marți, 20 noiembrie 2012

A Basic (yet essential) Pre & Post Content Launch Checklist (with guidelines)

A Basic (yet essential) Pre & Post Content Launch Checklist (with guidelines)


A Basic (yet essential) Pre & Post Content Launch Checklist (with guidelines)

Posted: 19 Nov 2012 06:48 PM PST

Posted by Mackenzie Fogelson

So you’re ready to launch some content.

Stop. Right. There.

In case you haven't noticed, our industry has evolved. As SEOs, we're expected to be an amalgam of technicians, analysts, creatives, and marketers. Agility is essential and if you want to acquire and sustain relationships with great clients, you’ve got to prove your worth in every effort you make or you won’t continue to earn your budgets.

Chances are, you’re already pushing out a great deal of content for your clients on a regular basis. Considering SEO, social, conversion, measurement, and analysis, there’s a lot that you have to get into place for success. 

So how about some checklists?

These checklists in this post are meant to serve as simple reminders prior to content release, but they’re also intended to encourage you to think beyond on-page SEO elements. Rely on these lists to make sure you’ve considered every possible angle so that your content isn’t just filling up space, but is working toward building community, brand value and awareness, and driving qualified traffic and conversions.

Disclaimer: Like most of my posts, you're gonna have to hunker down and read. You’ll notice the formatting is not true to a traditional checklist. I’ll walk you through each item (that's the guidance part) and then provide you with a true checklist format in Trello (if you make it through).

Pre-planning and pre-outreach


Even though these checklists are meant to verify that you’ve got everything in place after the content has already been generated, there are a couple things that are worth checking off even before you develop your content:

Google Suggest for ideas and keywords


Even with a stellar strategy, you’re going to need one-off ideas for your content so that you are building what people want, and also optimizing your content so that people can find it. Before you even make the effort on your content, go to Google and see if suggest can give you some direction.

What you have in mind may have already been done (but maybe not so well), so you’ve got to figure out how to dominate with a more unique angle. Google suggest is a great way to do this.

Google Suggest

Pre-outreach for buy in


Want to get the most out of your outreach efforts? Reach out to your community and target audience before you develop the content. This will help make link building easier and will ensure that you’re developing content that your audience actually wants.

 Depending on the magnitude of your content, there’s probably two ways to go on pre-outreach:


[1] Hefty stuff

If you’re putting together some hefty content like the SEOmoz Beginner’s Guide to SEO, then you’re going to want to do invest in some pre-outreach that involves something like a Launchrock campaign.



DistilledU Launchrock Campaign



This will help you determine that there’s interest in this content before you actually generate it, and you will have built a list of followers (email addresses) that you can market to once the content is ready to launch. Distilled did this with DistilledU and within 24 hours they had collected more than 1,000 email addresses. It’s a brilliant way to make sure your content will be well received and that your efforts generating the hefty stuff will be well worth it.

[2] Simple stuff

If you’re putting together a basic blog post, infographic, informal video, etc, you’ll still want to do some pre-outreach, but your effort will be less involved (you won’t need a Launchrock campaign around it). Once you’ve figured out the angle you’re going to take and the audience you’re targeting (particularly some influencers), try reaching out and ask them if the content you’re about to produce would be useful. Try providing a basic outline and see what kind of feedback you get. Involving influencers and target audience members will help you get buy in before you even go to the trouble of creating the content, increasing your chances of success.

How to Build a Lasting Relationship


On-page SEO stuff


Of course, you always want to make sure you’ve accounted for basic SEO stuff:

Keywords in page title


Your page title is probably one of the most important factors for on-page SEO. 
It used to be that you wanted to try to keep it to 70 characters. But now, Google may take the liberty of revising it so that it is more relevant to the query and could use your URL as the title instead of the actual coded page title. 

Bottom line: make sure your title is relevant to your content and keyword rich. I prefer to include personality in my titles, but sometimes that makes for some seriously long titles.

With everything in SEO, you’ll probably want to test this out and see what you find to be most effective.

