joi, 21 august 2014

Chart of the Week: Auto Production Hits Highest Level in 12 Years

The White House Thursday, August 21, 2014
 

Chart of the Week: Auto Production Hits Highest Level in 12 Years

The American auto industry remains a cornerstone of our economy -- a key source of our ability to export, innovate, and create jobs.

During the Great Recession, our auto sector shed hundreds of thousands of jobs, and production dropped to the lowest level recorded in data going back to the 1960s. In 2009, President Obama stepped in to save the industry from imminent collapse, saving 1 million jobs across the country.

Now, the American auto industry is once again a source of America's economic strength. In fact, the number of cars coming off our assembly lines just reached its highest level in 12 years.

Check out how fast the American auto industry has bounced back under President Obama:

Auto Production at Its Highest Rate Since 2002

 

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First Day at the White House

 
Here's what's going on at the White House today.
 
 
 
 
 
  Featured

First Day at the White House

Ever wondered what a first day as a new employee at the White House looks like?

What about a first day as the very first employee of a brand-new government service designed to remake the way people and businesses interact with their government online?

From parking forms to press conferences, from orientation to setting a new BlackBerry password to meeting with senior advisors, follow along as Mikey Dickerson, Administrator of the newly created U.S. Digital Service, makes his way through day one.

Take a look -- and then pass this one on:

Watch a video on new USDS Administrator Mikey Dickerson.


 
 
  Top Stories

The Attorney General's Message to the People of Ferguson

U.S. Attorney General Eric Holder traveled to Ferguson, Missouri to review the Department of Justice's ongoing independent investigation into the tragic death of 18-year-old Michael Brown. In an op-ed in the St. Louis Post-Dispatch, Attorney General Holder pledged to help find justice for a community that is rightfully hurting and looking for answers.

READ MORE

President Obama: James Foley's Life "Stands in Stark Contrast to His Killers"

Yesterday afternoon, the President made a statement on the killing of journalist James Foley by the terrorist group ISIL. He was 40 years old.

READ MORE

Chart of the Week: Auto Production at Its Highest Rate Since 2002

The American auto industry is once again a thriving source of our economic strength. The number of cars coming off our assembly lines just reached its highest level in 12 years.

READ MORE


 

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Google Webmaster Tools Just Got a Lot More Important for Link Discovery and Cleanup

Google Webmaster Tools Just Got a Lot More Important for Link Discovery and Cleanup


Google Webmaster Tools Just Got a Lot More Important for Link Discovery and Cleanup

Posted: 20 Aug 2014 04:01 PM PDT

Posted by RobertFisher

What if you owned a paid directory site and every day you received emails upon emails stating that someone wants links removed. As they stacked up in your inbox, whether they were pleasant or they were sternly demanding you cease and desist, would you just want to give up? What would you do to stop the barrage of emails if you thought the requests were just too overwhelming? How could you make it all go away, or at least the majority of it?

First, a bit of background

We had a new, important client come aboard on April 1, 2013 with a lot of work needed going forward. They had been losing rankings for some time and wanted help. With new clients, we want as much baseline data as possible so that we can measure progress going forward, so we do a lot of monitoring. On April 17th, one of our team members noticed something quite interesting. Using Ahrefs for link tracking, we saw there was a big spike in the number of external links coming to our new client's site. 

When the client came on board on two weeks prior, the site had about 5,500 links coming in and many of those were less than quality. Likely half or more were comment links from sites with no relevance to the client and they used the domain as the anchor text. Now, overnight they were at 6,100 links and the next day even more. Each day the links kept increasing. We saw they were coming from a paid directory called Netwerker.com. Within a month to six weeks, they were at over 30,000 new links from that site.

We sent a couple of emails asking that they please stop the linking, and we watched Google Webmaster Tools (GWT) every day like hawks waiting for the first link from Netwerker to show. The emails got no response, but in late May we saw the first links from there show up in GWT and we submitted a domain disavow immediately.

