Central Perk

vineri, 24 februarie 2012

The Math of CRO - Whiteboard Friday

Posted: 23 Feb 2012 12:40 PM PST

This post was originally in YouMoz, and was promoted to the main blog because it provides great value and interest to our community. The author's views are entirely his or her own and may not reflect the views of SEOmoz, Inc.

This week we are talking about math.... Don't worry it's not the tough kind that Isaac Newton used to do, but the math behind Conversion Rate Optimization (CRO). This week Rick Perreault from Unbounce joins us to show the value behind CRO and how you can show its value to your clients/bosses. After watching what Rick has to say, share a comment about your experience with CRO.

Video Transcription

Hi, I'm Rick Perreault. I am cofounder and CEO of Unbounce.com. Unbounce is a platform that allows marketers to create and A/B test landing pages without having to rely on IT. That is really a part of conversion rate optimization, which is today's subject.

When Rand asked me to come up here and do one of these Whiteboard Fridays and he asked me to do it on conversion rate optimization, you know, I run a software company. I am not a conversion rate optimization expert. However, I see hundreds of people do it every day, and I have experienced this through much of my career. So I am going to share with you what I've seen and how I've seen conversion rate optimization actually bring far more ROI to your online campaigns than not doing it.

So, let me begin. Let's imagine this as a period of a three-month campaign. In the old days, and to some degree still today, marketers are really concerned about what happens getting people to click an ad. Let's just say I'm using . . . these are all sample numbers. Just to keep the math simple. So, let's just say month one I've got $1,000 budget and I generate 1,000 clicks and I convert, my conversion rate 1%. I get 10 customers at a cost of acquiring that customer of about $100.

Now, so month two, I say, "Okay, that's pretty good." Now if I am going to get more sales, generate more customers, I just need to increase how much I am spending on advertising. So I increase that to $2,000 and I get 2,000 clicks. I'm still converting at 1%. The result of that, I get 20 customers at a cost of acquisition of still $100 per customer. That hasn't changed.

Month three, now I am going to increase that to $3,000. I get my 3,000 clicks. Again, convert at 1%, generates me 30 customers, again CPA stays at $100. Over a three-month period, a total spent of $6,000 generates me 60 sales. That's pretty good.

Now, as time has gone on, something has changes. Smart marketers realized they could actually get even more ROI from this online advertising by focusing on what happens after the ads are clicked and focusing on moving this number higher. This is what we call conversion rate optimization. That's A/B testing, using unique landing experiences, using analytics, and really understanding what happens after somebody clicks your ad.

So, in this example, I use the same thing. I spend my $1,000 to get my 1,000 clicks. But this time I am going to spend $200 on conversion rate optimization, and by using analytics and some A/B testing, quite quickly I am able to push my conversion rate up. So now, I push it up to 1.5%. What we see happen here, now I've generated 15 customers, but more importantly, my cost of acquisition has gone down to $80, a 20% improvement on the ROI.

So the next month, I continue and I spend my $1,000. I generate my 1,000 clicks. Again, I continue with my budget, my conversion rate optimization budget. Again, I do some more A/B testing, do some more analytics, create some more landing pages, improve it, test buttons, test messaging. I am able to push it up. Get 2% conversion rate. Now, look what happens here, again 20 customers at $60 to acquire them. So, again, even a better saving.

Then finally, okay, now I am really going for it. Month three, I am going to spend $3,000. I am going to get my 3,000 clicks, continue with my conversion rate optimization, my $200 here, maintain my 2% conversion rate, generate 60 customers, and the cost of acquiring them somewhere around $53, $53 something.

In this case, I spent $5,600 to generate 95 sales. Here I spent $6,000 to generate 60. The reason I was able to generate more sales on relatively the same ad spend is because I stopped worrying about just what was going on here and started focusing on what was going on here. This is the math of conversion rate optimization and this is why it is important.

So next time you are talking to your boss or a client and they're trying to understand the value of A/B testing or using a landing page or just spending any time on thinking of what happens after their ads are clicked, the landing experiences, walk them through this exercise.

