Didn't we note the the trade deficit was down .2 billion yesterday? I would assume now that the trade deficit is starting to go down and starting its waterfall decline, Mr Paulson feels that the dollar can get a little stronger.

might be the time to long gold. at least till the end of the day.

I agree that some degree of transperancy should exist for the FOMC, and i wonder how deep their influence of buys/sells runs in commodity and perhaps other markets.

I think the the FED/US gov will go to extensive measures to keep gold prices in check both because they want to strengthen the dollar, and also because high gold values are a negative indicator for the economy and would inspire media stories recalling the early 80's. Regardless of political party, the real issue that gets incumbants the boot is the health of the economy and no one wants to have it go down on their watch.

this is probably old news to a lot of you but here's the link anyway.

http://www.nypost.com/business/come_clean__ben__business_john_crudele.htm

i'm not morally offended (i am a man of principle. very few principles however. very few.) i'd just like them to be transparent enough so that i could make a buck off them like they've been making a buck off of me for all these years.

on another note, transports are real close to taking out that cycle low. the bulls better wake up and defend their weakening position. i really can't remember when i saw a broad multi-month W pattern in the indices fail. a third trip down to the 10,700 area may come quick and support may not hold.

ALOHA !!

Right on the money Bill ... This is typical Fed/US Treasury Speak! A total con job. Yet if you look at a five year gold chart you'll see they are gradually losing control on the POG. Obviously if they had any real control the POG would still be in the low $300s ...

We The People need a complete "honest" and thorough independent third party audit of "our" total US Gold Reserves. And ..NO ... "deep storage" is not an acceptable line item! I believe the last audit of Ft. Knox was in the 1950's ... If Ft. Knox is empty as I would suspect then its time for some BIG BANKS like Goldman Sachs to do some LONG TERM jail time! Since when did it become US government policy to allow a private entity like the Federal Reserve to sell off the "People's Gold" for the purpose of propping up US paper IOUs. The selling off of our gold is indeed a matter of National Security in a time of rampant worldwide irredeemable currencies! Think about it ... the Federal Reserve is selling off our gold, but who is buying it? That is the National Security issue that in my mind needs to be addressed ... NOW!

kaimu:

I was starting to nod as the afternoon side tracked but when you post I come to attention in more ways then one. You stay tooo long out in your tropical paradise, visit here more often.

you've got to get up pretty early to daytrade in hawaii.

kaimu - how much is central bank selling, vs. central bank lending to parties that sell?

alan - IMO, in the long run, the $usd will trade on the current account deficit, of which the trade deficit is a component of. So, the trade deficit can improve as the current account does not and the $usd falls.

The charts have shown weakness in volume and pattern so this is an opportune time for anyone wanting to drive price down to do their thing. Whether it was overbought, this is CBers, or just other short sellers, the complexion of the charts can be changed here on a LT basis. That, to me, is the danger with any extension of this move deeper.

With the negative move in the markets after the pause and the testing move down to 11040 Dow Friday, SP500 1265 area, a lot of "decisions" are being set up for next week.

The trend in the economic data is still stagflationary. The trade figure headlines (Bloomberg) were misleading. Exports would have to accelerate dramatically to provide relief, not at the paltry pace evidenced so far.

False relief as we ex out energy from producer prices paid IMHO in order to get a good headline. That was rapid acceleration. Anyone see $60bbl oil on their monitors? No? Then the figure stays high. The Powers that Be can attack all the commodities EXCEPT oil. That one has too many non-friendly interests behind it. Hence my hypothesis that the markets can't get in gear here and that eventually they test and fail at Dow 10700/SP500 1230.

Next week I won't be around as much so I wish everyone good luck and good trading as always.

g034, I was trying to be facetious in my earlier comment. With a trade deficit approaching 8% of GDP, a current account deficit higher, and with an external debt approaching 50% of GDP and growing 20% per year, the .2 billion "drop" in the trade deficit is a "drop in the bucket". To sustain this nightmare in its present form 3 things need to happen. The foreign countries with the huge trade surpluses must want to continue to increase their exports, thus supporting the dollar. The US has to allow these foreign countries that have been not purchasing our value added products, but rather stealing our technology, to purchase our companies and infrastructure (Warren Buffet's "a nation of sharecroppers"). And finally, the US must be prepared to support this debt by managing the housing and stock markets to the sky via lower nominal and maybe negative real interest rates. If the US housing market crashes via normal market forces, the world will go into recession, the US savings rate goes up with the trade deficit going down (no housing ATM card), a transfer of private and public debt to government debt via foreclosures, and a different view of this "global economy". A crash in oil prices and peace in the middle east would certainly slow down this process. Ross Perot's "giant sucking sound" is now here, and Clyde Prestowitz's predictions in his book TRADING PLACES published 18 years ago are coming to pass.

