Monthly Archives: September 2008

Quote Of The Day: Ben Bernanke

Henry Paulson, Ben Bernanke, and Christopher Cox testifying before the Senate Banking Committee on Tuesday (photo: Dennis Cook/AP on msn.com)

And no, despite any resemblance, that is NOT a photo of the Three Stooges. A definite case can be made, however, that Mr. Bernanke is surrounded by “speak no evil” and “see no evil”.

Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson, SEC Chairman Christopher Cox and Federal Housing Finance Agency Director James Lockhart testified today before the Senate Banking Committee, about the Bush administration’s $700 billion financial industry bailout plan (see Associated Press article).

As incredible as this sounds, Mr. Bernanke told lawmakers that “you risk a recession with higher unemployment and increased home foreclosures unless you act“.

Risk a recession ?

Could someone tell us what they’re smoking down there in Washington?

What planet is Mr. Bernanke living on ?

If we’re not in a recession, then perhaps the U.S. economy will simply skip the recessionary phase, and just sublime directly into a depression (we’re awfully damn close). We suppose that would be more energy efficient.

We’re kind of surprised that Mr. Bernanke could be so out of touch with average Americans that he doesn’t realize what horrific shape the economy is in. He has spent most of his career in academia, so the isolation of the ivory tower could have something to do with it. And while he has a net worth in excess of $1 million, he earns less than $200,000 a year as Fed Chairman. With the cost of living in the DC area, that’s probably not enough to live a real lavish lifestyle. So, you would think that even if he isn’t your average working stiff, and he probably hasn’t lost his home to foreclosure or gotten a pink slip lately, he would appreciate just how much the average American family is hurting because of the R-E-C-E-S-S-I-O-N.

Does Mr. Bernanke really believe that a recession is still only a threat at this juncture? It makes us wonder if there might be something in the water in Washington that could be affecting the judgment of our nation’s leaders. On the other hand, he might be under considerable pressure to sing the company song, even if he disagrees with the lyrics. It does beg the question; just how bad must things get before the Bush administration acknowledges we’re in a recession. Would they ever admit it under any circumstances ?

If we’re not in at least a recession (or worse), why is the economy on life support, and why are all of these banks, investment houses and insurance companies going belly up ? And why are the markets so unstable, with one-day 400-point drops on the Dow becoming commonplace, and oil shooting up $20 in a day. And why are so many companies laying off thousands of employees each ?

If this ain’t a recession, what is it ?

A correction ?

A mild downturn ?

A slight dip ?

Turbulence ?

A pre-recession, kind of bumpy ride, but not quite a recession sort of thingy ?

A __________________. (fill in the blank with your own description)

As far as Mr. Bernanke’s warning of “higher unemployment and increased home foreclosures”, you mean it could actually get even worse than it is now ? Really ?

Something to look forward to, huh ?

– Routing By Rumor

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Filed under Business, Employment, Jobs, Labor, Money, News, Politics, Quote Of The Day, Routing by Rumor, Stock Markets, The Economy, Your Money

Philip Schoonover Learns That What Goes Around, Comes Around.

Philip Schoonover, former Circuit City CEO (photo on circuitcity.com)

Philip Schoonover, former Circuit City CEO (photo on circuitcity.com)

We’ve raked the management of Circuit City Stores over the coals in the past, because of the way they have treated their employees, and for what seems to us, to be some of the worst business decisions in the history of the World.

Circuit City Stores announced on Monday that board member James Marcum has replaced Philip Schoonover as CEO (see “Circuit City CEO Gets Unplugged“, Businessweek, September 22). They did not say whether Mr. Schoonover plans on reapplying for his former job in ten weeks, at a market-based salary.

As they say, “what goes around, comes around”.

It would be no surprise if the Board finally staged a mutiny (although published reports indicate that Mr. Schoonover tendered his resignation). The scooner Schoonover has been on the rocks since Circuit City announced in March, 2007 that they were firing 3400 employees immediately, because they earned too much. Those employees were told that they could reapply for their former jobs in ten weeks, at a market-based (meaning lower) salary, but there was no guarantee a job would be available for them. We do not know if any of those employees were stupid enough to reapply for employment at Circuit City, or if any that might have done so were eventually rehired. We’re sure those 3400 former Circuit City employees feel just awful for Mr. Schoonover.

