking a fight, making outrageous claims, or starting a debate are all time-tested methods of link building and getting press. You have to be careful here: not everyone can pick a fight and not look like a jerk when it’s over. Additionally you want to be careful about who you pick a fight with because you dont want to come off as a bully.
Sometimes making outrageous claims works and, depending on who you are, you can fool a lot of people. Just be careful how you frame it because you don’t want to come off looking like the boy who cried wolf. You could also ask industry experts to speculate on a new product or future event, put all of their answers into one article, and publish that.
Using Press Releases
When you are doing something press worthy, be sure the press knows about it. Use services like PRWeb, PRleap and others to make sure your efforts get seen. I recently did an interview with Merrick Lozano of PR Leap about getting more out of press releases. When you invest the time, you want to get the most links and attention for your efforts. photo credit: inju
White House White Board: The Rebirth of the American Auto Industry
In the fourth edition of White House White Board, Austan Goolsbee, Chairman of the Council of Economic Advisers, discusses the President’s tough decisions on the American auto industry in light of the General Motors IPO. Watch the video.
In Case You Missed It
Here are some of the top stories from the White House blog.
The New START Treaty: "A National Security Imperative" The President speaks at a meeting hosted by the Vice President to discuss the New START treaty and why it is in our clear national security interest that the Senate approve it this year.
West Wing Week: "I Really Like this Guy" This week walk step by step with the President from the G-20 in Seoul to the GM announcement in the White House Briefing Room.
Today's Schedule
All times are Eastern Standard Time. Western European Time is five hours ahead of Eastern Standard Time.
5:50 AM: The President arrives in Lisbon, Portugal
7:25 AM: The President participates in a U.S. Embassy meet and greet
8:05 AM: The President participates in arrival ceremony and signs guest book
8:15 AM: The President holds a bilateral meeting with President Cavaco Silva
9:20 AM: The President and President Cavaco Silva deliver statements to the press
9:45 AM: The President holds a bilateral meeting with Prime Minister Socrates
10:05 AM: The President and Prime Minister Socrates deliver statements to the press
10:30 AM: The Vice President holds a Middle Class Task Force event to announce new initiatives to help middle class and low income families secure their legal rights
11:20 AM: The President participates in a NATO arrival reception
11:55 AM: The President attends the NAC opening session
1:00 PM: Open for Questions: Entrepreneurship and Innovation with Commerce Secretary Gary Locke
2:05 PM: The President participates in the NATO official photo
2:20 PM: The President holds a bilateral meeting with President Saakashvili
2:45 PM: The President participates in the NAC working dinner
Every project (product, play, event, company, venture, non profit) has a million tasks that need to be done, thousands of decisions, predictions, bits of effort, conversations and plans.
Got that.
But what's the hard part?
The CEO spends ten minutes discussing the layout of the office with the office manager. Why? Was that a difficult task that could only be done by her? Unlikely.
The founder of a restaurant spends hours at the cash register, taking orders and hurrying the line along... important, vital, emotional, but hard? Not if we think of hard as the chasm, the dividing line between success and failure. No, the hard part is raising two million dollars to build more stores. Hard is hiring someone better than you to do this part of the job.
Hard is not about sweat or time, hard is about finishing the rare, valuable, risky task that few complete.
Don't tell me you want to launch a line of spices but don't want to make sales calls to supermarket buyers. That's the hard part.
Don't tell me you are a great chef but can't deal with cranky customers. That's the hard part.
Don't tell me you have a good heart but don't want to raise money. That's the hard part.
Identifying which part of your project is hard is, paradoxically, not so easy, because we work to hide the hard parts. They frighten us.
In speeches before a European Central Bank conference in Frankfurt, Ben Bernanke went on an unprecedented attack, accusing China of throwing a monkey wrench into the global recovery, blaming China for slow global growth and a potential "End to the Tepid U.S. Recovery".
He also said "The current international monetary has a structural flaw" calling on the "global community, over time, to devise an international monetary system that more consistently aligns the interests of individual countries with the interests of the global economy as a whole."
Finally, he put up a misguided defense of Quantitative Easing that is sure to not go over well in the global community.
If Bernanke was trying to spook the markets, provoke China, cause a currency war, and get Congress to launch an extremely foolish set of tariffs, he would have been hard pressed to deliver a more powerful speech.
Federal Reserve Chairman Ben Bernanke put aside traditional central bank niceties and launched a direct attack on the slow pace of China's steps to strengthen its currency.
