Central Perk

vineri, 23 ianuarie 2015

Mish's Global Economic Trend Analysis

Prince Michael of Liechtenstein Warns "QE a Sign of Helplessness, Will Not Reach Economy"; Prince Michael vs. Martin Wolf
Rebels Advance Towards Mariupol; 15,000 Ukraine Troops Risk Encirclement in North; Kiev Lies Pile Up; New Maps
"World Running Out of Positive-Yield Bonds"

Prince Michael of Liechtenstein Warns "QE a Sign of Helplessness, Will Not Reach Economy"; Prince Michael vs. Martin Wolf

Posted: 23 Jan 2015 04:03 PM PST

I received an interesting email today from Geopolitical Information Service (GIS) regarding statements made by Prince Michael of Liechtenstein on European QE by the ECB.

Let's compare and contrast what Prince Michael has to say with what economic writer Martin Wolf had to say, also from today.

QE a Sign of Helplessness, Will Not Reach Economy

Please consider European QE Funds Will Not Reach the Economy by Prince Michael of Liechtenstein.

The European Central Bank's decision to introduce a programme of Quantitative Easing (QE) is not a win-win situation but rather an expression of helplessness ... that politicians in European Union countries are not prepared to address the necessary reforms, writes Prince Michael of Liechtenstein.

Necessary basic reforms are crucial in Europe if it is to restore global competitiveness, increase productivity and get the unemployed back to work. This includes reducing the share of national and local government in the economy. This will reduce the overheads of the national economy and reduce the deficit. Deregulation of laws which are too stringent such as labour and competition law, would enhance activities and ease innovation and job creation.

The 2008-2009 banking crisis saw the US focus on re-establishing the equity basis of the banks to a level which allowed the banks to lend to business. Europe instead chose the path of stress tests. In a simplified way we can say that if a bank reduced its loan portfolio to business, instead of increasing its sound equity basis, it could also pass the stress test. It also means that banks are reluctant to lend more money to business. This prevents new money trickling into the economy.

Zero to negative interest rates are also destroying savings and reducing personal retirement provisions. Pensions have been hit hard. This situation has been exacerbated by the fact that government pension schemes are insufficiently financed.

The real problem with the QE programme of buying sovereign bonds is that it takes the pressure for reform off the politicians. The ECB has already helped several European governments buy time so they can carry out reforms. Most of them – and especially France – have failed to use this opportunity.

It seems unlikely that these irresponsible attitudes will change with QE.

It Won't Work, "But It's a Start"

In contrast, Financial Times writer Martin Wolf says "Nobody knows whether ECB's QE will work but it is a start at least."

Actually, I am quite certain it will not work, and is in fact exactly the wrong thing to do. But let's dig deeper into Martin Wolf's thesis as outlined in Draghi's Bold Promise to do What it Takes for as Long as it Takes.

Wolf: Pity Mario Draghi, president of the European Central Bank. He is seeking to lead the eurozone to monetary water. Unfortunately, the beast has many heads: some long for a drink; others insist a drink would be bad for all. Yet the ECB has to try. Letting deflation take hold would be far more dangerous.
Mish: There's that nonsense about price deflation once again. A complete deflation rebuttal is below.

Wolf: So the ECB has decided to purchase €60bn of assets a month until at least September 2016. Above all, the purchases will continue until the bank sees a "sustained adjustment" in the path of inflation consistent with its aim of achieving inflation rates "below, but close to, 2 per cent" over the medium term. ...This is akin to Mr Draghi's 2012 pledge to do "whatever it takes" to save the euro. This time the ECB says it will buy some €1tn of assets, which is 10 per cent of eurozone GDP and a similar proportion of gross public debt. Above all, it will keep going until it hits its target. ... The crucial point is that the ECB has set a benchmark against which cessation of the programme must now be justified.
Mish: The crucial point is the stupidity of it all. Interest rates close to zero% did not fix the problem, or cause inflation. How in hell will interest rates going a few basis point lower fix anything? Here's the deal: The ECB cannot fix eurozone structural problems. And there are numerous problems to be sure. Add Prince Michael of Liechtenstein to the small list of people who realize the complete foolishness of the ECB's action.

Wolf: Failure to achieve the ECB's objective would devastate its credibility.
Mish: Credibility? What credibility? Prepare to be devastated.

Wolf: The eurozone might soon find itself coping with populist governments of the left or right utterly opposed to the policies imposed upon them. That way surely lies a far bigger disaster.
Mish: Populist policies are on the way because political leaders would not make the necessary reforms nor write off debt that cannot possibly be paid back.

Wolf: Nobody knows whether this action will work. But at least it is a start.
Mish: Actually, no one can realistically "know" much of anything about the future except outside of basic mathematical truisms and the fact we will all eventually die. That said, we can be quite certain, the ECB's plan is indeed ridiculous as explained further below. Curiously, not even Wolf claims it will work. Yet, he calls it a "start". A start to what?

Wolf: That is far from a complete solution to the eurozone's woes. But it is a welcome effort to keep the eurozone show on the road.
Mish: What road is that? To Oblivion?
Debate Over

Eurozone Structural Problems

The problems in Europe are insurmountable, and well understood by many, but apparently not Wolf.

No fiscal union
Wildly differing social agendas of member states
Wide variances in productivity
Wage discrepancies
Retirement benefit discrepancies
One size fits all monetary policy
To make treaty changes every eurozone country must agree
Target2 imbalances

What the hell good would even €5 trillion in QE do to fix those?

What good would it do if the ECB bought every bond from every country and pushed rates to zero across the board? How would it fix any structural problem?

Michael Pettis, Steen Jakobsen, Prince Michael, Mervyn King, Mish vs. Wolf

Once again, and with reasonable logic instead of Wolf's unrealistic hope...

