Central Perk

duminică, 5 septembrie 2010

Mish's Global Economic Trend Analysis

Hooked on Prescription Drugs - Half of US Took at least One Prescription Drug in Previous Month
Sunday Funnies 2010-09-05 Voting Trends
Driver's License Facility, State Lawmakers Face Eviction Over Nonpayment of Bills by State of Illinois
Dissolving Cities - Is this the Way Out?

Hooked on Prescription Drugs - Half of US Took at least One Prescription Drug in Previous Month

Posted: 05 Sep 2010 01:10 PM PDT

Here is an interesting article on Bloomberg regarding prescription drug usage. The study is from 2008. Please consider Prescription Drug Use Rose to Include Half of Americans in 2008.

Almost half of Americans took at least one prescription drug per month in 2008, an increase of 10 percent over the past decade, a U.S. study found.

One of every five children ages 11 or younger took at least one medication each month in 2008, led by asthma and allergy treatments, according to the survey released today by the U.S. Centers for Disease Control and Prevention. Among those ages 60 or older, 37 percent used five or more prescriptions per month.

The most common medications for adolescents were treatments for attention-deficit disorder, a condition in which people have trouble paying attention and engage in impulsive behavior.

For adults ages 20 to 59, antidepressants, including Eli Lilly & Co.'s Cymbalta and Pfizer Inc.'s Zoloft, were the most-used drugs. Cholesterol-lowering medications, including Pfizer Inc.'s Lipitor and AstraZeneca Plc's Crestor, were the most common drugs taken by people ages 60 and over, with 45 percent of those in that age group on such therapies.

$238 Billion Industry

Prescription drug were a $234.1billion industry in 2008. The number is certainly higher today. Are pharmaceutical companies interested in curing anything or just treating the symptoms?

Throughout grade and high school, I do not recall any kids with attention problems. How is it that attention-deficit disorder is now so widespread? Are kids today different? Why?

I do not like the way drugs are advertised. Is anyone else with me on this?

What's up with the "ask your doctor about the purple pill" campaign? What does the color have to do with reasons to take a pill. The most annoying thing about the ad are versions that do not even say what the drug is for, they simply stress the color purple, telling you to ask your doctor about it.

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

Sunday Funnies 2010-09-05 Voting Trends

Posted: 05 Sep 2010 12:37 PM PDT

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

Driver's License Facility, State Lawmakers Face Eviction Over Nonpayment of Bills by State of Illinois

Posted: 05 Sep 2010 09:01 AM PDT

The state of Illinois is sitting on $4 billion in unpaid bills. Some of that is to hospitals, some to schools, some of it is internal transfers, but a lot of it affects the lives of real people who need the money to pay their bills.

For example, please consider Libertyville driver's license facility may be evicted

Stephen Martin, whose family owns the Brookside shopping center on the 300 block of Peterson Road that houses the Secretary of State office, has sent a letter to state officials saying he wishes to terminate the lease agreement because of the long-overdue payments. Martin said the state owes him nearly $43,000 in back rent and expenses.

It's not the first time the state has fallen behind on payments for the facility, which opened in 1987, Martin said. Payments were six months overdue by the time a check was cut in December, and this past April the state owed Martin four months worth of rent when it finally paid.

If the state doesn't pay up this time, Martin said, he will go to court and begin eviction proceedings.

The delinquent rent checks are symptomatic of the state's ongoing financial problems. The comptroller's office has $4.3 billion in unpaid bills in its system, spokesman Alan Henry said this week.

Several state lawmakers have faced eviction because of late payments; just this week, state Rep. Sandy Cole of Grayslake temporarily began working out of her house because her office was shut down.

Without a doubt, Illinois is bankrupt.

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

Dissolving Cities - Is this the Way Out?

Posted: 05 Sep 2010 12:43 AM PDT

Some cities in California are so bloated in debt and other problems they are considering dissolution. Mercury News asks is this The End of Half Moon Bay?

Between budget losses and lawsuit payments, Half Moon Bay's financials have become so dire that if a local sales tax measure doesn't pass this November, officials say they may have to disincorporate.

City leaders have been using the "D" word for a few weeks now as they try to persuade voters to pass Measure K, a one-cent sales tax increase that would help the city balance its budget with an extra infusion of $1.4 million per year for the next seven years.

Dissolving Half Moon Bay -- handing the city's budget, operations and services to San Mateo County -- would be an absolute last resort, but the city may not have many other options left, City Councilman John Muller said.

