Fun Fact: Up until 1932, organizers of the famous Macy's Day Parade in New York City stitched self-addressed, stamped envelopes into a select few of the event's helium balloons. Once the marchers reached their endpoint at the flagship store on 34th Street, they released those rubber animals into the air where they were free to float up and eventually land in mysterious destinations. Whoever found them could then mail the envelopes back to Macy's and receive a gift.
But between 1929 and 1932, the liberated balloons wreaked havoc in the sky and on the ground below: dumping shredded latex bits into local waterways, inciting violence when more than one person found the balloons on land, and finally, in 1932, getting wrapped around the wing of a passing airplane and causing it to crash. And so marked the last time the Macy's Parade balloons were set free.
It's a quirk of fate that during the same 1929-1932 period, the major U.S. financial "balloons" had also popped, sending the entire economic aircraft into a devastating tailspin known as the Great Depression. Elliott Wave International wasn't around then. But we were here for the most recent financial flameout in 2007 -- when the most inflated credit environment in all of history entangled itself around the engine of economic growth and sent it hurtling toward a fiery collapse.
And contrary to the popular belief that the still continuing meltdown was an unforeseeable event, Elliott Wave International's team of analysts stayed ahead of the bursting of the economy's biggest balloons:
Mickey House-ing Market: A March 2005 CBS article celebrated "a new paradigm in real estate in which prices will continue to rise indefinitely.” Meanwhile, the March 2005 Elliott Wave Financial Forecast warned of a "serious unraveling of the housing market" and the potential for a dotcom-like fall for the S&P Homebuilding Index. Soon after, the July 2005 EWFF anticipated the central role that subprime loans would play in the real estate sector's reversal:
"There’s no mistaking who the Enrons of the bust phase will be. They will be the firms now peddling adjustable-rate, no interest/nothing down and assorted other types of subprime mortgages.”
Olive OIL: In June 2008, oil prices were orbiting an all-time record high, and the mainstream experts were firmly on board the black-gold bandwagon: "Oil: $300 Is On The Radar Screen... I don't see any barriers to further price rises." (New York Times) -- AND -- "No End In Sight To Soaring Oil. Few analysts are willing to call an end to crude's rally." (Boston Globe) On the other side, the June 9, 2008 Elliott Wave Theorist offered this very different viewpoint:
"I am publishing this issue a bit early in order to alert you to an opportunity developing in the oil market. One of the greatest commodity tops of all time is due very soon.”
From its July 11, 2008, peak of just under $150, oil plunged 80% in value to a five-year low.
Humpty Dumpty sat on a Wall Street of the world's leading investment banks. And, boy, did they ever Have A Great Fall. Here, the September 2005 Elliott Wave Financial Forecast first warned of what was to come: “Banks seem to be blind to the danger of overpriced collateral as they continue to stuff their balance sheets with mortgage-backed assets… Bad times are ahead in the financial industry.” When the tide had officially turned, the January 2007 Elliott Wave Financial Forecast announced that 2007 would be the official "Year of the Financial Flameout."
Bert and Ernie/Fannie and Freddie: Few, if any, foresaw the companies' conservatorship, their 90%-plus collapse in share value to under $1, and their eventual New York Stock Exchange delisting. The July 2004 Elliott Wave Financial Forecast was one such source, writing: "Despite a 45-year low in interest rates and the biggest mortgage explosion in history, Fannie Mae's stock price has already declined by 20% (from its December 2000 peak). It probably won't survive the bear market without a complete round trip to $1 a share."
Porky PIGS: In November 2009, the Eurozone's worst recession since World War II was declared over and as one NPR report put it: "In the eurozone, it looks as if a bottom has been reached." The December 2009 European Financial Forecast presented the following bearish picture of the PIGS stock markets and warned against a premature celebration of economic recovery via this telling insight:
"A European Tinderbox: The binding characteristic of the economies of Portugal, Italy, Greece and Spain is that each country is a full-fledged member of the eurozone. This means the economic pain in Southern Europe influences the euro's perceived safety. And to be sure, Southern Europe will destabilize as the next leg down gains traction. The five-down, three-up structure of the region's equity markets since 2007 argues unequivocally that more weakness lies ahead."