American Retrenchment Is a Golden Oldie

‘As we look out at the rest of the world we are confused,’ wrote Henry Luce in February 1941.

By James Dobbins

In its 76th year, the “American Century” seems headed for a premature end. Americans are reportedly tired of shouldering the burdens of world leadership, supporting democracy, promoting free trade, and defending their allies. From now on, the American president says, the indispensable nation is going to look out for No. 1, raise new barriers to trade and immigration, and renegotiate—or possibly renege on—recent and longstanding commitments.

Europe’s most influential leader, German Chancellor Angela Merkel, has given voice to what is likely a wider sentiment: America’s allies can no longer count on the U.S. and must take their fates into their own hands.

But America’s tendency to draw inward is nothing new. The American Century was first proclaimed by Henry Luce, publisher of Time and Life magazines, in words that resonate today. “We Americans are unhappy,” he wrote in February 1941. “We are not happy about America. We are not happy about ourselves in relation to America. We are nervous—or gloomy—or apathetic. As we look out at the rest of the world we are confused; we don’t know what to do.”

He continued: “As we look toward the future—our own future and the future of other nations—we are filled with foreboding. The future doesn’t seem to hold anything for us except conflict, disruption, war.” While this may sound familiar, Luce was describing a nation still recovering from the Great Depression. Most Americans were disillusioned with the results of the First World War and determined to stay out of the Second.

Many of today’s Americans still haven’t recovered from the Great Recession that began in 2008. Nearly all are deeply disappointed with the results of the seemingly endless wars in Iraq and Afghanistan. In 1941 Luce argued that “other nations can survive simply because they have endured so long—sometimes with more and sometimes with less significance. But this nation, conceived in adventure and dedicated to the progress of man—this nation cannot truly endure unless there courses strongly through its veins from Maine to California the blood of purposes and enterprise and high resolve.” He concluded: “It is in this spirit that all of us are called, each to his own measure of capacity, and each in the widest horizon of his vision, to create the first great American Century.”

Donald Trump is not the first president to want to reduce America’s foreign commitments. In 1969, as America began to withdraw from Vietnam, President Richard Nixon established a doctrine that came to bear his name, warning that the U.S. would henceforth expect its allies to provide the manpower for their own defense. Presidents Jimmy Carter, George W. Bush and Barack Obama also entered office promising a restrained American role abroad.

Yet Mr. Carter went on to launch a covert war against the Soviet presence in Afghanistan and enunciated a doctrine of his own, declaring that any “attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States of America, and such an assault will be repelled by any means necessary, including military force.” Mr. Bush pledged not to engage in “nation building,” yet ended up doing that in Afghanistan and Iraq. During his first term Mr. Obama announced a “pivot to Asia,” then the world’s most peaceful region, but spent his second term boosting American military commitments in Europe and the Middle East instead.

Isolationism is a recurring temptation of American foreign policy. Responding to new and unforeseen challenges, however, the U.S. has repeatedly resisted that temptation and risen to the demands of global leadership. Is it different this time? Certainly the official rhetoric from the Trump administration is more fervent. And Mr. Trump’s election is a sign that American dissatisfaction with the existent global division of labor is widespread.

But we don’t know how the country will respond to the next crisis. It took the surprise Japanese attack on Pearl Harbor, nine months after Luce’s call to arms, to push the U.S. into World War II. It took the installation of Soviet puppet regimes throughout Eastern Europe to keep America engaged on the Continent for 40 years after the defeat of Nazi Germany. It took the Soviet invasion of Afghanistan for Mr. Carter to commit to defending the Persian Gulf. The 9/11 attacks turned Mr. Bush into a nation builder, and the rise of the Islamic State and the Russian invasion of Ukraine led Mr. Obama to recommit American forces to the Middle East and Europe.

Mr. Obama, like his predecessors, discovered that while Americans wanted a less costly foreign policy, they had difficulty accepting the diminished influence that went with it. Americans are unlikely to remain comfortable seeing their leaders heading a coalition of petro-state monarchs and illiberal strongmen while the democratic world marches to a different drum.

President Trump and his administration will be tested soon. The test could come in Syria or on the Korean Peninsula, or in some wholly unanticipated place and some entirely unexpected way. Then, when allies’ support and international solidarity will be at a premium, Americans will find out whether their century of pre-eminence has ended.

Mr. Dobbins is a senior fellow at the RAND Corp., a former U.S. ambassador and assistant secretary of state, and the author of “Foreign Service: Five Decades at the Forefront of American Diplomacy,” just out from Brookings Institution Press.

