miercuri, 8 iunie 2011

SEOmoz Daily SEO Blog

SEOmoz Daily SEO Blog


Early Launch of SERPs Analysis Tool + June Linkscape Update

Posted: 08 Jun 2011 09:21 AM PDT

Posted by randfish

If you're anything like me, you spend several hours each month (maybe more often) preparing elaborate worksheets of ranking analyses to help uncover why a particular site/page is outranking another and what it will take to reach top rankings. Which is why the screenshot below has me pretty excited.

New SERPs Analysis

That's the first version of the new SERPs Analysis Tool, and, even in this early form, it's a thing of beauty. There's data on nearly every point I'd put in a worksheet comparing search results (social data and more sophisticated on-page analysis is coming soon). It's exportable to CSV so I can put the data into Excel and make cool charts and graphs, and it automatically generates based on any keyword set in a matter of 10-90 minutes (might be a bit longer this week since it just launched). Here's some more views:

New SERPs Analysis On-Page + Domain Name Match Metrics

SERPs Analysis Anchor Text Metrics

SERPs Analysis Domain Metrics

Ever since Adam tossed out that awesome preview last month, I've been dying to play around with this. Now that it's finally here, I can almost feel the pain of manual SERPs analysis disappearing. Feel free to give it a spin and provide feedback. To get the full data, just run a keyword difficulty report and click the "run full report" button.

Full Report Button in Keyword Difficulty Tool

In the next few weeks, we'll have more data, some additional UI elements and a version in the web app, but for now, feel free to save enormous amounts of time + energy with this first version.


Of course, that's not all!

Linkscape's index is also updated as of Monday of this week (we accidentally had a brief rollback, but the correct data's out there now) and have some new analyses of our metrics correlations, too. This is part of how we measure whether our data quality is improving - on the whole, our correlations should improve over time if our index quality (what we crawl, how we handle duplicates, canonicalization, etc) is getting better.

 

 Index 41 Correlations with Google.com US Rankings

The short story is that there's barely any change from the prior index from May (a couple metrics fell by >0.01), but we have improved somewhat from the figures presented in the ranking factors from late March (when, for example, Page Authority was as low as 0.28) .  We've also improved the coverage of the index for URLs we found in Google's top 30 results across a large sample set of keywords from 84.27% to 85.59%. In the future, we'll continue to try reporting regularly on these numbers to stay transparent about our own data confidence and quality.

Here's the stats for the latest Linkscape update:

  • 39,407,840,728 (41.3 billion) URLs
  • 371,306,396 (491 million) Subdomains
  • 119,104,781 (114 million) Root Domains
  • 397,844,228,049 (416 billion) Links
  • Followed vs. Nofollowed
    • 2.28% of all links found were nofollowed
    • 56.81% of nofollowed links are internal, 43.19% are external
  • Rel Canonical - 7.91% of all pages now employ a rel=canonical tag
  • The average page has 60.67 links on it (down from 61.00 last index)
    • 51.50 internal links on average
    • 9.17 external links on average

This index also features the first time we're treating the rel=canonical attribute like a 301 redirect. After several tests internally and observing the search engines' relatively liberal handling of rel=canonical, we feel this is the best behavior from a link-juice / metrics calculation perspective. You'll still see these as regular "links" in Open Site Explorer for now, but we plan to update to show rel=canonicaling pages with a special notation (like a 301) in the tool soon.

Enjoy the fresh link data, the spiffy new SERPs Analysis feature and let us know if you've got feedback or suggestions.

p.s. The new tool is PRO-only, but if you want to give it a spin, there's this spiffy free trial thingy we've got going :-)


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8 Methods + Lots of Tools for Getting to Know Your Audience

Posted: 07 Jun 2011 06:18 PM PDT

Posted by Laura Lippay

Music to enjoy while reading this post: We Know Something You Don't Know by DJ Format & Jurassic 5

You provide something specific: That might be a product, a service, a trustworthy source of information, a community space… And you know exactly what your audiences may be searching for to find your wares. But do you know what they really want out of you? Do you know how they really feel? Do you know what they want more of or less of in your industry? Do you know what they like or don’t like on your site or your competitor’s sites? Do you know what they think about your new product launch? If you knew this information, how could you use it to improve your products or services?

In this post we’ll look at a few ways in which you can gather insightful information to help you position your brand against your competitors, laser target the specific desires of your audiences, and dive into the psyche of the people you want to attract and convert, categorized by what they want out of your industry, you, and your site.

WHAT DO YOUR AUDIENCES WANT OUT OF YOUR INDUSTRY?

Let’s say you’re in the online car insurance industry. You are considering what steps need to be taken to avoid search engine algo disasters and provide unique, compelling content and services that your audiences want. You’ve done your keyword research, so you know what search terms people are using, but what do they really want from your industry? Here’s some ways to find out.

1) Industry Market Research

You can typically find a wealth of market research by industry from sites like the ones listed below, although oftentimes this research is not cheap.

What to look for:

  • Market demand
  • Market trends
  • Market entry
  • Market issues/obstacles
  • Statistical details for your target audiences

Sources:

Chart from free Forrester report

2) Social Industry Sentiment

Many people think of social media as a way to connect with your industry influencers and brand advocates. But social media data is also spectacular for simply passively gathering insights. There is a wealth of information online about your industry and how people feel about it, talk about it, interact with it, etc. This information can help you take a strategic approach at entering an industry, or refine your current positioning and offerings within an industry.

