How to Hack a Dominating Domain Name for Your Website

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How to Hack a Dominating Domain Name for Your Website Posted: 18 Jun 2012 01:51 PM PDT Posted by Cyrus Shepard It's a familiar story. My first website name came from Go Daddy, found using a hunt-&-peck method, one name at a time. Using a $7.99 promo code, if a name wasn’t available I moved on to the next. Let's step into the modern era. Each letter of a domain name is big business. In today’s environment, your domain name may appear thousands (or millions) of times daily in Google’s search results. A change in rankings or clickthrough rate of just 1% can make the difference between fortune and bust. Choosing the right name is both an art and a science. How One Seattle Startup Chose a Name Recently, a startup that I work with (full disclosure: I’m the part-time Director of Marketing for this company) undertook this naming process. Here’s how it played out: 1. Origins Before I joined the company, the co-founders paid an upscale branding/advertising agency to help develop a logo and name. 2. Survey 1 A handful of people, including myself, disliked the name. After some feedback from investors, we decided to open the issue back up before launching. We brainstormed for days, went back to original ideas, and then surveyed a group of 40 friends, families and investors using a free service from Survey Monkey. 3. Survey 2 Using the results from Survey 1, we took the top contenders and crafted a 2nd survey, soliciting feedback from 30 top-notch online marketers who were unfamiliar with our concept. 4. Contest We held a name contest on NameStation. (Good, clever results from the community there. The only drawback is the community is so very small at this point) 5. Clickthrough Rate Test I took the top 10 contenders from 1-4 and created an Adwords campaign with 10 individual ads. The keywords related to our market. Each ad was identical except for the company name in the title and display URL. The ad led to a generic “coming soon/sign up” page. For $100 we generated over 100,000 impressions and measured the CTR for each ad, trying to keep all other variables equal. Surprisingly, the CTR test resulted in a clear winner: the original name we paid the agency to develop. This cinched it. The Results: I present to you PlaceFull.com Today, I like the name a lot better. Data has a funny way of doing that. Lessons learned: You can’t please everyone. Good names often have negatives. If you had asked me to evaluate “Pinterest” a couple years ago, I would have given you 18 reasons why the name was a miserable choice. Gather feedback. Data rules. There is no substitution for testing. Dominating Domains & Science It stands to reason that certain names perform better in search results than others, and correlation data shows that certain domains tend to perform better than others. Does Length Really Matter? Two recent correlation studies, one performed by the Open Algorithm and another in 2011 by SEOmoz support the notion that shorter names are associated with higher search rankings. What this data shows is that longer domain names tend to rank lower than their shorter counterparts. (Remember the difference between correlation and causation). Most likely, this is not due to an algorithmic bias, but rather: Older, more established domains tend to be shorter. Long, exact match domains tend be disproportionately owned by spammers. Companies with larger marketing budgets can afford shorter, more desirable names, and also can spend more on content and SEO. Shorter domains are more memorable. If given the choice, "toothfestiva.com" would make a better choice than "chicagodentistscheduleanappointmentnow.com". As of this writing, both are available. A-Hyphen-Too-Far When the perfect domain is already taken, some webmasters resort to hyphenated versions. Is this a good idea? Bill Slawski, the Google patent guru, recently identified a patent that describes how Google might handle hyphenated domains. … when two, three, or more hyphens are present, this is often an indication that these domain names are associated with companies that are attempting to trick search engines into ranking their web pages more highly. United States Patent 8,046,350 Takeaway: "chicago-hotdog.com" might pass the mustard, but "best-chicago-hot-dog-cart.com" is going nowhere fast. Dating Exact Match.com If you sell “pink widgets”, does it still make sense to use an exact match domain like "pinkwidgets.com"? There’s been a lot of debate over exact match domains over the past year, but the correlation data suggests it’s still a good idea. The most recent SEOmoz study showed a fairly good 0.22 correlation between exact match .com names and higher rankings. Recent Google algorithm changes and concerns about Penguin and over-optimized anchor text have cooled exact match enthusiasm, but a more recent study by the Open Algorithm showed a still respected 0.181 correlation. Although it’s clear to SEOs that their effectiveness has declined since their heyday, the data shows exact match domains still perform well in search results. The SEO benefit of partial match domains is less clear. A partial match domain includes part of your keyword without the exact match. (For example, "widgetman.com" is a partial match domain for the keyword phrase "widget seller".) Although there may be a branding benefit of including a relevant keyword in your name, Mark Collier of the Open Algorithm argues that "having the keyword in some of your domain isn’t very beneficial. It’s either exact match or forget it." Controversial words, for sure. Regardless, if