The Trump in the Road

Merkel Concerned G-20 Summit Could End in Fiasco

 U.S. President Donald Trump

Ahead of the Hamburg G-20 summit, the EU trade conflict with the U.S. is threatening to escalate. Both Brussels and Washington are looking into sanctions and Chancellor Merkel is concerned that a fiasco could ensue. By SPIEGEL Staff

Wilbur Ross is the kind of man who is easy to underestimate. Approaching his 80th birthday in November, he seems slow at times and occasionally nods off during longer meetings. And sometimes, he does so even when his boss is holding an important speech only a feet away, as he did recently in Saudi Arabia.

Ross, though, is U.S. President Donald Trump's commerce secretary, a key cabinet position, and on Tuesday, he was wide-awake. Standing next to an American flag, he read out a speech that was being transmitted to Berlin via video link. Specifically, it was being broadcast into the ballroom of a luxury hotel where German Chancellor Angela Merkel and several hundred guests of the Economic Council, a German business association that is closely linked to Merkel's political party, the Christian Democratic Union (CDU), were listening.
Ross had initially wanted to travel in person to the German capital, but he canceled at the last minute because, he said in the video, "urgent unexpected matters required that I remain in Washington." The commerce secretary then straightened his glasses and monotonously recited what his president expected of the Germans.

He demanded that Germany buy raw materials from the United States instead of from Russia, lower tariffs on automobile imports from the U.S. and ensure that America "obtain a larger share" of the European market. Otherwise, he added, the government in Washington, D.C., would have no alternative but to "engage in self-help."

Ross had been allotted a speaking time of 10 minutes, but when he still hadn't finished after 30 minutes, the event participants had heard enough. They turned down the sound and switched off the video link. The U.S. commerce secretary disappeared from the screen, silenced like a political gadfly. Some in the audience laughed.

A Potential Fiasco

One could see the episode as a negligible display of disrespect, unworthy of much attention. The chancellor, after all, has a full schedule and doesn't have time to waste. But one can also see the incident as a covert threat to the Trump administration: If you don't stick to the rules, there are consequences; our patience is not inexhaustible.

Less than a week before the G-20 summit is set to start in Hamburg, the risk is growing that the unpredictable U.S. president could turn the prestigious meeting of world leaders into a fiasco.

Environment, refugees, trade: On a long list of issues, Trump and his America-first administration are sabotaging the search for joint positions among the world's industrialized and emerging economies. The discrepancies are "obvious," Merkel said during a speech before German parliament on Tuesday, the discussions "will be difficult."

If Merkel is right, the U.S. - after withdrawing from the Paris climate deal in early June - is now threatening another global agreement. Almost nine years ago, at the height of the financial crisis, the world's 20 largest economies agreed to launch economic stimulus programs and to reach consensus on joint regulations to prevent bank collapses and tax evasion. It was a far cry from the new global government that some had been dreaming of, but that summit did bring about some modest improvements.

Now, though, the Trump administration is reneging on numerous G-20 agreements because it doesn't see the world as a "global community," but as "an arena" in which countries "engage and compete for advantage," as National Security Adviser H.R. McMaster and Trump's economic adviser Gary Cohn wrote in a late May op-ed for the Wall Street Journal. Eat or be eaten: That is Washington's new foreign policy creed, one which doesn't have much in common with Merkel's image of a world with shared rights and regulations.

The chancellor had hoped that the Hamburg summit would be a festival of global cooperation and understanding, but it now looks like it will be sending a different message. Tensions between Russia and the U.S. are again on the rise and the risk of a trans-Atlantic trade war is greater than ever, which would have devastating consequences for the global economy. The West as an entity, it would seem, is disintegrating.

Points of Contention

And unease among G-20 planners is growing, in part due to the chaos in Washington. U.S. diplomats shudder to recall the May G-7 summit in the Sicilian town of Taormina, during which Trump exasperated the other delegations by turning over negotiating duties to a constantly rotating team of advisers. Shortly thereafter, he fired his chief negotiator Kenneth Juster, who had been scheduled to play a prominent role in Hamburg as well. His duties will now be executed by a man whose first day of work in the White House was just three weeks ago.

Making matters worse, many of the pledges Trump made in Taormina are no longer valid. At the G-7 summit, the U.S. spoke out against protectionism and unfair trade practices, but during a recent meeting in Paris of the Organization for Economic Cooperation and Development, American negotiators were of a different mind. They ensured that passages to that effect were removed from the closing statement.

But it's not just a question of terminology. The number of trade conflicts between Washington and Brussels has risen significantly in recent weeks. A paper on the desk of German Economics Minister Brigitte Zypries takes stock of the current points of contention. It is a long list.

