SEOmoz Daily SEO Blog

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Thumbs Up: Help Raise Money for New Zealand Posted: 03 Mar 2011 04:29 AM PST Posted by jennita Today we're taking a different angle than we normally do on the blog. As you know, recently New Zealand and Christchurch specifically was seriously affected by an earthquake on February 22nd. After Rand sent out an email last week for those chosen to participate in the 2011 Ranking Factors, our friend Kalena Jordan from Search Engine College responded asking if we could help raise money for the New Zealand Red Cross to help with the aftermath of the earthquake. The answer was "Absolutely!" so we thought about ways to include the community. Donations For Thumbs Up SEOmoz will donate $1 for every (authentic, human-created) thumbs up on this post and every thumb to every comment (up to a maximum of $2,000) received by 12pm Noon Pacific Tuesday, March 8th. We also invite any organization (or person) to offer a 10% match (providing 10% of the thumbs up in dollars donated) and we'll add you to the "matching" list below. In order to get as many comments and donations as possible, we ask that you add your best, creative and unique "white hat" link building ideas in the comments. The idea is to then thumb up any and all of the tips you like and agree with to help get the thumb count high. You can also make donations directly to the New Zealand Red Cross. Information About the Earthquake On February 22nd, Christchurch was struck with a 6.3 magnitude earthquake which has caused devastation throughout the city. The New Zealand Red Cross is in desparate need of money to help the homelss and displaces. Currently, over 75% of the city is without water and half without power and sadly the death toll has risen to 163. Read more up-to-date information about quake and aftermath: NZHerald Google page Companies/People Matching Following are the groups or people who will be matching 10% of the thumbs up: Distilled Lindsay Wassell Dr. Peter Meyers Jamie Steven Direct Match Media Odd Dog Media Alan Bleiweiss Affilorama - Based in Christchurch, New Zealand will match 20% Viperchill Best Buy Metals Kate Morris Third Door Media - Will match $2,000 @jameszol Lauren Hall-Stigerts Linear SEO Image Freedom will happily match 20% of SEOmoz donation. WyzAnt Metronet Norway - on behalf of Anita Williamson and her loved ones in Christchurch Geeks.com Thanks to everyone for participating, let's see how many thumbs up we can get and raise money for a much needed cause! Do you like this post? Yes No

Google's Farmer Update: Analysis of Winners vs. Losers Posted: 02 Mar 2011 03:54 PM PST Posted by randfish By now, everyone in the SEO world is aware of the algorithmic update Google launched last Wednesday, February 23rd. Several posts on the topic are worth reading, including Danny Sullivan's take, Aaron Wall's assesment, SearchMetrics' analysis and Sistrix's data-driven post. Here at SEOmoz, we've been analyzing the shift with help from our friends at Distilled, staff research scientist Dr. Matt Peters (whom you may remember from our Google Places analysis and who's now joined our staff full time - welcome!), and several other contributors. While there's no way to be precisely sure what Google changed to impact "11.8%" of queries, we've got some ideas that fit a number of the data points and we hope to contribute to the discussion on the topic and help search marketers gauge the update's impact on their own sites. How to See the Farmer Update's Effect on Your Site(s) with Google Analytics Step 1: Use GA's date comparison feature to see the same days before and after the update on Wednesday Step 2: Exclude "branded" keyword traffic - you don't want those terms potentially gunking up the data, since they were very unlikely to be affected: Step 3: Check out the traffic line comparison: Step 4: Remove the comparison to see keyword counts, too (this data will also be in your web app traffic tab at the end of the week): Step 5: Check out the week before, too: Note some of the key filters applied - the exclusion of branded terms, the use of "non-paid" keywords only, and selection of "Google" as the engine (Bing didn't have an update). Using this process, you can check to see how your sites were (or weren't) affected. It appears that SEOmoz is virtually unaffected, as the past few weeks, our search traffic has been rising similarly to this pattern. Who Lost in the Farmer Update? Thanks to some datasets, we're able to get good data on the winners and losers. First, there's Sistrix, which monitors 250,000 keywords in Google up to the first 