Central Perk

joi, 6 ianuarie 2011

SEOmoz Daily SEO Blog

Duplicate Content: Block, Redirect or Canonical

Posted: 06 Jan 2011 03:43 AM PST

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

Duplicate content in SEO has been around for quite some time and even if Google has been saying they have been getting smarter and smarter in figuring out the best page to display in the SERPS from a list of duplicate content pages. They claim that it is something less to worry about today, than before. But knowing this issue exist, they give advice from various places, also in support threads, employee blogs, webmaster help videos, and many other places on how we should fix this issue. Some say simply block your duplicate content pages, some say redirect them. Maybe there is no 1 rule that best fits all situations, so I decided to enumerate the various ways to fix duplicate content issues, the differences so you can draw you own advantages and disadvantages to help you judge which method is the best to use for your specific situation. So let's go ahead and review each one.

Blocking in Robots.txt

Probably this is one of the most common suggestion used by many people, including several people from Google. This is also one of the oldest recommendations in the book and is probably outdated since there are many other things you can do today.

This would work in eliminating duplicate content. Search engine bots will see the robots.txt file and when it sees to exclude a URL of the hosted domain name, this URL is no longer crawled and indexed. Having said that, the only problem in using robots.txt in eliminating duplicate content is some people may be linking to the page that is excluded. That would prevent these links from contributing to your website's search engine ranking.

Using the Meta Robots: NoIndex/Follow tag

Another way to eliminate duplicate content, is to use the Meta Robots tag noindex/follow:

<meta name="robots" content="noindex,follow" />

The rationale behind using this tag is the noindex value is telling search engines not to index the page, thus eliminating duplicate content. And the follow value is telling search engines to still follow the links found on this page, thus still passing around link juice. The problem is there are still some people that believes this does not work. Once it's noindex, most probably it is automatically nofollow as well, but then again, why was the value nofollow and follow invented for the robots meta tag if you are not given the power to separate this out from the index and noindex? Crawled or not, this has to be tested out. I believe Rand has taken Google's word for it that this tag works. Upon searching around for people that tested this with anchor text using unique words, I found Scott M. Clay from UK doing some test. Well for me, for some reason, can never be satisfied by results and post by other people including Matt Cutts statements sometimes. And the only reason why I haven't tested this myself for a long time was there are just many other alternatives in fixing duplicate content that I didn't find the need to really know how search engines really treat this noindex/follow tag. But if any of the readers has done a good test on this, maybe you can publish your results here and also say how you did your test.

The 301 Redirect

A lot of people in the industry love the 301 redirect to fix duplicate content. Because so many people have tried it out and many know it works. It has also been abused in many shady ways too, but that's not my topic. So what really happens in a 301 redirect in treating duplicate content?

The nice thing about this compared to the two methods above is we are really sure based on statements from the respective search engines, as well as testing by numerous people (which probably includes you, the reader of this blog), knows that a link going to a page that 301 redirects will be considered as a link of the destination page of the redirect. This seems like the ultimate fix to all duplicate content issues, but actually, there is also a good reason to use the next methods I will mention.

This blog post though is not about how to do 301 redirects but if ever just in case that is what you were searching for, 301 redirects can be done on the webserver software (Apache, IIS, etc.) or through server-side programming (PHP, ASP/.net, ColdFusion, JSP, Perl, etc.). Probably a good starter guide for different 301 redirect implementations is the guide by WebConfs.

The Canonical Link Tag

The nice thing about the canonical link tag, search engines behave in the same way how it would look at a 301 redirect. It is not going to index the duplicate content page. Only the destination page will appear in the search engine index. All links going to the duplicate content pages will be counted as links of the main content page.

<link rel="canonical" href="http://(main content page)" />

If Google treats the canonical link tag in a very similar way how 301 redirects are treated, the main difference is what the user experience is. A 301 redirect, well... redirects. While the canonical link tag does not. So you can imagine when this might be better than a 301 redirect, when users may not want to be redirected.

