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duminică, 15 iulie 2012

Mish's Global Economic Trend Analysis

Only 23% of US Companies Plan to Hire in Next 6 Months; "Lights Out" Moment Coming Up
ECB Advocates Forcing Senior Bondholders to Take Losses on Spanish Debt; What's It Mean?
Loan Moratorium in Italy for Small and Medium-Sized Businesses; GDP Expected to Contract 2 Percent
Political Cartoons Place Blame on Scranton PA Bankruptcy Saga Squarely Where it Belongs: Public Unions
U.S. Building Criminal Cases in Libor Scandal; Where Does Mish Stand?

Only 23% of US Companies Plan to Hire in Next 6 Months; "Lights Out" Moment Coming Up

Posted: 15 Jul 2012 09:50 PM PDT

According to the latest survey from the National Association for Business Economics (NABE) hiring over the next six months looks grim.

A NABE Poll Shows Fewer U.S. Companies Planning to Hire

Only 23 percent of the firms polled in June plan to add to staff in the next six months, the National Association for Business Economics said on Monday.

NABE's prior survey, conducted in late March and early April, had shown 39 percent of companies planning to add workers.

A July 6 Labor Department report, showed companies asked employees to work longer hours last month, even though they slowed the pace of hiring.

Among companies that produce goods rather than provide services, the impact was even greater, with nearly four in five reporting a Europe-driven decline in revenues.

Three months earlier, only about a quarter of total firms polled thought sales had fallen

Lights Out Moment Coming Up

This report is consistent with my report US Manufacturing ISM Contracts for First Time in Three Years; New Orders and Prices Plunge; Perfect Miss: 0 of 70 Economists Polled By Bloomberg Expected Contraction

Hiring plans are also consistent with the Case for US and Global Recession Right Here, Right Now.

All of a sudden, consumers and businesses alike are going to have a "lights out" moment where orders dry up, hiring dries up, and unemployment heads North.

If the NABE poll is correct (and it is certainly consistent with other data), that time has arrived.

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

ECB Advocates Forcing Senior Bondholders to Take Losses on Spanish Debt; What's It Mean?

Posted: 15 Jul 2012 03:49 PM PDT

In a surprise but welcome move, the ECB Shifts View on Bond Losses.

The European Central Bank, in a sharp turnaround, has advocated imposing losses on holders of senior bonds issued by the most severely damaged Spanish savings banks, though finance ministers have for now rejected the approach, according to people familiar with discussions.

The ECB's new position was made clear by its president, Mario Draghi, to a meeting of euro-zone finance ministers discussing a euro-zone rescue for Spain's struggling local lenders in Brussels the evening of July 9.

The ministers rejected the advice out of concern that financial markets would react badly to the decision. [Mish translation: Finance ministers want to screw the taxpayers to save the wealthy].

Imposing losses on bondholders reduces the amount of money taxpayers need to inject into struggling banks. One euro-zone official said the desire to avoid putting more public money at risk than necessary was one reason behind the ECB's change of heart since 2010. The ECB's new stance can also be explained by the different scenarios, including the existence of a bank-restructuring framework for Spain that didn't exist for Ireland, and the fact that the Irish government, unlike Spain's, guaranteed much of its banks' debts.

What's It Mean?

Take your pick from the following possibilities.

Losses at Spanish banks are way bigger than reported by Spain's prime minister Mariano Rajoy.
Losses at Spanish banks are such that they would blow out the entirety of the ESM
ECB president Mario Draghi is concerned about a reaction from the German constitutional court
German chancellor Angela Merkel warned Draghi in no uncertain terms that German taxpayers would not pony up any more money for bailouts.
ECB has recognized the approach in Ireland was a failure

I suspect all of those are true. I also expect Irish citizens will be hopping mad over how they were treated (as well they should be).