At first glance, disincorporation could save taxpayers some money: no more city administration to support. Police services would be contracted out, and the county would cover planning, building and public works projects from its offices in Redwood City.

City Manager Michael Dolder admits disincorporation is one of the options on the table now. The City Council already cut $900,000 from the current budget -- including half its employees -- and imposed furloughs on those who remain. Some of the cuts were needed to pay for the Beachwood lawsuit settlement, a $15 million burden the city will shoulder in bond payments for the next 20 years.

Disincorporation is so rare in California that it's almost without precedent. The last city to do it, Cabazon in Riverside County, had fewer than 2,000 residents and no functional government to speak of when it voted to give up cityhood.

The process is so complicated that county officials said they don't know what kinds of services the Board of Supervisors would choose to provide or how much they would cost.

One thing is certain: disincorporation is not a bailout. The county would lay claim to revenues, including Half Moon Bay's property taxes, sales taxes and hotel taxes, but not its liabilities. Today's Half Moon Bay residents would be required to assume the debt burden of Beachwood bond payments, which would likely be added as a lien on their properties, according to Assistant County Controller Bob Adler.

D Is for Disincorporate

The PropZero blog writes California Cities: D Is for Disincorporate

City officials in Half Moon Bay say the municipal budget is such a mess that it may make sense to disincorporate and turn the place over to San Mateo County

Consider Los Angeles County which has 88 cities, many of which it clearly does not need. Several of the smaller cities seem to exist as personal playgrounds for families or particular businesses. Those municipalities -- the now famous Bell just one of them -- have extensive histories of municipal corruption. If such cities were to go away, would they be missed?

A side note: unions have revived legislation in Sacramento that seeks to prevent cash-strapped cities from declaring bankruptcy (Municipalities would have to get permission from a labor-dominated commission first). The consequence of that legislation, were it to pass, might well be to promote more disincorporations -- that is, the shutting down of cities -- since bankruptcy would be all but off the table.

Simple Solution

Unions have revived measures to prevent municipal bankruptcies, but hopefully the governor would veto such asinine legislation were it to actually pass. I doubt there would be enough votes to override the veto.

The problem with disincorporation straight up is that it leaves the debts intact.

Instead, I propose Half Moon Bay file bankruptcy, wiping out its debts, or at least sending them to bankruptcy court. Then Half Moon Bay can disincorporate, saving itself the problems of dealing with a local police force and its pensions.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Seth's Blog : Your smile didn't matter

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

Your smile didn't matter

If you worked on the line, we cared about your productivity, not your smile or approach to the work. You could walk in downcast, walk out defeated and get a raise if your productivity was good.

No longer.

Your attitude is now what's on offer, it's what you sell. When you pass by those big office buildings and watch the young junior executives sneaking into work with a grimace on their face, it's tempting to tell them to save everyone time and just go home.

The emotional labor of engaging with the work and increasing the energy in the room is precisely what you sell. So sell it.

• Email to a friend •

•

Tip 6: An easy way to get great links

Hello

In today's lesson we discuss some great techniques for easily building quality links, and how to get the anchor text you want!

Read it online at
http://www.seobook.com/learn-seo/link-building.php

Cheers,
Aaron Wall

P.S. This article offers background information on link building
http://training.seobook.com/link-building

P.P.S. Did you know my private coaching club, "SEO BOOK CONFIDENTIAL", is an exclusive insiders group of some of the most influential and successful SEOs in the world? We quietly generate literally millions online for our clients and our own businesses——so can you imagine what it'd be like having us take a look at your SEO project?

Well here's the best part: inside the "SEO BOOK CONFIDENTIAL" forum, you'll be able to post all your problems and questions. You'll get specific advice from me and all the other top-level SEOs in our exclusive club. (Some of these guys charge upwards of $500 per hour... plus, even if you had the money to hire them, they're booked solid, so you couldn't anyway).

You'll also get the best of my free tools, exclusive premium tools, time-saving tutorials and cutting edge tips.

