Central Perk

joi, 17 februarie 2011

SEOmoz Daily SEO Blog

What It Takes To Be an Independent Search Marketer

Posted: 16 Feb 2011 01:34 PM PST

Greener Grass If you're a Search Marketer working at an agency, in-house or are out-of-work entirely, you've probably considered going independent at least once. A bad day at the office can inspire daydreams of earning more money and working from home in your pajamas. There are clear advantages to becoming your own boss but the grass isn't always greener, as they say.

Remember the 2010 SEO Industry Survey? More than 10,000 respondents participated and the result was some fascinating analysis by Will Critchlow and the Anatomy of a Search Marketer infographic was born. I was in love. As I began exploring the anatomy of an Independent Search Marketer the raw data from this earlier survey revealed yet another use.

I'll share a few new findings from the survey that I thought would be most interesting to those thinking of going solo. Also, as someone who's experienced in-house, agency, and now independent search marketing roles perhaps I can have a useful perspective. I'll try my hardest, anyway!

Lets check out the data first. After I shatter your dreams of making more money and attending every search marketing event once you go independent, we'll dive in to what the job of an Independent Search Marketer really looks like. If you are still interested, that is.

As with any survey, there are a number of caveats to take into consideration when looking at the data and conclusions. Take a read of those cautions as described when we first released the survey data over here. All of the data below looks only at US based respondents. There were 846 US Based Agency Search Marketers, 2217 US Based In-House Search Marketers, and and 1176 US Based Independent Consultants.

Interesting Find #1

On average, Independent Consultants earn about the same as Agency Search Marketers and In-House Search Marketers. The average yearly earnings for all three groups was within the $60-$75K range. As you can see in the graph below however, the distribution is very different. I'll let you interpret that bit as you will.

earnings comparison

If you're thinking of going independent for the financial advantage, rub the dollar signs from your eyes and think seriously about your business plan and revenue forecast. More money isn't a given, but is of course possible.

Interesting Find #2

Independent Consultants work with a smaller book of clients at one time than Agency Search Marketers.

how many clients do you work with at one time?

If you're looking for variety and to work with a larger number of clients at once, an Agency job might be your best bet. If you prefer to dive deep with a handful of clients, an Independent Consultant career path could be the way to go. Personally, I'd call this finding a big plus for the Independent Consultant side.

Interesting Find #3:

Independent Consultants are less likely to attend industry events and conferences than both Agency Search Marketers and In-House Search Marketers.

attended-event

Uh oh. Come on Independents! If I were to guess, I'd say that Independent Consultants are less likely to attend industry events because the cost comes directly out of their own pockets. I'm interested in your thought on this, too.

What does it take to become an Independent Search Marketer?

Still thinking of taking the leap from employed to self-employed? Lets explore how your duties as an In-House or Agency Search Marketer might change in your new role as Entrepreneur and Lone Ranger.

Expert Skills

Regardless of what search segment you choose to focus on, as an Independent Consultant your clients will expect you to be an expert. They'll be hiring you to make solid recommendations usually beyond the skill set that they have in-house. It is okay to ask for help from your peers (read your consultant/client NDA first!) and seek the opinions of others, but YOU need to make the call on the final recommendation based on your experience, expertise, and the information at hand.

Stay S-M-R-T Skills

In The Simpsons' "Homer Goes to College" episode, Homer gleefully sets his high school diploma aflame, while singing, "I am so smart, I am so smart, S-M-R-T, I mean S-M-A-R-T!" Behind him his living room is going up in flames (quote). Just because you've made it into the realm of independent consulting doesn't mean you can stop going to conferences (see Interesting Find #3). Keep engaging, keep reading, and keep learning if you wish to continue growing your career.

Self-Promotion Skills

Don't like to toot your own horn? That'll cost ya. You need to be able to speak intelligently and convincingly about your subject matter. You need to speak confidently about your experience and skills without taking it too far.

Nun-chuck Skills

Just kidding. You don't need nun-chuck skills to be an Independent Consultant, unless your also trying to get girls. Right Napoleon?

Closing-the-Deal Skills

Do you have a hard time asking for things? Once you've covered the Expert and Self-Promotion pieces, you might find yourself in a position to sell something. So, what do you do?

As an in-house or agency consultant, you likely haven't had to sell your services... for money. Sure, you sell ideas, projects, and the like. You may even be great at asking for a raise or negotiating for more holiday time. What it comes down to is this. Are you willing to look a prospect in the eye (or at least speak over the phone) and sell a project along with the price tag?

General Business Skills

You might be an SEO prodigy, but that doesn't mean you are a business person. It is possible that the most brilliant SEO on the planet would be most successful and earn the most money if he is allowed to focus on his core strength. Running an independent SEO consulting business requires a lot of tasks that will take you away from the thing you love. Here is a quick list of the non-SEO stuff you’ll need to be prepared to tackle.