Now, in addition to the strong headwinds that Circuit City is encountering because of the U.S. economic slump, and stiff competition from retailers such as Best Buy, they also have the benefit of consumer backlash towards a company that would treat their employees as poorly as they have. And it’s not just the mass layoff that we’ve just mentioned. Look at Circuit City’s wikipedia page, and read about some of the court cases they’ve been involved in, particularly regarding their employment practices.

It’s truly amazing that their ship, while listing heavily, is still afloat.

Circuit City has searched the seven seas looking for a suitor, but has been unsuccessful. Would YOU buy a company with as much bad karma or as much red ink as Circuit City ? But hey, there’s so much bailout money coming out of Washington these days, maybe they’ll tack a Circuit City rescue plan onto the $70 billion financial system bailout plan they’re debating right now.

To say that Mr. Marcum has his work cut out for him is an understatement. But then, perhaps his plan, assuming he has one, is not to rebuild the company. Mr. Marcum was elected to the Board in June, having been nominated by Circuit City shareholder Mark Wattles. Wattles has indicated in the past that he wants to find a buyer for Circuit City. It would certainly make sense to think that Mr. Marcum’s role will be that of caretaker, while they continue to look for a buyer.

We’ve mentioned previously that the best thing Circuit City could do to stem their losses is to liquidate the company. With dire predictions for this Christmas season for the nation’s retailers, as well as a bleak outlook for the economy in general, it doesn’t seem to make a whole lot of sense for a company in the sad shape that Circuit City finds itself to drag things out any longer.

– Routing By Rumor

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The Banking Meltdown Is Just A Symptom Of A Much Larger Problem

They’re comparing this week’s financial events in the United States with those that led to the start of the Great Depression. But make no mistake, the United States’ economy has been headed for disaster for years now. The loss of decent-paying jobs, the record number of home foreclosures and the depressed real estate market are all symptoms of a far greater problem. The near-collapse of the American banking system may be linked to the mortgage crisis, but look for a root cause elsewhere.

The looming failures of financial giants including Lehman Brothers and Merrill Lynch, and insurance companies such as AIG, have created shock waves felt from Wall Street to Main Street. For the first time in memory, people were concerned that the money in their bank accounts, money market accounts and retirement plans was at risk. A 1929-style run on the banks appeared to be imminent. Indeed, people started pulling their money out of money market accounts at an unprecedented rate. Even investment professionals are running scared. Putnam Investments was so rattled by recent events, that they suddenly decided to close and liquidate their $12.3 billion institutional Putnam Prime Money Market Fund, which had experienced a run of redemptions last Wednesday. (Read about money market funds “breaking the buck” in this cnn.com article, or in this blogger’s posting.) In the seven days ending this past Thursday, Americans collectively pulled a quarter of a trillion dollars out of their money market accounts, an indication that people are frightened. This has led to the government announcing that money market mutual funds will now be insured in much the same way that FDIC insurance protects bank deposits, although the insurance coverage is currently planned for only the next year (we think you can bet your bottom dollar (pun intended) that this insurance will become permanent).

Within the space of just a few days, the government’s $75 billion bailout of AIG grew into a proposed $700 billion bailout of the entire mortgage mess. (Didn’t something like that happen in the movie “The Blob That Ate Pittsburgh”?) The government certainly has the ability to print as much money as it needs to put out these brushfires, but it’s foolish to believe that the federal government throwing money at the problem will make it go away for any length of time.

The economists here at Routing By Rumor point to two very basic problems that the country’s economic woes can be directly attributed to. The first problem is that America is sending about half of it’s cash to the Middle East to buy oil. The second problem is that the rest of America’s cash is being sent to the Far East, mainly to China, to pay for just about everything else we consume. Unless this situation changes, the U.S. economy will never recover, and the current round of federal bailouts are just the beginning.

America has made little progress towards energy independence, despite 35 years having elapsed since the oil crisis of the early 1970’s gripped the nation. A second oil crisis in the late 70’s, as well as dramatic increases in the price of oil in the recent past have done nothing to break our dependence on foreign oil.