To discover more about our friendly community of SEOs——and how you can be getting one-to-one advice from us in the next five minutes——follow this link:
http://www.seobook.com/4973.html

-------------------------

To unsubscribe from the list follow this link http://www.seobook.com/autoresponder/unsubscribe/1/382346/e8da281c68153bd8937fe6a6e56c119d

sâmbătă, 4 septembrie 2010

Mish's Global Economic Trend Analysis

New Job Opportunity - Spitting at the Moon

Posted: 04 Sep 2010 11:30 AM PDT

In multiple posts Paul Krugman is saying "I told you so". For example, please consider Nobody Could Have Predicted

Pictures support the view that stimulus worked as long as it lasted, boosting the economy — which is the same conclusion Adam Posen drew from Japan's experience in the 1990s: Fiscal policy works when it is tried.

But the stimulus wasn't nearly big enough to restore full employment — as I warned from the beginning. And it was set up to fade out in the second half of 2010.

So what was supposed to happen? The invisible cavalry were supposed to ride to the rescue.

I never understood why the Obama administration thought this would happen so soon; history tells us that the effects of a financial crisis on private spending are normally protracted. And sure enough, the cavalry has not arrived.

Stimulus and Full Employment

The idea we can stimulate the economy to full employment is about as silly as silly gets. Krugman wanted double the stimulus we got. Well, we got zero benefit unemployment-wise from the stimulus and in my book infinity times zero is still zero.

Yes, unemployment fell from 10.1% to 9.5% but all of that decrease, if not more than all of that decrease, was a result of a falling participation rate. The bottom line is neither the Fed increasing its balance sheet by $trillions nor a $1.4 trillion deficit did a thing to lower unemployment.

Of course the Keynesian clowns will holler things would have been worse in the absence of stimulus. Really?! Would banks be lending more? Would small businesses be hiring?

Full Employment Made Easy

Krugman wants full employment. I suppose the government could easily employ everyone who does not have a job. Then again, didn't we effectively do just that?

Here is a snip from "Contained Depression" that suggests we did.

We are certainly in a depression. However, 40 million people on food stamps as of August 2010, masks that depression. The cost of the food stamp program is on schedule to exceed $60 billion in fiscal 2010. For comparison purposes, there was just over 11 million on food stamps in 2005.

Please note there are 14.6 million unemployed, but of them 4.5 million of them are receiving regular unemployment benefits and another 4.7 million are receiving extended benefits. Thus 63% of those unemployed are receiving benefits. Being paid while not working also masks the depression.

Spitting at the Moon

Suppose that instead of handing out free money to 9.2 million unemployed, we hire them at minimum wage to spit at the moon. GDP would rise because all government spending by definition adds to GDP, regardless of how unproductive the activity really is.

Such a move would allow Krugman the wonderful opportunity to crow about rising GDP.

Moreover, unemployment would crash to seven percent or so. That would really get Krugman crowing. Yet, would anything have changed about the true state of the economy? Clearly the answer is no.

Suppose government hired all 14.6 million unemployed to spit at the moon. Would that get the economy humming? For any longer than the jobs to spit at the moon lasted?

The above examples may sound absurd, but the the result is much the same whether we hire people to spit at the moon vs. paving roads that don't need to be paved. The main difference is money will run out faster hiring road workers because of the wasted material and equipment costs.

Practical Example

In actual practice, tax credits for housing was an abysmal failure. Would doubling that program have achieved different results? Would wasting the same out of money to repair schools or build new schools have done any better? Once again the answer is no. The only difference in any of these examples is the burn rate at which stimulus money is wasted.

Only Genuine Demand Will Fix Economy

What will get the economy humming is better tax policy, scrapping Davis-Bacon, dumping public union workers wherever possible, slashing defense spending, and letting home prices bottom.

Real demand for housing will step up as soon as there are bargains. Instead we have policies to prop up home prices.

Lesson of Japan

The lesson of Japan is the same as the lesson of home tax credits in the US - Stimulus programs do not work period, regardless of size. In Japan, every program failed. Japan is now in debt to the tune of 200% of GDP.

Some suggest Japan is no worse off for it. Nothing could be further from the truth. Japan squandered massive savings in the stupidest manner possible, building bridges to nowhere, and now its citizens are aging, in need of drawing down their savings.

Unfortunately those savings were squandered.

Japan is poised to blow up, however, the timing is uncertain. Sadly, the US is on the same path and Krugman is hellbent to get us there faster.

Consumer Credit Inflection Point

Let's review Are we "Trending Towards Deflation" or in It?