What to look for:

  • Track industry terms as your topics, to find out what people are saying about the industry, what they want to see more of, what they don’t like or want to see less of, and potentially for spotting any industry trends through online conversations.
  • Determine industry needs and sentiments in emerging markets before drawing up a product/service strategy.

Source A: Expensive, detailed (and mostly deep crawl) social media monitoring tools

There is still a major gap in social monitoring tools where the ones that provide the best crawl and interface for useful, actionable industry and/or brand health data can run you from $30,000/year to $30,000 month or more. For enterprise-level sites looking to harness conversations around the web, enterprise-level social monitoring solutions are the only answer (in this case, typically as an alternative or accompaniment to traditional survey-based brand health metrics). I’ve done audits on several of these solutions over the years and here are some worth looking into if you can throw the cash towards it.

  • NetBase – Still one of (if not the) best and most useful tools for brand sentiment I’ve seen yet. Competitive sentiment, competitive liked/disliked attributes, passion index, conversation drivers, etc.
  • Dow Jones Insight – Flexible sentiment, regional trends, large coverage on- and offline, measures not just what happened, but also what was impact?
  • Nielsen Online – LSI-type algorithm, feeling & tone metrics, measure by language + lots more.
  • Visible Technologies – Subtopic identification, management tools, highly drillable, sortable data + more.
  • Radian6 – Share of conversation, demographics, location, influence, Salesforce & WebTrends integration, lots of charts.

NetBase sample of benefits and drawbacks of hybrid car industry

Source B: Free and cheapish (but often not very deep crawl) sentiment tools

I want to have more faith in “tools for the people”, but in most cases, I’ve found search engines (see next section) to be more useful in finding good sentiment data than any of the free/cheap tools (and sometimes even the expensive tools). Try the software out and compare the insights you find with what you find in the next section using search engines to make the decision on whether it might be worth shelling out $200-$3000/mo or more towards these sentiment research tools.

  • Social Mention (free) – Sentiment, strength, passion & reach scores around a topic + top keywords, users, hashtags and sources.
  • HowSociable (free) - Brand visibility score in several social networks.
  • Trackur (paid) – Sentiment and influence metrics and tracking (history).
  • eCairn (paid) – Share of voice, mind and/or topic + additional social media tools.
  • Alterian SM2 (paid) – Share of voice, themes, demographics, sentiment analysis, etc.
  • Trendrr (paid) – Sentiment analysis & influencer identification, location & demographic filters.
  • Position2 (paid) - Share of voice, share of media, demographics, sentiment analysis, etc.
  • And 195 more: http://www.salesrescueteam.com/social-media-measurement-tools/

Source C: Search Engines

If you don’t have a social listening tool or you’re just not getting good info from it, use the tool we all know and love: Search! Search engines still crawl much farther and deeper than most social media tools, so you can find more information if you know how to look. Search for any variation of things like:

  • “like” + [your brand name]
  • “love” + [a feature you provide]
  • “I wish” + [a feature you provide]
  • “sucks” + [an author or blogger on your site or your competitor sites]
  • “hate” + [your competitors’ brand names or features]

"love" + seomoz

Additionally, search Twitter, Facebook, YouTube, Yahoo! Answers or other social networks for the same type of information. I typically find the best feedback in this manner (using search + searching social networks), although it is more time consuming than the social media monitoring tools.

 

WHAT DO YOUR AUDIENCES WANT OUT OF YOU?

3) Social Brand Asset Sentiment

In addition to what people want out of your industry, it is important to know what people want out of you and your brand assets. Your brand assets could include your services, products, product features, executives at the company, editorial personalities, and the brand name in general.

What to Look for + Sources

Test brand asset topics out in the social media monitoring tools mentioned above (including search engines) to gather insights on what people around the web are saying about your brand. Each tool may provide different types of information, like:

  • Positive and negative sentiment around brand assets and competitors
  • Share of voice
  • Specific likes and dislikes (deeper dig into sentiment)
  • Campaign reach/brand visibility
  • Localized share of voice and sentiment trends

NetBase brand sentiment

4) Traditional Brand Sentiment

These survey-based reports typically show similar types of insights as the expensive social monitoring tools, only they are derived from surveys rather than scraped from the web.

What to Look for

  • Brand health
  • Brand sentiment
  • Brand awareness/share of voice
  • Brand penetration
  • CSAT (Customer Satisfaction)
  • Same measurements online for competitor brands

Sources:

 Nielsen brand health sample metrics

WHAT DO YOUR AUDIENCES WANT OUT OF YOUR SITE?

Lastly, you’ll want to gather insights on the site experience that your audiences are having, and how it can be streamlined and improved. Don’t forget, search engines want to see sites that people find valuable, so make sure you’re doing what you can to attract your audiences and keep them engaged, as well as prompting the sharing of your content in social spaces.

5) Solicited Site Feedback

If you ask your visitors for feedback you can use that data as well. Although soliciting feedback is not as unobtrusive as just using your site analytics data to determine where there are problems, it may be useful in getting a more human response to the potential issues on your site. Consider small incentives in return for feedback, like discounts, being entered into a contest, access to survey results (when appropriate), or other types of special recognition.

Sources:

Get Satisfaction management for Yahoo Mail community problems

6) On-Site Search Queries

Looking at what people are searching for on your site, and what they are or aren’t finding, can be very useful site feedback. For sites with large databases like music or movies, site search may be the simplest way to get to the destination. See what is searched for the most to provide that content up front. For other sites, look at what people are searching for, which may be an indication of what they expect to find but can’t. Determine how your site can better meet those needs.