America has become dependent on China for almost all consumer goods. This is not only foolish from an economic perspective, it also presents a grave risk to America’s national security. We manufacture almost nothing domestically any more. We’ve said this before, and we’ll repeat it again… God help America if we ever go to war with China, because if that should ever happen, you might as well just go ahead and hang a picture of Chairman Mao in your living room. Now take a look at Walmart, the largest retailer in the United States. According to wakeupwalmart.com, more than 70% of the goods on Walmart’s shelves are made in China. To be fair, that’s probably no different than any other American retailer, but in our mind, Walmart is little more than a sales agent for China, Inc.

Just how bad have things gotten ? According to this CNN article, the United States Department of Agriculture says that 50 percent of the apple juice imported into the United States comes from China (an estimated 161,000 tons of apple juice compared to the 110,000 tons produced in the United States). If we’re reading those numbers correctly, that means the United States only produces 25% of all the apple juice it consumes.

Apple juice !!! What the hell is happening to our country ?

People, there’s something very, very wrong with the U.S. economy, if we can’t even grow our own apples in this country anymore. We’re in deep, deep trouble if we’ve even become dependent on China for apple juice.

They better come up with a new saying, because “As American as apple pie” doesn’t hold true any more.

When the presidential candidates show up for their next press conference or debate, in addition to the standard questions about abortion, the death penalty, Iraq and tax reform, perhaps someone can ask them to take off their shoes and tell us where they were made, and whether they see that as a problem. Or, ask them to remove all of their clothing that was NOT made in the U.S.A. That should be quite revealing.

Then there’s the U.S. banking industry, which to us, resembles nothing so much as legalized loan sharking. Banks are, on the one hand, paying minuscule interest rates to depositors, with regular savings accounts and interest-bearing checking accounts paying perhaps 1% or so, and in many cases, just a fraction of one percent APR or APY (the switch from quoting interest rates paid as APY, instead of APR is a scam onto itself, but we’re digressing). On the other hand, banks are charging 15% or 20% interest on credit card balances, and in some cases, as much as 35% or 40% APR for their less credit worthy customers. Did you know that federal law places no limit on the interest rate a bank can charge ? And while some states do so, there are states which do not cap interest rates. That’s why it’s likely that when you mail your monthly credit card payment, the address on the envelope is usually in South Dakota or Delaware, where, as far as credit card interest rates are concerned, the sky’s the limit.

Take a look at the off-the-wall late fees and other penalty charges that banks are getting away with, since a 1996 Supreme Court ruling removed limits on such fees. Today, typical credit card late fees are as high as $40, and continuing to go up. In fact, if there’s one thing that amazes us, it’s the way that banks continually come up with new ways of putting the squeeze on credit card holders. That’s why you continually get notices from card issuers, announcing changes in your account terms. It’s surprising to us that none of those notices have yet advised us that a late payment will result in a guy named Guido paying us a visit around midnight, to negotiate a repayment schedule using his Louisville Slugger.

We think most American’s have lost any trust they might have had in that cesspool called Wall Street, where, it seems to us, the average investor doesn’t stand a chance. Maybe Eliot Spitzer was on the right track after all, with his aggressive investigations. The well publicized scandals, insider trading and other illegal activities involving Wall Street firms and the companies that trade their stock there have eroded investor confidence. And while we don’t think it’s fair to single out any one individual, just take a look at the Dick Grasso case. How do you think the average American who is struggling to pay their mortgage or feed their family, feels about a situation like that one ? And yet, despite the current financial crisis in the United States, don’t expect CEO compensation to decrease much, even at companies that have to be bailed out with federal money.

So while the billions of dollars that Washington is throwing at the financial crisis will probably stabilize things in the short term, don’t start singing “Happy Days Are Here Again” just yet. They are not.

If you want to hear what it will sound like if happy days ever do get here again, check this out.

– Routing By Rumor

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Filed under Business, China, Consumerism, Employment, Energy, Energy costs, Food, Jobs, Labor, Money, News, Politics, Retail, Retailers, Routing by Rumor, Scams, Shopping, Stock Markets, The Economy, Walmart, Your Money

Hey Buddy, Can You Spare $85 Billion ?

1975 NY Daily News Headline

1975 NY Daily News Headline

Headlines, then and now…

1975: Gerald Ford To New York City: Drop Dead.

2008: George Bush To AIG: Are You Sure $85 Billion Is Enough?

