Are Bitcoin transactions traceable? I have a question after a silly discussion.

We discussed for the best way for terrorists to get money. I have offered bitcoins. My question is: is it possible to trace who has cashed out bitcoins into money if you know the bitcoin wallet address.

I think it should be possible to trace, but how to trace such a thing?

NOTE: I'm just talking about cashing out bitcoin into money, not buying some cheap stuff.
Bitcoins are only ever really anonymous if you mine them your self or were given them by a miner. Once bitcoins are exchanged on, well an exchange (especially one affiliated with the U.S.) then those bitcoins have been associated with you. You can transfer them to other wallet addresses, but it will be visible in the block chain. 

You can cycle them through many different accounts, but unless you have hundreds or thousands of accounts, then any illicit activity could be traced back to your first transfer by a sufficiently savvy analyst. 

I also think that in the current mining climate, it would not be a trivial feat to acquire enough computers to generate enough bitcoin to fund any significant endeavor.

It should be noted that any exchange operating in the U.S. is obligated to employ someone whose job description is to look for money laundering.