you become successful, your domain can become an exact match brand, much like Amazon, Facebook and Target. TLD with Tomato and Lettuce In early 2013, ICANN plans to introduce 1000s of new domain extensions in addition to the 22 generic TLDs (like .com and .net) already in existence. For now, .com still rules. Although correlation data shows very little preference for .com extensions, the public has traditionally embraced the dot com. Companies often start with non-traditional names, such as del.icio.us and bit.ly, only to seek mainstream success with a dot com. Regardless, many webmasters believe the dot com domination won't last forever. My friend Andrew Dumont successfully uses the .me extension, and numerous examples of successful non-.com alternatives are not hard to find: instagr.am seomoz.org who.is whitehouse.gov and of course… martian.at A few years from now, we might remember .coms as an interesting relic of the early days of the Internet. For the record, it cost $185,000 to apply for a new gTLD. Google applied for 50. International Domains If you do business outside the United States, should you use a country code top-level domain such as .de or .uk? In this case, there’s no one rule that applies to all circumstances. In many cases there may be some ranking and branding advantages to targeting a specific country. The problem is if you want to expand later, it causes a lot of work. Most experts agree that it’s usually best to snag a .com, even if you don't use it right away. International domains are good for other uses as well. In fact, SEOmoz uses mz.cm, from the country of Cameroon, for its URL shortener. Note: For history buffs who want to buy a domain from the collapsed Soviet Union, the .SU extension is still available. The $100 Google Ad Test In the PlaceFull.com example above, we used Google Adwords to test our 10 best candidates in the real world. Using ads that matched our brand message, this allowed us to gauge clickthrough rates and engagement on a massive scale at low cost. Spending $100, we generated over 100,000 impressions on Google's search and display network. The ads led to a public DropBox URL that displayed a generic "Coming Soon" signup page. Each ad was identical except for the first word of the title and the display URL - which represented the name we were testing. The winning name earned a CTR almost 250% better than the lowest performer, and about 10% higher than the second place winner. Validating your assumptions early can lead to higher earnings in the future. Pulling it Together So, the "ideal" domain is a short, exact-match .com (for now) with no hyphens that's easy to remember, spell, and accurately represents your brand. Other tips include: Say the name out loud. After reading your computer monitor all day, make sure your customers don't need to speak Klingon in order to pronounce your business name. Different cultures are attracted to certain letter combinations, like double letters (apple, zoom) and palindromes. Be sure to experiment. Domains that start with letters early in the alphabet are often listed higher in directories, lists of links, sponsor pages and so on. As links higher up on a page general carry more weight, domains like "aadvarkhunter.com" might earn marginally more link juice than "quiglyfy.com" Even if the domain is available, take precaution so you don't sued for using it. For folks in the United States, run the name through the Patent and Trademark Office's search system to root out any potential conflicts. Europeans can search OHIM. 17 Super Useful Domain Tools No more hunt and peck! For savvy marketers, the days of typing single domains into a search box are long gone. Below is a list of my favorite domain hunting tools. Name Generators 1. LeanDomainSearch Dead simple, fast and intuitive. Helps you quickly find names you never would have considered. 2. NameStation.com This premium set of tools offers both a free and paid level of membership. The paid level is well worth the cost, and the small community of human idea generators can offer professional naming ideas for a fee.   3. Bustaname.com  The standard. Great when you already have a few ideas, and want to quickly see what’s available. 4. Wordoid.com The made-up word generator. 5. Domai.nr Combines unique TLDs to generate names like elbo.ws and thehipsterho.me. 6. Impossibility.org Is this one of the best domain name generators ever? 7. Panabee.com Combines Panda and Bee. Get it? A great name-combining tool. 8. DomainNameSoup.com So many tools here, you could get lost for days. 9. Nameboy.com Solid, all-around domain tool. 10. Domainsbot.com Another well-rounded tool. Also checks Facebook and Twitter availability. 11. Domize.com Fast and easy domain suggestions.   Auctions & Premium Domains You know you’ve made it in the online marketing world when you can afford to spend more than $11 on a domain. Seriously, it drives me crazy to hear about startup founders (with funding!) still limiting themselves to available domains. Great after-market names are available at any price range, often starting as low as $25. Yes, there are still great domains out there unregistered, but if you’re a million dollar company launching a new venture, why not expand your horizons? 12. Sedo.com Super large collection of premium domains. In the screenshot below, the name "firstrankseo.com" is available for $60. 13. NameCore.com Hand selected premium domains.  14. BuyDomains.com Listing over 4,000,000 premium domains. Expired Domains in 3… 2… 1… Great opportunities can often be found buying recently expired domains. Some of these are well-aged domains with hard to find keywords. 