Of course, headlines rarely tell the whole story. But my, my, how times have changed. As the above Daily News front page shows, a drop of 12 points in the Dow was big news in 1975. This past Monday, it took a one-day drop in the Dow of 500 points to make Wall Street nervous (which was followed by another drop today, only two days later, of another 450 points). Another day or two of this, and we should be South of 10,000 on the Dow. Throw in a couple more banks or financial giants going belly-up, and you’ll see them skydiving without parachutes on Wall Street.

Oh, and Washington didn’t let New York City drop dead back in 1975, after all. The Federal government agreed to a bailout in the form of $2.3 billion in short-term loans, thereby allowing the City to avoid bankruptcy (read about it at americanheritage.com). These days, $2.3 billion is chump change.

Just how much is $85 billion ? Well, if you were given that much money, in say, ten dollar bills, and were told to count it, how long might that take ? Let’s assume you spent 24 hours a day, 7 days a week, 365 days a year, with no breaks. Even if you could count 200 ten-dollar bills ($2,000) every minute, and started counting as soon as you were born, you’d probably never finish before you died. It would take more than 80 years. If it was in one-dollar bills, then it would take you more than 10 lifetimes, and your pile of cash would probably weigh in the neighborhood of 200 million pounds or 91 million kilograms (a rough estimate, since we’ve never actually weighed a stack of money).

$10 x 200 per minute x 60 minutes x 24 hours x 365 days x 80 years = $84 billion ! (You’d still have a billion dollars left to count, and since you’re now 80 years old, there’s a good chance you’d forget how much money you counted, and you’d have to start all over again.) Sort of reminds us of Sisyphus.

We know what you’re probably thinking. You’re probably thinking that we have way too much time on our hands, if we’re calculating how much $85 billion would weigh. Well, it’s a good bet that you haven’t met this fellow yet. Not only did he do the math, he manufactured the bills, took pictures of everything, and created a website about it. Is there anything you CAN’T find on the Internet ? Probably not.

Put another way, $85 billion would easily pay for another fun-filled year of war in Iraq, with billions and billions of dollars left over to spend in Afghanistan, Pakistan, Iran, and anywhere else we wish to venture.

The $85 billion federal bailout announced yesterday of American International Group (AIG), the 18th largest company in the world, gives a whole new meaning to the term “economic stimulus“. Propping up AIG seems like a good idea. But then, so would distributing buckets to the passengers on the Titanic, and telling them to start bailing. Unfortunately, neither plan addresses the root of the problem.

Who insures the insurers? You do. The recent bail-outs of Fannie and Freddie, and now AIG, indicates that many people are getting very nervous about the economy. How nervous? Economic collapse nervous. Black Monday, 1929 nervous. Losing your home nervous. Civil unrest nervous.

Better start polishing those apples.

We love some of the nautical references you often see in annual reports and prospectuses, used as euphemisms for real bad financial news . Phrases like “staying the course”, “rough sailing”, “turbulent waters”, “sailing into a headwind”, etc. In our mind, the U.S. economy resembles a ship that is being tossed about by increasingly turbulent seas. As the waves get higher and higher, our ship runs the risk of encountering one that will push it past the tipping point. We think an $85 billion Federal bailout of AIG says that we’re not the only ones worried about the ship going down.

Hey, General Motors… Are you paying attention?

GM has gotten a lot more press than AIG, regarding their hemorrhaging of red ink. In our opinion, all they need to do is a bit more hand wringing, and then show up on Uncle Sam’s doorstep, hat in hand, and ask for a few bucks (see “Detroit wants its bailout too” on cnn.com). How much do you need, Rick ? $100 billion ? $200 billion ? more ? As we’ve written, the death of GM might not be a bad thing, but GM’s demise might scare too many people, so OK, Mr. Wagoner, here’s your money. Next in line ?

And it appears that in the past few days, that line has gotten a lot longer. Another down-on-their-luck financial giant, Lehman Brothers, apparently didn’t get that whole hat-in-hand routine right. Merrill Lynch has sold it’s soul to Bank of America. Do you see a trend developing here ?

It’s a good thing Uncle Sam owns those Intaglio presses, over at The Bureau of Engraving and Printing. Who says the Treasury Department doesn’t have a sense of humor ? The BEP website is at “moneyfactory.gov”. But the people at AIG probably think they should call it rescueme.gov. To paraphrase Popeye’s J. Wellington Wimpy, “I will gladly pay you Tuesday, for a bailout Today”.