The key problem for Bernanke is we have reached the Consumption Inflection Point - No One Wants Credit; Consumer Spending Plans Plunge

Keynesian Policies Fail

Keynesian stimulus measures have failed and will continue to fail. Please see Three Mish Segments on Tech Ticker, on Stimulus, Retail Sales, the Markets, Alternatives for details and an online interview.

We have wasted $2 trillion fighting deflation. It has not produced any jobs.

The correct way to spur growth is by fostering an economy that supports economic growth. For details, please see Bleak Outlook for Small Businesses and Job Creation; Where Obama Went Wrong, and What to do About It.

Keynesian Cures Worse than the Disease

Krugman has the wrong definition and the wrong worry. However, he is correct in his call for deflation. Unfortunately, this will lead to a bunch of "I told you so" kinds of posts from Krugman, in spite of the fact his cures are worse than the disease.

Indeed, Keynesian "cures" are one of the reasons this economy is in the mess it is in.

The final analysis shows that the real threat is not of deflation, but of absurd Keynesian and Monetarist attempts to prevent it. The Greenspan-Bernanke housing bubble (and subsequent crash), and decades of futility in Japan should be proof enough.

Nobody

For another "I Told You So" Krugman post, please consider Nobody

The truth is that some of us were practically screaming back in January 2009 that the administration was proposing too small a program. Start with Stimulus arithmetic (wonkish but important) and work forward. And no, the point isn't that I'm so smart — it is that given the forecasts we had at the time, and given historical experience of recessions after financial crises, it wasn't at all hard to see that the plan was too small. Things have been worse than expected — but not that much worse.

And why does this matter? Because the best chance Obama et al have to change things now is to make the case that we need to do more, and that Republicans stand in the way. Yet here they are, apparently trying to run on the claim that they had it right all along, or something. Is this just boneheaded political strategy? Is it about the egos of the advisers who called it wrong?

I Told You So

The easiest predictions in the whole world were ....

1. Stimulus would fail no matter how big.
2. Krugman would brag "I Told You So".

Three things about Krugman that irk me to no end are ...

His failure to look at the seen and unseen consequences of his proposals
His failure to address the question as to what happens when stimulus ends
His failure to look at structural problems

Ability for government borrowing is not infinite (at least without major economic repercussions). One easy to see problem is interest on the national debt will consume all tax collections if we stay on this path. Moreover, expiration of housing tax credits provides a clear example as to what happens when stimulus ends.

The Invisible Cavlalry

My friend HB has written an excellent article on similar lines. It turns out prosperity is not around the corner after all. Please consider Paul Krugman and the Invisible Cavalry

Averting the Great Depression Again

Throwing money at problems cannot ever work, but that especially holds true when structural problems like union salaries and public pension promises are left intact.

Just because Krugman was correct that stimulus would fail does not make him correct about the reasons why, or what the correct policy actions should have been. The irony as my friend points out, is Krugman's 2009 proclamation "So it seems that we aren't going to have a second Great Depression after all. What saved us? The answer, basically, is Big Government".

Now we need big government to save us again. Spare me the sap. Big government is clearly the problem, not the solution.

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

Voters Strongly Favor Non-Incumbent GOP Newcomers in Midterm Elections

Posted: 04 Sep 2010 01:14 AM PDT

More than any other class, including Republicans in general, voters have a decided preference for non-incumbent GOP challengers. Moreover, three in four believe an influx of new members would improve Congress, says Gallup.

Please consider Americans Most Likely to Favor GOP Newcomers for Congress

Suppose you had a choice among each of the following four types of candidates for Congress. Which one would you be most likely to vote for?

Republican serving in Congress - 15%
Republican who has not served in Congress - 38%
Democrat who has not served in Congress - 16%
Democrat serving in Congress - 24%
Other - 3%
No Opinion - 4%

Overall, a majority of Americans prefer a Republican candidate (regardless of experience) to a Democrat, 53% to 40%. And a majority also prefer a non-incumbent (regardless of party affiliation) to an incumbent, 54% to 39%.

The fact that Americans who prefer a Republican candidate want one who is new to Congress suggests that these voters want both GOP control of Congress and the new perspectives that come from members with no prior Washington experience. Americans who favor Democratic candidates, on the other hand, apparently are more satisfied with the type of experienced representatives now in Congress.