Let's say you are browsing a department store website. And a business traveler is looking for different traveling bags and also needed a laptop bag and arrived to a URL like this:

http://www.example.com/travel/luggage/laptop-bags/targus/

While let's say there is some computer geek that wants a new laptop and a bag to go along with it and ended up in a URL like this:

http://www.example.com/electronics/computers/laptops/accessories/laptop-bags/targus/

Let's say these two pages are duplicate content pages on the same department store website, but doing a 301 redirect to fix the problem, messes up the user experience. If the buyer's train of thought in this example was to buy different bags, if they get 301 redirected to the computers section, makes them lost and would need to do some extra effort to go back to the luggage. Which the geek laptop buyer looking for different accessories would not want to be redirected to the luggage since he may be looking for more laptop accessories.

Although a canonical link tag does not redirect, you still have to choose which one would be the main page search engines would display in search engine results.

The Alternate Link Tag

The alternate link tag, is very similar to the canonical link tag. Although this is used mainly for International or Multilingual SEO purposes.

The Canonical link tag will remove all other duplicate content, but for the Alternate link tag, all pages will still be index, but this helps guide Google choose the best result for the individual country versions of Google. And eliminates the problems Google may run into treating pages as duplicate content.

To sum things up, here is a simply guide when to use which type of redirect in different cases of duplicate content:

Alternate Link Tag
- International pages, multilingual pages, intended for different countries.
Canonical Link Tag
- Multiple categories and subcategories with different category paths, but the same content.
  Example:
  http://www.example.com/products/laptops/sony/
  http://www.example.com/products/sony/laptops/
- Tracking codes, Session IDs mainly because redirection sometimes interferes with the functionality of the tracking codes and sessions.
  Example:
  http://www.example.com/path/file.php?SID=BG47JF448JD6I7TGF439LVFD476
  http://www.example.com/path/file.php?utm_whatever=5uck3rs
  http://www.example.com/path/file.php
- Different variable orders due to how some CMS platforms are created.
  Example:
  http://www.example.com/path/file.php?var1=x&var2=y
  http://www.example.com/path/file.php?var2=y&var1=x
301 Redirect
- Cases where a redirection does not bother the user experience such as www and non-www, index files, trailing slashes, hosting IP address.
  Example:
  http://www.example.com/
  http://example.com/
  http://www.example.com/index.html
  http://www.example.com
  http://123.123.123.123/
- Domain changes, and URL changes of pages that no longer exist.
  Example:
  http://www.example.com/old_folder/old_file 301 redirects to http://www.example.com/new-folder/new-file/
  http://www.example.net/ 301 redirects to http://www.example.com/
Meta Robots NoIndex/Follow
- Probably the best place to use this is in a list of archived post, such as a blog. Where the main URL of the individual blog post or the permalink may have content that is posted as a duplicate somewhere in the archive view by date, the category view, the author view, tag topic views, or in the pagination of older blog post from the blog homepage. You cannot really do a 301 redirect, nor do a canonical link tag since these pages may have more than 1 blog post listed and you will have to finalized where the 301 redirect should go or where the canonical link tag should point to. Thus I would take my chances using the Meta Robots tag, NoIndex,Follow, and hopefully all the links still help.
Robots.txt
- I no longer see a need to use robots.txt in duplicate content issues. The natural linking is something too precious to lose. Just use robots.txt to really block of content that does not need to be indexed at all, duplicate content or not.

Disclaimer: Although I have in my examples, PubCon and CSI Miami, both websites do not have duplicate content. The images are for example purposes only. As for SMX East, SMX Advanced London and SMX Australia, these pages also have no duplicate content.

Photo of Brett Tabke, was by Andy Beal. CSI Miami photo of David Caruso by CBS Television/Alliance Atlantis. Photo of Danny Sullivan is a photo by SMX/3rd Door Media. All other brands used in this blog post are trademarks or registered trademarks of their respective owners.

