Housing starts lower than expected:

http://tinyurl.com/fgutt

Now, do the builders rally on the expectation that this will help reduce inventories? Or sell-off as it provides yet more proof that the soft landing is nothing more than a rosy bromide?

Or do they do nothing much and wait for the FOMC - which was gifted with another suspiciously tame PPI number?

http://tinyurl.com/jwlfw

Dollar looking a little pekid. Gold flat. Silver edging up.

And the mining stocks look weak in pre-market. Bears watching.

From today's WSJ...

"According to prime brokers who deal with hedge funds, funds-of-funds executives and others active in the commodities market, winners during the recent downdraft in natural-gas prices also included Tudor Investment Corp. and four Wall Street firms: Goldman Sachs Group Inc., Morgan Stanley, Merrill Lynch & Co. and J.P. Morgan Chase & Co.'s J.P. Morgan Securities. Traders at the Wall Street firms stressed that they weren't actively trading against Amaranth."

Of course they were trading against Amaranth!!! I hope nobody here believes on very thick Chinese walls.

This case is a beautiful example of ruthless capitalism where giants were fighting giants. It also proves the case that markets are not efficient -- at least on its strongest form.

My concern here is with a situation where everybody has the same position -- e.g. 1998 all over again.

There is systemic risk in the market and I just pray that I am on the right side of the trade when it implodes -- because this is not a question of if, but when we will have another 1998 again.

I would love to hear other thoughts even if someone thinks that I am losing it...

Sorry fo the typo, I meant to say that markets are "NOT EFFICIENT"

Back to Amaranth -- Everybody knows that they still hold a very large position in NatGas -- And they are forced to sell it.

I am very sure that others are in the same boat -- they bought because it seemed cheap...

JP,

I agree that there is systemic risk in the market, and that the level is rising. As I opined last night, I have a bad feeling that "something wicked this way comes." We can debate what may collapse or implode, but in the end, it usually catches Main Street by surprise (of course, in retrospect, the clues are always there).

We should be dispatching the budget deficit, the trade deficit, the deficits in our educational system, the collective waste in our society, and a hundred other things. Instead, money is flowing to a select few. How much trust can you have in that situation?

Could it just be a reverse of what we saw in the last couple of years?

Hedge funds were chasing commodities up - now they chase them down - some with black boxes - others because they have to close losing positions?

The risk is that the downside gets out of hand - but this would be "our" opportunity.

tradesman

ALOHA !!

What is the one investment the US government and Wall Street will not allow for retirement accounts/401k/SEP-IRA?

I quit contributing to my retirement back in 2001 because of it. Instead my retirement funds went to paying off debt and buying the "outlaw".

kaimu - I believe it is real estate

Re: "U.S. housing numbers point to problems, Tues., Sept. 19, 2006, 9:33 AM"

Slowing housing = trickle down effect slowing other industries = lower US Government tax income = lower dollar = higher gold prices.

If the trickle down effect is pervasive to whole economy = higher bond prices (lower yields). Bond market seems to be pointing towards this.

Stock market? Let's see, lower yields = higher stock market. Or is it; slowing economy = lower earnings = lower stock market. No idea, so I'll follow the tape (like every other market).

1970's had slowing economy with gold prices moving higher, not lower and stock / bond prices moving lower.

signed,

the simpleton

One other thought...

One well known technical analyst in Canada was commenting on how rare it is that the TSX index peaks before the US Index - after a move.

I like to keep my eye out for when something that rarely happens - happens.

One interpreation of this could be that commodities really are toast - with the TSX leading the way down. I favour this.

This 2-day short covering bounce in the TSX has been weak and there has just been a noticable RSI divergence on this mornings peak.

But as always I'm on the outlook for people getting caught going the wrong way - (shorting when the current move is over)

tradesman

http://www.pensco.com/

YHOO is back again to a trendline support going all the way back to '97...

Its montly RSI hasn't been this low since 2000 2001 but it did go lower in those years.

Yet again golds and oils taking the brunt of it and NAZ and DOW and S&P down much less.

Again as I see it - and trade it - it is the last bull market (commodities) that is going down the most.

tradesman

$100/bbl oil. $800/ounce gold. Did you feel like buying the OIH or XAU when those headlines were running? What about now?

Hard assets aren't the same as paper. Noone was rushing to dump investment properties in '93-they just went about the business of maintaining them, and once in awhile thought about buying another one. Accumulation over time as a means of diversification or as insurance is probably the best way to describe the hard asset class.

What happens if the USD declines and stays there? If the earnings of the next generation are unable to continue funding Social Security and Medicare? I see headlines now asking whether commodities are done.