With Walmart’s interest in expanding into banking and financial services, and given Walmart’s runaway profits, we’re kind of surprised there wasn’t a Walmart-AIG merger. It makes a lot of sense to us. They could sell AIG insurance policies at an AIG kiosk in every Walmart store, right next to the toilet paper and Pampers.

The AIG bailout sort of makes the economic stimulus checks the rest of us got from our rich Uncle seem stingy by comparison. It also begs the question… Who’s next ?

All this economic turmoil does have one benefit. Nobody even mentions Iraq anymore !

– Routing By Rumor

P.S. – We found this blogger, who is just as scared about all this as we are. She even chose almost the same title for her post.

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The Dirty Little Secret That Warehouse Clubs Would Rather You Not Know

We’ve had memberships to several membership-based warehouse clubs over the years. You can save money on many items, but there are often better deals on many items at your local supermarket, Walmart or Target. When you factor in the annual membership fees, which generally range from $50.00 to $100.00 or more, we’re not so sure that you actually save enough to make it worthwhile. That is, unless you own a restaurant, feed a small city, or really need to buy 50 pounds of rice, sugar or detergent at a time. They don’t bag your groceries for you. In fact, they don’t even have any bags (unless you want to buy 500 bags from them at a time).

Interestingly, at a time when other retailers are hurting because of an economy that is in deep recession, the warehouse clubs are enjoying healthy increases in membership and sales volume. Consumers desperate to stretch their dollars are flocking to these retailers in an effort to save some money. Check out this piece from CNBC that says Costco recently reported a 32% increase in quarterly profits, or this Forbes.com article that says BJ’s Wholesale Club saw a larger than 25% increase in profits in the first quarter of this year.

Many warehouse clubs open later and close earlier than supermarkets or other discount chains. In an effort to sell you their more expensive memberships, most of them offer expanded hours to only their premium membership holders, sort of like a caste system. By the time the doors swing open for the hordes of regular members, you just know that all the good stuff will have been snapped up by the privileged few who can afford the $100.00 premium memberships. All that will be left for everyone else will be the dregs. You might as well just drive ’round back and do some dumpster diving.

We’re also surprised they don’t have a little window by the entrance where you have to whisper the secret password before they’ll let you in. And some warehouse clubs limit your payment options. For instance, Costco won’t accept any credit cards except American Express. That’s unfortunate, since we’ve always felt that American Express offers the least consumer-friendly credit cards out there. And AmEx has probably deforested more of the planet than any other credit card provider, so that they can produce all the paper they stuff your mailbox with, trying to convince you to become a cardholder. We can’t believe the volume of crap we get from them. Maybe we should get a wood-burning stove. We could probably heat our home using nothing more than the American Express offers that our poor mail carrier has to keep delivering almost daily.

Then there’s the silly and demeaning entry and exit procedures at many warehouse clubs. You have to show your membership card (at least at Costco) to gain entry. After all, they can never be too careful about who they let in. I mean, God forbid a non-member might sneak in and try to buy something there. Then these places practically strip search you before you can leave with the shopping cart full of stuff you just paid for. If you think we’re overreacting to these policies, which seem to assume that everyone is a criminal, then you probably haven’t read this fellow’s rant on the subject. His discussion is much more eloquent than what the monkeys here at RoutingByRumor produce when they jump up and down on the keyboard to create each of these articles.

Here’s an account from a blogger who got the treatment at a North Carolina Walmart store, where he says he was briefly detained, then threatened by overly aggressive employees for declining to show his receipt.

Maybe we should put the warehouse clubs in charge of the U.S. borders and security at our airports. As an added bonus, they could sell club memberships to all the Mexicans that want to enter the United States, and the proceeds could go to the U.S. Treasury. Before they return to Mexico, they can stock up at Costco, Sam’s Club or BJ’s, thereby decreasing the U.S. trade deficit. Everyone benefits, and the illegal immigrants won’t have to risk their lives crossing deserts or rivers to get into the United States.

