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.
In the past few months, I have been watching a very unsettling trend unfold in very competitive ecommerce search results on Google. It appears that huge amounts of money are put into place to systematically and successfully manipulate highly competitive search terms in order to sell fake merchandise of almost every bigger brand out there. Some of these sites even solely exist to steal people's money and don't ship anything at all.
Rest assured that I am not talking about some people doing good linkbuilding or about people buying a lot of links. These operations I talk about are much, much bigger and in all cases almost certainly run by criminal organizations of some sort. They not only greatly affect US search results but are also very present in at least UK, France and Germany.
In this article, I will show you several examples of where Google’s search is absolutely broken (and by broken, I mean that 10 out of 10 page one search results are entirely fraud). I will also show you exactly how these rankings are achieved and take a look at what the impact on consumer’s may very possibly be. Last but not least, I’ll try to help you recognize these kinds of websites so you can avoid them as they become increasingly difficult to identify.
Exhibit A (“nfl jerseys”)
Let’s get started with [nfl jerseys] as our first keyword to be examined. If you take a look at the US search results on google.com with personal search disabled (add &pws=0 to any search URL), you will get a list of websites which claim to sell said wear and merchandise at a significantly discounted price. Such huge discounts can be found on pretty much any of these fake shops, many ranging up to 75% in “savings”.
Here’s the search engine results page as of 01/04/2011:
(Note: I’m not trying to “out” any particular site, so I removed any domain names in question from the screenshots)
As you can easily see, all of these sites feature ridiculous keyword stuffing in their root page titles as well as the term “jersey” within their domain name. This is both very common among them. Result #5 even contains Chinese letters.
As of this writing, the entire first results page is composed of fraudulent websites. In other words, Google’s organic results have become entirely useless for this search phrase.
Exhibit B (“pandora jewelry”)
Next, [pandora jewelry], also a very popular and well-respected brand. Positions 3, 5, 7, 8, 9 and 10 are fraud, which results in a 60% share of useless results.
Exhibit C (“thomas sabo”)
Looking at [thomas sabo] SERPs, they feel like a déjà-vu. Another jewelry brand, another wave of artificially boosted shops shipping either replica ware or just nothing at all: results 3, 4, 5, 6, 8, 9 and 10 should not be listed there at all in the first place (70%).
All of these sites try to appear as legit and official as possible.
See for yourself
Before diving into the details, I urge you to take a look at Google’s results for these queries yourself. Try searching for other brands, too. Almost every popular brand is affected by this growing issue.
How they do it
Now that I’ve shown you how seriously broken Google is, let’s take a look at why Google is ranking these sites so well. Since these are no legit shops after all, it’s obvious that there is no kind of “branding bonus” or boost through actual social media activity at hand. There’s only one thing that leads to these rankings. You’ve guessed it: keyworded anchor-text heavy links.
The interesting question is though: where do these sites get their (anchor-text rich) links?
I have taken a look at many of these sites and found out that their link profiles are basically comprised of two kinds of links: automated forum and blog spam along with some hacked websites.
Let’s take a look at the anchor text variation of result #1 for “nfl jerseys”:
This site also has a page authority of 64 and a domain authority of 57, according to Open Site Explorer.
Google's best guess for "pandora jewelry" looks similar:
And the #1 "thomas sabo" result:
You might be surprised to see plain-old forum spam work this well, but let me get one thing straight: it’s not like Google is not penalizing or de-indexing any of these sites. I see them come and go on a daily basis (although some actually seem to stick for weeks or even months).
However, these people (or rather organizations) push such huge amounts of these sites into the web that Google - obviously - is having quite a hard time catching up.
In some way, and this is my personal opinion, this might be related to the Caffeine update - Google is now crawling and ranking sites a lot faster than ever before, but it appears overall search quality has suffered dramatically in the past 6 months or so.
Furthermore, link placements on hacked websites are very difficult to spot algorithmically. Granted, many of those links are not visible to the human eye and that should raise some flags since Google is capable of rendering any page, but overall it’s not comparable to catching automated posts on tens of thousands of web forums.
What really should have set Google's alarm off, though, are the link growth patterns. Let's take a look at the "nfl jerseys" top 3:
Two of these sites started spamming back in April 2010 and are still ranking in January 2011. Go figure.
Same goes for "pandora jewelry" and "thomas sabo":
You get the picture.
What Google needs to do about it
Rand talked about it already, and his advice is instantly applicable to this issue: Google needs to greatly lower the value of keyword-rich anchor texts.
Think about it: if Google had not at all taken anchor text into account for these sites, none of them would probably rank anywhere near the top 10 results. Their links come from very different sources, and almost none of those sources is even remotely related to what their pretending to be selling.
As long as anchor text links outrank links from actually related websites, this is not going away anytime soon. Same goes for exact match keyword domains, by the way.
I do realize that anchor text is very important, but its abuse has reached a point where it’s no longer a ranking signal to be trusted as much as it currently is. Heck, I've actually seen websites rank #3 for these terms with one single sentence on the page: "seized by Department of Homeland Security".
What it means for SEO
Google has a serious problem, and I’m sure that they have been working on it relentlessly for quite some time now.
What it means for SEO is that whatever is working for the sites mentioned in this article - it will probably stop working soon. I would not be surprised to see Google shift even more ranking signal power from anchor-text heavy links to relevant social media “chatter”. I have a feeling that it’s gaining more traction as we speak.
Of course, tweets and status updates can be spammed, bought and faked, too. But at least it will buy Google some time.
This fight is never over nor ever "won" by anyone. Ever.
How to identify these sites as a consumer
Since I don’t want any of you to order from these guys and receive either fake goods or nothing at all, here’s some advice to identify them:
Most of these sites:
offer unrealistic discounts (>=50% are pretty much everywhere)
have no actual postal address
supply only a contact form or
supply only a GMail/Hotmail email address to contact them
feature way too many “trusted logos” in their footer
are written in poor English
Considering that most of the sites I talked about earlier already ranked well while all the holiday shopping took place, I can only imagine the damage done to thousands of families and individuals.
Please be cautious and remember that if a deal sounds too good to be true, it very probably is.
Since this is my first article for SEOmoz, please let me know in the comments if you liked this article and give me a “thumbs up” if you did. In case you’ve even been affected by this kind of fraud personally, I’d love to hear from you, too.
Hello mozzers! Wow, my first post as a Moz staffer and it's not even something I wrote or recorded, I promise the training wheels will come off soon. This week Rand dives into a topic that many of you have asked about in our Pro Q&A, “Interlinking my websites, can I do it?” As an SEO you can almost guarantee that you will be asked; “Why can’t I just buy 100 domains and link them back to my website with amazing anchor text and then conquer the world?” Rand give some helpful hints on when it is appropriate to link to your other sites and when it’s not such a great idea. After watching, please feel free to voice your option on the subject and how you deal with interlinking your websites.
Also at the end of this weeks transcription is the re-recorded version of last weeks live Whiteboard Friday which was not recorded due to a glitch. Please feel free to head back to that post and make any additional comments about the video.