We launched their new site in late June and watched as they climbed in the rankings; that is a great feeling. Because the site was rising in the rankings rather well, we assumed the disavow tool had worked on Netwerker. Unfortunately, there was a cloud on the horizon concerning all of the link building that had been done for the client prior to our engagement. October arrived with a Penguin attack (Penguin 2.1, Oct. 4, 2013) and they fell considerably in the SERPs. I mean, they disappeared for many of the best terms they had again began to rank for. They had fallen to page five or deeper for key terms. (NOTE: This was all algorithmic and they had no manual penalty.)

While telling the client that their new drop was a Penguin issue related to the October Penguin update (and the large ratio of really bad links), we also looked for anything else that would cause the issue or might be affecting the results. We are constantly monitoring and changing things with our clients. As a result, there are times we do not make a good change and we have to move things back. (We always tell the client if we have caused a negative impact on their rankings, etc. This is one of the most important things we ever do in building trust over time and we have never lost a client because we made a mistake.) We went through everything thoroughly and eliminated any other potential causative factors. At every turn there was a Penguin staring back at us!

When we had launched the new site in late June 2013, we had seen them rise back to page one for key terms in a competitive vertical. Now, they were missing for the majority of their most important terms. In mid-March of 2014, nearly a year after engagement, they agreed to do a severe link clean up and we began immediately. There would be roughly 45,000 – 50,000 links to clean up, but with 30,000 from the one domain already appropriately disavowed, it was a bit less daunting. I have to say here that I believe their reticence to do the link cleanup was due to really bad SEO in the past. They had, over time, had several SEO people/firms and at every turn, they were given poor advice. I believe they were misinformed into believing that high rankings were easy to get and there were "tricks" that would fool Google so you could pull it off. So, it really isn't a client's fault when they believe things are easy in the world of SEO.

Finally, it begins to be fun

About two weeks in, we saw them start to pop up randomly in the rankings. We were regularly getting responses back from linking sites. Some responses were positive and some were requests for money to remove the links; the majority gave us the famous "no reply." But, we were making progress and beginning to see a result. Around the first or second week of April their most precious term, geo location + product/service, was ranked number one and their rich snippets were beautiful. It came and went over the next week or two, staying longer each time.

To track links we use MajesticSEO, Ahrefs, Open Site Explorer, and Google Webmaster Tools. As the project progressed, our Director of Content and Media who was overseeing the project could not understand why so many links were falling off so quickly. Frankly, we were not getting that many agreeing to remove them.

Here is a screenshot of the lost links from Ahrefs.

ahrefs New and Lost Links March 7 to May 7

Here are the lost links in MajesticSEO.

MajesticSEO Lost Links March to May

We were seeing links fall off as if the wording we had used in our emails to the sites was magical. This caused a bit of skepticism on our team's part so they began to dig deeper. It took little time to realize the majority of the links that were falling off were from Netwerker! (Remember, a disavow does not keep the links from showing in the link research tools.) Were they suddenly good guys and willing to clear it all up? Had our changed wording caused a change of heart? No, the links from Netwerker still showed in GWT; Webmaster Tools had never shown all from Netwerker, only about 13,000, and it was still showing 13,000. But, was that just because Google was slower at showing the change? To check we did a couple of things. First, we just tried out the links that were "lost" and we saw they still resolved to the site, so we dug some more.

Using a bit of magic in the form of a User-Agent Switcher extension and eSolutions, What's my info? (to verify the correct user-agent was being presented), our head of development ran the user-agent string for Ahrefs and MajesticSEO. What he found was that Netwerker was now starting to block MajesticSEO and Ahrefs via a 406 response. We were unable to check Removeem, but the site was not yet blocking OSE. Here are some screenshots to show the results we are seeing. Notice in the first screenshot, all is well with Googlebot.


