vineri, 28 august 2015

Mish's Global Economic Trend Analysis

Posted: 28 Aug 2015 03:53 PM PDT

One of my constant themes over the past few years is the underfunding of state and local pension plans. Illinois is particularly bad, but let's look at some aggregate data.

The National Association of State Retirement Administrators (NASRA) provides this grim-looking annual picture.

Annual Update

Between the end of 2007 and end of 2014, pension plan assets rose from $3.29 trillion to $3.71 trillion. That's a total rise of 12.76%.

Plan assumptions are generally between 7.5% to 8.25% per year!

S&P 500 2007-12-31 to 2014-12-31

In the same timeframe, the S&P 500 rose from 1489.36 to 2058.90.

That's a total gain of 590.54 points. Percentage wise that's a total gain of 40.22%. It's also an average gain of approximately 5.75% per year.

Analysis

In spite of the miraculous rally from the low, total returns for anyone who held an index throughout has been rather ordinary.
The first chart is not a reflection of stocks vs. bonds because bonds did exceptionally well during the same period.

Drawdowns Kill!

To be fair, the first chart only shows assets, not liabilities, but we do know that pensions in general are still enormously underfunded, with Chicago and Illinois leading the way.

Negative Flow

My friend Don Campbell pinged me with this comment the other day: "Nearly all public pension funds have a negative cash flow, meaning they pay out in benefits each year more than they receive in contributions. For all public pension funds, the negative cash flow is approximately 3% of assets, which means an average fund needs to produce an annual return of 3% to maintain a stable asset value."

That's fine if assets have kept up with future payout liabilities and plans are close to fully funded.

However, it is 100% safe to suggest that neither condition is true.

So here we are, after a massive 200% rally from the March 2009 low, and pension plans are still in miserable shape.

And plan assumptions are still an enormous 8% per year. Let me state emphatically, that's not going to happen.

Stocks and junk bonds are enormously overvalued here.

GMO Forecast

"The chart represents real return forecasts for several asset classes and not for any GMO fund or strategy. These forecasts are forward‐looking statements based upon the reasonable beliefs of GMO and are not a guarantee of future performance. Forward‐looking statements speak only as of the date they are made, and GMO assumes no duty to and does not undertake to update forward‐looking statements. Forward‐looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. Actual results may differ materially from those anticipated in forwardlooking statements. U.S. inflation is assumed to mean revert to long‐term inflation of 2.2% over 15 years."

Over the next 7 years GMO believes US stocks will lose money (on average), every year. Those are in real terms, but returns are at best break even, assuming 2% inflation.

Bonds are certainly no safe have either. I strongly believe GMO has this correct.

Assume GMO Wildly Off

Even if one assumes those GMO estimated returns are wildly off to the tune of four percentage points per year, pension plans needing 8% per year will be further in the hole with 4% per year annualized returns.

Imagination

I have a musical tribute to imagination in regards to pension finances, especially imagination in Illinois.

link if video does not play: Creedence Clearwater Revival - Lookin' Out My Back Door

Illinois Non-Answer

Illinois house speaker Michael Madigan and Chicago governor Rahm Emanuel believe tax hikes are the answer.

Both are sorely mistaken. Here are a few viewpoints to consider.

The only way out of this mess is a pension restructuring coupled with municipal defaults.

Mike "Mish" Shedlock

Fed Queen Race: Personal Income Rises 0.4% as Expected; Good for Rate Hikes? GDP?

Posted: 28 Aug 2015 09:59 AM PDT

Personal income for July rose as expected in today's Personal Income and Outlays report. Consumer spending rose nearly as expected, led of course by auto sales. Price pressure was nonexistent.

There's no hurry for a rate hike based on the July personal income and outlays report where inflation readings are very quiet. Core PCE prices rose only 0.1 percent in the month with the year-on-year rate moving backwards, not forwards, to a very quiet plus 1.2 percent. Total prices are also quiet, also at plus 0.1 percent for the monthly rate and at only plus 0.3 percent the yearly rate.

On the consumer, the data are very solid led by a 0.4 percent rise in income that includes a 0.5 percent rise in wages & salaries which is the largest since November last year. Other income details, led by transfer receipts, also gained in the month. Spending rose 0.3 percent led by a 1.1 gain in durables that's tied to vehicle sales. The savings rate is also healthy, up 2 tenths to 4.9 percent.

The growth side of this report is very favorable and marks a good beginning for the third quarter. This at the same time that inflation pressures remain stubbornly dormant. And remember this report next month will reflect the August downturn in fuel prices. With the core PCE index out of the way, next week's August employment report looks to be the last big question mark going into the September 17 FOMC.

Favorable Beginning for Third Quarter GDP?

Let's investigate the above Bloomberg claim "The growth side of this report is very favorable and marks a good beginning for the third quarter."

Today's GDPNow Forecast

The Atlanta Fed GDPNow Forecast sees it this way:

"The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2015 is 1.2 percent on August 28, down from 1.4 percent on August 26. The forecast for real GDP growth in the third quarter decreased by 0.2 percentage points following this morning's personal income and outlays report from the U.S. Bureau of Economic Analysis. The slight decline in the model's forecast was primarily due to some weakness in real services consumption for July, which lowered the model's estimate for personal consumption expenditures from 3.1 percent to 2.6 percent for the third quarter."

GDP Now Model

GDP By Quarter

2015 Q1: 0.6%
2015 Q2: 3.7%
2015 Q3: 1.2% GDP Nowcast

Fed Queen Race

Consumer spending is supposedly humming along. GDP is not doing much of anything.