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

Loan Moratorium in Italy for Small and Medium-Sized Businesses; GDP Expected to Contract 2 Percent

Posted: 15 Jul 2012 12:47 PM PDT

Italy's new economic minister expects 2012 GDP fall "little less" than 2 percent.

Italy's GDP is expected to shrink "a little less" than 2 percent, the country's new economy minister Vittorio Grilli said in a newspaper interview published on Sunday.

Grilli, who took over the economy portfolio from Prime Minister Mario Monti on Wednesday, made his comments in a long interview with the Corriere della Sera newspaper.

The Bank of Italy governor has forecast that the economy will shrink by 2.0 percent and employers' lobby Confindustria has forecast a contraction of more than 2.4 percent.

Optimistic Politicians

Given that politicians are nearly always overly-optimistic in such forecasts, look for a collapse in GDP closer to 3% than 2%.

Italy Loan Moratorium for Small and Medium-Sized Businesses

Please note that things are so bad that Italian Loan Moratorium Approved.

Small and medium-size Italian companies will be permitted to suspend payments on 3.6 billion euros ($4.4 billion) of debt for as long as a year, the Finance Ministry of Italy said on Saturday.

Since a loan moratorium began on March 1, Italian companies have made 16,000 applications to postpone 5.5 billion euros of payments, the ministry said. About 10,000 applications were processed through May, and the rest are being addressed.

The nation's business associations and the Italian Banking Association agreed this year to extend an earlier moratorium to cope with the country's fourth recession since 2001. The previous moratorium, begun in August 2009, allowed 260,000 companies to delay 15 billion euros of payments, the association said in February.

This moratorium is nothing more than an attempt to keep bankrupt and underperforming businesses alive. In a free market, uncompetitive businesses should fail. Thus, the moratorium is a mistake.

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

Political Cartoons Place Blame on Scranton PA Bankruptcy Saga Squarely Where it Belongs: Public Unions

Posted: 15 Jul 2012 10:54 AM PDT

It's time once again for Sunday funnies. This time, let's take a look at Daryl Cagle's Cartoon Web Log.

Cagle asked John Cole, the staff cartoonist for the Scranton Times-Tribune , what his thoughts were on the news. Cole went back to November of 2010 and came up with 7 cartoons. Here are two of them.

Daryl writes "A state court sided with the police and fire unions, thus putting Scranton on the hook for tens of millions of dollars to cover back pay and future pay raises. The city hadn't anywhere near the means to cover the tab. It still doesn't, in fact."

Daryl writes "Around Christmas last year, the state Supreme Court sided with the city's police and fire unions, effectively saying that the state's recovery plan cannot preempt arbitration or the unions' contracts and ending the city's legal argument. This set the stage for the city's current financial nightmare."

For background on this story please see Scranton Mayor Slashes All Public Worker Wages to $7.25 per Hour, Including Police, Fire, His Own; City Effectively Bankrupt

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

U.S. Building Criminal Cases in Libor Scandal; Where Does Mish Stand?

Posted: 15 Jul 2012 01:05 AM PDT

Numerous people have asked me to comment on the LIBOR rate-rigging scandal. I have not done so previously because I had little to add.

Zerohedge has done a fine job breaking every story. So have others.

I prefer to comment when I have an edge of some kind: a different angle, a different source, or if I can offer a more comprehensive analysis than other writers.

As pertains to LIBOR, I still have no earth-shattering reports or breaking news. Rather, I am commenting because of repeated questions as to where I stand on the story.

Given the nature and magnitude of the story, that is a fair question from readers.

Criminal Investigations Pending

Before discussing where I stand, let's consider the latest headline from the New York Times: U.S. Is Building Criminal Cases in Rate-Fixing

As regulators ramp up their global investigation into the manipulation of interest rates, the Justice Department has identified potential criminal wrongdoing by big banks and individuals at the center of the scandal.