Keywords in headings


Don’t force it, but if you’re able to naturally integrate keywords into your headings, do it. I like AJ Kohn’s practical advice on headings and how they should seamlessly lead the reader through the content. So, when you’re finished with the post, go back and just read the headings all the way through. If there’s a way to smooth out the transitions, do your reader a favor and make some alterations. Paying attention to stuff like this will keep your readers engaged for longer, increasing time on site and the possibility of conversion (or sharing).


Keywords in body copy


Check that your keywords are integrated into your body text. Also check for natural variations on the keywords that are closely related to the topic. Your goal is to aim for relevance so that the page gets matched with the appropriate query. It’s really important to get the SEO integration right, but it’s just as important to make sure you’re delivering copy that’s easy to read. Ultimately, you want your reader to share what they’re reading, so make sure it’s packed with value and not just stuffed with keywords and their variants.


Descriptive alt text and images


Images can make or break your content, so make them count. Be thoughtful about how they are enhancing (or distracting from) your message.

 As far as SEO goes, be sure that you’ve covered your bases with images. Integrate the appropriate keywords into the image file name as well as the alt description. Keep in mind that image file names and alt tags are meant to provide the engines with a way to determine what the image is about, so don’t just stuff keywords into these places if they don’t in fact describe the image. This won’t do you any good. You want relevant traffic and to provide a satisfying user experience.


Readability

There’s all kinds of important stuff that needs to be checked to ensure for effective readability (and also SEO). Not just so your post is easy to read, but so that it doesn’t get in the way of the reader doing what you’d like them to do.


Headings and subheadings


You should have some. Make sure they are descriptive and flow from the beginning to the end of the post.


Font and line height


Unfortunately, there’s no straight answer here for making your content 100% easy to read, so you may have to do some testing to ensure that your content is formatted for optimum font size and line height. Just make sure that you’re factoring this into your final check on readability. It’s really important.



Short paragraphs and images


Readers are most likely going to be daunted by too many words on the page (I know, I'm aware I have a problem). You want your content to be inviting even if there is a lot of information to share. So check that you are breaking up your text into shorter paragraphs that are easier to digest, and use meaningful images to supplement your message.


Access and shareability

This is probably more a checklist item for blog integration altogether, but make sure that the post is actually being crawled (once it's gone live). We’ve had so many clients have weird things go on with their robot.txt file that resulted in blocked content. Don’t be that guy. And make sure that there’s social share (and follow) buttons (not just links) on the post so that there’s no roadblocks for readers who actually want to share what they’re reading (and perhaps choose to join your community).


Conversion

Get the most out of your content by making it more targeted and actionable (and make sure it’s worth launching in the first place). Here are some things to consider prior to launch, but certainly you can be thoughtful of them prior to content generation:


Consider value and purpose

To make the most of your content efforts, everything you produce needs to be working toward achieving the goals of your strategy and accomplishing the bigger picture of your client’s overarching business objectives. To that end, each piece of content that you launch should have a very specific purpose and task that you want your user to complete when they interact with it.

 So, before you launch your content, you may want to ask yourself these questions:



[1] Is this content helping to achieve our goals?

If not, make the necessary adjustments so that it is. Get into the habit of asking this question at the inception of the idea.



[2] Does this content offer value to our readers?

Seems silly to put this on this list, but I’ve had to challenge my team with this before, so it definitely warrants a spot. Everything you do should hold value. If it doesn’t, then hold off on generating something that does. Quantity is important but only if the quality is inherent in the effort.



[3] What would I like the reader to do after they’ve interacted with this content?

Have you integrated a call to action that is either inherent in the message or a visual call out (maybe a graphic, icon, button, etc) to make the targeted action easy for the reader to complete? This should carry all the way through to setting up goals in Google Analytics in Measurement Setup below.


Integrate links to other posts


Don’t forget to integrate links to other relevant posts from your site, as well as from other credible, relevant sources in your content. 

It adds more value and it lets your audience know what you've been reading.