But A Different Story for Ahrefs


And a Different Story for MajesticSEO

We alerted both Ahrefs and MajesticSEO and neither responded beyond we will look into it canned response. We thought it important to let those dealing with link removal know to look even more carefully. Now August and three months in, both maintain the original response.

User-agents and how to run these tests

The user-agent or user-agent string is sent to the server along with any request. This allows the server to determine the best response to deliver based on conditions set up by its developers. It appears in the case of Netwerker's servers that the response is to deny access to certain user-agents.

  1. We used the User-Agent Switcher extension for Chrome
  2. Next determine the user-agent string you would like to check (these can be found on various sites, one set of examples can be found at: http://www.useragentstring.com/. In most cases, the owner of the crawler or browser will have a webpage associated with them, for example the Ahrefs bot.)
  3. Within the User-Agent Switcher extension, open the options panel and add the new user-agent string.
  4. Browse to the site you would like to check.
  5. Using the User-Agent Switcher select the Agent you would like to view the site as, it will reload the page and you will be viewing it as the new user-agent string.
  6. We used eSolutions, What's my info? to verify that the User-Agent Switcher was presenting the correct data to us.

A final summary

If you talk with anyone who is known for link removal (think people like Ryan Kent of Vitopian, an expert in Link cleanup), they will tell you to use every link report you can get your hands on to ensure you miss nothing. They always include Google Webmaster Tools as an important tool. Personally, while we always use GWT, early on I did not think GWT was important for other than checking to see if we missed anything due to them consistently showing less links than others and all of the links showing in GWT are usually showing in the other tools. My opinion has changed with this revelation.

Given we gather data on clients early on, we had something to refer back to with the link clean-up; today if someone comes in and we have no history of their links, we must assume they will have links from sites blocking major link discovery tools and we have a heightened sense of caution. We will not believe we have cleaned everything ever again; we can believe we cleaned everything in GWT.

If various directories and other sites with a lot of outbound links start blocking link discovery tools because they, "just don't want to hear any more removal requests," GWT just became your most important tool for catching the ones that block the tools. They would not want to block Google or Bing for the obvious reasons.

So, as you go forward and you look at links with your own site and/or with clients, I suggest that you go to GWT to make sure there is not something showing there which fails to show in the well-known link discovery tools.


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SEO 2014: the biggest news so far this year

SEO 2014: the biggest news so far this year

Link to White.net

SEO 2014: the biggest news so far this year

Posted: 21 Aug 2014 01:31 AM PDT

2014 has already been an undeniably busy year in the way of important news. In a blind fit of rage, Solange Knowles attacked Jay Z in a lift, Kim Kardashian got married to Kanye West in a relatively low-key $12 million ceremony, and Prince George played with a ball in an extremely royal manner; one heard it was spectacular.

But in much less important news, there have been a number of interesting developments that have taken place in the ever-changing world of SEO and the Web since the start of 2014. Ranging from title tag modifications all the way to a certain algorithm update of the aviary kind, these changes so far have likely had an effect of some sort on the way you work, whether you’re an in-house SEO, agency side, or running your own business.
So I thought it might be helpful to list a number of the most important developments in SEO and the web so far this year and explain just what they mean for you.

Before we start though, I've listed a few bits of news that didn't make the cut, but may have been on the mouths of many SEOs. These are my honourable mentions.

Matt Cutts went on holiday.

On the 3rd June, Matt Cutts announced that he was going on holiday for three months, citing time off to be with his wife and do a bit of travelling. After almost 15 years of work, he’s now taking some well-deserved time off.

What does this mean for you?
Nothing really, he’ll be back before you know it and has left a capable team in charge, so no spammy activity please.

A blogger was fined for a review

Back in July, a French blogger was fined for ranking too highly in Google. After writing a scathing review about a local restaurant, the restaurant owner sued the blogger as the page ranked highly in Google and according to the owner had a negative effect on business. It went to court and interestingly, and in my view surprisingly, the Judge ruled in favour of the restaurant owner. The blogger was fined and ordered to change the title of the piece.