Marketing – I know, you can show up in the SERPs for the terms you are targeting but SEO isn’t the only marketing channel at your disposal to drum up clients. What else do you have in your tool belt? Email, graphic design, advertising, social media, affiliate...? Take stock and make sure you have enough tricks up your sleeve.
Basic Accounting – Even if you hire an outside accountant to handle your taxes, you’re going to have to keep records and have a clue about balancing a budget, filling out a W-9, invoicing, accounts payable, etc.
Bill Collecting - If a client doesn't pay, it is on you to follow-up and make it happen. Outsourcing this function can be pretty expensive, so be prepared to do it yourself at least in the beginning.
Strategic Planning – Sorry, this one sounds borrowed from a business 101 text book. The content there wasn't all drivel! Strategic planning is important because you need to be able to plan and think about your business as well as do the work.
Old-Fashioned Paper Pushing – You’ll need to register your business and keep it registered, notice and do something about legal matters as they arise, open your mail, deal with banks, order business cards, etc. This is my least favorite part about being independent. Each of these items can seem like a small task, but add them up and you can lose a lot of valuable billable time.

People Skills

You may know your search marketing inside and out. You may have a solution identified to triple a web property's search traffic. Unfortunately none of that will matter if you can't communicate and influence your prospects and clients. Some people are excellent at this from birth. Others have to work at it.

Money or Mommy

If you aren’t lucky enough to have contracts set-to-go the day you transition from employee to independent, you’ll last a lot longer if you have a cushion while you get on your feet. You can be creative here, for sure, because a safety net can take on many forms. Here are a few ideas.

Save money first ( You're so smart!)
Move back in with Mom. Food, shelter, bedtime stories, what more do you need? (Think I'm kidding? See: Census Bureau data, Slide 18)
Take a loan. This seems like a bad idea, but your finances are your own business. :)
Lean on your partner. Are you currently living large with two household incomes? I bet you could manage on one for a little while.
Get your boss to hire you. Some of my best independent consulting clients today are my employers of yesterday. Why not continue to work a bit for your current boss, as an outside consultant? It could make the transition smoother and help everybody meet their goals.

What is the fun in that?

Certainly there are a lot of heavy things to think about before making a go of it on your own. Lets round this post out with the top 5 reasons that being an Independent Consultant is awesome.

You can choose your own clients. Not into paper products? Don't pitch the project!
You don't have to get dressed in the morning. You should. The point is you don't have to.
You'll have a nice short commute from your bedroom to your office.
If you have a young family, you can oversee your children's care with in-home childcare.
If you do your best work at midnight, have at it. Aside from client calls and general daytime availability you can usually set your own hours.

That does it for tonight. Happy Daydreaming!

P.S. Congratulations Watson! "I, for one, welcome our new computer overlords." - Ken Jennings

Images from Shutterstock

Do you like this post? Yes No

Why It’s OK to Offend People in Social Media Graywolf's SEO Blog

Why It’s OK to Offend People in Social Media

Posted: 16 Feb 2011 08:01 AM PST

Recently, Kenneth Cole took a bit of criticism in the social media space for making what many considered an insensitive tweet. I’m going to disagree with the social media guru’s here and say it’s ok to offend people. In fact, it’s probably something you should do on a regular basis. In case you missed it, here’s the tweet in question

Kenneth Cole Tweet

First off, it’s pretty obvious the tweet was a joke. Done in poor taste … maybe … but it was still a joke. If you didn’t get that it was joke, then there are bigger issues you need to confront. But back to the point of this post, is it OK to offend people who might turn into potential customers … I say yes.

IMHO if you try to be the company or person that everyone likes and never offends anyone, chances are you will make a lot of compromises and end up with a mediocre product that is undistinctive and unremarkable. In short, you will have no point of differentiation. There’s nothing that makes you unique or memorable in anyway. The second point is that not everyone is your customer. The more you tailor your product to specific customers, the more those customers will love you.

Customized Scion

Take for example the Scion above. It’s boxy and lacks the streamlining of most modern cars and sports cars. It’s low to the ground so doesn’t appeal to the SUV soccer MOM demographic. This car isn’t made for everyone. It is made for a specific customer, a customer who likes this style and look. They like it so much, in fact, they create communities and groups where they can show off their custom modified versions, like the one pictured above. I think it’s ugly … and I realize I’m not the customer, but I am glad they are making them. Let’s be honest: presenting a Camry to the Toyota board of directors is a safe move; presenting a Scion takes some nerve.

When you build websites or other online community, you should look for ways to be more discriminating and distinctive. When you create places filled with information that people like or are passionate about, you become a destination they seek out, instead of a destination dependent on drive by search engine traffic. If people like you enough to go out of their way to visit you, you don’t have to worry about things like the death of RSS. If you don’t think being unique inspires feelings of loyalty and love then I suggest reading a recent post by OK Cupid on what makes people beautiful. It’s a fascinating piece.
photo credit: Ben Chau

What are You Doing With Your Social Media Traffic? While I may have some level of notoriety within the...
iPad Apps and Social Media In case you didn’t already know, I’m the owner of...
Talking Social Media With Loren Feldman of 1938 Media I had the pleasure of hanging with Loren Feldman of...
Is There Really Such a Thing as a Social Media Expert One of the common themes I see recurring in blog/websites...
Looking at Fake Social Media Profiles Somewhere in the middle of all the drama last week...

