miercuri, 28 septembrie 2011

Accidental Noindexation Recovery Strategy and Results

Accidental Noindexation Recovery Strategy and Results


Accidental Noindexation Recovery Strategy and Results

Posted: 28 Sep 2011 04:16 AM PDT

Posted by chadburgess

"I know before the cards are even turned over..." - Mike McDermott, Rounders

When Mike McD was called by Teddy KGB in a huge No-Limit Hold'em poker pot, he didn't have to see his opponents hand to know that KGB had two aces, the only hand in the deck that could beat his nines full of aces (if you have seen Rounders, feel free to skip over the video below, if not, you probably should get on that). This was the same feeling I had when we got "SERP a DERPd" via accidental noindexation of 9,000 of our most important pages....

 

Contents:

  1. What happens when pages are accidentally noindexed
  2. Tactics for getting pages into the Google index quickly
  3. How noindex impacts SERP rankings

(note that I am focusing on Google in this post) 

Background:

I am an in-house SEO and customer acquisition marketer at SeatGeek.com, a NYC tech startup. Our site is a ticket search engine for sports concerts and theater tickets (i.e. "a Kayak for event tickets").

On Monday 8/1, I was searching Google for 'mets tickets' and saw that SeatGeek had slipped from page 1. Worse, we weren't even on page 2. I tried a few more queries that I knew we should be on page 1 for and still nothing. My heart was beating. Had we been Panda'd? It didn't make sense, but I was panicked. Then it hit me. I opened up our New York Mets page, but, just like Mike Mcd, I knew before I even clicked view source...content="noindex" on all of our product pages.

No Index

I have only been doing SEO for ~2 years, so I had never directly experienced an accidental noindex situation. So even as I read reports of these not having an impact on rankings and knew this wasn't as bad as an accidental canonicalization problem, I couldn't help but envision the worst case scenario...9,000 of our most important conversion driving pages would be out of the index for weeks and would not have their same rank when they got back in

What happens when pages are accidentally noindexed

Impact of Accidental Noindexation

This is a chart of incoming organic traffic to one of our key pages right when the noindex hit.

Obviously organic traffic ceased to exist. Interestingly though, Google Analytics still reported some traffic to these pages.

This might be the one instance where having less frequent crawl frequency can be beneficial (assuming bandwidth isn't an issue). The pages that got noindexed are recrawled every 4-6 days, which would have given us a buffer if we caught this sooner. Unfortunately, Google waited until Saturday to crawl these pages and we didn't catch the problem until Monday. 

Reindexation Plan and Tactics:

The first course of action was to remove the noindex tags, which one of our pop star engineers did within five minutes. This was right around the time I sent out my first plan of action email which I have included below in case you ever have to write the same email: 

All,
So I was doing a daily scan of SERP positions and started noticing team band pages had dropped. At first I thought we got Panda'd, but it looks like the noindex tags that are supposed to be applied to search pages and filtered navigation recently got pushed into production, but because those pages only get reindexed every 3-6 days there was some delay in the traffic impact, which you can see if you filter by team/band pages.
We are currently:

  • Noindex already removed in production
  • Writing blog posts that link to all major sports teams to get these reindexed (more difficult for bands)
  • Launching social media campaigns to support this cause
  • Forcing update on .xml sitemap (hopefully to help with concerts issue)
  • Investigating additional techniques
  • Going to look into the current traffic impact / which pages got impacted the most (hopefully some deeper artist type pages never got recrawled before the fix)

http://www.webmasterworld.com/webmaster/3601620.htm Here's to hoping this is true "My experience is that "noindex" is quite harmless when it comes to ranking. As soon as you change it to "index", the pages should pop up at nearly the same positions in the SERPs as where they were." I will keep you all posted. -Chad 

Even if rankings would come back, we wanted this to happen as quickly as possible. I had a plan, and fortunately some great interns to help me out. So this is what we did (excuse any repetition from the email)...

Submit to Google Index via Webmaster Tools

All of the above was completed within one hour of us discovering the issue, except for the guest posts and contest which were done over the next 1-2 days. And then we waited... 