I hope that was helpful. Thank you very much.

Video transcription by Speechpad.com

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What Community Builders Can Learn From Research

Posted: 23 Feb 2012 02:42 AM PST

Posted by thogenhaven

Two weeks ago, Tom Critchlow suggested that we work to close the gap between inbound marketing and content marketing communities. It's time to build bridges again, this time between inbound marketing and research. In this post, you'll find research on participation patterns, how to spot high-value users, seeding content in a new community, how to bring new life to old content, and a little bit of gamification.

Some research is already being shared with the inbound community. Bill Slawski from SEO By The Sea does a great job reading and condensing patents from the search industry. But there is so much more research waiting to be tapped.

I am currently in a PhD program and therefore attend academic conferences. They are different to MozCon, SearchLove, SMX, Blueglass and the other conferences we all usually go to. And different means different perspectives. Last week at CSCW, 160 researchers from private companies and universities presented a paper. Topics include social media analysis, collaboration, gamification, incentives, recommender algorithms and online communities. For better or worse, I did not attend 160 presentations. So this will be a very limited summary, focusing on online communities.

Why Should You Care?

Universities and private companies like IBM, Microsoft and Google do some legit research. Being familiar with this research is a competitive advantage and will help generate new ideas.

In this post I focus primarily on community building. At SearchLove last year, Rand had a slide stating a 34% growth in 4 months, primarily from Q+A, YouMoz, the blog and user profiles. Add to this that community members are some of the best link builders you'll ever find. Getting community right is a huge win.

Who Participates In Online Communities?

Previous research offers two perspectives on participation patterns in online communities:

Some people contribute, and others do not. It is an inherent, personal trait like hair color.
Lurking is a development stage toward being an active member. All people potentially contribute, after the learning/socialization phase: users lurk for a while before participating.

Michael Muller from IBM presented fascinating research on a study on 8,711 online communities covering diverse topics with 224,232 unique users. The insight of the research shows a completely different pattern than the conventional wisdom above: 84 % of those users who participate in one or more community, lurk in others. However, the majority of members' lifetime contributions are in the beginning on their membership. Thus, many users start off contributing like mad, then stop. This means retention is key.

(Graph is printed in Muller, 2012. See references in the bottom of this post).

Design implications: Do whatever you can to grasp new members. There are many ways to do this: Make sure they get encouraging feedback to their initial comments/contributions. Assign them a mentor. Send them nice emails. Reach out to them on social media.

Spotting Talent

Despite the overall participation trend identified by Michael Muller, some people are more likely to contribute more to new communities than others. In fact, only few people end up participating in the first place. Google+ VP Bradley Horowitz once wrote about 90-9-1 principle, describing how 1% of community members are creators, 9% are synthesizers, and the remaining 90% are users/lurkers who do not directly add anything to the community.

Rosta Farzan and colleague from Carnegie Mellon University and University of Minnesota developed an algorithm to identify potential high-contributing members. The algorithm uses the following metrics to spot a potential high value member.

Quality
Motivation (quantity, frequency, and commitment)
Ability (knowledge, trustworthiness, and politeness and clarits)

Those identified as potential high-contributing members participated 10 times more actively than those not classified.

Design implications: sometimes the gold is right in front of us, but without our knowing. Identifying high potential members early on can help us reach out and retain these creators.

Starting A New Community

In inbound marketing, one often hears the advice: go build a community. Yes, we'd all love to have flourishing communities, right? But how to get critical mass? One solution often used is seeding a site with (third party) content. This is supposed to show that the community is lively and thereby encourage users to contribute. Jacob Solomon and Rick Wash from Michigan State University tried this form of bootstrapping when starting a new wiki.

The results show that users contribute more when they are given a blank page, than they do when they see a seeded page. This makes sense, as there is more work to do on a blank page. However, contributions made on a blank page tend to be unstructured. If the users see a page with some content (e.g. headers, text chunks, objective content, opinionated content etc.), they tend to contribute content similar to the seeded content.