In a speech prepared for a conference at the European Central Bank on Friday morning, Bernanke said that China's decision to undervalue the yuan has essentially thrown a monkey wrench into the global economic recovery.
The result could be slow growth ahead "for everyone," he said.
Bernanke's remarks do not lower the temperature of the debate. Instead, he launched a fierce defense of the Fed's bond-purchase plan, also known as "quantitative easing II."
"On its current economic trajectory, the United States runs the risk of seeing millions of workers unemployed or underemployed for many years," Bernanke said.
The Fed could not rule out the possibility that unemployment "might rise further in the near term," he said. This could bring an end to the tepid U.S. recovery, he said.
He pointed his finger at China's slow adjustment of its exchange rate.
"The strategy of currency undervaluation has demonstrated important drawbacks, both for the world system and for the countries using that strategy," Bernanke said.
China's strategy of export-led growth "cannot ultimately succeed if the implications of that strategy for global growth and stability are not taken into account," he said.
"Currency undervaluation by surplus countries is inhibiting needed international adjustment and creating spillover effects that would not exist if exchange rates better reflected market fundamentals," Bernanke said.
"Unfortunately, so long as exchange-rate adjustment is incomplete and global growth prospects are markedly uneven, the problem of excessively strong capital inflows to emerging markets may persist," Bernanke said
Rebalancing the Global Recovery
The text of one speech in Frankfort is on the Federal Reserve Website Emerging from the Crisis: Where Do We Stand? It's not worth a read as it contains none of the above fireworks.
In my view, the use of the term "quantitative easing" to refer to the Federal Reserve's policies is inappropriate. Quantitative easing typically refers to policies that seek to have effects by changing the quantity of bank reserves, a channel which seems relatively weak, at least in the U.S. context. In contrast, securities purchases work by affecting the yields on the acquired securities and, via substitution effects in investors' portfolios, on a wider range of assets.
Global Policy Challenges and Tensions
The two-speed nature of the global recovery implies that different policy stances are appropriate for different groups of countries.
The exchange rate adjustment is incomplete, in part, because the authorities in some emerging market economies have intervened in foreign exchange markets to prevent or slow the appreciation of their currencies.
It is striking that, amid all the concerns about renewed private capital inflows to the emerging market economies, total capital, on net, is still flowing from relatively labor-abundant emerging market economies to capital-abundant advanced economies.
A key driver of this "uphill" flow of capital is official reserve accumulation in the emerging market economies that exceeds private capital inflows to these economies. The total holdings of foreign exchange reserves by selected major emerging market economies, shown in figure 9, have risen sharply since the crisis and now surpass $5 trillion--about six times their level a decade ago. China holds about half of the total reserves of these selected economies, slightly more than $2.6 trillion.
Given these advantages of a system of market-determined exchange rates, why have officials in many emerging markets leaned against appreciation of their currencies toward levels more consistent with market fundamentals? The principal answer is that currency undervaluation on the part of some countries has been part of a long-term export-led strategy for growth and development. This strategy, which allows a country's producers to operate at a greater scale and to produce a more diverse set of products than domestic demand alone might sustain, has been viewed as promoting economic growth and, more broadly, as making an important contribution to the development of a number of countries. However, increasingly over time, the strategy of currency undervaluation has demonstrated important drawbacks, both for the world system and for the countries using that strategy.
Improving the International System
The current international monetary system is not working as well as it should. Currency undervaluation by surplus countries is inhibiting needed international adjustment and creating spillover effects that would not exist if exchange rates better reflected market fundamentals.
Conclusion
As currently constituted, the international monetary system has a structural flaw: It lacks a mechanism, market based or otherwise, to induce needed adjustments by surplus countries, which can result in persistent imbalances. This problem is not new. For example, in the somewhat different context of the gold standard in the period prior to the Great Depression, the United States and France ran large current account surpluses, accompanied by large inflows of gold. However, in defiance of the so-called rules of the game of the international gold standard, neither country allowed the higher gold reserves to feed through to their domestic money supplies and price levels, with the result that the real exchange rate in each country remained persistently undervalued. These policies created deflationary pressures in deficit countries that were losing gold, which helped bring on the Great Depression.3 The gold standard was meant to ensure economic and financial stability, but failures of international coordination undermined these very goals. Although the parallels are certainly far from perfect, and I am certainly not predicting a new Depression, some of the lessons from that grim period are applicable today.4 In particular, for large, systemically important countries with persistent current account surpluses, the pursuit of export-led growth cannot ultimately succeed if the implications of that strategy for global growth and stability are not taken into account.