Reindexation Metrics:

It took 1-2 days for our most important pages to get back into the index, which we were really happy with. Some of our deeper / less important pages took up to 5 days to come back or longer in some cases. Fortunately we had followed advice from other Mozzers and introduced multiple XML sitemaps earlier in the year with all our product pages in one XML sitemap we were able to easily track indexation of these pages via Google Webmaster Tools. Indexation and traffic were on their way back up by the next day, but as you can tell from the graph below traffic didn't return to previous levels to about 2-3 days from when the noindex tag was removed.

Noindexed Page Traffic Before and After

 

Rankings Impact of Noindexation:

Ranking After Accidental Noindexation

Now let's look at how this impacted our SERP rankings. The example above, was a truly interesting case because our Mets page returned to the index the night of the fix and I emailed my bosses to check it out as a good example of a recovering page, but by the time we got into work the next morning it had left the index again and I looked like a clown shoe. Fortunately, the page came back (again...) into the index the next day and was back up to its previous ranking by the end of the week. This is an example of a trend I noticed that many pages would come back into the index first and then return to ranking for their target terms a day or so later.

The example below is one where we returned to the index but without the same rank as we had before. There isn't really a way to tell if this was impacted at all by the noindex situation, I suspect it was just a random Google dance related to the more frequent shakeups I have seen in event "tickets" related queries. Overall, our page 1 SERP positions have completely returned to prior levels.

Giants Ranking after noindex

Conclusions:

  • If you accidentally noindex pages on your site, of course they will stop getting traffic from organic search, but this will be dependent on the crawl rate of the pages (in our case it took ~5 days for them to drop out of the index) and 2-3 days for them to return to normal levels
  • If you have a blog that gets crawled quickly, use that as a tool to help drive spiders back to the pages that were noindexed with strategic internal linking (of course wait until you have removed the noindex tag)
  • Take advantage of friends & family to help with social shares and pump this up with a social giveaway
  • Use Google Webmaster tools: 1) XML sitemap resubmit 2. Manual 'Submit to Index' 3. Sitemap indexation tracking
  • You should have Multiple XML sitemaps set up into logical buckets for indexation tracking to faciliate the indexation tracking mentioned above
  • Although your rankings might see short-term "dancing", an accidental noindex will not have a negative impact on them
  • Lastly, don't be too worried, just follow some of the tactics above and you should be back in the index with the same rankings (have your boss email me if they are giving you crap - chad@seatgeek.com)

Ok so that was probably too much information for just an accidental noindex situation, but when it happened to me it was scary and there wasn't a solid documentation on what to expect, so I wanted to produce this for the next person in my situation. Thanks for reading. Connect with me on Twitter if you are so inclined.


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Conquer Link Directory Best Practices for SEO

Posted: 27 Sep 2011 02:11 PM PDT

Posted by Cyrus Shepard

Good news to all you link builders out there. SEOmoz just updated the PRO SEO Web Directory List. The long overdue update includes over 400 directories (up from 180) separated into three categories – Web, Local and Social.

Wait, aren’t link directories dead?

The practice of obtaining links from online directories has changed dramatically over the past 10 years. The stereotypes of the past are both true and dangerous. Spammy, low quality directories flood the lower cesspools of the Internet. An unbridled strategy of obtaining links from these non-discriminate directories can actually hurt your SEO.

But times have changed, and strategies have become more evolved.

Rethinking Directories

We can move beyond thinking about directories as nothing more than paid links. For webmasters who use this approach, the links they obtain may not be worth the effort. An intelligent directory strategy provides depth to your SEO campaigns and offers tangible benefits including:

  • A more diverse link profile
  • Qualified referral traffic
  • Citations for different vertical ranking algorithms
  • Trust/Authority Signals
  • … and, of course, the link.

If you use different directories for different purposes, you can achieve this and more.