Note: you can dedicate a column on your blog that provides links to the most powerful posts available on your blog (this is also a great tactic for email marketing - more below). If the reader gets into the post and isn’t interested, some of these posts may attract their attention and keep them there (possibly assisting in conversion). If enough readers ditch the current post to go find the others, it would be ideal to track this all the way back to the goal that you set for this post and make the necessary changes.

SEOGadget Blog

Optimize meta description


The meta description is often neglected. Although it doesn’t influence rankings, it can most certainly aid in conversion. Ensure that you have a compelling meta description that helps the reader determine whether they’d want to read this post. 

Ideally, integrate the keywords you’re using to help the user with association (it helps them make the correlation that what they’ve searched for, and what you’re saying the post is about, is a direct match).


Measurement setup


If content launches and isn’t measured, does it make an impact? Make sure you’ve got these items covered so that you can track the effectiveness of your efforts:

Embed tracking code


Don’t laugh. It gets forgotten. A lot. That’s why it’s on the checklist. Make sure that whatever content you’re generating (blog post, infographic, video, microsite, etc.) that you’ve got tracking code on that sucker.



Set up goals

The hardest part about setting up goals is defining them. Every client is going to want to know what their ROI is going to be. Without setting up goals, there’s no way you can answer that.

 Although you can’t give any guarantees, you can at least help your clients define realistic goals, make efforts towards them, and then report on the metrics that are a result of your hard work. You can use Google Analytics for this, so make sure you’ve got your goals setup in GA so that they are ready for tracking.

Set up other tool stuff


Make sure all of the other tools you are using for measurement are ready to receive data (SEOmoz, Raven, Sprout Social, KISS Metrics, etc). From SEO to social and conversion, make sure all the tools are rearing to go.


Outreach and social

The most critical part of outreach happens before you ask anyone for anything. It’s the time you spend fostering quality relationships so that you have a community of people who actually want to help you. If the only time you’re spending on relationships happens when you’re doing outreach, you’re doing it wrong.





There is no shortcut to outreach. And if you want your outreach to be successful, you have to work at building a community. The only trick to this is being human. Be a genuine person who works hard and cares about people. Then, all you have to do is bust your ass (see, no shortcuts), do good work, and people will want to help you.


To that end, just because you put good content on your blog, doesn’t mean people are going to read it. Even if you’ve established a strong and supportive community, you have to do something to get the word out. Outreach isn’t easy, and when you don’t properly dedicate the time to it, you won’t get the most out of your efforts.


If you’re going to the trouble to write valuable content, seal the deal with effective outreach. Here’s a few items for you to consider:

Connect with the people you’ve mentioned in your content

Clearly there are several ways of doing this (and if you've done pre-outreach, this part should be a breeze). You can do this via email, DM (if they are following you on Twitter), or other social outlets like Google+, Facebook, LinkedIn, etc. If you have absolutely no relationship with them, do a little research about them beforehand. And then of course, let them know that their post was solid and was a really great fit, so you included it.

If they happen to link to or share your content, thank them (for the love of Pete)! Monitor your outlets and your analytics following the launch and take the time to thank people (this is called building relationships and it’s good for you). 


Connect with key influencers


Hands down, you want to connect with key influencers who you may not have mentioned in your post, but may be interested in sharing with their (ginormous) audience due to quality, relevance, or unique perspective. 



A HUGE note here: For me, I want influencers to share my content because it’s good, not just because they like me and are doing me a favor. As a result, I am very thoughtful about which influencers I ask to share my stuff as I do not want to abuse the relationship. Also, don’t over inflate your expectations. It’s their prerogative to say no (as they should if it’s not a match for their community). So, before you reach out to an influencer, I’d recommend being selective about who that is so that they are more inclined to say yes and don’t cringe every time they get a DM or a request for share email from you.



Connect with your community


There’s a ton of ways to do this, but there’s one method that is greatly underused. Brace yourself for this one. Use the phone. That’s right, there’s this thing called the phone and you can use it to talk to people. Seriously. Especially when you’re trying to build awareness and do outreach in your local community or with the media. Give them a call, let them know what you’re up to. If they’re interested, you can email (or social) the content so they can possibly link to it, or send it on to others who would find it useful. I’m betting you’ll stand out, hopefully make a good impression, and work toward a sustainable and rewarding partnership.



