vineri, 20 februarie 2015

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Lacy Hunt on Financial Repression; Deleveraging Not

Posted: 20 Feb 2015 12:30 PM PST

In another of his series on Financial Repression, Gordon Long of Market Research and Analytics interviewed Dr. Lacy Hunt, Executive Vice President of Hoisington Investment Management Company.

Previously Lacy Hunt was with the Federal Reserve in Dallas. He was also the chief economist for the largest bank in Philadelphia, and the chief economist for HSBC (at the time the largest bank in the world).

Hoisington manages over $5 billion for pension funds, endowments, insurance companies and others. Hunt has been with Hoisington for 19 years.



link if video does not play: Lacy Hunt on Financial Repression

Lacy describes financial repression as "a superficial attempt to deal with the excessive indebtedness that grips the global economy, not just the US, but Europe, Japan, the United Kingdom, and even now China and the emerging markets."

"In my opinion will not work," says Hunt.

"Monetary Policy is not the solution here. There are Fiscal Policy solutions but they require shared sacrifice, strong leadership (something we don't have in the US or Europe - no one has).

"Basically what we are trying to do is to solve an extremely over-indebted situation domestically and globally by taking on more debt and aggravating the problem. Rather than bringing us closer to the return of the normal business cycle, they are pushing it all further and further into the future."
 
2015 Parallels to Currency Wars of 1920s and 1930s

  • First, there is a global problem with debt and slow growth, and no country is immune.
  • Second, the economic problems now, like then, are more serious and are more apparent outside the United States. However, due to negative income and price effects on our trade balance, foreign problems are transmitting into the U.S. and interacting with underlying structural problems.
  • Third, over- indebtedness is rampant today as it was in the 1920s and 1930s.
  • Fourth, competitive currency devaluations are taking place today as they did in the earlier period. These are a combination of monetary and/or fiscal policy actions and also, with floating exchange rates, a consequence of shifting assessments of private participants in the markets.

Interest Rates

Regarding interest rates, Lacy says "The downward pressure on global economic growth rates will remain in place in 2015. Therefore record low inflation and interest rates will continue to be made around the world in the new year, as governments utilize policies to spur growth at the expense of other regions."

Three Problem Types of Debt 

  1. Borrowing to finance daily living needs
  2. Debt that leads to bankruptcy
  3. Worst type of debt is where excess debt creation inflates asset prices.  And that only leads to economic instability.

"Good debt" to Lacy is debt that yields an income stream sufficient to pay back principal and interest.

Deleveraging Not

"The world now has $35 trillion more debt today than in 2007. We are not in the age of deleveraging; We're still in the age of leveraging up. Unfortunately, the overleveraged condition is virtually everywhere in the world."

Thanks to Lacy Hunt for taking the time to share his thoughts.

Mish on Financial Repression

Gordon Long interviewed me on the subject of financial repression in October of 2014.

I describe financial repression as "a set of fiscal and monetary policies for the expressed benefit of the ruling class: politicians, banks, and the already wealthy, at the expense of everyone else."

You can find a synopsis and play the interview here: Gordon Long Video Interview of Mish: Topic - Financial Repression (and How to Defend Yourself From It)

Long also interviewed Dr. Marc Faber. On Long's Financial Repression Website, you can see all the interviews in this series.

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

Bailout Blueprint: Deal or Capitulation? ECB Prepares for a Greece Exit from Euro Zone

Posted: 20 Feb 2015 11:11 AM PST

Bailout Blueprint: Deal, Capitulation, or Neither?

At the 12th hour Finance Chiefs Draw Up Greek Bailout Blueprint.
Negotiations led by Jeroen Dijsselbloem, the Dutch finance minister who chairs the eurogroup of 19 eurozone finance ministers, have produced a common communiqué on the extension of Greece's €172bn bailout, according to a eurozone official.

The text was produced after nearly five hours of bilateral talks between Mr Dijsselbloem and key ministers, including Yanis Varoufakis, Greek finance minister, and Wolfgang Schäuble, his German counterpart. The eurozone official also said Mr Dijsselbloem was in direct contact with Alexis Tsipras, Greek prime minister, during the talks.

The text must now be presented to all 19 eurozone ministers for approval. "It will be fast," said the official.

According to a Greek government official, the new text was also agreed by the three institutions that monitor the country's bailout: the European Commission, the European Central Bank and the International Monetary Fund.

Mr Varoufakis had earlier insisted that Greece had made sufficient concessions to reach a deal to extend the bailout for six months after it expires next week and predicted that he and his 18 eurozone counterparts would reach an agreement.

He said Athens had "gone not an extra mile [but] an extra 10 miles" in its proposal for the extension, submitted to eurozone leaders on Thursday, adding it was now the turn of other ministers to meet Greece "not half way, but one-fifth of the way" to reach a deal.

Mr Varoufakis and a group of German-led eurozone countries are locked in a stand-off over the conditions of a bailout extension, with Berlin insisting the new Greek government agree to the terms of the existing bailout before it engages in negotiations over any changes in the programme.

Mr Tsipras's government has refused, saying it was elected to end the current bailout, but has made significant concessions, agreeing to ask for an extension with some loopholes that would give it some leeway to negotiate terms.

Speaking after a meeting in Paris, the leaders of both France and Germany said they remained committed to keeping Greece in the EU's common currency, but Angela Merkel, the German chancellor, added that Mr Varoufakis' request needed to be changed before it would be acceptable.

"There is a need for significant improvements in the substance of what is being discussed so that we can vote on it in the German Bundestag, for example next week," Ms Merkel said, standing next to her French counterpart, François Hollande.
Is there a deal? Does it need to be changed?

ZeroHedge reports according to Capital.gr, the preliminary agreement covers the following points:

  • 4 not 6-month extension
  • no completion of current program
  • no new austerity measures
  • no unilateral actions

If that's really the deal, then Greece bought time to speed up tax collections. In turn, that would strengthen its hand four months from now when this process starts all over.