This reminds me of the Red Queen Race, an incident in Lewis Carroll's Through the Looking-Glass that involves the Red Queen and Alice constantly running but remaining in the same spot.

"Well, in our country," said Alice, still panting a little, "you'd generally get to somewhere else—if you run very fast for a long time, as we've been doing."

"A slow sort of country!" said the Queen. "Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!"

Clearly we need to sell twice as many autos to get GDP where the Fed wants it to go.

Mike "Mish" Shedlock

How to Get Content into the Hands of Influencers Who Can Help Amplify It - Whiteboard Friday - Moz Blog

How to Get Content into the Hands of Influencers Who Can Help Amplify It - Whiteboard Friday

Posted by randfish

Step 1: Create 10x content. Step 2: ??? Step 3: Massive flood of traffic.

There's a bigger gap in step 2 than many marketers anticipate, and one of the best ways to fill it is getting your content in front of influential people who can help spread the word. You'll have to make it worth their while, though, and in today's Whiteboard Friday, Rand explains how to go about that.

Click on the whiteboard image above to open a high resolution version in a new tab!

Video transcription

Howdy, Moz fans, and welcome to another edition of Whiteboard Friday. This week we're going to chat about a problem that many of you have mentioned in comments, in tweets, in questions, and emails to me and to other folks here at Moz when we talk about content marketing and specifically content amplification like, "Okay, I made some great content. But how do I actually get people to share it? In particular, how do I get content into the hands of the influencers who might amplify it?"

Look, this is very frustrating, right? If you're a small brand, a small site, have a small social account, content amplification often feels like this.

You're like, "I just made the most amazing thing ever." It sucks, and I get that pain. I totally get that pain. We have all been there.

Moz has the wonderful privilege and opportunity of having this great content amplification channel. But when I started out, when I was making the blog in 2004/2005, nobody was listening. It was a very frustrating experience, and it took years before that content amplification lifecycle became to the point where I remember one year, I think it was 2008, and Greg Boser, who is legendary in the SEO world, was on a panel at a search engine conference. He's there and he says, "Well, Rand just cheats. All he has to do is hit Publish."

I was like, "Oh yeah, all I have to do now is hit Publish." But it takes a long time to build that. Those folks who already have a following, a following on their blog, on their social account, on an email list, on a news site, whatever it is, have this outsized ability to spark virality, to help something that might be incredible, that you've made, become seen by a wide audience who will actually appreciate it.

But it can be a frustrating process. Here's Ann Handley's account.

Ann Handley, one of the best, most followed folks in the online marketing world, @MarketingProfs is her handle, and she tweets stuff all the time that gets a lot of retweets, a lot of engagement, and folks are thinking like, "How do I reach her? I have something amazing that I want the marketing world to see. How could I get Ann to share my content?"

I have a few tactics for you that I hope will work.

First off, this is going to sound tough, but... it is tough.

1) The simple nudge

This is the thing that I think you should probably be using 80% or more of your time.

The simple nudge is just like what it sounds like. "Hi, Ann. I'm a big fan. I'm a long-time follower. We made this thing we think you're going to love. Let us know if you have any suggestions. We're going to be updating it for the next few weeks. Thanks, Rand."

That could be through email. It could be a LinkedIn message. It could even be a Facebook message. It could be a tweet. That's a little bit long for a tweet, maybe a long series of VMs. But the thing that is going on here is the content and relevance have to be outstanding. It has to be something that is remarkable just as soon as you share it, as soon as you give the title of it, Ann's like, "Oh wait, I have not seen one of those. I am super interested in that."

How are you going to find something that you can nudge that influencer with, where they will think, "That's so remarkable that even though I have never heard the name of this person before, I'm going to check it out and then I'm going to share it"? That's hard to do. It's a very, very high bar. But that's the same high bar that you have for creating what I have been calling 10X content, the kind of content that people will actually amplify and share.

I talk about this a lot. But I always urge folks to ask the question, "Who will help amplify this and why?" If you have a great answer to that question, the nudge should be all you need 80% of the time.

Now, I do have two tools that I'm going to recommend. They are both used for email outreach, specifically finding folks' emails or getting connected to folks through email.

Voila Norbert is a great tool for finding email that I have talked about on Whiteboard Friday before, and Conspire is a wonderful tool that will show you all of the people, who you have emailed, who have emailed that person. So if I hadn't emailed Ann directly, I could look in Conspire and I could see, "Oh look, Cyrus Shepard has emailed Ann previously. Great, let me reach out to Cyrus, ask him for an introduction. He'll connect me up."

So some good tools that can be helpful there. I'm reticent to promote it, but Followerwonk is also very useful for this discovery process, figuring out who those influencers are in the first place.

2) The inclusion mention

This tactic can work, and it's a nice, subtle way to get folks involved, especially if you're not too frustrated when it doesn't work out. For example, let's say Ann had tweeted something around CRM software. Well, she did send a tweet around CRM software that I copied in there, but maybe she has expressed some frustration around CRM software. She is like, "I don't know which vendors to choose. I wish there was a great resource."

I can say, "@MarketingProfs, your tweet about CRM frustration inspired us to make this." Cool. Now I'm sharing with her something that she has directly expressed an interest in, and I'm including her in there, again through Twitter. I could reach out through email. I could do it through LinkedIn. It could be through a lot of things.

I think any time you have content that's inspired by or particularly inclusive of a person, brand, or a place, let them know. There's no harm in letting them know. It could be that this is ignored 9 times out of 10, but 1 time out of 10 you're going to get that extra amplification and that's a wonderful thing.

