Central Perk

vineri, 11 mai 2012

Mish's Global Economic Trend Analysis

TrimTabs on Debt and Disability Claims: How Much Debt Does it Take to Generate $1 in GDP? Disability Fraud vs. Expiring Unemployment Benefits Revisited
ECRI Repeats Recession Call Based on Coincident Indicators, Especially Income
Cash Cow Liquidity Comparison: Where's the Cash and Where's the Debt? A Look at the Top 50 Companies

TrimTabs on Debt and Disability Claims: How Much Debt Does it Take to Generate $1 in GDP? Disability Fraud vs. Expiring Unemployment Benefits Revisited

Posted: 11 May 2012 09:39 AM PDT

In response to 2.2 Million Go On Disability Since Mid-2010; Fraud Explains Falling Unemployment Rate I received a nice email from Madeline Schnapp, Director, Macroeconomic Research at TrimTabs Investment Research.

Madeline Writes ...

Hello Mish,

I loved your disability graph so decided to expand on that theme some more and took a look at the relationship between the trend in disability recipients and the roll off of recipients of emergency and extended unemployment insurance programs.

Should we dare say there is a stunning relationship!

Enjoy,

Best, Madeline

Amazing Achievement is Fraud

First consider a few snips from my previous post, then we will take a look at what TrimTabs has to say.

In the last year, the civilian population rose by 3,638,000. Yet the labor force only rose by 945,000. Those not in the labor force rose by 2,693,000.

In the last month, actual employment fell by 169,000, but the unemployment rate dropped by .1%.

That is an amazing "achievement" to say the least.

Since Mid-2010 2.2 Million Went on Disability

Notice the jump in claims after the recession was allegedly long-over.

The timing coincides with unemployment benefits expiring at 99 weeks. Supposedly higher taxes will fix the problem. I say "nonsense".

Trim Tabs Weekly Macro Analysis

Please consider snips from the TrimTabs Weekly Forecast for May 8, 2012.

A recent post on the popular ZeroHedge financial blog compared the annualized growth in federal debt to the annualized growth in GDP in Q1 2012. ZeroHedge reported that while U.S. government debt rose by $359.1 billion in Q1 2012, the U.S. GDP grew only $142.4 billion. Durden noted that, "It now takes $2.52 in new federal debt to buy $1 worth of economic growth."

See Chart Of The Day: Change In Q1 American Debt And GDP

The surprising observation prompted us to examine the relationship between growth in debt and growth in GDP from 1975 through 2012. What we found is both astonishing and frightening. From 1974 to 1980, each $1 increase in GDP was accompanied by an increase in debt of between 20 and 47 cents. Since 2009, however, each $1 increase in GDP has been accompanied by a whopping $2.50 increase in debt. At some point, the amount of debt required to generate $1 of GDP will suffocate the economy and trigger another financial shock.

In Q1 2012, GDP rose $142 billion, while debt rose $355 billion. In other words, it took $2.50 in debt to generate $1.00 in GDP. We wanted to understand how this relationship compared to those that prevailed in previous decades. The graph below shows our findings.

click on chart for sharper image

From 1974 to 1980, each $1 increase in GDP was accompanied by an increase in debt of between 23 and 53 cents. Since 2009, however, each $1 increase in debt has been accompanied by a whopping $2.41 increase in debt. At some point, the amount of debt required to generate $1 of GDP will suffocate the economy and trigger another financial shock.

Another recent post on the popular Global Economic Trend Analysis blog (hat tip to Mish Shedlock) suggested the recent declines in the unemployment rate were due, in part, to the rapid increase in enrollment in disability because people on disability are no longer counted as unemployed.

Please see 2.2 Million Go On Disability Since Mid-2010; Fraud Explains Falling Unemployment Rate

In his blog post Shedlock reported, "Since mid-2010, precisely the time million of U.S. citizens used up all of their 99 weeks of unemployment insurance, disability claims have risen by 2.2 million."

Mish's observation prompted us to dig a little deeper into the relationship between the number of people exhausting extended and emergency unemployment benefits compared to the increase in disability recipients. What we discovered was interesting, to say the least.

click on chart for sharper image

From July 2010 to April 2012, the decline in the number of people collecting extended and emergency unemployment benefits was 2.46 million. Over the same time period the number of people collecting disability benefits increased by 2.20 million. We suspect the similarity in the inverse relationship is more than coincidence.

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

ECRI Repeats Recession Call Based on Coincident Indicators, Especially Income

Posted: 11 May 2012 08:22 AM PDT

Once again Economic Cycle Research Institute's Lakshman Achuthan repeats his recession call, this time saying within three months.

