Central Perk

sâmbătă, 29 iunie 2013

Mish's Global Economic Trend Analysis

Bill Gross Discusses the "Tipping Point" For Bonds; Does He Miss the Boat?

Posted: 29 Jun 2013 10:23 AM PDT

Bill Gross did not see this major selloff in bonds coming. He discusses the setup in his recent Investment Outlook called The Tipping Point.

Much of the article is about how he almost tipped a ship while in the Navy. He uses the tipped ship metaphor to talk about the position in bonds.

Gross says "Markets just had too much risk, and in PIMCO's opinion, too much hope for a constant QE and for the growth that it would produce. In effect, the ship was top heavy with too little ballast. Guess I should have known, huh?"

That's water over the dam at this point so the question Gross asks now is "Well where does the ship go from here?"

Here is a snip of Gross' explanation.

Should you as a bond investor jump overboard and risk the cold money market Atlantic Ocean at near zero degrees? We don't think so – and not because we want to keep you on board – we just don't think so. Why not?

1) The Fed's forecast of the economy which prompted tapering panic is far too optimistic. If 7% unemployment is tapering's final port of call, we simply think that we're much further away than the Fed's compass would suggest. We argue for structural headwinds – demographic, globalization, and technology influences – that have had and will continue to have dampening effects on domestic and global growth. The Fed, we would argue, is too cyclically oriented, focusing substantially on housing prices and car sales. And speaking of housing, since mortgage rates have risen by 1½% in the last six months and the average monthly check for a new home buyer is up by 20–25% as well, then as I tweeted several weeks ago, "Mr. Chairman are you serious?" Growth will be negatively influenced.

2) Inflation, according to the Fed's own statistics is running close to a 1% pace. The Fed has told us that they "target," " target" 2% and for the next 1–2 years are willing to accept even 2½% until they reverse engines. Fed Governor Bullard of the St. Louis Fed was in our opinion correct where he dissented from the majority decision several weeks ago, citing the distant shores of 2%+ inflation and the seeming inability to even move in that direction.

3) Yields have adjusted by too much. While T.V. and the press focus on 10-year Treasuries at 2.55% as their guiding star, subjective stabs by yours truly or anyone else are difficult day to day. ... To my eye, Fed Funds will not increase until at least mid-2015 and even then subject to a consistently strong economy that produces 2%+ inflation. I wonder if we can get there in this decade to tell you the truth. But the beauty of this North Star Fed Funds sextant is that it can be rather directly observed in futures markets, either for Fed Funds or for Eurodollars, which are a close companion. Right now, Fed Funds futures markets are predicting a 75 basis point yield in 2015, and Eurodollars validating a similar conclusion. That would suggest a mispricing, despite the obvious caveat of professional observers that some of the 75 is a surcharge for potential volatility. In any case, if frontend curves are up to 50 basis points cheap, then intermediate curves – the 10-year Treasury – may be as much as 35 basis points too cheap. They belong in our opinion at 2.20% instead of 2.55%.

So there you have it, fellow passengers and paying clients. Don't jump ship now. We may have reached an inflection point of low Treasury, mortgage and corporate yields in late April, but this is overdone.

Emphasis by Bill Gross

A Tipping Point That Won't Tip

Gross' message is clearly "the ship has reached a tipping point but don't worry, the ship won't tip". Let's discuss each of Gross' three main points.

1) "The Fed's forecast is far too optimistic".

I certainly agree with Gross that the Fed (and almost everyone else) is overly optimistic.

But what if growth is not the Fed's only concern? What if the Fed is concerned about the bubbles it has blown in stocks and bonds? What if the Fed is concerned about renewed speculation in housing?

Perhaps that scenario far-fetched, perhaps not, but at least some Fed governors have those concerns.

2) "The Fed's inflation target is 2%"

OK, the Bernanke Fed has an inflation target of 2%. But Bernanke will soon be gone. Will the next Fed have the same target? Any target? Given that Janet Yellen is likely the next Fed Chairperson, it is likely but not a given.

And how does one measure inflation? Will the Fed ignore housing like it did between 2002 and 2007? Will it at all look at brewing bubbles?