I have found, by the way, that many times when it comes to a longer form content responding to a blog post, responding to a tweet, responding to something that's been shared, that professional, respectful, well thought out pieces that advance the conversation can work well even if we disagree about things.

So if Ann's expressed something and I go, "Hmm, I disagree with that. Let me explain why and the thinking behind it." But I'm going to be very professional, very respectful. I'm going to advance the conversation, like bring things forward, include non-obvious stuff that is helpful that makes this a better dialogue.

I can write up that piece, and then I can share it with her. This can be especially effective if you share it with the person before you hit Publish. Again, a good reason for pre-content amplification outreach.

3) The review

Well, the review is a tough one. I don't love it all the time. I especially don't love it when it's been done to death, which it has very often. But this is something like, "We reviewed the latest guide from @MarketingProfs here." So we go check out MarketingProfs, and we download one of their guides. We really like it. We write up a review.

This works when it's positive and when that positivity is clearly authentic and not just designed to get amplification. One of the things that happens that I see all the time, especially in the web marketing, but even in the technology world and a lot in the travel world is folks doing things like this with no intention other than hopefully getting a link or a retweet. They clearly have not put any authentic thought into it. It's not a quality piece. It's just designed to get that link. It's very transparent to the vast majority of influencers who get targeted with this stuff all the time.

So if it's been done to death, probably don't bother. But the review system can work for other kinds of things, and if it's positive and authentic, and that's not why you did it, great.

4) The network effect

It's frustrating because it's not always as effective. However, it can still be a small win even when you don't get the big win. So the idea would be I go and I check out, maybe potentially use Followerwonk. Or Little Bird is another one. It's paid and expensive, but very, very good.

These four accounts tend to share things that major influencers later pick up. Hmm, interesting. So at such-and-such and at so-and-so, like these folks tend to be often much easier to target and to reach out to, much higher response rate, much more likely to reply to you and engage with you, and even if those major targets never come through, so even if these folks are targeted, they're followed by these seven influencers that we really are going after. Well, you know what, even if they share and none of the seven influencers do, that's okay. It's still a win.

So I hope that with these in your pocket you can go and do a little more successful content outreach and content amplification. If you have some tactics that you would like to share that have worked well for you, I would love to hear about them in the comments. I'm sure everyone else would as well, and you'll get lots of thumbs up.

So I look forward to that and to seeing you again next week for another edition of Whiteboard Friday. Take care.

Video transcription by Speechpad.com

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Seth's Blog : Scientific Management 2.0

Scientific Management 2.0

130 years ago, Frederick Taylor changed the world forever.

Scientific Management is the now-obvious idea that factories would measure precisely what their workers were doing. Use a stopwatch. Watch every movement. Adjust the movements until productivity goes up. Re-organize the assembly line for more efficiency. Pay people by the piece. Cull the workforce and get rid of the people who can't keep up. Make the assembly line go faster.

Once Scientific Management goes beyond system setup and starts to focus on the individual, it amplifies the gulf between management and labor. No one wants to do their work under the stopwatch (except, perhaps, Usain Bolt).

And now, here comes SM2.0.

White collar workers, the people who get to sit down at a desk, the folks with a keyboard not a hammer, can now be measured more than ever. And in competitive environments, what can be measured, often is.

Badge in, badge out.

How many keystrokes per hour?

How many incoming customer service calls handled per day?

What's the close rate, the change in user satisfaction, the clickthroughs, the likes?

You can see where this is heading, and it's heading there fast:

You will either be seen as a cog, or as a linchpin. You will either be measured in a relentless race to the bottom of the cost barrel, or encouraged in a supportive race to doing work that matters, that only you can do in your unique way.

It's not easy to be the person who does unmeasurable work, but is there any doubt that it's worth it?

• Email to a friend •

joi, 27 august 2015

Mish's Global Economic Trend Analysis

Steve Keen on Economic Forecasts, Ponzi Schemes, GDP, China; One Way Streets and Poison
Yet Another Dispute Over GDP; What's Really on the Fed's Mind?
GDP by Other Measures; Will the "Real" GDP Please Stand Up?
Kansas City Region Activity Remains in Deep Contraction
Second Quarter GDP Revised Up, as Expected, Led by Autos, Housing
Hall of Mirrors: Jim Grant on the "Paper Moon", No Price Discovery Economy; Psychology of Bubbles

Steve Keen on Economic Forecasts, Ponzi Schemes, GDP, China; One Way Streets and Poison

Posted: 27 Aug 2015 10:47 PM PDT

Economic Forecasts

Economist Steve Keen pinged me in response to my post Regional Manufacturing Expectations From Mars.

In that post, I compared Richmond Fed manufacturing survey expectations (six month look ahead projections made in February for August), to what actually happened in August.

In response, Steve Keen Tweeted

@MishGEA gets it wrong! Says "Regional Manufacturing Expectations From Mars" when they're really from Uranus.

I duly stand corrected. I am now planetarily aligned with Keen on the distinction between Mars and Uranus.

China Implosion

On a more serious note, please consider the Financial Times article Why China's stock market implosion might not be very meaningful, by Izabella Kaminska.

Kaminska quotes Steve Keen as follows ...

One key peculiarity about China's economy—and there are many—is that much of its growth has come from the expansion of industries established by local governments ("State Owned Enterprises" or SOEs). Those factories have been funded partly by local governments selling property to developers (who then on-sold it to property speculators for a profit while house prices were rising), and partly by SOE borrowing. The income from those factories in turn underwrote the capacity of those speculators to finance their "investments", and it contributed to China's recent illusory 7% real growth rate.

