Anil Batra�s Blog Quarterly Recap: Q1 2007

Starting this quarter, I will be doing monthly and quarterly recaps so that you will have an easier time locating previous posts.

This is the first full quarter when I actively blogged. I had this blog registered for quite sometime but did not find time or could not come up with a topic consistently till January this year. As you can see from my blog post, I am not a writer type so it was hard to consistently come up with topics or to write about the topics I had in my mind. I think, over last 3 months I have become good at coming up topics and writing on them. Most of topics are inspired by press releases, other bloggers and my customers.

I also wanted to take this time to reflect on how far this blog has come. About 3 months ago or so my Technorati ranking was about 1.8 Million, today it is a little below 60K. I am very happy and flattered to find that so many people are finding the value in what I write. My aim is to bring the view point of, not just me but of other (known and lesser know) analysts from this young community.



For this recap the posts are grouped into three categories, Career in Web Analytics, Behavioral Targeting and Web Analytics.

Career in Web Analytics � Web Analytics is a young field and there are a lot of open positions waiting to be filled. Irony is that there are people who have the right mindset to succeed in this field but are not really sure if they have what it takes to be a web analyst. Also, there are several people who don�t know how to get started in this field.

• My Predictions for 2007 � In Januray I made my predictions for Web Analytics in 2007. I predicted that there will be a lot more jobs available in 2007.
  


• Starting a career in Web Analytics post is an attempt to help all those looking to start their career in Web Analytics.
  

Continuing my commitment to help people who are looking to get started in this career I interviewed those analysts who have just started their career in webanalytics so that they can provide some insights to others who are seeking to move in.
Here is my series of Interviews

• Interview with Web Analysts


• Web Analyst Interview: Julien Coquet


• Web Analyst Interview: Adam Berlinger


• Interview with Web Analyst: Michael Notte


• Web Analyst Interview: Thomas Carrillo


• Web Analyst Interview: Joel Collymore

This series is still going on and I have some more interviews to come. If you would like to be interviewed please email me at batraonline at gmail (dot) com.

To keep an eye and highlight how many jobs are open and also to keep track of my predictions, I did two following follow-up postings on my predictions. Each month I will post an update on the job openings.

• Follow-up on my Web Analytics Predictions for 2007...


• Part II Web Analytics Predictions for 2007- Follow...

Behavioral Targeting � This topic is one of my favorite as I used to work for a BT company. The following are the posts on this topic.

• My Predictions for 2007 � I believe that Behavioral Targeting will become high on marketers priority list.


• Behavioral Targeting 101 - This article describes what Behavioral Targeting is. A very basic article for the beginners.


• Size of Your Segment and Network Reach Matters in ... � This article was a result of a discussion with one of my clients who was disappointed with the results they were getting from a Behavioral Targeting network. With an example, I show why they were not seeing the value they expected. I also provide some of the questions that you should be asking before you signup with a BT network.


• Calculating Behaviors on your site � I was kind of confused why a company like Revenue Science would come up with a press release stating how many behaviors they reach every day. In this article I show how 1 user with 30 pageviews can show 30 million behaviors and why this is not a good metrics to show to the world how good you are as BT network.


• Targeting Cart Abandonment by Email � This article was in response to John Rizzi, CEO of e-dialog�s article titled Four Ways to Improve Marketing ROI Through E-mail. I discuss two main issues that you should be aware of before acting on his advice of using Behavioral Targeting to convert abandoned carts.


• FOX INTERACTIVE MEDIA ACQUIRES STRATEGIC DATA CORP... � FIM acquisition of SDC proved that I was right when I predicted that that Optimization and Behavioral Targeting will be become very common.


• Interactive Ad Bureau (IAB) Opens D.C. Office and ... � A press release on IAB opening an office in DC to increase its sway over government.


• Omniture makes the right move With Omniture Genesi... I believe Web Analytics is not complete if you can�t fully understand various factors that drive traffic, understand what visitors do when they arrive on the site, segment these users based on their behaviors, demographics etc and then take action i.e. provide content, products and experience that is relevant for your segments. Omniture Genesis will allow Omniture customers to integrate web analytics data with other data sources and hence help marketers to get to 1:1 marketing.


• Omniture Acquires Touch Clarity and WebTrends Anno... � I predicted in January that Optimization and Behavioral Targeting will become a common term used by marketers (My Predictions for 2007). Omniture�s acquisition of Touch clarity proved that I was spot on with my prediction.


• Behavioral Targeting Hack � This article shows how easily you can get Behavioral Targeting going on your site without using any third party tool.