Use social



I heart Twitter

Especially in the SEO industry, Twitter is going to be one of the fastest ways to spread the word about your content and hopefully get retweeted. 

It’s ok to tweet the same content out a few times throughout the day, but make sure that you’re using a different teaser. If appropriate, call out specific tweeps. Be respectful of time zones, and if you’re going to use the whole “in case you missed it” line, only use that once.

Think about different and creative approaches for alerting your audience throughout the day. 

Make sure that you have a tweet button conveniently located for people to tweet the post. You can even provide a “tweet this” link after each tweetable thought to get more retweets or engagement from your post. 

For any social outlet, but especially when you’re using Twitter for outreach, always keep your goals in mind and remember what you’re trying to help the audience achieve.



Google+
Google+ is not Twitter or Facebook or LinkedIn. When you post the content here (same goes for any social outlet), you need to have a different approach. Use yet another unique teaser that is different than what you’ve used for all of the other outlets.

 Be sure to optimize your posts for maximum SEO benefit.

When I’m pushing content out on G+, I usually feature more than just one line of text. You could also try curating a few posts (vs. just sharing the one piece of content). In other words, select another relevant post or two that compliments the theme of the content you’re trying to get traction on. Provide key takeaways and links just it’s a mini-blog post. Just make sure if you do this that you break up the text into short paragraphs and use formatting so that it’s easy to read.



You can also link directly to your G+ posts from Twitter and draw some of your audience over that way. Test different ways of spreading the word about your content on social media and see what works best.





LinkedIn for good measure

Sure you want to make sure you’ve featured your content on LinkedIn, but do more than just post it as your status. Stop by your user groups and provide the content there.



And the others, too
There are so many other social outlets that you can use for outreach. 
You know which ones are going to perform the best for the content at hand. Make sure they're all on your checklist.

Schedule email marketing


Email marketing is another powerful outreach method. And, if you’ve done some pre-outreach, you already have a qualified list of people who want to be in your target audience. 



Note: Feature just the one piece of content that you’re marketing. That’s right, just that one. If you have other great content that people might want to read (or that you want to draw their attention to), you can include it in a dedicated column in the email template (just like on your blog). You’ll find that you’ll get some additional click throughs to other valuable stuff on your site.

Call to action from other places on your website


Double check that you’ve included outreach from relevant place on your website. Clearly your home page is a great one. If you have a rotating image feature in your header, design a slide just for this content and integrate some messaging about the specific task you’d like the reader to accomplish (all stuff to aid in conversion). If you are doing paid advertising, be sure that your add and all associated assets reflect the goal of your content as well.




Analysis, reporting, and testing

There's always more to do than just get your content launched. Now you've got to analyze it, report your winnings to your client, and of course invest in some testing.

Validate your efforts


Now for the fun part. The content has launched and the data is pouring in. Time to select the significant metrics to provide to your client. The most important thing to remember here is that the metrics you report send an important message to your client. If you’re focusing too much on keywords, or too much on (the wrong) social data, you're probably not doing yourself (or them) a favor.



Validate your efforts by reporting on the goals that you have set out for this content in the first place. Once the campaign (or month) is over and you’re being asked to show the client what you’ve been working on and how it’s gone, come all the way back to these goals. If you did your measurement setup properly, you'll have all kinds of data to stand behind what you've done.

We are all going to have different ways of reporting to our clients because every client is different, has different goals, and we all have diverse approaches and things to accomplish. The biggest thing to note here is that if you don’t provide accurate reports that actually measure what you’re doing for the client, you won’t earn their budget.



Prepare report for client


What we’ve been working on presenting in our reports lately is re-introducing the goals that have been defined (remember way back in Measurement Setup?), illustrate the efforts that have been taken in the campaign (or over the last month) to work toward those goals, and then show the metrics that reflect those efforts (screen shots that illustrate everything from GA to social and email marketing metrics).