Thus, it would be desirable for the global community, over time, to devise an international monetary system that more consistently aligns the interests of individual countries with the interests of the global economy as a whole. In particular, such a system would provide more effective checks on the tendency for countries to run large and persistent external imbalances, whether surpluses or deficits. Changes to accomplish these goals will take considerable time, effort, and coordination to implement. In the meantime, without such a system in place, the countries of the world must recognize their collective responsibility for bringing about the rebalancing required to preserve global economic stability and prosperity. I hope that policymakers in all countries can work together cooperatively to achieve a stronger, more sustainable, and more balanced global economy.
Preaching to the World
Bernanke is a man who could not find his ass with both hands and a roadmap when it comes to spotting the housing bubble, the recession, and levels of unemployment, yet he preaches to the world as if he has all the answers.
He is so hellbent on preventing deflation that he cannot see anything else. It would help if he even understood what it was. It sure would help if he could understand that rising prices without rising wages will crucify the average citizen.
But he is as blind, stubborn, academic wonk with no real world experience or common sense. I would love to debate him any day of the week.
The one thing I agree with Bernanke on is in regards to the term Quantitative Easing. We should simply call "Printing Money" or "Monetizing the National Debt". The former has the advantage in that most of the population would have a chance at understanding the term.
In regards to China, it bears repeating that what China is doing is no more manipulative that what the Fed is doing. In fact, a good case could be made that China's buildup of excess reserves has its origins in the housing bubble the Greenspan and Bernanke Fed blew.
His defense of 2% inflation targeting is beyond idiotic. The last thing 14 million unemployed people need is rising prices.
The other thing I agree with Bernanke on is the need for a "new" monetary system. The thing is, what's needed is not entirely new. We need a gold standard and the end of fractional reserve banking.
In his speech, Bernanke blamed gold for causing the great depression. Nothing could be further than the truth. It was a runup in excessive credit accompanied by micromanagement of interest rates by the Fed that kicked off the Great Depression.
Inciting Congress
Wittingly or unwittingly, Bernanke may have just incited Congress in two ways. The first way is Congress is unlikely to back down on how it sees QE. The second, more serious way is Bernanke may have just incited Congress to label China a "Currency Manipulator" and enact a bunch of horrendously foolish tariffs.
Heaven help us all if that is the result. It will not matter one bit whether or not that was his intention.
Even as Newark's police officers facing layoffs publicly voiced their frustration with their union leadership, a state appellate court issued a ruling that could end their jobs as early as Friday.
Union officials say they are doing all they can to prevent the layoffs, but contend the city has forced them into a corner. And one union official said older officers wouldn't give "a dime" to prevent the layoffs.
Meanwhile, the court set a hearing for today on the city's request to immediately end a 10-day stay on the layoffs granted last week by a lower court, said Derrick Hatcher, president of Newark's Fraternal Order of Police.
If the city prevails at Friday's hearing, Mayor Cory Booker's plan to layoff 167 police officers could go into effect immediately, said Hatcher. A city spokeswoman did not immediately reply to a request for comment.
"An officer who has been on the job 15 years is not going to fight for you," James Stewart, the union vice president, told the group outside. "Veteran guys are not giving up a dime," he said.
The Union Lie
"Union officials say they are doing all they can to prevent the layoffs". All it would take to save those jobs is a small cutback in wages or benefits.
Fire Them All
The problem is doing this in piecemeal. The city should fire 100% of them. That would get the unions attention. That likely sounds impractical, but it's rather easy. Newark should consider one of two things, most likely both.
1. Declaring Bankruptcy 2. Outsourcing all police duties to a Sheriff's Association.
The former is the real solution. Then the officers can see what benefits they can get in bankruptcy court.
By doing the latter, Newark could get more officers for a reduced rate. It is high time cities play hardball with public unions.
Taxpayers have had enough of paying more and more and more for fewer services.
Market participants are giddy today on the great news that Ireland will go deeper in debt in a foolish attempt to bail out the German and UK bondholders who were in turn foolish enough to lend ridiculous amounts of money to Irish banks in various real estate schemes.
The Irish government was of course foolish enough to guarantee all of this foolishness which means that Irish citizens many of whom were sucked into buying property at foolish prices are now on the hook to bail out the bondholders, rubbing salt into the wounds of Irish taxpayers, not all of whom were foolish enough to freely participate in the general foolishness.
