luni, 14 septembrie 2015

One Size Does Not Fit All: Driving Conversions Through Audience Analysis - Moz Blog

One Size Does Not Fit All: Driving Conversions Through Audience Analysis

"We need more content."
- Every brand ever, at some point in the history of their company

Having worked as a digital consultant over the past few years, I have been exposed to a good amount of brands in various industries. Some had content teams that consisted of one freelance copywriter, while others had a full-blown crew stocked with designers, videographers, and a slew of writers. Regardless of size, though, when discussing their content needs, there was always one common theme: they thought they needed more of it.

And honestly, my reaction would be something like:

"More content?! Easy! I know just the strategy to get you ranking for all the long-tail keywords surrounding your head term. I'll do a keyword gap analysis, some competitive research, maybe a little trend reporting and come up with 15–20 content ideas for you to send to your copywriter. We'll optimize those bad boys with title tags, H1s, and some not-so-secretly hidden CTAs, and we're done. We'll rank in the SERPs and get the masses to your site. Oh! And we can share this on social, too."

Seriously, I won't lie. That's what I used to do. But then I got sick of blindly going into these things or trying to find some systematic way of coming up with a content strategy that could be used for any brand, of any size, in any industry, that would appeal to any consumer.

So instead of immediately saying yes, I started asking them "why"... roughly 5 times (h/t Wil Reynolds):

1. Why do you want more content?

"Because I want rankings." (Well, at least they aren't trying to hide it.)

2. Why do you want rankings?

"Because I want more traffic." (Okay, we're getting there.)

3. Why do you want more traffic?

"Because I want more brand awareness." (Closer…)

4. Why do you want more brand awareness?

"Because I want people to buy my product." (Ah, here we go.)

5. Why do you want people to buy your product?

"Because I want money." (Bingo!)

Suddenly, it's no longer just "we need more content," but actually "we need the right kind of content for the right kind of audience at the right time in their journey." And that may seem leaps and bounds more complicated than their original statement, but we aren't dealing with the same kind of digital atmosphere anymore—and we sure aren't dealing with the same consumers. Think With Google's Customer Path to Purchase perfectly visualizes just how complex our consumers have become online.

And it doesn't just stop there. At each of these interactions, the consumer will be at a different point in their journey, and they are going to need different content to help build their relationship with your brand. Now more than ever, it is imperative that you understand who your audience is and what is important to them…and then be where they are every step of the way.

Super easy, right? Let's break it down. Here are some ways you can better understand your audience.

Who is your (right) audience?

"If your content is for everybody, then your content really is for nobody."
- Kristina Halvorson, MozCon 2015

While Kristina's entire presentation was gold, that was probably my favorite line of this past MozCon. Knowing who your audience is (and who your audience isn't) is pivotal in creating a successful content strategy. When you're a brand, you have a tendency to fall into the trap of wanting to make everyone your audience. But you aren't right for everyone, which is why you have a conversion rate of 0.02%. You don't need to be the best brand for everyone; you just need to be the best brand for someone…and then see if they have friends.

But I'm not saying you have to go out and do more focus groups, consumer surveys, and personas (although it wouldn't hurt to do a revamp every now and again). Let's work with what you've got.

Analytics

As stated before, it's all about targeting the right audience. Let's say, in this case, the most important people for my business are those that complete a specific goal. Well, I want to find out everything I can about those people and what is bringing them to my site.

To do this, set up a segment in Google Analytics to see only the traffic that resulted in that goal completion:

Add Segment
- Conditions
  - Find your specific goal
  - Change to > or = 1 per session

From there, you can use the demographics functionality in GA to take a deeper dive into that audience in particular:

You can look at age, gender, location, device, and more. You can even look at their interests:

I would also recommend doing this for particular groups of pages to better understand what kind of content brings in users that will convert. You can create groupings based on the type of content (i.e. help articles, branded content, top-of-the-funnel content, etc.) or you can just look at specific folders.

You can also use this segment to better analyze which sites are sending referral traffic that results in a goal completion, as this would be a strong indicator that those sites are speaking to an audience that is interested in your brand and/or product.

Twitter followers

While analyzing your current followers may only help you understand the audience you already have, it will absolutely help you find trends among people who are interested in your brand and could help you better target future strategies.

Let's start with Twitter. I am a huge fan of Followerwonk for so many reasons. I use it for everything from audience analysis, to competitor research, to prospecting. But for the sake of better understanding your audience, throw your Twitter handle in and click "analyze their followers."

Followerwonk will give you a sample size of 5,000, which still gives you a pretty good overview of your followers. However, if you export all of the data, you can analyze up to 100,000 followers. As a cheap beer enthusiast myself, I analyzed people following Rainier beer and was pleasantly surprised to see that I am in good company (hello, marketers).

You can also use Followerwonk to better understand when your audience is most active on Twitter, so you can prioritize when you will post.

Facebook fans

Utilize Facebook insights as much as possible for figuring out which audience engages with your posts the most—that's the audience you want to go after. Facebook defaults to "Your Fans," but check out the "People Engaged" tab to see active fans.