15. DropDay.com Lists tons of data about domain about ready to expire including backlink information, PageRank, age and more. A word of warning: Some webmasters buy expired domains because of a strong backlink profile, but often these domains come complete with a spammy links and a black-hat history. A PR6 expired domain isn’t always what it appears to be. Buyer beware. Pre-Branded Domains If you don’t want to spend weeks digging for the perfect domain, there are websites that will do it for you – complete with a new logo. In minutes, you can be up-and-running with your new brand starting with just a few hundred dollars. 16. Stylate.com Every domain on the site is $250 and comes with a color logo. 17. BrandBucket.com Often a little pricier than Stylate, but a big, well organized selection. What's your favorite domain tool? Let us know in the comments below. What's in a Name? The best name is one you take pride in, want to print on a t-shirt, and enjoy. That which we call a rose By any other name would smell as sweet; A good name delivers to its master high ROI. - Bill Shakespeare, Silicon Valley Sign up for The Moz Top 10, a semimonthly mailer updating you on the top ten hottest pieces of SEO news, tips, and rad links uncovered by the Moz team. Think of it as your exclusive digest of stuff you don't have time to hunt down but want to read!

Identifying Link Penalties in 2012 Posted: 18 Jun 2012 02:58 AM PDT Posted by RyanKent 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. It was the best of times, it was the worst of times. For SEOs and webmasters in June 2012, that sentiment is true. Some websites have reached record highs in SERPs since the sites which have been beating them for so long have been penalized. Other websites have received what is clearly the most painful, costly and time consuming penalty Google has ever dished out. The current Google penalty for manipulative links is so bad one of the seriously suggested solutions is to abandon the affected site and start a new one!?!? The first step in dealing with a penalty is identification. Site owners often are not immediately aware they have been penalized. They notice a drop in traffic or rankings, then begin to investigate the issue. So how do you really know if your site has been penalized? Once you know you have been penalized, how can you figure out the cause and fix it? Diagnosing Link Penalties Google Manual Penalty with Notification The easiest means to diagnose the penalty is if Google informs you they have penalized your site for manipulative links. Log into your Webmaster Tools account and search your message page from Google. Below is an image of the dreaded Google "you have been manually penalized" message. According to Matt Cutts, about 25,000 webmasters received similar notices earlier this year. NOTE: identifying information such as web addresses have been removed from all images to protect client confidentiality. The key elements of the above message are: “We’ve detected that...”. Translation, you have been caught and will be penalized. “look for possibly artificial or unnatural links...”. Translation, the cause of the penalties is “unnatural” links. “Submit your site for reconsideration”. Translation, you have a manual penalty. As bad as this message is, it is better than not knowing and guessing whether you have been penalized and what is the root cause. You now know you have a manual penalty due to unnatural links. Now you can focus your attention on fixing the problem. If you do not have a manual penalty notice, then another possibility is you have been hit by Penguin. Google Algorithmic "Penalties" - Penguin Penguin’s birthday is April 24th, 2012. What day did your rankings drop? If your ranking drop is right around that time, there is a strong likelihood your traffic drop is Penguin related. If you are unsure of the exact date, take a look at your Google Analytics account to see when your traffic dropped. TIP – In your GA account, go to Traffic Sources > Search > Organic. Do not expect to see a straight off the cliff drop in traffic. Most of the Penguin penalties I have seen involve about a 1/3 drop in organic search traffic. You will notice your overall organic search traffic for the two weeks after April 24th is approximately 1/3 lower than the two weeks before April 24th. If your site was boosted by a larger percentage of manipulative links, the drop can be more severe. It's important to note that the Penguin changes are NOT about improving search quality, but rather seems to be focused on penalizing specific types of spam. The most particular focus seems to be on anchor text "over-optimization". For more information on the Penguin update please watch Rand's WBF update on Penguin. Many clients ask "why was my site penalized but my competitor's site was left untouched?" We have all seen plenty of instances of this happening. It's similar to asking a cop "why am I getting pulled over for speeding when all these other cars are speeding too?" A line was drawn in the algorithmic sand and you were found to be on the wrong side of the line. With future updates, the line may move and hit your competitor's site too. That response isn't very comforting but it is the closest we are likely to get to the truth. Other Google Link Penalties Google often manually penalizes sites and does not inform site owners of the penalty. Furthermore, Google makes many algorithm changes each year. Most people are aware of the major algorithm changes, but you should also know Google makes about 50 algorithmic changes each month which could lead to ranking changes or an "algorithmic penalty". With the Penguin update specifically, we are unsure if there will be further refinements and rollouts as has happened with Panda. On May 25th Google rolled out what Search Engine Watch calls Penguin 1.1.  