With property price appreciation now over, those over-levered property developers aren't buying local government land any more, and one of the two sources of finance for SOEs is now gone. Borrowing is still there of course, and the Central Government will probably require local councils to continue borrowing to try to keep the growth figures up. But the SOEs are already losing money, and this will just add to the Ponzi scheme. The collapse of China's asset bubbles will therefore hit Chinese GDP growth much more directly than the crashes in the more fully capitalist nations of Japan and the USA.

Heart of the Matter

Keen indeed gets to the heart of the matter about SOEs, borrowing, and illusory growth rates.

I have commented time and time again, no one in their right mind believe Chinese growth rates. Not only are the numbers straight up fabrications, many of the projects have no economic benefit.

Moreover, Chinese growth estimates fail to take into account damaging pollution and cleanup costs that ought to subtract from GDP.

GDP itself is a useless statistic actually. The reason is government spending, no matter how counterproductive, adds to GDP.

It sounds convoluted, but if government paid someone to poison wells, that poisoning would, by definition, add to GDP.

Many connected politicians got extremely wealthy off SOEs. But most of the SOE projects had little if any economic benefit, and some undoubtedly had negative benefit because environmental damage was not properly accounted for.

In short, Chinese GDP does not properly reflect economically nonviable projects nor the outright poisoning of the Chinese population to hit preposterous targets.

Rather than admit past GDP was grossly overstated, revisions will likely be hidden in future GDP reports for years or decades to come.

Kaminska Concludes ...

"In short, don't worry so much about the stock market, worry more about the potential collapse of other major Chinese asset classes like property, ghost towns and factories. That's how the credit links back to the real economy."

Those were her words, not Keen's. I pinged Pater Tenebrarum at the Acting Man blog the above article and he replied ...

"Something has clearly changed now. Right now, it seems it actually does matter. China is seen as an economically important (for the world) since about 2005 or so, but I have a feeling that something more profound may actually be afoot now - due to the follow-on domino effects. I would estimate that global malinvestment in commodity projects along amounts to something like $2 to $3 trillion cumulatively, perhaps more. This one sector alone may leave behind $1 trillion in unpayable debt."

OK.
What's Changed?

China's Capital Accounts

Historically, China's stock market has moved independently of the country's economy because of China's closed capital account.

What if the Shanghai market has started to reflect the real fundamentals thanks to liberalization of China's capital account?

One Way Streets

Typically, money flowed into China in a one way street. This year, China took steps to open up the flows.

Forbes noted China Pledges 'Radical' Moves To Open Capital Account In 2015.

FTAlphaville notes This isn't the Chinese capital account liberalisation you're looking for.

Today every Chinese individual is allowed to buy no more than US$50,000 worth of foreign currency from banks each year. But that limit was lifted from US$20,000 in 2007, and it is also not that hard for the more savvy to get around it.

So we're in a situation where China's capital account is more open than it has been before and recent relaxations of control have increased the size and volatility of flows. Including, obviously but crucially, outflows.

This is a system that needs external capital very badly. It is happy to welcome it in, vastly less happy to see it leave. More so, it doesn't take much to draw a lesson about attitudes to control and stability from China's reaction to the recent stock market puke.

Needs vs. Reality

China needs external capital. Instead, China sees capital flight. Resultant stress is everywhere one looks because debt exceeds carrying capacity.

Symptoms of Too Much Debt

Yuan devaluation
Stock market prop jobs by Chinese regulators
Emerging market currency crashes
Global equity bubbles
Commodity price crashes
Junk bond bubbles
Slower global growth
Still raging property bubbles in Australia, Canada, and the US West Coast (thanks to influx of money from China)

Debt the Problem

Numerous bubbles have started to implode, even as property bubbles in some places expand. Central banks are hard pressed to keep all the Ponzi schemes going.

Although we do not see eye-to-eye on the solution, Keen and I agree that debt is a primary problem. Many prominent economists still have not figured that out.

For example: Larry Summers and Ray Dalio Seek Return of Quantitative Easing.

Paul Krugman says "Debt is Good".

Krugman: "There's a reasonable argument to be made that part of what ails the world economy right now is that governments aren't deep enough in debt."

Debt Bubbles

Debt and bubbles go hand in hand.

No matter how big the bubble, no matter how much the resultant income inequality, no matter how ridiculous or nonviable the project, no matter how little the economic benefit, no matter how much government overpays (thanks to inane union work rules and prevailing wage laws), you can always count on Krugman to want more and more and more debt, even though Japan is living proof such policies do not work.

In the US, the Fed used a housing bubble to bailout a dotcom bubble. And now we have QE-driven stock market and junk bond bubbles to smooth over the housing bubble. Corporations have gone into debt to buy back their own shares at absurd valuations.

Debt has been used to cure debt problems and over again. Apparently the cure is the same as the disease.

Mike "Mish" Shedlock

Yet Another Dispute Over GDP; What's Really on the Fed's Mind?

Posted: 27 Aug 2015 05:43 PM PDT

Disputes over GDP go on and on and on. MarketWatch reports By another measure, the U.S. economy was ho-hum in second quarter.

There are two ways to compute how well the economy is doing.

One is to tally all the goods and services produced during a given time period — that's called gross domestic product.

Another is to measure all the incomes earned in the production of those goods and services — that's called gross domestic income.

Over time, they should be exactly the same. But measurement isn't easy, and so the Commerce Department not only reports both figures, but also for the first time on Thursday averaged the two together.

The result wasn't great: It's showed a 2.1% average for the second quarter, since GDP growth was a sterling 3.7% and GDI was a meager 0.6%.

