Central bank impotence and market liquidity
By Henry C K Liu

http://www.atimes.com/atimes/Global_Economy/IH24Dj02.html

Moin from Germany,

thanks for posting the link :-)

Demand strong for ECB tender of three-month money

Data released by the European Central Bank on Thursday showed banks requested 125.7 billion euros from its three-month tender for 40 billion euros. The weighted average rate was 4.61%, against the 4.49% marginal rate. "So this tells us - and tells the ECB - that parts of the euro area banking sector are still very thirsty for three month money, despite the enormous liquidity injections. One might expect that under normal circumstances the three-month average rate might be something around 4.4% ahead of a presumed ECB rate hike," said Julian Callow, an economist at Barclays Capital

As US sinks, Asia unable to swim

The U.S. economy is beyond repair

http://www.atimes.com/atimes/Asian_Economy/IH24Dk01.html

Hi Bill,

I’m from the Netherlands and really like your blog. I’m also looking forward to your book being published. I’ve got a couple of questions about your trading system. I know you use RSI7 D/W/M.
1)When RSI 7 D/W are under 30 and D crosses W and D is now above 30 but RSI7 M is at about 30,31,32 or so. What to do then ? Do the trade or don’t because RSI7 M is still not under 30.
2)A couple a days ago you said you lowered the RSI bar from 30-70 tot 15-50 on Daily and 20-60 on Weekly price series data. And what about monthly ? Must is still be around 30 ? So when Daily RSI7 is under 15 and Weekly is under 20 and Daily crosses Weekly when Monthly is under 30 then we should buy ? I know also to use MACD crossings at this stage.
3)Maybe you can give some examples of stocks you’re are buying and selling and more important why. Not to make some quick money here but to fully understand the trading steps to make.
4)When to use RSI14 instead of RSI7 ?

Thanks Bill !

agree the positive tone in the financial sector sounds a little hollow...will be scaling out of WFC and XLF into strength.

OIH looks good this morning...NBR and PWE have traded flat recently on weakness in NG...may decide to shift a partial position out of UNG into NBR/PWE/APA for lower volatility...has anyone come across anything related to leisa's comment re rumours of forced selling in NG?

GDX looks good also...anyone who bought into last week's decline could actually take start to take profits here..

News on Gold Fields (GFI) ... the S.A. mining union has finally agreed to take the proposed settlement to the rank and file. While not a done deal, this clears a major hurdle.

Dear Bill,

I can second your opinion. My sister is a highly paid longtime HBB employee, and it's funny...Both her and her boss who run money together seem to have no idea what they're doing. She's that much more capable than he is, (crippled intellectually as he is by the formal study of finance on the graduate level) and together they are like, putting it kindly, forever missing the forest for the trees. I think they actually half believe the wall street research reports which they mistakenly imagine may be accurate and which they donn't recognize were not written for them. She sayst to me "you have no idea how dumb the people I work with are; you really belong in this business!" (but then none of the jerks want to hire me, I'm too flashy and not really staid enough tempermentally for that crew, as well as being a little old, according to them, to start a WS career).

I think you can be too close to a subject for objectivity, and objectivity is so precious, as you can imagine, when me and sis get together and prognosticate, I "beat her" every time. When she finally starts agreeing with me I begin looking for a turnaround!

My apologies if another has posted this link:

http://market-ticker.denninger.net/

Everyone should give it a read. 1.7 billion dollars worth of deep in the money, ostensibly covered ,calls were sold today for September 21, next month.

a tip of the hat to "Cyclist" on Kitco for the link.

N.L. announces $16B Hebron oilfield deal
The interesting thing about this deal is we finally see a province get an equity stake in an oil project. "The deal will include a 4.9 per cent equity stake that the province will purchase for $110 million, a cost described by Williams as a "wise and strategic investment in our province's future." Under the deal, the province will also receive "super-royalties," or tier-three royalties, meaning as the price of oil rises, so too will the royalty benefits paid to the province (CBC news)".
I wonder if Hugo Chavez's aggressive stance against big oil played a part in this deal.

