Some charts on how great the Economy is doing. We are once again reaching oversold levels in equities, and we should expect some kind of bounce soon, as the dumb money is getting rather bearish again (more on that later). Below some important charts of the Economy. Short summary; Philly Fed came in so low, almost hard to believe. Univ of Michigan Sentiment is indicating GDP much lower, and the Jobs market is “revisiting” levels prior to 2008 crisis. Welcome to recession once again.

Charts; Macro Story

So, to sum up:

• It is common practice for most Central Banks to hold part of their gold reserves overseas in ‘gold trading centres’ (read London and New York )

• One of those Central Banks – that of Venezuela – wants its gold back

• That means that a group of banks (mainly in the UK and the USA ) who are supposed to have that gold in their vaults need to GIVE it back…

• …which in turn could potentially trigger a race to repatriate national gold holdings

• Neither Fort Knox nor the Federal Reserve (the world’s two biggest gold depositories) have been independently audited in recent times

• The status of the gold held in the Bundesbank (home to the world’s third-largest hoard) is somewhat unclear

• The practice of leasing gold by Central Banks has been going on so long that it even predates the time when Alan Greenspan advocated sound money.

• The gold ‘physical market’ is approximately 100 times the size of the amount of actual underlying metal by which it is purportedly backed

• The top four bullion banks, or ‘commercials’ on the COMEX continue to run what we shall politely call ‘significant’ short positions (chart above)

In the three trading sessions since Chavez made his announcement on August 17th, gold has added almost $100, coming within a whisker of $1,900 before settling back at another record weekly close.

Market weakness? Maybe. Fear of further problems in Europe ? Quite possibly. Continuing disgust with the world’s fiat currencies? Highly likely.

The beginning of a race amongst the world’s Central Banks to grab physical gold? Now THAT would be something to see…

Full report, Hmmm August 20 2011

De Gaulle talking about Fiat Money back in the days….

Guest Post by Macro Story;

In hindsight one would say shorts make a “killing” during the 2008 meltdown or the 87 crash, etc. The reality is many were not in the trade or if they were stayed too long only to turn a profit into a loss. I read about the 87 crash where after closing out a position the Friday before and witnessing the carnage on Monday the trader doubled down on a new short on Tuesday making the worst trade of his life.

Earlier I posted the following chart of September 2008. Lehman Brothers fails yet two days later the market is higher. Fast forward to September 29, 2008 where markets are now in oversold territory and due for a technical bounce. They in fact rally for two sessions at which point I imagine longs opened positions and shorts covered.

Big mistake!  Over the next seven trading days the SPX lost 300 points. Now that is why I say markets reward conviction.