Advertisers:

Text Link Ads - New customers can get $100 in free text links.
BOTW.org - Get a premier listing in the internet's oldest directory.
Ezilon.com Regional Directory - Check to see if your website is listed!
Directory Journal - Get permanent deep links in a search engine friendly directory
Glass Whiteboards - For a professional durable white board with no ghosting, streaking or marker stains, see my Glass Whiteboard Review
Need an SEO Audit for your website, look at my SEO Consulting Services
Link Building- Backlink Build offers 45 PR5+ Backlinks for $295
KnowEm - Protect your brand, product or company name with a continually growing list of social media sites.
Scribe SEO Review find out how to better optimize your wordpress posts.
TigerTech - Great Web Hosting service at a great price.

This post originally came from Michael Gray who is an SEO Consultant. Be sure not to miss the Thesis Wordpress Theme review.

Why It’s OK to Offend People in Social Media

Advise the Advisor: Austan Goolsbee and Small Business

Your Daily Snapshot for
Thursday, Feb. 17, 2011

Advise the Advisor: Austan Goolsbee and Small Business

In the second edition of the Advise the Advisor series, Austan Goolsbee, Chairman of the Council of Economic Advisers, is asking for your feedback on small businesses and entrepreneurship.

Watch the video and submit your feedback.

Seth's Blog : On pricing power

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

On pricing power

If you're not getting paid what you're worth, there are only two possible reasons:
1. People don't know what you're worth, or
2. You're not (currently) worth as much as you believe

The first situation can't happen unless you permit it to. If you're undervalued, then you have a communication problem, one that you can solve by telling accurate stories that resonate.

Far more likely, though, is the second problem. If there are reasonable substitutes for your work, and those substitutes are seen as cheaper, then you're not going to get the work. 'Worth' in this case means, "what does it cost to get something like that if something like that is what I want?"

A cheaper substitute might mean buying nothing. Personal coaches, for example, usually sell against this alternative. It's not a matter of finding a cheaper coach, it's more about having no coach at all. Same with live music. People don't go to cheaper concerts, they just don't value the concert enough to go at all.

And so we often find ourselve stuck, matching the other guy's price, or worse, racing to the bottom to be cheaper. Cheaper is the last refuge of the marketer unable to invent a better product and tell a better story.

The goal, no matter what you sell, is to be seen as irreplaceable, essential and priceless. If you are all three, then you have pricing power. When the price charged is up to you, when you have the power to set the price, there is a line out the door and you can use pricing as a signaling mechanism, not merely a way to make a living.

Of course, the realization of what it takes to create value might break your heart, because it means you have to specialize, take risks, create art, leave a positive impact and adopt generosity in all you do. It means you have to develop extraordinary expertise and that you are almost always hanging way out of the boat, about to fall out.

The pricing power position in the market is coveted and valuable... The ability to have the power to set a price is at the heart of what it means to do business profitably, so of course there is a never-ending competition for pricing power.

The curse of the internet is that it provides competitive information, which makes pricing power ever more difficult to exercise. On the other hand, the benefit of the internet is that once you have it, the list of people who want to pay for your irreplaceable, essential and priceless contribution will get even longer.

• Email to a friend •

•

Mish's Global Economic Trend Analysis

40% of Madison Teachers call in Sick, Schools Shut; Video of Massive Protest in Wisconsin Capitol Building; If Jackasses Could Think
Good News: Chicago Population Sinks to 1920 Level
Germany Needs to Contribute More to European Bailout Fund; EFSF Agreement in Doubt? At What Point will German Citizens Revolt?
Bank of America Preys on Elderly Depositors; Culture of Greed, Arrogance, Incompetence
The Next Borrow-Short Lend-Long Guaranteed to Blow Up Bank Lending Scheme; Citigroup, Chase, Bank of America CD Ripoff

40% of Madison Teachers call in Sick, Schools Shut; Video of Massive Protest in Wisconsin Capitol Building; If Jackasses Could Think

Posted: 17 Feb 2011 12:44 AM PST

Public unions objecting to Wisconsin Governor Scott Walker's plan that will save 6,000 jobs flooded the state capitol in protest. 40% of Madison area teachers called in sick.

Those teachers should all be fired. Unfortunately they cannot be fired because their union protects them.

Please consider this amazing video from the Wisconsin state capitol building.

Time Magazine reports Public Workers Protest in Wisconsin

Thousands of Wisconsin's union workers and supporters crowded into the state capitol in Madison for a second day to protest a bill that would strip key collective-bargaining rights from public employees. The measure, introduced last Friday by new Republican Governor Scott Walker, would take away public-worker unions' ability to negotiate pensions, working conditions and benefits. State and local workers would have to foot more of the cost for their pensions--around 5.8 %--and more than twice that percentage of their health-care costs. Nearly all public workers--the bill exempts police, firefighters and state troopers--would be able to bargain only for salary, and any wage increases would be tied to the Consumer Price Index. (Raises beyond that capped figure would require a special referendum.)