The U.S., for example, is demanding that Germany finally take measures to reduce its immense trade surplus. Washington is considering the introduction of a so-called "border adjustment tax," which would make numerous German products drastically more expensive in the United States. The Americans also want to impose new sanctions against Iran, which Europe opposes, and are demanding that Europe import more natural gas from the U.S. instead of from Russia.

Of particular note, the list makes it clear that Europe and America are already threatening each other with retaliatory measures and reprisals on several issues.

Beef is a primary example. Since 1989, the import of hormone-treated meat has been banned in the EU for health reasons. It is a conflict that has appeared before the World Trade Organization several times and the U.S. has recently ignited it anew. Washington is demanding that Europe open its market to hormone-treated beef and has said that if Brussels doesn't acquiesce, punitive tariffs could be slapped on over 70 product groups or raise existing tariffs to more than 100 percent.

Steel Problems

The list of products that could be affected includes pork, tomatoes, chewing gum and even scooters. Washington is set to decide soon which measures to apply.

And on the eve of the G-20, the dangerous spiral of trade conflict could also be augmented by a dispute over another, often sensitive product: steel. For months, Trump has been execrating the import of cheap steel from China for the damage it does to American producers. Commerce Secretary Ross has been charged with producing a report to clarify whether the cheap imports pose a threat to U.S. national security and was originally supposed to deliver that evaluation in June. Now, however, the German government is concerned that Ross could advise his boss to impose tariffs on the eve of the Hamburg summit or, worse yet, during the meeting.

The problem is that such tariffs wouldn't just hurt Chinese companies, but primarily countries like Canada, South Korea and Japan in addition to the European Union, above all Germany.

Last year, Germany was the eighth largest exporter of steel to the U.S., ahead of even China. If Trump were to impose tariffs, it would have negative consequences both for German exports and for trans-Atlantic relations.

Policymakers in Berlin and Brussels have already begun discussing what countermeasures to take should the Trump administration impose steel tariffs. "The EU will answer appropriately if the U.S. introduces trade restraints against German or European steel companies," says German Economics Minister Zypries, adding that there are many tools at Europe's disposal.

European Trade Commissioner Cecilia Malmström echoed Zypries, saying: "If it hits us like it could, we will, of course, retaliate."

Brussels' first reaction would be to immediately file a complaint with the WTO. But such procedures often take years to resolve, so European officials are also considering other measures that would have a more immediate impact - such as punitive tariffs on agricultural products like corn, soy or rice. The goal would be to turn American farmers, many of whom voted for Trump, against Washington.

At the same time, the EU is hoping to build new alliances. Negotiations with Japan over a free-trade agreement are making solid progress and Malmström flew to Tokyo on Thursday to clear up some open questions. If her visit is successful, Japanese Prime Minister Shinzo Abe will stop by Brussels next Thursday on his way to Hamburg to sign a political declaration related to the deal. The intention is clear: "We want to send a signal to Washington: We are in favor of open markets," says an EU diplomat who is familiar with the plans.

Trouble Ahead

Currently, the signals seem to indicate trouble ahead. Washington views the European Commission's 2.4-billion-euro fine levied against Google on Tuesday due to the company's abuse of its market dominance as a hostile act. Meanwhile, Merkel's office believes that the Americans aren't just withdrawing from climate and trade consensus, but also from the G-20 process in general. "We are on a dangerous slippery slope," says finance expert and European parliamentarian Markus Ferber. "The USA is pulling back from international bodies. We can see it everywhere."

There is concern, for example, that the U.S. will back out of the joint fight against tax havens and tax dumping, a project where the G-20 had agreed on far-reaching cooperation. The U.S. is also increasingly going it alone when it comes to the regulation of financial markets and banks.

Washington still hasn't implemented the Basel III Accord, an agreement on strengthening capital requirements for banks. And it looks as though there is no intention to do so either. In mid-June, the U.S. Treasury Department introduced plans that also call into question some aspects of international capital and liquidity standards.

A key reason for the founding of the G-20 was to improve financial sector regulation so as to avoid a repeat of the global crisis that ensued following the Lehman Brothers collapse. If the Americans were to withdraw from that process, the body would become largely meaningless.

Merkel is still hoping that Trump can get through the Hamburg summit without causing another blow-up. Late this week, she sent her chief negotiator, Lars-Hendrik Röller, to Washington to try to save what could be saved of the summit. But the chancellor is also preparing to confront Trump should he remain intransigent. On Thursday, European G-20 participants met in Berlin to discuss their summit strategy - and agreed to form a common front in opposition to Trump.