So what’s their dirty little little secret? In many states, certain departments in members-only warehouse clubs are required to sell to the general public without requiring membership. It seems to vary by state, but in general, product categories regulated by the state, such as pharmacy, alcohol and gasoline sales, are usually open to the public. Here’s an article at answers.com that lists which states require warehouse clubs to sell alcholic beverages to the public. This article from prnewswire mentions the fact that Sam’s Club pharmacies are open to the public. But don’t expect the warehouse clubs to advertise this fact. They would probably rather sell you a membership. Don’t even expect a straight answer if you walk thru the front door and ask the gatekeeper at a place like Costco. We did, and our opinion is that they like to play dumb. If you press them, they will acknowledge the fact that certain items must be sold to the public. This posting confirms our experience, and even mentions something called a “temporary alcohol shopping pass” available at Costco. Is this country great, or what ?

With all the big chains offering cheap generic prescriptions these days on a wide variety of medications, is it worth trying to get past the pit bull chained to the entrance at your local Costco, just so you can get some cheap medicine at their pharmacy? This New York Times article certainly seems to think so.

Another option is to ask for a “one-day pass”, which most warehouse clubs will provide. You may have to pay a 10% or so surcharge on any purchases you make, but if you don’t plan on being a regular shopper there, it’s probably a lot cheaper than buying a membership. Some clubs will even refund the surcharge or apply it towards their membership fee if you join within a few days. What wonderful people.

Even in places where the law does not require sales to the general public, there are loopholes that people use to save some money. Some people share their membership cards with friends and neighbors. This article explains how non-members can buy gasoline at Costco gas stations that are supposedly members-only.

As much as we hate Walmart, we think you can do better on most items at Walmart than at the warehouse clubs. We’ve never checked out prices at Walmart’s Sam’s Club stores, but somehow, we doubt that there will be much of a differential in prices between the two.

When you figure in the cost of membership, the extra gasoline you’ll probably burn to get there, the generally limited product selection, the inconvenience, the lack of shopping bags, limited payment options, the crowds, the long checkout lines, the often shorter hours and the obligatory strip searches at the exit, are the warehouse clubs really worth it?

– Routing By Rumor

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We’ve Been Stumbled Upon By Stumbleupon.com

Like many bloggers, we like to look at the visitor statistics for our blog. In our case, that’s a combination of the stats which WordPress.com provides, and the wonderful free statistics we get from Statcounter.com.

Since we started RoutingByRumor late last year, we’ve become accustomed to the ebb and flow of traffic to our blog. Weekly traffic patterns are very predictable. Generally speaking, Saturday is the slowest day of the week, followed by Sunday, which is generally only marginally busier. Midweek tends to see the most traffic, and we’ve seen a pronounced drop in traffic during the summer months, particularly in August. It’s so predictable, that we can usually forecast to within a percent or two, what the traffic on any particular day will be. It sort of reminds us of how precisely electric utilities can predict electricity demand, based on day of the week, time of year, outside temperature, wind speed, cloud cover, etc.

We’ve read much into these patterns. We believe that most web surfing, or at least most blog reading, is probably done while at work. Sometimes you can prove this based on the DNS information associated with visitors IP addresses, such as RealBigCorporation.com (a hypothetical example). We see very predictable traffic patterns to each posting on our blog. Certain articles are perennial favorites, while other posts hardly ever muster any readers (a terrible shame, since we can attest to the fact that every single one of our posts are of excellent quality and worthy of your consideration). We never know ahead of time which of our articles will attract lots of traffic, and which ones will live their life in solitary confinement. Perhaps THIS article about Stumbleupon will be a big hit. Then again, maybe not. It’s difficult to predict. Sometimes, events in the news cause a particular article on our blog to explode in popularity for a few days.

If we’ve learned one thing, it’s that the popularity can be very fleeting. Another is that anything you post related to a scandal, public figures in the news, or some dirt being dished about someone, seems to attract many more visitors than any article you can post with any redeeming value. Sadly, the latest piece of trash about Brittany Spears will attract much more traffic than an announcement that you’ve found a cure for cancer, a solution to global warming and the key to world peace. It doesn’t say much about how discerning the average web surfer is, and it’s also probably why supermarket tabloids sell so well. Up until this past weekend, when Stumbleupon opened the floodgates of hell, the most traffic we ever saw at RoutingByRumor was in the days following our posting of this article. What a sad commentary on the human race.

While visitor statistics usually don’t tell us which search engine a visitor used to find us, it’s probably a good bet that it’s usually Google, the 10,000 pound gorilla of search engines. Thanks, Sergey! WordPress alerts Google and other search engines when new content os posted to a blog. It’s kind of scary how fast Google usually indexes our latest posting. Things usually appear to a limited extent in Google results immediately, with a fuller indexing within 24 to 48 hours.

