Central Perk

vineri, 26 august 2011

SEOmoz Daily SEO Blog

Posted: 26 Aug 2011 06:42 AM PDT

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.

I find link prospecting to be one of the most time-consuming and challenging parts of link building. In order to build and maintain a natural link profile for your website, your prospecting activity needs to cover a wide range of opportunities and generate the right targets and leads for your project/campaign. So prospecting is usually pretty easy to start off with - run a few Google searches and you've got yourself a set of content-rich websites within your target industry. However, once you’ve gone through this initial list, you realise the challenge that you're faced with.

Here are some of the things we do at GPMD to generate a broader set of quality prospects. Using these practices, we're able to identify a huge selection of relevant, high quality blogs and industry websites within different sectors.

Tip 1: Advanced search queries

Advanced search queries are our starting point. They’re quick, easy to use and they are great for finding opportunities for guest blogging, collaboration projects, sponsorship etc.

Examples of advanced search queries:

Inurl Search (Dental inurl:blog / Dental blog inurl:.co.uk)

These search queries will filter websites with your preferred domain extension or search term within its URL. The above examples will return dental blogs and dental blogs based in the UK.

Exact Phrase Search (Dental “Guest post” / Dental “Write for us”)

These queries (using speech marks to find the exact text) are ideal for finding websites that are either looking for guest bloggers or accept guest blog posts. The above examples will return dental websites that accept guest posts and dental websites that are looking for writers.

Intitle Search (Dental Intitle:Guest Post – Dental Intitle: Advertise)

Searching for specific content within the title helps to filter the pages that are most relevant and also find opportunities by searching for advertising or guest posting opportunities. The above examples will return dental websites that accept guest posts and dental websites with advertising opportunities.

Wildcard Search (Dental “Guest *” blog)

Using the wildcard (*) filters results that contain the exact words within your query and an additional word in the position of the wildcard. The above query will return dental blogs that feature “guest post”, “guest writer”, “guest blog” etc within their content or title (with the second word in place of the wildcard).

Using more than one of these strings within the same search will help to further refine the results and provide very specific prospects for you to use to build links.

Example Query
Example of a query that could be used for finding guest blogging opportunities for a dental website.

Tip 2: Use Twitter tools to find niche bloggers

Building relationships on Twitter is a great way of generating opportunities. By regularly talking to bloggers within your industry, you’re developing an outreach that could be utilised for product launches, obtaining reviews, guest blogging and much more.

Follower Wonk:

Follower Wonk is a great tool that allows you to search through Twitter bios, helping you to identify targets for building relationships or just approaching for link-building.

Follower Wonk

Example: If you're looking to obtain links from dental blogs, you could search for dental blog, dentist blog, dentistry blog and so on. You can then filter the results and order by the available metrics to help find the most suitable people.

Topsy:

Topsy is a very useful tool that lets you search the social web (including blogs). You could search for your brand, niche keyword or web address, find the people who're talking about you or your industry and then get in touch (and hopefully get a link from their blog). You could also search for guest blogging opportunities using things like 'guest blog dentistry' and then approach the website owner/blogger.

These are just a couple of examples, there are literally thousands more tools that can help you find link building opportunities.

Topsy

Tip 3: Look at blogroll and directory links

When you find a really good blog that you would like a link from, don't just contact them and wait for a reply! You should be looking for a links page or a blogroll to find other similar bloggers that could also provide a good link to your website. It is important to remember that not all good blogs are optimised for search, making a lot of them really hard to find – unless you use these kinds of techniques.

Also, when you're looking down at your competitors' links from directories like spammylinkdirectory.com (not a real website), you could be finding a few new opportunities. Chances are that you've already looked through your competitors' links, but you might find different websites that you haven't analysed within these directories, some of which may have some good ideas/links that you could emulate for your website.

Tip 4: Reverse image search

I often hear people moaning about how some blog or website has used one of their images in a post or article – without realising that this is a great opportunity to obtain a really good link! If you come across another website using your image, send them a polite email, compliment their content and website, and just ask if they can add a link to your website as the source of the image. This link-building technique is natural and free – which is why optimising your images and making them freely available is a great way of generating these opportunities. You can search for your web address in Google's new-look image search feature or tineye.com, both will help you to find where your images are being used.

TinEye Reverse Image Search

Tip 5: Use PPC advertising to find advertising opportunities

Running a short-term, low cost PPC campaign is a great way to find link building opportunities. Once your PPC ad is live on lots of related blogs, you can contact the blogger, mention your advert and suggest that you look at other options.

I would recommend complimenting the blog content and asking to submit a few guest posts about your experience within your industry. Then, once you have obtained a number of links, simply turn off the adwords campaign.

Tip 6: Use BuzzStream

I started using BuzzStream (a link-building CRM tool) around three months ago, with the intention of streamlining my link building process, and it has saved me a huge amount of time! BuzzStream does actually have a feature designed to identify link prospects, but I haven't really used it, I am more interested in the BuzzMarker and the BuzzBox.

The BuzzMarker is placed on your bookmark toolbar and it pulls in a huge amount of data with one simple click. This data includes whois information, social media accounts, contact details and even data from key SEO metrics (including SEOmoz data). All of this is then available within the CRM system itself and can be added too or edited at any point.