Portfolio management is at the heart of all my major mistakes and I doubt that there are many subscription letters that incorporate it. I guess just not sexy enough.

Breakouts galore on the indices, transports holding longterm trend, and everyone a bear. Looks like good sailing weather. Will the investor get back in the water?

Not that I'm a celebrity watcher but fwiw I was heartened by watching Brad Pitt make a substantive contribution to new orleans. He "gets it(the culture)" and innovative architectural housing on a mass scale is the stuff of exciting change. I think. (Number2son, maybe you did not see my prior post to you, but my offer still holds in case you missed it.)

KHRIF/KRI.TO

The permit is under review and not revoked as the media has alluded.

This from Khan headquarters.

Lg KHRIF

Si02 . . . . SFD: Rocketed up thru the 200, 20 & 50 day EMA at the open. Will probably gap back,

Listening to the live 1st quarter 2008 conference call this a.m. Overall very positive results.

Interesting take IMO was “ongoing substantial conversations” with China on pork production. China has a severe problem with shortage as they have lost 20% of their 500 million hog production to a disease problem. In other words, they’ve lost 100 million, which is about the entire production of the U.S. Company has discussed “sizeable shipments” in the fall to China, but has “no deal yet.” Nothing has materialized, but if so, SFD anticipates @ “4% of production” would be in play.

IMO, this should be good for the Brazilian producers you and I have “discoursed” before.

I don’t play hog futures, but if there’s someone here who does, it looks bullish down the road IMO.

KHRIF/KRI.TO
Further:

$34+Million of capital in the CA bank invested in demand deposits not in any SUBPRIME !!!!!!!!!

Seamus, beer is on me. Sold half my Calls and that paid for all my costs already. I did my DD and would have taken full responsibility had it gone the other way.
I agree about SDA and PDA. These are very dangerous waters though. I think just using the inevitable pull backs is a good course of action. Your porfolio must look very similar to mine. TRA recovering well too.

Thank you.

jasper-curiousity piqued..never been to "Nola," but if you can find any links to stories about your concerns would be interested in reading..

As expected, BOJ held interest rates at 0.5% with all the recent turmoil.

Sold 1/6th of FXY position for 7.4% (2 month) profit last night, but retaining rest of FXY as hedge. Don't think the yen or the USD situation is over yet.

Off to a Dr's apptmnt this a.m. Good luck everyone.

A system for buying low and selling high... Bill how do you know that when you are buying low, it isn't just the first major drop of a series of major drops, as in this time 1998? It feels like picking the bottom, and I've heard time and again that attempting to pick the bottom is unwise.

This is first level of resistance. Longs tried to pop over it on open but it is now getting turned back. ST overbought condition contributing also. Now the question is who has more firepower at this point? Yesterday, selling pressure subsided (model) so if that condition continues this should not be large retrace.

We take it a day at a time.

UNG -- What just happened? Fat-finger trade?

eTrade just lost a customer. No options quotes on Power eTrade Pro and their main website was down.

The "Elite" rep politely told me I was FOS.

Man, that ain't no way to run a business.

This morning's action doesn't look good to me, esp. in light of the rallies overseas.

I sold KRY just now for a 9 percent gain in 3 days. Nothing wrong with it, it's at the 20 day. I am not loving the head-and-shoulders look of the 10 minute chart, and am hoping to re-buy lower.

Also MSPD mindspeed tech, one of Cramer's old touts gapped up on the daily over the 20 day, which needs to flatten and begin to rise, then this baby's good to go.

2nd,

re nola, links aren't working yet, for me...but i'm not sure reading anything could express adequately what this city is. It certainly is not like any other place in the u.s. and I would never describe it as "southern." If you should like to fish, that would be one way to encounter both the people, the terrain, and its multitude of problems. Or, find a bed and breakfast, and hang out. Great food and conversation is just walking distance away. nola dot com is the website for the local paper. Back to the market, sure wish natural gas price would drift higher. I'm lucky enough to a very small percentage in a natural gas well. Family property that used to be inland and is now deep underwater.

oomph-

They are cueing on us now. Before the selloff, it was the other way around. JMHO.