• Presidential Candidates and Behavioral Targeting � Some fun stuff and how Presidential candidates can use Behavioral Targeting to reach the voters.


• Google and Behavioral Targeting � My thoughts on how Google is in a position to build the largest Behavioral Targeting network. This article got more attention from the readers than I had thought. I will be doing another follow-up post to answer some of the questions that I got from my readers.


• Follow the Search � This is an example of targeting which some are calling dynamic targeting. This article shows how you can show dynamic content on a generic landing page to the users based on what they searched to arrive on your site and reduce your bounce rate.

Web Analytics - Everything above touches web analytics in one way or the other, here are some specific articles on Web Analytics:

• Referring Domains Demystified � This article shows how the webanalytics tool report on Referring domains and pages.


• Referring Domains Demystified - Part II � Those who are trying to answer �Why do I see my own domain as the referring domain� this article is for them.


• Omniture Web Analytics Competition & BYU - An article on Web Analytics competition by Omniture, the first of its kind.


• Search for a Mertics to Compare Web Sites � My views on discussion about what is the right metrics to compare one site against another.


• Targeting Cart Abandonment by Email � This article was in response to John Rizzi, CEO of e-dialog�s article titled Four Ways to Improve Marketing ROI Through E-mail. I discuss two main issues that you should be aware of before acting on his advice of using Behavioral Targeting to convert abandoned carts.


• My Predictions for 2007 � My predictions about Web Analytics field.


• Follow-up on my Web Analytics Predictions for 2007...


• Part II Web Analytics Predictions for 2007- Follow...


• Understanding the "Time Spent on the Site" Metrics... � A lot of people (including analysts) do not understand what �Time Spent on the Site� is reporting but still use them as a KPI. I explain what this metrics measures and how it should be used.


• Identifying & Solving Client Pains � I participated in a series by Manoj Jasra did on Identifying and Solving Client pains. I talk about the two pain points that my customer encounter: 1. Accuracy of the Data 2. Acting on the findings.


• Measuring Real Conversion Rate � This is a post that I wrote in response to Excellent Analytics Tip #8: Measure the Real Conversion Rate & �Opportunity Pie� by Avinash.


• Homepage � How critical is it? � In this article I talk about why homepage is not necessarily the most important page of your site. By putting all your important announcements, promotions etc on the homepage might not be the best thing.


• Web Analytics � Tool For Measuring Off Line Effort... � This post shows you how can measure your offline campaigns by your web analytics tools.


• Who moved my traffic? � Wait before you get all anxious about the downturn in your traffic. Downturn in your traffic might not be something to freak out.

Hope this was informative. I would like to hear if these classifications make sense or if I should try in a different way next time.

Canon PowerShot G7

The Canon PowerShot G7 is a sturdy, advanced camera for serious users, with a large 10-megapixel sensor and 6x optical zoom. The G7 replaces the Canon G6, now about two years old, and is a nice middle ground between point-and-shoot cameras and digital SLRs. The G7 features a "shift-type" form of optical image stabilization, using tiny, internal gyroscopes to compensate for hand movements and other jitters that may cause blurring. Keep in mind, the G7 does not feature the RAW file format, so if you're looking for a real heavy-duty shooter, you'll have to look to SLRs like the Digital Rebel XTi/400D.

Canon G7 Specifications

* 10 megapixels
* 6x optical zoom / 4x digital zoom
* Auto focus, auto and manual exposure
* "Shift-type" image stabilization
* Movie mode with sound
* JPEG file format
* ISO 80-1600
* 2.5-inch LCD
* Secure Digitial Card storage (32MB card included)
* Lithium-ion battery

Video previews of Nokia's new 5700

The 5700 was announced by Nokia a few days ago. It is a combination of Nokia's 3250 and 5300. It has a twist design and is an XpressMusic phone. I found two clips on the phone. The first one is from symbianfrance. It shows the UI of the phone in action. The second clip is from clipset.net and I have no idea what language it is in. It does have an on screen translation though but it doesn't translate everything she says. The phone looks good.






Click for symbianfrance

Click for clipset.net

Amazing video of Sony Ericsson Night Tennis Miami 2007

Night tennis is a special event which Sony Ericsson created. It was introduced last year in Madrid, Spain. The game is played in total darkness except for UV lighting. Players are dressed in special glow in the dark clothing. The ball glows in the dark along with the paint on the court. This is accompanied by a neon light show and world famous DJ's, Paul Oakenfold and Masters At Work. This looks spectacular and I love the music. Wish I was there. Enjoy! =)



Click for night-tennis

Hands on video preview of Sony Ericsson's Z750

Sony Ericsson anounced the Z750, their first HSDPA phone a few days ago at CTIA. This is the first hands on video I have come across (thanks to phonearena). Enjoy.