The department's criminal division is building cases against several financial institutions and their employees, including traders at Barclays, the British bank, according to government officials close to the case who spoke on the condition of anonymity because the investigation is continuing. The authorities expect to file charges against at least one bank later this year, one of the officials said.

Authorities around the globe are examining whether financial firms manipulated interest rates before and after the financial crisis to improve their profits and deflect scrutiny about their health. Investigators in Washington and London sent a warning shot to the industry last month, striking a $450 million settlement with Barclays in a rate-rigging case. The deal does not shield Barclays employees from criminal prosecution.

The multiyear investigation has ensnared more than 10 big banks in the United States and abroad. With the prospects of criminal action, several firms, including at least two European institutions, are scrambling to arrange deals, according to lawyers close to the case. In part, they are trying to avoid the public outcry that stemmed from the Barclays case, which prompted the resignation of top executives.

Given the scope of the problems and the number of institutions involved, the rate-rigging investigation could provide a signature moment to hold big banks accountable for their activities during the financial crisis.

"It's hard to imagine a bigger case than Libor," said one of the government officials involved in the case.

According to people briefed on the matter, the Swiss bank UBS is among the next targets for regulatory action. The Commodity Futures Trading Commission is pursuing a potential civil case against the bank. Regulators at the agency have not yet decided to file an action against the bank, nor have settlement talks begun.

UBS has already reached an immunity deal with one division of the Justice Department, which could protect the bank from criminal prosecution if certain conditions are met. The bank declined to comment.

What is LIBOR?

For those not up-to-date on the story, LIBOR stands for London Interbank Offered Rate. It is the benchmark measure of how much banks charge each other for bank-to-bank lending.

Many mortgages and trillions of dollars in derivatives are based off LIBOR.

LIBOR works off the "honor system". Banks are asked how much they would have to pay to borrow from other banks.

My Take

Long-term readers should know where I stand. LiborGate is an open-and-shut case of criminal fraud.

When banks have a vested interest to lie, especially when they think it will all be swept under the rug later, they lie. And lie they did. Traders quoted prices requested by bank officials. Emails prove it, as widely reported elsewhere.

I want to see bank executives criminally charged.

Moreover, I am tired of bank responses we will put "better firewalls in place".

F*** "Better" Firewalls

The only firewall that makes sense for LIBOR is actual bank-to-bank transactions.

In the case of bank proprietary trading in general, the only thing that will work is a complete physical separation of entities. Yes, that means breaking up banks. Expecting employees to not talk to each other is simply ridiculous.

Banks should be banks, not hedge funds.

I welcome the return of Glass-Steagall. No doubt, that statement will have some Libertarians howl. I don't care. Regulations that prevent fraud and preserve property rights are entirely fine by me. Libertarianism is not the same as anarchy.

That said, the root cause of this mess is an unsound financial system and fractional reserve lending (not the prior removal of Glass-Steagall).

Banks take advantage of the system, every way they can, legal or illegal.

The system needs to change, in many ways, in many places. In the meantime, criminal prosecution of those who break laws is desperately needed.

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

Content Strategy for Small Businesses

Content Strategy for Small Businesses

Posted: 13 Jul 2012 07:08 AM PDT

Content strategy has always been a valued part of SEO and, with Google's recent updates, it's become increasingly important. No matter what size your business is, having a regular flow of good quality content on your site is essential.

However, content does take time to produce and, when you're a small business, it can be hard to find the time or people to produce regular content for your site.

There are several options for small businesses to make the most of their resources and create a site with a steady stream of relevant, useful content. We'll go through some of them here in order to help those of you who are finding it difficult to know where to start.

Have a blog

If you're going to start creating a stream of content for your website, then the easiest way to integrate it is by starting a blog. It's fairly simple to add to the structure of your website and gives you the opportunity to write pieces on everything from current industry trends to your business's achievements. It gives you a space to talk directly with your customers and perhaps be a little less formal than normal, thus allowing you to create a more personal relationship.