As I pointed out previously, as long as Greece has a primary account surplus, it can stay on the euro.

I have wondered if tax collections had shrunk so much ahead of Syriza's victory that it no longer has a primary account surplus.

ECB Prepares for a Greece Exit from Euro Zone

Meanwhile, Spiegel reports ECB Prepares for a Greece Exit from Euro Zone
The European Central Bank is preparing for the event that Greece leaves the euro zone and its staff are readying contingency plans for how the rest of the bloc could be kept intact, German news magazine Spiegel reported in a preview of its magazine.

The ECB declined to comment on the report, Reuters reported.

The German magazine also reported that the ECB was pushing Athens to introduce controls on the movement of capital.

Earlier this week, the European Central Bank denied a report in a German newspaper that it wanted Greece to introduce capital controls to stem the outflow of deposits from its banks.

Germany΄s finance minister was hostile to Athens΄ proposal this week although the government softened its tone on Friday as euro zone finance ministers raced to break the deadlock.
I suspect the ECB has been preparing for Grexit for months, and that helps explain the hard stance of Germany.

Deal or not? Capitulation by Greece or not? More negotiations in 4 months? If the latter, Greece bought some time to get back to (or strengthen) its primary account surplus.

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

Spotlight Japan: Inflation Barely Positive, Consumer Spending Down, Exports Up, Growth Slowing; Record Streak of Bad Weather

Posted: 20 Feb 2015 01:18 AM PST

Inquiring minds are looking at the latest inflation reports from Japan for clues in the success or failure of Abenomics and prime minister Shinzu Abe's stated goal of two percent inflation.

In December, Japanese inflation fell to 0.5% despite massive economic loosening, a 1% rise in industrial production, and a dip in the unemployment rate to 3.4%, the lowest since 1997.

Today Reuters reports Japan January Inflation Seen Easing, Factory Output Up.
Japan's core inflation is seen slowing for a sixth month in January while factory output is expected to rise, underlining the policy challenge facing the Bank of Japan as it strives to speed up economic growth and achieve its 2 percent price target.

Stripping out the effects of a sale tax hike, the nation's core consumer price index (CPI) - excluding volatile fresh food but includes oil products - is forecast to have increased 0.3 percent year-on-year last month, a Reuters poll showed.

The Bank of Japan is counting on exports to help offset the still-weak private consumption, and for weak oil prices to spur companies to spend more, helping the economy gather speed after last April's sales tax hike tipped it into recession.

The nation's factory output is seen jumping 2.7 percent in January from the previous month, the poll showed. In December, output increased 0.8 percent on-month, after a 0.5 percent fall in November.

Household spending is expected to have fallen 4.1 percent in January from a year earlier partly due to bad weather, down for a tenth straight month, the poll showed. And retail sales are set to fall an annual 1.3 percent last month, down for the first time in seven months.
Record Streak of Bad Weather

Household spending is down 10 straight months, partially die to bad weather. Is that a record streak of bad weather or what?

Those are forecasts of course, but with expectations of a 4.1% decline in spending, I will go out on a limb and guess the report is at least in the ballpark.

Markit Manufacturing PMI Suggests Growth Slowing

Markit claims the Japan Manufacturing PMI shows "solid production growth" but that is not my takeaway from looking at the data.

The February "Flash" Manufacturing PMI is 51.5, down from 52.2 last month and is the slowest since July 2014.

Manufacturing output is at 52.7, the same as last month, supposedly "solid" growth. Check out the summary.



Slower Growth

  • PMI
  • New Orders
  • Employment
  • Output Prices - In Actual Decline
  • Input Prices - Increase Slower

The big positive is an increase in export orders but the chart does not look too impressive.



GDP and Export Discussion

Every country wants a weaker currency to boost exports relative to imports. It's mathematically impossible. If Japan succeeds dramatically, it will be at the expense of some other country. Take your pick: USA, Germany, China.

Recall that exports add to GDP while imports subtract from GDP. If Japan is once again exporting more cars and technology to the US, and if the US is exporting less due to the rising value of the US dollar, where does that put US GDP?

And what about the possibility China enters a beggar-thy-neighbor scheme to lower the yuan to compete with Japan.

None of this sits very pretty for upcoming US GDP reports or for various trade retaliations.

I wonder if this is what's really on the Fed's mind when the Fed minutes surprised the markets with statements on being patient (See Patience is a Virtue, Unless It's Not)

More than likely, such thoughts give the Fed too much credit because history shows they are totally clueless.

Regardless, Japan is once again on the verge of price deflation in spite of Abenomics. That's a good thing actually for the Japanese consumer, but few see it that way.

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

Damn Cool Pics

Damn Cool Pics


How Game of Thrones Characters Look Based On The Books Vs TV

Posted: 20 Feb 2015 12:09 PM PST

Various artists have created some amazing artwork recreating "Game of Thrones" characters based on how they're described in the books. Which depiction do you like better, the books or the TV show?

Joffrey Baratheon



Tywin Lannister




Petyr Baelish



Oberyn Martell



Daenerys Targaryen



Tyrion Lannister



Theon Greyjoy



Brienne Tarth



Ygritte Snow



Renly Baratheon



Stannis Baratheon



Cersei Lannister



Sandor Clegane



Melisandre



Jorah Mormont



Davos Seaworth



Tormund



Syrio Forel



Daar Naharis



This Hottie Nailed It With Her Supergirl Cosplay

Posted: 20 Feb 2015 11:00 AM PST

It's safe to say that Supergirl has never looked so sexy.






















Driving Traffic from Facebook - Whiteboard Friday - Moz Blog


Driving Traffic from Facebook - Whiteboard Friday

Posted on: Friday 20 February 2015 — 01:16

Posted by randfish

Facebook sends a remarkable amount of traffic, but there's a lot of confusion around both just how much and (perhaps more importantly for our work) how we can optimize our work to take advantage of it. In today's Whiteboard Friday, Rand clears up some of the statistical noise and offers 10 tips for optimizing your Facebook traffic.