Mervyn King: More QE will not help the world.

Steen Jakobsen (Others): "Lower Interest Rates May Reduce Consumption". Michael Pettis at China Financial Markets and Lacy Hunt at Hoisington Management both agreed.

I wrote about Steen's theory in Grand Experiment Failure; Bankers Prefer Bubbles; Europe is not USA; Final Epitaph, a rebuttal to Bloomberg author Barry Ritholtz, also in favor of massive QE.

Deflation Fighting Silliness

Let's once again review my Challenge to Keynesians "Prove Rising Prices Provide an Overall Economic Benefit"

I also strongly suggest Wolf consider Deflationary Spiral Nonsense; Keynesian Theory vs. Practice; Eurozone Policymakers Concerned About Falling Prices.

For a third take on the insanity of fighting consumer price deflation, please see Deflation Bonanza! (And the Fool's Mission to Stop It).

Problem is Debt

The problem with the global economy in general is debt. You cannot cure a debt-deflation problem via attempts to force more debt into the system. It is axiomatic the cure cannot be the same as the disease.

I have emailed Wolf before but he does not have the courtesy to respond no matter how politely I express things.

I will email Wolf again but do not expect a reply. At any rate, I am pleased to see the list of people willing to speak out on the ridiculousness of QE is growing in unexpected places.

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

Rebels Advance Towards Mariupol; 15,000 Ukraine Troops Risk Encirclement in North; Kiev Lies Pile Up; New Maps

Posted: 23 Jan 2015 12:57 PM PST

Kiev Lies Pile Up

Major advances were made by rebels in the last couple of weeks. A claim made by Kiev that Ukraine recaptured the airport in Donetsk is a now proven lie.

And the lies pile up. For example, on January 21, the BBC quoted President Petro Poroshenko "Russia has more than 9,000 soldiers and 500 tanks, heavy artillery and armoured personnel carriers in Eastern Ukraine".

How can you hide 500 tanks and heavy artillery from US spy satellites? The answer is you cannot. And if those vehicles were actually in Eastern Ukraine, the US would have complained about it long ago.

On January 19, the Russian Activist reported 382 Russian soldiers killed in Ukraine during last three days.

"Respected Russian human rights activist Elena Vasilieva has announced that 382 Russian soldiers have been killed in Ukraine during the last three days."

There were no pictures or names. The above sentence was the entire article.

Sadly, people believe nonsense like this USA Today report:

There could be as many as 15,000 Russian troops in Ukraine, many of them deployed there without official documents", said Valentina Melnikova, head of the Committee of Soldiers' Mothers.

Reader Jacob Dreizin (a US citizen who speaks Russian and reads Ukrainian) had this to say about Valentina Melnikova:

Mish,

There have been a large number of these "Russian soldiers killed in Ukraine" stories in the Western press since last spring or summer. As a whole, they tend to confuse Russian soldiers with any and all Russians killed in Ukraine.

Yes, there have been a lot of Russians, Cossacks, and Chechens who have crossed the border to join the rebel militia. Several hundred of them have been killed, and in most cases, their bodies have been shipped back, funerals held, etc.

That does not mean that they were serving with the Russian army at the time of death.

What's really confusing to the Western press, is that the Russian groups keeping track of the deaths include all Russian citizens killed in Ukraine in their tallies.

As for actual Russian military deaths in Ukraine, it seems there were maybe several dozen of those, mostly from last August. But it was nowhere near the "thousands of Russians and hundreds of Russians tanks" claimed by Kiev. President Petro Poroshenko's claims are out-of-this-world nonsense.

Valentina Melnikova is totally off her rocker. Her group lost all credibility back in the early 2000s, when it inflated Russian deaths in Chechnya by a factor of three or four.

The allegedly widely respected Elena Vasilieva has claimed that entire Russian brigades have been wiped out in Ukraine. Keep in mind that a brigade is at least 2000 men. Of course, if 2000 bodies came back to one Russian base (or simply disappeared from one base), it would be all over social media in a split second. The western press has broadcast her claims with no questions and no sanity check. It is a disgrace.

Regards,
Jacob

Lies Repeated Often Enough Get Believed

The Telegraph, the Washington Post, the Daily Mail, and even respectable places like The Guardian have all carried such stories.

Lies repeated often enough get believed.

That does not mean I believe everything Putin has to say. I surely don't. Both sides lie. The first casualty of war is the truth.

But the preponderance of easily disputed lies is from Kiev. Yet, few in western media are willing to call President Poroshenko on them.

Ukrainian Dead Understated

Looking for accurate reporting of Ukrainian dead soldiers? Don't expect that out of Kiev either. CounterPunch explains in Ukraine's Lower Class Military.

Recently, there appeared on the Internet an electronic database with photo-documents of Ukrainian military personnel killed in the war in eastern Ukraine. The documents include passports, military IDs, drivers' licenses, personal files and credit cards. Some papers are half-burned, while others are untouched, as if nothing has happened to their owners. The documents were found with the dead bodies of these people in several areas of the Donbass region of eastern Ukraine, near the towns of Saurovka and Illovaisk, close to the cities of Donetsk, Lugansk and Gorlovka. The papers were published at the suggestion of the search teams so that the relatives of those killed could finally find out about their fate of their loved ones. As it happened, the majority were still officially listed as missing. They were also not included in the statistics of losses of the Ukrainian army.

The dead soldiers are from the 30th Mechanized Brigade of the Ukrainian armed forces, which in August was sent by its command into a crazy, suicidal mission.

The brigade was ordered to attempt a breakthrough that could lead to capturing the cities of Lugansk and Donetsk by the time of Independence Day in Ukraine, August 24.