3) "Yields have adjusted too much"

Have they? Let's assume that Gross is correct.

Gross emphasizes the yield on a 10-year note belongs at "2.20% instead of 2.55%".

Lovely! Let's once again assume Gross is right. The upside is 35 basis points. And what is the downside if Gross is wrong?

Is this what things have come to? That's it's necessary to speculate on a gain of 35 basis points because that is fair value? And where was Gross on "fair value" when the yield was 1.5%?

If it is correct to play for 35 basis points now, why was he in bonds when the yield was 70 basis points too low? Can you have this both ways?

And why is this suddenly a "3–5% for both stocks and bonds" when he tweeted "@PIMCO The secular 30-yr bull market in bonds likely ended 4/29/2013. PIMCO can help you navigate a likely lower return 2 - 3% future."

So, is this a 3-5% world or a 2-3% world?

Questions abound and answers are few.

I actually suspect Gross may have this correct, but what is the risk-reward if he is wrong? What if the bond revolt continues? What if the Fed has lost control? That's what Gross does not discuss, and that's where he missed the boat.

For further discussion, please see Calmer Waters for the Bond Market? Gold? Worst Over?

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

FHA Swamped By Defaults; Congressional Report Shows FHA Could Suffer Losses as High as $115 Billion; Shut Down Fannie, Freddie, FHA

Posted: 28 Jun 2013 11:21 PM PDT

An alleged "worst case scenario" shows the FHA could lose as much as $115 Billion. Since these worst case scenarios are always famously optimistic, the best course of action would be to shut the agency down.

I was quoted as saying just that by the Heartland in Congressional Report Raises Spectre of FHA Bailout.

The Federal Housing Administration's (FHA) losses over the next 30 years could be much higher than originally projected, according to the findings of a congressional committee. The dismal forecast has some bracing for another taxpayer-financed bailout.

The House Oversight and Government Reform Committee, chaired by Rep. Darrell Issa (R-Calif.) is reporting that a worst-case scenario stress test conducted last year estimated the FHA could suffer losses as high as $115 billion. That forecast is significantly worse than the one reported by independent auditor Integrated Financial Engineering Inc., which projected losses of $65 billion for the 79-year old agency.

Swamped by Defaults

The primary cause of the FHA's troubles is the plague of underwater mortgages that has struck the housing sector in recent years. During the late housing bubble, the FHA lost market share as more private lenders sold "subprime" loans to home buyers. But with the collapse of the housing market in 2007-08, much of that business returned to the FHA. While the agency has played a major role in propping up home prices, it has also been overwhelmed by defaults.

John Ligon, senior policy analyst at the conservative Heritage Foundation, writes:

The FHA has a core mission of providing targeted support to creditworthy low- and moderate-income, minority, and first-time homebuyers. The FHA cannot responsibly achieve these intended objectives when it is expanding its market share and competing with the conventional market for high-cost mortgage loans.

According to Ligon, the only way the FHA can avoid a bailout is to reduce its market share by lowering maximum loan limits to $325,000 over the next four years, raise credit requirements for borrowers, and institute "burden sharing" with loan originators by reducing insurance coverage from the current 100 percent to 50 percent by 2016.

While these reforms may improve FHA's balance sheet over the long term, they would also reduce market liquidity, which in turn could cause home prices to fall. Thus homeowners with little home equity now could find themselves underwater on their mortgages, which could trigger more defaults.

But it is precisely this apparent dilemma that government-sponsored enterprises like FHA have created with their meddling into the market that has some calling for a more radical approach.

'Shut Down Fannie, Freddie, FHA'

"I would shut down Fannie Mae, Freddie Mac, the FHA, HUD, and such similar programs and agencies," says Mike "Mish" Shedlock, a market analyst and host of the Web site Mish's Global Economic Trend Analysis. "The more money government threw at housing, the less affordable housing became until the bubble popped."

He says numerous government agencies and programs "should be shut down and things would be far better off because government can never allocate money better than the free market."