This week on Whiteboard Friday we're going to be talking about interlinking your site. This is a particularly relevant, I think interesting topic for a lot of people who are thinking about like, I own several websites, or I have relationships with a lot of websites. I control a bunch of sites. Maybe they are sites of clients or partners. A lot of times they are just sites that you have owned and registered yourself or that your company has. I hear a lot of this question and introspection around like, "Hmm, how much can I interlink? Can I interlink between all the pages on all the sites to help boost my page rank and send good anchor text and all these kinds of things. It seems like owning my own websites I can control all of this stuff. It would be really good for my SEO." But there are some dangers here. The search engines don't want to be manipulated by someone who owns 50 or 100 or 1,000 different websites. So, you need to be careful. There are some best practices to follow along these lines. I'll give you some simple examples, but you can extrapolate these out to more complex situations or to the specific situation you might be facing.
The first rule of this interlinking phenomenon is to link for humans and users first and to think about engine second. Now, the reason for this isn't because I'm telling you oh you have to be super pearly white hat and we can never do anything that would affect or impact or manipulate the search engines. I understand that you're going to want to get good anchor text. You're going to want to flow link juice from powerful pages to pages that need to be indexed that you want to rank well. That's okay so long as you think about why humans would want to pass from one page to another.
Let me give you an example. Let's say I am on this domain that I own and control. I can find a page on here where I talk about something that exists on domain two - a resource, a relevant topic, something where you can learn more information about that specific subject, whether it is commercial intent, information oriented, a cool piece of link bait, a piece of news, whatever it is that exists over here. That makes great sense to link over to, and I think it is perfectly fine and legitimate to link from those. For example, if there is some great news about how elephants at a particular zoo have been thriving in the new environment and you want to rank well for elephants at this particular zoo, let's say at the Bangalore Zoo, it's fine if you have some content over here that mentions those words, that is talking about them in a post, in an update, in a news item, something relevant, and you link over. That works great, because that way humans, who might want to learn more about this topic, can go over there and get that information. It is exactly what they want. Now engines as well will see and recognize that.
But if you do something spammy or manipulative, and this goes to rule number two, and you put something like "elephants Bangalore Zoo" in the footer of every page. This page has it. That page has it. This page has it. And they are all linking over to this one, and then domain three and domain four and domain five, they're all linking there too. That's super weird. So, putting those things in footers, having overly optimized anchor text, anchor text that just doesn't sound natural, doesn't fit with the flow of the page, has nothing to do with the content of what is on there, throwing in unrelated links, throwing in "elephants Bangalore Zoo" when this page is about where to buy pens. Just that kind of stuff is going to be confusing to humans as to why it exists, and that will mean that it might get spam reported to Google. It might be seen manually by quality raters, or it might be algorithmically detected. None of which you want to have happen. Besides which, you don't want to be scaring off your users with this manipulative, junky stuff anyway. Users are sensitive to spam and manipulation just like engines are and they'll be turned off. They'll think less of your brand and your site when they see that type of stuff. So, watch out for that.
Third, last rule, Google really knows a lot about what is happening on the Web. Not just through things like Google Analytics, but through Google Webmaster Tools, through e-mail accounts, through FeedBurner, through the Google toolbar. If they see that you appear to be trying to hide a link profile from them and link profiles are looking really similar between your different domains and there is lots of interlinking happening and the registration or hosting looks like it matches . . . . there are some SEOs certainly out there who are advanced and sophisticated enough to be able to spread their network out and have that rigid discipline about never visiting the same two sites with the Google toolbar on and making sure that no Webmaster Tools accounts are linked and all this kind of stuff that black hat operators often have to jump through these different hoops. There are ways to do it. As an ordinary marketer or ordinary operator, you know, SEOmoz-type white hat operator, you're really going to want to be authentic.
It's okay to link between sites that you own. I wouldn't be paranoid about this. Just make sure that you follow these rules and do it in a genuine, authentic way. Then Google is not going to be like, "Oh, this guy owns these sites. He's linking back and forth between these." They're going to be like, "Oh, yeah, he had some news about elephants and he points over here. Yeah, that makes total sense." Or, you know, "On his 'about page' he mentions the other sites that are also owned by the business owners of this site. That seems totally reasonable and fine." Maybe the privacy policy might have this privacy policy or these terms of use govern these five different websites and link out to all of them. That's okay. That makes total sense. But having manipulative anchor text in the footer of every page or in the side bar of every page on all these different domains, that is going to getting you in trouble. I'd watch out for that.
All right, everyone. Hopefully you've enjoyed this edition of Whiteboard Friday. Take care. We'll see you again soon.
West Wing Week is your guide to everything that's happening at 1600 Pennsylvania Avenue. This week, the President delivered his State of the Union Address, focused on jobs and the economy, and he took those ideas on the road traveling to upstate New York and Wisconsin.
Immigration & Winning the Future Winning the future will require a new approach to immigration policy. Melody Barnes spells out how the President plans to enforce our laws and improve our prosperity through comprehensive immigration reform.
When you first got a fancy job, you had a tie shortage, and thus attention was paid to ties. You bought "enough for now." Then you solved the tie problem and moved on.
When you first bought an iPhone, you had an app shortage, so attention was paid to apps. You bought "enough for now." Then you moved on.
Music might be an exception (buying a new stereo doesn't often lead to a new music binge). But in general, some external event occurs that creates a fissure, an opportunity, a problem. We search, we buy, we're done.
The challenge, then, is to develop products that match what the market is looking for, and more important, to overtly and aggressively seek out the people in that situation and ignore the rest. Which is precisely what most marketers large and small are not doing right now.
RELATED: Many marketers I know have a great idea for a product or service that will target a segment of the market that doesn't know to look for the great idea. For example, you might want to sell a better, easier to use hatchet for women. The problem is that women, long accustomed to never being able to find an axe that they're comfortable with, have given up looking, perhaps several generations ago.
Alerting a market segment that isn't looking is a thousand times harder than activating a segment that just can't wait for your arrival. Since it's your choice, since the segment is up to you, why not pick one that is itching for you to show up?
Once again it's the unwatched pot that boils over. A revolt that started in Tunisia has spread to other countries in Africa and the Mideast. Protests in Egypt have gotten downright ugly as demonstrators threw firebombs and chanted "Down with Hosni Mubarak, down with the tyrant." Police responded with teargas and bullets.
Mohamed ElBaradei, an Egyptian dissident flew home to claim his stake in the revolution, but no one showed up to cheer.
Egypt Shuts Down Internet, Blackberry, Text Messages
Reports are emerging that Internet has gone down in Cairo and throughout Egypt, only hours before the largest planned protests yet.
According to a report from The Arabist, "Egypt has shut off the internet."
CNN reporter Ben Wedeman confirmed Internet is down in Cairo and writes, "No internet, no SMS, what is next? Mobile phones and land lines? So much for stability.
The Los Angeles Times is also reporting that BlackBerry Internet has been taken offline in Egypt.
All International Connections Shut Down
The Huffington Post has had numerous updates to that story, each confirming additional shutdowns. Here is the 9:45 PM ET update ...