Simon Penson talked about how you can use Facebook to see if your audience has a greater affinity to a certain product/brand/activity than the rest of their cohort at SearchLove last year, and I highly recommend you play around with that function on Facebook as well.

What do they need?

Internal site search

I like to look at site search data for two reasons: to find out what users are looking for, and to find out what users are having a hard time finding. I'll elaborate on the latter and then go into detail about the former. If you notice that a lot of users are using internal site search to find content that you already have, chances are that content is not organized in a way that is easy to find. Consider fixing that, if possible.

I usually like to look at a year's worth of data in GA, so change the dates to the past year and take a look at what is searched for most often on your site. In the example below, this educational client can easily tell that the most important things to their prospective students are tuition prices and the academic calendar. That may not be a surprise, but who knows what gems you may find in your own internal site search? If I were this client, I would definitely be playing into the financial aspects of their school, as it's proven to be important.

Questions

Similar to site search, it's important to understand what questions your customers have about your product or industry. Being there to answer those questions allows you to be present at the beginning of their path to purchase, while being an authority in the space.

Don't hit enter

This is an oldie but a serious goodie, and I still use it to this day. Start with the 5 Ws + your head term and see what pops up in Google Autocomplete. This isn't the end-all be-all, but it's a good starting point.

Use a handy tool

I haven't been able to play around with all of Grepwords' tools and functionalities, but I love the question portion. It basically helps you pull in all of the questions surrounding one keyword and provides the search volume.

Forums

This is a fun one. If you know that there are popular forums where people talk about your industry, products, and/or services, you can use advanced search queries to find anyone asking questions about your product or service. Example:

site:stackoverflow.com inurl:"brand name" AND "product name"

You can get super granular and even look for ones that haven't been answered:

site:stackoverflow.com inurl: "brand name" AND "product name" -inurl:"answer"

From there, you can scrape the results in the SERPs and siphon through the questions to see if there are any trends or issues.

Ask them

And sometimes, if you want to reach the human behind the computer, you have to actually talk to the human. If you are a B2B that has a sales department, have someone on the marketing team sit in on 10–15 of those calls to see if there are any trends in regards to the types of questions they ask or issues they have. If you are a B2C, try offering a small incentive to have your customer take a survey or chat with someone for ten minutes about their experience.

If you are not comfortable reaching out to your current customers, consider utilizing Google Consumer Surveys. After collecting data from GA and other social platforms, you can use that information to hyper-focus your audience segment or create some form of a qualifier question to ensure you are targeting the right audience for your questions.

While Consumer Surveys has its issues, overall it can be a great way to collect data. This is not the platform to ask fifty questions so you can create a buyer persona; instead, pick some questions that are going to help you understand your audience a bit more. Example questions are:

Before purchasing [product], what is your research process?
Are you active on social? If so, which channels?
What prevents you from purchasing a product?
What prevents you from purchasing from a specific brand?
What are your favorite sites to browse for articles?

Side note: I am also a huge fan of testing potential headlines before publishing content. Obviously, this is not something you will do for every blog post, but if I was Zulily and I was considering posting a major thought leadership piece, I would probably want to set up a 2-question survey:

Question #1: Are you a mom?
If yes, question #2: Which of these articles looks most interesting to you?

The great thing about that is you only get charged for the 2nd question if they pass the qualifier round.

Give 'em what they want

Now that you have a better understanding of the kind of people you want to target, it's important that you spend the time creating content that will actually be of value to them. Continuously revisit these research methods as your audience grows and changes.

I rambled on about my favorite techniques, but I would love to hear how you go about better understanding your own audience. Sound off in the comments below, or shoot me a tweet @TheGurbs.

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Seth's Blog : Shouting into the wind

Shouting into the wind

Anything worth shouting about is worth shouting into the wind.

Because if enough people care, often enough, the word spreads, the standards change, the wind dies down. If enough people care, the culture changes.

It's easy to persuade ourselves that the right time to make change happen is when it's time. But that's never true. The right time to make it happen is before it's time. Because this is what 'making' means.

The most devastating thing we can learn about our power is how much of it we have. How much change we could make if we would only speak up first, not last. How much influence we can have if we're willing to to look someone in the eye and say, "yes." Or, "this is our problem, too." Or, "this must stop."

Yes, there's wind, there's always been wind. But that doesn't mean we shouldn't stop shouting.

HT: Jim, Brian, Willie, Jodi, Jacqueline, Don, John, Jo-Ann, Brooke, Casey, Allison and a thousand more...

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duminică, 13 septembrie 2015

Mish's Global Economic Trend Analysis

European Border Controls Return; Is the Schengen Free Movement Treaty Dead?

Posted: 13 Sep 2015 09:52 PM PDT

The Schengen Agreement represents a territory in Europe where the free movement of persons is guaranteed. 26 nations signed the treaty.

The signatory nations abolished internal borders in lieu of a single external border. Common rules and procedures apply to visas, asylum requests and border controls.

The treaty has been under pressure with a huge wave of migrants pouring into Germany, Sweden, Hungary, Italy, and Greece from Syria and other countries.

Last week I noted Denmark Cancels All Trains From Germany.

Today, reader Olivier pinged me with this comment "An Austrian rail company spokesman said trains from Austria to Germany have stopped running."