"I'm just trying to balance my budget," Walker told the New York Times. "To those who say why didn't I negotiate on this? I don't have anything to negotiate with. We don't have anything to give. Like practically every other state in the country, we're broke. And it's time to pay up." He says the measure will help avoid up to 6,000 layoffs.

The measure has infuriated the state's 175,000 public-sector employees, who say they're being scapegoated by a governor whose party has no love for unions. Other newly installed Republican governors, from Florida's Rick Scott to Ohio's John Kasich, have zeroed in on cutting state-employee rolls and rights as a way to close sagging budget gaps. But Walker's plan, which guts entrenched rights, is perhaps the most dramatic. "It is up to us to fight for the right of workers to have a collective voice on the job," said Wisconsin AFL-CIO president Phil Neuenfeldt. "This proposal is too extreme."

Walker's Proposal Not Extreme Enough

I have a problem with Walker's proposal. It is not extreme enough. There is no good reason to exempt police and fire and there is no good reason to allow any bargaining of wages.

Union workers can accept a wage offer or take employment elsewhere. That is how it works in private industry and that is the way it should work everywhere.

Millions in the private sector lost their jobs. Millions more took pay cuts. Public union workers have the gall to think they are special. This country has a severe problem with mountains of public union workers who think they are better than everyone else.

No one is special.

Teachers Should Be Fired

Every teacher who called in sick is guilty of fraud.

They cheated school kids out of a day of school. They cheated taxpayers who have to pay for it. They also placed tremendous burdens on many parents who were not prepared for school closing.

Amazingly, teachers are constantly whining about how they do everything "for the kids".

This clearly was not for the kids. This action by teachers was 100% for greedy teachers who walked out on their kids for their own benefit, at taxpayer expense.

There is absolutely no other way of looking at it.

Washington Post Columnist Compares Uprising to Egypt

Disgusted minds are reading Workers toppled a dictator in Egypt, but might be silenced in Wisconsin a misguided rant by Harold Meyerson in the Washington Post.

In Egypt, workers are having a revolutionary February. In the United States, by contrast, February is shaping up as the cruelest month workers have known in decades.

The coup de grace that toppled Hosni Mubarak came after tens of thousands of Egyptian workers went on strike beginning last Tuesday.

But even as workers were helping topple the regime in Cairo, one state government in particular was moving to topple workers' organizations here in the United States. Last Friday, Scott Walker, Wisconsin's new Republican governor, proposed taking away most collective bargaining rights of public employees. Under his legislation, which has moved so swiftly through the newly Republican state legislature that it might come to a vote Thursday, the unions representing teachers, sanitation workers, doctors and nurses at public hospitals, and a host of other public employees, would lose the right to bargain over health coverage, pensions and other benefits. (To make his proposal more politically palatable, the governor exempted from his hit list the unions representing firefighters and police.) The only thing all other public-sector workers could bargain over would be their base wages, and given the fiscal restraints plaguing the states, that's hardly anything to bargain over at all.

It's a throwback to 19th-century America, when strikes were suppressed by force of arms. Or, come to think of it, to Mubarak's Egypt or communist Poland and East Germany.

Our unions have already been decimated in the private sector; the results are plain. Corporate profits are soaring, while domestic investment, wages and benefits (particularly at nonunion companies) are flat-lining at best. With nobody to bargain for workers, America increasingly is an economically stagnant, plutocratic utopia. Is everybody happy?

American conservatives often profess admiration for foreign workers' bravery in protesting and undermining authoritarian regimes. Letting workers exercise their rights at home, however, threatens to undermine some of our own regimes (the Republican ones particularly), and shouldn't be permitted. Now that Wisconsin's governor has given the Guard its marching orders, we can discern a new pattern of global repressive solidarity emerging - from the chastened pharaoh of the Middle East to the cheesehead pharaoh of the Middle West.

If Jackasses Could Think

If jackasses could think they would not be jackasses.

In Egypt, a revolution began to restore democracy. There is nothing democratic about union thugs using bribery, extortion, and coercion to get what they want.

For the benefit of Harold Meyerson I am going to repeat something I have talked about before. Perhaps if he reads it, something will sink in.

Collective Bargaining is Extortion

Collective bargaining is not what its name indicates. In fact, it means exactly the opposite of what you'd guess. Collective bargaining refers to the obligation of an employer to recognize the elected representatives of a group of workers and his further obligation to negotiate with those representatives. This last part is what makes 'collective bargaining' extortion.

Under collective bargaining laws, employers have to recognize an elected union and have to negotiate with them.

Imagine if the tables were turned and employers had the right to 'employer bargaining', under which the employer could demand whatever pay reductions or workday increases he wanted, the employees had to negotiate with the employer, and employees couldn't quit!

Such an arrangement could only be classified as slavery.

The right to terminate the employer-employee relationship is a fundamental right of both employer and employee. Employment should be mutually beneficial to employer and employee and open to termination by either when it becomes non-beneficial (limited of course by any voluntary contractual agreements).