It also gives you a set timetable for content delivery – for example, you may decide to publish one blog post a week. Knowing this and having a set deadline means you can easily factor it into your weekly schedule. It also gives you a chance to plan out topics in advance and note down good ideas as they come along, whilst keeping space for flexibility in case anything news-worthy suddenly happens in your industry.

Blogs are also great because they allow for customer interaction. Make sure you have a comment section underneath every post and interact with your readers. Reply to their queries and encourage further discussion on the topic.

Have a plan for content distribution

So, you have a blog with a regular content schedule. Great. But what about getting people to read it? You need to make sure that your content is publicised. Use Facebook and Twitter to spread the word. You could set your blog posts to feed automatically into these social media sites. Allow readers to see a snippet of the text and provide a link back to your site where they can read the rest of it.

You could even start an email based newsletter. You might not want to send this out every week, but a monthly newsletter with links to your top blog posts, as well as a roundup of any important company activity can be another good way to get more traffic onto your site. Make sure you create an option on your blog and on your social media sites for people to sign up to receive this.

Another option is to set up an RSS feed. This is can be a great tool for pulling in more readers. Allowing people to subscribe to your RSS feed means that whenever you add new content to your site they will get a notification about it and a link, which will hopefully entice them to visit your site. You can also submit your feed to sites such as Alltop and Technorati who will include links back to your blog on their site, thus widening the number of people who might find your site whilst searching online.

Hire (or rent) someone who can write

This may seem to be an obvious point, but it's essential that you have someone within your company who can write good quality posts. Writing isn't everyone's forte and, if you don't have someone in your company who can do it, you might want to consider getting someone in specifically for content.

Naturally, hiring an extra person can be a big step for a small company, so you don't necessarily have to go this far. What you can do instead is outsource your content needs to freelance writers. There are plenty of sites – from Copify to ProBlogger – which allow you to post a title and brief for a piece and pay someone to write it for you.

One quick warning, not everything produced on these sites is of the highest quality; sometimes the content you get back doesn't read the way you were hoping.

There are a couple of things you can do about this. Firstly, when you write briefs, make sure they are detailed enough to explain what you really want. Secondly, you can normally ask for changes to be made to the piece by the author, and you do not have to accept it until it is satisfactory.

However, what you might also find useful is having someone who can dedicate half an hour or an hour to proofreading and editing each piece of content you receive. This can be a good way to check that the quality is good, as well as ensuring it gets the right message across and does so in the appropriate tone for your site.

You're ready to go!

If you put these simple guidelines into action you should be good to go. Get your plan together, check you have everything you need, and get started. As Google focuses more and more on content, having a good quality blog can only enhance your site. It should help your rankings and also encourage more people to visit, and hopefully link to, your site. So what are you waiting for?!

Image credit: Saad Faruque

Seth's Blog : It's easier to love a brand when the brand loves you back

It's easier to love a brand when the brand loves you back

Worth thinking about that the next time you're annoyed at a customer.

Or when you're dreaming up a policy designed to punish a few outlier customers while it actually annoys all of them.

Tell me again why the gift certicates you sell have an expiration date?

• Email to a friend •

sâmbătă, 14 iulie 2012

Mish's Global Economic Trend Analysis

Reader Questions on "Credit-Worthiness": Did Banks Give Mortgages to Non-Creditworthy Borrowers?

Posted: 14 Jul 2012 02:01 PM PDT

I received several emails from readers regarding Can Bernanke Force Banks to Lend by Halting Interest on Excess Reserves?

Here are the specific sentences in question:

Banks lend if and only if both of the following are true.

They are not capital impaired
They have credit-worthy borrowers willing to borrow.

Reader Gil writes ....

Hello Mish
I must take exception to #2.

Did the banks not lend to anyone that walked through their doors just a few years ago without asking questions and without income to repay the loans?

Yes, I know the Fed "forced" them to do it, but ....
Any thoughts on that?