Ideally, this will open up an educated discussion about expectations and results. There may be some adjustments that need to be made to efforts in general moving forward. Maybe some testing can be done. Maybe you need a new approach (or even some more concrete goals).

This isn’t meant to be all encompassing of our reporting process. Just some thoughts to be aware of and have on your checklist.

Do some testing

You can set up some content experiments so that you can test different variants and determine what can be improved in your content. If you're testing your content, you can stop guessing and figure out exactly what your audience wants. Testing will improve conversion rate, and it will help you deliver more value (which will help you earn your budget every year).


TL;DR Bonus

If you made it all the way to the end (I’m sure you read every word), then congratulations. You may have these checklists in Trello. Add your own items, move stuff around. Make them your own. Hopefully this is an effective springboard that will help you formulate your own checklists to match your process.

Always a work in progress

So it’s quite possible that I’ve left some things out (which I’m happy to hear about below). These checklists reflect some of the things that we’ve been working on not forgetting. We try to keep our process pretty agile, so it's continually evolving, just like our company, so I anticipate some revision will be necessary in the next couple months. At the very least, I hope these lists will help you to think beyond basic SEO stuff and just getting a bunch of content out. Good luck, and let me know how it goes.


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Seth's Blog : The fermata

 

The fermata

112px-Fermata

It is a mark from the composer to the conductor: Hold the pause as long as you like.

When we finally have the attention of an audience, our instinct is to rush. Attention is precious, please don't stare, okay, I'm hurrying, there, I'm done.

It doesn't have to work that way.

If you've got something to say, say it. Slowly. With effect. The audience isn't going anywhere. At least not the people you care about.

No, don't waste their time. Yes, handle your message with the respect it deserves.

If you have to rush to say it, it might not be worth saying.



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luni, 19 noiembrie 2012

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Idiocy in Spain: Bank Proposal to Build More Houses, Issue More Mortgages, Despite Massive Inventory and Enormous Drop in Sales

Posted: 19 Nov 2012 07:58 PM PST

Idiocy is running rampant in Spain. The Association of Spanish Banks (AEB) thinks the solution to the debt crisis is to build more houses in spite of the fact sales are down by as much as 85%.

Via Google translate, please consider Nonresident aliens buy 85% fewer homes than before the crisis.
Throughout the first half of this year only 1,363 homes were sold to foreign residents in Spain, far from the 9407 transactions in the same period of 2006, before the bursting of the housing bubble.

As pointed out shortly after the prime minister, Mariano Rajoy, the government wants to dispose of the stock of unsold homes, an issue that the Ministry of Public Works had already made ​​clear in the Plan for Infrastructure, Transport and Housing (PITVI ) 2012-2024. This reflects that "demand by foreigners is critical to recovery and sanitation sector", which has barely managed to reduce their unsold stock in 8000 from their peak levels in 2009 to about 680,000 homes.
Brief Summary

  1. The ministry of public works says "demand by foreigners is critical to recovery"
  2. Foreign demand is down by 85%
  3. There are 680,000 unsold homes

Permanent Residence Offered to Foreign Home Buyers

Also via Google translate, El Economista reports The government granted a residence permit to foreigners who buy homes of more than 160,000 euros
The government granted a residence permit in Spain to foreigners who purchase a home whose price exceeds 160,000 euros, as announced by the Secretary of State for Trade, Jaime García-Legaz.

"In a few weeks it will launch a reform of the Aliens Act for granting residence permits to foreigners in Spain who acquire a property from a price level [of 160,000 euros]"

The aim would be to reduce the "stock" of existing homes in Spain, where there currently "is not much purchasing power due to lack of credit. "
Magic Formula

In light of the massive overhang in unsold inventory of homes, the position of the Association of Spanish Banks wins the blue ribbon for stupidity.

Please consider "More Brick", also via translation, this time from El Blog Salmon.
I said a few days ago and now I repeat: we have learned absolutely nothing from this crisis. Michael Martin, president of the Spanish Association of Banks (AEB), said today that the solution to all our problems in Spain is very simple: build more houses and provide more mortgages to keep families were rendered homeless.