What to Look for:

  • What people want or expect to find on the site.
  • What people can’t find on the site.
  • Searches on your site that return no results.
  • Searches on your site that end in an exit rather than a click on search results.

Sources:

  • Your own on-site search analytics platform.

7) Click-tracking & heat maps

These colorful displays are probably the coolest ways of gathering site feedback. Use these tools to determine whether people are seeing your most important content and calls to action on each page.

What to Look for:

  • Are your primary calls to action getting clicks? Are they in view?
  • Are you funneling visitors to the pages you want to?
  • Are there links that are not getting any clicks?
  • Is there content that isn’t getting eyeballs?
  • What is the performance from search vs. the rest of the site?

Sources:

CrazyEgg heat map

8) Focus Groups and User Groups

Set up some objectives for a focus group to try to accomplish with your site and watch how they try to get there, what obstacles they come across along the way, how they think and feel about the experience, and more. This can be useful feedback from people who are not familiar with the site the way you and your team that are building the site are.

What to Look for:

  • How people feel towards planned new features or content
  • Ways to improve existing features and content
  • Whether your users want or need new features or content
  • Whether there are features and content you can change, improve, or get rid of
  • How people attempt to perform a task, and with what level of ease or difficulty

Sources:

  • Search for focus group companies in your area.
  • Do research on how to conduct your own focus group.
  • Psychster (usability)

Psychster study screenshot

Have any additional methods or tools not listed here? Please share! 


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How to Create an Amazing About Us Page Graywolf's SEO Blog

How to Create an Amazing About Us Page Graywolf's SEO Blog


How to Create an Amazing About Us Page

Posted: 07 Jun 2011 10:13 AM PDT

Post image for How to Create an Amazing About Us Page

About Us pages are one of the essential elements of a trusted website (see How to Make Your Website Seem More Legitimate); however, most people dread writing them or treat them as an after thought. But, with a little creativity, you can turn an ordinary “About Us” page into something really interesting. In this post, we’re going to take a look at three examples.

Most “About Us” pages are so banal they could be used as sleep aids for insomniacs. Other “About Us” pages at the other end of the spectrum  make the company look like boy scouts pulling a sled of orphans up hill through a snow storm because they’re so unbelievably glowing and one sided. One thing you won’t find is a scandal, except in the case of this Sandals Royal Plantation Resort where they talk about employee poaching, misguided romance, and a host of other activities …

Plantation Inn's very first manager was the universally respected Cy Elkins, who brought over many of Jamaica Inn's best staff to the new hotel. At first this symbiotic arrangement seemed to work out well. But, when Cy left Gloria for another love, she never forgave him, both for his desertion of their marriage and his pilfering of Jamaica Inn's treasured staff members! Over his time at the inn, Cy's greatest coup took place when he somehow managed to obtain the services of Theophilus Caiaphas Palmer of Ocho Rios, one of only two Jamaican Sommeliers to have trained in France under the watchful eyes of acclaimed oenologist, Alex Lichine.

Even if  your company doesn’t have a salacious past, you can still create an interesting “About Us” page with some javascript, like Technology With Passion does. When you move your mouse around, the faces follow you Brady Bunch style. The same thing happens when you click around. It’s kinda fun.

About Us Page that interacts with Mouse Movements

Let’s say you don’t have a history like a soap opera and your programmers don’t have any mojo … Then how about just owning what you are, what you are good at, and what sets you apart? I have to say that, in all my years on the web, this page from AbsoluteDespotism.com is the first “not safe for work” About  Us page I have ever seen. I’m a big fan of knowing that not everyone is your customer and not being afraid to offend the people who aren’t. As the saying goes, this Bud’s for you, Mr. Angry-Non-Politically-Correct-About-Us-Page-Writer …

So what are the takeaways from this post:

  • Look at your “boilerplate” pages and look for ways to make them interesting.
  • Own your past, present, or mission statement in a way that make you more exciting than a piece of cardboard.
  • On most pages, excessive technology distracts people from buying/completing an action; on your About page, Flash, Javascript, or Ajax can make you different.
  • Think of this as an opportunity to be self deprecating. Everyone can relate to you if you aren’t afraid to laugh at yourself.
  • Use it as a link building opportunity. How many other people have exciting About Us pages? The bar is pretty low if you want to try and stand out.

photo credit: Photospin

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How to Create an Amazing About Us Page

Photo Gallery: Chancellor Angela Merkel of Germany: Official Visit

The White House Your Daily Snapshot for
Wednesday, June 8, 2011
 

Chancellor Angela Merkel of Germany: Official Visit

Yesterday, President Obama and First Lady Michelle Obama welcomed Chancellor Angela Merkel of the Federal Republic of Germany to the White House. During the Germany Official Arrival Ceremony the President spoke of the strong alliance between our two countries:

"Today marks the first official visit and State Dinner for a European leader during my presidency. It’s only fitting. The transatlantic alliance is the cornerstone -- is the heart -- of our efforts to promote peace and prosperity around the world. And Germany -- at the heart of Europe -- is one of our strongest allies. And Chancellor Merkel is one of my closest global partners."

Read more about the visit or see the Photo Gallery

President Barack Obama and Chancellor Angela Merkel of Germany pause as the national anthem is played during the State Arrival Ceremony on the South Lawn of the White House, June 7, 2011. (Official White House Photo by Pete Souza)

In Case You Missed It

Here are some of the top stories from the White House blog.