100 ranking positions for each: # Domain Change SISTRIX (before) SISTRIX (after) # KWs (before) # KWs (after) 1 wisegeek.com -77% 121,58 28,22 74.024 21.940 2 ezinearticles.com -90% 65,08 6,65 184.508 54.277 3 suite101.com -94% 54,04 3,28 178.373 36.904 4 hubpages.com -87% 55,16 7,40 152.998 50.178 5 buzzle.com -85% 43,25 6,55 86.472 24.423 6 associatedcontent.com -93% 38,29 2,57 216.429 53.512 7 freedownloadscenter.com -90% 30,26 3,01 42.486 7.992 8 essortment.com -91% 25,73 2,32 27.501 7.459 9 fixya.com -80% 28,78 5,83 62.034 36.167 10 americantowns.com -91% 24,88 2,18 26.000 9.799 11 lovetoknow.com -83% 25,75 4,28 49.544 17.833 12 articlesbase.com -94% 19,96 1,16 82.274 31.365 13 howtodothings.com -84% 21,20 3,39 33.222 7.601 14 mahalo.com -84% 20,49 3,23 33.875 9.740 15 business.com -93% 17,24 1,13 21.556 4.813 16 doityourself.com -77% 20,89 4,90 23.256 6.870 17 merchantcircle.com -85% 18,43 2,67 93.347 34.681 18 thefind.com -83% 18,95 3,27 74.506 45.495 19 findarticles.com -90% 16,98 1,74 64.810 20.189 20 faqs.org -91% 16,52 1,46 33.648 11.142 21 tradekey.com -89% 16,83 1,79 37.364 16.268 22 answerbag.com -91% 12,93 1,11 67.314 26.054 23 trails.com -87% 12,05 1,62 38.346 8.511 24 examiner.com -79% 10,54 2,19 70.781 31.272 25 allbusiness.com -88% 8,86 1,08 16.457 6.034 _ Next is SearchMetrics, which monitors ~25 million keywords in Google:  Domain OPI_today OPI_last Difference % blippr.com 11,024 529,970 -518,946 -97.9% suite101.com 19,874 263,529 -243,655 -92.5% tradekey.com 2,970 38,237 -35,267 -92.2% associatedcontent.com 23,687 281,343 -257,656 -91.6% articlesbase.com 13,492 157,958 -144,466 -91.5% helium.com 7,170 83,184 -76,014 -91.4% faqs.org 15,971 140,951 -124,980 -88.7% freedownloadscenter.com 23,216 192,128 -168,912 -87.9% mahalo.com 56,305 442,563 -386,258 -87.3% allbusiness.com 2,694 19,995 -17,301 -86.5% ezinearticles.com 35,691 259,516 -223,825 -86.2% essortment.com 13,507 93,993 -80,486 -85.6% americantowns.com 6,109 38,783 -32,674 -84.2% findarticles.com 11,648 70,404 -58,756 -83.5% howtodothings.com 10,605 62,372 -51,767 -83.0% lovetoknow.com 30,289 157,037 -126,748 -80.7% hubpages.com 122,796 618,406 -495,610 -80.1% wisegeek.com 113,436 489,014 -375,578 -76.8% buzzle.com 78,206 335,304 -257,098 -76.7% doityourself.com 8,069 33,231 -25,162 -75.7% merchantcircle.com 20,195 83,133 -62,938 -75.7% business.com 10,961 42,877 -31,916 -74.4% thefind.com 13,107 46,769 -33,662 -72.0% trails.com 9,607 32,385 -22,778 -70.3%   As you can see, there's quite a bit of crossover between the two data sources on which sites have lost substantial traffic, and I suspect that both sources are at least correct that the sites listed have lost out in the update. Note that they both have unique ways of calculating a "visibility" score based on the rankings where a page/site appears, and these, along with the differences in which keywords they're monitoring, likely lead to imperfect overlap. Who are the Winners in the Farmer Update? Again, we've got some data from Sistrix:   And from SearchMetrics:  Domain OPI_today OPI_last Difference % wikihow.com 455,031 254,087 200,944 79.1% answers.yahoo.com 524,056 406,523 117,533 28.9% ehow.com 944,950 831,961 112,989 13.6% howstuffworks.com 666,073 574,523 91,550 15.9% huffingtonpost.com 1,262,562 1,173,229 89,333 7.6% facebook.com 3,157,406 3,094,804 62,602 2.0% instructables.com 80,142 68,685 11,457 16.7% This data's a bit more curated from SearchMetrics (they appear to be excluding many winners - possibly clients?), and Wikihow is curious because it appears to have gained so strongly in their measurement, but doesn't appear on Sistrix's list. Nonetheless, reviewing these winners and comparing them against the losers does suggest some potential causes, which we'll discuss more below. Do Link Metrics Correlate with the Losers or Winners? Before tackling other types of differences, we wanted to answer a question that Linkscape's web index is uniquely qualified to help handle - are links or link analysis responsible for Google's algorithmic shift? To answer that, we turned to the metrics available in the Linkscape API (most of which you'll see in the mozBar, Open Site Explorer and the Web App). Matt pulled data for each of the winners and losers from Sistrix's data (as we had that several days ago, but only today saw SearchMetrics' post). We then looked at Spearman's correlation coefficient for the winning vs. losing sites against various metrics. The chart below compares the correlations with Linkscape metrics to Sistrix's visibility scores from before and after the update: There's a few interesting takeways from this