As they read. The magic formula to end the crisis of this man and, therefore, the association president, is simply to follow step by step the same manual that has led to the declining economic situation: for all credit and brick. Martin, at a time of unprecedented lighting, dares to ensure that this would be the right way to end the social exclusion of our country.

Not if it happen to you but I read these things and I have stupid face: They ignore that in Spain there are between 700,000 and a million empty properties. That of "housing never goes down" is now part of our past. The Spanish have opened my eyes and now only see a situation of oversupply estate brutal. People do not want houses that are waiting for prices to sink and touch ground .

And if that was not enough he finishes calling back the debt. For years private debt has grown at an annual rate of 10% above the GDP to go from 100% to 200% of GDP between 2001 and 2008. We brought money of the future without shame for the sole purpose of being rich in this. Currently, a problem suffered very serious private debt and financial leverage out of this situation will be slow and painful.

Inflate the housing bubble again is not the answer, however much certain stakeholders are mouth-watering thinking that cheap credit flowing again through the arteries of the system.
That translation is a bit choppy, but surely you get the gist. I am obviously in agreement with the author of El Blog Salmon.

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


Stocks Rise on Can-Kicking Optimism; Leap of Faith Justified?

Posted: 19 Nov 2012 10:07 AM PST

Stocks are up across the board today in Europe and the US, allegedly on Fiscal Cliff Budget Optimism.
Stocks on Wall Street jumped on Monday on signs of progress in talks to resolve the scheduled tax increases and budget cuts in Washington.

The Standard & Poor's 500-stock index leapt 1.7 percent in afternoon trading, while the Dow Jones industrial average jumped more than 170 points, or about 1.4 percent. The Nasdaq composite index added 1.8 percent.

Leading Democratic and Republican lawmakers expressed confidence on Sunday that they could reach a deal to avert mandated tax increases and spending cuts that would begin Jan. 1.

"A deal that doesn't face health care spending head-on and also raises taxes of substance with economic growth mediocre is not a good deal," cautioned Peter Boockvar, managing director at Miller Tabak & Company in New York. "This said, the markets will celebrate any deal in the short term but will likely deal with the economic consequences in 2013."

UBS also introduced caution into the outlook. "We believe that the most difficult policy issues will be pushed into the future, constraining earnings growth and stock multiples," said Jonathan Golub, strategist at UBS in New York.
Leap of Faith

It takes quite a "leap of faith" to presume it is 100% certain a deal can be worked out.

Moreover, the deal that was on the table last summer is no longer on the table. There will be tax hikes or there will not be a deal, unless president Obama completely backs down, and I strongly suggest he will not.

Should there be a deal, I am 100% certain it will be little more than a can-kicking exercise that solves no long-term issues, but it may give the market something to cheer about for the near-term.

The obvious "solution" (not that it really solves anything),  would be to let the fiscal cliff happen, then both parties could get together to lower taxes. This would save face with Republicans, but under this scenario there still would be some tax hikes (compared to now), and some revenue increases (compared to now), with the devil in the details of precisely how much is punted down the road.

Do not expect the rally to last long under any of these possible setups. The economy is at stall speed, and more QE will not accomplish anything.

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


How Sustainable are China's Copper, Cotton, Steel Imports? What About Chinese Purchases of Canadian and Australian Real Estate? Fresh Thinking on Balance of Payments

Posted: 18 Nov 2012 11:26 PM PST

Inquiring minds as well as commodity bulls need to consider the likely economic impact of China's commodity imports and how sustainable those imports are.

For example, please consider China's Cotton Reserves Enough to Meet Deficit for Six Years
Cotton stockpiles in China, the world's biggest importer, are set to climb to about 9 million metric tons this season, enough to cover the country's deficit for the next six years, according to Allenberg Cotton Co.

Inventories are rising as the government boosts purchases to support domestic prices and lift farmer incomes, Joe Nicosia, chief executive officer of world's largest cotton trader, said at a conference in Hong Kong today. The country may buy 5 million tons for reserves this year, up from 3.2 million tons a year earlier, he said.