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How to Leverage Year Over Year Data Successfully

Posted: 05 Jan 2011 12:22 PM PST

Posted by JoannaLord

Oh the New Year. How we love you so. There are so many reasons to love you. Let us count the ways:

Those "Best of 2010" blog posts finally come to an end.
We all have a great reason to buy more stuff than we need because the entire world is on sale.
Everyone's energy is sky high. It's incredibly contagious. YES! LET'S DO THIS! WORLD DOMINATION!
Rarely does a New Year start without popping a bottle (or four) of champagne, which you all know is a favorite pastime of us Mozzers.
We can all get excited as we start baby stepping toward the summer, which means sunshine in Seattle is officially less than 1/2 a year away. Not that we are counting down or anything.

On top of all those excellent reasons I'd like to add my favorite part about the coming of a new year to the mix--it's time to explore your Year Over Year (YOY) data! Did you all just freak out like me? Yeah I thought so.

What makes YOY data so valuable?

YOY data is one of the few datasets that both offers a micro and macro view of your site's performance in one sitting. Throughout the year we work off mini-data segments (today compared to yesterday, week over week, month over month, etc.) and it is challenging to see outside influences. It is incredibly difficult to make valid conclusions off of data that exists in a vacuum. YOY analysis allows us the rare chance to compare large datasets side to side with similar outside factors already accounted for.

We can compare data and isolate out things like; year over year trends, year over year differences, anomalies that don't follow the grain, and so much more. In my opinion, all analysts should take a few hours in the next few weeks and just wander around their YOY analytics. Pull your performance reports, pull your traffic data, pull everything you can from 2009, and then pull it all for 2010. Put them side-by-side and then jump in there.

For those of you wondering the easiest way to get YOY data, if you are in GA, note the below screenshot. You can set the "Compare to" dates to be 2010 and 2009, and don't forget you can change the data represented from visits to whatever you are interested in looking at.

Google Analytics screenshot of compare to date ranges

If you switched analytic packages in the past two years, you might need to pull the data into excel from your two sources and create graphs there. Here is an example of what our Operations team tracks in excel. We will definitely be using this data in the coming year for a lot of sign up YOY comparisons:

Excel graph Year over Year stats SEOmoz

When it comes to pulling YOY stats, it might take some time to get it formatted in a useful manner. Trust me though, it's worth the few hours you take playing in reports and excel.

So what should you be looking at?

1. General health review

This is YOY analysis at it's most basic--have any of your site stats absolutely plummeted? As you collect data over the year you may see slight dips, and they not be red flags at the time, but in your YOY analysis you can now see that you are averaging a 15% higher bounce rate across your site that the year before. Three words folks: bad news bears.

This is what I mean by a general health review. You have internal goals for your site's performance, and YOY analysis lets you quickly identify any of the metrics that failed to meet your expectations. Specific metrics to keep an eye on are things like; analytic vitals (time on site, bounce rates, etc.) visitor engagement metrics (visitor recency, visitor frequency, etc.), and traffic drivers (branded term performance, your head term traffic, keyword queries that are historically conversion winners, etc.).

Other performance metrics to keep front-of-mind are things like value per visit (VPV), and cost per visit (CPV). While it's great that this year you made twice as much more money as the year before, you should also know if you are paying 1/3 more to acquire those successes. What if you could tweak something on performance and get that spend back down while maintaining increased performance? Then you are 133% above last year. These caveats in ROI calculations can make a big difference as you expand channels, and grow programs.

2. Dive deep into significant fluctuations

YOY data analysis is a great tool for gauging momentum gained or momentum lost on your site this past year. Do you see seasonal trends that show up year over year, and are they holding true? For some industries this may not be the case, but for quite a few industries you will see peaks and valleys around similar times of year. Pay special attention to the peaks. Believe it or not the valleys are easier to isolate out in smaller data segments, the real questions is did you see the seasonal jumps you usually see each year? If not, you may have an issue brewing. This is must easier to identify in YOY analysis.

See below picture for an example of how you can isolate out fluctuations and then easily research if they are accounted for.

** The yellow highlights were peaks and valleys in 2010 that matched the norm for 2009, but the two pink highlights weren't represented in 2009. Further research revealed they were due to us launching the web app and one of Rand's most popular posts of 2010. These are good things to know.