data: Generally speaking, link metrics on the domain level (Domain Authority, Domain mozRank, etc.) are very well correlated with Sistrix's visibility scores, which suggests that, broadly, links are (probably) quite important for large domains seeking to rank large quantities of content. That's nothing we didn't know, but it's a nice validation of both datasets and conforms to expectations. Prior to the Farmer Update, Linkscape's metrics were considerably better correlated with visibility scores, suggesting that link metrics are no longer as predictive of rankings/visibility as prior to the update (at least, for these sites). We generally interpret that to suggest that link analysis likely wasn't the culprit here - Google's Farmer Update is looking at something else on these sites - perhaps user/usage data, content analysis, page formatting, uniqueness/quality of user experience, etc. The bottom section of the chart is based on an intuition of Tom Critchlow's - that perhaps distribution of links to home vs. internal pages was a metric used in the Farmer Update. The data we collected, however, suggests (though doesn't prove) that's not the case. Remember that correlation is not causation - this data leads us to believe link analysis isn't the culprit and certainly suggests that having good links correlates well with higher rankings/visibility, but there's always the possibility that other factors are at play. Those caveats aside, Tom, Matt and I all feel it's most likely that link analysis wasn't at work here and Google's using something else. What Factors Could Have Caused Lost Rankings? In reviewing the sites that got hit, we were struck by a few interesting, potential culprits. _ An eHow page on the left-hand side and an EzineArticles page on the right   It seemed that sites whose pages had fewer and/or less intrusive blocks of advertisements on them tended to be in the winner bucket, while those with more and more intrusive advertising tended to be in the loser group. Likewise, sites whose UI/design would likely be described as more modern, high quality, thoughtful and "attractive" were winners vs. the "ugly" sites that tended to be in the loser bucket. When it came to user-generated-content (UGC) sites, those that tended to attract "thin" contributions (think EzineArticles, Hubpages or Buzzle) lost, while those with richer, often more authentic, non-paid, and not-intended to build SEO value or links (think Etsy, DailyMotion, LinkedIn, Facebook) won. In the "rich content" sector, pages with less usable/readable/easily-consumable content (think AllBusiness, FindArticles) tended to lose out to similarly content-rich sites that had made their work more usable (think LOC.gov, HuffingtonPost) Based on these, we have some guesses about what signals Google may have used in this update: User/usage data - signals like click-through-rate, time-on-site, "success" of the search visit (based on other usage data) Quality raters - a machine-learning type algorithm could be applied to sites quality raters liked vs. didn't to build features/factors that would boost the "liked" sites and lower the "disliked" sites. This can be a dangerous way to build algorithms, though, because no human can really say why a site is ranking higher vs. lower or what the factors are - they might be derivatives of very weird datapoints rather than explainable mechanisms. Content analysis - topic modeling algorithms, those that calculate/score readability, uniqueness/robustness analysis and perhaps even visual "attractiveness" of content presentation could be used (or other signals that conform well to these). More detailed analysis, particularly of individual pages that won vs. lost, may help to get more insight into these. If you're an SEOmoz PRO member, there's a great discussion going on in the Q+A section and several sites have shared their week-over-week traffic graphs. While some patterns are emerging, there's conflicting signals on virtually everything, so we're not yet confident about solutions. That said, we'll be looking more deeply into this over the weeks to come, and hope to have more to report soon. Do you like this post? Yes No

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Listen to President Obama's Call to Space