"As long as China maintains this regime to subsidize cotton farmers, the world will be prone to overproduction," he said. "Can you imagine a world without China importing any cotton for six years? They hold all the cards."
What About Copper?

A similar setup has developed in other commodities, especially copper. Please consider the FT Alphaville story China's growing copper fetish

Commodity Imports and Balance of Payments

Michael Pettis at China Financial Markets has given considerable thought to the economic impacts (and distortions) of commodity speculation and writes via Email ...
When it comes to defining the balance of payments components I don't think all commodity imports should be treated equally. Commodities that are imported for use or for working inventory should certainly show up in the current account, as they do. Commodities that are imported for speculative purposes or for stockpiles, however, should be included in the capital account, since they really are a form of external investment more than a form of domestic consumption.

This is how they would recorded, for example, if rather than import physical commodity for storage a local speculator purchased a commodity-linked note from abroad. There is no real economic distinction between the two transactions, but the former would be treated as a current account import while the latter would be treated, correctly, as a capital account export.

This matters because the numbers can be significant, and so heavily distort the balance of payments numbers. br />
Cotton stockpiles in China, the world's biggest importer, are set to climb to about 9 million metric tons this season, enough to cover the country's deficit for the next six years, according to Allenberg Cotton Co.

When you have stockpiled enough cotton to cover the next six years of imports, it seems to me, most of your stockpile represents a speculative bet on cotton prices. It should be treated no differently than any other speculative bet, and the fact that it warehoused domestically rather than off-shore is largely irrelevant.

It is not just cotton, of course, for which large speculative positions distort the balance of payments numbers. FT Alphaville quotes a Goldman report on copper.

This, of course, is an old story, and it is not hard to figure out what the consequences of this kind of thing are likely to be.

China Daily says Steel industry outlook worrisome

China's steel industry is a big cause for concern in the fourth quarter due to shrinking demand and heavy losses, according to an industry official. The fears were outlined by Huang Libin, an official from the Ministry of Industry and Information Technology, in an interview with China National Radio.

"The steel sector's performance has been bad since the beginning of the year," Huang said. "Their revenues are falling and demand remains weak." The entire steel sector is now operating at a loss and struggling with problems of oversupply and a broader economic slowdown, he said. MIIT data show that 45 percent of the country's steel companies suffered losses in the first nine months of 2012.


Clearly there has been too much stockpiling of a wide range of commodities, and just as I have warned for many years, Chinese stockpiling of commodities is a very dangerous balance sheet management given the positive relationship between Chinese growth and commodity prices. It was just a matter of time before a slowdown in Chinese growth would cause a collapse in commodity prices, saddling already-struggling Chinese producers with soaring inventory losses. This seems already to be happening, and of course there is a lot more to come.

Understanding the Balance of Payments

We are probably stuck with this very distorted way of recording commodity purchases in the balance of payments, and there is not much we can do to change it. It does suggest however that rather than accept the commonly accepted definitions of the balance of payments – or of other things, like GDP, and whether housing must be classified as consumption or as investment – as if they were fundamentally meaningful, we should constantly remind ourselves why exactly we need the information and then adjust the numbers accordingly.

In the case of China, this means that to the extent there has been an increase in commodity imports held for speculative or investment purposes, we should reduce imports and increase the current account surplus correspondingly, in our private calculations. We should also increase our estimates of capital account exports.

One way to think of it is that in the past China shifted out of whatever foreign assets Chinese owned abroad (or borrowed privately) into US and European government bonds. Now China is shifting out of US and European government bonds into whatever assets wealthy Chinese are acquiring abroad as they flee the country. The numbers are pretty big, especially if the current account surplus is understated, which it almost certainly is, and so the effect of these various shifts should show up in relative pricing.

What are Chinese currently buying? They are buying homes and real estate in a number of countries, especially Australia, Canada, the United States, and, to the extent that they can get around newly imposed restrictions, Singapore and Hong Kong. They are also buying commodities and commodity-related companies. They seem also to buying a lot of unrelated businesses in places like Australia, which is good for Australian asset prices but perhaps bad for Australian manufacturers.