Confirming what a few have reported this evening: in an action unprecedented in Internet history, the Egyptian government appears to have ordered service providers to shut down all international connections to the Internet. Critical European-Asian fiber-optic routes through Egypt appear to be unaffected for now. But every Egyptian provider, every business, bank, Internet cafe, website, school, embassy, and government office that relied on the big four Egyptian ISPs for their Internet connectivity is now cut off from the rest of the world.
Yemen, home to one of the world's oldest civilizations, is the poorest country in the Arab world as well as a haven for Islamic jihadists and the site of what amounts to a secret American war against leaders of a branch that Al Qaeda has established there.
In January 2011, Yemen became the latest Arab state to see mass protests in the wake of a revolution in Tunisia, as thousands of Yemenis took to the streets in the capital and other regions to demand a change in government.
Until the protests, the world's attention had mainly been focused on fears that Yemen could become Al Qaeda's next operational and training hub, rivaling the lawless tribal areas of Pakistan where the organization's top leaders operate.
Yemen faces a violent separatist movement in the south and an increasingly bold insurgency by Al Qaeda. An intermittent rebellion in northwestern Yemen that flared up again in August 2009, leaving dozens dead and wounded, has added another element of instability.
Al Qaeda's growing presence in Yemen — where it took credit for a deadly attack on the American Embassy in 2008 — is especially troubling because the country's fractious tribes and rugged geography make it notoriously difficult to control.
Much of the violent tribal feuds, banditry and kidnapping appear beyond the control of the central government. Yemen has the region's largest arms market: the country, with roughly 20 million people, is said to have at least 20 million guns.
Grounds for Extremism
Yemen is fertile ground for extremism not only because of its tribal culture and topography, but also because of its deep poverty, high illiteracy and birth rates, and government corruption.
For more on the Al Qaeda connection and the Yemini threat, please see the 10-page New York Times article Is Yemen the Next Afghanistan?
I am pleased to make the NYT global headlines list for my earlier report.
Tens of Thousands of Yemeni Protesters Demand President Resign
Demonstrators angry over unemployment and oppression under President Ali Abdullah Saleh demand political change. The unrest worries the U.S., which has been working with the government to defeat an Al Qaeda offshoot.
The current unrest in the Middle East spread to impoverished Yemen on Thursday as tens of thousands of protesters angry over unemployment and political oppression marched in the capital against President Ali Abdullah Saleh.
Instability in Yemen is a major concern for Washington, which has been working with Saleh's government to defeat an entrenched Al Qaeda offshoot that claimed responsibility for last year's attempted bombings of planes over U.S. airspace. Officials fear anarchy in the country would give militants a strategic base in the Arabian Peninsula and the Horn of Africa.
The U.S. has expanded its intelligence and security roles in the country, and American military aid is expected to reach at least $250 million this year, a major increase from previous years. But Washington has long been wary of Saleh, who runs a government based on patronage networks and has a history making questionable deals with enemies, including Islamic militants, who years ago were tolerated.
The tumult in Yemen, where more than 10,000 people took to the streets of the capital, Sanaa, on Thursday, added a troubling new dimension to the regional unrest that began nearly two months ago in Tunisia. Yemen, one of the poorest and most heavily armed countries in the Middle East, is home to multiple separatist movements and has its own particularly virulent branch of al-Qaeda.
"Yemen is a different game," said Khairi Abaza, a Middle East expert and a senior fellow at the Washington-based Foundation for the Defense of Democracies. "If things go out of hand in Yemen, you have many players who will be waiting to try to affect the outcome, from al-Qaeda to Iran."
The only certainty, experts said, is uncertainty - an extended and potentially dangerous period of instability that is probably just beginning.
"What happened in Tunisia is completely unprecedented in the Arab world," said Bruce Riedel, a former CIA officer who served as special assistant on the Middle East and South Asia to three presidents. "We've never had a dictator toppled by the street. As a consequence, there is no safety net, no organized opposition ready to move in. . . . No one has a clue what is going to emerge in some of these places."
Riedel said the uncertainty, combined with speed of the change underway, presents the Obama administration with an array of difficult choices as it seeks to show support for democratic expression while working to preserve stability and prevent violence. Historically, U.S. governments "have never gotten these things right," he said.
Washington Post Video
Thankfully, the protests in Yemen have not been violent.
Mohamed ElBaradei, the Egyptian dissident, flew home to Cairo on Thursday night to stake his claim as the leader of the would-be revolution to overthrow President Hosni Mubarak.
"If people, in particular young people, if they want me to lead the transition, I will not let them down," he told reporters in Vienna before boarding his flight.
Mr ElBaradei presented his offer as a gesture of self-sacrifice, yet it is unclear how grateful the protesters will be.
There were no throngs of people to greet him at the airport and many view the former chief of the United Nations nuclear watchdog with a degree of suspicion, seeing him as a rich outsider whose understanding of Egyptian suffering is limited.
As Mr ElBaradei has seized the limelight, so Mr Mubarak has shunned it. There has been no sign of him since protests began. Members of his family are rumoured to have left the country.
With the president looking ever weaker and more isolated, the outlawed Muslim Brotherhood, by far the largest opposition movement in Egypt, chose to make its first move by supporting the protests. "We are not pushing the movement, but we are moving with it," the group said in a statement. "We don't wish to lead it, but we do want to be part of it."
Violence in Egypt continues unabated in spite of President Hosni Mubarak's plea for calm. Demonstrators threw firebombs and chanted "Down with Hosni Mubarak, down with the tyrant." Police responded with teargas and bullets.
Protesters are angry over poverty, rising food prices, state food subsidies, unemployment, and social conditions.
Social media outlets, especially Twitter have played a leading role in organizing protests. The Obama administration and the US state department have also resorted to Twitter and Facebook.
Here are a number of stories I have been following, with references to Twitter and Facebook highlighted.
Egyptian anti-government activists pelted police with firebombs and rocks in a second day of clashes Wednesday that left two dead. Beefed up police forces on the streets quickly moved in and used tear gas, beatings and live ammunition fired in the air to disperse any demonstrations.
There were signs that the crackdown on protesters was taking a toll on Egypt's international standing. In Washington, White House Spokesman Robert Gibbs would not say whether President Hosni Mubarak, the target of demonstrators' anger and a close U.S. ally, still has the Obama administration's support. Secretary of State Hillary Clinton said the government should allow peaceful protests instead of cracking down.
Tens of thousands turned out for the largest protests in Egypt in years — inspired by the uprising in Tunisia. They demanded Mubarak's ouster and a solution to grinding poverty, rising prices and high unemployment.
"What happened yesterday was a red light to the regime. This is a warning," businessman Said Abdel- Motalib said on Wednesday.
Many in Egypt see these events as signs of the authoritarian president's vulnerability in an election year. There is speculation that 82-year-old Mubarak, who has been in power for nearly 30 years and recently experienced serious health problems, may be setting his son Gamal up for hereditary succession. But there is considerable public opposition and, according to leaked U.S. diplomatic memos, it does not meet with the approval of the powerful military. And the regime's tight hold on power has made it virtually impossible for any serious alternative to Mubarak to emerge.