What does this mean for you?
Hopefully nothing, and it would be a shame to have to worry about writing a negative post. But who knows, we'll have to wait and see if any more cases like this arise. So at the moment I don’t think it’s anything to worry about, write negative stuff, it’s your right.

Orkut is closing down

As of the 30th September, Orkut, once a social media force to be reckoned with, will close its web gates to the public after 10 years.

What does this mean for you?
Nothing. Unless you use it… You do? Oh. Sorry.

Right now that’s out of the way, let’s get on to some real news shall we?

5343656762_19cb3ed6a7_b

The ‘mighty’ Pigeon landed

On July 24th, Google released its most recent algorithm update. ‘Pigeon’, as it was dubbed by Search Engine Land, was released with the aim of providing more accurate and relevant local search results. It also aimed to return results that were tied closely with search ranking signals of the more traditional kind.

According to Search Engine Land, Google told them that ‘Pigeon’ tied deeper in to their search capabilities and incorporates many of the ranking signals that they use, such as synonyms, and spelling corrections, as well as the Knowledge Graph. It also apparently improves distance and location ranking parameters.

From what we can tell, Google seems to still be testing the algorithm, as users were reporting rankings as well as page layouts changing on a daily basis, and they couldn't understand why.

What does this mean for you?
If you're English, fortunately nothing at the moment, as it currently only affects US English search queries. For US businesses, it's a rather drastic change it seems.

As Search Engine Land reported, the changes were mostly behind the scenes, but the algorithm was said to “impact local search results rankings” and that “local businesses may notice an increase or decrease in web site referrals, leads and business from the change”.

It's unclear when this 'Pigeon' will migrate over to the UK, but hopefully it won't happen before Google has worked out the kinks in the current version, which listed Expedia as a hotel. So for now, keep an eye on the updates and ensure that your local SEO is in check, just to be on the safe side.

The fall of guest blogging

Besides ‘Pigeon’, this was arguably the biggest news to have hit the SEO world so far this year. On 20th January, Matt Cutts wrote a blog post all about how it was time to stop using guest posting websites for SEO purposes. Then, on March 19th, Cutts took to Twitter to announce that they had taken action against a large guest blogging website; MyBlogGuest as we soon found out.

As we’ve seen before, this was yet another once-legitimate link building method that, alas, began to be manipulated and abused. Previous examples include:
- Directory links
– Forum links
– Link exchanges
– Article marketing

As with all link building tactics that are manipulated and abused, Google stood up and said that it had had enough.

While the number of penalties handed out as a result of the hit on MyBlogGuest can only be guessed at, it was evident that a large amount of web masters found themselves suddenly stung as a result of Google’s action against guest blogging. Even we didn’t manage to escape the Google penalty furnace, as you can read in a recent post by Charlie Williams all about the lessons learnt.

What does this mean for you?
Guest blogging for SEO is dead, that much can’t be denied. But it doesn’t mean you should completely shy away from it, especially if you want to get your voice out there and share your expertise on a subject. If you get the offer to write for a great website you’re obviously not going to turn it down; it can be a great way to get your name out to a large audience, and even drive some of their traffic over to your website.

You have the right to be forgotten

As you may know, during May, Courts in the European Union decided that people have the “right to be forgotten” on the Internet. This means that people in 32 countries now effectively have legal grounds to make it more difficult to find inaccurate, outdated, and even embarrassing information about them online.

The number of rules, set out by Google, include insisting that you are a resident of one of the 32 countries, the need to provide photo ID, and the fact that the website that you want forgotten must be “outdated, inappropriate, or irrelevant” to named searches for you.  Google will then review the request and approve or deny it, depending on whether it fits the criteria.

The irony of the whole situation can not be seen better, than in this rather comical case of Mario Costeja Gonzalez, the man who went to court to have his actions removed from the internet as he felt they were damaging his image. The only problem, this made him famous, now everyone knows what he did, which I can only assume he knew was going to happen.