In scanning the scanned papers of the dead soldiers, one can clearly see a social portrait of the soldiers of the Ukrainian army. It is ordinary people who were killed on the soil of Donbass. Soldiers and junior officers were mostly from peasant backgrounds.

We are often told that everyone is equal in death, but as we clearly see in this example, this is not the case. President Poroshenko, who is directly responsible for the catastrophic losses of the Ukrainian army and the death of civilians in Donbass, hypocritically mourns killed journalists in Paris on January 11 while in Donetsk, innocent people continue to die.

Children of Ukrainian politicians and oligarchs are not lying dead in the lands of Donbass. They enjoy a life full of fun and joy. They don't fear forced military conscription. The petty, provincial bourgeoisie can relax and pay a bribe so their sons will not be drafted into the army. The corrupt generals cover for such 'business as usual'.

Ukraine Maps

Let's step through a succession of maps, from August 2014, from September 2014, and one from the last two days.

Military Operations August 10-25

click on any map for sharper image

The above from August 26: Ukraine Offensive in Donetsk and Lugansk Fails

On August 26, I also posted Jane's Defense vs. Colonel Cassad: Someone Seriously Wrong.

Jane's Defense had made the claim Ukrainian Military Moves to Endgame.

My sources accurately challenged that claim.

Military Operations August 25 - September 1

The above from September 3: Ceasefire or Not?

Military Operations January 19-21

Note that many white areas on the previous maps are now pink (totally in rebel control). The hashed pink areas are recent rebel advancements (neither side controls completely). In the South note the march on Mariupol.

NATO Commander Visits Wounded

Here is a video of Ben Hodges, U.S. commanding general of NATO ground forces, visiting wounded/crippled Ukrainian soldiers in the hospital and giving them cheap little trinkets/mementos. Some of it is in English.

Link if video does not play: Ben Hodges Visits Troops.

This is what it boils down to ... Get drafted, lose an arm (or die), get a NATO trinket worth about $2.

Update From Jacob Dreizin

One of the leading rebel sources claims that the operation to close the Debaltsevo "pocket" has begun. If closed from its northern-most edge, this would trap as many as 15,000 Ukrainian soldiers and militia as well as some of Kiev's heaviest artillery.

Also, one or more Ukrainian mortar shells landed next to some kind of bus or trolley in Donetsk this morning. The footage looks pretty bad. At least 8 civilians were killed, 7 of them inside that vehicle, and another 13 are in the hospital. "They are all Charlie", I'm sure.

Massive Ukrainian shelling of Gorlovka continues. Over 100 civilians have been reported killed there since the weekend.

Second Update

Colonel Cassad reports a rare setback for the rebels today. Jacob Dreizin comments ...

"A convoy of rebel towed antitank guns was shelled by Ukranian artillery near the town of Adveevka west of Donetsk airport, with 30-40 estimated dead and wounded. With a figure that high, it means all of the equipment was destroyed as well. Colonel Cassad makes the point that the rebels actually report their losses, whereas the Ukrainians don't."

Mariupol Next?

Dreizin had also reported that supply lines to Mariupol have been cut. A key bridge far west of the city in Ukraine-held territory has been blown up.

Interfax-Ukraine claims Train Movement on Damaged Bridge to Mariupol Restored.

Sad Quest for Symbolism

NATO and the US seriously underestimated the lengths Russia would go to stop the march of NATO eastward.

I have to wonder, how much longer Mariupol will last. Did Ukraine spread itself too thin trying to capture the Donetsk airport? I think so. And for what? Symbolism?

The entire war is nothing but a sad war for symbolism. Ukraine was never really one united country in the first place. Politicians create these messes by failure to take political, cultural, and religious differences into consideration when they draw maps.

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

"World Running Out of Positive-Yield Bonds"

Posted: 23 Jan 2015 10:20 AM PST

In the wake of ECB's €60 billion a month QE madness (see "QE already Working" Says IMF Lagarde; Ho-Hum Details Announced; Gold the Place to Be), one might be wondering what it may do to European bond yields.

German 10-Year Bond Yield

click on chart for sharper image

Since September of 2013, yield on the German 10-year bond has plunged from around 2% to 0.367%.

ECB Risks German Bonds Mismatch Exceeding 100 Billion Euros

With €720 billion annual asset purchases, a huge portion of the bonds the ECB buys will be German.

Bloomberg explains ECB Risks German Bonds Mismatch Exceeding 100 Billion Euros.

[Of the 60 billion monthly asset purchases], about 45 billion euros probably would be sovereign debt, according to a central bank official, equating to more than 100 billion euros of German securities this year, based on purchases being conducted in proportion to euro-zone members' contributions to the ECB's capital. That would shrink the tradable market for German bonds in a year when the debt agency already planned to reduce the amount of conventional bonds outstanding by 8 billion euros.

"It's going to cause a huge shock to the supply-demand balance in the European government-debt market," Anthony Doyle, investment director at M&G Group Plc in London, said before the ECB's decision was announced. "We might not be too far off the German bund market looking like the Swiss one, with a negative yield out to 10 years. It's pretty crazy."

ECB buying will be carried out in line with the capital key, Draghi said, which is a measure roughly in proportion to the size of each nation's economy. Adjusted for non-euro-region central banks, that works out as a 25.6 percent share for Germany, according to calculations based on data on the ECB's website.

If the ECB purchases about 450 billion euros of sovereign bonds over 10 months, about 115 billion euros would be earmarked for German debt. The exact amount has yet to be officially specified because the ECB plans to include debt of agencies and European institutions, as well as asset-backed securities and covered bonds in its purchases. As of Dec. 31, Germany had 1.16 trillion euros of tradable securities.