What advice is available for a site owner who wants to know if they have received a link penalty or at risk in the future? Check your anchor text distribution to see if it appears natural. You can perform a fast check in Open Site Explorer of your top 20 links as follows: Go to http://www.opensiteexplorer.org/ Enter in the URL of your site and press <enter> or the SEARCH button Change your drop down box settings as follows: Show [followed + 301] links from [only external] pages to [pages on this root domain]…..then press the FILTER button. These settings will remove the “nofollow” and internal links which are not evaluated by Google as part of link penalties. You will now see a list of all links to your site which may cause you to incur a penalty. For now, focus only on the Link Anchor Text column. If 50%+ of your top 10 links show the same or very similar anchor text, that is a warning sign of a very unnatural link profile. Of course, a deeper analysis is desirable but this method offers you some idea of the problem in just a few seconds. Hopefully your anchor text distribution looks more natural than the below example. Notice how all the links show anchor text? A natural distribution would show a high percentage of links with simply the site URL. When anchor text is naturally used, it is often far less than ideal. So what does a natural profile look like? It is easiest to show from AHREFs (https://ahrefs.com/), a tool similar to OSE but which offers a cool anchor text report. Below is the anchor text distribution report for GNC.com. GNC stands for General Nutrition Center. They sell vitamins, supplements and other health products. According to AHREFs, GNC.com has 5700+ domains linking to their website. The report below shows the top 10 anchor text keywords used in their backlinks. Notice all the keywords are their unique brand / site name, or generic terms such as click here to view website. What you don’t see is anchor text such as “buy vitamins” or “best herbal products”. Even if their 11th highest anchor text used a keyword, it would only represent 1% of the links to their site. THAT is a natural link profile. You can see similar profiles by looking at sites such as seomoz.org and google.com as well, but I wanted to use an e-commerce site to show how those sites can achieve the same results. In comparison, below is the backlink profile for the site first shown with the OSE anchor text distribution. This site has 335 linking root domains as per AHREFs. Notice the difference? 70 of the site’s 335 LRDs (over 20%) use the exact same keyword anchor text. This particular domain name, which uses the format doctorjohnsmith.com, has no relation to “los angeles dentist”. What are the chances that 20% of domains naturally chose that anchor text? If your site’s anchor text distribution looks similar to the below, expect to be hit by a penalty. As a note, it appears this particular site has NOT been hit by Penguin, but I would suggest it is a prime candidate for Penguin 2.0 if Google decides to move in that direction. Final Thoughts There are some reports from site owners who were penalized by Google after 301 redirecting a penalized site to their site. There is not enough data on this topic to form any conclusions yet. I can confirm two other items related to these penalties. First, any form of link network is a concern. The first client I worked with who had been penalized for links was in November of 2011. The client is a leader in their niche selling $18 million worth of products the prior year. Over a 12 year period the client grew a network of over 100 sites, mostly various forms of duplicate content of the main site. These were very large sites having hundreds of thousands of pages. By dismantling the network, we removed over 3.5 million links. If you are penalized, you should consider other sites you own which link to your main site. Ross Hudgens credits the removal of links from other company owned sites as the most critical reason WPMU made a fast Penguin recovery. The second item I wanted to share relates to Bing. Shortly after the above mentioned client was penalized by Google, they were penalized by Bing as well. Once the Google penalty was lifted, removing the Bing penalty was easy. I simply shared with Bing all the actions taken to resolve the Google penalty and they accepted that answer and lifted the penalty. With all the attention currently on Google, let's not forget that Bing (Bing + Yahoo) controls approximately 30% of search traffic in many markets. Thanks for reading. I hope you find this information helpful. This is my first SEOmoz blog article. I spend most of my limited free time in the Q&A. There seems to be a huge interest in both diagnosing and resolving link-related penalties. If this article is popular, I will write a follow-up article soon on How to Remove Link Penalties sharing some case-study examples. If you have any questions related to diagnosing link penalties, feel free to ask. I would like to extend a special thanks to Gianluca Fiorelli and Keri Morgret for nudging me to become more active in YouMoz. This article would not have been written without their encouragement. Sign up for The Moz Top 10, a semimonthly mailer updating you on the top ten hottest pieces of SEO news, tips, and rad links uncovered by the Moz team. Think of it as your exclusive digest of stuff you don't have time to hunt down but want to read!