A. Web Directories

Design Flavor

If links were easy for everyone, they would be less valuable for all of us. In general, the lower the bar of entry into any directory, the less inclusion into that directory is valued by the search engines.

Some editorial directories raise the bar by charging a high cost of inclusion (Yahoo, Best of the Web) and being somewhat selective about whom they include. Three hundred dollars is a lot to pay for “inclusion review” but the truth is that for an established business, these links are like bread and butter.

Other directories focus on a particular area, and thus are harder to get into. Examples of these “niche” directories include sites such as:

When pursuing directory links, keep the following tips in mind:

  1. Not every directory link is right for your site. Be selective and don't go for every link out there.
  2. Pace yourself. A good hint I got from Ian Lurie's Fat Free Guide is the 2:1 rule: for every two directory links you build, make sure to build one genuinely natural link. This helps to keep your link profile looking “natural”.
  3. Research. Understand where your link will be placed before you go after it. Check Google’s cache of the page to make sure they are indexing it. Large directories are often plagued by bad SEO, and not every link carries the weight it should.
  4. Seek relevancy. Ask yourself if this link has the potential to send qualified traffic to your site. Even if it's a small amount of traffic, it's probably worth the effort.

I’d often rather have a hard-to-get link from a smaller niche site that an easy-to-get link from a larger well-known directory.

B. Social Directories

delicious

We know that the rise of Social SEO means sharing your content on sites like Facebook and Twitter can have a positive impact on your site’s traffic. But far too many people limit sharing to the big three (Twitter, Facebook and Google+) without considering other social sharing sites. The plethora of specialized social sites offer several benefits.

1. Member Profiles – Here’s a random profile from Mister Wong, a social bookmarking site. (thank you rgonzalo!) Mr. rgonzalo appears to be an authority on the site. Any content he shares will carry weight with the Mister Wong audience.

2. Content Publishing – Instead of a single website listing, social sites allow you to promote individual pieces of content. Using the above example, whenever Rgonzolo shares a URL, that content is likely linked to and noticed by search engines.

3. Increased participation increases visibility. You probably can’t participate in every social site out there. For web marketers, focusing on a few sites where you can devote your time, like Quora or CrunchBase, may be a good strategy. Those who become trusted authorities within their community are often rewarded with increased visibility of the content they share.

C. Local Citation Directories

Judy's Book

Using local directories requires a shift in thinking for many webmasters, because it’s not always about the link, but about the citation. As David Mihm points out, the search engine’s local ranking algorithms work much differently than the search algorithms.

For local SEO, search engines trust verifiable information from local portals such as Superpages and Judy’s Book. In most cases, if you are a verified business, gaining a citation from these sources is worth the effort and time.

For more on local SEO directories, I highly recommend reading Mike Blumenthal and Andrew Shotland (and David Mihm, of course.)

Directories = Diversity in Your Link Profile

Just as you shouldn’t rely solely on directory links, you shouldn’t ignore them either. The goal is a diverse and blended link profile. Many webmasters have abandoned directory links due to the bad reputation they have gained over the past years. In truth, the variety and quality of the directories available today offer unique opportunities to expand your SEO reach and diversify your link profile in future-proof ways.

Web Directory

I encourage you to check out the new PRO Directory list, it's an awesome resource. That said, any SEO can take advantage of the tactics in this post. Even with a curated list, using Web directories takes time and research.

There are no shortcuts in link building, but the effort is worth it.


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Today: Join us for an Open for Questions with President Obama

The White House Your Daily Snapshot for
Wednesday, Sept. 28, 2011
 

Today: Join us for an Open for Questions with President Obama

Today, at 11:25 a.m. EDT, President Obama will participate in an Open for Questions roundtable with Yahoo!, MSN Latino, AOL Latino and HuffPost Latino Voices live from the White House.

The President will answer questions about issues that matter most to the Hispanic community and all Americas – the economy and job creation, education, health care, fixing the broken immigration system and more.