Confirmation comes from Spiegel article Stopped Trains from Austria to Germany: Refugee Crisis. Trains were not stopped heading the other direction.

"Temporarily" Halted Trains

The above train information from http://fahrplan.oebb.at/bin/help.exe/dn?tpl=showmap_external.

Border Controls Return

Supposedly this is a "temporary" measure until border controls can be reinstated.

Olivier offered this opinion: "I am afraid the Schengen Treaty is dead ("lettre morte", as they say in French). Speaking for myself that was one of the more tangible benefits of the European construction. If that is no more, it's one less reason to hang on to the EU."

Definition of Temporary

Temporary did not last long. A couple hours later the Guardian reported: Germany Reinstates Controls at Austrian Border.

Germany introduced border controls on Sunday, and dramatically halted all train traffic with Austria, after the country's regions said they could no longer cope with the overwhelming number of refugees entering the country.

Interior minister, Thomas de Maizière, announced the measures after German officials said record numbers of refugees, most of them from Syria, had stretched the system to breaking point. "This step has become necessary," he told a press conference in Berlin, adding it would cause disruption.

Asylum seekers must understand "they cannot chose the states where they are seeking protection," he told reporters.

All trains between Austria and Bavaria, the principal conduit through which 450,000 refugees have arrived in Germany this year, ceased at 5pm Berlin time. Only EU citizens and others with valid documents would be allowed to pass through Germany's borders, de Maizière said.

The decision means that Germany has effectively exited temporarily from the Schengen system. It is likely to lead to chaotic scenes on the Austrian-German border, as tens of thousands of refugees try to enter Germany by any means possible and set up camp next to it.

The move comes amid extraordinary scenes at Munich's main train station over the weekend and a growing backlash inside Germany over the decision last week by Merkel, to allow unregistered refugees to enter the country. The numbers exceeded all expectations.

On Saturday, 13,015 refugees arrived at the station on trains from Austria. Another 1,400 came on Sunday morning. The city's mayor, Dieter Reiter, said Munich was "full", with its capacities completely exhausted. Some refugees slept on the station concourse on Saturday night.

Numbers Exceed All Expectations

The only expectations that were exceeded were the expectations of complete economic illiterates. I predicted this well in advance as did anyone else with so much as an ounce of common sense.

EC president Jean-Claude Juncker and Keynesian fools who stated immigration would pay for itself are on top of the list of illiterates.

The Fence

Maizière said Germany had reintroduced border controls for reasons of security but added pointedly that they were also "a signal to Europe".

Germany, Austria and France support Juncker's proposal which would see 160,000 asylum seekers shared out across all 28 EU states. The refugees would be allocated to each country on the basis of its size and wealth.

There has been implacable opposition from other EU states including Hungary, Slovakia, the Czech Republic, Poland and Romania. On Sunday, the Czech prime minister, Bohuslav Sobotka, said: "I think it is impossible to retreat. Our position is firm."

Budapest is racing to complete a fence on its border with Serbia, where 4,330 people crossed on Saturday. On Tuesday, it introduces tough laws which make crossing the border punishable with jail.

Greek authorities said on Sunday that 28 people drowned, half of them children, when their wooden smuggling boat capsized in the Aegean sea. The incident happened before dawn off the Greek island of Farmakonisi. The Greek coastguard pulled 68 people out of the water. Another 30 managed to swim to land.

The CSU, the Bavarian sister party to Merkel's Christian Democrat CDU, has accused the chancellor of making an "unparalleled historical mistake" in opening Germany's borders. On Sunday, Christoph Hillenband, the president of Upper Bavaria, said the system for dealing with refugees was close to collapse, with 63,000 people arriving in Munich since late August.

As I have stated on numerous occasions: "There is an unlimited demand for free services, free food, and free shelter". Recent drownings, passport theft, and passport forgery is proof enough.

Upping quotas as Merkel proposes is not the answer, because as we have seen, numbers will easily surpass expectations.

Mike "Mish" Shedlock

China Announces SOE Shakeup: Too Little Too Late to Matter

Posted: 13 Sep 2015 11:00 AM PDT

What are SOEs? Who Benefited From Them?

SOEs are State Owned Enterprises. The SOEs made millions for the people who controlled them, largely corrupt local politicians along with the politicos friends and associates.

The SOEs also created jobs, but did so at huge expense: By taking productive land from farmers, by massive pollution, vacant cities and malls, forced migration, and an untenable reliance on fixed investment growth.

Overcapacity is rampant. We now see the effects in steel and cement production, crashing commodity prices, capital flight, and a plunging stock market.

China Announces SOE Shakeup

As a proposed remedy to this mess, China Plans Shake-Up of State-Owned Enterprises to Boost Growth.

China has unveiled the much-awaited guidelines for reform of its bloated state-owned enterprise sector as the latest official data show its economy continuing to slow.

The guidance from the State Council, China's cabinet, calls for a shake-up of SOEs with share sales and management changes planned to reduce losses and improve efficiency, reported Xinhua, the official news agency, on Sunday.