Click for phonearena

Today's archidose #78

REEF Model 6, originally uploaded by cs@sf.

IwamotoScott's entry -- titled Reef -- for the MoMA/PS1 Young Architects Program competition. Many more images in cs@sf's Flickr set and on YouTube.

To contribute your Flickr images for consideration, just:

:: Join and add photos to the archidose pool, and/or
:: Tag your photos archidose

100% legit Nokia N95 available on Ebay

Finally it has hit a well known seller on Ebay. X1387 is a reputable seller (I never had any problems with him) and if he lists it, then definitely he has it. It is available in two colors. The price as of this moment is 1190$ US. It's very expensive but I am sure the price will drop slowly day by day and as other sellers will also start listing. Happy shopping!

Click for ebay

Flashing K800 to K810 results

I posted before about the possibility to convert the K800 to K810. Well, a member of esato has tried flashing his K800 with K810 firmware. He flashed the K810i R1KC001 firmware with wotanserver with success. Here are the results:

- The photofix function is present but not that useful (not much different from photoDJ)
- TrackID is also present
- Java is updated to version 7.4
- Date of firmware is 7/3/07
- Game extreme snowboarding installed instead of photoquest fishing
- The keypad lights don't function properly

In conclusion this conversion is not advisable because of the keypad issue.

UPDATE: Here are pics of the keypad after the flash

Click for esato

Pics of Sony Ericsson's Z310

The Z310 is a lower end version of the Z610. It has the same external shiny flip as the Z610. You can only see the screen when it's lit up. The Z310 doesn't look half bad considering it's price. It even has a camera and light effects.

Click for more pics

Web Analytics Demystified Survey

Eric Peterson is conducting a short survey (I took the survey so can attest that really is short) of web analytics users, practitioners, vendors, and consultants is designed to identify some of the challenges we all face when analyzing our web sites.

This important study is the first of its kind to inquire about specific attitudes towards web analytics usage across a wide-range of participants. This research will be used to create FREELY AVAILABLE industry benchmarks covering many previously un-examined aspects of the web analytics industry and your participation is VERY IMPORTANT.

To encourage you to take this important survey TODAY, he is offering two valuable incentives for your time:

1. A free copy of the aggregated survey results when they're available in early May, 2007


2. 25% discount on the cost of purchasing both Web Analytics Demystified and The Big Book of Key Performance Indicators by Eric T. Peterson

According to Eric, this survey is COMPLETELY ANONYMOUS so nothing to worry about. Your answers will not be associated with your email address or any other personally identifiable information. If you have any questions or concerns about your privacy, please feel free to write him at eric@webanalyticsdemystfied.com.

If you'd like to learn more about the survey before participating, please copy the following URL into your web browser:

http://www.webanalyticsdemystified.com/survey

Sony Ericsson Cyber-shot mock-up

This mock-up was created by 'Meilow'. He used the Ubiquam U-520 phone for inspiration. It has a 5 megapixel autofocus camera with xenon flash. The lens cover slides sideways and it has a shiny front like the K810. This Cyber-shot also supports UMTS. It actually looks quite good.

Foolproof Recession Indicators

Economist Paul Kasriel at the Northern Trust has come up with a recession indicator that has called six consecutive recessions with no misses and no false positives dating back to 1962. It does however, have a single miss in 1960. The condition is an inverted yield curve as measured by the 10-yr treasury yield minus the Fed funds rate, in conjunction with an annual rate of change falling below zero on the CPI adjusted monetary base. With a small tweak in methodology as described below we can pick up that isolated miss in 1960.

Paul discussed his idea with me in an Interview with Paul Kasriel and I mentioned it in January in Leading Economic Indicators.