According to Josh Shapiro, chief U.S. economist at MFR, that's the largest gap between the two measures of the economy since the third quarter of 2007.

"Some research has shown the GDI figures to be a more accurate representation of economic activity, but the evidence is mixed and the debate continues. Nonetheless, the disparity reported in Q2 does lend credence to the notion that the GDP growth reported in the quarter likely overstates the underlying vitality of the economy in the span," he said in a note to clients.

Two Measures

That may look significant, but let's investigate further.

DGI vs. GDP Percent Change from Year Ago

DGI vs. GDP Percent Change from Year Ago Detail

Large Gap?

On a year-over-year basis it's hard to discern any gap. The dispute of Josh Shapiro, chief U.S. economist at MFR, is easily seen as total nonsense.

I don't believe the economy is as strong as most claim, but I certainly won't post easily disproved charts to make my point.

What's Really on the Fed's Mind

Still, one has to wonder "What's really on the Fed's mind?"

I surely doubt it is fear of inflation, at least as they claim to measure it. It's possible they fear bubbles, but I doubt that too. The Fed historically has been blind to bubbles.

Rather, I suspect they have come to the conclusion this recovery is as good as it gets, and if they cannot hike now, they will not be able to.

That may sound lame, but it is exactly how economic clowns think.

Let me phrase it this way: "We need to hike now so we have ammunition to cut when we need to."

Meanwhile, nothing the Fed says at all is believable if for no other reason than historical precedent that proves without a doubt, they clearly have no idea what's really going on, especially at turning points.

They cannot really come out and say "We are clueless bubble blowers", can they?

Mike "Mish" Shedlock

GDP by Other Measures; Will the "Real" GDP Please Stand Up?

Posted: 27 Aug 2015 12:30 PM PDT

In the wake of a stronger than expected GDP report (see Second Quarter GDP Revised Up, as Expected, Led by Autos, Housing), some are questioning the stated growth.

For example, the Consumer Metrics Institute says "On the surface this report shows solid economic growth for the US economy during the second quarter of 2015. Unfortunately, all of the usual caveats merit restatement".

Consumer Metrics Caveats

A significant portion of the "solid growth" in this headline number could be the result of understated BEA inflation data. Using deflators from the BLS results in a more modest 2.33% growth rate. And using deflators from the Billion Prices Project puts the growth rate even lower, at 1.28%.
Per capita real GDP (the number we generally use to evaluate other economies) comes in at about 1.6% using BLS deflators and about 0.6% using the BPP deflators. Keep in mind that population growth alone (not brilliant central bank maneuvers) contributes a 0.72% positive bias to the headline number.
Once again we wonder how much we should trust numbers that bounce all over the place from revision to revision. One might expect better from a huge (and expensive) bureaucracy operating in the 21st century.
All that said, we have -- on the official record -- solid economic growth and 5.3% unemployment. What more could Ms. Yellen want?

Revisions

I certainly agree with point number three. Significant GDP revisions are the norm, even years after the fact. The numbers are of subjective use at best because GDP is an inherently flawed statistic in the first place.

As I have commented before, government spending, no matter how useless or wasteful, adds to GDP by definition.

Moreover, inflation statistics are questionable to say the least, as are hedonic price measurements and imputations.

Imputations

Imputations are a measure of assumed activity that does not really exist. For example, the BEA "imputes" the value of "free checking accounts" and ads that number to GDP.

The BEA also makes the assumption that people who own their houses would otherwise rent them. To make up for the alleged lost income, the BEA actually assumes people rent their own houses from themselves, at some presumed lease rate. Imputed rent is an addition to GDP.

Why stop there? On the same basis people who cut their own grass would have to pay someone else to do it for them. And married men might go to prostitutes if they were not married.

And what about back scratching? You scratch mine and I scratch yours. Clearly there is unreported economic activity here.

There are limitless imputations the government can concoct if GDP needs a future boost.

By the way, Europe did recently revise up GDP on the grounds of unreported prostitution and illegal drug profits.

GDP by Other Deflators

Every month there are questions in regards to GDP deflators.

This month, Consumer Metrics notes that the CPI as a deflator would result in a more modest 2.33% growth rate. Computing GDP using the Billion Prices Project would put the growth
rate even lower, at 1.28%.

That's interesting, but is it valid?

Deflator Differences

EconPort compares the Differences Between the GDP Deflator and CPI

Although at first glance it may seem that CPI and GDP Deflator measure the same thing, there are a few key differences. The first is that GDP Deflator includes only domestic goods and not anything that is imported. This is different because the CPI includes anything bought by consumers including foreign goods. The second difference is that the GDP Deflator is a measure of the prices of all goods and services while the CPI is a measure of only goods bought by consumers.

Difference Between further adds to the explanation.

CPI and GDP deflator generally seem to be the same thing but they have some few key differences. Both are used to determine price inflation and reflect the current economic state of a particular nation.

GDP Deflator takes into account goods that are produced domestically. It does not bother with imported goods and it reflects the prices of all the commodities, services included. The GDP deflator is calculated quarterly and it weights may change per calculation.

There are so many price indices out there and GDP is unlike some of them that are based on a predetermined basket of goods and services. In the GDP deflator, the so-called basket in a year is weighted by the market value of all the consumption of each good therefore it is allowed to change with people's investment and expenditure patterns since people do respond to varying prices.