Finding Sellers

The difficulty for the ECB may be flushing out sellers and getting them to buy other assets instead. Banks and insurers need Germany's AAA securities to bolster their balance sheets and pension funds mop up bunds to match their liabilities. In a low-growth environment with scant inflation, investors are sticking with bonds, particularly when the ECB is levying charges on its overnight deposit facility.

Meanwhile, supply is shrinking. The German debt agency plans to sell 147 billion euros of conventional bonds this year, compared with redemptions of 155 billion euros, according to its outlook published in December. As much as 14 billion euros of inflation-linked bonds, which are also eligible for ECB purchase, will also be issued.

"Global central banks are petrified of deflation," said M&G's Doyle, whose firm oversees the equivalent of about $389 billion. "The real effectiveness of QE is through the portfolio-rebalancing effect. The world is running out of positive-yielding government bonds."

Just Can't Get Enough

In honor of the world running out of government sugar (a preposterous notion to be sure), I offer the following musical tribute.

Link if video does not play: Homer Simpson Cannot Get Enough.

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

Damn Cool Pics

How To Help Your Pet Live Longer [Infographic]
NYPD Downsizes Their Cop Cars
Facts You Probably Didn't Know About Denmark

How To Help Your Pet Live Longer [Infographic]

Posted: 23 Jan 2015 06:49 PM PST

Learn to care for your aging pet to help them live a longer, happier life with this infographic from Nutronics Labs.

Click on Image to Enlarge.

An infographic by Nutronics Labs

NYPD Downsizes Their Cop Cars

Posted: 23 Jan 2015 06:36 PM PST

Well, that's embarrassing.

Then

Now

Facts You Probably Didn't Know About Denmark

Posted: 23 Jan 2015 06:21 PM PST

If you don't know, now you know.

Know What Your Audience Wants Before Investing in Content Creation and Marketing - Whiteboard Friday

Posted: 22 Jan 2015 04:16 PM PST

Posted by randfish

Content marketing is an iterative process: We learn and improve by analyzing the success of the things we produce. That doesn't mean, though, that we shouldn't set ourselves up for that success in the first place, and the best way to do that is by knowing what our audiences want before we actually go through the effort to create it. In today's Whiteboard Friday, Rand (along with his stick-figure friends Rainy Bill and Hailstorm Hal) explains how we can stack our own decks in our favor with that knowledge.

For reference, here's a still of this week's whiteboard!

Video transcription

Howdy, Moz fans, and welcome to another edition of Whiteboard Friday. It's 2015. It's going to be a year where, again, many, many marketers engage in a ton of content investments and content marketing for a wide variety of purposes from SEO to driving traffic to growing their email newsletters and lists to earning links and attention and growing their social channels. Unfortunately, there's a content marketing problem that we see over and over and over again, and that is that folks are making investments in content without knowing whether their audience is going to know and love and appreciate what they're doing beforehand.

That kind of sucks because it adds a lot of risk to a process that is already risk intensive. You're going to put a lot of work into the content that you're creating. Well, hopefully you are. If you're not, I don't know how well it's going to do. All of that work can be for naught.

Let me show you two examples. Over here I have Rainy Bill from WhatTheWeather.com, and here's Hailstorm Hal from KingOfClimate.com. We'll start with Rainy Bill's story.

So Rainy Bill, he's thinking to himself, "You know, I want to invest in some content marketing for WhatTheWeather.com." He has an idea. He's like, "You know, maybe I could make a chart of the T-shirts that meteorologists wear by season. I'll look at all the TV meteorologists, all the Internet meteorologists, and I'll look at the T-shirts that they wear. They all wear T-shirts, and I'll make a big chart of them."

You might think this is a ridiculous idea. I have seen worse. But Rainy Bill is thinking to himself, "Well, if I do this, it's kind of ego bait. I get all the meteorologists involved. I'll feature all their T-shirts, and, of course, all of them will see it and they'll all link to me, talk about me, share it on their social media channels, email their friends with it. Oh check it out. Put it on their Facebook."

He makes it. He's got this beautiful chart showing different kinds of T-shirts that meteorologists are wearing over the seasons, and Bill's just as happy as a clam. He can't believe how beautiful that is until he tries to launch and promote it. Then it's just sadness. He's just crying tears.

What happened here is that no one actually cared what Bill had to say. No one cared about T-shirt patterns that are worn by meteorologists, and Bill didn't actually realize this until he had already made the investment and started trying to do the promotion.

This might be a slightly ridiculous example, but I can't tell you how many times I've seen exactly this story play out by marketer after marketer of content investments. They put something together that they hope will achieve their goal of reaching a new audience, of getting promoted, but it falls flat mostly because they had the idea before they talked to anyone else. Before they realized whether anyone else was interested, they went and built it.

That's actually kind of a terrible idea. Unless you have your finger on the pulse of an industry, a field so incredibly well that you don't need that process, I'm going to say that is the 1% of the 1% who can do this without going out and first talking to their audience and understanding.

Hailstorm Hal, from KingOfClimate, instead of having a great idea for a piece of content, Hailstorm Hal is going to start with the idea from which all content marketing springs, which is, "I want to make something people will really want and something they'll really love." Okay. They want it, and they're going to love it when they see it and when they get it.

So Hailstorm Hal is going to go out and say, "Well, what are the weather watchers talking about? People who are active in this community, in this industry, the people who do the sharing and the amplification, who influence what the rest of us see, what are they talking about?"

So he goes onto this weather forum and hears someone complaining, "The weather in Cincinnati is totally unpredictable." The reply, "Yeah, but it's way more predictable than Seattle is." "Nuh-uh, you liar." From this, eureka, Hailstorm Hal has a great idea. "Wait a minute. What if I were to actually go and take all of this online commentary and turn it into something useful where these two commenters could prove to each other who's correct and people would know for certain how much . . ."