Learn more and don't forget to watch it live

Photo of the Day

President Barack Obama shakes hands with people gathered at Abraham Lincoln High School in Denver, Colo., Sept. 27, 2011. (Official White House Photo by Pete Souza)

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

Bang for the Buck in the American Jobs Act
Setting the record straight on the costs and benefits of the American Jobs Act.

President Obama: We Need to Do Everything We Can to Prepare Our Kids for the Future
The American Jobs Act will create 21st century schools across the country

L’Shana Tovah
At sundown, the Jewish community here in the United States and all over the world will gather to celebrate the start of the new year. Rosh Hashanah offers us an extraordinary sense of possibility because it provides us an opportunity to shape our world for the better.

Today's Schedule

All times are Eastern Daylight Time (EDT).

11:25 AM: The President participates in an "Open for Questions" roundtable

12:00 PM: Press Briefing by Press Secretary Jay Carney

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

1:30 PM: The President delivers his third annual Back-to-School Speech

2:30 PM: The Vice President meets with Ambassador to Iraq Jim Jeffrey

4:30 PM: The President and the Vice President meet with Secretary of Defense Panetta

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

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SEOptimise


30 Google SERP Changes That Impact Your SEO Strategy

Posted: 27 Sep 2011 06:42 AM PDT

*

Just a few years ago SEO was really simple. You had to be in the top 10 or rather in the top 3 for relevant keywords. Then the traffic came and with it the leads, sales or whatever you wished. Today there is no real top 10 anymore. Even if you are at #1 in the organic search results, you might be below the “fold” so that users have to scroll to see your site on the Google search results page aka SERP.

Google has introduced so many changes to most SERPS that you can’t ignore them and go on as if it’s still 2005. You have to change your SEO strategy accordingly.

While many people already have noticed that Universal search is all over the place, and images, video or news results get displayed frequently, many still behave as if SEO was about checking rankings and aiming for #1 in organic search. These 30 Google SERP changes impact your SEO strategy in a way you can’t ignore.

  1. Ads and universal search push organic results below the fold
  2. There is opportunity in local search results
  3. Paid shopping results show above organic results
  4. There are sometimes more or fewer than 10 results
  5. Infinite scroll allows users to peruse longer lists of results
  6. Author avatars get displayed on the left of search snippet
  7. Bulleted snippets made of list items stand out
  8. Local results show up even without adding a location
  9. For location-based SERPs, organic results almost disappear
  10. Local SERPs may vary significantly
  11. Huge full-page site links for brands monopolise branded queries
  12. Brands tend to dominate their own SERPs
  13. Sidebar menu attracts clicks and competes with the actual results
  14. Social search annotations show up with favicon sized avatars
  15. Google+ bar with red notification distracts while searching
  16. +1 button clicks reorganise your search results significantly
  17. Google +1 counts appear in search results for everybody
  18. Public Google+ profile messages show up prominently in SERPs
  19. Google remembers and adds recent search queries you performed
  20. Your last visited pages get highlighted by Google
  21. Google adds your address from Google Profiles to public search results
  22. Mobile SERPs differ significantly from desktop SERPs
  23. “Searches related to” draw away attention from first query
  24. Google instant search results send people away to partial queries
  25. Google instant previews can lower your CTR and affect conversion rate
  26. Personalisation is taking over the average SERPs
  27. Keyword matching domains can now barely be seen
  28. Google may shorten your URL displayed, hiding “irrelevant parts”
  29. 5 years from now SERPs could be completely different
  30. Google can highlight on-site videos in SERPs

 

So how do we actually deal with these SERP changes? How exactly do they impact your SEO strategy? There are a few common traits you can focus on:

  • Relying on ranking reports is less and less useful; other metrics and KPIs have to be taken into account, such as traffic, conversions and ROI.
  • Websites have to be more usable and social in nature to stay competitive in SERPs.
  • You have to embrace universal search and add other media types than text.
  • Local SEO is the only SEO many businesses can go after, while for others it’s a new way of getting additional exposure.
  • Like it or not, you have to pay Google “to get your organic ranking back”, whether by ads or shopping search results.
  • You need to offer many ways to reach you, both via Google and social media. Organic results are not enough anymore.
  • You have to step up your SEO efforts or increase your SEO budget. SEO isn’t simple anymore, if it ever was. Now there are so many things to consider that only full time specialists can deal with it correctly.