You can also BCC the BuzzBox email address into emails that you're sending to prospects, which will then automatically add the emails into the CRM.

BuzzStream CRM

Tip 7: Ask questions

Once you have built a relationship (or link) with a blogger or industry professional, why don't you ask them which blogs and news websites they follow? This is a great way of identifying websites that you may not have reached or found otherwise and it will take very little time. If the blogger is a friend of connection of the person who recommended it, you then also have an angle to start contact with.

Tip 8: Use what's already out there

Competitor Analysis:

Looking at the links that your competitors have will provide opportunities and inspiration, but there is a limit to the number of links that you can get. Once you have found new opportunities from your competitors, why don't you look at their links, and then links going to their links and so on? If you're looking at relevant websites, chances are they will have some good links that you can look to emulate.

Old linkbait:

If you're looking to implement an idea or even just get some quick links, looking at what has been done before is a really good place to start.

For example, if you're looking to write a list of the top 50 most influential bloggers in your industry, have a look at those who are featured on the list and check if they link back to the website. If they do link back, they could be an easy win. Also, as your version will be the latest one, it's probably worth contacting the people linking to the previous version and asking them to link to your new release.

Tip 9: Utilise existing relationships

If you're involved within your industry, chances are that you know people that have contacts that have blogs. Well, now is the time to pull in that favour and get the introduction.

If you know people, or know people that know people, make sure you take advantage of the situation, as I can guarantee that your competitors will be doing it.

These links are simple, natural and are difficult for competitors to copy.

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Article Marketing: Mostly A Scam - Whiteboard Friday

Posted: 25 Aug 2011 02:10 PM PDT

Posted by Aaron Wheeler

Article marketing is mostly a scam. Well, wait... some types of article marketing are really scammy. Guest blogging, legitimate article sharing, and similar tactics are great and sustainable linkbuilding practices, but making up terrible article content and passing it off as something people should read or link to is both bad for users and bad for long-term SEO. This week, Rand discusses some of the reasons article marketing is so nefarious and some alternatives that are more user-friendly. Have any alternatives or tactics you're fond of? Let us know in the comments below!

Video Transcription

Howdy SEOmoz fans! Welcome to another edition of Whiteboard Friday. This week we're talking about one of the scummiest, lowdownest, dirtiest, ugliest, messiest, nastiest, no goodnesst things of all in the SEO world, it is called article marketing.

Now, there are some good, authentic, legitimate forms of article marketing. They're usually called guest blogging or guest authorship, guest writing. What article marketing has come to mean in the field that we are in is something just sickeningly awful. So what I want to do today is talk about it a little bit. You can probably feel some of my pain. Then, we can get into it in the comments and talk more. I know one of the issues, too, is that some folks have success with this, especially early on in their careers, and then think, oh, this is how I can do SEO. I can just do article marketing.

Let me first, for those of you who aren't familiar, walk you through how article marketing or article spinning, article republishing is done. Basically, we have our friend here. I don't know, let's call him Fred. Fred is clacking away on his keyboard. He's like, "Oh, you know what? I am going to make a useless, fairly painful to read, crap article about why cats are the best pets, and in that article I am going to link back to pages on my site that are about cat ownership or cat food or whatever it is that I am trying to rank for. Those links are going to pass me some nice juice. They'll go over to my website. That'll be real nice there." But instead of just publishing on my site, I might publish it on my site, but I am also going to either take it with me and submit it to a bunch of article directories, article portals, article resource sites, sometimes they're called article publishers. They have all sorts of different names - article portals or something like that sometimes.

Or even better, I'm going to use the article spinning robot software that I downloaded which will go and submit it to all these different article sites for me. By the way, one of the great features of it is it bypasses the CAPTCHA by reading it or they have special arrangements and it only cost me $299. How can I go wrong? My god! It sounds like an amazing deal. Who wouldn't want to spin their article with Article Spinning Robot 5000 for $300? What a . . . sure, that's totally going to work.

So, once you get your article published up on all these different sites, the goal is, the idea is that hopefully when I search Google for why cats are the best pets, I see hundreds of different results. Oh, look at all these article sites that I submitted to, they're all getting indexed, and that must mean they're passing link juice back to me, and hey some of these article sites have a nice home page PageRank, maybe a 4 or a 5 or even 3. Super exciting. Clearly going to be incredibly valuable and useful for my SEO practices. So the goal is I am going to get these hundreds of sites that are all linking back to me with the anchor text that I have optimized from my article and that's going to help me rank.

You know what the problem is? The thing that sucks about this is that sometimes it works. In fact, sometimes it works for months at a time or even a year or two at a time.

I was just in New York. I was speaking at an affiliate conference event, and there were some people in the room. One of the people there asked me, she said, "You know, Rand, I do a lot of article marketing, and I am wondering, instead of writing unique content pieces, entirely unique, I heard that Google only duplicate content checks the first and the last paragraph. So can I just leave the middle paragraphs the same and produce hundreds of different articles, send them out to all the different sites? Because usually the editors, they don't even have editors or they are crappy. They don't review anything. So, if the first paragraph is unique, they usually accept the article and I can get them reposted. Do you think that will work well?"