It's not just helpful to them. This is helpful to a huge, broad swath of society. How accurate are your meteorologists, on average, city by city? I don't actually know, but I would be fascinated to know whether when I go to San Diego -- I was there for the holidays to see my wife's family -- maybe the weather reports in San Diego are much more or much less accurate than what I'm used to here at home in Seattle.

So Hal's going to put together this great map that's got an illustration of different regions of the United States, and you can see that in the Midwest actually weather is more predictable than it is on the coast or less predictable than it is on the coast. That's awesome. That's terrific. This is going to work far, far better than anything that Hal could have come up with on his own without first understanding the industry.

Now the process and tips that I'm going to recommend here are not exhaustive. There are a lot more things in this. But if you follow these five, at least, I think you're going to do much better with your content investment.

First off, even before you do this process, get to know the industry, the niche, or the community that you're operating in. If Hal didn't know where to find weather watchers, he might just search weather forum, click on the first link in Google, and be at some place that doesn't really have a very serious investment from the community of people he's trying to reach. Without understanding all of the sites and pages, without understanding who are the big influencers in the community on social media, without understanding what are the popular websites, what gets a lot of interaction and engagement and doesn't, that's going to be really tough for him to figure out.

So that's why I would say you need to go out and learn about your industry before you make something for it. Incidentally, this is why it's really tough to do this as a consultant and why if you are paying consultants to go and do this, you're going to actually be paying quite a bit of money for this research time. This is going to be dozens of hours of research to understand the niche before you can effectively create content for it. That's something where it isn't just an on demand kind of thing.

Then from there you want to use the discussion forums, Q&A sites, social media, and blog comments to find topics and discussions that inspire questions, curiosity, and need. Some of that is going to be very blatant. Some of it is going to be much more latent, and you're going to be drawing from both of those. Your job is to have insight and empathy, and that's what a great marketer should be able to do when they're researching these communities.

Number three, you want to validate that if you created something, (a) it would be unique, no one else has made it before, and (b) others would actually share it. You can do this very directly by reaching out and talking to people.

So Hal can go and say, "Hey, who's this commenter right here? Let's have a quick conversation. Would you like this?" If the answer is, "Yeah, not only would I like that, I would help share that. I would spread that. I would love to know the answer to this question." Or no reply, or "Sounds interesting, let me know when you get it up." There's going to be a different variation.

You can go and use Twitter, Google+, and email to reach out directly to these people. Most of the time, if you're finding commentary on these forums and in these places, there will be a way to reach them. I also have two tools I'm going to recommend, both for email. One is Conspire and the other is VoilaNorbert. VoilaNorbert.com is an email finding tool. I think it's the best one out there right now, and Conspire is a great tool for seeing who you're connected to that's connected to people you might want to reach. When you're trying to reach someone, those can be very helpful.

Number four, it tends to be the case that visual and/or interactive content is going to perform a lot better than text. So if Hal's list had simply been a list of data -- here are all the major U.S. regions and here's how predictable and unpredictable their weather is -- well, that might work okay. But this map, this visual is probably going to sail around the weather world much faster, much better, be picked up by news sources, be written about, be embedded in social media graphics, all that kind of stuff, far better than a mere chart would be.

Number five, remember that as you're doing the creation, you need to align the audience goals with your business goals. So if KingOfClimate's goal is to get people signing up for a weather tracking service on an email list, well great, you should have this and then say, "We can send you variability reports. We can tell you if things are getting more or less accurate," and have an email call to action to get people to sign up to the newsletter. But you want to tie those business goals together.

The one thing I'd be careful of and this is a mistake that many, many folks who invest in content marketing make is that a lot of those benefits are going to be indirect and long term, meaning if the goal is that KingOfClimate.com is trying to sell professional meteorologists on a software subscription service, well, you know what? You're probably not going to sell a whole lot with this. But you are going to get a lot more professional meteorologists who remember the name, KingOfClimate, and that brand memory is going to influence future purchase decisions, likely nudging conversation rates up a little bit.

It's probably going to help with links. Links will lead to rankings. Rankings will lead to being higher up in search engines when professional meteorologists search for precisely, "I'm looking for weather tracking software or weather notification software." So these kings of things are long term and indirect. You have to make sure you're tying together all of the benefits of content marketing with your business goals that you might achieve.

I hope to see some phenomenal content here in 2015. I'm sure you guys are already working on some great stuff. Applying this can mean that you don't have to be psychic. You just have to put in a little bit of elbow grease, and you can make things that will perform far better for your customers, for your community, and for your business.

All right, everyone. Look forward to the discussion, and we will see you again next week for another edition of Whiteboard Friday. Take care.

Video transcription by Speechpad.com

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Seth's Blog : How loud and how angry?

How loud and how angry?

Professionals are able to get their work done without using emotion to signify urgency.

When a surgeon asks the nurse for a scalpel, she doesn't have to raise her voice, stamp her foot or even make a face. She merely asks.

When a pilot hits a tough spot, he's not supposed to start yelling at air traffic control. He describes the situation and gets the help he needs.

And despite what you may have seen in the movies, successful stock traders don't have to start screaming when there's more money on the line.

Compare this to the amateur world of media, of customer service and of marketing. Whoever yells the loudest gets our attention. Twitter users who use cutting language to get someone at a company to feel badly. Emailers who should know better who mark their notes as urgent, even when they're not. Politicians who take umbrage as if umbrage was on sale.

It should be clear (compared to say, astronauts and surgeons) that these people aren't angry because so much is at stake. They're angry because it works. Because attention is reserved in those industries for those who decide to demonstrate their emotions by throwing a tantrum.