Second, the misnamed term 'collective bargaining' has given an aura of moral righteousness to the unions who pretend to be fighting for true American values like the freedom of association. However, they are fighting for values quite foreign to the United States, values that come from Marxist collectivism, i.e. the expropriation of the property of employers and the negation of their rights.

Collective Extortion

Meyerson's comparison to Egypt is 180 degrees reversed. Those Madison protesters were not fighting for democracy but rather to preserve a system of collective extortion.

Unions threaten, bully and bribe their way into power and want more every step of the way.

At a minimum, please play at least the first two of these videos, preferably all of them.

Give Up the Bucks

SEIU Spokesperson Threatening California Lawmakers with Union Retaliation

Colorado Teachers Unions Abuse Non-Union Teacher Paychecks

New Jersey Governor Chris Christie explains how public sector unions control politicians

Governor Christie Explains Who Is To Blame For Teacher Layoffs

California Treasurer Bill Lockyer on Public Sector Union Influence

Armand Thieblot on Public Sector Unions (part 1)

Armand Thieblot on Public Sector Unions (part 2)

Unions Under Attack

Unions piss and moan and bitch and whine about how they are under attack. Yes, they are under attack.

The public is fed up with their public union greed, arrogance, vote buying, fraud, and extortion as noted in the above videos.

Uniquely Dysfunctional Relationship

Please consider this short snip from the New York Times article Public Workers Face Outrage as Budget Crises Grow

Fred Siegel, a historian at the conservative-leaning Manhattan Institute, has written of the "New Tammany Hall," which he describes as the incestuous alliance between public officials and labor.

"Public unions have had no natural adversary; they give politicians political support and get good contracts back," Mr. Siegel said. "It's uniquely dysfunctional."

Indeed. Public unions bribe politicians and get into bed with management in backroom deals that raise wages and benefits for both of them. Taxpayers suffer from those alleged "negotiations".

Freedom of Choice

No person should be forced to join a union to get a job, nor should union dues be used to extort money from taxpayers.

That last sentence says all you need to know. Unions rob people of their right to choice. Unions then go on to threaten others to do the same. Eventually they extort, bribe and coerce their way to salaries and wages that the private sector does not get.

The solution is to end collective bargaining of public unions, repeal Davis Bacon and all prevailing wages laws, and make every state in the union a right-to-work state.

Please Read the Following Paragraph Carefully and Guess Who Said It

All Government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service. It has its distinct and insurmountable limitations when applied to public personnel management.

The very nature and purposes of Government make it impossible for administrative officials to represent fully or to bind the employer in mutual discussions with Government employee organizations. The employer is the whole people, who speak by means of laws enacted by their representatives in Congress. Accordingly, administrative officials and employees alike are governed and guided, and in many instances restricted, by laws which establish policies, procedures, or rules in personnel matters.

Particularly, I want to emphasize my conviction that militant tactics have no place in the functions of any organization of Government employees. Upon employees in the Federal service rests the obligation to serve the whole people, whose interests and welfare require orderliness and continuity in the conduct of Government activities. This obligation is paramount. Since their own services have to do with the functioning of the Government, a strike of public employees manifests nothing less than an intent on their part to prevent or obstruct the operations of Government until their demands are satisfied. Such action, looking toward the paralysis of Government by those who have sworn to support it, is unthinkable and intolerable. It is, therefore, with a feeling of gratification that I have noted in the constitution of the National Federation of Federal Employees the provision that "under no circumstances shall this Federation engage in or support strikes against the United States Government."

So.. Who do you think said that?

If you did not already know the answer may shock you ...

The quote is contained in Letter on the Resolution of Federation of Federal Employees Against Strikes in Federal Service written August 16, 1937 to Mr. Luther C. Steward, President, National Federation of Federal Employees ...

By FDR

One of the solutions to the fiscal mess states are in is national right-to-work laws and the end of collective bargaining. Franklin D. Roosevelt would agree.

Instead we have to listen to misguided union sympathizers compare bribery, coercion, and extortion to democratic uprisings in Egypt.

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

Good News: Chicago Population Sinks to 1920 Level

Posted: 16 Feb 2011 08:53 PM PST

The Wall Street Journal reports Chicago Population Sinks to 1920 Level

A larger-than-expected exodus over the past 10 years reduced the population of Chicago to a level not seen in nearly a century.

The U.S. Census Bureau reported Tuesday that during the decade ended in 2010, Chicago's population fell 6.9% to 2,695,598 people, fewer than the 2.7 million reported back in 1920.

After peaking at 3.62 million people in 1950, Chicago underwent a half century of decline that ended only when the 1990s boom years produced a small gain in the 2000 count. At that time, the city loudly celebrated its comeback.

But the recent recession accelerated a migration both to the metropolitan area's farthest suburbs and to the Southern U.S. Chicago nonetheless is expected to remain the nation's third-largest city, behind New York and Los Angeles and just ahead of Houston, for which final census numbers aren't in yet.

The explosive growth of suburbs far outside Chicago produced huge gains in neighboring counties. Kane County grew by 27.5%, Will County by nearly 35% and Lake County by 9.2%, while DuPage grew a more modest 1.4%.