A Conciliatory Approach

Merkel is facing a difficult choice. Either she prioritizes consensus, which carries with it the risk that the summit's closing communiqué will be watered down to the point of meaninglessness. Or she tries to isolate Trump, at the risk of further damaging the already fragile trans-Atlantic relationship.

This week, it looked as though she were leaning toward compromise. After U.S. Trade Secretary Ross was cut off mid-speech during the event in Berlin, it was Merkel's turn to speak - and everyone was anxious to see how the chancellor would react to the attacks from Washington.

Merkel opted for a conciliatory approach. She seized on Ross' proposal to restart negotiations on a trans-Atlantic free-trade deal. What a great idea, she exulted. Such talks, she said, are the best way to solve existing conflicts.

By Peter Müllerr, Christoph Pauly, Christian Reiermann, Michael Sauga, Christoph Scheuermann, Christoph Schult and Gerald Traufetter

Yellen’s Wish May Not Come True

The Federal Reserve expects to raise rates gradually. If the unemployment rate keeps falling, that plan might not hold up

By Justin Lahart

Federal Reserve Chairwoman Janet Yellen testified on Capitol Hill in Washington on Wednesday. While the Fed has championed a ‘gradual’ pace on interest-rate moves, a possibly overheating job market may complicate decisions later in the year. Photo: Jacquelyn Martin/Associated Press

The word of the day at the Federal Reserve is “gradual.” It might not be the word of tomorrow.

In congressional testimony Wednesday, Fed Chairwoman Janet Yellen noted that the central bank has “gradually” tightened policy this year, that “additional gradual rate hikes” are likely in the years to come, and that policy makers intend to “gradually reduce” the Fed’s bondholdings.

“Gradual” is the stuff of central banker dreams, but up until late last year the Fed struggled to realize them. Whether it was the 2013 taper tantrum or the global credit worries that hit early last year, the Fed’s plans to wean the economy off its easy-money policies were repeatedly thwarted.

With the U.S. and global economies on better footing, it is unlikely the Fed will be forced to delay its tightening efforts. The bigger risk is that falling unemployment will force the Fed to raise rates faster than either it or investors expect.

The unemployment rate, at 4.4%, is a bit below what Fed policy makers think is its long-run, just-right level for the economy. But slow wage growth and low inflation raise the possibility the right rate might be even lower than it is today. If the unemployment rate were to slowly drift lower, the Fed might be open to sticking to its “gradual” guns and finding out what the right rate is.

The problem is the drop in the unemployment rate has been anything but gradual. It is nearly a half point lower than it was at the start of the year, and at the recent pace of hiring it could fall below 4% by January. That would put the Fed in a situation where it had to guess whether the labor market was overheating.

The consequences of guessing it wasn’t overheating, and being wrong, would be dangerous. The Fed would then need to raise rates sharply in an effort to push the unemployment rate higher.

And, as Bank of America Merrill Lynch economist Ethan Harris points out, increases in the unemployment rate of a few tenths of a percentage point are usually followed by recessions.

Instead of running that risk, the Fed would probably raise rates faster than it now has mapped out. Investors’ surprise at this wouldn’t be gradual.

Gold: Have We Hit Bottom Yet?

Taylor Dart

- Bullish sentiment on gold is trading at the lowest levels since December.
- The metal has plummeted $90/oz over the past 20 trading sessions.
- COT Data has finally begun to swing positive for gold, at is at levels consistent with where bottoms begin to form.

The price of gold (GLD) has been pummeled the past 6 weeks with seemingly no bottom in sight. Bullish sentiment has plunged to the lowest levels in 7 months, and miners are now trading at more attractive valuations than the Christmas lows. The million dollar question is whether it's time to step in now and take a stab, or if there's still more downside left to be seen. Bullish sentiment is at depressed levels and COT data has swung favorable, but price itself (the most important indicator) has not reached support just yet. Add this to the fact that 5-week losing streaks have always seen further draw-downs, and the best play seems to be patience at this juncture.