Inside the White House Kitchen: Preparing the State Dinner for Germany
Celebrating the first harvest of the spring, the German State Dinner menu uses local ingredients - including vegetables and herbs from the White House Kitchen Garden. Take a look inside with the White House Kitchen on the morning of the dinner with Executive chef Chris Cornerford. 

Fact Checking the Fact Checker
The truth about President Obama and the resurgence of the American auto industry.

The Facts: The Affordable Care Act, the Constitution and the Courts
Cases challenging the constitutionality of the Affordable Care Act are being argued in several courts.

Today's Schedule

All times are Eastern Daylight Time (EDT).

10:30 AM: The Vice President chairs a regular meeting of senior officials to assess progress in Iraq

11:10 AM: The President visits Northern Virginia Community College - Alexandria Campus
 

11:30 AM: The President delivers remarks on the importance of training and preparing our workforce to compete for manufacturing jobs across the nation

12:30 PM: The President and the Vice President meet for lunch

1:00 PM
: Press Briefing by Press Secretary Jay Carney 

2:25 PM: The President meets with senior advisors

3:00 PM: The President delivers remarks at an event honoring Auburn University's 2010 BCS National Championship  

4:40 PM: The President meets with President Goodluck Jonathan of Nigeria

 Indicates events that will be live streamed on WhiteHouse.gov/Live

Get Updates 

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Seth's Blog : The game theory of discovery and the birth of the free-gap

The game theory of discovery and the birth of the free-gap

It all started because of the discovery problem.

Too many things to choose from, more every day. No efficient way to alert the world about your service, your music, your book. How about giving it away to help the idea spread?

The simplest old school examples are radio (songs to hear for free, in in the hope that someone will buy them) and Oprah (give away all the secrets in your book in the hope that many will buy.)

There's a line out the door of people eager to spread their ideas, because in a crowded marketplace, being ignored is the same as failure.

Most people, most of the time, don't buy things if there's a free substitute available. A hundred million people hear a pop song on the radio and less than 1 percent will buy a copy. Millions will walk by a painting in a museum, but very few have prints, posters or even inexpensive original art in their homes. (In the former case, the purchased music is better--quality and convenience--than the free version, in the latter, the print is merely more accessible, but the math is the same--lots of visits, not a lot of conversion).

We don't hesitate to ask a consultant or doctor or writer for free advice, but often hesitate when it involves a payment. ("Oh, I'm not asking for consulting, I just wanted you to answer a question...") And yes, I'm told that some people cut their own hair instead of paying someone a few bucks to do it.

None of this is news. Two things have changed, though:

1. As more commercial activity involves digital goods (websites, ebooks, music, etc.), the temptation to spread the idea for free (to aid discovery) is actually economically possible--if you believe that the free spread will lead to more revenue in the long run. The cost of a single copy is zero, so you can choose to set the digital item loose without bankrupting yourself.

2. A culture of free digital consumption has evolved and is being adopted by a huge segment of the most coveted consumers (teenagers, the educated, the upper middle class).

The bet a creator makes, then, is that when she gives away something for free, it will be discovered, attract attention, spread and then, as we saw in radio in 1969, lead to some portion of the masses actually buying something.

What's easy to overlook is that a leap is necessary for the last step to occur. As we've made it easier for ideas to spread digitally, we've actually amplified the gap between free and paid. It turns out that there's a huge cohort that's just not going to pay for anything if they can possibly avoid it.

Radio thirty years ago was simple: everyone hears it for free and a few buy it.

For a time, one could use free to promote an idea and have leverage to turn that attention into paid sales of a similar item (either because free went away or because the similar item offered convenience or souvenir value).

I think that might be changing. As the free-only cohort grows, people start to feel foolish when they pay for something when the free substitute is easily available and perhaps more convenient.

Think about that--buying things now makes some people feel foolish. Few felt foolish buying a Creedence album in the 1970s. They felt good about it, not stupid.

This new default to free means that people with something to sell are going to have to push ever harder to invent things that can't possibly have a free substitute. Patronage, live events, membership, the benefits of connection--all of these things are outside the scope we used to associate with the creative business model, but that's changing, fast.

Lada Gaga's music is basically free. It's the concerts that cost money. McKinsey's consulting philosophy is free in the library, it's the bespoke work that costs money. Watching a movie on Netflix is free--once you pay to belong. Playing golf at the local public course is pretty cheap, it's membership in the fancy club that costs money...

There's a growing disconnect between making something worthwhile and getting paid for it. The digital artifact is heading toward free faster and faster, and the inevitable leap to a paid version of the same item is going to get more difficult.

Creators don't have to like it, but free culture is here and it's getting more pervasive. The brutal economics of discovery combined with no marginal cost create a relentless path toward free, which deepens the gap. Going forward, many things that can be free, will be.

Freegap.001
[Worth a side note to talk about the 'shoulds'. Some commentators have argued quite forcibly that things shouldn't be free, that creators should always be paid, that 47% of our economy is based on intellectual property...

Of course, free has always been part of the equation. These commentators, the ones arguing in interviews or in blog posts, are already sharing their ideas for free. The bestselling book of all time has no copyright and has been shared freely for thousands of years. Musicians gladly show up to play for virtually free on American Bandstand or the Tonight Show.

Most ideas have never been something one could monetize. The inventor of the knock knock joke, for example, or the two college kids who coined Six Degrees of Kevin Bacon have put ideas into the ideastream, and they spread without much thought for cash compensation.