Got that?
Here is a short video from the Wall Street Journal that explains why the bailout will not work.
Crude oil increased from a four-week low as Ireland moved closer to a European Union-led financial bailout, strengthening the euro and boosting commodities.
Irish Central Bank Governor Patrick Honohan said in an interview with state broadcaster RTE today he expects the country to ask the EU and the International Monetary Fund for "tens of billions" of euros to rescue its banks.
Desirable Outcome
"If these talks were to result in a substantial contingency capital funding" pool that didn't need to be drawn down, that "would be a very desirable outcome," Finance Minister Brian Lenihan said in the Irish parliament in Dublin today. He said no agreement has yet been reached.
Fairy Tale Nonsense
Check out that fairy tale silliness from Finance Minister Brian Lenihan, then answer this question: What are the odds that a "substantial contingency capital funding" would not be drawn down?
If you answered zero percent you are a winner, which makes the Irish taxpayer a loser.
Allied Irish Bonds Have Face Value Bid of 45 Percent
Allied Irish Banks Plc's 12.5 percent subordinated bonds due 2019 were quoted at a bid price of about 45 percent of face value, according to Jefferies International in London, down from 100 percent in September. Credit-default swaps insuring 10 million euros ($13.6 million) of the debt cost 5.9 million euros in advance and 500,000 euros annually, according to CMA.
Irish central bank Governor Patrick Honohan said he expects the country to ask for aid from the European Union and the IMF worth "tens of billions" of euros to rescue its battered banks and stop contagion across the region. The government already pledged to impose losses on junior bondholders at Anglo Irish Bank Corp. and Irish Nationwide Building Society.
Anglo Irish was nationalized in January 2009 as loan losses spiraled after a property bubble burst. The government also has taken a 36 percent stake in Bank of Ireland Plc and is preparing to take a majority stake in Allied Irish.
Credit-default swaps on the junior debt of Bank of Ireland Plc cost 2.9 million euros in advance and 500,000 euros a year, signaling a 58.75 percent likelihood of default within five years. Contracts on Anglo Irish's sub debt cost 8 million euros upfront, showing a 99.99 percent probability of default. Swaps on Allied Irish signal a 90.24 percent chance of default.
"Ireland is our closest neighbor, and it's in Britain's national interest that the Irish economy is successful and we have a stable banking system," says George Osborne, the U.K. chancellor. "So Britain stands ready to support Ireland in the steps that it needs to take to bring about that stability."
The Irish underestimated the severity of the losses for the past two years. In September, the government said that the bank bailout may cost as much as 50 billion euros. NAMA says it will absorb an estimated 73 billion euros of loans from the banks at a discount of about half of their value.
The figures sound small relative to the U.S. rescue of its banking system, except that Ireland's population hovers at 4.4 million, according to the World Bank; the bailout so far equals 30 percent of the country's 158 billion-euro gross domestic product. EU officials say Ireland's emergency aid package may tally $136 billion, roughly the same amount given to Greece in May.
While the U.S. economy was driven off a cliff by the reckless securitizing of subprime mortgages and Greece collapsed under the burden of misrepresented government spending, the Irish traveled a simpler road to ruin: by taking out enormous, unregulated loans. Ireland's economy has contracted for three consecutive years, and the Irish Central Bank governor has declared his country's fiscal deterioration "worse than almost any other country."
Today, according to former Central Bank of Ireland economist David McWilliams, the average Irish family owes 132,000 euros to banks.
Many Irish people won't be able to pay off their debts in their lifetime, and almost all commercial developers are broke.
New Buzzword "Namatized"
NAMA stands for National Asset Management Agency, Ireland's "bad bank." Bloomberg notes that NAMA was created by the Irish government in 2009 to help stanch a crisis within the Irish banking system that has pushed the country to the edge of insolvency.
NAMA clearly did not work. I am saddened to report Irish citizens have been "Namatized", a fitting tribute to the fools in Irish government that authorized the nonsensical guarantee of Irish bank debts.
On the surface, it's reminiscent of the problem Greece had with its unmanageable federal debt early this year, which shook world markets, ended a global rally in stocks and ultimately led to a $146 billion bailout by the European Union and the International Monetary Fund. Greece spent more money than it took in for years, papered over the gap, and essentially became insolvent when it could no longer borrow the money needed to finance its debt.