Your Daily Snapshot for Thursday, March 3,  2011   Listen to President Obama's Call to Space Today at 5:03 p.m. EST, President Obama will make a phone call to the crews of the Space Shuttle Discovery and the International Space Station. The phone call will be streamed live on NASA TV. Listen to the conversation live on NASA.gov. Photo of the Day   President Barack Obama passes staff from the White House Military Office as he jogs along the Colonnade of the White House following an event that ran late in the State Dining Room, March 1, 2011. The departing officers and members of their families were lined up to take departure pictures with the President in Oval Office. (Official White House Photo by Pete Souza) In Case You Missed It Here are some of the top stories from the White House blog. President Obama on the Tragic Events In Germany President Obama appears briefly during the press briefing to say his thoughts and prayers are with the victims of the attack in Frankfurt as well as their families. Going Further with America's Auto Industry Labor Secretary Hilda Solis relates stories of economic recovery and job creation at auto plants in the Midwest. Nick Jonas Wants Your School to Apply for the Commencement Challenge Nick Jonas encourages students to apply for the Race to the Top Commencement Challenge. The Commencement Challenge gives schools the opportunity to tell us how they are preparing students for college and a career and compete to have President Obama as a commencement speaker. Today's Schedule All times are Eastern Standard Time (EST). 8:00 AM: The Vice President hosts a breakfast meeting with Envoy of the Quartet on the Middle East Tony Blair 9:30 AM: The President receives the Presidential Daily Briefing 10:00 AM: The President and the Vice President meet with his national security team for his monthly meeting on Afghanistan and Pakistan 11:55 AM: The President holds an expanded bilateral meeting with President Felipe Calderón; the Vice President will also attend 12:20 PM: The President holds a one on one meeting with President Felipe Calderón 1:00 PM: The President and President Felipe Calderón hold a joint news conference 1:35 PM: The President meets with President Felipe Calderón for a working lunch 4:30 PM:Open for Questions: America's Great Outdoors 5:03 PM: The President calls the crews of the Space Shuttle Discovery and the International Space Station  Indicates events that will be live streamed on White House.com/Live. Get Updates Sign Up for the Daily Snapshot  Stay Connected     Facebook Twitter YouTube Flickr iTunes         This email was sent to e0nstar1.blog@gmail.com Manage Subscriptions for e0nstar1.blog@gmail.com Sign Up for Updates from the White House Unsubscribe e0nstar1.blog@gmail.com | 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

Mish's Global Economic Trend Analysis

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• Amazon May Cut Ties to California Over Tax Issues; Texas Distribution Site Closed Over Similar Issues Last Month; Litigation Issues Move to Forefront
• Roubini-Founded Consulting Firm Sees $100 Billion in Muni Defaults, Says Current Assumptions "Pollyannaish"; FDIC "Shock Testing" Includes Munis
• USA Incorporated - a Look at the Grim Financial Situation of the USA

Amazon May Cut Ties to California Over Tax Issues; Texas Distribution Site Closed Over Similar Issues Last Month; Litigation Issues Move to Forefront Posted: 02 Mar 2011 08:25 PM PST Cash strapped states are furious with Amazon.Com over sales tax collections. Several states passed laws or have sent Amazon bills. Amazon's response in every case so far is to leave the state. Amazon to close Texas distribution center amid sales tax fight The Statesman reports Amazon to close Texas distribution center amid sales tax fight Online retail giant Amazon.com will close its suburban Dallas distribution center amid a dispute with the state over millions in uncollected state sales taxes, The Associated Press reported Thursday. The AP obtained an e-mail Thursday sent to Amazon employees by Dave Clark, the company's vice president of operations. Clark wrote that the center in Irving will close April 12 because of the state's "unfavorable regulatory climate." Last year the Texas comptroller's office sent Amazon a demand for $269 million in uncollected sales taxes, plus penalties and interest, from 2005 through 2009. The state contends that Amazon.com is responsible for the sales tax it has not collected on online sales made in Texas. The state is seeking money from Amazon because its distribution center in Irving. Under a 1992 U.S. Supreme Court decision, that physical presence means Amazon potentially could be required to collect sales tax on transactions in Texas, according to legal experts. Amazon, which reported $34 billion in sales last year, has also been the target of numerous lawsuits filed by other states seeking sales taxes on online purchases. Amazon officials have not commented publicly on the