 

Any other recent or significant SERP changes I haven’t mentioned? Any other ideas on how to tackle these massive changes? Please add the in the comment section!

 

* CC image by SomeDriftwood.

© SEOptimise - Download our free business guide to blogging whitepaper and sign-up for the SEOptimise monthly newsletter. 30 Google SERP Changes That Impact Your SEO Strategy

Related posts:

  1. Experiment: Do Google +1s Impact Your Rankings?
  2. International SEO Strategy – Domains, Subdomains or Subfolders?
  3. 36 Must-Read Local SEO/Google Places Resources from 2010/2011

Seth's Blog : "No one goes there any more, it's too crowded"

"No one goes there any more, it's too crowded"

It's also true that most of your friends have more friends than you do.

The law of large groups is at work here. This explains why the people you see at the gym tend to be in better shape than you are.

People with lots of friends are more likely to be friends with you than people with no friends, right? And the people who are at the gym a lot (as in the people you see the most often) tend to be in better shape because they show up more often.

Discernment is the hardest part of marketing--seeing the world as it is, instead of how you experience it.

 

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marți, 27 septembrie 2011

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Europe Plans to Tax Stock and Bond Transactions .1%, Derivatives .01% Despite US Objections; Expect More Crashes Should it Pass

Posted: 27 Sep 2011 01:41 PM PDT

Europe plans to raise as much as 50 billion Euros annually with a financial transaction tax. If they are looking to increase volatility, remove liquidity, and increase the odds of a crash, then such a tax may "help".

Please consider Brussels to release financial tax plan despite US objections
The European Commission approved in principle the tax proposal on Tuesday, and the head of the EU executive Jose Manuel Barroso may outline the plan on Wednesday in a "state of the union" address to the European parliament in Strasbourg.

On the commission's drawing-board for more than a year, the idea was given fresh impetus last month when given the nod by Europe's power couple, French President Nicolas Sarkozy and German Chancellor Angela Merkel.

"The idea is to force a contribution from the financial sector, which enjoys fiscal privileges thanks to a sales tax exemption, meaning it saves 18 billion euros a year in Europe," an EU source told AFP on condition of anonymity.

If adopted -- not before 2014 -- the tax could ring in between 30 billion and 50 billion euros a year -- possibly half for the European Union budget, the remainder for national governments.

The rate suggested would be minimal with member states free to hike the tax.

The financial transactions tax is slated to target a wide field, with the latest known proposals aiming to slap 0.1 percent on shares and bonds and 0.01 percent on derivatives.

While Merkel and Sarkozy offered no details on the tax in August, their support helped send shares into an immediate tailspin with financial sector players warning the measure would push business away from Europe.

Britain, at the heart of the financial industry, reiterated demands for any such tax to be applied globally. "Otherwise the transaction covered would simply relocate," a Treasury spokesperson said.

But a source close to experts drafting the proposals said the research on the issue was "reassuring", with negative impact deemed "negligeable" when compared with Europe's overall attraction to financial transactions.

The tax, the source added, would include a principle of territorial location to avoid relocation.

"A non-European bank registered in Europe for certain transactions could be considered to be established in Europe. The tax would not be based on where transactions take place but on the parties involved."
Reduced Liquidity Increases Chance of Crashes

Short term traders add liquidity. Would .1% drive them away? Yes, it might. Think of it this way, 10 quick flips is 1%. 100 trades is 10%. In the short-term trading world 100 trades is not a big number.

What about computerized trading? I fail to see how that is any different.

Reduced liquidity increases the chances of crashes. Thus, the financial transaction tax will not help anyone, and that includes long-term hold types.