One would naturally expect Democrats to prefer Democratic candidates, and Republicans to prefer Republican candidates, and that is the case when looking at the data by party. But partisans' preferences for incumbents versus challengers seem to be influenced by their knowledge that the Democrats currently have a majority in Congress, and thus, more Democrats will be defending House seats this fall. Democrats are more likely to prefer a Democrat who is in Congress to a Democrat who is not, and Republicans are more likely to prefer a Republican outside of Congress to one who is currently serving there. Independents also show a strong preference for Republican non-incumbents.

Strong Anti-Democratic Sentiment

Gallup reports Anti-Democratic Sentiment Aids GOP Lead in 2010 Vote

The Republicans' lead in the congressional generic ballot over the past month may be due as much to voters' rejecting the Democrats as embracing the Republicans. Among voters backing Republican candidates, 44% say their preference is "more a vote against the Democratic candidate," while 48% say it is "more a vote for the Republican candidate."

The 44% of Republican voters who say they are voting more against the Democratic candidate exceeds the level of negative voting against the incumbent party that Gallup measured in the 1994 and 2006 elections, when party control shifted (from the Democrats to the Republicans after the 1994 elections and from the Republicans to the Democrats after the 2006 elections).

GOP Holds Huge Edge In Turnout Related Question

In our third poll topic, Gallup shows Republicans Hold Wide Lead in Key Voter Turnout Measure

Two months before this year's midterm congressional elections, Gallup finds 54% of Republicans, compared with 30% of Democrats, already saying they have given "quite a lot of" or "some" thought to the contests.

Republicans' current level of thought about the elections, from Gallup Daily tracking conducted Aug. 23-29, matches or exceeds that found in October/November of the last three midterm years. By contrast, Democrats are giving far less thought to the elections today than they did in the final weeks before the prior four midterms. As a result, Democrats are on par with independents in current attention levels -- a sharp departure from recent years, when the Democrats exceeded independents on this measure.

The large party gap in "thought" suggests the typical Republican turnout advantage could be larger than usual this year if that gap persists until Election Day. Attention normally spikes as elections approach, and this is likely to occur among Democrats. However, it is unclear whether the Republicans have reached the limit for how much attention they will pay to a midterm election, or whether their attention will rise to perhaps a historic level by November. How this plays out will determine Democrats' ability to catch up to Republicans on this measure before Election Day, and will in turn determine the size of the Republican turnout advantage.

It's a virtual certainty that voters' attention to the election will increase in the coming months. If this increase is proportionate between Republicans and Democrats, then the Republicans will likely maintain a formidable turnout advantage. However, it's also possible that Republicans have merely tuned in early to the elections, leaving less room for their attention to expand -- and thus giving the Democrats an opportunity to narrow the gap by November.

Temper Tantrum?

In Our Quick-Fix Electorate on Real Clear Politics, Eugene Robinson proclaims

...This isn't an "electoral wave," it's a temper tantrum. In the punditry business, it's considered bad form to question the essential wisdom of the American people. But at this point, it's impossible to ignore the obvious: The American people are acting like a bunch of spoiled brats. ...there's no mistaking the public mood, and the truth is that it makes no sense.

On the contrary, this makes perfect sense. The public is fed up with how beholden Obama is to unions. They are fed up with sacrifices they have to make that government workers don't. They are fed up with how well the political class has fared in this election vs. how well they have fared in this election. They are fed up with never-ending wars.

It's not that people prefer Republicans by some huge margin. They don't. They specifically prefer non-incumbent Republicans hoping for a Change. Obama promised "Change you could believe in", but where is it? We are still bogged down in Afghanistan, Obama did not get us out of Guantanamo Bay as promised, but most importantly he did continue the same bailout strategies and surrounded himself with the same economic philosophy and same Wall Street advisors as Bush.

The public is fed up and rightfully so. The anti-union vote is going to be huge, and deservedly so.

I am increasingly confident that Republicans are going to take the House. So be prepared to Kiss Nancy Pelosi goodbye and be prepared to welcome John Boehner as the new House speaker. Perhaps we can get some real change. If not, gridlock is better than what we have seen under Obama.

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

SEOmoz Daily SEO Blog

LDA - Is On-Page Optimization the SEO Secret?

Posted: 04 Sep 2010 05:59 AM PDT

Posted by Dana Lookadoo

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.

How do I recap the SEOmoz PRO Seminar session on Uncovering a Hidden Technique for SEO? The title is so attractive that it produces Pavlonian symptoms as we salivate at the thought of uncovering a hidden SEO treasure. Ben Hendrickson of SEOmoz presented a model which appears to show how Google may assigning relevance to keyword terms based on context - topical relevance.

