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How much longer for dollar strength?

Despite the plethora of data that has come out recently, one thing that has occasioned very little comment is the outlook for US exports. Exports are generally not a big factor in the subset of companies involved in the ISM survey, but the plunge in export orders to 34.5 suggests that US exports, hitherto a support in an otherwise collapsing economy, could be in big trouble as well.

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Deflation in action

Here’s a good little measure to see how far we’ve fallen: Just more than 1 year ago Royal Bank of Scotland (RBS) paid $100bn for ABN Amro (80% cash). For this amount, RBS could buy:

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U.S. loses 533,000 jobs, unemployment rate up to 6.7%

U.S. loses 533,000 jobs, unemployment rate up to 6.7%

The Bureau of Labor Statistics just released this month’s unemployment report and the data were grim.  The unemployment rate rose to 6.7%, while the economy shed 533,000 jobs – the largest decline since 1974.  The result was widely expected to be bad, but yesterday we heard even more announcements of job cuts, ensuring that the unemployment rate will continue to […]

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Capital One buys Chevy Chase Bank: Another bailout freebie

I wrote a few weeks back about how your bailout money was being used for mergers and acquisitions to line bankers’ pockets instead of for making loans to desperate homeowners. After receiving $25 billion in bailout funds, Citigroup attempted to buy Chevy Chase Bank despite the fact it was near collapse. Luckily this deal was scuppered as Capital One has now acquired Chevy Chase, just as the Wachovia deal was canceled when Wells Fargo stepped in.

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Links: 2008-12-05

Snowbound Marshall is doing an admirable job running things while I sun myself in the Bahamas (rubbing it in, eh?). You may remember Marshall from his days as a writer for Prudent Bear. Please do comment on his posts as he will respond in kind.

Below is a list of a few links to newsworthy items from our newsfeed. As always, other items can be found at the newsfeed itself.

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Treasury Considers Plan to Halt Home Price Slide

Marshall here. Slowly but surely, the Treasury is beginning to move more aggressively on providing help to homeowners, as opposed to bankers. This makes sense: A financial meltdown and housing deflation cannot be cured simply by pumping money into the banking system. You also have to consider a program which provides mortgage relief to homeowners as well.

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Bernanke urges more to be done on housing crisis

Quite a punchy speech from the Fed Chairman, especially the conclusion, which suggests big support ahead for housing:

In this regard, reducing the number of preventable foreclosures would not only help families stay in their homes, it would confer much wider benefits. Significant efforts have been taken in this direction, but more can be done.

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More on California Housing data

Marshall here, as Ed is busy sunning himself in the Bahamas, whilst I am stuck in snowy Denver! It sounds as if JMP Securities has also read the California report that I discussed recently. This is the first outside source that I have seen respond to that report.

It is so ironic. I think that the blue collar areas that were the most in danger financially have been corrected, perhaps even over corrected and yet the markets are focused on other things even though, housing was always what America’s monetary and fiscal authorities were looking to cure for the financial system to stabilize.

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Jobless claims data tell a mixed story

Jobless claims data tell a mixed story

U.S. Jobless claims are out again and the data are mixed. The past week saw a drop in seasonally-adjusted claims from 530,000 to 509,000. Meanwhile, continuing claims rose on a seasonally-adjusted basis from 3,962,000 to 4,087,000. While the data are mixed, we should still expect a large job loss when the unemployment number is released at 8:30AM ET tomorrow. Many are expecting upwards of 300,00 job losses and an unemployment rate of 6.8% or higher.

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Links: 2008-12-04

I wanted to leave you all with a few links to interesting articles while I am away on holiday.

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Treasury to Consider Further Measures to Halt Housing Slide

The Treasury Department is considering a plan to halt the slide in home prices that would lower mortgage rates using Fannie Mae and Freddie Mac. The plan could reduce rates for newly issued loans to as low as 4.5%. Slowly, but surely, the government is moving in the right direction. It is beginning to dawn on Treasury (albeit, belatedly) that a prerequisite for economic recovery is not just the stabilisation of the banking system, but some sort of program which provides mortgage relief for home owners. This plan is a small start.

I have a problem with this though. It is “trickle down”.

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Chart of the day: Excess Reserves

Chart of the day: Excess Reserves

One feature that is peculiar to the present downturn is the accumulation of reserves at the U.S. Federal Reserve. I imagine it is no different at other central banks, though I have not seen the data. Let me tell you what this reserve accumulation means and show you a chart of excess reserves compiled by the St. Louis Fed.

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