tax bill from Texas, but the Seattle-based company said in a securities filing last year that it intended to fight the demand. Amazon filed a lawsuit against the state last month, demanding that it produce the audit that it used to arrive at the $269 million figure. In his e-mail to staffers, Clark said Amazon also is scrapping plans "to build additional facilities and expand in Texas, bringing more than 1,000 new jobs and tens of millions of investment dollars to the state." Comptroller Susan Combs has estimated that the state loses $600 million a year from untaxed online sales. The comptroller's office said last year that it has sent demands for payment to other online retailers similar to what it sent Amazon. ACLU, Amazon face North Carolina tax collectors in Seattle court Flashback October 13, 2010: ACLU, Amazon face North Carolina tax collectors in Seattle court North Carolina tax collectors say they want Amazon.com to turn over the names and addresses of customers in their state and a description of all purchases so they can get the sales-tax money they're owed. But the American Civil Liberties Union argues that if Amazon is forced to comply with North Carolina's data demands, Internet users would start to think twice about buying controversial books, music and movies, violating their constitutional rights to free speech. Amazon, which is being audited in North Carolina, says it has provided massive amounts of data about sales to state residents since 2003, including the city, county and ZIP code to which an item was shipped, the product code and total transaction price, but it did not turn over names and addresses. Amazon says disclosure of such data would have a chilling effect on people's willingness to buy books, music and other "expressive works" that might reveal an intimate fact about them. The ACLU agrees, saying the seven Amazon customers it represents include an elected official in Asheville, N.C., who is an atheist. "The intervenors have bought books about divorce, atheism, personality disorders, cancer and numerous politically charged issues," said ACLU lawyer Aden Fine. "It's no surprise the intervenors want to keep that information private and free from government scrutiny." North Carolina is one of several financially strapped states that have made more of an effort to collect sales tax from online purchases in the past two years. While the recession has hit many stores hard, Internet-only retailers continue to grow as shoppers become more comfortable buying online. North Carolina argues that because many online shoppers never pay sales tax, Amazon enjoys an unfair advantage over bricks-and-mortar stores. (North Carolina merchants collect state and local sales tax of 7.75 percent in most counties.) Under a 1992 U.S. Supreme Court ruling, North Carolina cannot force Amazon to collect its sales tax if it doesn't have a physical presence in the state. Amazon has no offices or warehouses in North Carolina, so state lawmakers last year decided the company's relationships with local marketing affiliates amounted to a physical presence. Amazon responded by severing ties with its North Carolina affiliates, a move it also made in Rhode Island and Colorado. A few days after Amazon filed its lawsuit, North Carolina offered a deal to Internet retailers, saying it would give them until the end of August to sign an agreement to begin collecting sales tax on products sold to state residents. In return, the state would not come after them for years of back taxes, penalties or interest, and it would not demand data about customers who bought from them. Of about 450 e-commerce companies that received the offer, 24 entered into an agreement with North Carolina, said revenue-department spokeswoman Beth Stevenson. The state estimates it will lose $162 million in uncollected sales tax from online purchases this year. Meanwhile, U.S. Rep. Bill Delahunt, a Democrat from Massachusetts, has introduced federal legislation that would allow states to require online retailers to collect sales tax regardless of whether they have a local presence. North Carolina Drops Lawsuit Against Amazon Flash Forward February 12, 2011: North Carolina Drops Lawsuit Against Amazon You probably are aware that online vendors – such as Amazon – do not charge sales tax to customers outside their home state. You also know that this has created much the controversy with the states, ever eager to tax to anything that moves within their borders. To be fair, if a person went a sticks-and-bricks store to purchase an item, the transaction would be sales taxable. It is the intermediation of the