I don't even know how to tell you what's wrong with your frame of mind when you ask these questions. It's incredibly frustrating. I tried to be very empathetic and explain, hey, search engines use these Markov chain analyses, they can detect duplicate content, very similar content pretty easily, and these sites tend to be very low quality anyway. She's sort of like, "Well, okay. I hear you, but I did get my rankings up quite a bit when I used the article spinner." It's sort of like, yeah, the problem with all of this stuff, with low quality tactics like this is that sometimes they work in the short term and you have to decide whether it is worth the risks.

Let's talk about a few of those. First off, does Google really want to count those links? Is that what search engineers feel like are going to provide the best results? When I search for something in Google and they say, "Ah, well, you know what, looks like Rand's article on white cats are the best pets, that's been spun on 300 article sites, so he must be the very best resource in the whole world on that topic." Can you possibly imagine a Googler thinking that way? So, instead they're going to be writing algorithms to try and prevent this stuff from working. They do all the time. Some of them fall out of favor. You can see they'll sometimes publicly lose their PageRank, or they won't but they'll lose their ability to pass link juice, or the sites will be completely penalized and they won't rank anywhere in the top 5 or 10 results and your site won't rank anywhere. One day Google just wakes up, does an algorithm change. You wake up in the morning, and boom, all your rankings are gone. You're way down in the penalty box. You go, "What did I do wrong? I've been a good article spinner. How could they do this to me?"

Another big risk is the duplicate content side. If you've submitting any content that you'd actually like to rank for, it's going to be pretty tough because some of these article sites are going to claim it's their own. They're going to earn links to their site more than you're able to earn links to your site. You might be penalized and they stay unpenalized, meaning that they're going to essentially cannibalize the traffic that you could have earned. If you are writing anything really good, you should be wanting to put it on one of two sites - your own 90% of the time, or maybe 10% of the time on a guest posting on another blog, on another website, on a content site, that has great reach, great reputation, that's going to earn you some trust and authority, not just from the links you're going to get. That's not the goal. The goal is to get readership and trust over to your site from real people who enjoy that content.

Of course, the content itself. Most of the time when people are talking about doing article marketing or article spinning, they're talking about the worst quality, lowest junk crap. As you can see with updates like Panda and Big Daddy and Vince a little bit, Google is just getting so much smarter about content analysis, and they're able to determine what matters in a block of text and what actual people like. They use user and usage data to do this now. Trying to game that system with low quality junk is not going to get you very far.

Finally, the thing that I think people forget about the most is they'll spend weeks or months, hours and hours on end, trying to spin the right things and find the right directories and getting their articles submitted here and generating some junky crap over there. I think to myself, imagine, imagine if you were doing something authentic. Imagine if you were doing real high quality SEO and inbound marketing. Imagine if instead of doing that, you got 50 more Twitter followers that day and you shared a bunch of good stuff and you wrote one guest post that maybe only went to one site, but that link lasted for the next 10 years. Imagine what you've lost when you spend time doing this kind of crap.

So, are there some alternatives? I was talking to some people at the affiliate show about the alternatives they are using. They're like, "Yeah, you know, when article marketing stopped working for me, I went with some directory link submission stuff. Then I tried some do follow commenting, and that seemed to work all right." They are sort of like, "Oh, you know, maybe some nofollow comments. That could work as well. It seems like sometimes nofollow comments do work. I'll do some reciprocal link exchanges." No. No. No. No. No. No. No. No. Just no. Okay.

How about you try something, anything real? Real and useful. If you think that you can manipulate the search engines or that search engine optimization, that the practice of improving your rankings and gaining traffic is going to be done through this kind of stuff, you're living a decade ago man. This is not going to work. One of the worst parts about this is that when you do this, the impression you create on users, on visitors who do find you, even if you manage to win . . . let's imagine that you got your content up to number one using article spinning and article robots and article marketing. Good for you. Imagine what's going to happen when I come to your site, I visit, and I am, like, "God, this is totally junky." Then I see a bunch of nofollow comment spam that you've left on the Web, and I see the articles of low quality that you've submitted everywhere. What am I going to think about your brand? How is your conversion rate possibly going to match up to the high rankings that you've achieved? If it doesn't, why are you even bothering? Isn't it so much easier to get 100 visitors and convert 10 of them than to get 10,000 visitors and convert 1 out of 1,000? It always is.

So, I really want to suggest it's not that article marketing is evil. This isn't a moral thing. This is about wasting your time and energy as a marketer and doing things that just detract from our profession.

I hope that you will avoid the classic forms of article marketing and consider some real authentic alternatives. I certainly hope that you'll join me again next week for another edition of Whiteboard Friday. Take care.

Video transcription by Speechpad.com

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West Wing Week: Mailbag Summer Edition 2011

Your Daily Snapshot for
Friday, August 26, 2011

West Wing Week: Mailbag Summer Edition 2011

This week we bring you Mailbag Day, Summer Edition 2011 where we respond to some of your emails and letters. Also this week, the President addresses the situation in Libya, monitors Hurricane Irene, and Vice President Biden travels to Asia to re-emphasize our strong economic and diplomatic ties to Asian nations. Plus, the White House experiences a little shake.