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

Video transcription

Howdy, Moz fans, and welcome to another edition of Whiteboard Friday. Today we're going to talk a little bit about Facebook. Facebook has been growing massively. It sends out a tremendous amount of traffic, and as a result, more and more of us in the field of web marketing as a whole, and because it's so interesting as a correlated factor with things that tend to perform well in Google, are interested in the traffic that Facebook can drive and in potentially growing that.

So I'm going to start out with a few stats. I think it is actually very important that marketers like us understand how statistics work, especially as they're represented. I hear from folks all the time like, "Oh, my boss emailed me the new Shareaholic report, and it says that 25% of all traffic comes from Facebook, and we only get 10% of our traffic from Facebook. So we must be doing Facebook badly." That's not actually the case.

Then I'm going to talk a little about some rough estimates, just for theoretical fun purposes, around traffic that Facebook might send versus Google, and then I actually have a bunch of tips for Facebook optimization. None of this is going to be dramatically brand new, but I've tried to distill down and aggregate some of the best ones, throw out some of the ones that no longer apply as Facebook has been maturing and getting more sophisticated and those kinds of things. All right, let's start with these stats.

So let's say your boss does send you this Shareaholic report, and Facebook sends 24% of all referral traffic. Wow. Shareaholic is on 300,000 websites. That's a pretty big group. Like how can we ignore that data? It's not that you should ignore it, but you should also be aware of why is Shareaholic installed and who uses it.

So these 300,000 sites are almost certainly massively over-representative across the several hundred million websites that exist on the Internet of those that receive and are optimizing for social media traffic. I think this is an excellent stat, and if you are a social media heavy site and you are getting less than say 20%, less than 15% of your traffic from social, well, you probably have some work to do there and some opportunity to gain there.

I also like this one from Define Media Group. Define of course is a Marshall Simmonds' company, and they measure across major publishers. So one of the things that you might hear is Buzzfeed, for example, last year put out their big article about how they get 70% plus of their traffic from social, and they don't even care about search, and search is dead. No one does SEO anymore and blah, blah, blah. It turns out actually, I think Buzzfeed does a tremendous amount of caring about SEO despite what they say, but they don't want to be perceived as doing that. Define said across all of their 87 major publishers -- so these are big news sorts of publishers and entertainment content publishers and that kind of stuff -- social sent about 16% of all traffic, search 41%, and direct 43%. That's a very big difference from the social sharing site. So again, you're seeing that granularity and disparity as we look across different segments of the web world.

Worldwide by the way, according to StatCounter, whose stats I like very much because they're across such a wide range of distributed websites, many hundredths of thousands, I think even millions of websites in the U.S. and abroad, so that's really nice and they share their global statistics at gs.statcounter.com, which is one of my favorite resources for this type of stuff. According to them, worldwide Facebook, in January of 2015, driving around 80% of all social referrals in the U.S. Interestingly enough, people like Pinterest and Twitter and LinkedIn and Google+ have more of a share than they do in the rest of the world, and so Facebook is responsible for only about 68% of all social referrals in the U.S. as a conglomerate.

It is the case for anyone measuring Facebook traffic, the average pages per visit tends to be around one. Now, you compare that to Google, where it's around 2, 2.2, or 2.5, you compare that to Direct and Direct is usually closer to the 3, 4, or 5 visits per session. So Facebook's traffic is kind of at the low end of the performance and engagement scale. It tends to be the case that when you're in that Facebook feed, you're just trying to consume content, and you might see something, but you're unlikely to browse around the rest of the website from which it came, and that's just fine. Although, interestingly enough, Facebook does perform better, slightly better than Twitter does by this metric. So Twitter's traffic is even more ephemeral.

I tried to do some rough statistics and think about like, okay Rand, I really need a comparison between how much traffic does Google send and how much traffic does Facebook send. This is something that people ask about all the time. There are no terrific sources of data out there, so we sort of have to back into it. I think you can do that by saying, "Well, we know that Google's getting around 6 billion searches a day currently, and we know that those send on average . . . well, we don't know for sure. We know that years ago an average Google search resulted in 2.1 or 2.2 clicks." I think that was 2009, so this was many years ago. So it could have gone down, or it could have gone up from there. I'm going to say between 1.5 and 3 visits on average, somewhere in there.

Facebook has 890 million daily active users, and we don't know the statistics again perfectly there. But again, several years ago, I want to say maybe 4 years ago, 2011, they had a stat that around 2 external clicks per day per Facebook user. So let's say it's probably gone up maybe 2 to 4, somewhere between there. So given that, Google is in the 9 to 18 billion referrals per day stage and Facebook 1.8 to 3.6 billion.

So if you think Facebook has grown just absolutely huge, it could be as big as a third of the smallest growth maybe that Google has experienced in terms of referral traffic. I think that's possible. I think the numbers are probably closer to the 9 and 3.6 than they are to the 18 and 1.8. That would be my guess. I think Facebook is somewhere between 15% and 30% of the traffic that Google's driving. So pretty massive. Definitely bigger than any of the secondary search engines. Probably driving more traffic than YouTube, driving more traffic than Yahoo!, driving more traffic than Bing. Probably driving more traffic than all three of those combined even. That's quite impressive, just not as impressive as the enormous amounts of traffic that Google does set.

Still, one of the reasons that we care about Facebook even if we don't love the traffic that Facebook sends us because we don't feel that it performs well, Facebook's likes and shares are very indicative of the kinds of content that tend to perform well in search. So if we can nail that, if we understand what kind of content gets spread socially on the web and engages people on the social web, we tend to also perform well in the kind of content we create for search engines.

So some tips. First off, make sure that the Facebook audience and whoever your . . . well, that pen is going to work beautifully for someone never. Let's see if I can make it from here. You guys can't see this, but we'll just pretend I make it. Oh yeah, nailed it. Oh, it almost went in. It like bounced off the shelf and then almost went in.