A couple weeks ago I put out a note on gold and stated that the metal had a setup in place from which most of the ingredients for a bounce were there, but the key was defending $1,240/oz. Failure to hold the $1,240/oz level would not be a good omen for the bulls, as there was a pocket of air below down to $1,200/oz. This provided a low-risk long setup to get long vs. $1,245/oz with a stop below $1,240/oz. While the metal did bounce shortly after, it ran right into resistance at $1,260/oz. Shortly after, the $1,240/oz level was violated, and the rest is history.
It's very rare that I say that bad news is good news, but in terms of the gold market here, this may be one of those times. I was really hoping that we would see an ugly week for gold last week, to allow us to register a fairly rare signal, and fortunately, we've got it. Gold ended last week in the red and in doing so recorded its fifth straight weekly decline, something we've only seen 11 times in the past 18 years. The results after these signals are quite interesting and tend to be quite positive for gold looking one month ahead. The caveat is that every single time we've seen a 5-week losing streak, the close of the 5th week has never marked the bottom, and there's always been some more pain ahead. Let's dig a little deeper into the study....
Five-Week Losing Streaks
(Source: Microsoft Excel, Author's Table)

Since 1999, we've only had eleven 5-week losing streaks for gold, and we have been higher a month later 73% of the time by an average of 2.1%. This means that if we were to perform with the average of this signal, gold would end the first week of August at the $1,235/oz area. The smallest decline over the next month we've seen after the fifth straight losing week was 0.73%, with the worst being 6.31% - the average decline: 2.74%. These numbers are intra-day numbers as they are draw-downs, so this is not returns, but just where gold has traded down to after recording 5 straight losing weeks in the past.

Given that we closed the 5th straight losing week at $1,210/oz, if we were to perform in line with the average decline, we'd see ourselves touching $1,176/oz between now and August 7th.

It's worth noting that even if we do go that low, the average signal manages to finish the month with a 2.1% return. What this means is that there's a setup here where the average decline is 2.74% over the next month, with the month finishing with a 2.1% return on average. The strategy is pretty simple, if we pullback into the $1,180 - $1,192/oz area, it's likely a nice risk/reward spot to buy the dip.
As for draw-ups, we have always traded higher than the 5th straight losing week's close at some point, and the average move higher (draw-up) over the next month has been 4.80%. This means that if we were to trade with the average, at some time over the next month we would touch $1,268/oz. Certainly the opposite of what most are expecting right now.
Forward returns on a 1-week basis tend to be poor, with 1-week returns averaging 0.17%, but only seeing a positive return 36% of the time. Having said that forward 1-month returns are much better as explained above. So if we were to trade in line with past occurrences, we've likely got another week or so of pain ahead, but can expect to begin the month of August higher than where we are now. The ideal setup would be for us to be red this week, as past occurrences when we get a sixth straight losing week are higher 1-month later 86% of the time. The worst thing possible according to this signal is a strong week this week and a large green bar, the only 2 times we saw this, we saw the worst 1-month returns going forward.
Past instances and returns do not guarantee future returns and performance, but buying the dip if we can see a pullback into $1,180/oz - $1,192/oz seems like a decent setup here, and the bulls likely have a good shot at turning this around very soon. The key is there doesn't seem to be any rush to jump in just yet to buy either miners or gold, a better opportunity should lie ahead during the next two weeks.

To avoid any confusion, forward returns in the table are based on if gold was bought at the close of the fifth straight losing week, the numbers are not weekly/monthly performance numbers, they are where the return would stand if we had bought the close of the 5th straight down week.
COT Data
Moving onto COT data, for the first time since the December lows the commercials are at a very modest net short position, and this was as of mid last week while we still sat near the $1,220/oz level. When looking at COT data, the most important indicator to me is what the commercials are doing as they have been the most reliable indicator over the past couple decades when it comes to tops and bottoms in commodities. Having said that, I do pay attention to what small speculators are doing as they've been known also to be good contarian signals when used in conjunction with commercials positioning.

As we can from the above charts, commercials are now less net short than they were at the December lows post-Fed, while small speculators are significantly less net long than they were at the December lows for gold. This means that commercials who I want to see paring back their net short position have done so dramatically, and small speculators want absolutely nothing to do with gold right now as they are nearly flat on their positioning - something we very rarely see. For those that have difficulty making sense of the chart, the commercials were net short 150,000 contracts in December, and are currently only net short 107,000 contracts. Meanwhile, the small speculators were net long 20,500 contracts at the December lows, and are currently net long significantly less with 13,000~ contacts.