What does this mean for you?
It will probably not have a huge impact on SEO at this current time, unless your website contains information that someone might want removing. The only businesses that are likely to be affected by this are newspapers and magazines, or other publishers of similar stories.

So don't worry about it for now, but just be aware that requests could disrupt search results, so keep an eye out for posts of yours that could be affected.

As more and more businesses spring up with the sole intention of filling out the right to be forgotten form for you, it will be interesting to see how the number of requests rises.

 

Google’s SERP makeover/under

In March this year, Google rolled out an updated design of their SERPs. The changes weren’t drastic, but there were subtle changes that are still important.

Possibly the most noticeable change was the size increase of the title tag. Instead of the standard 50-60 character limit, it’s now important to take pixel width in to account. For instance, capital letters take up a higher pixel width, so the more you use, the shorter your title tag can be.

The second interesting change we witnessed was that Google removed the peach/orange background for the ads and replaced it with a small yellow ‘Ad’ button.

Besides these two changes, the rest were mostly slight size increases in text and the removal of underlining for all links, as you can see below:

new serp

What does this mean for you?
The main factor to be aware of is the change in title tag limits. If you’re using all capitals in your title tag, you can expect to be cut off below the 55 character mark, so keep this in mind when updating your meta data; you can even use this handy online tool for previewing and checking your title tags from Moz! Besides this, you’re all good.

New robots.txt tester

As of July, the Google Webmaster Tools robots.txt testing tool received an update designed to help it highlight errors that caused Google to be unable to crawl certain pages on your website. The update also lets you edit your file, test if any URLs are blocked, as well as allowing you to view older versions of your file.

The updated robots.txt tester will now let you test whether you have an issue with your file that’s blocking Google from crawling a page, or a part of your website. As you may well know, this part of GWT used to be called Blocked URLs.

What does this mean for you?
This makes it even easier to test your robots.txt files to ensure that it contains no errors. And if it does, this update allows you to edit and fix the file. You will just need to upload the new version to the server for the changes to take effect.

In a post on the subject, Google’s Jon Mueller explained that you should check your robots.txt file, even if you believe it’s fine. He also wrote that you should “double-check how the important pages of your website render with Googlebot, and if you’re accidentally blocking any JS or CSS files from crawling.”

Google removes people’s faces

Back in June, Jon Mueller shocked a few SEOs by announcing that Google were going to be removing the images from the search results, or as he put it, “simplifying” the way authorship is displayed in search results.

This change was met with mixed results, since including the image next to an article was supposed to increase click through rates. But on the other hand, some claimed that the authorship image tactic had, like so many other SEO tactics, been abused. So Google removed them all.

But wait, did they?

No, not all of them as it turns out. In a move that we might have expected by Google, they removed all of the authorship images from external sites, so the only images that now show up are from Google+ posts, only if you’re logged in it seems.

While some might not be happy about this move, it must be said it’s an ingenious way of drawing attention, and engagement, to Google+. The only downside I seem to find is that these images will only show up if you’re connected to whoever wrote the post on Google+. So someone like myself, who neither uses or entirely understands Google+, I rarely see authorship images anymore.

What does this mean for you?
Firstly, although the images are gone the author links are still present, meaning users will still see who wrote it, providing the writer with at least a certain level of credibility. So it’s definitely worth implementing authorship if you, or your clients actively blog.

Secondly, the authorship images will show up for those that you are connected to on Google+, which is good if you’re inactive user who is connected to every single person… But this does encourage you to get more involved on Google+, and in a y case, there’s no reason not implement Google authorship on posts that you publish.

In my personal opinion, this seems quite harsh on those that have put in the effort to have their posts, and faces, appear in the search results. While this might not change the rankings drastically, it’s quite evident that authorship images have a certain amount of power over what a user might click. This change simply seems to make it easier than ever to have your authorship image appear in the SERPs for people that you’re connected to.