Design implication: If you want users to create a special kind of focused content (e.g. replies of a certain length or with a special focus), seeding can be good. The bad news: seeding content is not a shortcut to start a community as it might actually reduce contributions. Two weeks ago, Rand and Dharmesh launched Inbound. When the site was launched, it was already seeded with many good articles. According to this paper, this seeding reduced contributions, but made them more focused on the kind of articles Rand and Dharmesh want. Sounds plausible.

New Life To Old Content

This one might require a bit engineering power. But it is really neat. Aditya Pal and colleagues from University of Minnesota created an algorithm to detect expired content on a Q&A site. The algorithm uses metrics such as

TF/IDF
Reference to a specific time (e.g. date, month)
Fixed vs relative time reference (ago, after, before, today, tomorrow)
Reference a date in past
Tense of the question

Design implications: Such algorithms are not only useful on Q&A sites. On enterprise websites, it can be used to flag content that ought to be updated, removed, rel=canonicalized or 301 redirected to new content. This creates better and fresher content on websites, as well as help avoiding old and irrelevant pages rank in Google. It can also help scale some of Cyrus Shepard's advices on fresh content, and help you rank for QDF keywords.

(This illustration is made by Dawn Shepard for Cyrus' post mentioned above)

Gamification Over?

Gamification has been a hot topic in the last couple of years. For many websites, the question is no longer if gamification systems should be implemented, but if it should be kept. Jennifer Thom and collaborators from IBM studied the removal of gamification points from IBM's internal social network. The researchers found that removing the points system made users contribute significantly less than before.

Design implications: You might (also) be tired of hearing about gamification. But it kinda works... So you might want to take a look at these gamification slides from Richard Baxter:

Gamification: Rewarding Users with Simlpe Game Mechanics

Curious for more?

The ACM Library is very good. In fact, so good that Matt Cutts blogs about it. To access the articles, you might have to go to a library or a university. But many researchers are happy to share their research, and link to it directly to their own work from their personal websites (The authors have the rights to share their own articles for free). So a little Googling can usually provide the article.

References

Michael Muller (2012): Lurking as Personal Trait or Situational Disposition? Lurking and Contributing in Enterprise Social Media. Proceeding to CSCW 2012

Aditya Pal, James Margatan, Joseph Konstan (2012): Question Temporality: Identification and Uses. Proceeding to CSCW 2012

Jacob Solomon, Rick Wash (2012); Bootstrapping wikis: Developing critical mass in a fledgling community by seeding content. Proceeding to CSCW 2012

Rosta Farzan, Robert Kraut, Aditya Pal, Joseph Konstan (2012): Socializing volunteers in an online community: A field experiment. Proceeding to CSCW 2012

Jennifer Thom, David Millen, Joan DiMicco (2012): Removing Gamification from an Enterprise SNS. Proceeding to CSCW 2012

West Wing Week's 100th Episode

Your Daily Snapshot for
Friday, February 24, 2012

West Wing Week' s 100th Episode

It's hard to believe that when West Wing Week was born, "Don't Ask Don't Tell" was still around, American troops were still fighting in Iraq, the American auto industry was on the brink of collapse, and nobody knew that President Obama could sing -- what a difference 694 days makes.

We've got a great week for you -- featuring BB King, the Boeing Dreamliner, a speech about American energy, a payroll tax cut extension, and special musical guest Keb Mo.

Be sure to watch West Wing Week’s 100th episode for a special treat:

Seth's Blog : The Trip Advisor tail wagging the real world dog

The Trip Advisor tail wagging the real world dog

More than fifty years ago, Duncan Hines (a real guy, unlike Betty Crocker), turned the restaurant business upside down. He began certifying restaurants as clean and safe, offering a sign for roadside diners that wished to welcome travelers from out of town.

The existence of his certification changed the way restaurants did their job.

Today, it's sites like Trip Advisor and Yelp (among many others) that are transforming the way service businesses operate. Here's how it works: at first, a business might try to ignore the system, but then they notice their customers talking about the reviews and their competitors. So some stoop so low as to attempt to game the system, sending sock puppets and friends to post reviews. But that doesn't scale and the sites are getting smart about weeding this out.