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Why Refi? Your Questions Answered

Your Daily Snapshot for Tuesday, June 19, 2012   Why Refi? Your Questions Answered Over the past few weeks we’ve been telling you about President Obama’s plan to cut through the red tape that’s been preventing many homeowners from refinancing their mortgages and saving hundreds of dollars each month. Many of you had questions about the plan and how it would impact you and your community, so we asked Jim Parrott, Senior Advisor for Housing at the National Economic Council to record a few video responses to some of your most common questions. If you still have questions, HUD Secretary Shaun Donovan will answer some of them later this week -- ask your questions here. Photo of the Day President Barack Obama talks with Chief of Staff Jack Lew at the Esperanza Resort in San Jose Del Cabo, Mexico, before the start of a bilateral meeting with President Vladimir Putin of Russia, June 18, 2012. (Official White House Photo by Pete Souza) In Case You Missed It Here are some of the top stories from the White House blog: A Bilateral Meeting with President Putin President Obama meets face-to-face with his Russian counterpart -- Vladimir Putin. Entrepreneurs and Innovators Rock 3rd Annual Health Datapalooza Using health-related data available from federal and state agencies, entrepreneurs are creating new applications and services that, for example, help consumers find the best health care provider for their families, doctors deliver the best possible care, and mayors make better-informed policy decisions. Reforming Unemployment Insurance to Protect Jobs and Incomes for American Workers President Obama's proposal to expand work-sharing programs creates a true win-win situation for businesses and workers: By softening the effect of reduced hours on workers, it gives businesses a better chance of hanging on to their skilled employees during a rough period Today's Schedule All times are Eastern Daylight Time (EDT). 11:00 AM: The President attends the second G-20 plenary session 12:30 PM: The President attends the third G-20 plenary session 2:15 PM: The Vice President delivers remarks at the 40th Annual International Convention of the American Federation of State, County and Municipal Employees in Los Angeles, California 3:45 PM: The President attends a working lunch 5:20 PM: The President attends the closing ceremony of the G-20 Summit 5:45 PM: The President holds a bilateral meeting with President Hu of China 6:30 PM: The Vice President attends a campaign event 7:30 PM: The President holds a press conference  8:40 PM: The President departs Los Cabos, Mexico 1:05 AM: The President arrives Washington, DC 1:20 AM: The President arrives the White House  Indicates that the event will be live-streamed on WhiteHouse.gov/Live Get Updates Sign up for the Daily Snapshot Stay Connected     Facebook Twitter YouTube Flickr Google+     This email was sent to e0nstar1.blog@gmail.com Manage Subscriptions for e0nstar1.blog@gmail.com Sign Up for Updates from the White House Unsubscribe | Privacy Policy Please do not reply to this email. Contact the White House The White House • 1600 Pennsylvania Ave NW • Washington, DC 20500 • 202-456-1111

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Mish's Global Economic Trend Analysis

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• G-20 Summit in Flames Already as EC President Blames US For Financial Crisis in Europe
• "Germany is a Credit Risk" Says Bill Gross; Germany Exiting Eurozone is One of Very Few Scenarios in Which German Bonds Do Well
• Another "We are Saved" Euphoria Lasts Only Moments; European Bond Market Revolts Already as Spain 10-Year Yield Hits Record High 7.28%
• Greek Election Sideshow; Socialists Win Absolute Majority in France; How Long Will the Bond Market Celebrate Another Glorious Can-Kicking Exercise?