Bottom line: Google+ isn’t going anywhere, so it’s more important than ever to look to see Google+ as an asset an actively utilise it to benefit yourself, your business, and your clients.

Have you had experience with any of these changes? Have I missed anything? Do you have any predictions for the latter part of the year? If so I'd love to know, as there is a very good chance I've missed a crucial update or piece of news and I’d love to update the page if more ideas come in! Feel free to comment below, email me on bobby@white.net, or simply tweet me @robertjmcgill!

Featured image credit: Armando G Alonso ✈︎ via Compfight cc

The post SEO 2014: the biggest news so far this year appeared first on White.net.

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miercuri, 20 august 2014

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


China Manufacturing PMI Treads Water

Posted: 20 Aug 2014 10:41 PM PDT

Chinese manufacturing is once again treading water, barely above contraction according to the HSBC Flash China Manufacturing PMI.

Key points

  • Flash China Manufacturing PMI™ at 50.3 in August (51.7 in July). Three-month low.
  • Flash China Manufacturing Output Index at 51.3 in August (52.8 in July). Three-month low.



click on chart for sharper image

Comments

Commenting on the Flash China Manufacturing PMI survey, Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC said ...

"The HSBC Flash China Manufacturing PMI moderated to 50.3 in August, down from 51.7 in July. Both domestic and external new orders rose at slower rates compared to the previous month. Meanwhile, disinflationary pressure returned as input and output prices contracted over the month. Today's data suggest that the economic recovery is still continuing but its momentum has slowed again. Therefore, industrial demand and investment activity growth will likely stay on a relatively subdued path. We think more policy support is needed to help consolidate the recovery. Both monetary and fiscal policy should remain accommodative until there is a more sustained rebound in economic activity."

Mish Translation of Comments

China PMI has gone nowhere. The last uptick Qu raved about is now in the ashcan. Thus, Qu wants more "policy support" AKA loose money from the China central bank to "consolidate the recovery".

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com 

Election Jackpot Scratch and Sniff: LA Proposes Free Lottery Tickets if You Vote; Romney Says Obama Worse Than Expected

Posted: 20 Aug 2014 01:33 PM PDT

Turnout in some Los Angeles elections is so low that LA Considers Giving Citizens Lottery Tickets if they Vote.
With as few as 8% of registered voters showing up to vote in some recent elections, the Los Angeles Ethics Commission has urged the City Council to consider improving turnout with a lottery pilot program. No actual vote would be required, but those participating would have to show up at the polls to participate. There was no decision on what the grand prize for participating in the democratic process. "Maybe it's $25,000, maybe it's $50,000," Ethics Commission President Nathan Hochman told The Los Angeles Times. "That's where the pilot program comes in—to figure out what...number and amount of prizes would actually get people to the voting box."

It would seem that almost any prize would draw more voters than are currently participating in municipal elections. Only 23% of registered voters cast ballots in the 2013 mayoral election, according to the Times.

Detractors of that initiative, and the Los Angeles proposal, say it would bring people to the polls who were interested only in the prize, not in the issues.

"That might produce better results," Fernando Guerra, a researcher at the Center for the Study of Los Angeles at Loyola Marymount University, told Southern California Public Radio. "There is no data to show that uninformed voters make worse decisions than informed voters."

Los Angeles is also considering a more mundane solution to the problem of voter turnout. It's looking at moving its municipal elections to even-numbered years to coincide with state and federal elections.
Is there any data that says it matters how people vote?

Speaking of which, look at the pathetic choices in the last presidential election. Romney vs. Obama how did it matter?

Romney Says Obama Worse Than Expected

The laugh of the day is Mitt Romeny Claims Obama Worse Than Even I Expected.

It's easy enough to cite failures of Obama. There are dozens of them. But at no point in the interview did Romney say what he would have done differently.