Seth's Blog : The facts

The facts

A statement of fact is insufficient and often not even necessary to persuade someone of your point of view.

[I was going to end the post just like that, but then I realized that I was merely telling you a fact, one that might not resonate. Here's the riff:

Politicians, non-profits and most of all, amateur marketers believe that all they need to do to win the day is to recite a fact. You're playing Monopoly and you say, "I'll trade you Illinois for Connecticut." The other person refuses, which is absurd. I mean, Illinois costs WAY more than Connecticut. It's a fact. There's no room for discussion here. You are right and they are wrong.

But they still have the property you want, and you lose. Because all you had was a fact.

On the other hand, the story wins the day every time. When the youngest son, losing the game, offers to trade his mom Baltic for Boardwalk, she says yes in a heartbeat. Because it feels right, not because it is right.

Your position on just about everything, including, yes, your salary, your stock options, your credit card debt and your mortgage are almost certainly based on the story you tell yourself, not some universal fact from the universal fact database.

Not just you, everyone.

Work with that.]

• Email to a friend •

joi, 25 august 2011

Mish's Global Economic Trend Analysis

Schwab Sues Bank of America, Citigroup for Manipulating LIBOR Rates; IMF Notes that LIBOR Underpins $400 Trillion in Financial Derivatives
Fed’s Hoenig Says "Fed Can't Do It All, No Reason for Operation Twist to Work", Focus Should Shift to Fixing U.S. Fiscal Woes
France, Spain, Italy Extend Bans on Short-Selling; Wasn't this Supposed to be Good News?
Bank of America Surges on Fluff Buffett Deal; German DAX Market Plunges 4% in 15 Minutes; What's Buffett Doing? Bear Market Rallies End on Good News
Reader Seeks Help/Advice on US Housing/Economy; How Far to THE Bottom?

Schwab Sues Bank of America, Citigroup for Manipulating LIBOR Rates; IMF Notes that LIBOR Underpins $400 Trillion in Financial Derivatives

Posted: 25 Aug 2011 06:55 PM PDT

Investment News reports Schwab sues banks for manipulating Libor rates.

Charles Schwab Corp., the largest independent brokerage by client assets, sued Bank of America Corp., Citigroup Inc. and other banks claiming they manipulated the London interbank offered rate, or Libor, starting in 2007 in violation of U.S. antitrust law.

The banks conspired to depress Libor rates by understating their borrowing costs, thereby lowering their interest expenses on products tied to the rates, according to the lawsuit filed Aug. 23 in federal court in San Francisco, where Schwab is based.

The banks "reaped hundreds of millions, if not billions, of dollars in ill-gotten gains," Schwab wrote.

In separate suits in April, three European asset-management firms and the Carpenters Pension Fund of West Virginia sued the banks claiming they manipulated Libor. U.S. and U.K. officials are cooperating in a probe of possible Libor manipulation, a person close to the investigation said in March.

The Schwab suit seeks unspecified damages, which may be tripled under antitrust law. It also includes claims for racketeering and securities fraud.

Did the banks manipulate LIBOR? Of course they did. Proving it may be difficult.

LIBOR stands for London Interbank Offered Rate. It is the rate at which banks would lend top each other.

LIBOR is a rate at which banks say they would lend. However, it can easily be manipulated because it does not represent real transactions.

Previous LIBOR Manipulation Charges

Wikipedia describes previous LIBOR Allegations nicely.

On Thursday, 29 May 2008 the Wall Street Journal (WSJ) released a controversial study suggesting that banks may have understated borrowing costs they reported for LIBOR during the 2008 credit crunch. Such underreporting could have created an impression that banks could borrow from other banks more cheaply than they could in reality. It could also have made the banking system or specific contributing bank appear healthier than it was during the 2008 credit crunch.
For example, the study found that rates at which one major bank "said it could borrow dollars for three months were about 0.87 percentage point lower than the rate calculated using default-insurance data."

To further bring this case to light, the Wall Street Journal released another article dealing with this matter titled "U.S. Probe Presents Dilemma over Libor" on Friday, March 18 2011. The article stated that regulators are focusing on Bank of America Corp., Citi-group Inc. and UBS AG. Making a case would be very difficult because determining the LIBOR rate does not occur on an open exchange. According to people familiar with the situation, subpoenas have been issued to the three banks.
In October 2008 the International Monetary Fund published its regular Global Financial Stability Review which also found that "Although the integrity of the U.S. dollar LIBOR-fixing process has been questioned by some market participants and the financial press, it appears that U.S. dollar LIBOR remains an accurate measure of a typical creditworthy bank's marginal cost of unsecured U.S. dollar term funding."

LIBOR Underpins $400 Trillion in Financial Derivatives

The IMF Global Financial Stability Review states "LIBOR rates are estimated to underpin some $400 trillion of financial derivatives contracts".

That is a direct quote on PDF page 16 if the IMF review. It clearly shows why banks have a huge incentive to lie.

Am I the only one who thinks $400 trillion tied to a made up number is insane? Hells bells, $400 Trillion riding on LIBOR would be insane even if the number was real. Heck, $400 Billion would still be insane.