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

Using The New Adwords Keyword Planner For Local SEO Keyword Research

Posted: 28 Jun 2013 05:57 AM PDT

Posted by Casey_Meraz

This post was originally in YouMoz, and was promoted to the main blog because it provides great value and interest to our community. The author's views are entirely his or her own and may not reflect the views of Moz, Inc.

Let's face it. Local keywords research has never been that easy since the Venice update. While we have always been able to use the Google Keyword Tool to find out search volumes for keywords with Geo Modifiers such as "City Name + Keyword" we have been lacking some reasonable data regarding keywords that do not already have a Geo Modifier.

My frustration has always been this: So what if Google tells me there are 12,100 searches for "Personal Injury Lawyer"? My client is in a local city and I want to know how many people in his city are searching for his services. The good news is that there is now an adequate solution to this problem we have long been plagued by.

Let me introduce you to the Google AdWords Keyword Planner. This new tool combines the data from the Keyword Tool and Traffic Estimator which are nowbeing replaced by this nifty piece of software. The good news is that this data that we were previously lacking is now available in this great tool! So let's dive into a practical exercise of how to get this data.

Start with some good local keyword data

Before you start, make sure you are setup for success by doing some preliminary keyword research in your niche. While the Google Adwords Keyword Planner is a great tool by itself, you can generate even more ideas for keyword variants by using a few tools already available. I prefer to use:

Mike Blumenthal's Category Tool - To get some ideas on locally based keyword categories and synonyms
Local Marketing Source's Keyword Research Tool - This will help you get an idea of surrounding areas you want to focus on
Google Analytics - Check your analytics and see what keywords are already bringing traffic. There may be opportunities to increase your visibility on something that's already preforming.

Using these tools and collecting some good data up front will make the process more laser focused. Make sure that you always focus on converting keywords that provide the searcher (and then website visitor) with the proper intent.

So how do you use this fancy new tool? Let's get started!

Before you get started make sure you have a Google Account because to access the planner you will need to be logged in. Once you are logged in simply visit the Google AdWords Keyword Planner here.

Google Keyword Planner Intro Screen

Step 1: Log in and input your keywords

Start by logging into the Google Adwords Keyword Planner and select the option "Search for keyword and add group ideas." In this box you should put the variants you typically might use for your industry. For example, if you're a personal injury lawyer, you could put in variants related to your practice area including:

Personal Injury Lawyer
Personal Injury Attorneys
Car Accident Lawyers
Auto Accident Lawyer

This is also a good place to put in the keywords you found in your preliminary research.

Put your keywords in this box

Step 2: Remove the country targeting

This is where it starts to get real cool! Using this new tool you can see the search volumes for your keywords in certain geographic areas. By default, you will likely see your country in the list. To use this tool to its full potential for a city, you will want to click on the country name under targeting and select the remove option.

Remove the country

Pro Tip: If you don't remove the country as mentioned above you will find that your searches will also combine the data from the entire country which defeats the purpose.

Step 3: Add your first city or cities

Since we are using this for local keyword research, we want to find out how many people in our city or surrounding areas are searching for our keywords. Under the targeting area, make sure to add the cities you want to focus on. As a general rule of thumb, the larger cities with higher populations will generate more results for your keywords. Where there are more devices, there are more searches.

How to add your cities in Google Keyword Planning Tool

Pro tip: Keep in mind that this tool is using actual city boundaries defined in Google Maps. Getting to visualize this data will show you if you need to add more cities, etc.

Google Cities Visualization in the Google Keyword Planning Tool

But what if you want to target surrounding areas?
Using this new tool, Google also integrated the "Surrounding Areas" option which allows you to add surrounding cities and also visualize the data. To access this information simply click the "Surrounding Areas" option. As you will see below it will come up with some recommendations, but also allow you to add your own information including "a country, city, or region."

Surrounding Areas in Google Keyword Planning Tool

Step Four: Get Ideas & See Exact Matches

After you have inputted your keywords and selected the cities you want to target, hit the "Get Ideas" button at the bottom to be taken to the results page. If this is done correctly, it should display the areas that you're targeting on the left side of the screen. To see the exact keywords you entered, make sure to select the Keyword Idea's tab in the top middle. By default, it will likely show the "Ad Group Ideas" tab. Typically, I will also select the exact match option as seen below.