3. Use YOY data to measure the success of last year's company goals

I bet you all know if you hit your 2010 revenue goals, don't ya? How about traffic goals? What about your secondary metrics? Things like specific channel goals? Do you know if you are seeing that 10% jump in referral traffic you wanted to get by the end of the year? Do you know if you doubled the number of keywords driving traffic to your site like you wanted?

I blame the fact that we are all in the Inbox weeds at the beginning of the year, but I am also guilty of forgetting to circle back on last year's goals. Your YOY data is especially valuable when you want to quickly identify if you accomplished all you set out to do. Plus you can show all of these pretty comparison charts to your boss when you ask for that 2011 bump in pay.

4. Use YOY data to guide this year's company goals

We all know that accurate performance projection is an art form. In fact our VP of Marketing, Jamie Steven, is the in-house whiz on this, but I am realizing more and ore that good predictions involve a lot of data crunching. Last year's performance is one of those vital indicators not just on potential success, but on what times of year you may see drops you need to plan ahead for. Having YOY data to work from helps you be even more accurate in those predictions.

You can see below what parts of the year we see a drop in one of our key metrics--signups by month. You can imagine that our acquisition goals for next year (set on a week by week basis) will be adjusted accordingly during those times of year.

5. Find the Wild Card of Data Awesomeness

What the heck am I talking about? I'm talking about your low hanging fruit. When you do YOY research you often come across one or two metrics that literally have not seen much action or possibly seen recent minimal wins. With a little effort these guys can be quick wins for the company. If you can isolate out one or two of these and then build marketing campaigns around them, you can see big successes early in the year. It's a great way to start the year, don't you think?

A great examples would be to isolate out the long tail keyword wins (those words that ended up converting for you, or ones that now drive significant traffic) of the year before last, and take the ones of this past year, and see if you can combine them for a new category of long tail queries to go after. These would be less competitive to acquire traffic from, and you've already proven they will return.

Below is an example from our December 2010 stats. You can see that phrases with "title tag" in them caught wind in Decemeber when compared to November.

Title Tag volume by query seomoz

It would be worth it to see what title tag queries got traction in 2009, and start building content around the topic. People are looking for it, and it could be a quick 2011 content win for us.

So there you have it. These are just some of the ways you can take your YOY stats and milk them for data goodies. I know the beginning of the year we are all looking forward, but before you do, I urge everyone to take a little time and look backwards.

So cheers to a new year of data collection friends...may this year be full of beautiful charts, insightful finds, and the resulting ROI successes.

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Robert Gibbs Says Goodbye, Holly Petraeus Says Hello

Your Daily Snapshot for
Thursday, Jan. 6, 2011

Photo of the Day

President Barack Obama talks with Vice President Joe Biden in the Oval Office while National Security Advisor Tom Donilon and Counsel to the President Bob Bauer confer in the Outer Oval Office, Jan. 5, 2011. (Official White House Photo by Pete Souza)

Seth's Blog : Soles

[You're getting this note because you subscribed to Seth Godin's blog.]

Soles

All you've got, all your brand has got, all any of us have are the memories and expectations and changes we've left with others.

It's so easy to get hung up on the itinerary, the features and the specs, but that's not real, it's actually pretty fuzzy stuff. The concrete impact of our lives and our work is the mark you make on other people. It might be a product you make or the way you look someone in the eye. It might be a powerful experience you have on a trip with your dad, or the way you keep a promise.

The experiences you create are the moments that define you. We'll miss you when you're gone, because we will always remember the mark you made on us.

There's a sign on most squash courts encouraging players to wear only sneakers with non-marking soles. I'm not sure there's such a thing. If you've going to do anything worthy, you're going to leave a mark.

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miercuri, 5 ianuarie 2011

Mish's Global Economic Trend Analysis

Laid Off Firefighter Panhandles On Street
Playing Chicken with Debt Limits: Obama as a Senator vs. Obama the Hypocrite President Today
Sound Money, Gold Fever, and Crackpot Ideas
Hedge Funds Raise Crude Bets to Four-Year High; CFTC's Position Limit Plan Gains Steam; Everyone is Happy; Impact on Silver and Crude

Laid Off Firefighter Panhandles On Street

Posted: 05 Jan 2011 07:14 PM PST

Here is a story of a laid-off firefighter blaming the wrong thing for his woes. Meet Jason Pickering begging for money.