Mark, I don't understand what you mean...

omphalos - Like many others, I use and am very pleased with Interactive Brokers's service and trading platform. Never a problem with quotes unless problems occur at the exchange, in which case IB customers are alerted via online bulletins when the problem arises and when it has been resolved. Plus, commissions are low, generally 1/2 penny per share if you trade in 100-share lots. Security is provided via a (now mandatory, I believe) hardware-based random challenge and response key system, in addition to ID and password. Without physical possession of the hardware key and knowledge of the user-selected pin required for its use, no one can access your account in any way--even if they are in possession of your ID and password.

Do you get a commission on referrals, OldGoat? (wink)

I'm filling out their application as we speak. I sure hope I can circumvent the hardware key -- what a bother I suspect that must be.

Now eTard's website (the only place I can real-time options quotes) is stating that the bid and ask on my AAPL puts it the same... sigh.

I wish! I must say that I very much like having the hardware key, as it immunizes me from a wide variety of very real security threats (just because I'm paranoid doesn't mean they're not out to steal my money...)

Gold is being punished but GG is still up 2%. (?)

Dear Bill,

I agree with you about the "we', not "I". First though, a bit more about 'me" so we can appreciate the context of my remarks.

When I graduated college (from a state school) as an honors student in history, I asked my sister to ask the resident billionaires at her HBB firm if there wasn't SOME place in the HBB universe where I might work doing, perhaps, some prop trading or perhaps, some chart work. Heck. It got to the point where I would have been glad to just get coffee for the prop traders, keep records and to maybe help analyze charts.

I would call up these trader contacts these guys would hook me up with begging for an interview and they would say, almost without exception, "Where did you graduate from?"

It is a sad fact of this thing that

A) a LOT, not most, not even a majority maybe, but a LOT of the well-paid Wall-Streeters aren't particularly intelligent, aren't particularly good at their jobs, and surprisingly, aren't even all that interested in the financial markets. I realize this is a highly controversial accusation, but I'm sure you've known people in your careeer.....

B) There are two primary ways one gets hired at an HBB firm.

First, and more important than major, grades or honors
(or, or course, experience, which HBB considers a detriment) is...... WHAT college did you go to, emphasis on the ivy league and other expensive, private colleges which I could not afford to attend.

The second primary method of hire at a well-paid HBB job is to have a blood relative usually, an uncle Sid who's been at HBB for years and basically "gets" you hired with one of his HBB friends, which process, of course, cuts dramatically into the availability of HBB jobs.

A small number of people are geniuses in computers, stat and math and aren't really market savvy per say but have skills applicaple to computer trading and such, and a few, actually more than a few ethnic minorities are offered jobs (and often rich compensation when they leave) as well.

If your a white guy who went to State, graduated with honors, almost 4 gpa and was president of your golf team for two semesters and who loves trading stocks and doesn't have an uncle Sidney, it's very hard to get these jobs.

Am I envious of people who make seven hundred thousand dollars, a million dollars and more a year because their parents could afford Columbia or who have an Uncle Sidney? Absolutely envious.

I'm sorry if this post is too much about me. I'm sure we could put together a trading team that could beat the pants off a lot of desks. I'm up for it if you are.

Chris, Just wondering how your sister got the Hb&B job.

Hello Bill,
Did you get to talk to Ray T. yesterday and if so when do you anticipate doing a WGI update?
Thanks,
tom

Chris,
If you change the way you think about things, things change.

Perception becomes reality. If you change your perception, the reality will change.

No one can empower you in this regard but yourself. The answer is not without (in others) it is within.

"other expensive, private colleges which I could not afford to attend"

I couldn't afford these expensive institutions on my own, but with massive amounts of student aid and loans I could.