All right. First off, make sure that your Facebook audience usage matches your content goals and targets. If you're saying, "Hey, we're trying to convert people to a B2B software product in an industry that really targets technical folks on the engineering side," Facebook might be really, really tough. If, on the other hand, you are selling posters of adorable cats and dogs, woo, that's a Facebook audience right there. You should nail that. So I think you do have to have that concept. You can't just disassociate those two. If you're working for a patent attorney, trying to get likes and shares is going to be really hard for their content versus maybe trying to get some tweets or some shares on LinkedIn or those kinds of things.

Second, learn what does work in your topics in Facebook. There's a great tool for this. It's called BuzzSumo. You can plug in keywords and see the pieces of content that over the past six months or a year have performed the best across social networks, and you can actually filter directly by Facebook to see what's done best on Facebook in my niche, with my topics, around my subjects. That's a great way to get at what might work in the future, what doesn't work, what will resonate, and what won't.

Number 3, you should set up your analytics to be able to track future visits from an initial social referral. There's a great blog post from Chris Mikulin. Chris basically shows us how in Google Analytics you can set up a custom system to track referrals that come from social and then what that traffic does after it's come to you from social and left, oftentimes coming back through search, very, very common.

Number 4, headlines often matter more than content in earning that first initial click. I'm not going to say they matter more than content overall, but headlines are huge on Facebook right now, and that's why you see things like the listicles and click bait all of those types of problems and issues. Facebook says they're working to update that. But for right now there's a ton of sharing going on that's merely around the text of that 5 to 15 word headline, and those tend to be extremely important in determining virality and ability to make their way across Facebook.

Number 5, it is still the case -- this has been true for many years now across all the social media platforms -- that visuals tend to outperform non-visual content. When you have great visuals, the spread and share of those tends to be greater.

Number 6, timing still matters a little bit, but actually, interestingly not as much as it used to. I think a lot of folks in the social media sphere have been looking at this and saying, "Gosh, you know what? We're running the correlations and we're trying these experiments, and what we're seeing actually is that it seems like Facebook has gotten much smarter about timing." So they're not saying, "Oh, you posted in the middle of the night and you didn't get very many likes, so we're not going to show your post to as many people." They're now saying, "Well, as a percentage of the engagement on average that's received by this group in these geographies, in these time zones, at these particular times, how did you do?" I think that relativism has made their algorithm much more intelligent, and as a result we're seeing that posting at a certain time of the day, when more people are on Facebook or less are, isn't quite as powerful as it used to be. That said, if you want to try some timing experiments, watch your Facebook Insights page, and figure those things out. There's still some optimization opportunity to be gleaned there.

Number 7, the really big driver of Facebook spread and of the ability to be seen by more and more people, have a post seen by more and more people on Facebook, appears to be -- at least from all the social media experts, and I would validate this myself from my experiences there -- the percentage of the audience that's seeing the post, interacting with that post -- and by interacting I mean they like, they comment, they share, they click on the link, or even, I'm fairly certain that Facebook is also using a dwell time metric, meaning that if they're looking at that post for a considerable amount of time, even if they're not clicking Like or Share or Comment or clicking, if they're observing it, if that's staying active on their Facebook feed in the visual portion of the panel, that seems to be a metric that Facebook is also using. I would be fairly sure it is. I think they're pretty smart about that kind of stuff. Because this is a big driver, what you're trying to do is grow engagement. You want more people to interact more heavily with your content. I think that's one of the reasons that unfortunately things like click bait work so well and great headlines do too.

Number 8, brand page reach is limited. We know this. There have been many sort of Facebook algorithmic updates that talk about what's the organic reach if you post, but you don't pay at all, those kinds of things. However, the flip side of this is that in order for Facebook to not be overwhelmed by content, because the amount of content that's posted there is simply enormous, they've reduced some of those things. But that means a little bit more room for individual people. So individual accounts, like your Facebook account, my Facebook account, not my public page, but my personal Facebook account, your personal Facebook account, those have a little bit more opportunity to get reach versus brands, which for a while were more dominating than they are. Now it's pretty small.

Number 9, if your traffic from Facebook has good ROI -- and this is one of those big reasons why you need to be measuring the second order effects and when that traffic comes back and those kinds of things -- go ahead and pay to amplify. This is just like Google. If you see that a key word is performing well and you can turn on AdWords and you can get more of those visitors and they're going to convert, hey, the same thing is true on Facebook, and Facebook's traffic, generally speaking, is much cheaper on a per-click basis than Google's is. It's also much less targeted. It tends not to perform as well, but much less expensive. So I would urge you to pay to amplify. When you see sites that are performing gangbusters -- Buzzfeed being a very fair example of that -- they're paying a lot of money to drive all that traffic to their site and to amplify their organic reach. They're getting organic and paid reach.

And the last one, number 10, Facebook is really hard to game anymore -- it didn't used to be this case -- with direct signals. It used to be the case that if you posted something on Facebook, you could have a bunch of your friends like, "Hey, everyone go check their Facebook feed now. Make sure you're subscribed to me. If you don't see it in your feed, go over to my specific feed, click it, Like it, Share it, comment it." Then we can sort of amplify its organic reach, because Facebook cares a ton about those first 5 or 10 minutes and what the engagement is like there. That doesn't work very well anymore. Facebook is very, very careful, I think, nowadays to look at: Who did we organically show this to in the news feed? How many of them interacted and engaged with it? What's their history of interacting and engaging with stuff on this particular site? Are they somehow connected? Is there gaming going on here? Have they consistently liked everything that's come from this site in the first five minutes of it being published? All those kinds of things that you would expect them to eventually get to, they've really gotten to, and so gaming it is much more hard.