Is Latent Dirichlet Allocation (LDA) that hidden jackpot?

1st - LDA is not new nor something SEOmoz invented. The Information Retrieval model has been around for 7 or 8 years, and IR geeks have talked about it before. There are a number of resources, as well as nay saying, about LDA and Google's possible use of it.

2nd - What is new is SEOmoz's LDA Topics Tool that produces a relevancy score based off a query (search term). It enables one to play with words that may increase a page's relevancy in the eyes of Google. It shows words that help Google determine how relevant the page is to a user's search query.

Game Changer?

Kyle Stone tweeted that the LDA tool is a game changer, and many retweeted.

SEOmoz LDA tool = game changer

Is SEOmoz's LDA tool a game changer? That's yet to be seen. The goal is to report Ben's research as presented at the Mozinar and how a layman (myself) interprets such. Rand is going to do a follow-up post to explain more.

Why all the hype?

The SEO Challenge

SEOs face the continual challenge of figuring out Google's hidden ranking algorithms. How do we rank higher? Which signals are the most important? We know search engines are "learning models" that attempt to understand "context” of words. Google has said for years that webmasters should concentrate most on providing good relevant (contextual) content.

There are ways to rank higher. Is it as easy as 1, 2, 3?

Create quality copy with keyword(s) on the page along with associated anchor text links.
Get good links.
What Ben talked about in this session.

LDA - Topic Modeling & Analysis

Latent Dirichlet Allocation, in layman's terms, translates to "topic modeling." In search geek terms, LDA is the following formula:

LDA Formula

(Did you digest that? Don't worry; Mozzers groaned and laughed at the same time. PLUS: Scientist Hendrickson delivered this session after lunch!)

LDA Simplified - Here is Ben's way of explaining topic modeling:

LDA Formula Simplified

(Okay, I was once proud that I got an A in Logic and Combinatorics - discrete math/set theory. However, that computer science class now feels like basic math compared to this formula.)

It made more sense when Rand Fishkin joined Ben on stage and when Todd Freisen moderated and deciphered during Q&A. (Manuela Sanches of Brazil was sitting next to me and said that Ben's "presentation needed subtitles!")

The objective of LDA, from my deciphering of Greek, is to understand how Google is using semantic contextual analysis combined with other signals, to define topics/concepts. It's how Google analyzes the words on a page to determine the "set" to which a word belongs - how relevant a search query is to pages in its database.

For example: How does Google assign relevance to the word "orange" on a page? They determine orange is related to the fruit set or to the color set by page context.

LDA Defined:

"Latent Dirichlet Allocation (Blei et al, 2003) is a powerful learning algorithm for automatically and jointly clustering words into "topics" and documents into mixtures of topics. It has been successfully applied to model change in scientific fields over time (Griffiths and Steyver, 2004; Hall, et al. 2008).

A topic model is, roughly, a hierarchical Bayesian model that associates with each document a probability distribution over "topics", which are in turn distributions over words."

Bayesian - ah, a term I recognize!! Bayesian spam filtering is a method used to detect spam. It draws off a database and learns the meaning of words. It's "trained" by us when we mark an email as spam. It looks at incoming emails and calculates the probability that the content of an email is contextually spammy.

I found a PowerPoint presentation about Bayesian Inference Techniques by Microsoft Research from 2004 that presents the possibility of using LDA. Go to slide 54 and read:

"Can we build a general-purpose inference engine which automates these procedures?"

Microsoft has been looking at LDA models. Do search engines use it as one of their primary methods?

Ben sampled over 8 million documents with approx. 1,000 queries. He believes Google is using LDA topic modeling to determine (learn) what words mean by their associations with, relevance to, other words on the page. (Other factors are included.) Ben called the results a "co-occurrence explanation" that use a "cosine similarity."

SEO Takeaway:

Results that are higher in Google SERPs, in general, have more topical content.
Search engines do APPEAR to apply semantic analysisÂ… when indexing a page and determining the intent of the words on the page.

Rand tweeted an explanation (in 140 x 4) as follows:

Rand's tweets explaining LDA

Dana's LDA Catwalk Metaphor for Topic Modeling:

Imagine the words on your page as walking down the fashion runway in Paris. Your keyword phrase is "dressed" in semantic accessories, words that correlate to and dress up your topic. Associated words bring meaning to and highlight the fashion model's outfit. Adjectives, modifiers and synonyms are like jewelry, hats, and shoes. The combination can transform your base layers (your target terms) from casual or conservative business attire into a sexy night-on-the-town ensemble.