"The guidelines suggest that by 2020, the goals in all the main reform areas should be accomplished, constituting a system that is more suitable to the nation's socialist-market economy," said Xinhua. "The SOE system should be more modernised and market-oriented. It should make for higher economic vitality, higher control, greater influence and SOEs will be more risk-resistant."

China has more than 155,000 SOEs, employing tens of millions of people in all sectors from banks to hotels and airlines to oil refiners. But while the vast majority are managed by local governments, there is a core of more than 100 large nationally strategic groups, including ICBC, the world's biggest bank by assets, and China Mobile, the world's biggest network by subscribers, controlled by Beijing.

The State Council said that SOEs would be classified as either playing a social or commercial function, to better integrate them with the market economy.

The government will then "actively introduce different investors" and push SOEs for public share sales, although most analysts believe that wholesale privatisations are highly unlikely.

Analysts at ANZ argued last week that this round of SOE reform could be a "game-changer" in China's economic development.

But they warned that "SOE reform will still be a gradual process" and it is "unlikely that the government will relinquish its tight control and involvement over the SOEs, especially those in strategically important sectors".

Game-Changer Not

Color me totally unimpressed. This is not a game changer, it is an effort to hide the fact the SOEs are for the most part bankrupt.

China would not need to "actively introduce different investors" if the SOEs were solvent corporations. Instead, it's pretty clear China hopes to transfer massive malinvestment losses to the public. China need fools to bail out the system.

Classification Shell Game

One has to laugh at the notion "SOEs would be classified as either playing a social or commercial function, to better integrate them with the market economy".

Really? How the hell is reclassifying businesses as to social or business function going to do anything?

Instead, I propose classifying SOEs as viable or nonviable. Next, nonviable businesses should close and viable businesses privatized.

My proposal might actually be a game-changer, but it's not going to happen because it would result in an immediate slowdown at expense of the local politicians who do not want to give up the gravy train.

Michael Pettis Chimes In

I mentally penned the above while reading the article. Towards the end of the article, Michael Pettis at China Financial Markets offered a few similar thoughts.

"What China needs to do is transfer wealth from the state to the household sector, for example by lending more to private enterprises and less to SOEs and local governments. But it's tough to do so because it means taking away resources from those that have benefited over the last two or three decades," said Pettis

Pettis added "Xi's administration has inherited a country with deep imbalances and enormous amounts of debt. There's no precedent in history for a country resolving those issues without a significant slowdown."

China's "Socialist-Market" Goals

Hide SOE losses
Reform SOEs without privatizing them
Prop up the stock market
Reduce fixed investment
Float the Yuan
Manage the range of the Yuan
Stop capital flight
Not have a slowdown

Conflicting Goals

China's goals are incompatible with reality. Huge writeoffs are coming on SOE assets, as is a huge slowdown in GDP, if not an outright contraction in growth.

The sooner that happens, the better off China will be. China seeks a miracle, but a miracle isn't coming.

Instead, expect a strongly renewed witch hunt for scapegoats when growth slows.

Mike "Mish" Shedlock

Seth's Blog : Another chance to start over

Another chance to start over

Every day that you begin with a colleague, a partner, a customer... it might was well be a fresh start.

There's little upside in two strikes, a grudge, probation. When we give people the benefit of the doubt, we have a chance to engage with their best selves.

If someone can't earn that fresh start, by all means, make the choice not to work with them again. Ask your customer to move on, recommend someone who might serve them better.

But for everyone else, today is another chance to be great.

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sâmbătă, 12 septembrie 2015

Mish's Global Economic Trend Analysis

Raging California Wildfires Force Evacuations; Governor Brown Declares State of Emergency

Posted: 12 Sep 2015 08:28 PM PDT

California remains a tinderbox due to drought conditions.

Fires rage in multiple places and Governor Brown has declared a state of emergency with a new fire about to consume San Andreas, a town 60 miles East of Sacramento.

The Guardian reports Explosive Wildfire Threatens California Mountain Towns as Blaze Intensifies.

A mountain town is standing by to evacuate on Saturday and residents across a huge swath of northern California have been warned of "explosive fire conditions" as a fierce wildfire across more than 100 square miles suddenly intensified.

California governor Jerry Brown has declared a state of emergency for the counties experiencing the inferno, as it approaches the town of San Andreas, about 60 miles south-east of Sacramento in the Sierra Nevada region.

Some homes have been engulfed and thousands are threatened with imminent destruction in the path of flames that are spreading over steep landscape.

The gradients help the fires grow by sending heat up slopes and increasing ground temperatures ahead of the flames while making it extremely difficult for the emergency services to tackle the blaze.

A blaze that covered one square mile on Thursday quickly burned more than 100 square miles and was only 5% contained by Friday evening. By Saturday afternoon, firefighters had gained some ground and containment had increased to about 10%, fire officials said.

Meanwhile, in central California between the city of Fresno and the Kings Canyon National Park, firefighters are digging trenches to try to stop wildfires reaching a growth of ancient giant sequoia trees in the Sierra Nevada, where the towering specimens are often found to be 3,000 years old.

The Grant Grove of sequoias is named for the majestic General Grant tree in its midst, which is 268 feet tall. Lightning caused a fire more than a week ago that has now spread to an area of 40 square miles.