I'm certainly not arguing that content should be free, it's clear that the argument on the either side isn't absolute. My argument is that the line for using free as a discovery tool is shifting, and the best (and perhaps only) way to monetize in the future is for the idea to be encased in something that could never realistically be free. Prorducts and services with a marginal cost of more than zero, for example.

Should consumers be willing to pay for great content? You bet. In fact, paying for content is a great way to ensure that more of it gets made.

Does the game theory of the market make it likely that those in search of discovery will accelerate the use of free to get attention? Of course.

Creators have trained the most coveted, biggest spending and intelligent portion of the market to expect that many digital items will be free. Now it's up to us to wrap those items in such a way that they're worth paying for again.]

 

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marți, 7 iunie 2011

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


China Plows Into Absurd Bet on Long-Term Japanese Debt

Posted: 07 Jun 2011 08:08 PM PDT

Bloomberg reports China's Net Purchases of Japan's Long-Term Debt Rises to Record in April
China's net purchases of Japan's long-term debt reached a record as the larger nation seeks to diversify the world's biggest currency reserves.

China bought a net 1.33 trillion yen ($16.6 billion) in Japanese long-term bonds in April, the biggest amount since records began in January 2005, according to data released today in Tokyo by Japan's Ministry of Finance. The nation sold a net 1.47 trillion yen of short-term debt, the data shows.

"As China tries to diversify its assets with its huge foreign-exchange reserves, it probably wants to have yen- denominated assets to some extent" in the longer term, said Tetsuya Inoue, chief researcher for financial markets for Tokyo- based Nomura Research Institute Ltd. "China has a strong trading relationship with Japan."

Japanese government debt due in 10 years and longer has handed investors a 2.2 percent gain since the start of April, versus a 1 percent advance for the broad market, based on Bank of America Merrill Lynch data. The Nikkei 225 Stock Average has fallen 2.9 percent over the same period.
$16.6 billion is peanuts to China, but the trade itself is ridiculous. 10-Year Japanese debt is yielding 1.2%. 30-year Japanese debt yields 2.2%.

Pray tell what is the upside? Is 10-year debt falling to zero%?

Bear in mind that nations do not enter trades on a profit-loss basis so losses are of no concern. However, why take risks for almost no chance of gain when there are huge risks of losses, especially when there is a more viable play.

Buying long-term Japanese bonds is a heads you break even, tails you lose your ass bet. One can lose twice if yields rise and the Yen sinks. It is a sure loser if yields rise substantially, even if the Yen appreciates.

Holding Yen straight-up at least has a chance. I do care for that play, but perhaps I am wrong.

So what is China thinking? The answer is they aren't thinking.

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


Bernanke's Self-Serving Bold-Faced Lies

Posted: 07 Jun 2011 04:36 PM PDT

Inquiring minds are reading Bernanke's blatantly self-serving speech including some bold lies regarding the U.S. Economic Outlook.

I can condense Bernanke's speech down to a single paragraph. An interesting set of word cloud images follows this summation.

Blah, blah, blah brief update. Economic growth slower than expected. Blah, Blah, uneven across sectors and frustratingly slow, millions of unemployed and underemployed workers. Blah, Blah, ability and willingness of households to spend will be an important determinant of the pace at which the economy expands in coming quarters. Blah, blah, signs of gradual improvement. I expect hiring to pick up. Business sector presents a more upbeat picture. Blah, blah, blah Fiscally constrained state and local governments continue to cut spending and employment. The solution to this dilemma, I believe, lies in recognizing that our nation's fiscal problems are inherently long-term in nature. Consequently, the appropriate response is to move quickly to enact a credible, long-term plan for fiscal consolidation. Blah, blah. Establishing a credible plan for reducing future deficits now would not only enhance economic performance in the long run, but could also yield near-term benefits by leading to lower long-term interest rates and increased consumer and business confidence. Blah, Blah, the Outlook for Inflation Blah, Blah, the prices for many commodities have risen sharply, resulting in significantly higher consumer prices for gasoline. Price index for personal consumption expenditures has risen at an annual rate of about 3-1/2 percent, compared with an average of less than 1 percent over the preceding two years. Blah, blah, blah, not much evidence that inflation is becoming broad-based or ingrained in our economy Blah, Blah, subdued unit labor costs should remain a restraining influence on inflation. Blah blah, longer-term inflation expectations reasonably stable. Blah, blah, commitment of the central bank to low and stable inflation remains credible. Blah, blah world oil consumption rose by 14 percent from 2000 to 2010. Blah, blah, U.S. oil consumption was about 2-1/2 percent lower in 2010 than in 2000. Blah, blah improving diets in the emerging market economies. Blah blah, Production shortfalls have plagued many other commodities as well. Not all commodity prices have increased, blah, lumber and natural gas near levels of early 2000s. Blah, blah, dollar's decline can explain, at most, only a small part of the rise in oil and other commodity prices. Blah, blah, blah dual mandate of maximum employment and price stability, and we will certainly do that. Blah, blah, economic recovery in the United States appears to be proceeding at a moderate pace, longer-term inflation expectations remain stable. Blah blah, (FOMC) has maintained a highly accommodative monetary policy, keeping its target for the federal funds rate close to zero. Blah blah, economic conditions are likely to warrant exceptionally low levels for the federal funds rate for an extended period. Blah, blah, blah [blatant lie coming] Federal Reserve's actions in recent years have doubtless helped stabilize the financial system, ease credit and financial conditions, guard against deflation, and promote economic recovery. All of this has been accomplished, I should note, at no net cost to the federal budget or to the U.S. taxpayer. Blah blah blah Federal Reserve be vigilant in preserving its hard-won credibility for maintaining price stability.