This has at least one implication. Real estate and commodity prices have been dropping, but this has come in spite of a massive program by Chinese effectively to swap out of US and European government bonds and into commodities and real estate. Where would prices have been absent this Chinese swap? Probably much lower, right?

So what will happen next? The demand for real estate may or may not abate at some point in the future, given the size of Chinese demand to hold assets in a safe place – a demand which is not likely to drop with slower Chinese growth but rather to speed up. The demand for commodities, however, will certainly do so once Chinese long positions, combined with much slower growth, make them excessive.

This can't be positive for commodity prices. My point more generally is that growth in China is likely to be negatively correlated with Chinese demand for foreign real estate and positively correlated with Chinese demand for commodities. It will also affect other things for which China has effectively been swapping US and European government bonds, after many years of doing the opposite.

You can accelerate investment forever

It is, to me, astonishing that China in just five years is "replicating the entire US commercial banking sector", and yet so many analysts are expressing delight with China's return to growth. Of course you can generate growth if you force such a tremendous expansion in credit, but this is simply unsustainable.

I know I've said this many times, and I apologize for boring regular readers, but while I expected that politics would require a jump in growth over the rest of this year and the beginning of the next, this "good growth" tells us nothing about the health of the underlying economy. It only tells us how difficult politically the transition is likely to be.

My guess is that the more difficult the consolidation of power, the longer the period of above 7% growth – which is perhaps another way of saying that the happier the sell-side analysts are, the more worried long-term investors should be.
I Side With Pettis

Michael Pettis is in a debate with the Economist on the future of Chinese growth as noted previously in The Dating Game: Michael Pettis Challenges The Economist to a Bet on China.

Just this month there has been further discussion and debate in the Wall Street Journal.


I know clear economic thinking when I see it, and Pettis is thinking clearly.

What About Canadian and Australian Real Estate?

Pettis states "The demand for real estate may or may not abate at some point in the future, given the size of Chinese demand to hold assets in a safe place – a demand which is not likely to drop with slower Chinese growth but rather to speed up."

Demand to get money out of China will likely speed up. However, and in a rare (albeit slight) disagreement with Pettis, I suggest demand for real estate is likely to plunge once real estate investment is no longer considered a safe haven.

Property bulls in Australia and Canada will not know what hit them once that "safe haven" status disappears (and it will). When it does, Chinese demand will go down the drain as well, further depressing the markets.

Actually, Australia is already burnt toast and Canada's turn is coming.

Ghost Malls, Ghost Cities, Infrastructure Malinvestment

China is home to the world's largest shopping mall and it sits empty. For a discussion and video, please see How Will China Handle The Yuan?

Also recall that China is home to numerous vacant cities. For a discussion, please see World's Biggest Property Bubble: China's Ghost Cities Revisited; 64 Million Vacant Properties

The Video of Ghost Cities is a must see eye-opener for those overly bullish on China.

In effect China already has accelerated investment forever forward, so much so that it's no longer even investment but rather massive speculation, a point Pettis makes easily in his latest email.

GDP

I was laughing when I read the following paragraph from Pettis "I apologize for boring regular readers, but while I expected that politics would require a jump in growth over the rest of this year and the beginning of the next, this "good growth" tells us nothing about the health of the underlying economy. It only tells us how difficult politically the transition is likely to be."

I can offer the same apology for harping about GDP.

As I have pointed out before, GDP is an essentially useless measure. For example, government spending, by definition, adds to GDP. If the government paid people to spit at the moon, it would add to GDP.

Here's a more practical example: If the government gives out a union contract to repair a bridge for $10 billion, GDP will rise by the exact same amount as if it fixed 200 bridges using non-union labor for the same amount.

Is dropping bombs in Iraq or Afghanistan productive? I suggest it has negative benefit because of the enemies it makes and the economic distortions it causes.

In regards to government spending, the bigger the waste, the higher the GDP.

Everyone is worried GDP will drop. Given unsustainable government spending and Massive Misdiagnosis of the Fiscal Cliff, the worry should be that GDP doesn't drop.

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

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