The problem with requiring people to be loud and angry to get things done is that you're now surrounded by people who are loud and angry.

What happens if you take a professional approach with the people you work with, rewarding people who properly prioritize their requests (demands) and ignoring those that seek to escalate via vitriol? What happens if you consistently enforce a rule against tantrums?

If you go first, by consistently rewarding thoughtful exchanges and refusing to leap merely because it's raining anger, the people you work with will get the message (or move on).

A pitfall of throwing tantrums is that sometimes, people throw them back.

• Email to a friend •

joi, 22 ianuarie 2015

Mish's Global Economic Trend Analysis

Housing Affordability: How Does the US compare to Canada, China, Australia, Japan, Ireland, UK
China Manufacturing Flat-Lining In Slight Contraction
Revised Greek Default Scenario: Liabilities Shifted to German and French Taxpayers; Bluff of the Day Revisited
"QE already Working" Says IMF Lagarde; Ho-Hum Details Announced; Gold the Place to Be

Housing Affordability: How Does the US compare to Canada, China, Australia, Japan, Ireland, UK

Posted: 22 Jan 2015 11:27 PM PST

Congratulations to Hugh Pavletich and Wendell Cox (co-authors) of the 11th Annual Demographia International Housing Affordability Survey 2015, for another excellent job.

The survey shows ...

"For the second year in a row, the United States had the most affordable housing among major metropolitan markets, with a moderately affordable Median Multiple of 3.6. Canada (4.3) Ireland (4.3), Japan (4.4), the United Kingdom (4.7) , and Singapore (5.0) had seriously unaffordable housing.

Three national markets were severely unaffordable, with Median Multiples of 5.1 or above. These included China (Hong Kong), with a Median Multiple of 17.0, New Zealand, at 8.2 and Australia at 6.4."

Housing Affordability - Major Markets

click on chart for sharper image

The problem with the above chart is Hong Kong is so far off the scale, that everything else looks OK in comparison.

So, don't be fooled by such distortions. My suggestion to the authors: Perhaps a logarithmic chart would help.

The following table will put things in better perspective.

Housing Affordability Rating Categories

Anything over 4.1 is "seriously unaffordable" or worse. From a metro-area perspective things look even worse.

Housing Affordability by Nation

Given that anything over 5.1 is "severely unaffordable" it's no blue ribbon to be 10 points better than Hong Kong.

Demographia does not cover China proper. However, The Economist does. The Economist China Index of Housing Affordability, which covers 40 cities of China shows the overall housing affordability multiple was 8.6.

Affordibility by Major Metro Area

"Hong Kong's Median Multiple of 17.0 was the highest recorded (least affordable) in the 11 years of the Demographia International Housing Affordability Survey. Again, Vancouver was second only to Hong Kong, with a Median Multiple of 10.6. Housing affordability in Sydney deteriorated to a Median Multiple of 9.8, which was followed by San Francisco and San Jose (each 9.2). Melbourne had a Median Multiple of 8.7 and London (Greater London Authority) 8.5. Three other markets had Median Multiples of 8.0 or above, including San Diego (8.3), Auckland (8.2) and Los Angeles (8.0)."

Methodology

The Demographia International Housing Affordability Survey uses the "Median Multiple" (median house price divided by gross annual median household income) to assess housing affordability. The Median Multiple (a house price to income ratio) is widely used for evaluating urban markets, and h as been recommended by the World Bank and the United Nations and is used by the Joint Center for Housing Studies, Harvard University.

The "Median Multiple" measure may be the best way, but it's far from perfect as I am sure the authors would admit. A simple chart on major metro area affordability may explain.

Affordable Major Metro Markets

Major Metro Questions

Do you want to live in Detroit?
Send your kids to Detroit schools?
Are the houses that make up the median price survey livable at all?

At the other end of the extreme, crack-shacks in Vancouver can sell for $1,000,000. For an amusing test, please see Crack Shack or Mansion Game

Inquiring minds may also wish to investigate Vancouver B.C. vs. Donegal Ireland Real Estate: What Will $890,000 Buy?

Ten Least Affordable Major Metro Areas

All Markets

Although I once visited Ireland and took many outstanding images on the trip, years ago, I know little about Limerick to comment. In contrast, I do know a bit about Rockford, Illinois. It's about 90 minutes way.

Rockford is an economically depressed area in serious trouble. In fact, I have reason to believe the city is headed for bankruptcy. As facts come in, I will post on them.

So, the same questions I posed about Detroit, I ask about Rockford. The only difference is no one has heard much about Rockford ... yet.

Spotlight on Canada

Do any Canadians readers care to comment about this:

"Canada's most affordable market again was Moncton (NB), with a Median Multiple of 2.2. Both Saint John (NB ) and Fredericton (NB) had Median Multiple s of 2.5. Other affordable markets included Windsor (ON), at 2.8 and Charlottetown (PEI), at 2.9."

Given that Windsor and Detroit share a border crossing, I believe I know the answer, but if I get some choice comments, I will post them.

While on the subject, here's an interesting bar bet question: If you are in Detroit, headed due south, what is the first country you hit?

Here's the key to the answer: "Windsor is located directly south of the city of Detroit."

Canada High End

Land-Use Chicken Egg

The Demographia authors point out "no major metropolitan market without urban containment policy has ever been rated with severely unaffordable housing in 11 years."

I have to ask: Which came first, containment or lack of land? Is there more usable land around LA or San Antonio? Is Detroit affordable because it has no land use restrictions or are there no land use restrictions in Detroit because no one wants to live there?

In my view it is overly simplistic to place to place the majority of the blame on land use restrictions, even if restrictions are a major problem in some areas.