His call is based on coincident indicators, especially income. According to Achuthan, income growth in the last three months is lower than at the start of any of the last 10 recessions.

Link if video does not play: Why U.S. Economy is Heading Back Into Recession

Once again I tend to agree with him, yet once again I find some things that sound rather disingenuous.

When asked "Can the Federal Reserve do anything about this?", Achuthan responded "no".

Specifically Achuthan replied "It's so ironic. We're all free-marketeers. .... the free market has indigenous inherent business cycles which means ups and downs. It's ironic that we think that the Fed or other policies could just stave off a recession".

I agree. However, the statement represents one hell of an attitude change as the following flashbacks show.

Window of Opportunity

Friday, January 25, 2008
ECRI Says There Is A Window of Opportunity for the US Economy

The U.S. economy is now in a clear window of vulnerability, given the plunge in ECRI's Weekly Leading Index (WLI) since last spring. Yet there is a brief window of opportunity within that window of vulnerability to avert a recession. That is why ECRI has not yet forecast a recession. ....

This is why, having correctly predicted the last two recessions in real time without crying wolf in between, we are not forecasting one yet.

ECRI Denial

The ECRI laid it on pretty thick, openly mocking the "best advertised [recession] in history" while claiming "This is why, having correctly predicted the last two recessions in real time without crying wolf in between, we are not forecasting one yet."

The irony is the recession was about 2 months old at the time.

Recession of Choice

Friday, March 28, 2008
ECRI Calls it "A Recession of Choice"

The U.S. economy is now on a recession track. Yet this is a recession that could have been averted. In January, given the plunge in the Weekly Leading Index, we declared that the economy had entered a clear window of vulnerability. Yet we emphasized the brief window of opportunity within that window of vulnerability for timely policy stimulus to head off a recession.

It is a somewhat different story with regard to GDP, because the cyclically volatile manufacturing sector still accounts for 36% of GDP. A mild downturn in that sector should limit the decline in GDP in this recession.

Question for Achuthan

If it was a recession of choice in 2008 (after the recession already started), why isn't it a question of choice now? Of course, it is entirely possible Achuthan has changed his mind about what is or isn't possible.

Then again, is that change of heart a new fundamental belief or simply a necessary statement because his call is now recession as opposed to no recession in late 2007 and early 2008 (while later taking credit for predicting a recession).

It is not my intent to keep bringing this discrepancy up, but Achuthan has come out with yet another reason for his call that is dramatically different that what the ECRI has stated before.

The key point however is the forecast, and on that score I side with Achuthan. I also side with Achuthan that he Fed cannot do much to stave off recessions. History will show who is correct.

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

Cash Cow Liquidity Comparison: Where's the Cash and Where's the Debt? A Look at the Top 50 Companies

Posted: 10 May 2012 11:35 PM PDT

In light of renewed banter about corporations being flush with cash following Apple's stellar earnings, I thought it would be instructive to take a look at the top 50 companies by market cap in the following ways:

Debt and liabilities vs. cash
Debt and liabilities vs. cash plus short-term investments
Debt and liabilities vs. cash plus both short-term and long-term investments

With thanks to Ross Perez at Tableau Software for compiling the data for my idea, please consider the following interactive graph.

Note the ability to change the "cash" metric in the upper right of the graph.

Liquidity Comparison

Richard Shaw has an excellent article on Seeking Alpha that discusses cash, short-term investments, and long-term investments and what they mean: Comparing Liquidity Of Microsoft And Apple And Both Compared To Other Cash Rich Companies.

Bottom line: net cash on hand at the top 50 companies is negative to the tune of $1.479 trillion. If one considers short-term investments to be cash equivalents, then net cash is negative $1.251. Only if long-term investments are included does the number go positive.

Clearly there is not as much "sideline cash" as most are led to believe. By the way, the notion of sideline cash is bogus in the first place.

No Such Thing As Idle Sideline Cash

For those who want a second opinion, John Hussman has written about sideline cash on several occasions. Please consider There's No Such Thing as Idle Cash on the Sidelines.

The amount of "sideline cash" has been rising for years and will keep doing so unless money supply contracts. Yet the S&P 500 was clobbered in 2008 and early 2009 anyway. Why?

Stock prices rise and fall on sentiment changes every single day, not because money flows into or out of the market.