Ireland is on the brink of insolvency too, which has helped drive down the S&P 500 stock index by nearly 4 percent over the last few days. But unlike Greece, Ireland is a relatively wealthy country, with per capita GDP of nearly $38,000. That's 21 percent higher than per capita GDP in Greece, and in the top third for European countries. Low corporate tax rates and a skilled workforce have made Ireland a haven for some of the world's biggest companies. And its public debt, about 65 percent of GDP, is far below Greece's crushing load, which is 126 percent of GDP. Ireland's debt levels are even lower than those in France, Germany and the United Kingdom.
But Ireland has one huge problem that may soon make it a supplicant to its European brethren: A failed banking sector that Ireland's government can no longer rescue on its own. Ireland is in the midst of a real estate bust that could trump even the ruinous downturns that turned parts of southern California and Nevada into suburban ghost towns, with home-grown banks stoking it all. Now, those banks are trying to manage catastrophic losses. The Irish government has effectively nationalized the nation's biggest banks by guaranteeing their debt, which would be akin to the U.S. government taking over Citigroup, Bank of America, J.P. Morgan Chase and Wells Fargo.
That means the Irish government is also on the hook for the losses those banks endure--which have risen far beyond initial estimates, and may have a lot farther to go. So far, the Irish government is obligated to cover losses amounting to 175 percent of Irish GDP, which is becoming an unsustainable burden. "If the Irish banks go down, the Irish government also goes down," says economist Jacob Kirkegaard of the Peterson Institute for International Economics.
Rat's Ass Perspective on "Help" from UK, EU, and IMF
The other countries in the EU do not give a rat's ass about Ireland. All they really cares about is $650 billion in loans on the books of UK, German, French, Italian, and Spanish banks.
The US is of course the third most interested party and will no doubt apply pressure on the IMF to apply pressure on Ireland to accept some sort of bailout.
Ireland is sitting on a pile of cash. That cash will last much longer if Ireland defaults and that I believe is just what Ireland should do.
The short answer is for Ireland to tell the EU and IMF to "Stuff It".
Every country for itself. There is simply no reason for Irish citizens to bailout UK, German, French, and US banks.
Postponed is Not Solved
Bailout "help" will do nothing but overburden Ireland while making its problems worse down the road. Resentment will build up and hopefully Irish voters will do the same thing Icelandic voters did: throw the bums out and tear up the agreement.
Meanwhile, Spain is waiting in the on-deck circle. The proverbial s* hits the fan when Spain comes up to bat.
Curve Watchers Anonymous has a quick update on US Treasuries.
click on chart for sharper image
The yield curve is flattening, in a bearish way. A Bull flattener would be when yields are dropping across the board with yields on the long end dropping more than the short end.
In this case, 5-year and 10-year yields are up about 45-50 basis points from the low just after QE II started, while yields on 30-year treasuries are up only about 30 basis point. Daily Snapshot
You can see this easily in a daily snapshot from Bloomberg.
click on chart for sharper image
As I have pointed out before, this action is not at all usual. It is an artifact of everyone front-running the Fed's announcement of Quantitative Easing purchases, then selling the news.
Yields are higher across the board than in August when the Fed first hinted at another round of QE.
Mortgage Rates Climb
Curve Watchers Anonymous also points out that mortgage rates are on the rise
In the truth is stranger than fiction category, Fed chairman Ben Bernanke tells US Senators that Quantitative Easing will create 700,000 to 1 Million Jobs.
Federal Reserve Chairman Ben S. Bernanke met with U.S. senators today to defend his expansion of record monetary stimulus, saying it would aid job growth and the central bank would control any inflation.
Alabama Senator Richard Shelby, the senior Republican on the Banking Committee, said Bernanke cited an estimate that the program may help create 700,000 to 1 million jobs. Bernanke met with about 11 committee members amid a Republican backlash against the Nov. 3 decision by U.S. central bankers to buy an additional $600 billion of Treasury debt.
Bernanke reiterated his view that the central bank needs help from Congress in aiding the economy. "He went out of his way to say that he absolutely hopes Congress will take the lead in setting economic policy," [Indiana Senator Evan] Bayh said.
Curiouser and Curiouser
Inquiring minds are asking, if that's all it took, why didn't he do so in 2008 when the unemployment rate started soaring? Why not double it and create 1.4 to 2 million jobs?
That last paragraph in the Bloomberg snip above has me wondering if Bernanke went down the rabbit hole. Allegedly Bernanke wants help from Congress to set Economic Policy?! Really? What about that big battle Bernanke had with Congress over that very same issue?
Failure of QE Round One
Round one of QE was supposed to stimulate housing. Did it?