"We took an oath to save people's lives ... and the city just threw us to the curb," Jason Pickering told WGN-TV.

The 34-year-old Pickering, a 10-year department veteran and one of 34 Gary firefighters who lost their jobs, now goes out begging, dressed in his cold-weather firefighting gear, collecting dollar bills in a boot. A hand-made cardboard sign he has strung around his neck reads: "Laid off Gary firefighter. Family of 6. Thank you and God bless."

Since Sunday, he has collected $475. But he says it's not enough to make ends meet for his wife and four children. At the end of January he will lose his health insurance, and he gets only $350 a week in unemployment compensation.

Jason says he will continue begging and protesting the layoffs.

Hello Jason. The city did not put you on the curb. The union did. Gary is broke. And now so are you. And the reason why Gary is broke is the same reason why you are broke. That reason Jason, is the union. The union refused to take pay or benefit cuts to save your job. That is why you are on the curb.

You see Jason, the union does not give a rat's ass about you. All the union cares about is preserving the pay and benefits of senior members.

Jason, if you want to protest, I suggest you stand outside your former headquarters and ask every firefighter going into the building why they voted to put you on the curb.

Then again, Jason, how did you vote on those wage and benefit cuts the city needed? If you voted no, the harsh reality is you helped put yourself on the street.

By the way Jason, unemployment benefits are taxable. Now that you are panhandling, how does it feel to have taxes collected out of your small check to pay monstrous benefits to the remaining union members who tossed you on the curb?

Think about that Jason while you are whining about your lost job begging everyone else who has been in your situation for years, paying taxes so that you accrued benefits they will never see.

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

Playing Chicken with Debt Limits: Obama as a Senator vs. Obama the Hypocrite President Today

Posted: 05 Jan 2011 12:21 PM PST

President Obama is very concerned that Republicans might "Play Chicken" with the debt ceiling. The president is so concerned his aids are sending out dire warnings about dollar defaults and "catastrophic impacts" to the economy.

Please consider Don't 'play chicken' with debt ceiling

Some Republican lawmakers said Sunday they opposed raising the ceiling on the nation's debt without tackling government spending, and President Barack Obama's top economic adviser warned against "playing chicken" on the issue.

Austan Goolsbee, the chairman of the White House Council of Economic Advisers, said that refusing to raise the debt ceiling would essentially push the country into defaulting on its financial obligations for the first time in its history.

"The impact on the economy would be catastrophic," Goolsbee told "This Week" on ABC. "That would be a worse financial economic crisis than anything we saw in 2008."

Goolsbee added: "I don't see why anybody's talking about playing chicken with the debt ceiling."

Flashback March 20, 2006 - U.S. Senate Floor

Inquiring minds just may be wondering what the president's position was when he was a senator, just a few year's back.

Please consider Flashback: Previous Debt Limit Votes Have Not Been Good Ones

March 20, 2006: This was the last stand-alone debt limit vote on which then-Senator Obama voted. He was one of 48 members to vote against the increase, which passed with 52 votes.

He said: "The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the U.S. Government can't pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government's reckless fiscal policies. … Increasing America's debt weakens us domestically and internationally. Leadership means that 'the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better."

Truer Words Never Spoken

America's debt problem is a "sign of leadership failure"
We have "reckless fiscal policies"
Washington "shifts the burden of bad choices today onto the backs of our children and grandchildren"
America has a debt problem and a failure of leadership.
Americans deserve better

Yes Mr. President, America does deserve better. I suggest you do the best thing you can possibly do for your country today: Resign.

Since that is unlikely, I urge Republican to take the measures Obama recommended in 2006 when he crossed party lines and voted with Republicans in 2006 to not raise the debt limit.

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

Sound Money, Gold Fever, and Crackpot Ideas

Posted: 05 Jan 2011 09:58 AM PST

Larry Hilton, an attorney and insurance salesman has authored the "Utah Sound Money Act". A couple of state legislators are considering sponsoring the bill. Here are a few things the bill would do.