This population shift to traditionally conservative counties could alter the balance of power in both the state house and the Illinois congressional delegation.

The influx of residents to outlying areas could translate into additional Republican seats, though the arrival there of Chicagoans—particularly minorities—could make those regions more politically diverse. For instance, said University of New Hampshire demographer Kenneth Johnson, "DuPage County could become less Republican." Mr. Johnson said his analysis of census data showed that metropolitan Chicago grew 4% to 9,683,000 people.

Anything that helps break Chicago's grip on statewide politics is a good thing. This alone will not do it, but it cannot hurt.

The startling thing is Houston may pass up Chicago. So much for "second city". Chicago may become "fourth city".

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

Germany Needs to Contribute More to European Bailout Fund; EFSF Agreement in Doubt? At What Point will German Citizens Revolt?

Posted: 16 Feb 2011 11:59 AM PST

I keep wondering when the tipping point will arrive for mass German protests against the bailouts or against the Euro itself. I do not have the answer, and perhaps it does not come.

However, not a week goes by without some bureaucrats somewhere, sometimes even within Germany, expecting more from German citizens.

Here is a case in point. Germany's Finance Minister Wolfgang Schaeuble says Germany Needs To Contribute More To New ESM

Germany's contribution to a future mechanism to rescue troubled euro-zone countries will need to be higher than its contribution to the current bailout fund, German Finance Minister Wolfgang Schaeuble said Tuesday.

The 17 countries using the euro Monday agreed a future bailout mechanism--or European Stability Mechanism--to be used from mid-2013 onwards, will have an effective lending capacity of EUR500 billion, the chairman on the Eurogroup of finance ministers and Luxembourg's prime minister, Jean-Claude Juncker, said.

The euro zone's European Financial Stability Facility that expires in mid-2013, has been set up for EUR440 billion, but its effective lending capacity is seen at around EUR250 billion, in part due to the aspiration to reach a triple-AAA rating for bonds raised by the EFSF. The European Union provides another EUR60 billion to the current rescue fund.

To ensure the new, post-2013 rescue mechanism will have EUR500 billion available in aid if needed, "Germany's participation will need to be a bit higher," than in the current fund, Schaeuble said at a press conference after meeting European Union finance ministers.

EFSF Agreement in Doubt

Note: Links in the following article are in German. I posted one of them. They all point to the same site, and a login is required.

Euro Intelligence comments EFSF agreement in doubt

There will be some agreement on March 24-25, but there is a potential for a major shock. Frankfurter Allgemeine, deeply hidden in a news story on yesterday's Ecofin, writes that Wolfgang Schäuble said he was no longer sure whether they would deal with the EFSF in March.

Two weeks of reduced market panic, and the EU's political system is reverting to its default mode of complacency. The European Council's pledge to do whatever it takes the eurozone, and to agree a one-and-for-all crisis resolution mechanism is gradually being expose as the lie that it always has been.

There are also some legislative problems to overcome. Reuters reports that Finland, where elections are held next month, says that it can only approve an agreement reached at the special eurozone summit on March 11. If there were any material changes between Mar 11 and the Mar 24-25 EU summit, the Finnish government would not be able to sign off on those.

The Frankfurter Allgemeine article has some more details on the financing of the ESM, the successor mechanism. Ministers are discussing two models, one where the six AAA-rated countries alone increase their guarantees, which would involve a doubling of the German guarantee to €250bn, or if the non AAA rated countries would deposit cash. It looks as though the compromise will involve a mixture of both, but any increase in the German contribution would require a vote in the Bundestag (and this, as we reported this week, may require a two thirds majority).

There is an angry editorial in Frankfurter Allgemeine this morning, which complains that the likely German contribution to the ESM would amount to two-thirds of the federal budget, and would invariable trigger a total loss of sovereignty of the German parliament. (The latter is a particularly sensitive point, as the German Constitutional Court is extremely inflexible on that issue. If it views the EFSF/ESM as impacting the parliament's sovereignty, the court could still jeopardise the project.)

Risks rise along with increasing complacency everywhere.

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

Bank of America Preys on Elderly Depositors; Culture of Greed, Arrogance, Incompetence

Posted: 16 Feb 2011 09:56 AM PST

In Citigroup, Chase, Bank of America CD Ripoff I talked about guaranteed to blow up Borrow-Short Lend-Long strategies that banks are using.

I also talked about absurdly low CD rates offered by Bank of America, Northern Trust, JPMorgan Chase, and Citigroup.

Here is the pertinent snip regarding CDs with a couple additions in brackets.

According to Bankrate, national average for 5 year CDs is 1.61% and the rock bottom low is .95%. The site average is 1.98% and the top yielding 5-year CD yields 2.75%. Thus Citigroup's claim of competitive rates is absurd.

[Citigroup 5 year CDs yield 1.5%]

Although Bank of America makes no such claims, its CD rate is priced so preposterously low, that Bank of America must not even want to deal with them.

Alternatively, B of A has an incredibly large pool of moronic depositors begging to be ripped off.