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

Damn Cool Pics

Indian Dubstep [Video]

Posted: 10 May 2012 10:55 PM PDT

This new video shows Gerardam, a group that consists of two brothers Gerard, introducing what they call "Indian dubstep." Among some of their more notable additions to the style are what they've dubbed Hair Tutting and Shoulder Blade Tutting.

Johnnathan writes:

I liked DUBSTEP the moment I listened to it because, it suited very well with the style of dance that I am most comfortable with! Therefore I decided to compose an Indian version of DUBSTEP.

Kowloon Walled City - The Most Densely Populated Land in the World

Posted: 10 May 2012 10:26 PM PDT

Originally a Chinese military fort, Kowloon "Walled City" in Hong Kong was the most densely populated land in history, containing 50,000 residents within 6.5 acres. From the 1950s to the 1970s, it was controlled by Triads and had high rates of prostitution, gambling, and drug use.

Taken by Canadian photographer Greg Girard in collaboration with Ian Lamboth the pair spent five years familiarising themselves with the notorious Chinese city before it was demolished in 1992.

Photographer credit: Greg Girard and Ian Lambot Via Dailymail

An idea that helps all of us

Good afternoon --

Right now, refinancing a home mortgage can be confusing and costly -- but it doesn't have to be that way.

And that's why President Obama is asking Congress to make things simpler for responsible homeowners as part of his To-Do List for lawmakers.

All over the country, there are Americans who bought houses before the financial crisis, and they're locked in at high interest rates. Despite staying current with payments, they can't refinance at today's rates, which are historically low.

This issue affects you, even if you have a good rate, or don't have a mortgage at all. Lower monthly payments mean lower foreclosure rates, helping property values in your community. And more money in people's pockets helps to move our economy forward and create jobs.

By improving this process, responsible folks who work hard will be able to feel a little more secure in their finances and a little more secure in their homes.

Watch one of President Obama's economic advisers explain how in this quick video:

Lowering the interest rate on your mortgage should be an idea that makes sense for both Republicans and Democrats. Outside the halls of Congress, paying a mortgage isn't a partisan, political issue.

President Obama has done what he can to make refinancing simpler, but unless Congress acts, there's a limit to how much we can help responsible homeowners.

Nothing will help to change the debate more than Americans across the country joining the conversation. We saw your impact a few months ago when Congress finally extended the payroll tax cut, keeping an average of $40 in everyone's paycheck. Now it's time to for more action – this time to help homeowners all over America.

So I'm asking you to talk to people about this refinance proposal and the other ideas on the To-Do List. You can find more info about them on WhiteHouse.gov:

http://www.whitehouse.gov/todolist

Thank you,
David

David Plouffe
Senior Advisor to the President

P.S. -- If you're on Facebook or Twitter, consider posting the video. I bet you'll get a surprising response from your network. Most people don't track the day-to-day in Washington closely, but all of us know people who would love to refinance their mortgages.

This email was sent to e0nstar1.blog@gmail.com.
Unsubscribe | Privacy Policy
Please do not reply to this email. Contact the White House

The White House • 1600 Pennsylvania Ave NW • Washington, DC 20500 • 202-456-1111

The Penguin Update - Whiteboard Friday

Posted: 10 May 2012 01:59 PM PDT

Posted by robkerry

SEOmoz and I don't always see eye to eye on industry issues, but I still have a lot of respect for the company. In fact SEOmoz is still the website that I send people to, when they want to learn about SEO or get into our industry. Rand kindly invited me to the SEOmoz office when I was in Seattle this week, for a chat and the opportunity to present a Whiteboard Friday.

This week's Whiteboard Friday covers the recent Penguin Update, including what to do and what not to do. I certainly wouldn't say that it's a comprehensive guide, but it does discuss the issues and causes that I have witnessed. Fortunately Ayima's campaigns have been unaffected (other than increases) by the update, but we do monitor our client's competitors and their agencies to a very granular level using in-house technology. Off-Page SEO has been changing dramatically for a while now, and it's important that agencies and in-house teams don't get left behind. Always ask questions and never just assume that Google whacked you by mistake, even if you are "White Hat".

Video Transcription

Hello, and welcome to another Whiteboard Friday. My name is Rob Kerry. I'm co-founder of an SEO agency called Ayima. Today we're going to be talking about the Penguin Update. There's been a lot of talk in a lot of communities out there, a lot of SEO communities, about the Penguin Update. A lot of false information being chucked around out there as well. Hopefully, this video clears up quite a few things.