Does this mean we have to bottom? Absolutely not. But we are at levels in the COT data that are consistent with previous bottoms, so the box can be checked for this indicator being a "go".
Moving onto the technicals, the key here is if we still have support below and are still in a bull market. Depressed sentiment can be a good indicator to time bottoms, but it is much more reliable to see depressed sentiment in a bull market vs. a bear market. Indicators used to time the long side become much less reliable in bear markets as absolute panic takes over and things can go much further than anticipated. The same is true of using indicators to time the short side in euphoric bull markets, just ask those that tried to short in the Dot Com era. While a few made out well trying to bet against a market that had asinine valuations, the majority failed miserably.
Taking a look at the monthly chart of gold, we can see that we are currently violating the 20-month moving average which is not a particularly positive development for the bulls. Having said that, I only care about this indicator when it comes to monthly closes, so this current violation is meaningless unless we close the month below here. The 20-month moving average currently sits at roughly $1,240/oz, so the bulls have some serious work to do to avoid this. As we can see gold also broke below the 20-month moving average near the December lows and this was not a deal-breaker for the metal. The 20-month moving average is simply a gauge for me to assess the health of a market, and the more months spent the 20-month moving average, the more likely a bear is to rear its ugly head. The more important takeaway from this chart is the uptrend line off of the 2015 bottom that I would not like to see violated. This uptrend line currently comes in around the $1,180/oz level, and also coincides with horizontal support.
Moving to a weekly chart we can get a better look at this horizontal support level and the weekly higher swing lows we had seen up until recently. While we did violate this pattern and make a lower swing low vs. the May one recently, the key for me is defending the January and March weekly swing lows at $1,179/oz and $1,194/oz. It is possible that we violate these levels to the downside intra-day, but what I'll be watching for is where we finish the day and week. A daily and or weekly close below $1,180/oz would be a massive dent in my bullish thesis and would force me to exit my half position in gold that I put on at $1,176/oz last year.
So how am I positioned?
Once $1,240/oz broke I began to get defensive in my miner allocation and pared back from a 35% weighting in miners to 22% as of most recently. This is because one of my risk management rules triggered that only allows me a certain amount of exposure to an industry that is ranked in the bottom 20% of all industries. The early month move in gold and gold stocks triggered this rule, and I was forced to liquidate quite a few positions. Having said that I have a few names, and have a shopping list of undervalued miners I'm waiting to deploy in my premium newsletter.
My top 5 weighted miner positions in no particular order are:
Alio Gold remains the most attractive from a valuation standpoint of the current miners I hold along with Semafo Gold (OTCPK:SEMFF), NewCastle Gold and Marathon Gold are the most attractive from a take-over standpoint among the juniors with undervalued premium ounces in favorable jurisdictions, and Osisko is my the most de-risked junior I own and one of the only juniors I see with the potential to prove up 10 million plus ounces across their properties company-wide.

In summary, I see no reason to jump on the buy button yet for those that already have exposure, as we have always seen weakness after 5-week losing streaks. If I did not have any exposure whatsoever here, I would begin nibbling and starting positions in a couple names with room to add when I'm confident a bottom is in.
Gold trades on sentiment as much as it does on technicals and the metal is always pushed to extremes in both directions. Based on the average draw-down from 5-week losing streak signals, at the minimum, we should see gold trade down to $1,201/oz before it finds its footing.
It is entirely possible that gold does not pullback with the average decline of 2.74% after these signals and instead makes a higher low. I am open to seeing a higher low for gold, but am cautious of this as the majority of the time we do see more pain and to the tune of at least 2%. If we do make a higher low, this would be a positive for the bulls and I'll be looking for certain indications on my swing charts to tell me that there's a high-probability the bottom is in.
I'm likely going to sound like a complete broken record by now, but what does this all mean? If we do see a 1-2% pullback over the next couple weeks, we'll be pulling back into my support zone between $1,180/oz and $1,200/oz, we'll be doing so with sentiment in the dumps at an area where it usually bottoms out (at least for a short term bounce), at an area where Markos has turned bearish and finally thrown in the towel on the metal, and we have forward returns strongly in our favor after this setup has occurred in the past. There are no guarantees in life and certainly not in the market, but this would likely be as close to a perfect storm as we can get for a low-risk long entry.
As stated above, due to the fact that I have a decent amount of long exposure I'm sitting on my hands for the time being. If I had no long exposure or minimal long exposure (under 5%), I would begin nibbling on the best in breed miners and or gold.