Here is an interesting snip from PDF page 93 (report page 74) "given the huge outstanding amounts of derivative contracts and other financial instruments linked to term LIBOR and Euribor, these benchmark rates need to be maintained. Although the survey methodologies have been effective at eliminating most biases at the individual contribution level, proposals by the British Bankers' Association (BBA) to increase the number of sampled banks and introduce more aggressive scrutiny of individual bank contributions are welcome."

It is staggering that there can be $400 trillion in derivatives based on LIBOR but there you have it. The number sounds impossible but the Bank of International Settlements shows there were $601 trillion in derivatives as of December 2010.

Of that number $465 trillion was interest rate contracts. For comparison purposes, a mere $65 billion is bet on gold.

Total Over-the-Counter Derivatives

click on table for sharper image

Bear in mind that $465 trillion on interest rate contracts is a "notional" amount. The actual market value of interest rate bets is a mere $14 trillion, and total derivatives a mere $21 trillion.

What a relief!

From the IMF Report ....

Box 2.2. Is the LIBOR Fix Broken?

Market observers have been expressing concerns that some LIBOR contributors submit rates that are too low, particularly when they are facing liquidity constraints (Mollenkamp and Whitehouse, 2008). This is said to be driven by the requirement of the British Bankers' Association (BBA) that all rate submissions be published, and by the fact that banks facing liquidity strains may not want to reveal the higher market rates they are actually being offered.

Box 2.3. The Federal Reserve's Term Auction Facility

In December 2007, the Federal Reserve announced a temporary Term Auction Facility (TAF) that enabled U.S. banks to borrow for four weeks against the wider range of collateral permissible at the discount window.

Conclusions

Short-term funding markets in mature economies have been under stress for an extended period despite extraordinary policy interventions by central banks to widen the availability of secured liquidity. Although interbank lending is no longer the principal source of bank term funding, wide spreads are not simply arising from the method for calculating interbank rates and are principally driven by concerns about banks being in significant distress, with U.S. dollar liquidity strains also representing a significant factor in the euro money market.

Further, evidence of disruptions to bank and near-bank financing markets indicates that the transmission of policy interest rate changes are less certain and reliable. Policy interventions to further broaden access to emergency liquidity may continue to contain systemic risks but are unlikely to resolve the crisis until broader policy measures are implemented.

The paragraphs I highlighted do not exactly match the one sentence Wikipedia found buried in the middle of the report: "It appears that U.S. dollar LIBOR remains an accurate measure of a typical creditworthy bank's marginal cost of unsecured U.S. dollar term funding".

Second Lawsuit in Six Weeks

This is the second LIBOR Lawsuit in the last six weeks. Last month Eldorado Trading Group LLC filed a lawsuit accusing a group of banks of conspiracy. See Trading Firm Accuses Bank of America, JPMorgan, UBS, and Citigroup of Conspiracy to Manipulate LIBOR

I do not think there is collusion here, rather they all lied because it was in their best interest to lie. Did they lie? Of course. Good luck proving it.

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

Fed’s Hoenig Says "Fed Can't Do It All, No Reason for Operation Twist to Work", Focus Should Shift to Fixing U.S. Fiscal Woes

Posted: 25 Aug 2011 01:05 PM PDT

Fed Chairman Ben Bernanke ought to listen to common sense from Kansas City President Thomas Hoenig who says Focus Should Shift to Fixing U.S. Fiscal Woes

Federal Reserve Bank of Kansas City President Thomas Hoenig said there's a limit to how much more the central bank can help the U.S. economy and that the focus should now be on solving the country's fiscal problems.

"We can't do it all," Hoenig, the central bank's longest- serving policy maker, said in an interview with Bloomberg Television that airs today. "We have a problem in this country with debt" and "if we don't turn to the long run, we will be dealing with overnight crises for as far as the eye can see."

"Monetary policy is an important tool, it is a valuable tool, but it is not an exclusive tool," Hoenig said in the interview from Jackson Hole, Wyoming, where the Kansas City Fed is hosting the central bank's annual symposium. Yet "it does not solve all problems."

Hoenig, who has led the Kansas City Fed since 1991, said he would probably oppose the idea of the Fed taking further action to stimulate the economy. He said he still continues to support the central bank's dual mandate for achieving price stability and full employment.

The Fed can use monetary policy to "perhaps nudge the economy in the short run," he said. Yet "whether it has a long-term beneficial effect is of greater debate, something that would have to be debated. I'm not sure more short-run fixes are necessarily good for the economy."

'Operation Twist'

When asked whether he would support action like that of "Operation Twist," the 1961 initiative by the central bank and President John F. Kennedy's administration to spur growth by lowering long-term rates and keeping short-term ones unchanged, Hoenig told Bloomberg Television, "I don't see any reason" why it would work.

"What's the fundamental problem?" Hoenig said. "Is the fundamental problem a yield curve issue? Or is the fundamental problem that the United States and world have too much debt?"

"Would Operation Twist help solve the problem?" he said. "If the answer is yes, go for it. If the answer is no, let's not."

Hoenig Interview

Inquiring minds may wish to play the Bloomberg Interview With Hoenig

The opening part of this interview is a bit of cheerleading for the Fed, not started by Hoenig, but by Bloomberg's Michael McKee.