For starters, Obamacare is Romneycare no matter how much he tried to distance himself from that simple fact. Would Romney have given arms to Syrian rebels like Hillary proposed? Would the US be at war with Iran now since Iranian sanctions did not do a damn thing?

Would we be at war with Russia? Economic war with China? In what ways would anything be different under Romney?

Might Things Under Romney Actually Be Worse?

On the military front, I suspect we would be in more wars. We would also be in more trade wars if Romney did what he said with China.

Would anything on immigration have passed in a split Congress?

In what ways, others than birth control, abortion, and the like, would anything be different under Romney?

"None of the Above"

Is it time to consider adding "none of the above"as an option on every ballot? And if "none of the above" wins, should we just do away with the office?

That would actually give people a reason to vote.

The problem with such proposals is the only safe politicians will be in gerrymandered districts.

Some propose term limits. But how does that help in a district that votes overwhelmingly for the same political party every year, and the candidates are all clones of each other?

"If voting changed anything they'd make it illegal"

That phrase has been attributed to Mark Twain, but more likely it belongs to anarchist Emma Goldman.

You can pay people to vote, but what we really need is non-gerrymandered, real choices, not politicians owned by party demagogues, not politicians bought and owned by special interests.

Given the Supreme Court ruled corporations are people, and given special interest groups bribe politicians with huge campaign contributions, I don't see any impetus for reform unless and until there is campaign finance reform and non-gerrymandered districts.

Nonetheless, I keep hoping. I have voted in every national election since the age of 18.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Argentinian Peso in Massive Slide; Argentina’s Bonds Decline on Plan to Offer Local-Law Swap

Posted: 20 Aug 2014 11:48 AM PDT

In June, the US Supreme Court ruled that Argentina Cannot Selectively Default on a small group of hold-outs demanding full payment on otherwise restructured government bonds.

The problem with the ruling is that if Argentina pays the vulture fund full value, it will have to pay all the bondholders full value, and that would wreck the country again.

In the future, bond agreements will force everyone to go along with a majority decision.

In the meantime, US courts ruled Argentina must negotiate will all the parties, including the vulture funds that own roughly 8% of Argentine debt and demand full payment on it.

The ruling meant, and banks enforced, the all or none principle. Argentina defaulted on all the bonds, not because it wanted to, but because US courts forced that outcome.

Local-Law Swap

In an attempt to circumvent the ruling, Argentina will swap the bonds in question for new bonds. It will then hope to pay the 92% according to the prior workout agreement, leaving the vulture funds in limbo.

With that backdrop it will be easier to understand today's Bloomberg report Argentina's Bonds Decline on Plan to Offer Local-Law Swap.
Argentina's bonds sank to a two-month low after the government said it plans to pay foreign-currency notes locally to sidestep a U.S. court ruling that blocked payments and caused its second default in 13 years.

The government will submit a bill to Congress that lets overseas debt holders swap into new dollar-denominated bonds governed by domestic law, President Cristina Fernandez de Kirchner said in a nationwide address yesterday. Payments will be made into accounts at the central bank instead of through Bank of New York Mellon Corp., the current trustee.

Fernandez's move flies in the face of orders from U.S. District Judge Thomas Griesa that a swap would be illegal. He has said the nation must pay $1.5 billion to holders of debt defaulted on in 2001 or reach a settlement before resuming payments on restructured notes.

The country's benchmark restructured bonds due in 2033 fell 2.58 cents to 80.16 cents on the dollar as of 11:47 a.m. in New York, the lowest level since June 19. The price is still above the 74.03-cent average of the past five years.

On June 20, Griesa said that Argentina is prohibited from paying the overseas bonds in Argentina under a local law. Any intermediaries assisting Argentina in the process could be sued for contempt of court, while investors who aren't able to hold local bonds would have to sell their holdings.