G-20 Summit in Flames Already as EC President Blames US For Financial Crisis in Europe Posted: 18 Jun 2012 06:08 PM PDT The G-20 summit is off to a great start if you like fireworks, endless bickering, and finger-pointing. Otherwise these summits are totally useless. When asked by a Canadian journalist "Why should North Americans risk their assets to help Europe?" EC President José Barroso replied "Frankly, we are not here to receive lessons in terms of democracy or in terms of how to handle the economy. The Guardian has further details in Barroso blames eurozone crisis on US banks. The opening day of the G20 summit was threatening to deteriorate into a fractious row between eurozone countries and other non-European members of the G20, notably the US, as EU commission president José Manuel Barroso insisted the origins of the eurozone crisis lay in the unorthodox policies of American capitalism. As Europe's leaders came under intense pressure to act decisively to cure the euro's ills, and a campaign gathered pace to relax some of the austerity programmes laying waste to countries with unsustainable debt levels, Barroso said Europe had not come to the G20 summit in Mexico to receive lessons on how to handle the economy. Asked by a Canadian journalist: "Why should North Americans risk their assets to help Europe?" he replied: "Frankly, we are not here to receive lessons in terms of democracy or in terms of how to handle the economy. "This crisis was not originated in Europe … seeing as you mention North America, this crisis originated in North America and much of our financial sector was contaminated by, how can I put it, unorthodox practices, from some sectors of the financial market." The European council's president Herman Van Rompuy, speaking alongside Barroso, said a draft G20 communique showed "support and encouragement for the euro area countries and leaders and for the European Union as a whole to overcome this crisis". "We are not the only ones that are so-called responsible for the current economic problems all over the world," he said. A Few Questions Nannycrats Might Consider Might I point out to nannycrats Barroso and Van Rompuy that leverage in European banks exceeded leverage in US banks? How about the fact the property bubbles in Spain and Ireland were bigger than the property bubbles in the US? Is the US responsible for putting together a structurally unsound euro, or is Europe? Did the EU fail to do its homework in letting Greece into the EU? Did nannycrats in Brussels praise property development in Spain before everything blew sky high? I am quite certain I can ask dozens of such questions. Let's be honest here. Yes the US caused lots of problems. So did the ECB, and so did the nannycrats. China played a part as well. Thus, those comments by Barroso are strictly from Fantasyland if not Idiotland. Europe created the euro, not the US. Europe foolishly pledged more and more money to Greece, not the US. And eurozone rules are at the heart of Europe's mess, not anything the US did. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

"Germany is a Credit Risk" Says Bill Gross; Germany Exiting Eurozone is One of Very Few Scenarios in Which German Bonds Do Well Posted: 18 Jun 2012 11:01 AM PDT Bill Gross echoes my statements that Germany is poised for a big hit either by a piecemeal breakup of the eurozone, by Germany indefinitely ponying up more money to keep the eurozone intact, or by Germany saying it has had enough and goes back to the deutsche mark. On Bloomberg TV's "Market Makers" Bill Gross of PIMCO spoke to Erik Schatzker and Stephanie Ruhle today and said, "I would be leery of German bunds simply because there are only a few scenarios in which they can do well…Germany for me is a credit risk. It's not an attractive market." Partial Transcript Gross on what he sees happening in Europe: "I would be leery of German bunds simply because there are a few scenarios in which they can do well. If they will do well, if Germany leaves the zone and some way or another move back to the deutsche mark opposed to the euro and pay off obligations in euros and benefit because of it. Otherwise, increasingly, as we have seen over the weekend in terms of Greece, this kick the can environment adds liabilities to the German balance sheet day after day. They have what they call it a target 2 type of liability where they assume constant liabilities from Spain, Italy, and others as they move to the German Bundesbank. Increasingly, as the months move on, Germany becomes more and more liable for the euro balance sheet despite the possibility that Greece departs. Germany to me is a credit risk and certainly in terms of its tight shirt and shrinking shirt at the sleeves, is not an attractive market." On countries like Germany and Japan: "We were making a point in internal discussions that these clean dirty shirts have to fit. To the extent that these have been shrunk at the dry cleaners and the sleeves are up to the elbows in terms of low yields then perhaps you do not want to wear that shirt either. That is the case in Germany, not necessarily the case in Japan. In Germany, we have seen a bubble of some proportions as money is moving from Greece and other peripherals into the