Crises vs Problems: "Crises are dealt with in the moment, problems are dealt with in the long run. We have a problem. It's time to look to the long run."
Overnight Crises Far as the Eye Can See: "If we do not turn to the long run we will be dealing with overnight crises as far as the eye can see. "
On Monetary Policy: "We need to provide an environment where people can make decisions, where price signals mean something. We can't do it all. Monetary policy is a tool that can't solve every problem in America or the globe today. The Sooner we turn our attention to to the long-term the more adequate will be the solution."
On Stable Prices: "There is nothing inconsistent with stable prices and full employment. Stable prices is a necessary condition for that [full employment] and when you get away from that you introduce instability into the market."
On Full Employment: "Full employment follows a stable monetary policy and a stable fiscal policy. That's an outcome, not an input". Michael McKee "Can you target unemployment with monetary policy?" Hoenig "No, I don't think you can and I don't think you should."
On Savings Rate: "One of the things in this country we have don't for two decades now, we've consistently consumed more than we produced. That is not sustainable. We had a savings rate that was allowed to go to zero, that is not sustainable."
On Policy Choices: "So what are the policy choices going to be to over time allow our economy to become rebalanced, to produce more, to better balance ourselves with the rest of the world?"

This was a stunning interview, far better than anyone might have ever hoped for from a Fed Governor. Bernanke should listen, but he won't. Congress should hear, but they won't. Obama should listen but he won't either.

I would like to hear some political candidates speaking in these exact terms. Sadly other than Ron Paul, most are clueless.

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

France, Spain, Italy Extend Bans on Short-Selling; Wasn't this Supposed to be Good News?

Posted: 25 Aug 2011 11:02 AM PDT

As rumored earlier today France, Spain, Italy Extend Bans on Short-Selling

French, Italian and Spanish stock- market regulators extended temporary bans on short selling introduced this month in a bid to stem market volatility.

Spain and Italy extended their bans through Sept. 30, regulators in both countries said in a statement. France's Autorite des Marches Financiers said its ban could last as long as Nov. 11. The "objective" is to lift the temporary ban on short-selling of financial stocks "as soon as market conditions allow," Spain's CNMV market regulator said.

The three countries, along with Belgium, imposed bans on short-selling of some financial stocks from Aug. 12 in an effort to stabilize markets after European banks including Societe Generale (GLE) SA hit their lowest levels since the credit crisis of 2008. The restrictions cover short selling of shares and equity derivatives in some financial firms.

Wasn't this Supposed to be Good News?

Why yes it was. So was the initial short-selling ban. Was it? Of course not.

Artificially driving out shorts creates air pockets of no support because it does not apply to market makers.

DAX 5 Minute Chart

click on chart for sharper image

I show a 4.8% plunge in about 45 minutes. I can also come up with 3.9% in 20 minutes.

The total top-to-bottom swing was 5.6% after a ridiculous gap up, probably coinciding with "good news" from Buffett. See Bank of America Surges on Fluff Buffett Deal; German DAX Market Plunges 4% in 15 Minutes; What's Buffett Doing? Bear Market Rallies End on Good News for details.

This kind of consistent, heightened intraday volatility is not healthy to say the least. It is a bear market sign, and given that bank stocks are the biggest part of the volatility, it is also a sign of huge bank stress.

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

Bank of America Surges on Fluff Buffett Deal; German DAX Market Plunges 4% in 15 Minutes; What's Buffett Doing? Bear Market Rallies End on Good News

Posted: 25 Aug 2011 09:56 AM PDT

Deal Book says "Buffett to the Rescue Again". Mish says "Hardly".

Everyone is excited Buffet is investing $5 billion in Bank of America. I suggest it may be a ploy.

It's difficult to know if Buffett really likes Bank of America or not. Perhaps he merely believes BAC can honor its dividend commitments. Perhaps Buffett is attempting to stabilize the markets.

Here are questions, the answers to which show Buffett may have other angles than simply believing in Bank of America.

How much Wells Fargo does Buffett hold?
Might not he attempt to change psychology in the banking sector given he is stuffed to the gills with bank stocks?
Remember S&P PUTs Buffett Sold?

Please consider Buffett Invests $5 Billion in Bank of America

Warren E. Buffett comes to the rescue, again.

On Thursday, Berkshire Hathaway, run by Mr. Buffett, announced plans to invest $5 billion in Bank of America, a vote of confidence for the beleaguered financial firm.

The conglomerate has agreed to buy 50,000 preferred shares that will pay a 6 percent annual dividend. Bank of America has the option to buy back the shares at any time for a 5 percent premium.

"I remain confident that we have the capital and liquidity we need to run our business," Bank of America chief executive Brian Moynihan said in a statement. "At the same time, I also recognize that a large investment by Warren Buffett is a strong endorsement in our vision and our strategy."

Buffett did not buy common shares he bought preferred shares. And here are the "temporary results"

JPMorgan rose 4 percent. Citigroup rose 7 percent and Bank of America jumped a whopping 17 percent to a high of $8.80. Many Bank of America shorts were blown out today. An air pocket sits below.

That 17% pop did not last long. Share prices are sinking fast.