Lee Adler at the The Wall Street Examiner has a nice report on housing this month that touches on this very issue. Here are a few snips from a 19 page (subscription) PDF.
Housing Report – Wednesday, November 17, 2010
Purchase mortgage applications dropped to near record lows last week as government programs to suppress mortgage rates first failed to stimulate demand, and now seem to be failing to suppress rates. Zillow sales volume data now confirms that this September was by far the worst September since the housing collapse began. Since then, purchase mortgage applications have remained near record lows.
That means that housing sales data to be reported over the next two months will continue to be terrible. Data from Housingtracker.net as of mid November shows that price declines are actually accelerating. Meanwhile shadow inventory will continue to feed into the supply with the inventory to sales ratio already near record levels. Supply demand imbalances will grow increasingly unfavorable.
Mortgage Applications
Mortgage purchase applications fell in the week ended November 12 leaving them barely above the absolute lows, recently unresponsive to the record plunge in mortgage rates. Now an uptick in mortgage rates threatens to shut down what's left of a barely functioning market. The Fed's strategy to drive down long term rates to stimulate the housing market has failed miserably and now it looks as though an even larger program of QE2 may turn out to be an even bigger bust.
click on chart for sharper image
Applications are now down 12% versus this date last year which itself was in the vacuum that followed the ending of the first homebuyer's tax credit. They are down 38.5% since the end of the second homebuyers' tax credit, and down 28.8% since April 2009 when mortgage rates made their last previous low. Applications are down 66% since the May 2005 peak. Rates are currently approximately 16 basis points lower than they were in April 2009 and yet sales are far weaker.
Even worse, the market has now been dead in the water at these levels for 5 months, including what are usually the strongest months of the year. Where do we go from here? Falling rates have not stimulated sales. Nor have falling prices enticed buyers into the market. The level of applications remains at the lowest levels of the past 13 years.
Anyone who refinanced at cheap rates has more money to spend each month, but that is the only conceivable point of success for QE I. The cost side of the equation is increased taxpayer exposure to Fannie, Freddie, and the FHA.
QE II like Using Shotgun to Kill Mosquitoes
The first and foremost problem in arbitrarily cranking up the printing presses is the Fed has no control of where the the money goes, or indeed if it goes anywhere at all.
QE I at least had a definitive target, mortgages (not that it helped much, as noted above). QE II is more like trying to kill mosquitoes with a shotgun. Not many (if indeed any) pellets will hit the intended target.
Southern Copper Corp., a Phoenix- based mining company that boasts some of the industry's largest copper reserves, plans to invest $800 million this year in projects such as a new smelter and a more efficient natural-gas furnace.
Such spending sounds like just what the Federal Reserve had in mind in 2008 when it cut interest rates to near zero and started buying $1.7 trillion in securities to spur job growth. Yet Southern Copper, which raised $1.5 billion in an April debt offering, will use that money at its mines in Mexico and Peru, not the U.S., said Juan Rebolledo, spokesman for parent Grupo Mexico SAB de CV of Mexico City.
"You're seeing leakage from quantitative easing," said Stephen Wood, chief market strategist for Russell Investments in New York, which has $140 billion under management. "That leakage is going into emerging markets, commodity-based economies, commodities themselves and non-U.S. opportunities."
"I have begun to wonder if the monetary accommodation we have already engineered might even be working in the wrong places," Richard Fisher, president of the Federal Reserve Bank of Dallas, said in an Oct. 19 speech.
Wal-Mart Stores Inc., the world's largest retailer, raised $5 billion last month and said it would use the money to pay off existing short-term debt and for general corporate purposes. A spokesman for the Bentonville, Arkansas-based company didn't respond to an e-mailed question about planned investment locations.
Tim Hoyle, vice president for research at Haverford Investments in Radnor, Pa., which manages $6 billion, said Wal- Mart is among several corporations he follows that are refinancing existing debt and reinvesting the proceeds.
"In Wal-Mart's case, all of the reinvestment is happening in overseas markets," he said.
That phenomenon illustrates the challenge confronting Bernanke. "All the Fed can do is create liquidity," Hoyle said. "What Fisher is saying is correct: The Fed has no control over how that liquidity is used."
There are many more examples in the article. Yet somehow we are supposed to believe this shotgun blast will create 700,000 to 1 Million Jobs.
Bernanke is out of his mind if he believes that. So is Bernanke out of his mind or is he purposely lying to Congress to shut them up?
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