Much More To See

There's much more in the 59-page report. Give it a look. Just don't expect perfection, especially in regards to affordability of places where nearly everyone wants out but lacks the means to escape.

That aside, compiling data for all the major metro areas in the world is not an easy task. All in all, Hugh Pavletich and Wendell Cox did an outstanding job, once again. Their work is much appreciated.

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

China Manufacturing Flat-Lining In Slight Contraction

Posted: 22 Jan 2015 06:46 PM PST

It's pretty much the status quo for the HSBC Flash China Manufacturing PMI report.

Key Points

Flash China Manufacturing PMI at 49.8 in January (49.6 in December). Two-month high.
Flash China Manufacturing Output Index at 50.1 in January (49.9 in December). Three-month high.

When a rise from 49.6 to 49.8 puts you at a high (with 50 being the break-even point between contraction and expansion), you cannot possibly be moving fast.

Flat-lining in slight contraction is the best phrase to describe the current state of affairs in China. The following charts show just that.

click on chart to show sharper image

China's manufacturing PMI has hovered in a range just under and just above the 50 expansion-contraction line since mid-2011.

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

"The HSBC China Manufacturing PMI rose to 49.8 in the flash reading for January, up from 49.6 in December. Domestic demand improved marginally while external demand remained solid. The labour market weakened and prices fell further. Today's data suggest that the manufacturing slowdown is still ongoing amidst weak domestic demand. More monetary and fiscal easing measures will be needed to support growth in the coming months."

More Easing to Support Growth?

How much more easing can the world even take? The answer depends on how much bigger current asset bubbles can get. And no one knows the answer to that.

Regardless, all this "easing" at this point is counterproductive. It will lower consumption in Europe for reasons explained by Steen Jakobsen, chief economist at Saxo Bank in "ECB About to Make Biggest Mistake in History".

Michael Pettis at China Financial Markets echoed the same views in regards to both China and Europe as noted in Grand Experiment Failure; Bankers Prefer Bubbles; Europe is not USA; Final Epitaph.

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

Revised Greek Default Scenario: Liabilities Shifted to German and French Taxpayers; Bluff of the Day Revisited

Posted: 22 Jan 2015 11:36 AM PST

Dr. Eric Dor, director of IESEG School of Management in Lille, has an update on bank exposure to Greek debt liabilities.

The numbers are roughly in line with figures I have posted earlier, but the breakdowns and other details are interesting.

IESEG	Bilateral loans	Guarantees on the borrowings of EFSF to fund its loans	Implicit share of TARGET2 claims of the Eurosystem	Implicit share in the SMP holdings of bonds by the Eurosystem	Total
Austria	1.555	4.235	1.198	0.574	7.562
Belgium	1.942	5.291	1.512	0.725	9.470
Cyprus	0.11	-	0.092	0.044	0.247
Estonia	-	0.39	0.118	0.056	0.564
Finland	1.004	2.735	0.767	0.368	4.873
France	11.389	31.02	8.651	4.148	55.209
Germany	15.165	41.308	10.981	5.266	72.72
Greece	-	-	-	-	-
Ireland	0.347	-	0.708	0.340	1.395
Italy	10.008	27.259	7.511	3.602	48.380
Latvia	-	-	0.172	0.083	0.255
Luxembourg	0.14	0.381	0.124	0.059	0.704
Malta	0.051	0.138	0.040	0.019	0.247
Netherlands	3.194	8.699	2.443	1.171	15.507
Portugal	1.102	-	1.064	0.510	2.676
Slovakia	-	1.503	0.471	0.226	2.200
Slovenia	0.243	0.717	0.211	0.101	1.272
Spain	6.65	18.113	5.394	2.587	32.744
Total	52.9	141.8	41.709	20	256.409

The above table from Exposure of European Countries to Greece by Dr. Eric Dor, IESEG School of management.

Exposure of European Banks

The exposure of European banks to Greek public and private debt is most interesting.

Nearly all the liabilities have been shifted from banks to the public. For example the exposure of German banks to the Greek public sector is now limited to $181 million.

German Bank Claims on Greek Public Sector

The exposure of French banks to the public sector of Greece is now limited to $102 million.

French Bank Claims on Greek Public Sector

The exposition of European banks to the private sector of Greece excluding banks is also very limited, even if it recently increased for German banks, for which it amounts to $7.885 billion.

The exposure of German banks to Greek banks amounts to $5.702 billion. Their other potential exposure to Greece amounts to $2.912 billion in the form of derivatives, guarantees extended and credit commitments.

German Bank Claims on Greek Private Sector

The exposure of the French banks to the private sector of Greece excluding banks is limited to $1.646 billion.

French and German banks dumped their exposure to Greece on to the public by dumping assets and also via the EFSF.

German taxpayers are responsible for $41.3 billion via the EFSF, with Target2 liabilities of another $11 billion.
German taxpayers are responsible for $31 billion via the EFSF, with Target2 liabilities of another $8.7 billion.

Bluff of the Day Revisited

Taxpayers in general, not banks are the ones at risk if Greece defaults. This explains the Bluff of the Day: Germany Warns "Greece is No Longer of Systemic Importance For the Euro".

It's pretty clear Greece is still of systemic importance. What Merkel really meant is this: "German banks now have limited concerns if Greece defaults. Instead, it's German taxpayers who are at risk."

As Steen Jakobsen chief economist of Saxo Bank in Denmark explains "Euro is Not a Good Idea and ECB About to Make Biggest Mistake in History" .

Steen's rationale is supported by Michael Pettis at China Financial Markets and Lacy Hunt at Hoisington Management. For details, please see Grand Experiment Failure; Bankers Prefer Bubbles; Europe is not USA; Final Epitaph.