The only alternative? Amazing service. Working with customers in such an extraordinary way that people feel compelled to talk about it, post about it, and yes, review it. It's not an accident that Hotel Amira is one of the highest rated hotels in all of Turkey. They didn't do it with the perfect building or sumptuous suites. They did it by intentionally being remarkable at service. And yes, the Holiday Inn in Oakland has the same story. They took what they had and then they deliberately went over the top in delivering on something that never would have paid off for them in the past.

Amplifying stories causes the stories that are built to change. Outliers are rewarded (or punished) and the weird and the wonderful are reinforced. Once people see what others are doing, it opens the door for them to do it, but with more flair.

The web changes everything it touches, sometimes in significant ways. Travelers ranted about poor service for a generation, but once the internet makes it easy to rank and sort and connect, the service has no choice but to change. Some businesses see Yelp and others as a tax, a burden they have to pay attention to in order to stay relevant, and they grumble about it. Others see these sites as the opportunity of a lifetime, a chance to deliver service (which takes guts and care, more than money) to get ahead.

• Email to a friend •

joi, 23 februarie 2012

Mish's Global Economic Trend Analysis

Troika Demands 38 New Changes in Greek Tax, Spending and Wage Policies in Next 6 Days
Pact With the Devil Over Gold
Don't Worry, It's Only a "Mild Recession"
Misunderstanding "China's Sweatshop As Great Wall Starts Building Cars In Bulgaria"

Troika Demands 38 New Changes in Greek Tax, Spending and Wage Policies in Next 6 Days

Posted: 23 Feb 2012 03:40 PM PST

The hit parade of demands on Greece keeps right on marching. The Troika has 38 new demands in addition to 10 pages of prior demands that have not been met.

The ten-page list of prior demands need to be met by the end of the month. Fortunately this is leap year so Greece gets an extra day.

The Financial Times reports Athens told to change spending and taxes.

European creditor countries are demanding 38 specific changes in Greek tax, spending and wage policies by the end of this month and have laid out extra reforms that amount to micromanaging the country's government for two years, according to documents obtained by the Financial Times.

The reforms, spelt out in three separate memoranda of a combined 90 pages, are the price that Greece has agreed to pay to obtain a €130bn second bail-out and avoid a sovereign default that the government feared would throw Greek society into turmoil.

They range from the sweeping – overhauling judicial procedures, centralising health insurance, completing an accurate land registry – to the mundane – buying a new computer system for tax collectors, changing the way drugs are prescribed and setting minimum crude oil stocks.

"The programme is much, much more ambitious than economic reform," said Mujtaba Rahman, Europe analyst at the Eurasia Group risk consultancy. "This is state building, as typically understood in traditional low-income contexts."

Most urgency is attached to a 10-page list of "prior actions" that must be completed by Wednesday in order for eurozone finance ministers to give a final sign-off to the new bail-out at an emergency meeting scheduled for Thursday.

Among the measures that must be completed in the next seven days are reducing state spending on pharmaceuticals by €1.1bn; completing 75 full-scale audits and 225 value added tax audits of large taxpayers; and liberalising professions such as beauty salons, tour guides and diet centres.

Demands Designed to Fail

The Troika demands 75 full-scale audits and 225 valued added tax audits in 6 days! Is that going to happen?

This setup is without a doubt designed to fail and that should have been obvious ever since Germany asked to put a commission in charge of the Greek budget on Feb 7. Please see Greece to Cede Sovereignty to Eurozone "Budget Commissioner" for details.

These new demands are in addition to a requested a constitutional change that is impossible before 2013.

For details, please see Greece Needs New Constitutional Provision Imposed by the Troika; Slight Problem, Constitutionally It Can't Do it

It is possible some of the new demands need constitutional changes as well. I simply do not know.

Please also consider the Pact With the Devil Over Gold

As I have said repeatedly ...

Germany has put up roadblock after roadblock attempting to get Greece to scuttle the deal, only to have fools like Finance Minister Evangelos Venizelos agree to them.