Bank of America 60 Minute Chart

DAX Drops 4% in 15 Minutes

Bloomberg reports European Stocks Slide as DAX Drops 4 Percent in 15 Minutes; RWE, EON Sink

European stocks declined, snapping three days of gains, as Germany's DAX Index tumbled 4 percent in 15 minutes amid speculation that regulators planned to impose further restrictions on equity markets.

Futures on the DAX plunged as much as 4.1 percent as a cascade of trades pushed the volume in the contracts to a quarter of the daily average between 3:45 p.m. and 4:15 p.m. in Frankfurt.

"It looks like someone fears the update today from French and Spanish regulators will extend the short-selling ban," said Michael Scholz, executive director for client solutions and derivatives at WestLB AG in Dusseldorf. "It was a strange move selling the DAX futures in 30 minutes. Someone may be preparing their portfolio for tomorrow."

A total of 50,000 contracts exchanged hands in the 30- minute period, according to Bloomberg data. The average volume in the past 30 days was 207,000, Bloomberg data show.
Short-Selling Restrictions

Authorities in France, Spain and Italy all had to decide whether to extend short-selling bans that would have expired over the next 48 hours.

Bear Market Rallies End on Good News Not Bad

Once Again, it's difficult to know precisely what the stock market is reacting to. It may or may not have anything to do with short-selling restrictions.

What I do know is that bear market rallies typically end on good news, not bad news. This fluff maneuver by Buffett, whatever his reasons, is just the kind of seemingly good news that gets sold.

Bank of America is now up 6.44% and sinking fast. It is just this kind of fluff good news that ends bear market rallies.

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

Reader Seeks Help/Advice on US Housing/Economy; How Far to THE Bottom?

Posted: 24 Aug 2011 11:22 PM PDT

Reader "Chris" is seeking advice on the state of the economy and the US housing market. Chris asks.

Hello Mish,

I have been reading your blog for a number of months now and I really appreciate your insights on the global economy. I have a more specific question for you in regards to housing.

We are recently married, 25 years old. My wife and I both have fairly solid jobs and we have a small amount of student loan debt. We currently rent a small apartment and have slowly started looking at housing in the Saint Louis area. While we both would like to upgrade our current housing situation, I get very gun-shy about jumping into such a large purchase, especially with the teetering of the economy. Saint Louis didn't have the large run up in home prices like the coasts have, but there was still a mini-bubble throughout the area.

My concerns are when I read these doomsday scenarios where housing prices collapse and food shortages occur. While I don't think this is the scenario that plays out, it's enough to get me thinking about an event like this and I get extremely cautious.

What I'm trying to ask is for your advice/prediction on where the US is headed where housing is headed and what your vision is as the new normal for housing and living standards.

Thanks for your time, and I really enjoy the blog.

Chris

Has Housing bottomed? If not, when will it?

Barry Ritholtz at the Big Picture Blog chimed in on the housing bottom question back in April, and in response to Barry's post, Calculated Risk chimed in. I will chime in after taking a look at what Barry and Calculated Risk have to say.

Barry posted his projection in Case Shiller 100 Year Chart

click on chart for sharper image

Based on the Upward Slope of Real House Prices Calculated Risk does not think home prices will fall as Barry suggests.

I've argued that "In many areas - if the population is increasing - house prices increase slightly faster than inflation over time, so there is an upward slope for real prices."

Sure - house prices could overshoot to the downside. But the projection on the first graph of close to 25% in further real price declines is probably excessive. Right now the real CoreLogic HPI is less than 5% above the trend line (it could overshoot), and the Case-Shiller national index will probably decline sharply in Q1 too and not be far above the trend line.

Japan Nationwide Land Prices

Here is a recap of how I have called things.

Flashback March 26, 2005: It's a Totally New Paradigm

Here are some excerpts from that post.

Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors says that "South Florida is working off of a totally new economic model than any of us have ever experienced in the past." He predicts that a limited supply of land coupled with demand from baby boomers and foreigners will prolong the boom indefinitely.
"I just don't think we have what it takes to prick the bubble," said Diane C. Swonk, chief economist at Mesirow Financial in Chicago, who was an optimist during the 90's. "I don't think prices are going to fall, and I don't think they're even going to be flat."
Gregory J. Heym, the chief economist at Brown Harris Stevens, is not sold on the inevitability of a downturn. He bases his confidence in the market on things like continuing low mortgage rates, high Wall Street bonuses and the tax benefits of home ownership. "It is a new paradigm" he said.

I called the top of the housing bubble in summer of 2005 based on the Time Magazine Cover "Why We're Going Gaga Over Real Estate" and have been updating the chart ever since, in real time.

When was the US Housing Peak?

Case-Shiller has the peak in summer of 2006. I have it in summer of 2005.

Summer of 2005 is correct. Case-Shiller is a lagging indicator. It shows prices on a delayed basis a quarter old. More importantly, Case-Shiller does not look at condos or new home sales.

In summer of 2005 the condo market bit the dust in many places. Also home builders started discounting heavily. Those discounts did not show up in prices for six months or longer. Instead, we saw incentives such as "free" three-car garages, free granite counter-tops, free cars, etc.

In addition, there were massive fraudulent cash back schemes starting in 2005 that overstated home prices. Thus, contract prices did not reflect real costs to buyers for numerous reasons. Real costs were much lower because of incentives and discounts.