internet that presents the problem. And it is a problem. For example, I recently purchased an item from Britain. Would it be reasonable for that vendor to charge me Kentucky sales tax, as I live in Kentucky and the transaction would otherwise go untaxed? NC went after Amazon, requesting records of Amazon's transactions with North Carolina residents. Think about this for a moment. The state is forcing a company to release its records about you. You are not involved in the litigation; heck, you are not even aware of the litigation. The privacy concern here is staggering. The American Civil Liberties Union joined in a lawsuit against NC, and very recently NC settled the case. The state agreed to pay almost $100,000 in legal fees and ceased its action, but it reserved the right to go against Amazon and/or its customers in the future. North Carolina had previously gone after Amazon for sales tax on the argument of economic nexus. This means that a company has "nexus" with a state if it derives a financial benefit from commercial transactions within that state. This is an interesting argument, in that a variation of that argument would subject me to New Zealand taxes for ordering the Lord of the Rings video trilogy. In Amazon's case, NC argued that the economic nexus was provided by the affiliates, which are blogs or other online sites that provide links to products and/or offer coupons. I listen to online radio, for example. If a particular song captures my ear, I can click on the site, find out the artist and likely have a link to purchase the artist's CD. That is an example of an affiliate. North Carolina continued to chase Amazon for taxes before those affiliate ties were severed, resulting in the settlement mentioned above. Do you see any winner in this story? The Court Ruling Please consider the Amazon, North Carolina, ACLU Privacy Lawsuit Settlement U.S. District Judge Marsha Pechman ruled last October that the North Carolina Department of Revenue had overstepped its boundaries with its request for personal information, and noted that there is "no legitimate need" for them to have such information. "The fear of government tracking and censoring one's reading, listening and viewing choices chills the exercise of First Amendment rights," said Pechman. According to Rudinger, Amazon was not part of the settlement, and it was unclear whether Amazon's lawsuit regarding the state's audit was pending on appeal. In addition to Amazon, the North Carolina Department of Revenue is also facing lawsuits from many online travel companies such as Travelocity.com, Travelscape, Hotels.com, Trip Network Inc. and Orbitz due to the state and counties' tendencies to "arbitrarily change the contracts" they have with hotels in North Carolina. Texas Tries a Different Tact Unlike North Carolina, instead of requesting information from Amazon, Texas Sends Amazon a $269 Million Sales Tax Bill As states grapple with increasingly squeezed budgets, one simmering battle -- trying to collect sales taxes from retailing behemoth Amazon has heated up considerably over the past year. The jury's still out on how much money states like Rhode Island and North Carolina (which is thick in litigation with Amazon over this very issue) will get from online sales-tax initiatives. But Texas has issued its own bill to Amazon -- to the tune of $269 million. Not Really Doing Business in Texas? The issue of uncollected sales tax runs deeper in Texas because Amazon maintains a distribution center in Irving (close to Dallas-Forth Worth International Airport), which it opened in 2006. Two years later, the Texas comptroller's office launched an investigation into Amazon's bifurcated status. The company defended its lack of sales tax collection by saying Amazon doesn't actually own the distribution center. It's owned by a subsidiary, Amazon.com KYDC LLC, which is technically based in Kentucky. Assigning the distribution center to a different holding company, by Amazon's logic, means it doesn't have nexus there -- and that's why it feels it's off the hook. Of course, Texas disagrees, having estimated it loses $600 million a year from untaxed online sales. With a bill sent to Amazon, that opens the door to long-expected litigation between the two parties as well as to the possibility that other states will jump on the collection bandwagon. It may also hamper the retailer's plans to open several more distribution centers around the country because the prospect of sales tax collection may prove too much -- and too costly -- of a headache. Amazon Threatens to Leave 10,000 California Affiliates Inquiring minds are investigating