The Guardian has many images. This is the lead image.

A house burns as the Butte fire rages through Mountain Ranch, California, on Saturday. Photograph: Noah Berger/Reuters

Mike "Mish" Shedlock

What the Hell is the US Mission in Syria? Perverse Wisdom

Posted: 12 Sep 2015 11:04 AM PDT

Now that the US has destabilized Iraq and Syria, and a four-way battle over both countries is underway, I have a simple question: What the hell is the mission?

In Iraq, Isis, the Kurds, the Shia, and the Sunni all fight for portions of the country. In Syria, there are pro-Assad forces, Al-Qaeda rebels, and Isis fighting over a badly splintered country.

The US backs Syrian Al Qaeda rebels (many of whom eventually defect to Isis).

Did I say four-way battle? Maybe I should have said five- or six-way battle. Russia is now in the picture. And there's always room for more.

Lebanon is tired of hosting millions of refugees. Perhaps it gets into the act. And of course Iran wants to fight Isis, but the US does not want that kind of help because Iran supports Assad.

Russia Seeks US Cooperation in Syria

Please consider Russia Calls on US to Cooperate with its Military in Syria.

Russia has called on the US to co-operate with its military in Syria to avert "unintended incidents" as Moscow boosts its forces in the war-torn country in what Russian foreign policy officials say is a bid to lead the battle against the Islamic State of Iraq and the Levant (Isis).

John Kirby, state department spokesman, said that he did not know what Mr Lavrov was referring to when he talked about possible "unintended incidents".

[Duh! How about US-backed rebels fighting Assad, accidentally shooting at Russian or Iranian backed forces attacking Isis? Was that really so hard to figure out John?]

"We would welcome constructive efforts by Russia against Isis, but that cannot be a function of continued support to the Assad regime," Kirby said. "The most productive thing that they can do is to stop aiding the Assad regime."

Top Priority

With that statement, Kirby, just emphatically explained the US number one priority: Getting rid of Assad is far more important than stopping Isis. The US even backs Al Qaeda in that mission under the perverse description "moderate rebels".

Please recall that the US took out Saddam Hussein on a blatant lie about weapons of mass destruction, but also on a secondary lie that Hussein backed Al Qaeda.

Al Qaeda is now our friend (until of course they get in control, then we will want Al Qaeda out as well).

Meanwhile, a squadron of five Russian naval ships equipped with guided missiles has also set off to conduct maneuvers in Syrian territorial waters, a source close to the Russian navy told Reuters news agency on Friday.

Accidents can happen.

Let's Be Realistic

Financial Times writer David Gardner says We Must be Realistic about Intervention in Syria.

I certainly agree with that headline idea, and also with Gardner's statement "Alongside revived talk from London to Ankara of intervention in Syria, there is no clarity of aim."

Unfortunately, Gardner quickly provides clarity in support of the "perverse top priority".

"It is important to get away from the perverse received wisdom that the only way to fight Isis is to lay off the Assads. That is a mirror image of the hopeless choice facing millions of Syrians, caught between the barrel bombs of the regime and the barbarian savagery of Isis. Mr Assad has used total and sectarian war to create the self-fulfilling conditions whereby he would be seen as the only alternative to jihadism," says Gardner

Perverse Wisdom

The perverse wisdom is there is such a thing as "moderate Al Qaeda rebels".
The perverse wisdom is that Iraq can stay in one piece.
The perverse wisdom is that Assad gets all the blame for the mess in Syria.
The perverse wisdom is that the Kurds should not have their own country.
The perverse wisdom is the US should refuse help from Iran and Russia to contain Isis.
The perverse wisdom is the "House of Saud" is our friend.
The perverse wisdom is Iran must remain an enemy.
The perverse wisdom is the US should be nation building at all in this region.

Gardner concludes "Does Tehran want full control of a pariah enclave — or more realistic influence in a Syria with which its neighbours can live? As the Assad realm shrinks, it may have to decide."

It seems to me the US ought to be asking the question "As the Assad realm shrinks, do we really want Al Qaeda or Isis in complete control of the country?"

Nation Building

Let's reiterate the key "perverse wisdom" point: The perverse wisdom is the US should be nation building at all in this region.

We are in this four to six-way mess precisely because of the perverse wisdom the US needed to get rid of Hussein in a nation-building mission in Iraq.

By all means, David Gardner, "We Must be Realistic about Intervention in Syria".

And it's perverse wisdom to expect better results nation building in Syria than we achieved nation building in Iraq.

Mike "Mish" Shedlock

Seth's Blog : Will this be on the test?

Will this be on the test?

The test, of course, offers nothing but downside. No extra credit, just points marked off. The test is the moment where you must conform to standards, to say what is expected of you.

Perhaps a better question is, "Will this be in the Playbill?"

The Playbill is the little program they hand out before the Broadway musical. The Playbill is all about extra credit, about putting on a show, surprising, elevating, doing something more than people hoped for.

A different part of our brain is activated when we think about what's possible as opposed to what's required.