The financial resources exist for a person who wants to go there. It's more a question of internal motivation and getting past the admissions committee.

Coming from these expensive institutions, the moral values of these people are no better than anyone else. They just have access to more power. Give a person on the street this kind of access, and they could easily abuse it. Lo and behold, abuses abound.

There are too few who live by right and wrong for the sake of right and wrong, not for the consequences of getting caught.

Chris,
If you have not already, I suggest you watch the movie "The pursuit of Happiness" to see how another guy with name "Chris" did it.

http://www.sonypictures.com/homevideo/thepursuitofhappyness/
http://www.chrisgardnermedia.com/main/biography.htm

My sister went to the same private college that Dick Jenrette went to, and there was a standing order at that firm to take a good hard look at anyone who went there. This was also at a better time in the biz employment wise, of course.

I just want to add...I don't mean to come off bitter, which I am, and I know I do sound bitter. We all have disapointment in life, we all lose our one true love who wasn't really....

let me just say, I do feel it's what I do at this point that matters. I do feel you can't win until you've lost, and I've won a lot, and lost, a lot, and I love my trading. Who knows... maybe one day I will be very glad I didn't have to deal with HBB's bs on a daily basis. I suspect in a way it's a big advantage. Now it depends on me and what I do.

shark/chris -

Even if you do graduate from an ivy, you got to get right on the HB&B escalator. If you want to do something else for a while (write a novel, bum around the world for a few years) you may return too old to get hired as an HB&B trader!

Also, how many Wall St. kings started their careers at lesser institutions than HB&B: Soros, Bloomberg, Levy among others ....

There are lots of paths. What's the sense in geting hung up on those not taken?

Chris,
I agree that you were up against it. I've had similar experiences throughout my entire career(s). Look at all the comments on this site regarding "family and friends". These comments support your argument. In my opinion, "knowwho" carries a lot more weight than "knowhow" when it comes to getting in the door. After that, it becomes a whole new game determined by knowwho, talent, politics and a little luck. C'est la vie. We play with the cards we're dealt or we find a new game. Some of us manage to change the rules of the game but, not enough of us.

J.L. Bane is at it again, attacking KRY on Seeking Alpha. I'm long KRY and give little creedence to J.L. Bane but, I thought that KRY holders should know.

Latest DOE/EIA Nat Gas Storage Report -- released 10:30 this morning; data is for week ending 8/17:
http://tonto.eia.doe.gov/oog/info/ngs/ngs.html

Seeking Alpha link regarding KRY.
http://tinyurl.com/2aawbl

Another reference to the J.L. Bane article posted on Resource Investor.
http://tinyurl.com/3955gg

My cousin, who is a white guy, who went to a state university, who majored in liberal arts, who got average grades, and who spent the last several years, playing in a band, just got hired at Merrill. The hell of it is, he *doesn't care about the market!!* Grrr. Maybe that's the secret.

Fred, imho J.L. Bane (aka Jane Louis) is not worthy of discussion on this blog or any other.

JB thanks for that link, an interesting read...

number2son,
I agree with you. Unfortunately, I can't ignore his/her negative impact on my wallet.

number2son, is that true about JL?? I already doubted the JL Bane person's objectivity, but if that is truly her, then when she "quotes" JL Bane in another article on Resource Investor, she is really "quoting" herself. That fact alone, then, would call into question the veracity of every single thing "he" or "she" "reports." Another fine example of truth in reporting.

Oil/Nat Gas -- Any ideas as to what's behind the near simultaneous up moves that began at 2:16-2:18EST?

Any thoughts on Silver Standard (SSO.TO, SSRI) jumping up yesterday and jumping down today? Seems very strange.