a March 2, 2011 post on Bloomberg: Amazon.com Threatens to Cut Ties With California Affiliates Over Tax Issue Amazon.com Inc. (AMZN), the world's largest online retailer, has threatened to sever ties with more than 10,000 affiliates in California amid a dispute with the state over proposed taxation of Internet purchases. Four state proposals aimed at forcing Seattle-based Amazon to collect taxes from residents may be unconstitutional and lead to job losses, Paul Misener, Amazon's vice president for global public policy, wrote in a letter to the California Board of Equalization. Amazon's affiliates put ads for the retailer on their websites and then get compensation when shoppers click through and buy items. Californians could still shop at Amazon.com, though state businesses would miss out on the ad sales, potentially hurting tax revenue, the company said in the letter. When other legislatures passed similar provisions, Amazon terminated its affiliate relationships and then collected no sales tax for those states, according to the letter. Amazon and California tussled over the tax issue in 2009, when the state considered a similar measure. Governor Arnold Schwarzenegger vetoed the bill after Amazon said it would terminate the affiliate relationships, according to the letter. That same year, Amazon cut ties with affiliates in Rhode Island, North Carolina and Hawaii over tax disputes. I am an Amazon affiliate in Illinois. I make 30 cents or something when someone buys a book on my recommended reading list. It does not cost anyone a penny. Indeed, if someone would rather that 30 cents go to Amazon instead of me all they have to do is remove the tag "mishsglobalec" from the link. Note that 30 cents is a made-up number because it varies by price and I do not even know the percent. My recent statement shows a total of $246.62. I wonder how many books that is. Will getting rid of 10,000 Amazon affiliates in California accomplish anything? If so what, and in what timeframe? Consider my blog for example. Will I change my recommended reading list or stop pointing to Amazon? The answer is no. Amazon provides a good service and fast execution in my opinion. I am not using Amazon for the money. Others may be, but how much would it matter? It will be interesting to see how this plays out. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Roubini-Founded Consulting Firm Sees $100 Billion in Muni Defaults, Says Current Assumptions "Pollyannaish"; FDIC "Shock Testing" Includes Munis Posted: 02 Mar 2011 11:07 AM PST A consulting firm founded by economist Nouriel Roubini said there could be close to $100 billion of municipal-bond defaults over the next five years as state and local government-debt problems damp the U.S. economic recovery. That figure would by most estimates represent a significant increase over defaults in recent history, but it doesn't appear to be as dire as a prediction last year by analyst Meredith Whitney. The report, by David Nowakowski and Prajakta Bhide at Roubini Global Economics and released to clients Monday, says state and local debt problems aren't "systemic" in nature, nor will they "infect the financial system." The authors of the report declined to comment. Most of the defaults will occur among special government projects and revenue-generating entities that aren't considered viable, it says. "Defaults will continue to be isolated events." The Roubini report says that relying on the history of low default rates in the municipal debt market is "Pollyannaish." "Avoiding a crisis will involve real austerity that has only partially been implemented thus far," the report states. Pollyannaish but not Systemic? I do think there is a systemic concern in regards to pension funding. State public pension funds are $3 trillion in the hole and that is a systemic concern in and of itself. I do not have an estimate for city and county public pension plans but that could easily be another $3 trillion in underfunding. Cities and states are without a doubt insolvent as I type. Oakland, Detroit, Miami, San Francisco, Los Angeles, Houston, Cincinnati, Newark, and countless other cities big and small are insolvent. It is unclear if Roubini Global Economics considers those pension problems as a separate issue. I will see if I can get an answer. Otherwise, my assessment is similar, at least for now. I do not think we see a massive wave of defaults on bondholders. The biggest defaults will affect pension plans (assuming nothing is done), not bondholders in general. Promises that cannot be met won't, and public pension plans are near the top of the list. Nonetheless, the defaults that do occur will rattle the municipal bond market and deservedly so. Bank Borrow-Short Lend-Long Schemes I do have another systemic issue in mind. I discussed it in The Next Borrow-Short Lend-Long Guaranteed to Blow Up Bank Lending Scheme; Citigroup, Chase, Bank of America CD Ripoff The issue is banks have gone straight to direct issuance of loans to municipalities, bypassing the bond market. Banks are lending straight to municipalities at rates as low as 3.85% for 21 years. Those terms are begging for trouble. Here is my comment from the above link. 