But gaming people is not much harder, because unfortunately our software has not been considerably upgraded in the last few hundred years of evolution. So as a result, gaming human psychology is really how to, I don't want to say manipulate, but certainly to get much more reach on Facebook. If you can find the angles that people care about, that they're vocal about, that they get engaged, excited, angry, passionate, of any emotional variety about those things, that's how you tend to trigger a lot of activity on Facebook. This is a little different than how it works on other social networks, certainly LinkedIn, parts of Twitter, Instagram different. Facebook very much this kind of controversy, passion, excitement, tribalism tends to rule the day on this platform. I think that's part of why you see some of these click bait and headline heavy sites performing so well. But if you want to find ways to make Facebook work for you, you might want to marry the things that are on brand, on topic, helpful to you, actually will earn you good visits, but do take into account some of that human psychology that exists on Facebook.

All right everyone, what I would love, and I don't always ask for this, but I would love if you have great tips or things that you've seen work really well on Facebook, please share them in the comments below. I would love to read through them. I'm guessing there are some folks in the Moz community who have extensive, wonderful experience here. We'd love to hear from you.

All right everyone, take care. We'll see you again next week for another edition of Whiteboard Friday.

Video transcription by Speechpad.com


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Seth's Blog : Pitchers and hitters

Pitchers and hitters

Hitters don't have much of an agenda other than, "swing at the good balls." No one blames the hitters when the pitcher has a hot hand and throws a no hitter.

Pitchers, on the other hand, decide what's going to happen next. Pitchers get to set the pace, outline the strategy, initiate instead of react.

When your job is in reaction mode, you're allowing the outside world to decide what happens next. You are freed from the hard work of setting an agenda, but in exchange, you dance when the market says dance. "I did the best I could with what was thrown at me..."

Finding the guts to move up the ladder is hard. When you decide to set the agenda and when you take control over your time and your effort, the responsibility for what happens next belongs to you.

            

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joi, 19 februarie 2015

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Survival by Coercion: No-Confidence Vote in France Fails; Rules of the Game Show Wasted Opportunity by Hollande

Posted: 19 Feb 2015 07:40 PM PST

No-Confidence Vote in France Fails

French President Francois Hollande took an unusual step on Tuesday of passing a law by decree, with no parliamentary vote.

Article 49.3 of the French constitution allows that, but doing so runs the risk of a no-confidence vote and dissolution of the government should the vote of confidence fail.

I commented on Article 49.3 in Hollande Risks Vote of No Confidence Over Business-Friendly Legislation; National Debate Over Baguettes.

That headline was a bit inaccurate because there really was little risk. Heads of state don't go out of their way on such measures unless they know full well they will survive.

234 voted to censure Hollande, but 289 votes were necessary. Mainstream media portray this as some sort of victory. I don't. I call it a wasted opportunity. I will explain why in a bit, but first let's dive into the reporting.

Survival by Coercion

Reuters reports French Government Survives No-Confidence Vote.
France's Socialist government survived a parliament no-confidence vote called by opposition conservatives on Thursday after it resorted to a controversial decree to bypass broad opposition to a flagship economic reform bill.

Some 234 lawmakers voted in favor of the motion, according to the official vote tally - well short of the 289 votes needed to secure an absolute majority in the lower house of parliament.

The challenge was made after Prime Minister Manuel Valls on Tuesday resorted to a little-used mechanism to push through a package of economically liberal reforms opposed by the left - a tactic widely denounced as anti-democratic.

However the outcome of the no-confidence vote came as little surprise after Socialist leaders said they would eject from the party any lawmaker who joined the censure motion. A Reuters reporter in parliament said no Socialist did so.
Vote With the Party or Be Ejected

There you have it. Coercion at its finest. Vote for censure and you will be ejected from the party.

That you have to issue such statements is bad enough. And given that many from other parties do not want a collapse of the government at this time, the vote total should be considered an embarrassment, not a victory.

Wasted Opportunity by Hollande

And what does Hollande have to show for this coercion? The reforms include increasing the number of Sundays that shops can stay open from five to twelve and deregulation of notary and legal professions.

This was my comment two days ago "It is absurd to believe allowing shops to stay open an extra 7 Sundays will do anything meaningful for the economy. If you are going to risk a vote of no-confidence, why not make it meaningful?"

Rules of the Game

The rules of game are such that you can only use Article 49.3 once per parliamentary session. I had to look that up.

Wikipedia reports the French Parliament meets for one nine-month session each year: under special circumstances the President can call an additional session.

So, in the sake of reform that is supposed to impress Germany, Hollande put it all the line by letting shops open up an extra 7 days on Sunday and other miscellaneous and essentially meaningless items.

Socialist Revolt in Words Not Actions

Socialists were horrified about the prospect of having to work any extra Sundays a year. Martine Aubry, the daughter of former EU commission president Jacques Delors and an influential Socialist party figure, attacked the plan to increase the number of Sundays shops can open from five a year to 12, calling it "social regression".

In the end, coercion "won". Not a single socialist stood their ground fearing expulsion from the party.

Final Analysis

What was really achieved? Nothing but Embarrassment. Pathetic.

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

NSA Hacks Into SIM Card Makers Giving US and UK Criminals Access to Millions of Cell Phones

Posted: 19 Feb 2015 04:49 PM PST

The Great SIM Heist

I have a simple question: Why is it a crime for someone to hack into Sony, Target, weather stations, etc., but not a crime for the NSA to hack into phone SIM card producers then steal every master key?

In my opinion, all of these hacks are illegal, and the NSA officials who authorized the hack I describe below belong in prison.

Please consider The Great SIM Heist
AMERICAN AND BRITISH spies hacked into the internal computer network of the largest manufacturer of SIM cards in the world, stealing encryption keys used to protect the privacy of cellphone communications across the globe, according to top-secret documents provided to The Intercept by National Security Agency whistleblower Edward Snowden.

The hack was perpetrated by a joint unit consisting of operatives from the NSA and its British counterpart Government Communications Headquarters, or GCHQ. The breach, detailed in a secret 2010 GCHQ document, gave the surveillance agencies the potential to secretly monitor a large portion of the world's cellular communications, including both voice and data.