alan, here's an excerpt from Alan Abelson in this week's Barron's:

"The powerful impact the great boom in housing has had on the economy -- and a measure of how much growth overall will suffer from the end of that boom -- is furnished by our friends at the Liscio Report. Each dollar spent on residential construction, they observe, generates $1.27 in additional economic activity. That's topped only by manufacturing ($1.37) and handily bests the contribution of health care (54 cents to 81 cents, depending on which part of that amorphous field you're talking about), retail (57 cents) and finance (53 cents)."

I appreciate that there's a lot of worry that the woes of the housing market will have an effect on the rest of the U.S. and world economies. But there simply isn't demand for housing at current prices. Deflation in this particular asset class seems to me the sanest and most natural solution to the problem, and one that would result in a healthier economy. The question is just how orderly that process will be.

Like MarkM I'm trying to get out of here for a while next week but hope to have access from the road.

A hard landing for R/E could suggest a hard landing for the economy which could suggest a hard landing for energy (the most popular sector) wouldn't it? Gold could benefit from a flight to safety (as would (are) defensive stock sectors) but other commodities seem at risk in the down cycle.

Oil has been cut in half on a regular basis historically off cycle peaks (which usually coincide with an econ slow down or decline) so it seems the stock sector popularity makes the group more vulnerable than most to this observer. By the way, someone questioned me on whether energy sector's poor performance (following fed pause) wasn't based on it's bear cycle since the early 80's. In fact in the secular stock bear 1966-1982 there were 4 fed cycles- energy underperformed the SPX ALL 4 TIMES after the 'pause'. Don't worry though I here more reassurance from managers and traders on this sector than any other. Buyer beware.

In my long term charts it also strikes me that the RUT is particularly vulnerable. Last cycle peak ratio with SPX occured in 1994 (another fed year) at about .57; cycle trough 1999 (another fed year) at about .32; peak 2006? (fed yr) at .59?

Electronics, Retailers and consumer related stocks are pretty unpopular- Rydex data and extreme RSI's tell the story. Bonds, Financials, Utes and Energy pretty popular areas these days...

The RUT:SPX ratio on monthly data has decisively broken the uptrend that has been in place since 1999. Buyer beware.

The MID:SPX ratio has also broken long term trend.

JMHO. Good luck to everyone next week.

If every downtick in gold is viewed as a manipulation, I'd think you'd welcome it, as a gift and a buying op. Options, futures, back up the truck time, since it's obviously on sale.

How can you get mad a a store for running a 10% off sale? You don't call for an investigation at Macy's or Sears do you. You buy, if you need the goods.

the more information, the better.

the greater the transparency, the better.

for an example,take the committment of traders data. there are plenty of times in dull markets when it tells us nothing but at market extremes, it becomes fairly useful data. in a hard sell-off, it can indicate to us which S&P price points the big firms are willing to step in and defend. access to the information is an example of useful transparency.

if the fed is involved with major broker dealers, the relationship should be more visible. for various reasons, the entire world is moving away from the stilted,claustrophobic vision of a universe where some people because of their birthright and pedigree have a right to know - and hence profit - and others are not.

this is not like knowing that hedge fund X is way too short a thinly traded security and trying to force a short squeeze. what happens there is fair game. it may be painful but that's part of the game.

this is the ultimate inside money. this is about the ultimate profit center. and if the fed is part of it, it is not fair game.

if it was a game of pick-up out on the street, we'd be screaming foul.

my apologies for the rant but a small step would be every two weeks to give us a backward look at any positions assumed by the fed trading desks at different market junctures. who knows? maybe it's already out there and i just don't know how to google it.