Word Cloud of Bernanke's Speech

Zero Hedge provides this word cloud image of Bernanke's Speech.



Inspired by Zero Hedge, I ran my summation through a word cloud program.



I believe I've captured the essence of Bernanke's speech perfectly except for the lies.

Self-Serving Lies

Bernanke did everything possible to mitigate his role and the Fed's role in this crisis. His unmitigated gall comes through loud and clear with this bald-faced lie:

"The Federal Reserve's actions in recent years have doubtless helped stabilize the financial system, ease credit and financial conditions, guard against deflation, and promote economic recovery. All of this has been accomplished, I should note, at no net cost to the federal budget or to the U.S. taxpayer."

For starters, were it not for the complete ineptitude of the Greenspan and Bernanke Fed the US would not be in this mess in the first place. Second, there most assuredly is a cost to the Fed's policies.

Prices are higher, wages are not. Banks were bailed out at taxpayer expense. The Fed pays interest on reserves. That interest comes from taxpayers. The Fed's balance sheet is loaded to the gills with garbage from Fannie Mae and Freddie Mac. The Fed is not at risk on that garbage because Congress approved unlimited backing for GSE debt. That unlimited backing is over $300 billion and counting. Those losses are not all on the Fed's balance sheet of course. However let's not ignore the Fed's role in getting Congress to pass that blatantly stupid bill.

Let's also not forget the Fed cheerleading fiscal stupidity in Congress, not wanting Congress to do anything about monstrous deficits now. Keynesian and Monetarist clowns never want to do anything now. They always want to do it at the "appropriate" time, which in practice means never.

Most importantly I would like to point out the very real cost of those on fixed income, attempting to get by with higher food prices, higher gasoline prices, etc. I dare Ben Bernanke to face senior citizens and tell them there is no cost associated with interest rates at 0%.

In case you missed it please read Hello Ben Bernanke, Meet "Stephanie". That post is about the plight of those on fixed incomes struggling to get by with rising costs and CD rates at 1%.

Finally, there is an unseen cost to the stupidity of Bernanke's policies. That unseen cost is the cost associated with fostering still more speculation in the financial markets. There is another bubble in the stock market, another bubble in junk bonds, and another bubble in commodities.

We have yet to feel the ramifications when those bubble pop, and they will. Bernanke cannot see those bubbles for the same reason he could not see the bubble in housing, the bubble in credit, the rapidly rising unemployment rate, and countless other things he missed.

Bernanke is a complete fool, trapped in academic wonderland, completely oblivious as to how the real world works. To top it off, Bernanke has the gall to knowingly lie about the real world effects of his blatant stupidity.

Ben Bernanke, you are disgusting.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Prudently Managed Banks Victimized by Taxpayer-Subsidized Too-Big-To-Fail Banks; Seen and Unseen in Dodd-Frank Regulation

Posted: 07 Jun 2011 10:47 AM PDT

Dallas Fed president Richard Fisher blasted too-big-to-fail banks, CEO compensation, bank risk-taking, inadequacies in Dodd–Frank regulation, and unintended consequences of poor legislation in a speech in New York on Monday.

Please consider excerpts from Containing (or Restraining) Systemic Risk: The Need to Not Fail on 'Too Big to Fail'
I confess that in matters of monetary policy and regulation, I am often in the minority. This does not make me the least bit uncomfortable. The majority opinion is not always right; indeed, my experience as an investor has biased me to conclude that more often than not, the consensus view is the wrong view, even among the most erudite.

For example, some of you may recall the public letter written by 364 eminent economists predicting disastrous consequences that would result from Thatcher's policy initiatives. That letter was published in the Times of London on March 30, 1981. The British economy began a recovery almost immediately afterward.

Most regulatory reform initiatives applied since the Banking Act of 1864 have missed the mark. They looked good on paper and appeared to solve the problems of the day but later proved not up to the task. This is especially true with efforts to solve the "too big to fail" problem, in which an unwillingness to follow through on prior policy commitments to actually close down large failures and impose losses on their uninsured creditors has led to what economists call "time inconsistency" in policy.

While there is much to criticize about Dodd–Frank, I cotton to those blunt statements on ending too big to fail. For, if after the myriad rules and regulations are written and implemented we have not eradicated too big to fail from our financial infrastructure, reform will have failed yet again.

In looking at regulatory reform and implementing Dodd–Frank, I think a key point worth repeating is that the distinction between "commercial banks" and "the shadow banking system" is a false one. The two became intertwined beginning with the bypassing of Glass–Steagall strictures by Sandy Weill and Citicorp and the deregulatory initiative of Gramm–Leach–Bliley. The fact is that the largest commercial banks played a major role in many of the more problematic phenomena of the recent credit boom and ensuing crisis, including the spread of what I have previously referred to as financial STDs, or securitization transmitted diseases.

In the aftermath of the Panic, these viruses linger. Last week, the New York Times printed an interesting article by Joe Nocera, who drew upon the observations of a highly regarded regional banker from Buffalo, Robert Wilmers of M&T Bank. Wilmers claimed that of the $75 billion made by the six largest bank-holding companies last year, $56 billion derived from trading revenues.

Nocera noted that "in 2007, the chief executives of the Too Big to Fail Banks made, on average, $26 million … more than double the compensation of the top nonbank Fortune 500 executives."