Requires State To Accept Gold As Money

Among other things the sound money act requires the state to accept gold as payment and would allow but not mandate businesses to accept gold as payment.

Creates Defense Force to Protect Gold

Part 5 of the bill requires the governor to "recruit, form, train and deploy such troops and regiments of the Utah State Defense Force ... as the Governor may deem necessary and appropriate to store, safeguard, protect and transport the Registered Specie holdings of all Utah Governmental Entities, as well as provide a means for the exchange, between and among Utah Governmental Entities and Utah Taxpayers, of Registered Specie, either by transfer of ownership of the same held in a secure storage facility or by physical delivery according to the recipient's preference."

Mandates Treasurer to Fix the Price of Gold and Silver Periodically

The Utah State Treasurer would have responsibility to "periodically set a Specie Exchange Rate for gold as well as one for silver. These rates shall equate a specific quantity of Federal Reserve Notes, or fraction thereof, to one Troy grain of each metal."

Periodically means "no more than once per day, bank holidays and weekends excluded. Newly set Specie Exchange Rates shall not be disclosed to anyone other than the Utah State Treasurer's staff until such new rates take effect at 12:01 a.m. the following day, at which time the new rates shall be published and readily available to Utah Taxpayers, residents and citizens."

Limits Price Movements

Moreover "No single Specie Exchange Rate change effected by the Utah State Treasurer shall differ by more than one percent from the previously effective rate."

Crackpot Idea?

The Salt Lake Tribune "Gold Fever" editorial calls Larry Hilton's proposal a "crackpot idea".

The 2011 session of the Utah Legislature is looking like uncommonly fertile ground for crackpot ideas. So far there is a bill to name an official state gun and two calling for conventions to amend the U.S. Constitution. But the most outrageous scheme to surface yet is the Utah Sound Money Act, a system of commerce within the state that would be based on gold and silver coins.

So far, the bill hasn't found a sponsor. Here's hoping it doesn't. Utah can't secede from the Union, and it shouldn't try to secede from the federal currency, either.

Volatility Argument Flawed

The editorial's primary argument against Hilton's bill was in regards to volatility of the price of gold, measured in dollars. The irony of that logic is that price volatility of nearly everything is a result of boom-bust cycles caused by the Fed and fractional reserve lending.

Prior to the Fed, boom-bust cycles were exacerbated by banks lending out more paper gold than there was backing for it. Fractional Reserve Lending has always been a problem with banks and needs to be stopped.

It is governments, paper money, and fractional reserve lending that create volatility.

Hilton's Bill Fatally Flawed

However, Hilton's bill is indeed fatally flawed for numerous reasons including price fixing by the treasurer and authorization of a defense force to protect stored gold. As a practical matter, gold owners would not pay dollar debts in gold in the first place.

One does not (or at least one should not) attempt to fix the price of gold in dollars. Nor can one set prices once a day or hold price movements to 1% a day. Those are flawed ideas that cannot and will not work.

Instead, one dollar should represent a fixed amount of gold and every dollar should be 100% backed by that amount of gold.

Gold will buy what it will buy, and prices of goods and services will fluctuate by supply and demand. As a result, prices will be far more stable under a 100% gold backed dollar. Those who disagree need answer this question: How can the purchasing power of dollars backed by something not be more stable than dollars backed by nothing and conjured into existence at will by the Fed?

In spite of Hilton's good intent, a 100% gold-backed dollar is a proposal that must happen at the federal level. I am quite sure Ron Paul will introduce a valid proposal in due time.

In the meantime, as convoluted as Hilton's bill is, it's important to remember the crackpot idea here is not a gold backed dollar, but rather crackpots who would rather have a dollar backed by nothing than gold.

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

Hedge Funds Raise Crude Bets to Four-Year High; CFTC's Position Limit Plan Gains Steam; Everyone is Happy; Impact on Silver and Crude

Posted: 05 Jan 2011 01:55 AM PST

Hedge funds, pension plans, and small speculators have all been plowing into commodities with abandon. The result is easy to spot, particularly in the energy markets.