Keyword Ideas Results from Google Keyword Planning Tool

Just like the old Google Keyword Tool, you can also scroll below the keywords you input and have access to other keywords that Google believes is relevant to your search term. Of course, the more work you put into finding initial results, the better the results will be.

Other Keyword Results also show as normal

How Can You Use This Data?

There are many great ways you can use this data, but I'll point out a couple that are important to me. For starters, you can now provide clients with accurate information on the searches for their business that are happening in the area they service. You can target your campaign towards cities where you know search volumes already exist and scoop up the business. Another thing you can do is start developing strong content marketing strategies to provide great information on the web and reach potential customers through long tail searches. If you looked on in horror when you saw the low volumes for these searches, it's important to remember that all searchers are different. This is where a long tail strategy comes into play. Put yourself in other's shoes and create content that actual customers would want.

Overall, the good news is that the days of not knowing where geographic searches are coming from are at an end. I give Google props for making this tool available for use and I'm looking forward to see what they will be releasing in the future.

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Confronting the Growing Threat of Climate Change

Featured

Confronting the Growing Threat of Climate Change

In this week’s address, President Obama told the American people about a plan he unveiled a few days ago that confronts the growing threat of climate change, which will cut carbon pollution, protect our country from the impacts of climate change, and lead the world in a coordinated assault on a changing climate.

Watch this week's Weekly Address.

Seth's Blog : Less for less

Less for less

In the long run, there are only two sustainable positions--you sell less for less or you sell more for more.

It's tempting to think that you can pull a Wal-mart and appear to deliver more for less, but that's far more rare than it appears. And the market is smart (and getting smarter) so delivering less for more, while apparently a great gig, doesn't last.

People are going to figure out what's on offer, and they're going to seek out real value. For some, that means getting a little less (less service, less quality, less panache) and paying less, or getting a lot more (more meaning, more insight, more joy) and paying a bit more.

Time to pick.

• Email to a friend •

vineri, 28 iunie 2013

Mish's Global Economic Trend Analysis

Calmer Waters for the Bond Market? Gold? Worst Over?

Posted: 28 Jun 2013 11:41 AM PDT

Curve Watchers Anonymous has its eyes on the bond market as the quarter comes to a close today. It's been a very bad stretch for US treasuries as the chart below shows.

Yield Curve as of 2013-06-28

click on chart for sharper image

$TYX: 30-Year Long Bond Yield - Green
$TNX: 10-Year Treasury Note - Orange
$FVX: 05-Year Treasury Note - Blue
$IRX: 03-Mnth Treasury Bill - Brown

The above chart shows the monthly close for the treasury symbols, except the current month is month to date (with the close coming up today).

$TNX Daily

That last candle is a feed error. The 10-year yield did not swing 50 basis points today.

So, while things have calmed down a bit over the past week, the 10-year yield has climbed from 1.614% to 2.551%, a rise of 93.7 basis points since the beginning of May.

Impact on Housing

The selloff in mortgage backed securities has been even worse. Mortgage loans have risen by as much as 175 basis points.

For details, please see 10-Year Treasury Yield Up 100 Basis Points Since May; What's That Mean for Mortgage Rates and Housing Affordability?

Gundlach Sees Calmer Waters Ahead For Bond Market

MarketWatch reports Gundlach Sees Calmer Waters Ahead For Bond Market

"From the frying pan into the fire."

That phrase came up repeatedly during Jeffrey Gundlach's ad-hoc webcast Thursday as the DoubleLine Capital chief executive sought to calm shaken bond investors.

His comments reflected the role that the bond market's biggest names have recently taken on in soothing fears about the asset class after a panicked global selloff in recent weeks. Pimco's Bill Gross also advised investors Thursday against jumping ship.

For those thinking of fleeing bonds for greener pastures, Gundlach's webcast fittingly started with a review of gold GCQ3 +1.05% , which has taken a dive in recent days.