Gold the Place to Be

Today, ECB president Mario Draghi put taxpayers still more at risk with QE policies that cannot possibly work as noted in "QE already Working" Says IMF Lagarde; Ho-Hum Details Announced; Gold the Place to Be.

Gold in Euros

Nick at Gold Charts "R" Us provides this chart.

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

"QE already Working" Says IMF Lagarde; Ho-Hum Details Announced; Gold the Place to Be

Posted: 22 Jan 2015 09:55 AM PST

Today, ECB president Mario Draghi announced his much awaited QE program that will allegedly save Europe from the imaginary perils of price deflation. See Deflation Bonanza! (And the Fool's Mission to Stop It).

Stocks are up a bit, the dollar is up a bit, the yen is up a bit, and gold is up a bit. Oil is down a bit.

The details are more or less along the lines most thought, not the celestial "big bang" that everyone hoped.

ECB QE Press Release

Here are a few snips from the ECB Press Release on Asset Purchases.

ECB expands purchases to include bonds issued by euro area central governments, agencies and European institutions
Combined monthly asset purchases to amount to €60 billion
Purchases intended to be carried out until at least September 2016
Programme designed to fulfil price stability mandate

The programme will encompass the asset-backed securities purchase programme (ABSPP) and the covered bond purchase programme (CBPP3), which were both launched late last year. Combined monthly purchases will amount to €60 billion. They are intended to be carried out until at least September 2016 and in any case until the Governing Council sees a sustained adjustment in the path of inflation that is consistent with its aim of achieving inflation rates below, but close to, 2% over the medium term.

The ECB will buy bonds issued by euro area central governments, agencies and European institutions in the secondary market against central bank money, which the institutions that sold the securities can use to buy other assets and extend credit to the real economy. In both cases, this contributes to an easing of financial conditions.

With regard to the sharing of hypothetical losses, the Governing Council decided that purchases of securities of European institutions (which will be 12% of the additional asset purchases, and which will be purchased by NCBs) will be subject to loss sharing. The rest of the NCBs' additional asset purchases will not be subject to loss sharing. The ECB will hold 8% of the additional asset purchases. This implies that 20% of the additional asset purchases will be subject to a regime of risk sharing.

Six Elements of Decision

Digging a little deeper, here are Six Key Elements of ECB Decision.

Starting in March the ECB will buy 60 bln euros a month in national bonds and agency bonds. The amounts will be driven by the "capital key" which corresponds roughly to the size of the economies. That means that Germany, France and Italy will be the largest buyers.
The risk will remain largely with the national central banks, but the risk of agency purchases will be shared collectively. Agency bonds will amount to 12% of the assets being purchased. The ECB argues that by controlling all the design features and coordinating the purchases, it has "safeguarded the singleness of the Eurosystems's monetary policy. " Market participants may disagree.
The program will run through September 2016, but ECB clearly keeps door open: the purchases "will in any case be conducted until we see a sustained adjustment in the path of inflation."
The asset purchased will be investment grade, but "some additional eligibility criteria will be applied in the case of countries under an EU/IMF adjustment program. This is subtle but important. As long as Greece, Cyprus and Portugal are on some program their bonds can be bought. This is also a subtle indication that the old Troika no longer exists. This is part of the signal from the European Court of Justice preliminary ruling and also the signals from the new EC.
Although the ECB did not cut its official rates, it did remove the 10 bp premium over the main repo rate (MRO) for the new TLTRO facility.
There is an issuer limit of 33%. This is why Draghi has indicated that Greek bonds could be bought after SMP redemption, which means after July.

The above courtesy of Marc Chandler of Marc to Market via TalkMarkets.

Any Surprises?

Given that most believed an open ended program is coming, that announcement was hardly earth-shattering.

Nonetheless the ECB is playing with fire. Instead of taking all the risk or making each national central bank take all the risk, it incorporated "risk sharing". And it's pretty clear the ECB took most of the risk.

Expect challenges from Germany.

Reactions

Global market reactions are pretty moot so far. The biggest move is in the currencies. The Euro dropped to a new low vs. the US dollar and the Swiss franc.

US Dollar vs. Euro

The US dollar is back to a level last seen in October of 2003. Parity was last seen in November 2002.

"QE already Working"

Just ahead of the announcement IMF director Christine Lagarde said on a panel at Davos, QE Already Working.

"To a point you can say that it has already worked," Lagarde said on a panel in Davos. "If you look at currency variation and where the euro is at the moment, you can't deny that there is expectations there that QE is about to come and is announced and will be significant."

Apparently Lagarde thinks trashing a currency means the move is working. Hmm. How long ago was it that Lagarde and various monetarists thought the key to saving the world was forcing the US dollar lower.

Here's the other side of the story. Consumers in the eurozone will see prices rise. US exports to Europe will decline.

More importantly, if this is another one of those "whatever it takes moments", where do you want to be? The inflated stock market? Bonds with negative yield? How about gold?

Gold in Euros

The above chart is yesterday's gold close divided by the current movement in euros. Roughly multiply the right scale by 100 to get gold price in euros.

In November something changed big time. I suggest belief in central banks is fading. Gold in all currencies has been rising. Today gold is up again even though the dollar is up significantly.

And in euros, gold is up roughly 22.8% from the November low.

Where Do You Want To Be?

So where do you want to be if the ECB continues QE indefinitely until it reaches its inflation target of 2%. Bonds yielding 0% or even negative percent?

If you look under the covers you will discover Central Banks are as Impotent as Obama. Gold is the place to be.

Addendum:

Nick at Gold Charts "R" Us provided a better chart than the one I posted above from Stockcharts.

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

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