CPI tends to consider insignificant goods, even the outdated ones that are not really purchased by the consumers anymore. Nevertheless, they are still considered for pricing in the fixed basket. Consumption goods are the main priority of the CPI measure. The prices of other items used in production are not considered as well as the prices of investment goods. Only consumer items are taken into account. The machines and the industrial equipment that are used to make them are not considered.

I am not going to suggest the GDP deflator is by any means correct.

Indeed, I believe some prices are inherently difficult if not impossible to measure. But substituting the CPI as a more valid measure is as likely as not to be even more inaccurate.

Solid Growth?

In regards to point number four, average growth through three quarters is certainly not solid. Q1
is 0.6%, Q2 is 3.7%, and the GDPNow estimate for Q3 is 1.4%.

For 2015, through three quarters, we are talking about growth of about 1.6% or so. This is not rate hike material.

Since point four above was obvious sarcasm targeted at Fed Chair Janet Yellen, I am in agreement with Consumer Metrics on this point.

Per Capita GDP

Finally, and in reference to point number two, real per capita GDP remains quite anemic.

The above chart from Advisor Perspectives.

Per capita GDP reflects aging boomers, student debt, government debt, slow household formation, untenable pension promises, and extremely poor central bank and governmental policies that have effectively wiped out the middle class.

Mike "Mish" Shedlock

Kansas City Region Activity Remains in Deep Contraction

Posted: 27 Aug 2015 10:07 AM PDT

Unlike housing and auto sectors, economic regions dependent on oil activity remain severely stressed.

For example, the Kansas City Fed regional factory report came in today at -9, compared to an Economic Consensus of -4.

Factory activity in the Kansas City Fed's region remains in deep contraction, at minus 9 in August vs minus 7 in July and deeper than the Econoday consensus for minus 4. New orders are also at minus 9 with backlog orders at minus 21. These are deeply depressed readings that point to a long run of weak activity in the months ahead. Production is already far into the negative column at minus 16 with hiring at minus 10. Price readings in the August report are in contraction.

This report speaks to significant distress for the region which is getting hit by the oil-led fall in commodity prices. Taken together, regional reports have been mixed to soft so far this month, pointing to slowing for a factory sector that got a bit boost from the auto sector in June and July.

Mike "Mish" Shedlock

Second Quarter GDP Revised Up, as Expected, Led by Autos, Housing

Posted: 27 Aug 2015 09:46 AM PDT

Economists had been expecting today's second quarter GDP estimate to rise from initial readings, based largely on auto sales and housing, and they were correct.

"The GDP estimate released today is based on more complete source data than were available for the 'advance' estimate issued last month. In the advance estimate, the increase in real GDP was 2.3 percent. With the second estimate for the second quarter, nonresidential fixed investment and private inventory investment increased. With the advance estimate, both of these components were estimated to have slightly decreased."

Advance Estimate vs. Second Revision

Economic Consensus

GDP was a bit higher than the Bloomberg Economic Consensus.

The second-quarter did show a big bounce after all, up at a revised annualized growth rate of 3.7 percent which is 5 tenths over the Econoday consensus and just ahead of the high estimate. The initial estimate for second-quarter GDP was 2.3 percent. This report points to better-than-expected momentum going into the current quarter.

Consumer demand was strong with personal consumption expenditures at a 3.1 percent rate led by an 8.2 percent rate for durables, a gain that was tied to vehicle spending. Residential investment was very strong, at plus 7.8 percent, as was nonresidential fixed investment which, boosted by an upward revision to structures, came in at plus 3.2 percent. Inventories contributed to second-quarter growth as did improvement in net exports. Final demand proved very solid, at plus 3.5 percent. The GDP price index, unlike many other price readings, is showing some pressure, at 2.1 percent and just above the Fed's general policy goal.

The economy's acceleration is now much more respectable from the first quarter when growth, at only 0.6 percent, was depressed by heavy weather and special factors. Splitting the difference, first-half growth came in a bit over 2 percent which, as it turns out, is right in line with the similar performance of 2014 when first-quarter growth, again depressed by severe weather, fell 2.1 percent followed by a 4.6 percent surge in the second quarter. Growth in the third quarter last year was 4.3 percent which would be a very good performance for this third quarter.

The impact of today's report on Fed policy for September's FOMC is likely to be minimal. Focus at the upcoming meeting will be on the state of the global financial markets and, very importantly, the strength of next week's employment report for August.

GDPNow Third Quarter

I do not believe today's report will impact estimates for third quarter for the Atlanta Fed GDPNow Model by much if any. We will find out on the next update, tomorrow.

GDP Average

The GDPNow forecast for third quarter is 1.4%. Through three quarters, annualized growth is about 1.57%, not exactly rate hike material.

Growth is fueled by autos and housing, the only two strong aspects of this economy. Last year, the third quarter was strong, this year will not repeat.

Mike "Mish" Shedlock

Hall of Mirrors: Jim Grant on the "Paper Moon", No Price Discovery Economy; Psychology of Bubbles

Posted: 26 Aug 2015 11:23 PM PDT

Reason TV had an excellent interview with Jim Grant, editor of Grant's Interest Rate Observer on the recent stock market turmoil. Grant says The Fed Turned the Stock Market Into a 'Hall of Mirrors'.

"Confoundingly to me, people have come to be quite accepting of the value attached by fiat to these pieces of paper we call currency," says Jim Grant, who's the editor of Grant's Interest Rate Observer and the author of The Forgotten Depression: The Crash That Cured Itself.

"Are prices meant to be imposed from on high, or discovered by individuals acting spontaneously in markets? The readers and viewers of Reason known the answer to that but they're regrettably in the minority."