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


European Stocks Climb Most in 16 Months; Pimco's El-Erian Says "Europe Finally Gets It"; El-Erian is Wrong in Multiple Ways

Posted: 27 Sep 2011 09:53 AM PDT

For three days European stocks have soared 7% with the beaten up banking sector up even more. This is the biggest rally since May 10, 2010. That rally did not hold, and while anything is possible, this rally is unlikely to hold either. In the meantime, enjoy the rally.

European Stocks Climb Most in 16 Months

Bloomberg reports European Stocks Climb Most in 16 Months Amid Effort to Contain Debt Crisis
European stocks climbed the most in 16 months amid speculation policy makers will increase efforts to contain the region's sovereign-debt crisis.

Rio Tinto Group led a rally in raw-material shares, surging 7 percent, as metal prices rose. BNP Paribas (BNP) SA and Societe Generale (GLE) SA, France's biggest banks, soared more than 12 percent. MAN SE (MAN) rose 6.9 percent as European Union regulators cleared Volkswagen AG (VOW)'s takeover of the truckmaker.

The benchmark Stoxx Europe 600 Index climbed 4.4 percent to 229.88 at 4:36 p.m. in London. That's the biggest gain since May 10, 2010, when it jumped 7.2 percent after the EU unveiled a 750 billion-euro ($1 trillion) loan package aimed at controlling the debt crisis. The gauge has surged 6.8 percent over the past three trading days after falling to a two-year low on Sept. 22.

The Stoxx 600 fell 26 percent from this year's peak in February through Sept. 22 as European and U.S. economic reports trailed forecasts, adding to concern that the global recovery is at risk. The decline left the measure trading at 9 times estimated earnings, the cheapest since March 2009, data compiled by Bloomberg show.

U.S. Treasury Secretary Timothy F. Geithner predicted that European governments will step up their response to their region's debt crisis after a chiding from counterparts around the world.

"They heard from everybody around the world" in Washington meetings last week, Geithner said on ABC's "World News With Diane Sawyer" program. Europe's crisis is "starting to hurt growth everywhere, in countries as far away as China, Brazil and India, Korea. And they heard the same message from us they heard from everybody else, which is it's time to move."
Stocks Not Cheap

For starters, stocks are not particularly cheap. Earnings in general will be worse than expected because consumers have increasingly thrown in the towel and much of the global economy is back in recession. Banks are still hiding losses, and European banks are way over-exposed to sovereign debt not remotely marked-to-market.

While the 3-day euphoria spreads, I point out many times in the past six months where there have been 1- to 3-day rallies that all died.

This time the market is giddy over EFSF leverage that the German parliament may not even approve, and the German supreme court says "not without a referendum".

Please see Germany's Top Judge Throws Major Monkey Wrench Into Leveraged EFSF Machinery, Demands New Constitution and Popular Referendum for Further Powers for details.

Europe Finally Gets It

El-Erian Says "Europe Finally Gets It"
"What I learned in Washington is that Europeans finally get it," El-Erian, chief executive and co-chief investment officer at the world's biggest manager of bond funds, said in a radio interview today on "Bloomberg Surveillance" with Tom Keene and Ken Prewitt. "They recognize they have deep problems and they recognize they need to do something about it. And now they are going back and will try to do something about it. This was a very important wake-up call for Europe."




Talk is Cheap

El-Erian says that European leaders are now "all saying the right things". What right things? There is bickering over bank capitalization ratios, bickering over how banks will be recapitalized, and bickering over whether or not Greece will default and if so what the haircuts will be.

None of the talk regarding the currently hatched plan addresses haircuts that are coming.

European leaders have their heads in the sand, or perhaps up Treasury Secretary Tim Geithners' ass as it was Geithner who actually hatched the ballyhooed leveraged bailout scheme.

Yes, they have hatched a plan to use leverage, but that plan has enormous risks. Moreover, it is questionable at best the German supreme court will allow that plan to stand.

Even if the plan does stand, throwing trillions of Euros around just to prevent Greece from defaulting hardly seems like a sensible policy. The sensible policy would have been to let Greece default two years ago.