Bloomberg reports Hedge Funds Raise Crude Bets to Four-Year High

Hedge funds raised bullish bets on crude oil to the highest level in more than four years on speculation that futures will climb as the U.S. recovers from the deepest recession since the 1930s.

The funds and other large speculators increased net-long positions, or wagers on rising prices, by 4.6 percent in the seven days ended Dec. 28, according to the Commodity Futures Trading Commission's weekly Commitments of Traders report. It was the biggest total in records going back to June 2006.

Oil prices will average $93 a barrel this year and are "very likely" to climb above $100, Jason Schenker, president of Prestige Economics in Austin, Texas, said yesterday in an interview with Deirdre Bolton on Bloomberg Television's "InsideTrack."

Futures advanced as high as $92.58 yesterday after the Institute for Supply Management's U.S. factory index climbed to 57 in December, the fastest pace in seven months. Fuel demand increased to the highest since May 2008 in the week ended Dec. 24, Energy Department figures showed last week.

"Crude oil prices are up, and people expect them to keep going up," said Tim Evans, an energy analyst at Citi Futures Perspective in New York. "It speaks to the frame of mind that people are in more than it speaks to the underlying reality. We have no physical tightness here."

CFTC's position limit plan gains needed support

Please consider CFTC's position limit plan gains needed support

A top official at the U.S. futures regulator said on Tuesday he was now in favor of a stalled position limit plan, a key turnaround that would allow the controversial rules to advance to the public comment stage.

The Commodity Futures Trading Commission introduced on December 16 its long-awaited plan to curb speculation in the metals, agriculture and energy markets but at the meeting, Chairman Gary Gensler abruptly postponed a vote on the proposal.

Commissioner Bart Chilton, the most vocal proponent of cracking down on speculators, was key to the postponement as he told Reuters he would have voted against the plan. It would have included a two-step approach to allow more time for the agency to gather information on the opaque swaps market.

"While I will now support publishing a position limit proposal for public comment, I will continue to make the case that we need to address excessive speculation in these markets immediately," Chilton said in a statement on Tuesday.

A coalition of businesses dependent on buying commodities which has pushed for the limits said it supports Chilton's plan as an interim measure.

"In light of the existence of large speculative positions in today's energy and agricultural markets, it is imperative that the Commission to do something now, and without delay, in order to address these large positions and send a message of confidence and certainty to market participants," said Jim Collura, spokesman for the Commodity Market Oversight Coalition.

U.S. Commodity Regulator to Review Speculation Limits

Let's flash back to December 16 and a recap of U.S. Commodity Regulator to Review Speculation Limits

The top U.S. commodities regulator will consider today steps to curb speculation in raw materials including oil, gold and wheat as part of the most sweeping rewrite of Wall Street rules since the 1930s.

Four of five members of the Commodity Futures Trading Commission said they will vote in favor of publishing a two-part proposal to restrict the number of contracts one firm can hold. The plan, if approved after a 60-day public comment period, would limit traders to 25 percent of deliverable supply in the contract nearest to expiration, followed by an all-month ceiling of 10 percent of open interest up to the first 25,000 contracts and 2.5 percent thereafter.

"At the core of our obligation is to protect market integrity," Gensler said at the hearing today. The rule will shield the markets from excessive speculation by ensuring positions aren't too concentrated, he said.

Gensler, along with Commissioners Bart Chilton, Scott O'Malia and Michael Dunn said they will vote today in favor of publishing the rule for comment. Dunn and O'Malia said they may not ultimately support imposing position limits. Commissioner Jill Sommers said she would vote against the rule.

"It's bad policy to promulgate regulations that are not enforceable," Sommers said, adding that the commission lacks the data needed to enforce effective caps.

"Without specific swaps data, we have no ability to claim we are applying enforceable limits without understanding the full size of the market," O'Malia said in a statement.