Comments from Paul Kasriel

• The "real" unadjusted monetary base (bank reserves plus currency) seems to provide fewer false recession signals than does real M2 growth. That does not necessarily mean that the real base does a better overall job of forecasting real GDP, just that it does a better job of forecasting official recessions. Mish notes: "Real" in this case means inflation adjusted via the PCE price deflator, and "unadjusted monetary base" means a non-seasonally adjusted monetary base.
• I have used the PCE price deflator to get "real" rather than the CPI for purely arbitrary reasons here, not theoretical -- I don't have time to explain now, but it is not a big issue. Mish note: There is a potentially confusing mix of terminology here but none of the charts in this post were seasonally adjusted (except perhaps for consumer sentiment and on that I am unsure). Our inflation adjustments used the CPI, and any references to "real" in what I wrote (as opposed to what Kasriel wrote) means CPI adjusted. As Kasriel suggests there is little difference between the two. We tried both and settled on using the CPI because that that is what Shostak did as explained in Money Supply and Recessions.
• Starting with the recession of 1970, a negative spread on the 10-yr Treasury minus the fed funds rate in conjunction with a contracting year-over-year change in monetary base/CPI has predicted recessions with no false signals. In Q3 and Q4 of 2005, the real monetary base contracted but the interest rate spread still was positive. Now, the interest rate spread has turned negative, but the real monetary base is no longer contracting -- just barely.
  

Kasriel fully explains his theory in the March 22 article Recession Imminent? Both the LEI and the KRWI are Flashing Warning.

I have found that every recession starting with the 1970 recession has been immediately preceded by the following combination - a negative spread between the yield on the Treasury 10-year security and the federal funds rate (hereafter referred to as "the spread) on a four-quarter moving average basis and a year-over-year contraction in the quarterly average of the CPI-adjusted monetary base.

The monetary base is the sum of bank reserves and coin/currency, both of which have been created out of thin air, as it were, by the Fed.

The following chart shows the historical behavior of the "Kasriel Recession-Warning Indicator" (KRWI).



The KRWI has given no false signals in that when it has warned of a recession, there has been one. Unlike the LEI, which signaled a recession for 1967, the KRWI did not. However the 1960 recession was not signaled by the KRWI because the spread remained positive, although it did narrow. As of the fourth quarter of last year, the spread moved into negative territory, but the year-over-year change in the real monetary base remained positive. So, like the LEI, as of the fourth quarter of last year, the KRWI had not signaled that a recession was imminent.

Barring upward revisions in the LEI and KRWI and sharp increases in the immediate months ahead, both of these indicators will be sending a signal that a recession is on the horizon. Perhaps this will be the first time in over 45 years that the KRWI will emit a false signal and only the second time that the LEI emits a false signal. Perhaps.

10 Yr Treasury Minus 3 Mo Treasury

For comparison purposes I asked Bart at NowAndFutures put together a chart showing the 10 year treasury yield minus the 3 month treasury yield (as opposed to the FF rate) just to see what we could find.



Bingo! A perfect seven of seven with no misses and no false positives. The two blue-grey ovals are conditions where only one of two conditions were met.

Note: The above chart was formulated by subtracting $IRX (the 3 month treasury discount) from $TNX (the 10 year treasury yield). The former is a discount not a yield so the chart is slightly off the stated intent but it is extremely close. I had Bart look at the actual data and the numbers did go negative intra-month even if it does not show it on the chart. Using a true yield instead of a discount would make the spread more negative, so the signal was definitely given (even if ever so slightly).

Interestingly enough the 10 year minus the 3 month spread by itself has no misses since 1960 (seven for seven) but it did have a single false positive in 1967. The CPI adjusted monetary base was also seven for seven but with a false positive in 2005. False positives in isolation are shown in blue-grey ovals. Together they are perfect.

Thus by using Kasriel's idea of a paired set of indicators but substituting the 3 month yield for the Fed Funds rate we achieve a perfect seven of seven dating back to 1960, picking up the single miss of the Kasriel's KRWI in 1960.

M Prime Update

M' is an Austrian money supply indicator that I have been following for some time and started charting (with help from Bart) back in January. See Money Supply and Recessions for the theoretical justification of M'.

M Prime and Recessions



An annual rate of change in M' dipping below the 0% line is a pretty rate event but does not necessarily lead to a recession. On the other hand in each of the last six recessions M' did have a significant dip (though not as severe as the one we see now).

Notes:

• The sweeps data is notoriously late. I am not sure why. The latest data we have is for January. We extrapolated that data forward for two months. That is the best we can come up with at this time.
• The biggest difference between M' and M1 is in sweeps data. M' properly picks up sweeps data while M1 has been distorted since 1995 by the lack of it.
  
• Kasriel mentioned to me in the interview that he felt the Fed includes sweeps data in their M1 analysis. We get the data from an obscure Fed publication that is not updated very frequently. Why isn't sweeps data part of the mainstream data and more up to date?
• We took this series back as far as we could find data. Unfortunately that is no further than 1968.
  

Real M Prime (CPI adjusted) and Recessions



As far as predicting recessions goes, M' CPI adjusted is clearly an improvement over M' straight up. The CPI adjusted M' gives off very strong but not perfect recession warning on a cross of the 0% line on an annual rate of change basis. In conjunction with an inverted yield curve M' is a perfect six of six with no false positives.