heart and the core of euro land. Would I buy a two-year German Schatz at close to 0% yield? Probably not. It is not only the dirt on the shirt, but the fit in terms of the yield that is important as well." On Subprime and Distressed Credit: "We want yield, but we want what we call safe yield. We want to invest in the cleanest dirty shirts, which appear to be the United States and perhaps the United Kingdom. To that extent, we're looking at mortgages, non-agency mortgages, not subprimes, but agency mortgages which provide a 1.5%-2% yield. These are instruments which because they prepay so rapidly at 25-30% a year, really present a two to three year maturity like the portfolio that Jamie Dimon was mentioning and they yield 1.5%-2%. These are not the heydays of bond investing, those were back in 1981, but to the extent you can beat a two-year treasury at 27 basis points with a mortgage that resembles that at 1.5 to 2 is what we are doing." On whether Germany has the ability to rescue Spain: "I think the ECB as representative of euro land as a core has the ability. The question is do they have the will. Any central bank has the potential to increase their money supply to buy obligations and to write checks if they are willing to suffer the currency depreciation that comes from that. Up until this point, the euro has gone down in value. Will the ECB be willing to permit a 10-15-20% decline from this point forward? It's not very German-alike in terms of their attitude. It's not very Austrian in terms of their monetary policy, but increasingly the market expects them to at least move closer to the margin in that regard." On whether Spanish bonds will ever become attractive to PIMCO: "Of course. If a bond manager says there is no price, then he is not thinking straight. I think at these levels with these types of market technicals, probably not. What euro land, the EU, and the ECB want, they want the PIMCOs of the world, the Chinese and their associated agencies to come back in the water. PIMCO and others basically sense a lot of sharks in the surface. A lot of fins protruding from the surface. It's not a safe environment as long as the EU and the global economy is delevering, which it continues to do." On whether there's a point where intervention has to happen in Spain because they won't be able to rescue themselves: "They say 7%, but that is a fictional number. No one really knows. What's important to me and to PIMCO going forward is to look at the entire zone and not the falling dominoes in Greece, Ireland, Portugal, and perhaps Spain, but to look at the core. Imagine a financing rate for the core if you used Italy and France together, not Germany because they are a little on the too-high quality side and too low yield, but together Italy and France yield about 4% of the total. That's still too high a rate relative to nominal growth. What the EU wants is nominal GDP growth. They want to reflate. They want some inflation as well. 4%-types of financing is still above that 1%-2% nominal GDP growth that they are experiencing. Rates in Spain, Ireland and Greece another matter, but rates at the core are still too high and they need the private market to come back in." Leery of German Bonds I concur with Bill Gross. I suppose yields could go negative in a capital flight scenario, but otherwise where are German bonds headed? Are Germany Two-Year Bonds attractive at .025%? I do not think .025% is an attractive rate for 2-year bonds. Nor is 1.41% an attractive rate for 10-year bonds. A bet on long-term German bonds is a bet that Germany is not affected by eurozone fallout and/or returns to the deutsche mark. One reader commented this is not about return-on-investment but rather return-of-investment. Perhaps so. However, return-of-investment may not hold up if German bonds yields soar due to credit risk. While I think Germany should exit the eurozone, a piecemeal breakup that has a nasty spillover into Germany is as likely. For a discussion why,  please see "Multi-Stage" Nannycrat Proposals; Devaluation - The Last Option? Focus on the Obtanium not the Unobtanium Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Another "We are Saved" Euphoria Lasts Only Moments; European Bond Market Revolts Already as Spain 10-Year Yield Hits Record High 7.28% Posted: 18 Jun 2012 09:44 AM PDT Following news of the victory of the "pro-bailout the French and German banks party" known in Greece as "New Democracy", the euro sailed to 1.2760 and a lovefest in the Asian equity markets began. However, the rally in the euro did not last long. There was no rally in the European bond markets to begin with. The US stock market opened in the red. Euro 15-Minute Chart click on chart for sharper image Chart from Barchart The rally in the euro lasted about 39 candles, 585 minutes, or roughly 9.75 hours. It was essentially straight downhill once the European markets opened. European Bond Market Revolts Already The far more important European bond market never got going in the first place as the following charts from Bloomberg show.  