[Bank of America 5 year CDs yield 0.95% (annualized monthly not daily to extract every possible cent from its clients it is blatantly ripping off]

In response to the possibility that "Bank of America has an incredibly large pool of moronic depositors begging to be ripped off", I received this email from a reader.

Hi Mish

I'll tell you what fools buy Bank of America CDs at less than treasury rates. Little old ladies do. B of A has found that little old ladies will do just about whatever a good looking middle aged "financial advisor" tells them to do.

My mother-in-law complained about the value of her investments falling, and I found that they had split her $125,000 investment into three parts. $50k was in an account that paid 0.05% interest. Yes, the decimal point is in the right spot. 50K was in 20 year Freddy Mac bonds and 25k was in 30 year Fanny Mae bonds.

I hit the roof! I told her that all three investments were a bad idea, and that she ought to move her money to 3, 5 and 7 year treasuries. Fortunately she is taking my advice.

She called the bank, and the nice man explained to her that the up and down in valuation didn't matter since she'd get all her money back at maturity.

The bonds will mature around her 110th and 120th birthdays.

I believe that B of A's "financial advisors" serve only the interest of the bank. They seem to me to be more than willing to complete the screw job to those on fixed income that Bernanke has started by pushing interest rates so low.

Best Regards,

Bill

Culture of Greed, Arrogance, Incompetence

Telling someone not to worry about losses on assets held to maturity, when maturity would put an investor at age 110 or 120 is either gross incompetence or gross greed.

I am quite sure that Bank of America will offer some nonsense that this is an isolated case not reflective of their desire to blatantly rip off its client base. Yeah right. Offering CDs at .95% annualized monthly instead of daily (to extract every possible last cent) is proof enough of what they are doing.

By the way, this is exactly why banks do not want tighter regulation regarding fiduciary responsibility.

If you have an elderly parent or grandparent with money tied up in CDs or in investments at Citigroup, Bank of America, JPMorgan Chase or for that matter any place, please do what you can to make sure they are not being ripped off and their investments are suited to their age and risk tolerance.

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

The Next Borrow-Short Lend-Long Guaranteed to Blow Up Bank Lending Scheme; Citigroup, Chase, Bank of America CD Ripoff

Posted: 16 Feb 2011 12:33 AM PST

Borrow-short lend-long strategies have caused more pain and grief than nearly any play in the book. They are virtually guaranteed to blow up given enough time if the duration mismatch and leverage is too great.

For those who do not know what I am describing, a couple examples below will help explain. The first example is a look at "cost of funds" and guaranteed profits that banks can make. It is not a borrow-short lend-long strategy but will morph into such a scheme as I vary the parameters.

Citigroup CDs

Inquiring minds investigating Citigroup's cost of funds note that Citigroup 5 year CDs yield a mere 1.5%. For this example, Citigroup's cost of funds is 1.5%, the rate it pays depositors. Here are a few snips from Citi's website.

Who said there are no guarantees in life?

Some things in life are a sure thing. Like a Citibank CD, which offers a guaranteed—and highly competitive—interest rate. You also get a wide range of terms, from 3 months to 5 years.

Guaranteed Ripoff

Citigroup has the gall to brag about "guarantees in life" when the "guarantee" in question is a complete ripoff. It's a ripoff because 5-year US treasuries currently yield 2.35%.

Anyone buying CDs at less than the treasury yield rate is a fool.

Rates at Bank of America, Northern Trust, JPMorgan Chase

I will tie this together shortly, but first make note that the Northern Trust, Bank of America, and JPMorgan Chase offer even lower 5-Year CD rates.

Here are some rates courtesy of Bankrate.Com as of 2011-02-15.

According to Bankrate, national average for 5 year CDs is 1.61% and the rock bottom low is .95%. The site average is 1.98% and the top yielding 5-year CD yields 2.75%. Thus Citigroup's claim of competitive rates is absurd.

Although Bank of America makes no such claims, its CD rate is priced so preposterously low, that Bank of America must not even want to deal with them. Alternatively, B of A has an incredibly large pool of moronic depositors begging to be ripped off.

Guaranteed Free Money

Anyone buying 5-year CDs from Citigroup, Bank of America, Northern Trust, or JPMorgan Chase is giving those banks a shot at guaranteed free money.

All those banks have to do is take that money and invest in 5-year US treasuries to have a guaranteed profit. Here are the reasons for that statement.

There is no duration mismatch. The banks secure funding for 5 years and invest that money for 5 years.
The US government is not going to default no matter what nonsense you may hear elsewhere.

Purists may point out the play is not entirely risk-free because people can pay a penalty, cash out the CD, then take the money elsewhere. However, from a practical standpoint, fools dumb enough to accept 1.5% or lower are probably not bright enough to pay a penalty and take the money elsewhere even if rates dramatically shoot up.

Borrowing-Short and Lending-Long

Please note that those 5-year CDs are borrowed money. Banks have to pay that money back plus interest (pathetic interest in this case) to the depositor. Banks keep those deposits on the book as a liability.