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? Please see my discussion for more details. FDIC Shock Testing In response to that post, I received an interesting Email from "ABO" a Bank Owner and CEO regarding new FDIC shock testing exams. ABO writes ... Hello Mish You nailed it on the CDs. I just got done with an FDIC exam and they requested shock testing 400 basis points up and nothing down. Hard to go below zero. In terms of 5 to 7 year CDs a 15 year GNMA is probably a better way to go. Don't buy them at a premium and look at average life of 4 to 5 years. They are zero risk based as well. Anyway nice job I could not agree with you more. Last week a Bloomberg columnist asked for details regarding that stress test. Unfortunately, not only are the findings confidential, but so are the questions. However, I do have a bit more to add from a second email exchange with ABO. Shock Testing Now Includes Munis for First Time ABO Writes ... The reports and content are confidential, otherwise I would be happy to help you. They also asked us to audit the Municipal bond portfolio for quality as well. That was also a first. What I told you is 100% accurate. Previously we used a model of 300 basis points up or down. That was the threshold of the shock test. The change certainly makes sense in that not much chance of rates going down by 300 basis points. I would like to see the US Treasury shock testing for 400 basis points! By the way we are a very high quality bank with no problems so the request was not about us. We sort of live in the good old days of banking with excess capital and a 50% loan to deposit ratio with no wholesale funding. I am a strong liquidity guy as well. I asked ABO for a contact at the FDIC so I can raise my concerns directly. I do not have a response on that yet. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

USA Incorporated - a Look at the Grim Financial Situation of the USA Posted: 02 Mar 2011 01:56 AM PST Inquiring minds are digging deep into a 266 page PDF called USA Inc. a basic summary of America's financial statements. It is loaded with stunning graphs and charts on Social Security, Medicare, Medicaid, TARP Bailouts, Fannie Mae and Freddie Mac, military spending, tax revenues, and various projections. Here are a few images, but please give the document a closer look when you have a few moments. Click on any chart to see a sharper image. Cash Flow Expenses at a Glance Unfunded Liabilities Federal Spending as Percent of GDP Note this mess started with the creation of the Fed Growth in Entitlement Spending Take a step back, and imagine what the founding fathers would think if they saw how our country's finances have changed. From 1790 to 1930, government spending on average accounted for just 3% of American GDP. Today, government spending absorbs closer to 24% of GDP. Spending + Interest vs. Revenues By 2025, entitlements plus net interest payments will absorb all – yes, all – of USA Inc.'s revenue, per CBO. Less than 15 years from now, in other words, USA Inc. – based on current forecasts for revenue and expenses - would have nothing left over to spend on defense, education, infrastructure, and R&D, which today account for only 32% of USA Inc. spending, down from 69% forty years ago. This critical juncture is getting ever closer. Just ten years ago, the CBO thought federal revenue would support entitlement spending and interest payments until 2060 – 35 years beyond its current projection. To 25 Countries in Defense Spending Entitlement Spending by Household Medicaid Underfunding When Medicaid was created in 1965 to provide health insurance to low income Americans, 1 in 50 Americans received Medicaid, now 1 in 6 Americans receives Medicaid. Healthcare Spending Social Security Workers vs. Retirees Social Security Dependents GSE, Fannie Mae, Freddie Mac Expansion If that is not a shocking state of affairs, what is? There are lot more charts and graphs in the PDF. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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