The Argentine president has argued that obeying the ruling by paying the holdouts would trigger a Rights Upon Future Offers clause in the exchange bond contracts that obliges Argentina to match any improved offer to all bondholders. That could trigger claims of at least $120 billion, according to the proposal.
Intermediaries Now Gone

The trustee and primary intermediary was Bank of New York Mellon Corp. Kiss that intermediary goodbye. Bondholders can get payment directly from Argentina's central bank.

The fact that debt is above average valuation of the past five years looks promising. The article suggests Argentina will be shut out of the credit markets.

Is that necessarily the case?

After all, Argentina is going out of its way to pay 92% of the bondholders who agreed on the initial restructuring.

Nonetheless, Bloomberg reports "U.S.-based investors may be wary of taking part in the swap over concern they will be held in contempt of court, according to Casey Reckman, an economist at Credit Suisse."

If so, it's ridiculous. In fact, the Supreme Court ruling is ridiculous. When you make risky bets, some of them work, some of them don't.

The idea that bondholders or even certain bondholders can never take losses is idiotic, yet that is what the court ruled.

Argentinian Peso in Massive Slide

Inquiring minds may be interested in how the Argentinian Peso has been holding up under the circumstances.

Peso vs. US Dollar



Since late 2007, the peso has fallen from 3.02 to the dollar to 8.32 to the dollar. That's a decline of 63.7%.  

Question of Reserves

Argentina has about $29 billion in foreign currency reserves. Is that enough?

The Wall Street Journal discussed the issue the other day in Argentine Bonds Fall Further as Talks Stall.
Investors are more focused than ever on Argentina's reserves, which the central bank uses to defend its currency and fund imported goods.

Unable to borrow hard currency abroad because of a debt dispute in U.S. courts, President Cristina Kirchner has instead borrowed $31 billion from the central bank to pay public- and private-sector creditors since 2010.

Reserves stood at just under $29 billion on Thursday, up about $2 billion since the end of March thanks to exports of a record soy harvest and import restrictions.

Payments to multilaterals this year won't necessarily mean a net decline in reserves because Argentina frequently gets new loans as it pays back those lenders.

Even so, Argentina's reserves are among the lowest of major Latin American economies due to government borrowings and capital flight by investors weary of Mrs. Kirchner's populist policies.

Inflation thought by many to be around 40%, dollar shortages that have forced the government to restrict vital imports, and sluggish trade with neighboring Brazil pushed Argentina into recession earlier this year. The economy is expected to contract about 0.9% in 2014, according to the latest monthly survey of analysts by FocusEconomics.

Argentina defaulted on some of its bonds on July 30, after it missed a roughly $539 million interest payment due to its restructured bondholders. U.S. District Judge Thomas Griesa has ruled that Argentina can't pay its restructured bondholders until it pays the holdouts, which are a group of hedge funds suing the country for full payment on bonds it defaulted on in 2001.

Argentina has argued that it isn't in default because it deposited on June 26 with Bank of New York Mellon BK +0.36% the money necessary for the interest payment. The deposit was made in both dollars and euros. However, BNY Mellon hasn't passed the money along to bondholders because Judge Griesa also warned that any bank who helps Argentina process the payment would be violating a U.S. court order.

Judge Griesa reiterated in an Aug. 6 order that BNY Mellon will keep the money in its account until otherwise ordered by the court. He also said BNY Mellon wouldn't be held liable for claims by bondholders.

On Friday, a group of restructured bondholders who own Argentine bonds denominated in euros appealed Judge Griesa's Aug. 6 order to the U.S. Court of Appeals for the Second Circuit. The euro bonds were among the ones Argentina defaulted on two weeks ago because BNY Mellon wasn't allowed to process the interest payment Argentina deposited. These bondholders have tried to get their interest payment by suing BNY Mellon in Belgian courts, and they have threatened to sue the bank in U.K. courts.
As noted above, US courts ruled the holdouts must be paid in full, or nobody paid at all.

Yet, if Argentina paid the holdouts, it would trigger $120 billion in other claims, and Argentina only has $29 billion in reserves.

Inane US court ruling? I think so.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com