It may be up to Germany to come up with still more ludicrous demands in hope that the Greek finance minister and Greek politicians finally get the message "it's not wise to make a pact with the Troika devil", especially one that requires Greece to relinquish its gold.

On Tuesday I said it's a 9 Day Race to Ecstasy; Only Way Greece Can Win Is To Lose

It's now 6 and counting.

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

Pact With the Devil Over Gold

Posted: 23 Feb 2012 12:44 PM PST

The one and only thing that might possibly spare Greece the agony of a completely worthless currency is Greece's small hoard of 111 tons of gold.

Pact With the Devil

Yet, in the fine print in the latest deal, Greece's lenders will have the right to seize its gold reserves according to the New York Times article Growing Air of Concern in Greece Over New Bailout.

In the fine print of the 400-plus-page document — which Parliament members had a weekend to read and sign — Greece relinquished fundamental parts of its sovereignty to its foreign lenders, the European Commission, the European Central Bank and the International Monetary Fund.

"This is the first time ever that a European and probably an O.E.C.D. state abdicates its rights of immunity over all its assets to its lenders," said Louka Katseli, an independent member of Parliament who previously represented the Socialist Party, using the abbreviation for the Organization for Economic Cooperation and Development. She was one of several independents who joined 43 lawmakers from the two largest parties in voting against the loan agreement.

Ms. Katseli, an economist who was labor minister in the government of George Papandreou until she left in a cabinet reshuffle last June, was also upset that Greece's lenders will have the right to seize the gold reserves in the Bank of Greece under the terms of the new deal, and that future bonds issued will be governed by English law and in Luxembourg courts, conditions more favorable to creditors.

Causing a Nightmare Scenario

On Tuesday, Finance Minister Evangelos Venizelos defended the new debt agreement, calling it "the most significant deal in Greece's postwar history" and asserting that it had "averted a nightmare scenario."

Today this same puppet of the Troika installed government claims, as he has been for weeks, No Loan Deal Means Absolute Catastrophe

Greece Finance Minister Evangelos Venizelos said Thursday Greece would face an absolute catastrophe if it didn't approve the terms demanded by international creditors in exchange for a second bailout, which includes a EUR107 billion debt write-down plan.

Greece is already in a state of absolute catastrophe. The one thing 100% guaranteed to make matters worse for Greece is if Greece lost its hoard of gold to the thieves and plunderers at the IMF and Troika.

Rather than "averting a nightmare scenario" that pact is going to "cause" a nightmare hyperinflation scenario.

Value of 111 Tons of Gold

One tonne = 1000 kilograms = 32150.746 troy ounces.
At $1780 per troy ounce, the value of that gold is roughly $6.35 billion.

Given an estimated size of the Greek economy at $290 billion or so, that is not a huge hoard.

However, something is better than nothing as Zimbabwe proves. Something is enough to prevent a currency from going completely worthless, although obviously not enough to prevent a massive devaluation.

Still Time

There is still time for Greece to come to its senses and reject the deal. Also recall the conditions of the deal require a constitutional change and that is impossible before 2013.

For details, please see Greece Needs New Constitutional Provision Imposed by the Troika; Slight Problem, Constitutionally It Can't Do it

Biggest Hope for Greece is Germany

In an enormous irony, Germany may be the biggest hope for Greece. Although France and other countries do want this pact to go through, Germany's words and actions prove that Germany does not.

Germany has put up roadblock after roadblock attempting to get Greece to scuttle the deal, only to have fools like Finance Minister Evangelos Venizelos agree to them.

It may be up to Germany to come up with still more ludicrous demands in hope that the Greek finance minister and Greek politicians finally get the message "it's not wise to make a pact with the Troika devil", especially one that requires Greece to relinquish its gold.

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

Don't Worry, It's Only a "Mild Recession"

Posted: 23 Feb 2012 07:30 AM PST

The economic clowns in the EU have finally acknowledged something that was blatantly obvious at least six months ago (and a lot longer if one factored in the likely effects of multiple austerity programs in numerous countries).

However, the economists' new conclusion is about as silly as the "no recession" call that preceded it. The new forecast: there will be a recession in the eurozone but not the EU and it will be "mild".