The company targeted by the intelligence agencies, Gemalto, is a multinational firm incorporated in the Netherlands that makes the chips used in mobile phones and next-generation credit cards. Among its clients are AT&T, T-Mobile, Verizon, Sprint and some 450 wireless network providers around the world. The company operates in 85 countries and has more than 40 manufacturing facilities. One of its three global headquarters is in Austin, Texas and it has a large factory in Pennsylvania.

In all, Gemalto produces some 2 billion SIM cards a year. Its motto is "Security to be Free."

With these stolen encryption keys, intelligence agencies can monitor mobile communications without seeking or receiving approval from telecom companies and foreign governments. Possessing the keys also sidesteps the need to get a warrant or a wiretap, while leaving no trace on the wireless provider's network that the communications were intercepted. Bulk key theft additionally enables the intelligence agencies to unlock any previously encrypted communications they had already intercepted, but did not yet have the ability to decrypt.

As part of the covert operations against Gemalto, spies from GCHQ — with support from the NSA — mined the private communications of unwitting engineers and other company employees in multiple countries.

Leading privacy advocates and security experts say that the theft of encryption keys from major wireless network providers is tantamount to a thief obtaining the master ring of a building superintendent who holds the keys to every apartment. "Once you have the keys, decrypting traffic is trivial," says Christopher Soghoian, the principal technologist for the American Civil Liberties Union. "The news of this key theft will send a shock wave through the security community."

According to one secret GCHQ slide, the British intelligence agency penetrated Gemalto's internal networks, planting malware on several computers, giving GCHQ secret access. We "believe we have their entire network," the slide's author boasted about the operation against Gemalto.

"It's unbelievable. Unbelievable," said Gerard Schouw, a member of the Dutch Parliament, when told of the spy agencies' actions. Schouw, the intelligence spokesperson for D66, the largest opposition party in the Netherlands, told The Intercept, "We don't want to have the secret services from other countries doing things like this."

All mobile communications on the phone depend on the SIM, which stores and guards the encryption keys created by companies like Gemalto. SIM cards can be used to store contacts, text messages, and other important data, like one's phone number. In some countries, SIM cards are used to transfer money. As The Intercept reported last year, having the wrong SIM card can make you the target of a drone strike.

SIM cards were not invented to protect individual communications — they were designed to do something much simpler: ensure proper billing and prevent fraud, which was pervasive in the early days of cellphones.

One of the creators of the encryption protocol that is widely used today for securing emails, Adi Shamir, famously asserted: "Cryptography is typically bypassed, not penetrated." In other words, it is much easier (and sneakier) to open a locked door when you have the key than it is to break down the door using brute force. While the NSA and GCHQ have substantial resources dedicated to breaking encryption, it is not the only way — and certainly not always the most efficient — to get at the data they want. "NSA has more mathematicians on its payroll than any other entity in the U.S.," says the ACLU's Soghoian. "But the NSA's hackers are way busier than its mathematicians."

SIM card "personalization" companies like Gemalto ship hundreds of thousands of SIM cards at a time to mobile phone operators across the world. International shipping records obtained by The Intercept show that in 2011, Gemalto shipped 450,000 smart cards from its plant in Mexico to Germany's Deutsche Telekom in just one shipment.

In order for the cards to work and for the phones' communications to be secure, Gemalto also needs to provide the mobile company with a file containing the encryption keys for each of the new SIM cards. These master key files could be shipped via FedEx, DHL, UPS or another snail mail provider. More commonly, they could be sent via email or through File Transfer Protocol, FTP, a method of sending files over the Internet.

The moment the master key set is generated by Gemalto or another personalization company, but before it is sent to the wireless carrier, is the most vulnerable moment for interception. "The value of getting them at the point of manufacture is you can presumably get a lot of keys in one go, since SIM chips get made in big batches," says Green, the cryptographer. "SIM cards get made for lots of different carriers in one facility." In Gemalto's case, GCHQ hit the jackpot, as the company manufactures SIMs for hundreds of wireless network providers, including all of the leading U.S.— and many of the largest European — companies.

In Asia, Gemalto's chips are used by China Unicom, Japan's NTT and Taiwan's Chungwa Telecom, as well as scores of wireless network providers throughout Africa and the Middle East. The company's security technology is used by more than 3,000 financial institutions and 80 government organizations. Among its clients are Visa, Mastercard, American Express, JP Morgan Chase and Barclays. It also provides chips for use in luxury cars, including those made by Audi and BMW.

In 2012, Gemalto won a sizable contract, worth $175 million, from the U.S. government to produce the covers for electronic U.S. passports, which contain chips and antennas that can be used to better authenticate travelers.

PRIVACY ADVOCATES and security experts say it would take billions of dollars, significant political pressure, and several years to fix the fundamental security flaws in the current mobile phone system that NSA, GCHQ and other intelligence agencies regularly exploit.

A current gaping hole in the protection of mobile communications is that cellphones and wireless network providers do not support the use of Perfect Forward Security (PFS), a form of encryption designed to limit the damage caused by theft or disclosure of encryption keys. PFS, which is now built into modern web browsers and used by sites like Google and Twitter, works by generating unique encryption keys for each communication or message, which are then discarded. Rather than using the same encryption key to protect years' worth of data, as the permanent Kis on SIM cards can, a new key might be generated each minute, hour or day, and then promptly destroyed.

The only effective way for individuals to protect themselves from Ki theft-enabled surveillance is to use secure communications software, rather than relying on SIM card-based security. Secure software includes email and other apps that use Transport Layer Security (TLS), the mechanism underlying the secure HTTPS web protocol. The email clients included with Android phones and iPhones support TLS, as do large email providers like Yahoo and Google.

"We need to stop assuming that the phone companies will provide us with a secure method of making calls or exchanging text messages," says Soghoian.
NSA Criminals

That was a long snip, but from a very long article. There's more in the article to see including how the NSA accomplished the hack.