Thanks, Gil

Meaning of "Credit-Worthy"

For starters let's quickly discard the notion the Fed forced banks to lend. The Fed has no such power. If the Fed did, there would be more lending now.

My statement of lending conditions above are accurate. It all depends on the meaning of "Credit-Worthy".

All I meant is banks thought they would be repaid. More accurately, banks extend credit if they think loans will result in profits.

Did Banks Give Mortgages to Non-Creditworthy Borrowers?

Certainly banks do not lend if they expect losses.

Recall that banks did not believe that people would walk-away! It had never happened before. People historically paid their mortgage before paying credit card bills. There was much discussion of this before it happened.

I predicted mass "walk-aways", banks certainly didn't.

Five Reasons Banks Extended Credit in Housing Bubble Years

People would pay mortgage loans because they always did
Housing prices would rise sufficiently to cover defaults
Mortgage interest rates to subprime borrowers were high enough to cover risk
Defaults would happen over a long period of time, not quickly concentrated
Banks could pass the trash to Fannie Mae and Freddie Mac (without clawbacks for non-performance), and/or loans could be sliced and diced in tranches to investors

If any of those conditions were true, then banks were indeed making loans to "credit-worthy" borrowers. Subprime borrowers did pay a huge penalty rate. Multiple combinations of the above five points are likely.

Huge Mistakes Coupled With Greed

Banks made huge mistakes because all five conditions above failed, far sooner than banks or the Fed expected. Recall that Bernanke did not believe there was a housing bubble at all!

Thus, at the time, banks thought they were making creditworthy loans.

They thought wrong, in a big way, and they were very greedy as well. Greed coupled with poor thinking is a very bad combination.

What About Now?

Banks are not lending now for three reasons

Banks are capital impaired
Banks are worried about being repaid
The relatively small pool of credit-worthy borrowers who banks would lend to right now, do not want credit

Stunning Change in Attitudes

Another way of looking at the five points pertaining to the "housing bubble years" is there has been a stunning change in attitudes regarding how banks perceive "credit-worthiness" as well as a stunning change in willingness of consumers to go deeper in debt.

Conclusion: Then as now, banks only lend to customers they think are credit-worthy.

However, Attitudes on what it takes to be "credit-worthy" have changed.

Attitudes are the key to understanding this apparent conundrum.

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

Extreme Drought Hits Much of US; 1000 Counties in 26 States Named Disaster Areas; Ranchers Sell Herds as Feed Costs Skyrocket

Posted: 13 Jul 2012 11:32 PM PDT

Corn, soybean and wheat prices have soared lately due to poor crop estimates amid extreme drought conditions in 26 states.

Let's take a look at those conditions, followed by charts of agricultural commodities

The Atlantic Wire reports U.S. Declares the Largest Natural Disaster Area Ever Due to Drought

AP Photo/Seth Perlman

The blistering summer and ongoing drought conditions have the prompted the U.S. Agriculture Department to declare a federal disaster area in more than 1,000 counties covering 26 states. That's almost one-third of all the counties in the United States, making it the largest distaster declaration ever made by the USDA.

The declaration covers almost every state in the southern half of the continental U.S. However, it does not include Iowa, which is the largest grain and corn producer in the U.S.

About 53 percent of the country is facing "moderate to extreme drought" so far this summer.

The New York Times reports Drought Worsens for Farmers and Ranchers.

More than 1,000 counties in 26 states across the country were named natural-disaster areas on Thursday in a statement from the U.S. Department of Agriculture. It was the single largest designation in the program's history and the worst drought since 1988, government officials said.

USDA Announces Disaster Areas

The USDA announces Streamlined Disaster Designation Process with Lower Emergency Loan Rates

July 11, 2012—Agriculture Secretary Tom Vilsack today announced a package of program improvements that will deliver faster and more flexible assistance to farmers and ranchers devastated by natural disasters. ....