These recent numbers buttress Nocera's reasonable conclusion that bank CEOs "were being compensated in no small part on their trading profits—which gave them every incentive to keep taking those excessive risks."

I am sympathetic to these concerns. There is no logic to having the public underwrite through deposit insurance or subsidize through protective regulation the risk-taking ventures of large financial institutions and their executives. There is a substantial case to be made for separating the "public utility"―or traditional core function of banking―from the risk-taking function.

To be sure, financial problems are not limited to large institutions and their complex, opaque and conflicted operations. Regional and community institutions that have, for the most part, stuck to the public utility function have faced their own difficulties, especially in the context of construction lending. But while over 300 banks failed during the crisis, another 7,000 did not. Community and regional banks that are not too big to fail appear to have succumbed less to the herdlike mentality and promiscuous financial behavior that affected their megabank peers.

Moreover, when smaller banks got into deep trouble, regulators generally took them over and resolved them. In the treatment of big banks, regulators, for the most part, tiptoed around them. Failing big banks were allowed to lumber on, with government support, despite the extensive damage they wrought. Big banks that gambled and generated unsustainable losses received a huge public benefit: too-big-to-fail support.

Post-crisis, the large institutions are even larger: The top 10 now account for 64 percent of assets, up from 58 percent before the crisis and substantially higher than the 25 percent they accounted for in 1990. In effect, more prudent and better-managed banks have been denied the market share that would have been theirs if mismanaged big banks had been allowed to go out of business. This strikes me as counter to the very essence of competition that is the hallmark of American capitalism: Prudently managed banks are being victimized by publicly subsidized competition from less-prudent institutions.

In solving the crisis at hand during the Panic, it appears that the most imprudent of lenders and investors were protected from the consequences of their decisions; the sinners were rescued and the virtuous penalized. In crafting regulations in response to Dodd–Frank, we need to restore market discipline in banking and let the market mete out its own brand of justice for excessive risk-taking rather than prolong the injustice of too big to fail.

It is not difficult to see where this dynamic, if uncorrected, will lead—to more pronounced financial cycles and recurring crises. I would argue that the failure to reform the banking system in Japan was one of the principal reasons for that country's "Lost Decade(s)." We must not let that pathology take hold here.

Making Matters Worse

Here, I think it wise to draw upon the insight of the classical liberal Frédéric Bastiat in his take on unintended consequences.

To the extent that a large scale becomes necessary to absorb the regulatory cost associated with reform, Dodd–Frank could intensify the tendency toward bank consolidation, resulting in a more concentrated industry, with the largest institutions predominating even more than in the past. Such an outcome would appear to me contrary to the stated spirit and goal of the act. A more consolidated industry would only magnify the challenge of dealing with systemically important institutions and offsetting their historically elevated too-big-to-fail status.

My concerns over regulation-induced economies of scale and the implications for industry consolidation apply to all the size classes of banks, given the extensive list of new or enhanced requirements created by Dodd–Frank and their associated compliance costs.

The act indicates that all banking organizations with more than $50 billion in assets should be subject to enhanced supervision. Yet, few really believe a $50 billion bank poses a systemic threat to our $17 trillion banking system. Nor is a $50 billion bank qualitatively similar along risk dimensions to the very largest ones that exceed $2 trillion in size. The top 10 banking organizations have a cutoff point of $300 billion. I posit that this group should constitute the primary target for enhanced supervision. Interestingly, despite its large share of industry assets, this group holds only about 20 percent of the small-business loans on bank books. Clearly, these institutions are engaged in substantial activities outside the traditional banking role. It is within these very largest banks, and perhaps a few slightly smaller yet highly complex or interconnected ones, that systemic risk is concentrated.

If the enhanced-supervision requirements are not highly graduated and imposed primarily on the very largest banks, it is not difficult to imagine how the costs associated with such supervision could lead mid-tier banks that exceed the $50 billion threshold—yet fall well short of megabank status—to seek merger partners in order to achieve sufficient scale by which to help cover the cost of regulation. This would compound the problem rather than alleviate it.

However, when it comes to the top 10 or so, I would apply Dodd–Frank extensively and vigorously. I would apply all the elements of heightened supervision—from enhanced standards for capital and liquidity requirements, leverage limits and risk management to the additional measures of living wills and credit-exposure reports, concentration limits, extra public disclosures and short-term debt limits—with full force.

I quoted Bastiat's criterion for a good economist as one who accounts for "effects that must be foreseen." Economists did not do a good job of foreseeing the financial crisis. Neither did regulators. Moreover, previous measures directed at containing too big to fail proved ineffective, with no one too surprised that when crisis came, many large-bank counterparties were protected under implicit guarantees.

Let's hope that going forward, regulators can do better, avoiding both unintended consequences and time inconsistencies. For if they don't, and they are unable to solve the too-big-to-fail issue in a timely manner, we will ultimately have to take more draconian measures and simply break up the largest banking organizations to eliminate the threat they pose to financial stability and economic growth.

That is my contrarian view, and I'm sticking with it.

Thank you.
Fisher Hits the Bulls-Eye.

It is exceptionally rare for me to endorse a lengthy speech by a Fed governor. However, Fisher hits the bulls-eye on many points.