The plan exempts so-called bona fide hedgers who use contracts to offset commercial risk. Swaps dealers, who sell derivatives, are free from limits as long as the transaction is made on behalf of an end-user, while facing caps for trades made to mitigate bets dealt to speculators.

The proposal covers 28 commodities, including crude, natural gas, gasoline, heating oil, gold, silver, copper, platinum, palladium, corn, oats, rice, soybeans, soybean meal, soybean oil, wheat, feeder cattle, live cattle, lean hogs, milk, cocoa, coffee, orange juice, sugar and cotton.

The commission estimated that the spot-month rules would affect 70 traders in agricultural contracts, six in base metals, eight in precious metals and 40 in energy. The combined caps may affect 80 agriculture traders, 25 in base metals, 20 in precious metals and 10 in energy.

Nearly Everyone Is Happy (For Now)

"Super Silver Bulls" want limits thinking it will force prices up and crush JPMorgan. Meanwhile, buyers of energy and agricultural goods think limits will reduce prices. For a while, this means bulls, bears, and buyers all all happy.

The only ones not happy with limits are a the few commissioners who think limits will not work. I side with those who think limits will not work. I have both short and long-term reasons.

Short-term, position limits will likely reduce liquidity and further distort the markets.

The most likely long-term impact is that trading will move to less regulated foreign exchanges. If so, US commodity exchanges will lose their global importance.

Long-term, commodity prices are going to go where they are going to go anyway. Attempts to curb speculation brought on by loose policies of the Fed cannot work in the long run.

The Impact on JPMorgan

Short-term prices might depend on exactly what the limits are, who is affected, and how the CFTC implements the rules changes.

Here is one key paragraph: "The plan exempts so-called bona fide hedgers who use contracts to offset commercial risk. Swaps dealers, who sell derivatives, are free from limits as long as the transaction is made on behalf of an end-user, while facing caps for trades made to mitigate bets dealt to speculators."

I fail to see how that will necessarily curb JPMorgan's massive short position. (I am assuming JPMorgan is hedged). However, let's assume JPMorgan is not hedged.

How will the CFTC phase in the rules? If they do so by limiting the buying of silver futures until position limits are reached (the method used to end the Hunt cornering attempt) , then silver will likely get hammered short-term.

Thus, I do not agree with zero-hedge who writes "And if indeed this news was the catalyst for today's precious metal and other commodities sell off, it is woefully misinterpreted, as the only major institutional parties impacted will be those who hold outsized short positions in the precious metals space."

It's not that Zero-Hedge is necessarily wrong; it's just that he is not necessarily right.

However, if I had to bet one way or another, I would bet that whatever method the CFTC comes up with will not adversely impact JPMorgan in any significant way.

Thus, if anyone is impacted in the short-term, I suspect it will be silver longs, even though long-term the price of silver will get to wherever it is headed.

My friend "HB" agrees. He just pinged me with this comment. "The GATA crowd should be livid when it realizes that position limits may - gasp - depress the silver price."

Crude COTs

click on any chart below for sharper image

Crude Weekly Chart

Commodity charts and open interest are not always as correlated as show above.

By the way, much of that crude open interest is hedging various crack spreads (crude vs. gasoline, heating oil, diesel, etc).

Crack spread is a term used in the oil industry and futures trading for the differential between the price of crude oil and petroleum products extracted from it - that is, the profit margin that an oil refinery can expect to make by "cracking" crude oil (breaking its long-chain hydrocarbons into useful shorter-chain petroleum products).

In the futures markets, the "crack spread" is a specific spread trade involving simultaneously buying and selling contracts in crude oil and one or more derivative products, typically gasoline and heating oil. Oil refineries may trade a crack spread to hedge the price risk of their operations, while speculators attempt to profit from a change in the oil/gasoline price differential.

Is the CFTC ready to sort this all out?

Silver COTs

It is hard to predict anything at all regarding the price of silver from the following COT chart.

Silver Weekly Chart

Finally, it is worth pointing out that commodities in general simply might be ready for a strong pullback. Sentiment is extreme. It it happens, attributing precious metal declines to a smackdown by gold and silver shorts is beyond silly.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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joi, 6 ianuarie 2011

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