SECRETARY VILSACK: Thank you, and thanks to all who are on the call. I am joined today by Juan Garcia, FSA, and Brandon Willis, who is from my office, and if there are very detailed questions, I may ask either one of those gentlemen to help me.

We just had a crop report today, which indicated a significant reduction in corn production as well as bean production, lower forecast for wheat, soybean, soybean oil, soybean meal, and corn, lower forecast for milk, beef, pork, broilers, and turkey. And it's obvious that weather is having an impact on the estimates of crops. Despite the fact that we have more acreage planted this year, we still are looking at significant reductions, and despite the fact that we may even with the corn estimates, as they have been reduced, would still have the third largest crop of corn in our history, nearly 13 billion bushels, and a very large soybean crop. We need to be cognizant of the fact that drought and weather conditions have really impacted and affected producers around the country.

USDA Drought "Fast-Track" Map

Please consider the USDA Drought "Fast Track" Map

Fast-Track means farmers and ranchers will be able to access "faster and more flexible assistance". Actual drought conditions are worse than the above map indicates as shown by the following map.

U.S. Drought Monitor

Click here for a very nice 12-week time-lapse drought animation of the above chart.

Alabama Drought

The Gadsen Times reports Drought emergency declared in 33 Alabama counties

Corn wilts in high temperatures in a filed along Upper River Road in Priceville, Ala., Friday, June 29, 2012, as temperatures exceeded 100 degrees. Thirty-three Alabama counties, mostly in the Southern part of the state, are under a severe drought emergency. (Brennen Smith | Decatur Daily | Associated Press)

Eastern Iowa in 'severe drought'

The USDA reports Eastern Iowa in 'severe drought'

An eastern Iowa triangle from the Quad Cities and Dubuque extending west to Cedar Rapids and near Waterloo has joined Illinois, Indiana and Missouri as places in "severe drought."

The updated U.S. Drought Monitor map issued Thursday by the U.S. Department of Agriculture, the National Weather Service and the University of Nebraska returned western Iowa to abnormally dry status after a week of virtually no rainfall.

The weather service forecasts what it calls a "slight chance" of thunderstorms for today and Saturday, with temperatures returning to the mid-90s by Monday.

Midwest drought is severe or extreme in most of Missouri, Illinois and Indiana. The western half of Nebraska is now in severe drought and parts of western Kansas are experiencing extreme drought, according to the updated map.

Ranchers Sell Herds as Feed Costs Skyrocket

Reuters reports Ranchers Sell Herds as Feed Costs Skyrocket

Ranchers are rushing to sell off some of their cattle as the worst drought in nearly 25 years dries up pastures, thins hay supplies and sends feed costs sky-rocketing.

The drought in the Midwest follows another one last year in the southern Plains. The 2011 drought was centered in the heart of cattle country in Texas and helped to shrink the U.S. herd to about 91 million head, the smallest in about 60 years, while sending beef prices to record highs.

A rush by ranchers to sell cattle, and in some cases hogs, could force consumers to dig deeper into their wallets next year as smaller herds can lead to higher beef and pork prices.

There has been a big jump in the number of cows slaughtered in the United States. Cows are critical to growing the beef herd, fewer cows means fewer beef cattle later. In the week ending June 30, 52,700 cows were slaughtered, 3 percent more than a year ago during the peak of the Plains drought, USDA data showed.

Corn

click on any chart for sharper image

Soybeans

Wheat

Going long agricultural commodities in early June was a winner. However, I cannot divine the weather.

The thing that amazes me in all of this is the USDA still expects the third biggest corn harvest ever.

If the drought in Iowa worsens, that is not going to happen.

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

duminică, 15 iulie 2012

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

Content Strategy for Small Businesses

Content Strategy for Small Businesses

Seth's Blog : It's easier to love a brand when the brand loves you back

It's easier to love a brand when the brand loves you back

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