Egypt and the Internet
Activists used social networking sites to call for fresh demonstrations Wednesday. But Facebook, a key tool used to organize protests, appeared to be at least partially blocked in the afternoon. On Tuesday, Twitter and cell phones appeared to be sporadically blocked as well.
The Interior Ministry warned Wednesday that police would not tolerate any gatherings, and thousands were out on the streets poised to crack down quickly on any new signs of unrest after clashes on Tuesday that killed three demonstrators and one police officer.
Thousands of protesters burned tires, threw Molotov cocktails at a government building and fought riot police in Egypt yesterday in the worst unrest in President Hosni Mubarak's 30-year-old rule.
Police retaliated with tear gas, beatings and by firing live ammunition in the air in street clashes that mirrored those that drove Tunisia's dictator from power two weeks ago.
The unprecedented street fury against Mubarak -- a close US ally -- prompted the Obama administration to deliver a rare public demand for change in Cairo.
"We believe strongly that the Egyptian government has an important opportunity at this moment in time to implement political, economic and social reforms to respond to the legitimate needs and interests of the Egyptian people," Secretary of State Hillary Rodham Clinton said.
The 82-year-old Mubarak, who came to power in 1981 after President Anwar Sadat was assassinated, has been the target of growing anger over the country's poverty, corruption and repression.
New elections are scheduled for September, but critics believe Mubarak, who has recently experienced serious health problems, is setting his son Gamal up for hereditary succession.
Yesterday's protests extended well outside the capital. In the city of Suez, an angry crowd of about 1,000 people gathered outside the city's morgue demanding to take possession and bury the body of one of three protesters who died in clashes on Tuesday.
Current protests in Egypt recall "Bread Riots" of 1977
The ongoing anti-government protests on the streets of Cairo and other Egyptian cities represent the biggest public demonstration in the country since the famous 'bread riots' which occurred exactly 34 years ago. The current riots, while more dedicated to the overthrow of President Hosni Mubarak, are also partially incited by rising food prices.
Ammar Ali Hassan, director of the Middle East Studies and Research Centre, told the paper: "The atmosphere that prevailed before and during the 1977 bread riots is similar to now, especially in that there is no confidence in the government. The desire to protest has overwhelmed a large sector of society."
Egyptians denounce Mubarak, clash with riot police
Egyptian police fired tear gas and rubber bullets and beat protesters to clear thousands of people from a central Cairo square Wednesday after the biggest demonstrations in years against President Hosni Mubarak's authoritarian rule.
Mobilized largely on the Internet, the waves of protesters filled Cairo's central Tahrir — or Liberation — Square on Tuesday, some hurling rocks and climbing atop armored police trucks.
"Down with Hosni Mubarak, down with the tyrant," chanted the crowds. "We don't want you!" they screamed as thousands of riot police deployed in a massive security operation that failed to quell the protests.
The sound of what appeared to be automatic weapons fire could be heard as riot police and plainclothes officers chased several hundred protesters who scrambled onto the main road along the Nile in downtown Cairo. Some 20 officers were seen brutally beating one protester with truncheons.
Discontent with life in Egypt's authoritarian police state has simmered under the surface for years. However, it is Tunisia's popular uprising, which forced that nation's autocratic ruler from power, that appears to have pushed young Egyptians into the streets, many for the first time.
"This is the first time I am protesting, but we have been a cowardly nation. We have to finally say no," said Ismail Syed, a hotel worker who struggles to live on a salary of $50 a month.
"We want to see change, just like in Tunisia," said 24-year-old Lamia Rayan.
Dubbed a "day of revolution against torture, poverty, corruption and unemployment," Tuesday's protests in cities across Egypt began peacefully, with police at first showing unusual restraint in what appeared to be a calculated strategy to avoid further sullying the image of a security apparatus widely criticized as corrupt and violent.
Protests Spread to Algeria, Morocco, Jordan, Yemen
Record food prices may fan social unrest and fuel inflation beyond North Africa as thousands of people take to the streets of Cairo to denounce President Hosni Mubarak, delegates at the World Economic Forum said.
"This protest won't end in North Africa; it will spread in many countries because of high unemployment and increasing food prices," Hamza Alkholi, chairman and chief executive of Saudi Alkholi Group, a holding company investing in industrials and real estate, said in an interview in Davos, Switzerland.
Risks of global instability are rising as governments facing budget crunches cut subsidies that help the poor cope with surging food and fuel costs, the head of the United Nations' World Food Program said two days ago. World food costs rose to a record in December on higher costs for sugar, grain and oilseeds, the UN reported Jan. 4, contributing to the uprising that ousted Tunisia's Zine El Abidine Ben Ali on Jan. 14. Protests have spread to Egypt, Algeria, Morocco and Yemen.
Higher commodity prices are "leading to riots, demonstrations and political instability," Nouriel Roubini, the New York University economics professor who predicted the financial crisis, said on a Davos panel. "It's really something that can topple regimes, as we have seen in the Middle East."
In Algeria, three were killed and 420 injured at rallies against high food prices and a lack of public housing. Jordanian opposition groups have held peaceful protests against the government, and in Yemen today thousands gathered outside the main university in the capital, Sana'a, demanding that President Ali Abdullah Saleh step down.
"If you don't improve people's lives, you will have social unrest," Sheikh Mohammed bin EssaAl Khalifa, chief executive officer of the Economic Development Board in Bahrain, said in an interview. "Each country is different, each country is unique. It could spurt up in Latin America. It's not an Arab thing."
Obama Tells Egyptian President to "Embrace Change"
The White House is prepared to step up its criticism of Egyptian President Hosni Mubarak, a key Middle East ally, if his government intensifies its crackdown on protesters, said an administration official.
President Barack Obama privately pressed Mubarak in a telephone call last week to embrace democratic changes, said the official, who requested anonymity. Secretary of State Hillary Clinton yesterday said Mubarak, in power since 1981, has an "important opportunity" to enact economic, political and social reforms.
'Potentially Dangerous'
The Obama administration needs to move cautiously, said Anthony Cordesman, a senior defense analyst at the Center for Strategic and International Studies, a nonpartisan research group in Washington.
"There isn't just the morning after to think about, there is the decade after," he said in a telephone interview. "For the U.S. to get out in front now would be premature and potentially dangerous."
Shadi Hamid, an expert on Islamist politics and democratic reform in the Middle East at the Brookings Institution, said the large pro-democracy protests may have broken the "psychological barrier of fear" among Egyptians.
"The U.S. does not want to see the Egyptian regime fall any time soon,'' Hamid said in a telephone interview. "But people who are protesting, the tens of thousands, do want to see the regime fall some time soon. They are diametrically opposed interests."
The White House Press Secretary Robert Gibbs created some ambiguity yesterday when asked whether the administration still supports Mubarak. In his response that ''Egypt is a strong ally,'' he avoided repeating Mubarak's name.
The Obama administration also has been communicating through the same social media sites that the Egyptian protesters have used to organize themselves. The State Department issued statements yesterday on Twitter, including one supporting the ''universal rights of the Egyptian people including freedom of expression.''