Grant sat down with Reason magazine editor-in-chief Matt Welch on Tuesday to discuss the underlying causes of the recent market turbulence, why we don't really "have interest rates anymore," and how the classic jazz song "It's Only a Paper Moon" provides a fitting metaphor for the equities market.

Grant Interview

Psychology of Bubbles

Central banks have blown another massive set of bubbles by removing every aspect of price discovery for the sole benefit of banks and the already wealthy. That's the bottom line, and it's remarkably easy to see.

Yet, very few see it that way.

Why?

Wall Street, academia, and the media, all have a vested interest in denial. Bad news does not sell. And people believe what they want to hear: Stocks are cheap and the economy is getting better.

Expect another "no one could possibly have seen this coming" set of excuses.

Mike "Mish" Shedlock

Moz's Acquisition of SERPscape, Russ Jones Joining Our Team, and a Sneak Peek at a New Tool - Moz Blog

Moz's Acquisition of SERPscape, Russ Jones Joining Our Team, and a Sneak Peek at a New Tool

Posted by randfish

Today, it's my pleasure to announce some exciting news. First, if you haven't already seen it via his blog post, I'm thrilled to welcome Russ Jones, a longtime community member and great contributor to the SEO world, to Moz. He'll be joining our team as a Principal Search Scientist, joining the likes of Dr. Pete, Jay Leary, and myself as a high-level individual contributor on research and development projects.

If you're not familiar with Mr. Jones' work, let me embarrass my new coworker for a minute. Russ:

Was Angular's CTO after having held a number of roles with the company (previously known as Virante)
Is the creator of not just SERPscape, but the keyword data API, Grepwords, too (which Moz isn't acquiring—Russ will continue operating that service independently)
Runs a great Twitter profile sharing observations & posts about some of the most interesting, hardcore-nerdy stuff in SEO
Operates The Google Cache, a superb blog about SEO that's long been on my personal must-read list
Contributes regularly to the Moz blog through excellent posts and comments
Was, most recently, the author of this superb post on Moz comparing link indices (you can bet we're going to ask for his help to improve Mozscape)
And, perhaps most impressively, replies to emails almost as fast as I do :-)

Russ joins the team in concert with Moz's acquisition of a dataset and tool he built called SERPscape. SERPscape contains data on 40,000,000 US search results and includes an API capable of querying loads of interesting data about what appears in those results (e.g. the relative presence of a given domain, keywords that particular pages rank for, search rankings by industry, and more). For now, SERPscape is remaining separate from the Moz toolset, but over time, we'll be integrating it with some cool new projects currently underway (more on that below).

I'm also excited to share a little bit of a sneak preview of a project that I've been working on at Moz that we've taken to calling "Keyword Explorer." Russ, in his new role, will be helping out with that, and SERPscape's data and APIs will be part of that work, too.

In Q1 of this year, I pitched our executive team and product strategy folks for permission to work on Keyword Explorer and, after some struggles (welcome to bigger company life and not being CEO, Rand!), got approval to tackle what I think remains one of the most frustrating parts of SEO: effective, scalable, strategically-informed keyword research. Some of the problems Russ, I, and the entire Keyword Explorer team hope to solve include:

Getting more accurate estimates around relative keyword volumes when doing research outside AdWords
Having critical metrics like Difficulty, Volume, Opportunity, and Business Value included alongside our keywords as we're selecting and prioritizing them
A tool that lets us build lists of keywords, compare lists against one another, and upload sets of keywords for data and metrics collections
A single place to research keyword suggestions, uncover keyword metrics (like Difficulty, Opportunity, and Volume), and select keywords for lists that can be directly used for prioritization and tactical targeting

You can see some of this early work in Dr. Pete's KW Opportunity model, which debuted at Mozcon, in our existing Keyword Difficulty & SERP Analysis tool (an early inspiration for this next step), and in a few visuals below:

BTW: Please don't hold the final product to any of these; they're not actual shots of the tool, but rather design comps. What's eventually released almost certainly won't match these exactly, and we're still working on features, functionality, and data. We're also not announcing a release date yet. That said, if you're especially passionate about Keyword Explorer, want to see more, and don't mind giving us some feedback, feel free to email me (rand at moz dot com), and I'll have more to share privately in the near future.

But, new tools aren't the only place Russ will be contributing. As he noted in his post, he's especially passionate about research that helps the entire SEO field advance. His passion is contagious, and I hope it infects our entire team and community. After all, a huge part of Moz's mission is to help make SEO more transparent and accessible to everyone. With Russ' addition to the team, I'm confident we'll be able to make even greater strides in that direction.

Please join me in welcoming him and SERPscape to Moz!

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Seth's Blog : The strawberry conundrum

The strawberry conundrum

Every grocer has to decide: when packing a quart of strawberries, should your people put the best ones on top?

If you do, you'll sell more and disappoint people when they get to the moldy ones on the bottom.

Or, perhaps you could put the moldy ones on top, and pleasantly surprise the few that buy.

Or, you could rationalize that everyone expects a little hype, and they'll get over it.

A local grocer turned the problem upside down: He got rid of the boxes and just put out a pile of strawberries. People picked their own. He charged more, sold more and made everyone happier.

Hype might not be your best option.

• Email to a friend •

miercuri, 26 august 2015

Mish's Global Economic Trend Analysis

Durable Goods Boost Third Quarter GDP Estimate to 1.4% Annualized
Unidentified Investors Lend Belgium €50 Million, for 100 Years, With Flexible Conditions, at 2.5% Interest
Durable Goods Orders Surprise to Upside, Led by Autos

Durable Goods Boost Third Quarter GDP Estimate to 1.4% Annualized

Posted: 26 Aug 2015 02:53 PM PDT

Durable goods orders this morning leapfrogged all economic estimates (see Durable Goods Orders Surprise to Upside, Led by Autos).