The first issue is that a lot of people still use the term white hat, grey hat, black hat. Now, this terminology was taken from the hacking world and adopted for SEO reasons. It's actually in Google's best interest for us to use this terminology because it makes SEO sound like a risky, dangerous, almost illegal thing to be doing. Whereas if you actually use the hacking terminology and adapt it to SEO, the only thing that is black hat SEO is hacking someone's website and embedding links into there for SEO reasons. Everything else is basically white hat, because you're either getting permission from another webmaster to have a link on their site, or you're making adaptations to your own website, all of which would be classed as white hat.

Rather than looking at whether you use a white hat SEO provider or a black hat SEO provider, actually have a look to see what techniques are being used. Even if you're not buying links, you can still get affected by the Penguin Update. This isn't an update about whether you are buying links or not buying links. This an update about how you're trying to manipulate Google.

If your white hat SEO provider is currently just putting links into your site for commercial terms or even only putting 50% of the links in using commercial terms, let's say we're trying to rank for the term "penguin," if half your links or more are saying penguin in them, then you're going to get tripped up in this kind of filter because you're seen as manipulating Google, even if those links were acquired through directories or through asking for links or through viral campaigns.

So, rather than looking at that, we need to look at the footprints that are going into your site. Quite a good case study for that is we have a client who works with a lot of seasonal campaigns. We were about to run one at the beginning of this year for an event, which they sell products for. A competitor SEO agency in the UK works with one of their big competitors, one of the big competitors of our client. We were basically monitoring to see what that other SEO agency was doing. Three months before the seasonal campaign needed to launch, they started building links into their client's website using the commercial anchor text, so people putting links in saying penguin, penguin, penguin, going into those client pages. Whereas, we went with a different tactic.

We actually changed the way that we do SEO in terms of off-page SEO about a year ago, predicting that this kind of update would get rolled out. With our clients now, as long as the on-page is optimized properly and there are a few links going in using commercial terms, then we basically just build up the authority and the trust of our client website.

It sounds like kind of a lame idea, and it goes against traditional ideas of SEO, but it does actually work ever since this update rolled out. So, whilst we were starting to go up and up and up in the rankings, eventually hitting number one place for the biggest term for this seasonal campaign, we noticed our competitor going down and down and down.

There are even complaining on Twitter that Google might be broken, there's an algorithm issue, just because they didn't understand why putting loads of anchor text with commercial terms going into the client's site wasn't working. It's basically because Google has been working towards this kind of thing for quite a long time.

So, have a look at your anchor text ratios. Go to Open Site Explorer, type in your website, click on the anchor text link, and that will order it by, I think, group linking domains. You can actually see what links are most used on each URL of your website. If your commercial terms are quite near the top, let's say in the top 10, then you need to really work at getting better links going into your site and maybe even taking down some of the links, which are overly optimized. This is basically their step towards an over-optimization penalty.

There's another thing, which is content providers, who as soon as the Penguin Update rolled out, we got a barrage of emails from all of these people saying, "We can fix Penguin by building lots and lots of more pages of content for your site." These would actually negatively affect you, because one of the things that Penguin's trying to do is further penalize the production of crap content.

Rather than paying thousands and thousands a month to have 200-words news articles put onto your website, get rid of those if they're not actually bringing any traffic in. Look at actually creating a good quality resource of information on your website to become the authority in your industry. A few pages of great content is a lot better than just hammering Google with loads of news articles.

The big thing is there's no quick fix. If you get an email from a company saying that, "We can fix all your Penguin issues," it's likely not to be the case, especially if it's like a $35 fix. You just basically need to build a better campaign for your website. Look at taking down content which might not be unique or useful information. Get rid of some of that from your website if it's not driving any traffic directly to it.

Also, look at just making your website look as natural as possible. Build authority into the pages that you want to rank, but don't start over- optimizing on the anchor text. If you start doing that, not only will it fix Penguin issues, but it will also help you to rise up in the rankings. Thank you very much, and that's about it.

Video transcription by Speechpad.com

Sign up for The Moz Top 10, a semimonthly mailer updating you on the top ten hottest pieces of SEO news, tips, and rad links uncovered by the Moz team. Think of it as your exclusive digest of stuff you don't have time to hunt down but want to read!

West Wing Week: "Teach Your Parents How to Tweet"

Your Daily Snapshot for
Friday, May 11, 2012

West Wing Week: "Teach Your Parents How to Tweet"

This week, the President traveled to Virginia and New York to urge Congress not to let interest rates double on student loans and to introduce a to-do list for Congress. He also hosted the University of Kentucky Wildcats, the Fermi Science award winners, and this year's Gershwin Award Winners.

Check out full footage from this week's episode of West Wing Week.