UNG - Again testing 36.70 resistance.

back in KRY low 3.90's

I can sell you a lot more for low 3.80s

Bill, if by "gather assets" you mean "do sales," then, yes. I think they had him doing cold calls at first, and he has recently passed a number of tests in order to be hired full time and to move up. Actually, we're all quite proud of him, as he's doing well. I just wanted to illustrate that you don't have to go to a greener-than-thou Ivy University., or make top grades, or smooch up, etc, in order to get into the biz.

SO, did the dollar just strengthen, for some reason? Gold and silver seem to have jumped off a cliff.

jogyp-i'll let you borrow my shares in the low 3.70s and you can make a little more ;)

Novice,

Silver Standard has about 43M exposure to asset-backed commercial paper exposure. You can see a partial list of affected miners here: http://shockedinvestor.blogspot.com/

My brother is a salesman for Merrill. They hire a lot of them - most don't but it. Out of a class of 25 in 1999, only two are still with the firm.

Okay, trading tech question: I'm about fed up with Verizon DSL. I just moved, and I'm experiencing more drops than the USD. Does anyone use Verizon's FIOS service, and if so, do you love it? How about Comcast, or some other cable modem service? Does anyone have any thoughts about which kind of service is faster and more reliable? Thanks

writer - Comcast is definitely much faster than DSL. Reliability is not perfect but quite good. (In the event of the occasional outage, you can generally use your laptop to hookup to the internet at the local library or Starbucks.) Cost can be reduced by cutting the cord to the local phone company completely and going all cellular. Plus you'll get a small extra discount ($5/mo?) if you also have Comcast cable TV.

Thanks, OG. I should add that after trying for several months to get this fixed, and after dealing with nearly every department at Verizon, I have concluded that it is not a very well-organized company, and if I owned the stock, I'd be shorting it! So, I would hate to reward bad biz behavior by taking their FIOS service, but I do hear it's fast. As per what you said, I also hear cable is fast. I just wonder who is faster, and, equally, if not more important, in the case of trading, who is more reliable.

When I got hired by Merrill, all they cared about was whether or not I had a warm market(Friends and relatives) with money. I never finished college.

From what I've heard, Verizon's FIOS service is wonderful. See http://tinyurl.com/2894fg

Curious if anyone else was unable to get options quotes on Power Etard Pro this morning.

Omphalos - The little green light in the lower left hand corner of Power Et. Pro was out, though I was getting info, so I called them, and they said there were problems with the market feed, and that that affected the options quotes.

I should add I use Comcast and it's fast and fairly reliable (Wash/Seattle area). When the end of my 12 month "introductory" offer was up, I called and said I got a better deal with DishNet and they reduced my rates to the intro level.

Thanks for the link to the FIOS conversation.

They never bothered to 'fess up to having trouble with their feed, which is what ticks me off the most.

I'm still moving to IBB, but I'm sure not looking forward to getting used to a new platform.

WB -- Oh, I never noticed those little green lights before! Thanks for the tip.

BTW, the forum link I sent for the FIOS conversation is a great resource for computer hardware and software discussions. I've been a regular there for 6+ years and guarantee anyone who asks a thorough question will get some of the best help on the web.

Mozilo knew what he was doing, we all knew that this pile of manure would light up eventually. For the record, I started worrying many, many months too early - it may have cost me a few percentage points in return the last few years, oh well, but it got me really interested in learning about gold and that's a good thing :-)

IMO, all of these execs who perpetuated this derivative mess due to greed should be replaced without the exorbitant salaries. Mozilo should be giving money back.

g034, it's never too early to worry about something of this magnitude. In my opinion, you can't tell if it's "too early," or not, until it isn't, and by then, it's too late.

writersblock - yeah, it's never too early to worry about anything. As a matter of fact, the more you know, the more you worry, but the more prepared you will be. The problem, as I see it, is to get so caught up in what could happen due to a fundamental issue, that you make bad decisions. For example; I know a "trader" who was so caught up in the bear argument, that he ignored tech analysis and continued to short the market for the last few years. Fortunately he was also long gold, so that made up for his stock losses. If my friend would have taken Bill's advice and used both fundamental AND technical analysis, he would have achieved a much better p&l.