Unless it's different this time, another recession is headed our way. Depending on whether one uses M' or the monetary base as a starting point (either will do in conjunction with the 10yr-3mo treasury spread), we are headed for a perfect seven of seven or eight of eight in recession predictive ability (with the difference being how far back the data series goes). Both sets have no misses and no false positives. None of this even takes into consideration the mess in housing which is a pretty good leading indicator in and of itself.

Those looking at M2 or M3 alone as proof of economic expansion or as some sort of inflation picture are missing the big picture. The economy is slowing far faster than most think by the three best leading indicators once can find (the yield curve, rates of change in M' or Monetary Base, and housing). Financial speculation as evidenced by growth in M3 and the final buildout of retail stores already under construction are all that is keeping the good ship Credit Bubble afloat.

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

Mysterious Nokia

What do you guys think this is? (besides the fact that it looks like the 7250)

Click to find out

Video of Sony Ericsson's W580 fitness app

"With the W580 Walkman� phone you can even take your favourite tracks to the track. It will count your steps, your calories and monitor your running speed/distance/time. Add to that your best tunes for motivation and whether you�re on a run, in the gym or just out for a stroll, the W580 is the perfect fitness partner."

Above is SE's description of the fitness app that comes with the Z580. This video from slashgear shows the app in action. Enjoy.

Click for video of phone

Click for slashgear

Another hands on video of Sony Ericsson's W580

This is the third hands on video of the W580. This clip from phonearena is alot longer than gizmodo's video. I posted another video a few days ago. Enjoy.

Click for previous video

Click for phonearena

Richard "Priztker" Rogers

As is probably known by most people that read this page, Richard Rogers has been announced as the 2007 Pritzker Architecture Prize Laureate. This means he joins an elite list of past recipients, receives a medal in a ceremony in London on June 4, and gets $100,000 spending money. More coverage can be found at ArchNewsNow, yesterday and today.



Rogers is a fitting recipient, known for technologically-minded buildings -- the Centre Pompidou (with Renzo Piano), Lloyd's of London, and Channel 4 Headquarters -- and ecologically-minded theories of architecture and urbanism. Rather than pepper this post with images of these or other well-known projects, I thought I'd show images of an unbuilt submission for a 2004/5 competition for the British Antarctic Survey�s Hally VI research station in Antarctica, found here. Enjoy.

Today's archidose #77

Australia_2006_0301, originally uploaded by marco 2000.

The Council House 2 Building in Melbourne, Australia by DesignInc. More information at Inhabitat.

To contribute your Flickr images for consideration, just:

:: Join and add photos to the archidose pool, and/or
:: Tag your photos archidose

Nokia N95 music capabilites reviewed

Two days ago allaboutsymbian reviewed the GPS capabilities of the N95. Today they posted an in depth look at the music capabilities of the N95. They were impressed and gave the N95 a score of 90. They did however mention that the disadvantages of the N95 are, weak battery, price and memory.

Click for review

K810 pic gallery and video

This is a bit old but still worth checking out. 'Rog' from se-community has posted a pic gallery and a hands on preview video of the phone. Enjoy.

Click for pics

Click for video

MOTOKRZR SE Z610 hybrid

Well, I guess the folks in China decided to kill two birds with one stone...copy the design of the MOTOKRZR and Sony Ericsson's Z610. It comes in turquoise, pink and black just like the Z610. Well, everything else just reminds me of the KRZR. The phone is a dual band clamshell. It features a 1.3 mega pixel camera, 260k color 176x220 screen and supports t-flash memory cards. It's special feature is the "shiny mirror effect" flip. Hmmm...sounds familiar....Anyways, it costs around 120$ US.

Sony Ericsson W850 copycat

This is a dual band slider phone. It features a 1.3 mega pixel camera, 1.8 inch 176x220 260k color screen and supports t-flash memory cards. It also has stereo speakers. One at the top of the phone and the other at the bottom. The main attraction I would say is the colorful lighting effect when a call or message is recieved. Not only did they copy the W850 design, the icons in the menu are copied from Sony Ericsson. This phone is also from China and costs around 130$ US.

Nokia 5300 copycat

This is a dualband phone which features a 2 mega pixel camera, 260 k color 3 inch touchscreen and supports t-flash memory cards. The best part is that it even has a game emulator. I am guessing that it is a NES (Nintendo) emulator meaning there are tons of games (which are included). It is not a slider like the phone it is trying to copy. It also has gaming buttons. All this for only around 130$ US straight from China.