"Gold looks like death," he said.

Nonetheless, the choppy seas of the bond market are giving way to smoother waters, he said. The 10-year Treasury note 10_YEAR +1.94% yield fell 6 basis points Thursday to 2.475% after hitting a high of 2.66% last week.

"I do think the worst is over. Now we have corroborative evidence from the markets," Gundlach said.

With the markets settling, there are deals to be had.

Markets Settling? Worst Over?

For starters there is scant evidence the treasury market is settling. Yield on the 10-year note is up to 2.517% today from 2.475% yesterday.

The weekly action looks no different that similar consolidation action in the middle of May and the middle of June. After similar-looking consolidation periods, yields blasted higher each time.

Given action in the $HUI, a better case can be made that gold is settling.

$HUI 2-Hour Chart

That's a pretty dramatic reversal in unhedged miners.

Is the bottom in? I don't know, nor does anyone else. Nor do I know whether or not a short-term top in treasury yields is in.

End of Treasury Bull Market

What I do know is that Bill Gross proclaimed on May 10, Bull Market in Bonds Is Over.

Bill Gross said the three-decade bull run in bonds ended last week when the 10-year Treasury yield hit 1.67%. The manager of the world's largest bond fund stressed that a bear market in bonds won't start until economic growth and inflation pick up — an arrangement that he doesn't expect to see immediately.

"Tweet" from Bill Gross on May 10

"@PIMCO The secular 30-yr bull market in bonds likely ended 4/29/2013. PIMCO can help you navigate a likely lower return 2 - 3% future."

Let's assume Bill Gross is correct. And if he is, then there is little value in bonds. There was negative value in them at the time Gross made that tweet.

It's hard enough to navigate a cyclical bear market. And it's a brutal mistake for investors to believe they can navigate a secular bear market in anything, especially on the long side.

Since 1980, treasuries have been in a secular bull market. Investors have not known anything else. Might not Gross be wrong when he says "a bear market in bonds won't start until economic growth and inflation pick up."

I think he already is, by any reasonable definition. If the bull market is over, a bear market has started.

It remains to be seen if the secular bull market in gold is over, but if I believed that, I would not be heavily in gold.

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

Unpaid Interns Get Scrutiny; Reader Mailbag on Internships

Posted: 28 Jun 2013 01:19 AM PDT

Reader Mailbag

Reader "CM" writes ....

Hello Mish

Just two weeks ago, our human resources department blocked us from taking on an unpaid summer intern. The college student did not have any professional experience, but was trying to do something productive with his summer. My colleague decided to give him a shot. HR blocked the internship for fear of breaking the law.

How ridiculous is that? A college student with no professional experience wants to work as an intern and we would like to extend him an offer, but we didn't take him on for the summer yet due to the concern that we would be breaking the law.

Best,
CM

Unpaid Interns Get Scrutiny

It's easy to explain why HR nixed the deal.

A federal judge in New York recently ruled moviemakers violate labor laws if they do not pay interns.

Bloomberg reports Sleeping-Giant Issue of Unpaid U.S. Interns Gets Scrutiny

[Student internships], especially common in competitive industries like journalism, finance and filmmaking, could change if the appeals court upholds the ruling of a federal judge in New York who found that moviemaker Fox Searchlight Pictures Inc. violated labor laws by not paying two of its interns. Cases have also been brought against Hearst Corp., Conde Nast Publications and the Public Broadcasting Service's Charlie RoseShow.

"This question of whether private-sector internships violate the minimum wage laws has been sort of a sleeping-giant issue for many years," said David Yamada, director of the New Workplace Institute at Suffolk University Law School in Boston. "The absence of payment is done with a wink and a nod. Interns know they better not make any trouble about this."

Half Unpaid

According to a survey by the National Association of Colleges and Employers, a Bethlehem, Pennsylvania-based recruiting and research group, more than 63 percent of graduating seniors in 2013 either had an internship or a co-op, a position more closely tied to an educational curriculum. About 48 percent of those were unpaid, according to the survey.