Please consider Euro zone economy to shrink in 2012.

The euro zone's economy is heading into its second recession in just three years, while the wider European Union will stagnate, the EU's executive said on Thursday, warning that the currency area has yet to break its vicious cycle of debt.

"Recent developments in survey data suggest that the expected slowdown will be rather mild and temporary," EU Economic and Monetary Affairs Commissioner Olli Rehn told a news briefing following the release of the European Commission's interim report on the EU economy.

The wider, 27-nation European Union, which generates a fifth of global output, will not manage any growth this year, the Commission said.

"The EU is set to experience stagnating GDP this year, and the euro area will undergo a mild recession," it said.

"Negative feedback loops between weak sovereign debtors, fragile financial markets, and a slowing real economy do not yet appear to have been broken," the Commission said.

Germany and France, the euro zone's two largest economies, are likely to escape recession this year, growing 0.6 percent and 0.4 percent respectively, while Greece will enter its fifth year of economic contraction and Spain will shrink 1 percent, the Commission said.

Alternate Viewpoint

Let me reiterate things I have said many times: Germany and France will not escape recession, the German export machine will see a shocking slowdown (likely billed as "no one could have possibly seen this coming"), the overall EU will face a recession with the UK leading the way (the UK is highly in recession already), and these recessions will be neither mild nor fleeting.

By the way, a "negative feedback loop" is self-correcting by definition.

Negative feedback occurs when the output of a system acts to oppose changes to the input of the system, with the result that the changes are attenuated. If the overall feedback of the system is negative, then the system will tend to be stable

The writer meant a positive feedback loop (with negative consequences).

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

Misunderstanding "China's Sweatshop As Great Wall Starts Building Cars In Bulgaria"

Posted: 23 Feb 2012 12:23 AM PST

ZeroHedge posted an interesting article called Europe Is Now China's Sweatshop As Great Wall Starts Building Cars In Bulgaria. Unfortunately the article contains many often repeated trade fallacies as well as numerous other errors.

ZH: "With China Forecast To Reach Wage Parity With The US In Five Years, Is A New Manufacturing Golden Age Coming To The US?"

Mish: China's wages are rising fast. Sometimes in leaps of 20%. From where? How sustainable is it? Please consider this snip from the Reuters article HP, Dell watch rising China labor costs for Apple written February 22, 2012:

"Taiwan-based Foxconn said the pay of a junior level worker in Shenzhen, southern China, had risen to 1,800 yuan ($290) per month and could be further raised above 2,200 yuan if the worker passed a technical examination. It said that pay three years ago was 900 yuan a month."

Let's do the math. $290 a month is $3,480 a year. Assume 20% annual wage hikes, once a year for 5 years. Should that happen, at the end of that time, the salary would be 8,659.35. US minimum wage is $7.25 an hour (not sure what it will be five years from now), but that is about $14,500 assuming a 40 hour work-week and 2 weeks unpaid vacation.

It would take 33% raises every year for five years just to match US wages. Is that likely?

Bear in mind that shipping costs and productivity issues are also in play. This is not simply a wage issue.

ZH: As Spiegel reports, carmaker "Great Wall this week became the first Chinese automobile manufacturer to open an automobile assembly plant inside the European Union in the latest move suggesting the country's carmakers are seeking to establish a beachhead into the European market." Yes, that's right: it is now cheaper for China to make cars in the European Union: "It used to be that European carmakers opened plants to assemble their cars in China. Now the Chinese have turned the tables with the opening of their first factory in Bulgaria, an EU country with low labor costs and taxes.

Mish: Is it really cheaper to build cars in Bulgaria, or is something fundamentally different happening? I suggest the latter, possibly both, but the latter point is critical. China is sitting on huge piles of forex resereves. Those reserves must return at some point. China can either buy goods from Europe, or it can invest in Europe. What better place to invest than in a country with low taxes and low labor costs? The Bulgarian Lev currency is pegged to the euro at €1 = BGN 1.95583. Bulgaria is expected to join the Eurozone by 2015. Whether joining makes sense is debatable, but China sees an opportunity. China also has a need to put euro reserves to work. That need is a mathematical identity. By the way, this is likely a good deal for Bulgaria. It gets badly needed jobs.