Re: gold - seasonal weakness ending in a few weeks if not now. We may be setting up for a "perfect storm" of the bullish kind. Fed liquidity injections/easy policy PLUS India's seasonal physical demand may = new gold highs. A major solvency issue, if it occurs, will virtually guarantee the perfect storm. Long gold and waiting...

good luck to all,

g034

C.Note -
Regarding Khan, the word "invalid" comes from their own press release dated Aug 17 and not from the media. They issued another press release today changing their view based on clarification from MRAM. I actually took a risk and added some more shares during this drop so my basis is now below 2.

writersblock -
I use FIOS for broadband and it is very good. The only issue I have is when I moved recently they've replaced their router with a "new and improved" model that has a tendency to lock up so I have to reboot it periodically (their old router worked like charm).

While the over-tanned Mr.Mozilaionarre was telling investors how sound CFC was, he and the directors were selling everything out the back door. By my calculations on insider transactions he sold approx. 5,000,000 shares from Nov 1 2006 to 8/13/07. But things were great at CFC (very little sub prime exposure) LOL

BTW I did these numbers off the insider report. There may be inaccuracies

I am posing a question to gold shorts and if it is not answered today, I will ask again tomorrow. You are anonymous here, so there is no reason not to answer and I know that there are traders short of gold that read this site. Convince Bill's community and profit from your trade.

So; what is your rationale for shorting gold in the face of such a fundamentally bullish environment? Please help this simpleton understand your rationale.

TIA

Kaimu,

Massive shift in gold position by GS?

Goldman Sachs long gold position at Tocom has gone up by 3,265 contracts today (yesterday this volume was 1,700). This is shown on the daily volume at Tokom.

The open short interest position is 11,865 and the open long position is 507, for a net short of 11,358 contracts.

This seems to be a massive shift from what it was. What kind of gold (ounces and $) do these contracts represent?

However, the total long positions by all members is 202,326, and the total number of short positions is also 202,326. This seems to be a zero-sum game. (Mitsubishi holds a massive short position). Can you explain this? Thank you.

Dear Bill,

You asked......"HB&B has a business model that works; how do you think an independent trading team should work, Chris?"

Obviously, location should be no issue, technology what it is today. What we're looking for is performance, from wherever it emanates.

One thing I am clear on is eliminating some of the mistakes my of HBB teams. For one thing, fundamental ideas shouldn't be initiated without screening them technically. I can't tell you how bad the timing of some of these "fundamental-only" portfolio managers is.

Another thing that is really detrimental to the success of a lot of money management operations is a strict heirarchy, wherein the junior members feel unable to stand up and speak the truth to the big man, be it about a stock, a sector, or something just work related generally. It can really become an "emperor has no clothes" scenario. Ideas should be freely expressed and judged according to their merit, which in this business means, "were you right?"

The team should allocate funds (one way or another) to trades and ideas based on the track record of the team members generating the ideas. The more right someone's ideas prove to be, as time goes by, the more his or her opinion should count vis-a vis asset allocation.

We could, democratically, offer a contest during which performance could be established, and membership then extended to the best performers.

We could work together, coorordinating ideas in the morning. Daytrading ideas, swing trades and longer term ideas could all be considered by the team in one forum, not three. Money could be a non-issue, as we are all trading our own accounts now, and it is most practical and just that at this point, the source of the capital is us.

I know I'm leaving out a lot and have hardly begun to think about your question. I hit the golf course at about 3:30 today and am going to Cape Cod Saturday for a week, but I will be checking in. (the pleasures of a non HBB life...also called the upside of the downside).

Have an excellent evening.