Social Media
Twitter Inc. of San Francisco, which was used to help coordinate the Tunisian protests, yesterday said access to its services was blocked in Egypt. Facebook Inc., the Palo Alto, California-based owner of the world's most popular social- networking service, hasn't seen any major changes in user traffic in Egypt, though it is aware of reports of service disruption in the country. Earlier, some Facebook users reported the site was inaccessible in Egypt, according to Herdict.org, which monitors web access.
Clinton Defends Facebook, Twitter Amid Egypt Protests
Note: The entitre article that follows is on social networking including, Tritter, Facebook, Google, and Blackberry.
As Egyptian authorities struggled to quash anti-government uprisings yesterday, Secretary of State Hillary Clinton called on the longtime U.S. ally to unblock social networking sites that have been used to organize protests, such as those operated by Facebook Inc. and Twitter Inc.
By urging Egypt's government "not to prevent peaceful protests or block communications, including on social media," Clinton in Washington renewed her call for freedom of expression and assembly online, and fueled debate over how to promote those goals without undermining other U.S. interests.
Clinton's defense of social networking is "a very delicate balancing act," because of the longstanding U.S. relationship with Egyptian President Hosni Mubarak, said Ethan Zuckerman, a senior researcher at Harvard University's Berkman Center for Internet and Society. "At the same time, we're starting to see evidence of an anti-authoritarian revolution in the region, and she doesn't want to be on the wrong side of that either. The safe stance is to be pro-free speech," he said.
Google, Microsoft Corp., and Yahoo! Inc., are the only technology corporations that have joined the Global Network Initiative, a group of financial services firms, rights groups and communications companies committed to resisting government censorship and demands for private user information.
Blackberry Monitoring
The UAE, Saudi Arabia and India last year threatened to shut down BlackBerry service unless authorities were allowed to monitor messaging, citing concerns about illegal activities. The Saudi and UAE governments eventually backed down; India's talks with RIM are ongoing.
As with other private talks, it's hard to determine if the intervention of U.S. officials made a difference. RIM declined to comment.
Egypt is riskier than Iraq in the market for credit default swaps for the first time in at least a year after protests denouncing President Hosni Mubarak.
The cost of protecting Egyptian debt against default for five years with the contracts jumped 69 basis points, or 0.69 percentage points, this week to 375 today, compared with 328 for Iraq, according to prices from CMA, a data provider in London. Just last week, Iraqi swaps cost 19 basis points more than Egypt's, and in June, an average 240 basis points more, as Iraq recovered from the U.S.-led invasion in 2003.
The unrest, inspired by the revolt that toppled Tunisia's leader, "does raise political risks," said Eric Fine, a portfolio manager in New York who helps Van Eck Associates Corp. oversee $3 billion in emerging-market assets. "If this is a revolution, the price of risk for Egypt could go much higher, and if it's a failed one" the cost will drop to 300 basis points and probably 250, Fine said in a phone interview.
Higher borrowing costs may crimp Egypt's ability to meet its target of cutting the budget deficit to 3 percent of gross domestic product by 2015 from the current 8 percent. Yields at the government's debt auction climbed this week. The average rate on 91-day bills rose 30 basis points from the previous sale to 9.5 percent, while the yield on 182-day bills advanced 20 basis points to 10.2 percent, data compiled by Bloomberg show.
The yield on Egypt's 2040 dollar-denominated bonds jumped 50 basis points since Tunisian President Zine El Abidine Ben Ali was ousted on Jan. 14 to 7.10 percent, the highest level on record, according to data compiled by Bloomberg. Mubarak, 82, has been in power since 1981 and hasn't said whether he will run in the September elections.
Egypt is rated BB+ at Fitch Ratings and Ba1 at Moody's Investors Service, the highest non-investment grade levels. Iraq's 2028 dollar bond isn't rated and rose for the first time in six days yesterday, pushing the yield down less than 1 basis point to 6.4 percent, according to data compiled by Bloomberg.
The assessment of U.S. President Barack Obama's administration is that "the Egyptian government is stable," Secretary of State Hillary Clinton said.
The U.S. relies on Mubarak as a mediator in the Palestinian-Israeli conflict, and Egypt is the second-biggest recipient of American foreign aid after Israel. Relations were strained during the administration of President George W. Bush, who repeatedly called on Mubarak to allow more freedoms.
Mubarak will probably survive the protests as strong ties between the ruling National Democratic Party and the military means that a repeat of Tunisia's uprising is unlikely, Richard Fox, Fitch's London-based head of Middle East and North Africa Sovereign Ratings, said in a conference call today.
"The military has long been the lynchpin of stability in Egypt and our base case at this stage would be that stability will be restored in due course," Fox said.
"One thing that we can all take from the Tunisian situation is that the unexpected can sometimes happen rather quickly," Fox said. "It would be a brave man who would try to expect what would happen in Egypt between now and the election."
Information is power and Twitter and Facebook do help spread information. While I do not condone riots, I certainly understand them. Nonetheless, people have a right to the news, and the same thing applies to the US.
Unfortunately, the US is headed down the path of more news suppression more control over media.
North Africa proves it will not work and cannot be done.
Blood on Bernanke's Hands
Most of the increases in food prices are due to droughts in South America, floods in Australia, and poor growing conditions in many places.
However, Bernanke's "Quantitative Easing" policies combined with rampant credit growth in China and India have led to increased speculation in commodities. That speculation has forced up food prices.
If you are tweeting, please tweet this "Bernanke has blood on his hands".
Please note that speculation in commodities is not a cause of anything. Rather commodity speculation is a result of piss poor monetary policies not only the Fed, but central bankers worldwide.
Japan has the largest debt problem in the G20 by measure of debt-to-GDP ratio near 200%. Moreover, Japan's aging demographics and lack of growth give Japan little ability to pay that debt back.
Japan's credit rating was cut for the first time in nine years by Standard & Poor's as persistent deflation and political gridlock undermine efforts to reduce a 943 trillion yen ($11 trillion) debt burden.
The world's most indebted nation is now ranked at AA-, the fourth-highest level, putting the country on a par with China, which likely passed Japan last year to become the second-largest economy. The government lacks a "coherent strategy" to address the nation's debt, the rating company said in a statement. The outlook for the rating is stable, S&P said.
The yen and bond futures fell on concern the downgrade will push up the cost of borrowing for Japan, where public debt is about twice the size of gross domestic product. Vice Finance Minister Fumihiko Igarashi this week said the government must fix its finances to avoid a debt crisis that could trigger a "global depression."
"I hope this serves as a warning for the government, they have absolutely no sense of crisis," said Azusa Kato, an economist at BNP Paribas in Tokyo. "Once bond yields spike and the fire is lit, the amount needed to finance Japan's borrowing needs is going to jump and it's going to be too late."
It is possible for companies to have higher ratings than the local or foreign currency ratings of their home country, S&P said in a May 2009 report. The best candidates have a robust export base, little reliance on the public sector and sell products with "relatively inelastic" demand. The S&P report said businesses with sales mainly in local currency, subject to regulation and heavily dependent on imports probably won't pass stress tests without "heavy overcollateralization or reserves."