  • Fisher blasted Sandy Weill and Citicorp
  • Fisher blasted too-big-to-fail
  • Fisher blasted Dodd-Frank
  • Fisher blasted CEO pay
  • Fisher blasted the "herdlike mentality and promiscuous financial behavior" of large banks
  • Fisher blasted the removal of Glass–Steagall
  • Fisher cited trading profits and promotion of risk taking
  • Fisher cited Frédéric Bastiat on unintended consequences and the seen vs. unseen


What's not to like?

I suspect this is one of the few lengthy speeches by anyone on bank regulation that would have Barry Ritholtz, Calculated Risk, Yves Smith, and myself in major agreement. It would be interesting to see them chime in.

Alas, I suspect Fisher wasted his breath. Bernanke is not behind those ideas, and getting Congress to completely revamp Dodd-Frank would be difficult at best, even with a major push by Bernanke.

Reflections on Another Lost Decade

Fisher said "I would argue that the failure to reform the banking system in Japan was one of the principal reasons for that country's Lost Decade(s). We must not let that pathology take hold here."

Unfortunately that very pathology has already taken hold.

Greenspan and Bernanke both criticized Japan for not forcing banks to take losses and write down assets. When given the same opportunity, the Fed and ECB opted to kick the can at taxpayer expense while embarking on a misguided QE policy, just as Japan did.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Excluding Default Risk, 33 European Banks Need Additional $347 Billion of Capital; Banks Trade Below Book Value; Only 22% Expect Credible Stress Test

Posted: 07 Jun 2011 08:48 AM PDT

European banks have $188 Billion at risk from Greece, Ireland, Portugal, and Spain. Excluding default risk, those banks are still woefully short of capital according to a study coming out tomorrow.

Please consider European Banks' Capital Shortfall Means Greece Debt Default Not an Option
The "fragilities" of Europe's banking industry mean a Greek default isn't an option, European Union Economic and Monetary Affairs Commissioner Olli Rehn said in New York last week. By delaying a decision some investors consider inevitable, policy makers risk increasing the cost to European taxpayers and prolonging Greece's economic pain.

"European officials are trying to buy time for the troubled economies to get their house in order and the banks to be strengthened," said Guy de Blonay, who helps manage about $41 billion at Jupiter Asset Management Ltd. in London.

While estimates of the capital shortfall vary, the vulnerability of European banks to a sovereign shock isn't disputed. Independent Credit View, a Swiss rating company that predicted Ireland's banks would need another bailout last year, found in a study to be published tomorrow that 33 of Europe's biggest banks would need $347 billion of additional capital by the end of 2012 to boost their tangible common equity to 10 percent, even before any sovereign default.

European banks had $188 billion at risk from the government debt of Greece, Ireland, Portugal and Spain at the end of 2010, according to a report this week from the Bank for International Settlements. European lenders held $52.3 billion in Greek sovereign debt, with German banks owning the biggest share, the BIS data showed.

European banks are trading at 0.83 times book value, according to the banks index, almost the widest discount since the end of 2008 to their U.S. counterparts, which trade at 0.94 times book, based on the 24-member KBW Bank Index. (BKX) The five-year average price-to-book ratio of the 51 European lenders is 1.34, data compiled by Bloomberg show.

That banks in both regions are trading below book value indicates investors don't believe their assets are worth as much as the companies say.

Low market valuations make any potential capital-raising more dilutive for shareholders, said Simon Maughan, head of sales and distribution at MF Global Ltd. in London. Questions about regulatory requirements are adding pressure on bank stocks, making a quick recovery unlikely, he said.

"The big issue behind why price-to-book ratios are well below averages is that the market is saying banks can't make a proper return and certainly not a return anything like they've been used to getting," said Maughan.

EU regulators are seeking to assuage investors' concerns about capital with a second round of stress tests on 90 lenders. The European Banking Authority is promising tougher tests this year after failing seven of 91 banks last year and finding a capital shortfall totaling 3.5 billion euros, or about a 10th of the smallest estimate from analysts. Ireland's biggest banks needed a rescue four months after passing the test.

Tests carried out in the U.S. in 2009 found 10 lenders including Bank of America Corp. (BAC) and Citigroup Inc. needed to raise $74.6 billion of capital. The banks were required to raise the funds from private investors or accept government aid.
Mark-to-Fantasy Asset Valuations

Bank stocks have been in the gutter because of mark-to-fantasy accounting. No one believes asset valuations, and no one believes results of existing stress tests.

Few will believe the results of the next one.

Only 22% of Respondents Expect Next Stress Test will be Credible

The Wall Street Journal reports Spanish, German, Greek Banks Seen Failing Stress Tests -Survey
Banks from Spain, Germany and Greece are expected to have to raise the most new capital following the next round of European stress tests, according to a survey of investors by Goldman Sachs published Monday.

But the survey of 113 fund managers, mostly from hedge funds and long-only investors, also found that only 22% of respondents expect the test to be a "credible reflection of bank resilience," highlighting the lack of credibility of the stress test.

Last year's test rubber-stamped the balance sheets on several banks that later fell on hard times, including Irish banks that a few months after the tests were published had to be bailed out.

According to the Goldman survey, investors expect the stress tests to show that banks will need another EUR29 billion in fresh capital. It expects 90% of the banks included in the test to pass. Investors on average expected nine out of the 91 banks that will take the test to fail, down from 10 institutions that failed last year's stress tests.
The stress test should include default because default is the epitome of stress. Default is also highly likely.

The expected result of the stress test is a mere EUR29 billion in fresh capital ($42.5 billion US) for 91 banks. Compare that to Credit View's analysis that shows 33 banks, need $347 billion in capital, not counting a risk of default.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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