SiO2,
How did you come accross this data? Is it publically available?
Brendan

Brendan:

http://www.tocom.or.jp/souba/gold/torihiki.html

g034,

You posed a question to gold shorts regarding how they could possibly be leaning that way. I have no positions in gold at this time for the simple reason that the gold market seems to be so fickle. Gold seems too correlated to stocks in general, and then you have the PPT influence, and which way the carry trade is evolving. I decided since taking a position in gold was the same thing as pulling for stocks to go up, or the carry trade to kick in that I would rather just play the stocks and/or currencies directly. That's for the simple reason that I seem to have a better feel for stocks and currencies. Trade what you know and feel comfortable with. I agree there are numerous fundamental reasons for gold to go up, but I would rather put my eggs in other baskets.

Si02,

What did they do over at the COMEX?

Don't forget, Mitsubishi may simply have some large short positions that are actual hedges from mining customers. Or they could be helping Paulson et al.

TT - I trade gold, oil, bonds and stocks. They all trade differently, but the same, if that makes any sense.

For example, I use fib for gold, but not much in individual stocks.

I'm simply looking for an intelligent, reasoned response from someone who has put their money where their mouth is.

Many of the writers that are currently bearish on gold have held the same view for the last few YEARS - eventually they will be correct, but not now, IMO.

shark_attack, Bill,

Re: "HB&B has a business model that works; how do you think an independent trading team should work, Chris?"

Your (Chris's) independent trading team could function across the internet via a virtual 'trading desk', in some augmented and enhanced wiki-like format, with positions dynamically evolving and maintained by team member inputs and actions that are performed in real-time in response to actual (non-virtual) market data. A sim-desk evolving in response to actual market events.

Much in the way Wikipedia, for instance, evolves stated positions out of collaborative exchanges of wiki members, the 'trading desk' positions would be immediately available online for each member to view and use for maintaining their own market positions, i.e., real trades through their own online brokers. The feedback of market performance of each individual member would be shunted back into the team's virtual 'trading desk', weighted by their 'clout' factor, which is based on past performance. Thus the group of individuals affect the ongoing team's virtual positions as markets change and also continuously updates and adjusts each individual team member's rating (and hence, their clout) within the team's performance.

The team performance would thus evolve dynamically out of individual trader decisions in real-time operations on real-data affecting real individual portfolios that are synthesized and synchronized into the virtual 'trading desk' statistics.

As it derives composite team performance and ratings of individual members out of conglomerate individual portfolio decisions the team serves both as model and beacon as individual team members hone their own decision-making skills in real-time against real data.

It would be a challenge to devise the software for internet collaboration, but it could be done. If effectively married with good interface design and recent developments in AI systems it might pay for itself and sustain livlihoods of each and all team members successfully integrating into its operations. Furthermore it might prove to be the ultimate market 'learning curve mean-machine' for mentoring novice traders into expert performer. Now that would be social equity with a vengence!

In about 10 business days I am expecting the market to peek and begin to fall to test recent lows, to put pressure on the Fed for a rate cut.

If the Fed doesn't cut, they will know for-sure they will be doing damage to the underlying economy and so I think there is a 99% chance the cut will be made (unless Bernake is a total idiot).

Once the market gets below 12800 again, it should be bought strongly and continue uphill to take out the old highs: Providing the rate-cut takes place.

I expect it to be a 50 bases point cut.

I expect the lows to be close to the recent low that was just put in, but I suggest buying start at 12800 incase it doesn't make it to 12600.

Follow the emotional chart: Once the market gets to about 12800 and you feel like all hell is breaking loose, like u did 2 Fridays ago, that will be the signal to buy. Wait till it hits you in the pit of your stomach to pull the trigger.

Personally I am thinking the brokerage firms will be the best to buy once the bottom is retested. Maybe something like Merill Lynch or Goldman sachs, which happen to be the best value plays of the Brokerage Firms on my lists.

How many more deals in the pipeline will unwind? Here is Home Depot getting quite a crew cut...

WSJ
August 24, 2007; Page A10

Home Depot was Thursday night close to accepting about $1.2 billion less for the sale of its wholesale distribution business to three private-equity firms ... But there were still substantial doubts about whether the deal will actually close before a Thursday deadline, as three major banks continued to balk over the financing.