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vineri, 11 septembrie 2015

Mish's Global Economic Trend Analysis

Apocalypse Illinois: IOUs Projected to Hit $10.5 Billion, $163 Billion Total Accumulated Liabilities
China's Art of Propaganda: Future So Bright You Need Sunglasses Inside
CME Fedwatch and Bloomberg Rate Hike Odds Still Wrong; Deflationary Bust Coming

Apocalypse Illinois: IOUs Projected to Hit $10.5 Billion, $163 Billion Total Accumulated Liabilities

Posted: 11 Sep 2015 12:33 PM PDT

Flat Out Broke

Illinois is in serious fiscal trouble. Unpaid bills will hit about $10.5 billion later this year, counting unpaid lotto winners and state university bills.

Lotto is a small problem overall, yet symbolic of the mess the state is in.

Because Illinois has no current budget, the state does not pay lotto winners. Instead it sends the winners IOUs. Yesterday, two Illinois lottery winners filed a class action lawsuit over unpaid prizes.

Promises, Promises

Unpaid bills do not count additional promises that politicians seek. For example, Chicago Mayor Rahm Emanuel wants a half billion dollars from the state to shore up the Chicago school budget.

Where is that supposed to come from?

The list of "wants" is endless; the reality is "Illinois is flat out broke".

When will multiple downgrades from Moody's, Fitch, and the S&P hit the overall state, not just the city of Chicago?

Drowning in Red Ink

In a big understatement of Illinois' problem, a Crain's Chicago headline reads Illinois IOUs Growing Fast, Could Pass $8.5 Billion by Yearend.

Slowly but surely, Illinois government is beginning to drown in red ink, State Comptroller Leslie Munger said today, as the cost of the continuing Springfield budget war steadily worsens the already bad condition of state finances.

Without legislative action to adopt a balanced budget, the state's backlog of unpaid bills will hit $8.5 billion in December—not counting an additional $4 billion in spending for state universities, lottery winners and other purposes that has been indefinitely deferred, Munger said.

If the bill backlog indeed hits $8.5 billion in December—and you include half of that $4 billion in other spending, since December is the midpoint of the state's fiscal year—that would put the cumulative backlog at what appears to be an all-time high of $10.5 billion.

As best as I can tell from consulting with state finance insiders, the highest the backlog ever reached in non-inflation-adjusted dollars was in 2010, early in the days of the Pat Quinn administration, when it hit $9.9 billion.

Humorous Solution

My favorite comment to Crain's article comes from "Earl" who sarcastically asks "Why not try not spending money the state does not have?"

Indeed. Let's try that. Well, actually Illinois has been doing that for years. And bad as $10.5 billion sounds, it's but a small drop in the cumulative bucket.

Apocalypse Illinois

Drum roll please: In January, Illinois' total cumulative liability was $159 billion.

Counting $4 billion in spending for state universities, lottery winners, etc., the total cumulative liability is on the order of $163 billion today, and growing more rapidly than ever.

A study released this past January called "Apocalypse Now" discusses the "Consequences of Pay-Later Budgeting in Illinois".

Deficit Spending

IOUs

The stack of IOUs. The term "legacy costs" is sometimes used to describe obligations to pay for services purchased by the state in previous years.

Figure 1 shows that the state of Illinois has run deficits in every fiscal year since 2001. A portion of these shortfalls were covered by asset sales and other one-time revenue sources, but most were covered by some form of borrowing. We look first at the total value of these legacy costs in Illinois, separated by type:

Pension obligation bonds. Illinois issued bonds in FY 2003, 2010 and 2011 to cover scheduled contributions to its pension funds. At the end of FY 2015, the remaining principal on these bonds will be $12.7 billion.
Unfunded liabilities for pensions. As of the end of FY 2014, the state of Illinois' five retirement systems had assets to cover only 42.9 percent of liabilities, leaving an unfunded liability of $104.6 billion.
Unfunded liabilities for retiree health costs. As of the end of FY 2013, the state had unfunded liabilities for retiree health costs of $34.5 billion.
Short-term inter-fund borrowing in FY 2015. Authorizing legislation for FY 2015 permits the General Funds to borrow $650 million from other funds to be paid back within 18 months.
Unpaid bills. As of December 2014, unpaid bills for services already provided to the state totaled $6.5 billion.

The total value of these obligations to pay for past deficits is $159 billion.

Budget Gap

Figure 2 shows a projected deficit of $9 billion for FY 2016 to 2022.

Illinois is projected to have total sustainable revenue in FY 2016 of $65 billion, but a much smaller amount represents state-controlled revenue. If we eliminate federal grants, health provider fees (linked to Medicaid spending), and the portion of sales, income, and other taxes transferred back to local governments, the state's own share of total revenue in FY 2016 is only $36.3 billion.

The $9 billion deficit represents 25 percent of that revenue. Raising all of Illinois' taxes and fees by 25 percent would be extremely difficult politically.

Crowding Out

Pay-later budgeting has been perpetuated by a political willingness to ignore the fact that every dollar borrowed to pay the bills in one year must be paid back with interest, thus crowding out what the state can spend on other priorities in future years.

Illinois' fiscal problems are huge, structural, and escalating quickly. The state's deficits cannot be eliminated by quick, temporary fixes, or by waiting for the economy to grow.