Finance Minister Yoshihiko Noda said Jan. 24 the debt burden has risen to a point where Japan can't rely on bond sales to cover revenue shortfalls. Economy Minister Yosano warned the same day that such a reliance on such sales could lead to a jump in borrowing costs.
"If we continue relying on bond sales to make up for spending that exceeds revenue, we could see long-term interest rates increase or a deterioration in our debt ratio, causing Japan to lose credibility globally," Yosano told parliament.
Japan's borrowing costs are among the lowest in the industrialized world, helping it fund its debt load. The yield on the benchmark 10-year bond slipped 1 basis point to 1.23 percent as of 10:47 p.m. in Tokyo. It touched 1.26 percent in Jan. 19, the highest since Dec. 16.
Japanese Debt Time Bomb
It's only a matter of time before Japan's debt problem matters in a serious way. However, it's important to note that it's only been a matter of time for the last decade as well.
The key to understanding the urgency now is the warning from Finance Minister Yoshihiko Noda that Japan's debt burden has risen to a point where Japan can't rely on bond sales to cover revenue shortfalls.
Japan has reached the point where its savers need to draw down their savings in retirement, and thus need to sell Japanese government bonds, not buy them. However, the Japanese government has squandered those savings (and 100% more of GDP as well) building bridges to nowhere fighting deflation.
Nations often default on foreign debt, but this is debt the government owes the Japanese people.
Will Japan embark on a huge austerity program in the midst of deflation? Will Japan simply print the money? If so, what happens to interest rates?
Should those interest rates rise to a mere 3% or so, interest on Japan's national debt will consume most of its revenue.
This mess shows the foolishness of using Keynesian and Monetarist stimulus to defeat deflation. Neither worked. Now Japan is left with an enormous debt problem and no way to solve it.
The Yen is flying high right now, the crucial question is for how long?
Many stories of significance have come my way on housing issues, state debt issues, federal debt issues, pension issues, and other economic items of note. I feel as if I am buried a mile deep news. Here are a few stories that caught my eye.
In his first major legislative proposal, U.S. Sen. Rand Paul has proposed cutting government spending by $500 billion in a year, including eliminating the Departments of Energy and Housing and Urban Development and most of the Department of Education.
That is the single best piece of fiscal legislation proposed in years.
Nevada Governor Brian Sandoval Addresses Underfunded Public Pension Plans
Tax increases are the last thing Nevada businesses need now, Gov. Brian Sandoval told a receptive audience Wednesday during a speech to the Las Vegas Chamber of Commerce. "My understanding is that PERS is an $8 (billion) or $9 billion unfunded liability that Nevada can't afford," he said. Sandoval said benefits reforms must starts with the new employees hired by the state.
I commend Governor Brian Sandoval's ideas and his starting point. States need to scrap defined benefit pension plans for new hires immediately.
100,000 People in Oakland Expected to Apply for 650 Subsidized Housing Openings
Oakland's housing authority opened up its waiting list Tuesday for Section 8 housing vouchers, drawing thousands for a coveted spot in line.
The only way to sign up was over a computer, so across the city, hundreds jammed into city libraries to fill out the forms in the hope that they might eventually get a chance to live in subsidized housing.
In the first three hours, 6,000 people filled out applications. Over the five-day application period, the housing authority expects 100,000 people to apply for only 10,000 spots on the waiting list.
The housing authority uses a lottery to determine who gets on the list. And even then it's no more than a foot in the door. It has taken nearly five years to clear the waiting list that was opened in 2006. Vouchers, for the most part, only become available when people living on assistance obtain higher-paying jobs or die.
Even now, only 650 vouchers are available, said Eric Johnson, the housing authority's executive director.
With those odds, I have a simple question: Does this program make any sense whatsoever? Here is a bonus question: Does this feel like a recovery?
A state oversight board on Wednesday seized control of Nassau County's finances, saying the county, one of the nation's wealthiest and most heavily taxed, had nonetheless failed to balance its $2.7 billion budget.
Nassau's tax receipts are the envy of many worse-off municipalities: its malls and busy retail districts, a short drive from New York City, help generate about $1 billion in sales taxes a year, and its aging bedroom communities add about $800 million in county property taxes.
But the county has resisted cuts in services, and its current leaders have been just as adamant about not raising taxes.
The problem should not be hard to guess - public unions wages and benefits. It will be interesting to see what the imposed solution is. It could be higher taxes or wage and benefit cuts.
Churches Walk Away
You have no doubt heard about homeowners and businesses "walking away". Churches are now doing the same thing. Please consider Churches Find End Is Nigh
Residential and commercial real-estate owners aren't the only ones losing their properties to foreclosure. The past few years have seen a rapid acceleration in the number of churches losing their sanctuaries because they can't pay the mortgage.
Just as homeowners borrowed too much or built too big during boom times, many churches did the same and now are struggling as their congregations shrink and collections fall owing to rising unemployment and a weak economy.
"Religious organizations may be subject to the laws of God but they are also subject to the laws of economics," said Chris Macke, senior real-estate strategist at CoStar. Many troubled churches, he said, are in states such as California, Florida, Georgia and Michigan, which also have some of the highest home-foreclosures rates in the country.
In many cases, churches ran into trouble after borrowing to build bigger houses of worship needed to accommodate growing congregations in once-booming housing markets.
Pastors Rich and Lindy Oliver decided their Family Christian Center needed more space after their congregation rose from a few hundred in the early 1990s to 650 by 2002. The church borrowed $4.2 million and began building a new 1,000-person sanctuary on 11 acres in Orangevale, Calif., including classrooms and a space for adult learning.
But when housing prices across California began tumbling in 2006, followed by a surge in unemployment and foreclosures, many congregants moved away, and those who were left reduced their tithing sharply. Meanwhile, the property, valued at $8.5 million in 2002 was appraised at just $2.5 million in 2008.
Stretched to the limit, the pastors stopped making payments. "I just told the bank to take it," Mr. Oliver said. "If you're a church with a piece of property upside down and no one will refinance the loan or lend you more money, there's not really another choice but to walk away."
E-mails Suggest Bear Stearns Cheated Clients Out of Billions
Former Bear Stearns mortgage executives who now run mortgage divisions of Goldman Sachs, Bank of America, and Ally Financial have been accused of cheating and defrauding investors through the mortgage securities they created and sold while at Bear. According to e-mails and internal audits, JPMorgan had known about this fraud since the spring of 2008, but hid it from the public eye through legal maneuvering. Last week a lawsuit filed in 2008 by mortgage insurer Ambac Assurance Corp against Bear Stearns and JPMorgan was unsealed. The lawsuit's supporting e-mails, going back as far as 2005, highlight Bear traders telling their superiors they were selling investors like Ambac a "sack of sh*t."
Mike Nierenberg, who ran the adjustable-rate mortgage trading desk at Bear and is now the head of mortgages and securitization for Bank of America, was a key player ensuring the defaulting loans Bear was buying would move off their books right after they bought them, with little concern for the firm's due diligence standards. He was joined in this scheme by Jeff Verschleiser, his peer and Senior Managing Director on the mortgage and asset-backed securities trading desk and head of whole loan trading. He is now an executive in Goldman Sachs' mortgage division.