Case-Shiller only looks at resales, and those resales did not catch the action in condos, in cash back schemes, in huge incentives, and fraud.

Where Are We Now?

I think housing in some areas is very close to a bottom. Others areas have more to drop.

No Need for Buyers to Rush In

Even if housing is at the bottom, based on inventory, shadow inventory, and boomer demographics, home prices are not going up significantly for a long time yet, perhaps a decade.

There is certainly no reason for buyers to rush. Moreover, anyone with any uncertainties regarding their employment has no business even thinking about buying now.

The global economy, including the US is headed for recession.

Flashback October 27, 2007: When Will Housing Bottom?

The following charts are from a friend who goes by the name "BC".

click on chart for a much sharper image

Housing Starts 1959 - Present

click on chart for a much sharper image

Those looking for a housing bottom anytime soon are likely to be disappointed.

Note that the current boom has lasted well over twice as long as any other. If the bust lasts twice as long as any other, 2012 just might be a rather optimist target for a bottom.

Please compare the above projections with recent charts by Calculated Risk.

New Home Sales

Housing Starts

Humorous Look at 2008 Bottom Calls

While searching for my housing bottom link from 2007, I stumbled across Rebuttal To SmartMoney Housing Bottom Call from May 2008.

Donald Luskin at SmartMoney is making a case that Housing Prices Near or at Bottom
Today home prices have fallen so much, mortgage rates are so low, and personal income is so high — that homes are more affordable today than at any other time, ever — with mortgage payments on the average home eating up about 40% of income.

With houses more affordable than ever before, why should we expect prices to fall much further from here?

Let's put it in concrete terms — jobs. Since the housing market started coming apart two years ago, jobs in the housing sector — broadly construed, to include everything from bricklayers to mortgage brokers — have already declined by over 1.5 million. That's about 1% of the whole national labor force, and it takes housing employment back to where it was in 2000 before the so-called "housing bubble" even got started. Which begs the question: How many more jobs are there to lose in this sector?

When I proposed 2012 as a possible bottom way back in 2007, many people thought the idea was absurd. Certainly Luskin must have thought so.

Well, here we are, less than six months away, prices still falling, and the economy likely headed for another recession.

2012 may still be an optimistic target for a bottom but we are certainly closer to the bottom now than we were than we were in 2007 or 2008.

Rentership Society

Reader Michael writes ...

Hi Mish

Thought you might be interested in this:

I had a neighbor over for dinner a few days ago. He's a solid homeowner, probably with reasonably high equity. Eventually the conversation turns to business health and the economy, housing, etc. His completely un-solicited comment was, "It's better to rent." I think my jaw hit the floor.

Signs Signs Everywhere a Sign

That is a sign we are far closer to the bottom than the top (look at my chart closely). Indeed some areas likely have bottomed.

Now let's return to reader "Chris".

I have no idea whether St. Louis is one of the areas that has bottomed or not. I can say we are back in conditions where it makes sense to assume in some locations there are reasonable values, perhaps even good values.

However, I repeat my caution: In general, housing prices will not go much of anywhere for a decade even though local conditions can vary widely. There is no need to rush to buy, even if the bottom is in.

My general advise stated last year still applies.

If you want a house and can afford a house
If you are fully prepared for the loss of a job
If you have six months (preferably a year) cash cushion of living expenses sitting in the bank
If you are prepared for reasonable losses (say 15-20% or so) .....

Then buy a house.

I am simply attempting to be realistic. I expect little to no "real" appreciation for a decade in most locations. Yet, residential real estate in good neighborhoods with good schools can easily outperform many other assets, especially the overvalued stock market.

As for food shortages and other hyperinflationist claptrap reader Chris asked about, I suggest people stop reading sites spewing such nonsense.

The irony is that if hyperinflationists are right, hard assets and housing should do splendidly.

Addendum:

Here are some common-sense thoughts from reader "Fedwatcher"

House prices will continue to decline in many high price areas. Some areas have already hit bottom. How do you tell? Well the fundamental value metrics are the cost to rent the house and the cost to build the house. Or rental equivalent and price per square foot. A two by four is a two by four and that cost will rise slowly. Rent is LOCAL and depends on employment. Then there is transaction cost - figure 10% to move from A to B.

Thus, if your attachments to the community are strong and you can see yourself in that house 10 years out, buy. If only 5 years out rent. In all cases you must factor in a long period of unemployment by one of the two incomes. Factor in 1 year at a minimum, that is take the bigger of the two salaries and assume it goes away for a full year. Finally since if you have to sell, it takes time and costs at least 6% to exit, can you afford that hit? You must assume that in today's market that price appreciation is negative in real terms. In some areas it is positive in nominal terms.

Owning has many "hidden costs" such as a new furnace or a new air conditioner or a new water heater or having your place put in a flood zone requiring you to buy flood insurance. Loans have covenants requiring that you have various forms of hazard insurance. If you do not buy it, your lender will and tack it onto the bill.

Realtors only show you an optimistic version of the costs. Realtors also show you houses that you qualify for, but not necessarily houses you can really afford.

An investment in a PC and learning how to use Excel is step number 1. You need to run the numbers.

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

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