Digging out of our accumulated fiscal problems also requires changes in awareness and expectations.

Being saddled with paying off IOUs for past years' bills means that Illinois' citizens must reduce their expectations for the services that they can expect from government and be prepared to pay more for government now and in the future. Decision makers need to understand — and act on — the fact that pay-later financing hurts the state's residents and businesses in future years.

Estimating Crowding Out Effects Not Included in the Fiscal Futures Model

Some of the legacy costs detailed above have pay-off schedules and are included in the deficit projections, but others do not. The lack of a pay-off schedule can conceal but does not change the fact that legacy liabilities will crowd out other spending. In order to illustrate the magnitude of those "hidden" effects of past deficits, we use the Fiscal Futures Model to simulate of effects of specified pay-off schedules for the "hidden" liabilities.

Figure A1 shows the result of adding these three payment schedules to the Fiscal Futures Model.

Accumulated Debts Per Capita

The US Census Bureau reports the Illinois population is on the order of 13 million and growing slowly if at all.

The accumulated bill amounts to $12,538 per every man, woman, and child. But children don't pay bills or taxes.

So let's do the calculation based on the census estimate of 4,772,723 households. That accumulated bill amounts to $34,152 per household.

Problem Understated

I propose the Apocalypse Now study hugely understates Illinois problems.

What About?

What about aging infrastructure?
Boomer demographics?
Chicago schools?
Business flight?
Taxpayer flight?
Bond downgrades and higher borrowing costs?
Untenable pension plan assumptions?
Possibility of a significant stock market decline?

Sobering View

I discussed point eight in detail on July 21 in SuperBull Club: RBC Ups Morgan Stanley, Says Bull Market to Continue 6 Years; Sobering Alternative View from GMO.

Sobering Alternative View from GMO

In contrast, to the SuperBulls, I present the 7-Year Real Return Forecast of GMO.

*The chart represents real return forecasts for several asset classes and not for any GMO fund or strategy. These forecasts are forward‐looking statements based upon the reasonable beliefs of GMO and are not a guarantee of future performance. Forward‐looking statements speak only as of the date they are made, and GMO assumes no duty to and does not undertake to update forward‐looking statements. Forward‐looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. Actual results may differ materially from those anticipated in forward-looking statements. U.S. inflation is assumed to mean revert to long‐term inflation of 2.2% over 15 years.

Rain on the SuperBull Party

Note that GMO expects negative real returns in US stocks, on average, for a full seven years.

I hate to ruin a SuperBull party with forecasts that have been historically among the best in the world, but so be it.

Reforms, Not Tax Hikes

Tax hikes are not the answer. Tax hikes will just cause more Illinois taxpayers and businesses to flee. Business exodus is already a serious problem. For details, please see Get Me the Hell Out of Here.

Massive reforms are the only thing that can possibly save this state.

Meanwhile, Debt downgrades from Moody's, Fitch, and the S&P are just around the bend, and deservedly so.

Mike "Mish" Shedlock

China's Art of Propaganda: Future So Bright You Need Sunglasses Inside

Posted: 11 Sep 2015 12:10 PM PDT

The future of China is so bright you need to wear sunglasses inside to see.

That's the essence of recent propaganda from China, where the state promotes good lies with discussion of the bad truth strictly forbidden.

Please consider Don't Fret About the Data, China's GDP Forecast to be Good News.

"The focus for the month of September will be strengthening economic propaganda and . . . promoting the discourse on China's bright economic future and the superiority of China's system," the party's propaganda department said in a directive to national media outlets.

A photograph of the latest directive was posted online by California-based China Digital Times, which monitors Chinese media and internet censorship. "They want to control how the media frames and interprets [economic data], making sure that they all focus on positive things," said Xiao Qiang, CDT founder.

CDT also posted a notice from the chief editor's office at the Xinhua news agency, dated September 7, that reiterated the need to "stabilise expectations and inspire confidence". The Xinhua notice instructed staff to "please plan related reporting" and send their story ideas to the agency's Creative Planning Center.

This week, Chinese leaders went on a public relations offensive, having stayed largely silent during both a controversial stock market intervention launched in July and last month's "one-off" devaluation of the renminbi.

China's central bank remained silent for two days after devaluing the renminbi 1.9 per cent against the dollar on August 11 and adjusting its mechanism for setting the currency's daily dollar "reference rate".

David Bandurski, at the University of Hong Kong's China Media Project, said it was rare for the propaganda department to issue written rather than oral directives for fear they might leak. "Economic troubles have been a focus of concern in the party's news and propaganda work lately," he added. "The content of these purported propaganda instructions fits with what official state media have been pushing for the last few months."

An official whose name and phone number appeared on the Xinhua notice declined to comment. The party propaganda department could not be reached for comment.

Say the right things and you move up the party line. Say the wrong things and you are put in prison or shot.

China has no human rights, appalling property rights, illiquid bond markets of insufficient size, and a pegged currency it can no longer control smoothly. Capital controls round out the mess.

Yet, people think the Yuan will "soon" become the world's reserve currency, replacing the US dollar.