The situation was becoming increasingly ugly, with some of the most senior figures on Wall Street trying to manage their exposure to a deal beset by twin crises in both the housing and credit markets. The banks -- J.P. Morgan Chase, Lehman Brothers Holdings Inc. and Merrill Lynch & Co. Inc. were last night preparing for the possibility of lawsuits over the matter.
...
Pinched by the current credit crisis, the banks are toughening their stance against the private-equity firms. With a backlog of some $300 billion of U.S. private-equity deals still to be funded, the banks are now facing significant writedowns on their balance sheets. That's why they are weighing how to extract themselves from as many buyout transactions as possible.

ALOHA !!

SiO2 ... Goldman Suchs volume was 3265 long and 81 short, which means they covered a total of 3184 short positions, bringing their net short to 11,358. Yet another record low since they started trading the TOCOM.

A futures contract is a standard contract, traded on a futures exchange, that allows a trader to buy or sell commodities on a certain future date for a specified price. A standard gold futures contract is 1kg and a mini is 100g priced in JPY/gram on the TOCOM. The open interest you refer to does not dictate pricing of a contract, in gold its the spot price, so there is not a "zero sum gain". You have to have a counterparty to buy a long position and visa-versa.

Peter,

Thanks for your thoughts.

I just bought some GS but probably should have
waited. I'll add to my position if the price drops
again.

ALOHA !!

Okay this is just a little too "over-the-top" for Goldman Suchs(GS). Watch out for the sucker play to bash the POG! Just my contrarian instincts ...

First Goldman dumps shorts like its going out of style on the TOCOM and then they come out with this little news tidbit! Whats up? Could GS, an inside trader and agent for the US FED and US TREASURY abandoned ship this soon? I mean GS just got a $3bil bailout. Is this how they bite the hand that feeds them? I somehow do not buy GS is now a default "goldbug"! I know they want to rally the markets but this is no way to defend the US Dollar! I smell a setup ...

READ ON:
Goldman Sachs expects dollar decline, interest rate cut

By Ye Xie
Bloomberg News Service
Friday, August 24, 2007

NEW YORK -- The dollar may decline to a record low against the euro in the next six months because U.S. economic growth will slow, forcing the Federal Reserve to cut interest rates, according to Goldman Sachs Group Inc.

From the current level of $1.3568 per euro, the U.S. currency will weaken to $1.43 per euro in the next three to six months, Goldman Sachs said in a research note yesterday. New York-based Goldman, the world's biggest securities firm by market value, lowered its dollar forecast from a prior estimate of $1.35. The dollar set a record low of $1.3852 per euro on July 24.

Concern about losses in investments related to mortgage securities has bolstered expectations that the Fed will cut its benchmark interest rate from 5.25 percent at its Sept. 18 policy meeting. Traders are certain that the Fed will cut its key rate to at least 5 percent by Sept. 18, futures show.

"Financial conditions are tightening at a time when clearly there's some downside risk to growth," said Jens Nordvig, a senior currency strategist at Goldman Sachs in New York. Fed rate cuts "will drag the dollar lower."

Link: http://tinyurl.com/3yc43v

This appears to be shaping up as a pivotal day. We have several "reported as bullish" stories unraveling in the financial press and we are likely to see some bad numbers on the economic front. I want to see how this is handled because, to me, the bounce has taken place solely on the back of engineered sentiment and ST technicals.

This appears to be shaping up as a pivotal day. We have several "reported as bullish" stories unraveling in the financial press and we are likely to see some bad numbers on the economic front. I want to see how this is handled because, to me, the bounce has taken place solely on the back of engineered sentiment and ST technicals.

Kaimu,

Thanks for the explanation. As for the zero-sum game (not "gain"), it looks like all those transactions are within a closed club since the numbers of contracts bought is the same as the numbers of contracts sold, then they are exchanged between the club members only. So it looks like somebody increased the number of short positions as well.