And, Bill, feudalism ended too and hopefully is not coming back. And, number2son, I completely agree that a major housing market correction would be "the sanest and most natural solution to the problem". Unfortunately, this matter is not about sanity, but rather greed, dishonesty, and vested interests. The global bankers would not make as much money in a recession. In fact, some of them would lose money. They would prefer to continue to create debt for a fee in the US and sell that debt for a fee to foreign interests. A housing collapse would increase the savings rate in the US and the resulting worldwide recession would slow the "global economy" and reduce the rate of debt creation worldwide, resulting in less money collected by the global bankers. And don't blame the US as a nation of nonsavers. It was the global bankers that put the little people in houses they can't afford for a fee and then told them it was ok to take out home equity loans for a fee to make up for their stagnant wages. It was the credit card companies that begged the little people to take on more credit for a fee by raising their maximum debt level limits. Of course, the credit card companies also raised the interest rates to adjust for the increased default risk. And that well known bond specialist on the financial talking head show who screamed when people were talking about the rising trade deficit, "Don't sell America short!", wasn't he selling America short by originating debt in the US for a fee and selling it to foreign interests for a fee? Managing the stock market higher while the CEO's sell their illegally obtained stock options helps Wall Street make money and falsely creates a picture of an economy that is doing well. A signifant housing correction would be a natural part of the economic cycle and would allow the US to continue it role as the most powerful military and financial power in the world by allowing its economy to be BALANCED again. This idea of an asset inflation based economy is just smoke and mirrors. All this, of course, is in the context of IMHO.

Great discussion, gentlemen!

Just wanted to let you all know that, even though we don't frequently comment, there are many of us who thoroughly enjoy the dialog.

I appreciate your response Bill.

I was trying to make a point. While your analysis may well be correct, as to the direction and ultimate price of gold, I find it a bit disconcerting when contrary moves are blamed on evildoers.

It reminds me in some ways of the Naked Short crowd, who blame thier lousy stock performance on same. Interesting that nearly 100% of that bunch are way down on thier own demerits, despite the wailing.

I'd feel better if some pops in gold were described as panic buying or knee jerk reactions to news, and not always as proof of concept. My point is , you don't want make a religion out of a trading position, can be very dangerous. Then again, I do understand you don't want people shaken out on fake moves against the trend.

Speaking of the PPT and such, I'm not so sure they don't provide a service. Better a govt bid, then to let the hedgies run all the stops, and dislocate the market, so they can come in and cover at fire sale prices. Panic is quite ugly and benefits mostly a few well heeled players.

I'm not so sure total transparancy is possible here , as it would not be from an agency such as the CIA or FBI. Transparancy = Ineffectiveness in many cases.

Opaqueness to borrow from Mr. Douglas, is good.

.....total transparency may not be possible here?.....

procol, i see what you're saying. i honestly do but then, how do i get myself a job on that team? and also, jobs for my friends and family?

if you're a branch of government and you take up what are essentially trading positions and those trading positions are bolstered by inside information, you need to give us a look. once every two weeks. i'm not offended that it happens but what's wrong with divulging bi-weekly information that might give me a little bit of an edge once in awhile? i'll do the work. i'll crunch the data. what's wrong with some transparency?

it's not asking for the farm; it's asking for an end to the hypocrisy of the situation.

lol, well, let's put it this way. Much of the power they MIGHT wield is held in the fact that no one is quite sure if they are really there or not.

Releasing the 'minutes' of thier actions would spoil the illusion, don't you think?

ALOHA !!

The Federal Reserve ... It was once known as "ANTI-TRUST" !!! Anyone recall what happened to the "Seven Sisters" oil cartel? Now we have a huge banking cartel that essentially not only manipulates markets and money but governments. Why is it a cartel of private banks that controls the US monetary system is legal? Its no more legal than the oil cartel of the early 1900's run by the Rockefellers. Market manipulations now are a daily occurance. Manipulation comes in many forms ... PPT, media, Wall Street banks, government officials and data.

Some here consider this illegal and fraudulent Federal Reserve monetary system and market manipulations accpetable if it were only "more transparent". This is truly a sad commentary to the ethics this country lacks now. You may as well ask the Mafia to be more transparent ... What's the difference? To tolerate current market manipulations is to condone it and that opens up your financial future to confiscation.

Goldman Sachs ... a card-carrying member of the Federal Reserve. Ex-CEOs US Treasury Secretarys for the past five administrations. Profit last quarter ... 85%. Where's the SEC?

Commodity Take Down - Part 2?

Is this a repeat of May's takedown?
Fed wants these prices under control by the September meeting - he has no other option...

Oil will be the key to watch here IMHO....