I have heard these yuan reserve currency "soon" stories for at least a decade. What a joke.

Mike "Mish" Shedlock

CME Fedwatch and Bloomberg Rate Hike Odds Still Wrong; Deflationary Bust Coming

Posted: 11 Sep 2015 01:56 AM PDT

As of September 10, the CME has the odds of a September hike by the Fed at 24%. Bloomberg says the probability of a move is 28%.

Bloomberg Rate Hike Odds

CME Fedwatch Odds

Both Models Wrong

What's wrong with both models is they still presume a quarter point hike.

Neither Bloomberg nor the CME allows for the possibility of a Fed hike to precisely 0.25% or to a smaller tighter range.

Given the effective Fed Funds Rate is 0.14% (see upper right of Bloomberg chart), resetting the rate to a flat 0.25% from the current range of 0.00-0.25% (now at 0.14%), would be both a "move" and a "hike".

Tighter Range

The Fed could also use ranges as Bloomberg and CME imply, but target ranges in 1/8 of a point increments rather than 1/4 point increments.

For example the Fed could target a range of 0.25% to 0.375%.

I suspect the odds of a move to a flat 0.25 or a range (0.25% to 0.375%), are far greater than Bloomberg's "probability of a move" set at a mere 28%.

I went over this before, on August 19, in Plotting the Fed's Baby Step 1/8 Point Hikes; Yellen vs. Greenspan "Measured Pace".

I updated my charts today.

Flattening of Rate Hike Expectations

Using Fed fund futures from CME, I calculated implied interest rates through December 2017. The line in Blue shows what futures implied on August 19. The line in red is from September 10.

Note the flattening of the curve. This has been happening pretty much all year.

The market initially penned in hikes for January. The hikes then shifted to March, then June, then September, and now December by both the Bloomberg and CME models.

Range Watch

Curve Watchers Anonymous is closely watching the implied baby steps in the Fed fund futures. Incrementally, the hikes appear as follows.

Month	Fed Funds Future	Rise in Implied Rate
Aug-15	99.863
Sep-15	99.835	0.028
Oct-15	99.805	0.030
Nov-15	99.765	0.040
Dec-15	99.720	0.045
Jan-16	99.685	0.035
Feb-16	99.645	0.040
Mar-16	99.610	0.035
Apr-16	99.560	0.050
May-16	99.520	0.040
Jun-16	99.480	0.040
Jul-16	99.435	0.045
Aug-16	99.385	0.050
Sep-16	99.350	0.035
Oct-16	99.295	0.055
Nov-16	99.230	0.065
Dec-16	99.170	0.060
Jan-17	99.135	0.035
Feb-17	99.055	0.080
Mar-17	99.020	0.035
Apr-17	98.970	0.050
May-17	98.915	0.055
Jun-17	98.875	0.040
Jul-17	98.830	0.045
Aug-17	98.780	0.050
Sep-17	98.740	0.040
Oct-17	98.700	0.040
Nov-17	98.650	0.050
Dec-17	98.615	0.035

Baby Steps Plotted

Fed fund futures imply a very slow tightening of 3-6 basis points a month. The only exception is January to February of 2017 where the incremental rise is 8 basis points (0.080 percentage points).

The Fed does not set policy every month. Instead it does so about eight times a year. FOMC dates are not yet set for 2017, but futures imply something like the following.

Fed Rate Hike Expectations Through 2017

Yellen vs. Greenspan

The above market expectations are clearly similar to Greenspan's famous statement: Hikes will be at a "pace that's likely to be measured".
The Yellen expected "pace" is half as often.
The Yellen expected "measure" is half as much.

Just Get On With It!

Via email, Albert Edwards at Society General writes:

The clamour for the Fed not to enact the long-awaited ¼% rate hike next week is growing by the day. Misgivings come not just from reputable mainstream commentators, but now also the World Bank has repeated the IMF's recent words of caution in advising delay. What a load of nonsense! My esteemed colleague Kit Juckes characterises the current consensus thinking as "If the Fed hikes, pestilence, plague and never-ending deflation will follow." Well even those like me who see a deflationary bust awaiting think the Fed should hike next week – because the longer you leave it, the bigger the financial market excesses become, and the bigger the risk of financial dislocation and global recession ensuing. Have we learned nothing from the 2008 Great Recession? Just get on with it!

Exactly!

A deflationary bust is coming and there is nothing the Fed or any central bankers can do about it.

And when the bubble busts, Paul Krugman, Larry Summers, the World Bank, and Christine Lagarde at the IMF will all be singing the "I told you so" tune.

The irony is Krugman, Summers, the World Bank and the IMF are all wrong. The seeds of the upcoming deflationary bust were planted, watered, and over-fertilized by central bankers everywhere, all in the asinine name of "price stability" and deflation fighting.

For further discussion on the sheer ridiculousness of price stability policy, see Cross-Border Deflation: US Export Prices Collapse Most Since July 2009; How Damaging is Price Deflation?

Mike "Mish" Shedlock

luni, 14 septembrie 2015

One Size Does Not Fit All: Driving Conversions Through Audience Analysis - Moz Blog

One Size Does Not Fit All: Driving Conversions Through Audience Analysis