Unless something pops up in the news that is in some way related to one of our articles, there aren’t many surprises. We see some unexplained transient spikes in traffic to certain articles, but that’s generally all. So, we had to do a double take this past weekend, when traffic to a single article on our blog shot up around 10,000 % or about 100 times more than what we normally see. Our first impression was that it was some sort of problem with the stats. It wasn’t. Good thing that WordPress doesn’t charge us for bandwidth usage !!!

What happened ? We had been “stumbled upon” by stumbleupon.com, which we had never heard of. More specifically, a stumbleupon.com member named Bizspotter stumbled this post of ours.

Apparently, Stumbleupon is part search engine, part social networking site, and part viral marketing tool. Wikipedia describes Stumbleupon this way… “StumbleUpon chooses which Web page to display based on the user’s ratings of previous pages, ratings by his/her friends, and by the ratings of users with similar interests“. Sounds like an interesting concept. Similar to how a site like Amazon suggests to you that people who bought this item also bought these other items, or iTunes telling you that people who bought this album also liked these other albums.

The fact of the matter is that it looks to us like Stumbleupon is the crack cocaine of traffic generators. Why do we say this ? Because despite the incredible amount of traffic it sent to our blog in a matter of hours (it was pretty much all over by the next day), it appears that none of those visitors were the least bit interested in reading the article they landed on, or anything else we’ve blogged about. We saw absolutely no increase in click-thrus. That is, once they landed at our site, unlike many visitors who find us via a search engine, these Stumbleupon visitors didn’t stick around, and they didn’t click on any links in the article. Unlike many of the “normal” visitors to RoutingByRumor, they also didn’t read any of our other articles.

So, it appears to us that Stumbleupon serves up relevant traffic much the way that McDonald’s or Burger King serve up health food. A search engine like Google is very good at finding content on the Web that is of interest to someone doing a search. It appears that Stumbleupon does a very poor job of finding content that will interest a particular web surfer. Of course, the Stumbleupon paradigm is new to us. Perhaps there are others with more experience with products like Stumbleupon, who have a different opinion as to it’s value. Based on what we’ve seen, if we were paying for traffic to be referred to our blog, we wouldn’t pay a cent for the “junk” traffic Stumbleupon is sending our way. The sheer number of hits that stumbling a URL can generate are very impressive, but a closer look at the quality of that traffic is utterly disappointing indeed.

It makes you wonder why eBay thought that Stumbleupon was worth the $75 million they paid for it. Probably because anything on the Web these days with a social networking slant (facebook, myspace, youtube, linkedin, etc., etc., ad nauseum) is hot.  But then, eBay thought Skype was worth shelling out at least $2.6 billion for (mere pocket change). Hey, people once ridiculed William Henry Seward for spending two cents per acre for a piece of land called Alaska ! We guess that when you have as much money as eBay, dropping a billion here and a billion there isn’t a big deal.  Besides, have you noticed that most big business deals aren’t measured in terms of millions of dollars anymore, but rather in the billions of dollars.  I don’t think it’s inflation so much as it is proof that wealth is being concentrated more and more in a smaller and smaller percentage of society, certainly in the United States, and no doubt elsewhere.  It’s also a result of the shift in our economy, away from dominance by companies like IBM, AT&T and General Motors, to the new billionaires… The Microsofts, Googles, eBays and WordPresses of the world.  (Oops… how did WordPress slip in there ?)  If it doesn’t end in “.com”, it doesn’t really matter anymore.  But I digress.

Of course, we’re probably just a wee bit out of touch with the masses when it comes to appreciating some of the finer websites the Web has to offer. For instance, we can’t quite understand why anyone with even the slightest semblance of a life would find myspace.com the least bit interesting, but at least a few myspace users would probably disagree with us. Myspace claims to have blown by the 100 million user mark more than two years ago, and we’ve seen reports that more than 250,000 new myspace accounts are created daily. Gee whiz… it’s almost as popular as RoutingByRumor !

On the one hand, we were underwhelmed by Stumbleupon. On the other hand, we know when we’re outnumbered (IYCBEJE**). So, if you liked this article, Stumble It!

– Routing By Rumor

(** IYCBEJE – If You Can’t Beat ‘Em, Join ‘Em)

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