According to the lawsuit, the Bear traders would sell toxic mortgage securities to investors and then sell back the bad loans with early payment defaults to the banks that originated them at a discount. The traders would pocket the refund, and would not pass it on to the mortgage trust, which was where it should have gone to be distributed to the investors who owned the bonds. The Marano-led traders also cut the time allowed for early payment defaults, without telling the bond investors. That way, Bear could quickly securitize defective loans, without leaving enough time for investors to do their own due diligence after the bonds were sold and put-back any bad loans to Bear.
Bear deal manager Nicolas Smith wrote an e-mail on August 11th, 2006 to Keith Lind, a Managing Director on the trading desk, referring to a particular bond, SACO 2006-8, as "SACK OF SH*T [2006-]8" and said, "I hope your [sic] making a lot of money off this trade."
It's this blatant internal awareness inside the Bear mortgage trading division that the Ambac suits says led Bear to implement an across-the-board strategy to disregard its contractual promises and conceal the defective loans. By JPMorgan taking over Bear, it became the successor of interest in Bear Stearns. As the lawsuit lays out, JPMorgan is responsible for the flagrant accounting fraud started by Bear designed to avoid, and has continued to avoid, recognition of vast off-balance sheet exposure relating to its contractual repurchase agreements. This allowed executives to reap tens of millions of dollars in compensation from a bank that wouldn't have been able to buy Bear without tax payer assistance.
Barney Frank Chides GOP for 'Waiting' on Fannie, Freddie
Rep. Barney Frank, (D., Mass.), the top Democrat on the House Financial Services Committee, told reporters that he was "puzzled" by what he characterized as a lack of action by Republicans, who criticized the Dodd-Frank financial-overhaul law enacted last summer as incomplete without dealing with the mortgage giants.
"Last year the Republicans were very insistent that this was an emergency," Frank told reporters. "I'm waiting for their plan. I am surprised that they're not moving as quickly…They knew exactly what they wanted to do when they were in the minority, so I don't know why they aren't moving forward."
This is easy to address. The Republicans ought to take Barney Frank up on his excellent suggestion and introduce legislation tomorrow to phase out Fannie Mae and Freddie Mac in a two-year timeframe.
Then we can watch the biggest Fannie hypocrite the world has ever seen protest the move.
Postal Service Eyes Closing Thousands of Post Offices
The U.S. Postal Service plays two roles in America: an agency that keeps rural areas linked to the rest of the nation, and one that loses a lot of money.
Now, with the red ink showing no sign of stopping, the postal service is hoping to ramp up a cost-cutting program that is already eliciting yelps of pain around the country. Beginning in March, the agency will start the process of closing as many as 2,000 post offices, on top of the 491 it said it would close starting at the end of last year. In addition, it is reviewing another 16,000—half of the nation's existing post offices—that are operating at a deficit, and lobbying Congress to allow it to change the law so it can close the most unprofitable among them. The law currently allows the postal service to close post offices only for maintenance problems, lease expirations or other reasons that don't include profitability.
Sen. Susan Collins (R., Maine) says the agency should instead cut waste in its ranks. Although the postal service has cut its work force through attrition in recent years, it is still weighed down by overly generous employee benefits, she says.
"One of my frustrations is that the first approach the post office seems to take is to reduce service…when instead it needs to tackle a benefit structure that is too expensive, and it needs to look for ways to stay in business and deal with the digital age," says Sen. Collins.
Senator Collins hits the nail on the head. The problem is excessive public union benefits.
Clark County won a months-long labor dispute with its firefighters union Wednesday when an arbitrator chose the county's final contract offer, a decision that will save an estimated $7.4 million.
The 741 firefighters covered in the contract will get a 2 percent pay cut, no wage increases, a reduction in long-term disability benefits and a tougher sick leave policy.
Clark County Commissioner Steve Sisolak Not Yet Done With Firefighters
Best wishes to Clark County Commissioner Steve Sisolak who is still justifiably after firefighters over fraudulent sick leave.
In 2009, Clark County Commissioner Steve Sisolak began looking hard at Fire Department costs. He had received a deluge of angry calls and e-mails from constituents wondering why the unionized firefighters weren't accepting salary or benefits reductions as the county dealt with budget cuts and the local economy continued its slide.
"Everybody was losing their jobs, their homes," Sisolak said.
For much of that year, he was the only commissioner willing to criticize their salaries, benefits and retirement packages that averaged about $180,000 in 2009.
In retaliation, members of the union showed up at Sisolak's public meetings to glare at him. He said he received death threats, which prompted county administrators to post park police at commission meetings. A city firefighter posted on Facebook that she'd like to shoot him.
This week brought a measure of vindication for Sisolak in his fight with the union after an arbitrator broke a stalemate in negotiations by deciding the county's contract offer was better than the firefighter union's offer.
Sisolak said he was happy. "I'm not done, though," he added.
Late Thursday, he sent letters to the FBI, Metro Police, Clark County district attorney and others seeking an investigation into potentially criminal acts of racketeering and fraud by firefighters. Sisolak has long alleged that firefighters are abusing the sick-leave system to rack up overtime pay.
After reading the arbitrator's 26-page decision, he is more determined than ever to have his suspicion investigated. He pointed specifically to one part of the decision:
"Some employees use sick leave as vacation, scheduling themselves to be 'sick' months in advance. This improper use of sick leave is evident from e-mails the (Fire) Department recovered," arbitrator Norman Brand wrote. "Second, it appears some firefighters may deliberately call in late to turn the overtime opportunity into a callback/overtime opportunity."
Callback pay is more valuable than overtime because it pays overtime plus a contribution to a firefighter's pension.
In his letter, Sisolak said if more than one firefighter has been involved in sick-leave scamming, it might represent a violation of the federal RICO (Racketeer Influenced and Corrupt Organizations) Act.
As San Francisco struggles under ballooning pension and health care costs, the city's retirees will receive unexpected cost-of-living bonuses totaling $170 million. The city's anticipated budget deficit for the coming year is $360 million.
A political battle has raged over the city's growing retirement obligations. In November, Proposition B, which would have required city workers to contribute more toward their pensions and benefits, was soundly defeated. The measure's opponents — every major elected official and energetic public-employee unions — said fears about the pension fund were overblown.
Meanwhile, the fund's fundamentals deteriorated as it gradually accounted for its huge losses in the stock market crash. It took in $414 million in contributions in 2010 but paid out $819 million.
On Jan. 4, an actuarial firm reported that the $13.1 billion San Francisco Employees' Retirement System now had an unfunded liability of $1.6 billion — triple its shortfall a year earlier. Gary A. Amelio, the system's chief since January 2010, did not respond to questions.
In spite of the shortfall, Mr. Amelio and the system's board quietly decreed in mid-December that "excess" earnings on investments in 2010 entitled retirees to an unexpected cost-of-living increase of as much as 3.5 percent this year. The special $170 million bonus is in excess of regular cost-of-living adjustments, or COLAs.