Motorola Ming copycat

This phone from China features 2.2 inch 260k color 176x220 touchscreen, 2 mega pixel camera with LEDS and loads of other stuff. It also lists that the mp3 ringtones are very loud. What really catches my eye is the fact that the logo symbol looks almost identical to Motorola's symbol. Like most copycat phones from China, this phone is dualband and alot cheaper than the original Motorola Ming. It only costs about 130$ US.

Is the Fed really "pumping money"?

I had a very interesting email exchange with three Minyanville professors about whether or not the Fed is "pumping money". The three professors are Fil Zucchi, John Succo, and Scott Reamer.

The discussion started off with an email to Fil Zucchi so let's start there.

Mish to Professor Zucchi

Fil, I would like to discuss a comment you made about the �Fed pumping money�. I am not trying to nitpick but "pumping money" doesn't seem to be the best description of what is really happening. Here is how I look at things:

This Fed has chosen to defend an interest rate target. The Fed must supply all demand for credit at that target. If the Fed failed to do so the interest rate target would not be hit and interest rates would either rise or drop accordingly.

Now I am a big fan of abolishing the Fed and letting the market set rates, but as long as the Fed has an interest rate target (as opposed to a money supply target) the Fed is not pumping money per se, the Fed is defending an arbitrary target that it has established, no more no less. Thus it is not the Fed initiating anything, the Fed is merely meeting demand for money at the arbitrary target they set.

Now if the Fed instead set money supply targets instead of interest rate targets then interest rates would float day to day and money supply policy would be known. Yet every day I hear the same comments every day �The Fed is pumping to save housing� or �The Fed is pumping to save the stock market� or �The Fed is pumping the PPT�. All of this kind of talk seems ass backwards to me. The Fed is meeting money supply demands at its target. Period. Typically the Fed has been meeting demand for money with repos. Repos are short term loans, not part of permanent money supply.

But people take these ideas about �pumping� as well as conspiracy theories about M3 and draw still more inaccurate conclusions as to what is going on. I can and will make a case that looking at M3 in isolation is missing the big picture (at least from an Austrian perspective) as to what is really going on with money supply. But that is another issue for Friday or early next week in my blog.

Right now, it�s time to clear up this �pumping money� issue. Claims that the �Fed is pumping money� is putting the cart before the horse because by defending an interest rate target instead of a money supply target the Fed does NOT have a choice as to what the demand for money will be at its designated (and arbitrary) target currently set at 5.25%.

In essence I feel that "pumping money" statements only serve to reinforce various conspiracy theories that are now running rampant. If I am mistaken then perhaps you or John Succo or Scott Reamer can clear up my misconceptions and I welcome the opportunity to learn.

Response from Professor Zucchi

HI Mish � great points and I understand what your saying, but I am not sure I agree entirely with it. A response will require me to wear my thinking cap for a while, but I�ll certainly post one. Meanwhile I�m gonna send this on to Succo, Reamer and Sedacca as I imagine they may wanna give a crack at it as well. Hear u soon, Fil

Response from Professor Succo

Both are right�we are picking over semantics.

The Fed has set an artificially low interest rate. The market wants higher rates because it sees the problems these low rates are causing: that money is getting into speculation and very low grade credit. The Fed must supply enough new credit (repo) in order to keep rates from rising. The recent steepening of the yield curve is telling us that this is hard to do: they are doing too many repos trying to keep rates low.

If the Fed wants to stop pumping money they would admit that rates are too low and would raise them.

In fact the recent steepening is very alarming. It is due to defaults/foreclosures/ where lenders are saying they cannot continue to pass on to speculators/low quality borrowers all that new credit the fed is trying to force into the market.

An inverted yield curve normally predicts a recession. That recession comes home to roost when the yield curve suddenly steepens our of that inversion: the market is tightening out of necessity just as the fed is trying to make it not to.

Response from Professor Reamer

There is another operational element here that very few folks appreciate and it is this: In setting the fed funds target rate and defending it, the Fed�s open market operations take the form of either pumping liquidity into or out of the banking system (via Fed Funds) in an effort to keep the target rate at (for now) 5.25%.

Let�s say that economic activity is heating up; there is more manufacturing activity, more employment, more lending by banks and as a result of all of those, more demand for short term monies by commercial banks. Bank lending activity goes up and their demand for short term money (the cost of which is set by the Fed) increases commensurate with their need to keep capital/coverage ratios at whatever bare minimum regulations demand they be. So, net/net greater economic activity implies more money demand by commercial banks. If money demand by commercial banks increased, in the absence of the Fed, we would see the �cost� of the money (the interest rate) do what?