Public Spheres for the Trump Age

J. Bradford DeLong
. Berkeley protests


BERKELEY – In many societies, universities are the main bastions of ideological and intellectual independence. We count on them to transmit our values to the young, and to support short- and long-run inquiries into the human condition. In Donald Trump’s America, they are more important than ever.
Unlike universities, for-profit media enterprises have never been up to the task of nurturing a robust “public sphere.” Inevitably, their coverage reflects enormous pressure to please the base – their advertisers or investors – or at least to avoid giving offense. That is why the American writer and political commentator Walter Lippmann – no stranger to journalism – ultimately put his trust in public intellectuals working in universities, think tanks, or other niches.
For most of the post-war era, the for-profit media’s structural deformities were relatively harmless. The far right, having unleashed Nazism and fascism on the world was in political exile. And the far left had its own albatross: “really existing socialism” in the Soviet bloc was murderous and unproductive.
This left only the North Atlantic triptych of political democracy, free markets, and social insurance. Technocratic debates about how to achieve the greatest good for the most people could proceed without the baggage of deranged ideologies. The West was living through the “end of ideology”; or, even more optimistically, the “end of history.”
But now we are confronting what Lawrence Summers calls “the challenges of the Trump era,” and the stakes could not be higher. In a recent commentary for the Financial Times, Summers laments that universities, in particular, have failed to rise to today’s challenges.
For starters, Summers rightly calls for universities to do more to “recruit, admit, and educate economically disadvantaged students.” When universities accept only the well prepared, they are not just being lazy. They are also failing their students, faculty, and the communities they serve.
Underprivileged students who are less prepared than their peers should not be blamed for the circumstances into which they were born.
In economic terms, it is a university’s job to maximize its educational “value added,” which means that it should seek out the students who stand to benefit the most from its services. And, once admitted, these students should be afforded what they need to complete their studies.
Summers is also right to find it “terrifying that the US now has its first post-rational president who denies science, proposes arithmetically unsound budgets, and embraces alternative facts.”
Universities, Summers points out, should “be bulwarks for honest, open debate as a route towards greater truth.” Indeed, universities are venues for not just expressing but evaluating ideas. We should cultivate intellectual diversity; but we also must reject failed, unsound, or fraudulent ideas.
For this reason, university faculty and students may proffer any argument or idea that they deem worthy of further investigation. And they should be free to invite speakers who share their perspective. Summers is right that a university is no place for “giving a heckler’s veto to those who want to carry the day with the strength of their feeling rather than the force of their argument.”
And yet there is some conflict between rejecting failed ideas and maintaining intellectual diversity.
One rule of thumb, offered 70 years ago by the historian Ernst Kantorowicz, is that those who advance an idea have an obligation to “their conscience and their God” to be sincere about it.
Consider the example Summers cites: Charles Murray’s visit to Middlebury College, which resulted in large student demonstrations. I saw Murray discuss his notorious book, The Bell Curve: Intelligence and Class Structure in American Life, back in the mid-1990s, and I was not impressed. And since then, Murray’s ideas – especially his claims about IQ and race – have not been well received.
So, to my mind, if Murray was invited, he should be allowed to speak. But the Middlebury students who invited him also owe it to their consciences, their God, and the rest of us to explain in good faith why they think his ideas are still worthy of consideration.
One area where I disagree with Summers concerns his defense of meritocracy. Suggesting that meritocracy is an unalloyed good ignores the provenance of the term, which the sociologist Michael Young coined in his 1958 dystopian satire The Rise of the Meritocracy.
Summers laments that college faculty are now being “trained that it is wrong and even racist to say that ‘America is a land of opportunity’ or that ‘meritocracy is a good thing.’” But whether such statements are objectionable depends on the context in which they are uttered. It is fine to encourage promising young people to work hard. But the meritocracy we have is an untrustworthy arbiter of individual worth, given how much it discriminates against those who, through no fault of their own, are not prepared to fulfill its criteria for success.
At this point in discussions about today’s universities, the term “safe space” often crops up. To be sure, universities should be safe spaces for exchanging and judging ideas, and for changing one’s mind in the face of new arguments and evidence. Summers, for his part, is right that “a liberal education that does not cause moments of acute discomfort is a failure.” But he errs in not acknowledging that some students experience acute discomfort by being made to feel as though they do not belong.
As communities of speech and debate, universities are vulnerable to disruption, which is why civility, as Summers rightly emphasizes, must be upheld. Moreover, campus turmoil is often perceived as a sign of societal disorder. Summers cites the historian Rick Perlstein to remind us that Ronald Reagan’s political rise in the 1960s partly reflected his “railing against” the student protests at the University of California, Berkeley, at the time. Summers suspects that campus radicalism is on the rise again, and that “the political effects will be about the same now as they were then.” Donald Trump, one suspects, is counting on it.

Luxury Cars Offer More Models, but Find Fewer Buyers


The Mercedes CLA, which sells for about $30,000, premiered at the 2013 North American International Auto Show in Detroit. Credit Geoff Robins/Agence France-Presse — Getty Images

Over the last several years, luxury carmakers like BMW and Mercedes-Benz have added a dizzying array of variations to their model lines, in hopes of attracting buyers from rival brands.

But the strategy is not working out.

Fresh evidence of the auto industry’s woes arrived on Monday, when automakers reported that sales of new cars and trucks declined by 3 percent in June from a year earlier, the sixth consecutive monthly decline. And luxury cars were no exception.