Combinations and permutations of words on a page "dress" your skinny or curvy fashion model. Relevant words provide Google with an image of what she is wearing and the catwalk upon which she struts. LDA refers back to what Google already knows about these "accessories" (words) and their previous association with the topic terms related to fashion.

Enter Topical Ambiguity - I just broke the "rules" for context with the catwalk metaphor by referring to modeling in two contexts on this page:

I used "modeling" terms that relate to the "fashion industry" set.
The catwalk metaphor is irrelevant content that is off-topic for discussing "LDA topic modeling."

Google Algorithm Exposed?

Ben clearly said that LDA is an ATTEMPT to explain the SERPs. His scenario, a quote from his presentation slides, follows:

One of us needs to implement it so we can:

1) See how it applies to pages
2) See if it helps explain SERPs
One-two-three-not-it.

LDA is not LSI.

There were some tweets claiming SEOmoz was bringing back LSI or snakeoil. Ben clarified that LDA is not LSI, which deals more with keyword density. He explained that he is NOT talking about loading keywords on a page but about the relevance of the topics within the page. He said that:

"LSI doesn’t have the same bias toward simple explanations. LSI breaks down as you try to scale up the number of topics."

The LDA tool deals with context, semantic relevancy, not density - in addition to some other random factors. Example:

If SEOmoz has a page all about "SEO" and "tools," and there is another word on the page that can be explained by a word that is more related to SEO topic, then the related word would be used. Meaning, "seo tools" doesn't have to be repeated over and over, and the related word would be interpreted by Google as being relevant.

Ben, who appears to have the brain of a search engine, noted that it "appears" LDA is what Google is heading for in the near future. He said (paraphrased):

If they are not doing it, they seem to be doing something that has the same output. They are probably already using it.

Rand deciphered:

It’s a super weird coincidence if Google is not using it.

Are On-Page Signals Stronger than Links?

Are we heading toward more emphasis of on-page topic modeling? I'm not an IR geek, but I do plan to spend more energy focusing on understanding how search engines retrieve informaton. We are dealing with a semantic Web. LDA may indicate that good old on-page optimization sends stronger signals than links.

SEOmoz's LDA tool attempts to show how relevant content is to a chosen keyword. It computes relevance of queries.

The following shows how relevant SEOmoz's Tools page is to Aaron Wall's SEO Book Tools page.

seo tools relevance for SEOmoz & SEO Book

The score at the top is an indicator of how relevant the content on that page is according to LDA.

Aaron's content is 72%* relevant for the query "seo tools."
SEOmoz's tools page is 40%* relevant.

*NOTE: (I inserted the logos.) You can run the same pages and get different results. The results are similar in that SEO Book always scored as more topically relevant, but the percentage varies. Is this the random Monte Carlo algorithm at work? Ben?

Mozinar Question:

"How do we execute this for SEO?"

Ben's Answer:

"I don't actually do SEO. I write code."

That's up to us, the SEOs, to play and test in our Google playground.

Use the tool to decide if you can win with LDA to optimize your on-page signals.

Use the LDA Topics Tool to return words that could be used on a page for a query.
Then determine who is ranking for that term.
Simply write content that is highly on-topic based off the findings you observe.

If you are not performing that well in the SERPs, think about classic on-page optimization. In the example above, rather than putting another instance of "seo tools" on the page, LDA shows there are better ways to tell Google that you are about that topic. The tool provides a way to measure that.

IMPORTANT: There is a threshold at which too many related words will appear as too spammy. LDA is not something to be used to game Google.

Test the LDA Tool out for yourself, and draw your own conclusions.

***
DISCLAIMER: I'm not claiming this methodology has uncovered hidden SEO treasures. Time, testing and playing around with a new SEOmoz tool while observing the SERPs will reveal the answer. In the meantime, I'm going to dress up my pages and accessorize them with relevant terms that make them dazzle so they look good climbing the Google catwalk.

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Daily Snapshot: Honoring the American Worker

Your Daily Snapshot for
Saturday, September 4, 2010

Your Weekly Address: Honoring the American Worker

The President talks about his fight to make America work for the middle class and make sure hard work is rewarded -- rather than greed and recklessness. Watch the video.