For now, you should assume every conversation you have made since 2010 had been stolen. Nothing you do or say on your phone is private, not even in your own home.

I seem to recall a piece of paper, now meaningless, that supposedly guards against such seizures.

Seventh Article of Bill of Rights

The right of the People to be secure in their persons, houses, papers and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.

Send them to Prison

The only way to stop this sh*t is to press charges, find the NSA guilty and send those responsible to prison.

Since Obama is unwilling to do what's necessary, and given Jeb Bush and Hillary Clinton won't either, if you are outraged by this, I suggest voting for Rand Paul, the one person who has taken a stand on these issues.

In the meantime, act as if someone is listening to every conversation you make.

I go one step further given my outspoken nature on these issues. I act as if my entire house is bugged and the NSA is monitoring everything I do.

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

Debaltsevsky Under Rebel Control, Boiler Remains; What's Next?

Posted: 19 Feb 2015 03:35 PM PST

More details show the alleged "orderly retreat" of Debaltsevsky by Ukrainian forces was anything but orderly. Now that the city has fallen, Germany and France have again renewed efforts at a ceasefire.

Yahoo!News reports Debaltseve Under Rebel Control, Cossack Fighters Celebrate. My inline comments are in braces.
Rebel fighters, many of them Cossacks roamed the streets of Debaltseve on Thursday, a day after Ukrainian forces began withdrawing from the besieged town. The mood was celebratory, with fighters laughing, hugging each other and posing for photos.

[See Wikipedia for a description of the term Cossacks]

Associated Press journalists drove Thursday around about half of the key rail hub that has been the focus of weeks of fighting in eastern Ukraine between Russia-backed separatists and government troops. They found all its neighborhoods under the control of rebel fighters.

On the road out of town, dozens of Ukrainian military vehicles were retreating to the government-held town of Artemivsk. Many were riddled with bullet holes or had their windshields destroyed. Soldiers in them spoke of enduring weeks of harrowing rebel shelling, barrages designed to annihilate their ranks.

"Starting at night, they would fire at us just to stop us from sleeping," a Ukrainian soldier named Andrei told the AP, sitting in his truck outside Artemivsk. "They did this all night. Then in the morning, they would attack, wave after wave. They did this constantly for three weeks."

[All the while Ukrainian president Petro Poroshenko said his troops were not surrounded. That charade continued even through the Minsk II ceasefire agreement. In fact, refusal to admit the loss of Debaltsevsky, coupled with Kiev reneging on both amnesty promises and on promised constitutional reforms is why the ceasefire had no chance from the beginning.]

As rebels waved separatist flags in Debaltseve, Nikolai Kozitsyn, a Russian Cossack leader and prominent warlord in separatist eastern Ukraine, drove around in a Humvee-like vehicle captured from Ukrainian troops.

Two rebel fighters inspected a tank left behind by Ukrainians, what they called a "gift" from the government troops.

Capturing the town is a significant military victory for the rebels because it's a railway junction that straddles the most direct route between Donetsk and Luhansk, the separatists' two main cities.

France and Germany, which oversaw marathon peace talks between the Ukrainian and Russian leaders last week in Minsk, Belarus, both signaled Thursday that they're determined to salvage the cease-fire deal and keep the two sides talking.

The German government said the four leaders had agreed "to stick to the Minsk agreements despite the serious breach of the cease-fire in Debaltseve."
Debaltsevsky Boiler Remains



Note the separatist flags over Debaltseve and Chornukhyne. Also note the tightening noose around the remaining troops.

Here is a simplified map I created.



Colonel Cassad has comments on what remains of the Debaltsevsky Boiler. My translation follows ...
The total boiler south Loginov is about 4,500, down from the original group of 8-9 thousand. Man. The group is cracked in half. A key success was a surprise attack on Uglegorsk, after which the events went in our favor after an unsuccessful offensive in Svetlodarsk.

Stubborn resistance by a number of parts of the junta was higher than expected. To escape encirclement, parts of the junta's forces left behind heavy weapons including tanks and infantry fighting vehicles. Other forces tried to break free as with Ilovaiskaya and crumbled. Once again some idiots decided that the agreement (safe exit in return for the surrender of equipment) does not apply to them.

Up to 500 were captured and approximately the same number seeped through fields and back roads north of the M-103, partly on foot.

Most of the heavy weapons remain in the boiler so there are really a lot of "trophies". All stories about an organized exit is propaganda bulls**t.

The junta suffered 1200-1500 killed in the battle for Debaltsevsky. Our losses not were not specifically voiced to me, but they were still very significant.
Battle of Ilovaisk

I believe Cassad's comments on Ilovaiskaya refer to the devastating defeat of Ukraine in the Battle of Ilovaisk in which Ukrainain forces refused an offer to exit encirclement by leaving behind equipment. Instead, everything was destroyed including the encircled Ukrainian army.

As the above map shows, the battles for the cities of Debaltseve and Chornukhyne are over, but Ukrainian forces in the area are encircled. They face certain doom unless they agree to abandon "trophies".

What's Next?

A lasting truce is easy. All Ukraine has to do is agree to a federation with Donetsk and Luhansk coupled with universal amnesty and an offer of political independence.

That deal certainly would have prevented a civil war in the first place. Instead we have witnessed the destruction of huge parts of Ukraine with needless lives lost.

Since Poroshenko has proven to be a military dimwit as well as a stubborn fool, I now expect the way forward may eventually involve someone in Kiev getting tired enough of this senseless war to take him out.

Perhaps Poroshenko will finally listen to chancellor Merkel who applied pressure on him to agree to a federation. However, history suggests two things. 1. Fools seldom learn. 2. Fools stay in power longer than most expect.

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

Head-On Collision: Germany Rejects Greece "Trojan Horse"; Slovakia Rules Out Further Aid

Posted: 19 Feb 2015 12:17 PM PST

Today the eurogroup finance ministers rejected Syriza's request for a bridge loan to work things out.