Like all goods, when the demand for something goes up, the price increases in the short run. So in the case of short term (Fed) funds, increased economic activity generates greater demand for short term funds by commercial banks and that increases the cost of those monies � increases the interest rate of these monies. But the rate � cost � of Fed Funds is 5.25% and the good boys at the NY Fed have pledged that it will defend the FOMC�s Fed Funds target � neither letting it rise nor fall. But if increased economic activity is driving up the Fed Funds rate, then the Fed must increase the supply of credit in an attempt to keep the rate at 5.25%. This is of course a basic law of economics: in the face of increased demand, prices rise. The only thing that can keep prices the SAME would be an immediate increase in supply. And that is what the NY Fed does when economic activity increases � they increase the supply of monies in the system (via repos and other means) in order to defend that Fed Funds target.

More interesting than that is what happens when economic decreases. The opposite situation arrives: when economic activity decreases the demand from commercial banks for short term funds decreases and thus the price (rate) falls. In order to maintain and defend that fed funds target in a scenario where economic activity is decreasing and lending activity is slowing, the Fed has to decrease the supply of monies available to the system. Thus, the Fed will be taking money from the system once economic activity decreases unless and until they change the Fed Funds rate target.

That period of time between a slowdown in economic activity and an eventual decrease in the Fed Funds rate can take months or quarters. If the size and severity of the misallocation of investments in the economy are significant, that period where the NY Fed open market desk is defending the FOMC�s rate by decreasing monies in the system, need not be lengthy at all to create the kind of tightening of monies that is so anathema to a credit-driven, asset-based economy. A few months of taking money out of the system in order to defend a Fed funds target is all that is theoretically needed to create the type of tail event that we believe it highly probable in the credit and stock markets, not to mention the real economy.

The conditions of decreasing economic activity are present; the malinvestments are both huge and pervasive; the Fed could easily start to take money out of the system to keep the Fed Funds rate at 5.25%; and commercial bank lending declined last week more than it has at any time since February 1960. Those are the conditions � sufficient but perhaps necessary � for a credit-based contagion event. And few times in history have markets been implying the odds of this are so low.

I took the liberty of passing on Professor Succo's comments to my Austrian minded friend who goes by the name of Trotsky.

Trotsky Chimes In

• You are right - Since the Fed has abandoned 'money supply targeting' it merely supplies WHATEVER the market demands at the prevailing set target. Note however, that lately, the Fed has supplied funds quite often well BELOW target, so the idea that it is busy 'pumping' right here and now is not totally off the wall. Nonetheless I agree with the general thrust of your argument.
• Succo is also right - When the curve begins to steepen out of an inversion, the recession alarm bells go off. This is due to the nature of the whole thing - Why is the curve inverted? It is not because the Fed has deliberately inverted it - After all, in setting the FF rate, the Fed actually tends to follow rather than lead the short term market interest rate. In other words there is a feedback loop - when the market expects them to tighten, it will raise t-bill yields before they actually tighten, and vice-versa. So what creates inversions? It is mostly enormous demand for short term speculative credit.
  
• The previous episode of money pumping (examine money supply growth charts for 2001-2002 when they dropped rates to 1%, and you will see they went off the charts) begins to percolate through the markets setting off asset bubbles (stocks, housing, commodities - what have you), that produce returns that far exceed the rate charged by the Fed. Consequently, demand for credit based speculation heats up, as the bulk of traders, hedge funds, etc. are simply trend followers. This eventually inverts the curve. Thus, when the curve begins to steepen out of an inversion, it signals a growing loss of liquidity, as speculative demand for credit wanes (for whatever reason - it could well be that lenders become reluctant to supply more credit, such as is the case in housing now).
• The 'market is tightening out of necessity' just as Succo has put it. Since the boom was entirely artificial and credit driven, the sudden loss of credit intermediation support shows up as a steepening curve and morphs into a recession/bear market.
• The Fed IS or HAS BEEN pumping in the sense that the rate it has set is still lower than the one the market would have set if rates were completely free in the face of such overwhelming demand for credit. In short, the housing bubble would have been stopped in its tracks much sooner in a truly free market, as the demand for mortgage credit would have pressured rates higher much earlier. Of course, in a truly free market, the entire rate term structure would look different - there would be scant difference between short and long rates most of the time, and rates overall would be far lower in an honest money system.