Yet the GDPNow Forecast only rose by .01%.

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2015 was 1.4 percent on August 26, up from 1.3 percent on August 18. The forecast for real GDP growth increased 0.1 percentage point to 1.4 percent after this morning's advance report on durable goods from the Census Bureau. The report boosted the model's forecast for equipment spending in the third quarter from 7.7 percent to 8.9 percent, and led to a slight improvement in the contribution of real inventory investment to third-quarter GDP growth.

GDPNow August 26, 2015

It's been entertaining and informative watching the evolution of these forecasts. Really big swings in some economic numbers often barely budge the expected result.

GDP growth of 1.4% is hardly the material on which rate hikes have historically been based.

Mike "Mish" Shedlock

Unidentified Investors Lend Belgium €50 Million, for 100 Years, With Flexible Conditions, at 2.5% Interest

Posted: 26 Aug 2015 11:10 AM PDT

In yet another sign of economic madness, investors have concluded that rates in Belgium are likely to stay low for decades to come.

Via translation, please consider Unidentified Investors Lent Belgium €50 Million for 100 Years at 2.5% Interest.

The director of the Belgium debt agency, Jean Deboutte, announced Belgium borrowed 50 million euros, for a hundred years at an interest rate 2.5 percent.

The borrowing for a hundred years is via EMTN loans. These are loans with more flexible conditions than the traditional OLO government bonds.

Who granted Belgium the loan is unknown.

"These are professional investors. Goldman Sachs International contacted us stating that it had investors who were interested in such a long term investment," said Deboutte.

According Deboutte, hundred year life of this debt shows that investors have great confidence in the reliability of Belgium as a good payer.

EMTN Defined

I looked up the term "EMTN". It stands for Euro Medium Term Note. If 100 years is "medium term", dare I ask the definition of "long term"?

100 years at 2.5% and flexible conditions. What can possibly go wrong with that?

In the grand scheme of things €50 Million is a trivial amount to the global economy. Nonetheless, the transaction does reflect how one-sided sentiment is in belief of perpetually low rates.

Mike "Mish" Shedlock

Durable Goods Orders Surprise to Upside, Led by Autos

Posted: 26 Aug 2015 10:08 AM PDT

Durable goods orders surged in July, beating the top-end of Bloomberg Consensus Estimates. Despite the surge, year-over-year orders are still in the red.

Exports have been weak but they didn't hold down July's durable orders which, for a second straight month, are strong, and strong nearly across the board. New orders rose 2.0 percent in the month which easily beat out top-end Econoday expectations for 1.2 percent. Excluding transportation, orders rose 0.6 percent which is near the top-end forecast for 0.7 percent. Capital goods data show special strength with nondefense ex-aircraft orders up 2.2 percent following June's 1.2 percent gain and with related shipments up 0.6 percent following a gain of 0.9 percent.

Motor vehicles led the industrial production report for July and they're a standout in this report also. Orders for vehicles surged 4.0 percent in the month on top of June's 0.8 percent gain. Vehicle shipments are right behind, up 3.9 percent following a 0.9 percent gain. Commercial aircraft, a center of strength for the nation's factory sector, fell back with orders down 6.0 percent following June's 70 percent surge.

The good news continues with total shipments up 1.0 percent vs June's 0.9 percent gain which are very strong readings. Unfilled orders rose 0.2 percent while inventories, reflecting strength in shipments, were unchanged.

The factory sector has had a tough year, that is up until June when demand for vehicles began to take hold. This report speaks to domestic strength and should help offset ongoing concerns over global volatility.

In a special note on year-on-year change, total new orders are down 19.6 percent which reflects an aircraft comparison with the Farnborough airshow in July last year. Excluding transportation, orders are down 2.5 percent which is an improvement vs declines of 4.5 and 2.7 percent in the prior two months.

Monthly vs. Yearly

The skew in aircraft orders made the year-over-year comparisons this month (yellow highlight) especially tough. Next month, the year-over-year comparison (pink highlight) will be especially easy.

Discounting the huge swings, this is the first time durable goods have had consecutive month-to-month gains in a year.

Once again autos lead the way. I keep wondering how long that can possibly last.

Mike "Mish" Shedlock

vineri, 28 august 2015

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

How to Get Content into the Hands of Influencers Who Can Help Amplify It - Whiteboard Friday - Moz Blog

How to Get Content into the Hands of Influencers Who Can Help Amplify It - Whiteboard Friday

Video transcription

I have a few tactics for you that I hope will work.

1) The simple nudge

2) The inclusion mention

3) The review

4) The network effect

Seth's Blog : Scientific Management 2.0

Scientific Management 2.0

More Recent Articles

joi, 27 august 2015

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

Moz's Acquisition of SERPscape, Russ Jones Joining Our Team, and a Sneak Peek at a New Tool - Moz Blog

Moz's Acquisition of SERPscape, Russ Jones Joining Our Team, and a Sneak Peek at a New Tool

Seth's Blog : The strawberry conundrum

The strawberry conundrum

More Recent Articles

miercuri, 26 august 2015

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

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vineri, 28 august 2015

Video transcription

I have a few tactics for you that I hope will work.

1) The simple nudge

2) The inclusion mention

3) The review

4) The network effect

joi, 27 august 2015

miercuri, 26 august 2015

Pagini

Persoane interesate

Arhivă blog

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