In recent years, the industry has been riding high, with low gasoline prices pushing buyers toward bigger — and for companies, more profitable — cars like sport utility vehicles and trucks. But the luxury sector, so often a bright spot in automakers’ earnings, has lost its sheen.

“The luxury industry is pretty flat right now,” said William Fay, senior vice president of automotive operations for Toyota North America.

Among the luxury brands, BMW suffered a decline of 2.8 percent last month, while sales at Mercedes-Benz fell slightly and Toyota’s Lexus division reported that its new-vehicle sales fell 5 percent.

The challenges to the category have not been for lack of variety. The BMW 3 Series compact, for example, is now available as a four-door sedan, a hatchback, a station wagon, a diesel and a plug-in hybrid. Other variants made from the same basic parts but called the 4 Series include a convertible, a two-door coupe and a four-door coupe.

The 2016 Gran Turismo, part of BMW’s 3 series. Sales of BMW series 3 and 4 cars plunged 24 percent in 2016 and have fallen another 8 percent this year.

Still, sales of BMW 3 and 4 cars plunged 24 percent in 2016 and have fallen another 8 percent this year.

“BMW’s goal was to increase market share but it’s turned out to be a little bit of cannibalization,” said Shujaat Siddiqui, general manager at Dave Walter BMW in Akron, Ohio. “BMW customers are just moving from one model to another,” he added, but the brand has been unable to bring in new buyers and expand its market share.

To a lesser extent, Mercedes has also expanded its offerings of sport utility vehicles. It enjoyed a big jump in S.U.V. sales last year, but in the first half of this year they have fallen about 2.3 percent — at a time when overall sales of S.U.V.s and lighter versions called crossovers are soaring.

The proliferation of models is just one of the problems that luxury-car makers are facing.

Another is that American consumers now strongly prefer S.U.V.s and crossovers and are moving away from cars, the traditional strength of the premium brands. “We are getting to a point where the market is pushing close to 65 percent trucks,” once S.U.V.s and minivans are included, Mr. Fay said.

Mr. Fay said Lexus would kick off new sales promotions, including increases in subsidized leases and financing offers, to push Lexus sales through the summer. Two luxury rivals, Acura and Infiniti, saw big gains in June sales after offering discounts and other deals.

Luxury-car makers began to grab an increasing slice of the American car market as baby boomers reached their peak income years and splurged on upscale automobiles. In 2007, they had 11.8 percent of the market, up from about 9 percent in 2001.

After the recession, they developed new models in an attempt to continue the upward trend.

Cadillac added a new compact, the ATS. BMW built a small electric car, the i3. Mercedes developed an entry model, the CLA, to sell for about $30,000 and compete with mainstream cars like the Honda Accord and the Toyota Camry.

Cars in the 2016 BMW 2 series.

They had some initial success, but many models introduced in the last several years are now floundering. In June, sales of Cadillac’s ATS were just 1,185, 37 percent fewer than in the same period a year ago. BMW i3 sales this year have totaled fewer than 3,000 cars, less than half the pace of two years ago. At Mercedes-Benz, sales of the CLA declined 8 percent in June — and are down 37 percent in the first six months of the year.

“In some ways, their strategy has backfired on them,” said Jessica Caldwell, a senior analyst at

As consumers flock to S.U.V.s, manufacturers are also finding that luxury buyers are not as enthralled with horsepower and racetrack handling anymore.

“The idea of what makes a luxury brand has changed,” Ms. Caldwell said. “A fast zero-to-60 time used to be important for any luxury car. But if you’re buying an all-wheel drive S.U.V., nobody really cares about that.”

Tesla, with its semiautonomous Autopilot technology, has become a serious competitive threat to more established premium makes, she added. “Luxury doesn’t have to be defined by how many cylinders or how many gears you have. For a lot of buyers, being really high tech and having this self-driving capability is luxury.”

But more difficulties for the luxury brands may be on the way. Their efforts to sell new cars this year are facing increased competition from used cars that were leased two or three years ago and have been turned in to dealers. Many have been driven fewer than 40,000 miles and sell for about half the price of new models.

“Some of the used-car valuation has had an impact” on luxury brands, Mr. Fay said.

Next year, an even larger number of luxury cars will re-enter the market as used vehicles, according to industry analysts.

“The cars coming off lease are a very attractive deal, and that lowers prices of new cars,” said Jim Ursomarso, vice president of Union Park Automotive Group in Delaware, which operates BMW, Jaguar and Volvo franchises. “So it’s not going to get easier from here.”