However, what if the banks borrowed money for 5 years and lent it out for 21 years? Perhaps banks could get 4% interest on those loans (much higher if they assume more risk), but what if interest rates 5 years from now are 6%?

All that has to happen to turn this scheme into a guaranteed loss for the bank is for the cost of funds (CDs, savings accounts, or borrowing from the Fed), to rise above the rate the bank lent that money out.

Borrowing-short and lending-long thus poses a significant risk if interest rates raise.
Moreover, duration mismatch and rising cost of funds are not the only risks. Banks also need to lend at a rate sufficiently high to cover default risk.

To be fair, banks can hedge the risk of rising rates, but then one must ask "who is the counter-party to that hedging risk, and what happens if they blow up?"

The Next Borrow-Short Lend-Long Guaranteed to Blow Scheme

With the discussion about duration mismatch out in the open, please consider Banks Go Straight to Public Borrowers

Banks are setting aside billions of dollars to do something that until now was rarely heard of: making big loans to cities, states, schools and other public borrowers that otherwise might have turned to the bond market.

When Riverside, Calif., was ironing out a bond offering recently to expand its performing-arts center, several banks pitched a radical idea: Why not take out a loan instead? The city scrapped the bond plan and borrowed $25 million from City National Bank in Los Angeles.

"This was a method we'd never even heard of before," says Scott Catlett, the city's assistant finance director. He says Riverside now intends to seek a bank loan for a conference center that it had planned to build with bonds.

J.P. Morgan Chase & Co. is devoting billions of dollars to direct loans this year to both refinance deals and for new projects, according to a bank official. Last year, the bank made a few hundred million dollars of direct loans to municipalities. Now, the bank would consider making a single loan for hundreds of millions of dollars, the official said. It also is dispatching teams to explain the concept to wary public borrowers.

Citibank also is courting municipal borrowers with direct loans, according to several bond issuers. A spokesman for the Citigroup Inc. unit declined to comment.

"This used to be unheard of," says Eric Friedland, managing director of public finance at Fitch Ratings, noting that in the past, banks would occasionally loan a municipality less than $1 million to finance projects too small for a bond offering. For bigger loans, they would form a syndicate with other lenders.

It remains to be seen what land mines may be lurking for lenders and borrowers. Some municipalities are going through significant struggles, raising questions about whether they will prove good credits. And direct loans are less liquid, meaning banks can't sell them as easily as bonds.

For banks, this is a potentially lucrative business at a time when they are sitting on cash that isn't earning huge interest and are reluctant to make loans for mortgages and other areas they see as risky.

In the event of a bankruptcy, analysts say, it is unlikely that a bank extending a direct loan would be given priority over bondholders.

The city saved hundreds of thousands of dollars in issuance costs, says Mr. Catlett, the assistant finance director. Plus, he says, the interest rate is 3.85% versus at least 5% if it had floated a public offering. The term is slightly lower—21 years versus perhaps 30 years in the bond market.

"This was all new to us," he says. "I don't know now when we'll go back to the bond market. This is easier."

Fed or FDIC Should Stop this Fraudulent Scheme Now

The Fed or FDIC should step in right now. There is no way banks can secure cost of funds for 21 years for 3.85%. Moreover, the risk of default is hardly zero, and banks will not be first in line should default happen.

I think borrowing-short and lending-long is fraudulent. How can you lend something for 21 years when you only have the right to use it for 3, 5, or 7?

Want to know what those banks thinking? This is what ....

They are too big too fail
The Fed will bail them out
Cities won't default but who cares anyway because the Fed will bail them out
They have a hot pile of cash the Fed crammed down their throats at 0% and they want to put it to use
They got burnt badly on mortgages and home equity loans so they need to find something new
One idiot bank made an absurdly risky deal so like sheep they all want to do it

Right now they are all thinking there is nothing to lose from this. The Fed or Congress will bail them out at taxpayer expense if they get in trouble.

Then, when this does get out of control and blows sky high, they will all scream, "no one could possibly have seen it coming".

Addendum:

For a follow-up post with further discussion including an email from a reader about someone being taken advantage of by B of A, please see Bank of America Preys on Elderly Depositors; Culture of Greed, Arrogance, Incompetence.

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

joi, 17 februarie 2011

SEOmoz Daily SEO Blog

SEOmoz Daily SEO Blog

Interesting Find #1

Interesting Find #2

Interesting Find #3:

What does it take to become an Independent Search Marketer?

What is the fun in that?

Why It’s OK to Offend People in Social Media Graywolf's SEO Blog

Why It’s OK to Offend People in Social Media Graywolf's SEO Blog

Related posts:

Advertisers:

Advise the Advisor: Austan Goolsbee and Small Business

Seth's Blog : On pricing power

On pricing power

More Recent Articles

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

Pagini

Persoane interesate

Arhivă blog

joi, 17 februarie 2011

Interesting Find #1

Interesting Find #2

Interesting Find #3:

What does it take to become an Independent Search Marketer?

What is the fun in that?

Related posts:

Advertisers:

More Recent Articles

Pagini

Persoane interesate

Arhivă blog

Subscribe to