Discussion Points

• As Professor Reamer points out the big risk is for a "credit-based contagion event" especially if the Fed artificially tries to hold the Fed Funds Rate higher than where the market thinks rates should on the way back down. Such actions would require various monetary draining operations by the Fed that perhaps the market is not prepared for.
• If the Fed has indeed been supplying money at rates below the Fed Funds Rate as Trotsky pointed out, then the word "pumping" in and of itself seems appropriate.
• If the Fed was targeting money supply instead of defending an arbitrary interest rate target it would be easier to defend claims one way or another whether or not the Fed was "pumping money".
  
• In a free market economy where the market set interest rates instead of the Fed, the housing bubble never would have gotten as big as it did because interest rates would have been driven higher faster and may not have gotten as low as they did in the first place.
  

Outside of the Fed supplying money below their targeted rate, this may be a debate over semantics as Professor Succo suggests. Nonetheless I am sticking with my cart/horse scenario simply because defending an interest rate target while claiming to be fighting inflation (as the Fed is doing now) is putting the cart before the horse.

When it comes to inflation fighting discussions, talk about the CPI, PPI, capacity utilization, as well as the price of oil, copper and cotton is in reality nothing but a sideshow. Inflation starts with an expansion of money and credit. It is striking (as well as absurd) that we have a monetary policy where the Fed discusses everything but money.

By arbitrarily defending interest rates targets that the market never would have set, the Fed put itself in a box and started chasing its own tail inside that box. The Fed is now wondering what to do next when there simply is no right solution at this point other than to abolish the Fed and let the market fix the problem over time. Since that is not about to happen any time soon, the best we can do is watch for conditions that might signal the beginning of a "credit-based contagion event".

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

Convert your K800 to K810

Well I don't mean the housing. Now you can flash K810 firmware to K800 phones. The K810 firmware has a slightly improved media player, more advanced themes and Track ID. Sounds good to me. Now all we need is to try to change the housing. Good luck to anyone who wants to flash their K800 with K810 software. The flashing is through wotanserver.

UPDATE

Click for results of flash

Click for wotanserver

Helio's Ocean dual slider

This is one impressive device. It slides one way to reveal a number keypad and slides another way for a full QWERTY keyboard. It also isn't so big and doesn't even look thick or bulky.I find the screen a tad small though. Mobileburn has a hands on preview and a picture gallery.

Click for mobileburn

Review of Sony Ericsson's K200/K220i

The K200/k220 are SE's low end phones. The handset measures 103?46?16.7 mm at weighs 82 grams. The phone features a VGA camera. The user interface is simple and easy to use. The difference between the K200 and K220 is that the latter has FM radio. Mobile-review has an in depth review of the phone. I think the phone looks good for it's price.

Click for review

Sandisk introduces 4 gb memory stick micro

SanDisk expanded its Memory Stick Micro (M2) line by introducing a 4-gigabyte (GB) card.
With the capacity to hold up to 1,000 songs, 2,000 high-resolution photos or 20 hours of MPEG4 video2, the 4GB M2 is compatible with Sony Ericsson�s latest generation of slim line, multimedia mobile handsets such as the Cyber-shot and Walkman� series. SanDisk announced the 4GB M2 at CTIA Wireless 2007.

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Nokia 5070: Fun and function

Espoo, Finland - Designed with the needs of young consumers in mind, the newly announced Nokia 5070 features a compelling blend of fun and function for today's socially networked mobile customer. With strong messaging, leisure and personalization features, the Nokia 5070 has everything that the mobile social set needs. The Nokia 5070 will be available in the second quarter of 2007 with an estimated retail price of EUR 100 excluding taxes and subsidies.

This is a low end phone. It features Xpress studio messaging, FM radio and camera. It will be available in red or blue.

Click for press release

Nokia 5700 XpressMusic: Adding a new twist to mobile music

3G Smartphone can download and play tracks from range of Internet music stores

Espoo, Finland - Today, Nokia revealed the Nokia 5700 XpressMusic, an accessible 3G smartphone augmented by a dedicated audio chip for enhanced music performance. The Nokia 5700 XpressMusic features an iconic twist design that easily switches between four modes at the flick of the wrist - music player, 2 Megapixel camera, video call and smartphone. Combining the benefits of a music-oriented, multipurpose device featuring 3G dataspeeds, the Nokia 5700 XpressMusic is expected to retail for an estimated EUR 350 before taxes and subsidies during the second quarter of 2007

I guess the rumors of this 5700 were true. It features a dedicated audio chip, 3.5 earphone connection, 16 million color screen and is powered by Symbian S60. I wish they would release the phone with a different color scheme. It will be available Q2 2007.

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