To critics, unpaid internships are an abuse of the labor system, a way for employers to take advantage of desperate job seekers. Supporters, including some former unpaid interns, see it as a way to get training and career contacts.

Eric Glatt, 43, The lead plaintiff in the case against Fox Searchlight, Glatt had left a job at the insurer American International Group Inc. in New York to pursue a career in film. After earning a certificate in film editing, he eventually took two temporary positions on the set of the movie "Black Swan," where he spent much of his time learning the art of making copies.

Taken Advantage

"I knew I was being taken advantage of," Glatt, now a law student at Georgetown University in Washington, said in an interview. "I just didn't think there was anything I could do about it."

If Pauley's decision is challenged and later affirmed by the U.S. Court of Appeals in Manhattan, the case might be considered in conflict with the Ohio federal appeals panel, raising the possibility that the issue could end up before the U.S. Supreme Court.
'Legal Uncertainty'

The ruling in the Fox Searchlight case "creates a significant legal uncertainty," said Samuel Estreicher, professor of labor and employment law at New York University. He said he would advise employers not to use unpaid interns in light of the decision.

Who Took Advantage Of Whom?

Glatt's complaint is absurd. He was extremely lucky to get experience on the "Black Swan" movie set. He brought no experience to the table. And it is crystal clear he does not even want a career in movie editing, something very valuable he may have learned as an intern.

Thousands of people would have welcomed the opportunity he got. And if he did not like the offer, then he should not have accepted. So who took advantage of whom?

Should that ruling be upheld, look for internships to become a thing of the past. That's unfortunate for college students struggling to gain work experience.

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

Damn Cool Pics

6-Year-Old Aaralyn Scream Her Original Song, "Zombie Skin" - America's Got Talent [Video]
Where Google Street View Ends
Rapper Flo-Rida’s Buys Gold Chrome Bugatti Veyron
The Rise of the Cyberwarrior [Infographic]
How to Fold a Shirt in Under 2 Seconds [Video]
The Electrifying Ladies of the Electric Daisy Carnival 2013 Las Vegas

6-Year-Old Aaralyn Scream Her Original Song, "Zombie Skin" - America's Got Talent [Video]

Posted: 28 Jun 2013 12:43 PM PDT

She looks like a princess, but sings like a heavy metal warrior! Brother and sister duo Aaralyn & Izzy sing their original song, "Zombie Skin."

Where Google Street View Ends

Posted: 28 Jun 2013 12:35 PM PDT

Kaimu-Chain of Craters Road, Hawaii

Jetty on Sand Island, Midway Islands

Sha Tau Kok crossing, Hong Kong/Mainland China

End of Milford Sound Highway, Southland, New Zealand

Laie Point, Oahu

End of Cape Regina Road, Northland, New Zealand

End of the road, near Sund, Norway

Street View car at end of Navy Road, NWT, Canada

Via theatlantic

Rapper Flo-Rida’s Buys Gold Chrome Bugatti Veyron

Posted: 28 Jun 2013 09:50 AM PDT

Rapper Flo-Rida was apparently unsatisfied with his Bugatti Veyron in the attention-getting department. So he did what anyone in that lamentable situation would do, and wrapped it entirely in shimmering gold chrome.

Flo-Rida achieved this feat with the help of graphics installation company Metro Wrapz. Their slogan is "Our Wrapz Create HYPE!," which is certainly what they have done here.

Via: Wrappedworld

The Rise of the Cyberwarrior [Infographic]

Posted: 28 Jun 2013 09:15 AM PDT

News of the rise in cyber crime is rarely good unless you happen to be in the market for a job as a cyber warrior. Do you have what it takes to be a crime fighter?

Click on Image to Enlarge.

Hacking with a Computer Virus: The Emergent Problem of Cybercrime

Courtesy of: OnlineSchools.com

How to Fold a Shirt in Under 2 Seconds [Video]

Posted: 27 Jun 2013 08:57 PM PDT

How to fold a shirt under 2 seconds. This step by step guide shows you how to fold a shirt very quickly. Works on all short sleeved tops including t-shirts and polo shirts. Great tutorial and easy to learn.