Throwing Trillions of Euros is Not "Getting It"

Europe does not "Get It", nor does El-Erian. In the end, El-Erian is just another monetarist who thinks the answer to problems is sloshing around money, at taxpayer expense, to bail out banks and bondholders who should instead have to take losses for poor lending decisions.

This is Not "Getting It". Rather it is "Going All In" instead of taking writeoffs that are going to happen anyway. Thus, El-Erian is wrong in more ways than one.

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


Cash Crunch in China Picks Up Momentum; Chinese Economy "Teetering On the Edge"

Posted: 27 Sep 2011 01:42 AM PDT

Todd Martin, an Asia equity strategist at Societe General SA, talks about the outlook for China's economy and credit market. Martin also discusses global stocks and commodities. He speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia."



The interview starts off with a very weak idea "fundamentals have been thrown out the window". However the analysis gets much better as the video progresses. Here are a few key ideas from Todd Martin.

  • RMB offshore vs. onshore rate is at a historic low. This shows Hong Kong or China mainlanders are hoarding cash, possibly to repay debts.
  • The liquidation phase is concerning. Markets are looking into a deflationary abyss.
  • Recent capital inflows into China are misleading. It was not investment but rather mainland money repatriated to repay debt.
  • Cash crunch in China picks up momentum. We are going into a new down phase and true credit cycle in China. That can take on a life of its own.
Select Quotes

Rishaad Salamat: "Are you saying at the moment that the Chinese economy is teetering on the edge as a consequence of all this?"

Todd Martin: "It's beginning to look like that. There are signals that there is a cash crunch and it is picking up momentum. The offshore RMB market for one. The repatriation of capital for two. This could cascade into a property correction. Once that gets going, you could probably get a lot of sellers jumping into the market."

Rishaad Salamat: Is commodities the worst asset class to be in, at the moment?

Todd Martin: "Commodities is probability the worst asset class to get hit. If you are in a business seeing input prices fall and you have some pricing power downstream, then you could come out OK. Steel prices are still falling faster than iron ore, so that is still not one to be in yet. It's pretty bloody. We are withing 15% of the bottom but the credit cycle concerns me."

Fundamentals

I disagree with Martin about the fundamentals. I think fundamentals on China are horrible. I have been bearish on commodities because China is overheating at a time global demand from Europe and the US will collapse.

For further discussion, please see Michael Pettis: Long-Term Outlook for China, Europe, and the World; 12 Global Predictions written August 22.

Hopping into commodities or commodity-related currencies with a strengthening US dollar, falling global demand, a potential breakup of the Eurozone, a default by Greece, etc, was a poor investment idea.

Please see the link for a very nice discussion of 12 detailed ideas for the global economy.

This is what I said on August 22, in response to the ideas of Pettis.

Six Key Ideas

  1. China Will Slow Much More than China Bulls and Commodity Bulls Think
  2. Non-food Commodities Take Big Hit
  3. Eurozone Experiment Ends in Breakup
  4. US Protectionism Takes Hold
  5. Deficit Countries Control Demand, Thus Have the Best Cards
  6. Disaster Hits BRICs

Contrarian Thinking

Except perhaps for points three and four (and perhaps for all six points) investors and analysts have taken the opposite view. Most are looking to buy the dip, invest in commodities, invest in commodity producing currencies, and invest in the BRICs.

We did not have commodity producer decoupling in 2008 and there is no reason to expect it as debt-deflation plays out and China abandons its reckless investments in infrastructure.

I suspect China slows sooner than Pettis thinks, but no sooner than the next regime change in China. Markets, however, may react well in advance.

Global Deflationary Outlook

Pettis does not use the word "deflation" in his writeup, but he describes a very deflationary global outlook complete with protectionism, beggar-thy-neighbor policies, currency wars, and falling non-food commodity prices.

Pettis did not discuss energy, but the forces are clear: peak oil. vs. global slowdown. Given peak oil and the possibility of war over it, energy is a wildcard.
China did not decouple in 2008 (except perhaps in reverse), and it will not be immune from this global slowdown either.

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