Germany upped the ante, calling Greece's Letter Requesting Extra Time a "Trojan Horse" and instead demanded a three sentence letter accepting all Trioika demands.

  1. Official request for an extension
  2. Promise to complete the current programme
  3. Commit to negotiating any changes with bailout monitors

I have a simple question: What's left to negotiate other than how big a capital surplus Greece must have and for how long.

And those, Germany wants a Greek capital account surplus of 3.5% this year, and 4.5% next year and the following years.

Athens wants 1.5%. Any room for serious negotiation here?

I rather doubt it.

Head on Collision

Media still clings to hope that a collision can be avoided. For example, the Financial Times headline reads German and Greek Ministers Set to Collide.
Athens' chances of finding itself without an EU financial backstop in one week will come down to a bitter face-off in Brussels on Friday between the Greek and German finance ministers after Berlin rejected Greece's request to extend its €172bn rescue by six months.

The German rebuff came just hours after Yanis Varoufakis, the Greek finance minister, reversed his government's long-held promise to kill the current bailout by submitting a letter to his fellow ministers formally requesting the additional time and vowing to bring the programme to a "successful conclusion".

Berlin told counterparts [the letter] amounted to "a Trojan horse" designed by Athens to change the conditions it must meet to receive €7.2bn in aid available for finishing the bailout.

"The letter from Athens is not a substantive proposal for a solution," said Martin Jäger, spokesman for the German finance ministry. "In truth, it aims at bridge financing without fulfilling the demands of the programme."

Germany took an even harder line in a pre-eurogroup meeting of finance ministry deputies on Thursday, calling on Athens to submit no more than a three-sentence letter requesting the extension, promising to complete the programme, and committing to negotiating any changes with bailout monitors.

In addition, the official said Berlin wanted to take back €10.9bn in bailout funds sitting unused in Greece's bank bailout facility — money some EU officials believe could be needed if its financial institutions further weakened.

One person briefed on the talks said an earlier version of the Greek letter was more in line with German demands to agree to all aspects of the current bailout, with limited "flexibility" to negotiate its terms once an extension deal was signed, before it was hardened in Athens.

But the Greek government said it would not revise its letter, arguing the eurogroup had just two choices: accept or reject the Greek request. "This will show who wants to find a solution and who doesn't," a Greek official said.

In his maiden address to parliament as prime minister two weeks ago, Alexis Tsipras vowed not to accept an extension of the bailout, insisting the new government was elected to end its economic and financial strictures, which already makes Mr Varoufakis's letter a significant U-turn even without further concessions.

A two-thirds majority of the governing council's 21 voting members would be needed to end the ELA — which would in effect force Greece to adopt capital controls or quit the currency area.

Germany's rejection of the Greek request cut short a market rally in Greece that had pushed short-term borrowing costs close to a month-low.

Yields surged back up above 17 per cent while shares on the Athens stock exchange slid 5.5 per cent in early afternoon trading.

However, market commentators say that even if Athens does not meet its obligations and leaves the eurozone, contagion will be limited.
Slovakia Rules Out Further Financial Aid for Greece

Recall that eurozone rule changes require every country to agree. Right now it is 18-1 against Greece, with Germany leading the nay-sayers.

But it's not just Germany. For example, Slovakia rules out further financial aid for Greece.
Slovakia's prime minister [Robert Fico] has vowed to oppose Athens' push to ease the terms of its bailout, and warned that Bratislava was "calm" about a possible Greek exit from the eurozone if the country refused to honour its commitments.

"This is a red line for us. It would be impossible to explain to the public that 'poor' Slovakia . . . should compensate Greece," Mr Fico told the Financial Times in an interview in his office on Thursday. "To explain to people that we have to give money to Greece for their salaries and pensions? Impossible. Impossible."

While Germany is frequently portrayed as the biggest obstacle to Greece's new leftwing government, Slovakia's hard line is a reminder that Berlin is hardly alone. Officials involved in the talks said Slovakia has been one of the toughest opponents of relaxing the rules governing Greece's loans.

"The [previous] Greek government has agreed to the conditions of financial assistance," said Mr Fico. "It is not possible that a new government comes and immediately declares that, er, well, we will not respect this."

Mr Fico, who has strongly criticised austerity measures imposed on his own country, said he would only accept concrete promises from Athens that ensure it "will behave in a way that will guarantee that in 10, 15, 20 years, Greece will be able to pay [back] what they get".
Red Lines and Contagion

Excuse me for pointing out the obvious, but governments change agreements all the time. No law is permanent. Even the constitution can be changed, although it's purposely difficult to do so.

As for Slovakia not wanting to give money to Greece. It's going to happen one way or another, unless Slovakia acts like Greece.

  • Slovokia's portion of EFSF guarantees is €1.5 billion. It's total exposure to Greece is €2.2 billion. That's not much, but it is a lot to Slovakia.
  • Spain's exposure to EFSF guarantees is €18.1 billion. Spain's total exposure to Greece is €32.7 billion.
  • Germany's exposure to EFSF guarantees is €41.3 billion. Germany's total exposure to Greece is €72.7 billion.

For more country-specific details, please see Greece Has Less Than One Week of Cash; Another DOA Proposal Discussed Thursday; Exceptional Game Playing.

The idea that all of this is ring-fenced and will not matter is simply preposterous. One way or another, Germany, Greece, Spain, Italy, and in fact all 18 remaining eurozone states will pick up a portion of Grexit.

All that remains is when will that be recognized. I suggest there is no time better than now.

The Game All Along

It is in the best interest of Greece to let Germany force it out of the eurozone, especially if Germany takes the blame.

I proposed long ago that may have been Syriza's game all along!

No politician wants to take the blame when things go bad. And in that regard, Syriza has played a perfect game, bending a bit, but receiving no meaningful concessions from Germany.

Syriza has the support of its people. Germany, not Alexis Tsipras will take the initial blame should Grexit occur.

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