ZH: Chinese carmakers are setting their sights on the European and American automobile markets." The ramifications of this landmark development are massive for virtually every aspect of the economy: for domestic labor migration, for inflation, for the trade balance, and certainly for US workers.

Mish: Agreed but for different reasons. This is a necessary part of global rebalancing.

ZH: Bulgaria, the EU's poorest country, is attractive as a labor market because it is an oasis of cheap wages and low taxes. Workers are considered well educated and the country is ideal as the site for a company like Great Wall to launch. Given that wages for factory workers have risen considerably in China in recent years, assembly sites abroad have become increasingly attractive for some manufacturers.

Mish: Exactly. So just how likely are those 33% annual raises for Chinese workers if the trend catches on? How likely are those 33% annual raises regardless?

ZH: So the real question is if Chinese wages can no longer compete with those in a poor EU member, just how high are they?

Mish: $290 a month for junior level workers and I will take a stab at not much higher for senior level workers.

ZH: And how long before China, for so many years a happy mercantilist importer of Bernanke's monetary inflation courtesy of its currency peg, is no longer competitive with ever growing parts of the EU, and then America? Does this mean that China's cheap labor force has pleateaued and the labor migration of peasants moving from the periphery to the cities no longer provides cheap labor? This was the topic of an extended analysis by SocGen from early January (posted here), of which the salient chart is presented below.

Mish: Is that alleged shortage of labor due to inflation and monetary stimulus in China or the US? How much Chinese labor goes into totally unaffordable projects driving up the price of labor? How much of the worker stagnation is simply do to falling export demand? I do not have the answers to those questions but there are multiple explanations for the alleged "shortage of labor". The single most likely explanation however, is unsustainable stimulus and growth, in China.

ZH: Aside from demographics, the macroeconomic implications on foreign trade and capital flows are monumental: most immediately for the US, it puts today's Wal Mart miss in a very different perspective, as it means that China is no longer the source of cheap commoditized produce, which in turn means that the entire discount retail vertical may have entered the secular sunsetting phase.

Mish: For a completely different viewpoint, and a deflationary one at that, please consider Hugh Hendry of Eclectica Discusses Hyperdeflation, Europe, China, and Japan.

ZH: Most importantly, it means that going forward China will have zero tolerance for Fed monetary expansion as any hot money will immediately set off an inflationary forest fire as China suddenly finds itself with absolutely no output gap slack (unlike America which allegedly has more than enough, even though it is really just a secular regression to the mean shift).

Mish: Most importantly, such events are a necessary part of global rebalancing. As a mathematical identity, China's hoard of euros must eventually return to Europe just as China's hoard of dollars must eventually return to the US. The sooner this happens the better. The US and Europe should both embrace Chinese investment. Unfortunately, that is highly unlikely.

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

vineri, 24 februarie 2012

The Math of CRO - Whiteboard Friday

The Math of CRO - Whiteboard Friday

Video Transcription

Why Should You Care?

Who Participates In Online Communities?

Spotting Talent

Starting A New Community

New Life To Old Content

Gamification Over?

Curious for more?

References

West Wing Week's 100th Episode

Seth's Blog : The Trip Advisor tail wagging the real world dog

The Trip Advisor tail wagging the real world dog

More Recent Articles

joi, 23 februarie 2012

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

Pagini

Persoane interesate

Arhivă blog

vineri, 24 februarie 2012

The Math of CRO - Whiteboard Friday

The Math of CRO - Whiteboard Friday

Video Transcription

Why Should You Care?

Who Participates In Online Communities?

Spotting Talent

Starting A New Community

New Life To Old Content

Gamification Over?

Curious for more?

References

West Wing Week's 100th Episode

Seth's Blog : The Trip Advisor tail wagging the real world dog

The Trip Advisor tail wagging the real world dog

More Recent Articles

joi, 23 februarie 2012

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

Pagini

Persoane interesate

Arhivă blog

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