Spain 10-Year Yield Hits Record High 7.28% Chart from Bloomberg. Italy 10-Year Yield Hits 6.17% Chart from Bloomberg. Greece wants to stay on the euro. Lovely. How long will Spain and Italy? What about France? For further discussion, please see Greek Election Sideshow; Socialists Win Absolute Majority in France; How Long Will the Bond Market Celebrate Another Glorious Can-Kicking Exercise? Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Greek Election Sideshow; Socialists Win Absolute Majority in France; How Long Will the Bond Market Celebrate Another Glorious Can-Kicking Exercise? Posted: 18 Jun 2012 01:18 AM PDT New Democracy won the Greek election. However, party leader Antonis Samaras still needs to form a coalition.  If this seems like Déjà Vu, it's because it is. We were in the same place following the May election. Does the Outcome Matter? This go around, I expect Pasok will reluctantly cave in and form a coalition with New Democracy.  The price might be high, such as demanding the much despised Antonis Samaras to step aside. Regardless, does the outcome matter? The answer is "not really", except in the very short term, because of what I said in Europe Will Splinter Regardless of Greek Election Outcome; "France Has At Most Three Months Before Markets Make Their Mark" says German Official All eyes are focused on the Greek election on Sunday. However, a fundamentally far more important election (for the long term) will take place in France on Sunday. If socialists take control of both houses in French parliament as expected, president François Hollande would have free rein to carry out his stated policies such as hire more public workers, raise taxes on the rich, and Wreck France With Economically Insane Proposal: "Make Layoffs So Expensive For Companies That It's Not Worth It" Tensions Between France and Germany Mount If Hollande is serious, and I think he is, France is going down the tubes fast. Moreover, the already strained relations between Hollande and German chancellor Angela Merkel mount as Merkel attacks French economy. Major Differences Hollande wants Eurobonds, Merkel says no Merkel wants a tighter political union, Hollande says no Hollande wants bank recapitalizations by the ECB and Merkel says no Hollande wants more stimulus, more government workers, increased difficulty to fire workers and Merkel disagrees on all counts Hollande is more willing than Merkel to make concessions to Greece Hollande wants bigger "firewalls", Merkel does not. Do they agree on anything other than the desire to keep the eurozone intact? Socialists win absolute parliament majority in French election The results are in: Hollande's Socialists win absolute parliament majority in French election French President François Hollande's Socialists won an absolute parliamentary majority on Sunday, strengthening his hand as he presses Germany to support debt-laden euro zone states hit by austerity cuts and ailing banks. The Socialist bloc secured between 296 and 321 seats in the parliamentary election runoff, according to reliable projections from a partial vote count, comfortably more than the 289 needed for a majority in the 577-seat National Assembly. The left-wing triumph means Hollande, elected in May, won't need to rely on the environmentalist Greens, projected to win 20 seats, or the Communist-dominated Left Front, set for just 10 deputies, to pass laws. The centre-left already controls the upper house of parliament, the Senate. Greek Sideshow Hollande now has free rein to do whatever he wants. I believe he will do just that, and if so the bond markets will not take too kindly to it, nor will Merkel, and nor will the average citizen in Germany, Finland, the Netherlands, or Austria. An amazing amount of attention has been focused on the election in Greece when a far more important election was just held in France. The French election received scant media coverage. Moreover, Spain has not been fully reckoned with, nor has Italy. France Has At Most Three Months If Hollande carries out his stated programs, it won't take three months before the bond market revolts, Germany revolts, or both revolt. Step back for a moment and look at the enormous fundamental rift between France and Germany. Regardless of the outcome of the Greek election, that rift is not going away. Hollande already threatened to renegotiate the so-called Merkozy treaty (which by the way France has not yet ratified). Also note that last Thursday, the Bundesbank (Germany's central bank) came flat out and stated Policymakers Should Refrain From "Wild Goose Chase" of Higher Firewalls and Merkel Warned "Limited German Resources" Assume France does ratify the treaty. Major revisions down the road are virtually impossible. Dead Before Arrival Thus, I was highly amused when a group of eurozone Nannycrats agreed to meet later this month to devise a master plan for a eurozone fiscal and banking union. (see Details of the Secret "Nannyplan" Emerge; Proposed Nannygroup Uniforms) My response was "Dead Before Arrival": Bundesbank Shoots Down EU Banking-Union Proposal; Eight Lessons the EU Needs to Learn Another Glorious Can-Kicking Event For now the market is celebrating another glorious can-kicking event. The celebration will last until the bond market has had enough. I expect days at most, and perhaps hours. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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