"The irony of issuing bonus payments to retirees at a time the pension fund is a billion dollars down is insane. It really is," said Jeff Adachi, San Francisco's public defender and the chief proponent of Proposition B, which he says would have saved the city $120 million this year. "It's like a bankrupt corporation paying dividends to its shareholders."
The actions of Gary Amelio who authorized bonuses on the basis of fund "excesses" are every bit as fraudulent as bankrupt corporations paying dividends.
I hope Jeff Adachi resubmits Proposition B in the next election, tripling or quadrupling the last amount he requested union members contribute.
In the meantime, someone should seek civil if not criminal charges against Amelio right now.
Groundbreaking California Ruling OKs Teacher Layoffs Not Based on Seniority
In a case that pits the constitutional rights of students against the job protections of teachers, a Los Angeles County Superior Court judge approved a groundbreaking settlement Friday that limits the effect of layoffs on the district's most vulnerable students.
Up to 45 Los Angeles Unified School District campuses will be shielded from teacher layoffs altogether, Judge William F. Highberger ordered Friday, and layoffs in the district's other 750 schools must be spread more equitably.
The decision comes amid deep education cuts and a debate over teacher tenure rules, which are being challenged across the country. New Jersey Gov. Chris Christie recently called for the end of tenure, as have leaders in Florida, Idaho, Wyoming and elsewhere.
Lawyers representing district students hailed the judge's ruling as a "landmark victory" that put the interests of children ahead of their instructors.
Representatives of United Teachers Los Angeles, which vigorously opposed the settlement in court, said the teachers union will probably appeal the order, which "eviscerates seniority" and will damage the morale of district teachers.
The settlement is an attempt to address a problem all parties recognize: the devastating effect that layoffs have had on district campuses in recent years. Some schools have lost as much as 50% of their teaching staffs to cutbacks, unraveling some reform efforts and causing turmoil at already struggling campuses.
A Times investigation last year found that seniority-based layoffs in the district had led to the dismissal of hundreds of highly effective teachers and fell hardest on schools in the city's poorest neighborhoods. Far fewer layoffs would be necessary if the decisions were based on performance rather than seniority, a Times analysis found.
If teachers wanted what was best for the kids, they would not object to this ruling.
Unfortunately, it has been proven countless times teachers want only what is best for teachers. Add this item to the list.
Société Générale crafts strategy for China hard-landing
In a report entitled The Dragon which played with fire, the bank's global team said China had carried out its own version of "quantitative easing", cranking up credit by 20 trillion (£1.9 trillion) or 50pc of GDP over the past two years. It has waited too long to drain excess stimulus.
"Policy makers are already behind the curve. According to our Taylor Rule analysis, the tightening needed is about 250 basis points," said the report, by Alain Bokobza, Glenn Maguire and Wei Yao.
The Politiburo may be tempted to put off hard decisions until the leadership transition in 2012 is safe. "The skew of risks is very much for an extended period of overheating, and therefore uncontained inflation," it said.
Under the bank's "risk scenario" - a 30pc probability - inflation will hit 10pc by the summer. "This would cause tremendous pain and fuel widespread social discontent," and risks a "pernicious wage-price spiral"
The bank said overheating may reach "peak frenzy" in mid-2011. Markets will then start to anticipate a hard-landing, which would see non-performing loans rise to 20pc (as in early 1990s) and a fall in bank shares of 50pc to 75pc over the following 12 months.
"We think growth could slow to 5pc by early 2012, which would be a drama for China. It would be the first hard-landing since 1994 and would destabilise the global economy. It is not our central scenario, but if it happens: commodities won't like it; Asian equities won't like it; and emerging markets won't like it," said Mr Bokobza, head of global asset allocation.
Credit expansion in China is indeed rampant, and although the timeframe is uncertain, a hard landing now seems baked in the cake.
Anyone providing personalized investment advice to retail customers would have to adhere to a fiduciary standard of care under a recommendation contained in a Securities and Exchange Commission staff report. The SEC study, which was mandated by the Dodd-Frank financial reform law, was submitted to Congress late Friday night.
The report encourages SEC commissioners to write a regulation that would impose a universal fiduciary duty that is "no less stringent" than the one that currently applies to investment advisers. Dodd-Frank allows the SEC to move ahead and write such a rule.
Currently, broker-dealers must only meet a suitability standard when providing personalized advice about securities to retail investors. But the SEC staff calls for raising the bar by requiring brokers to act as fiduciaries, and thus put their clients' best interests ahead of their own.
New Haven Connecticut Seeks To Change Binding Arbitration Rules
New Haven's mayor sent Hartford a message: Yes, we need money. Just as important, we need to revolutionize the way we settle labor disputes. Mayor John DeStefano issued that call Tuesday at a press conference to highlight the city's agenda for the upcoming state legislative session.
The call comes as New Haven is negotiating with 13 unions whose contracts have expired, and two more (police and fire) that expire on June 30. With the city facing a projected $52 million budget gap in the next fiscal year, and therefore seeking dramatic pension and health insurance givebacks, the atmosphere has turned contentious.
Right now, if the two sides can't agree on terms, the matter may ultimately go to binding arbitration: The city picks an arbitrator. The union picks an arbitrator. They agree together on a third arbitrator.
That system's broken, DeStefano argued. As a result cities are saddled with expensive pension and health-care plans that risk bankrupting them.
"You inevitably get a system that splits the baby and lowers the expectation of any meaningful change," DeStefano argued.
Any third arbitrator who wants to continue getting hired has to make sure not to offend either side, even if he or she concludes that one side is right, the mayor argued. If an arbitrator were to decide that the city can't afford to maintain the current pension plan, for instance, unions probably wouldn't agree to hire him or her the next time around.
To remedy that, DeStefano proposed that the governor appoint an independent panel to choose the neutral third arbitrators—similar to the way the state chooses superior court judges—and give those arbitrators terms rather than select them for one case at a time.
If you are going to ask for changes, why put forth a wimpy proposal. The goal should be complete elimination of collective bargaining. The compromise, and a wimpy one at that, is what DeStefano asked for.
House GOP Lists $250 Billion in Spending Cuts, Repeal of Davis-Bacon
Moving aggressively to make good on election promises to slash the federal budget, the House GOP today unveiled an eye-popping plan to eliminate $2.5 trillion in spending over the next 10 years. Gone would be Amtrak subsidies, fat checks to the Legal Services Corporation and National Endowment for the Arts, and some $900 million to run President Obama's healthcare reform program.
What's more, the "Spending Reduction Act of 2011" proposed by members of the conservative Republican Study Committee, chaired by Ohio Rep. Jim Jordan, would reduce current spending for non-defense, non-homeland security and non-veterans programs to 2008 levels, eliminate federal control of Fannie Mae and Freddie Mac, cut the federal workforce by 15 percent through attrition, and cut some $80 billion by blocking implementation of Obamacare.
I am in favor of those cuts and more. The best thing in the bill however, is a line to repeal the Davis-Bacon prevailing wage law.
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