Just six months ago, most people believed that they were doing just fine. "All's right in the world," they might have said. Today, that complacency and positive feeling have turned to worry and negativity. And no wonder, as people lose their jobs, economies throughout the world reel, financial markets crash, and big companies like Citigroup and GM founder.
"Can you feel it coming in the air tonight?" sang Phil Collins on his first solo album. What most people feel coming in the air is a sense of being on edge, of waiting for the next shoe to drop, of waiting for more bad news to come. Uncertainty, despair, worry, fear: it's all in the air tonight – and during the day – as news stories of the latest economic problems pile up.
It's been a wonder to see how quickly our collective mood has changed from one of free-wheeling spending to worrying about paying the bills. But what you hear now is the sound of social mood turning negative. Or, to quote another great singer-songwriter, Sam Cooke: "That's the sound of the men working on the chain gang." Today, folks may feel like the chains that bind them to the gang are credit card debt, sky-high mortgage payments and outright losses on their investments.
What's interesting to us here at Elliott Wave International is that we've been anticipating and chronicling these sorts of negative feelings ever since the market began its downtrend in 2000 (yes, 2000 – the ensuing market action was a bear-market rally). But now, since the markets started to crash in September 2008, more people are aware of the negative mood and how it's cropping up in the world around them.
When financial markets head up, they reflect positive social mood, and when they head down, they reflect the fact that social mood has turned negative. That's the crux of the socionomic theory that Bob Prechter has promulgated, based on the ebb and flow of the Wave Principle (five waves up, three waves down). Here is a short list of mood opposites that Bob published in his book, The Wave Principle of Human Social Behavior. You will quickly recognize that the moods on the left-hand side show up during positive social moods while those on the right-hand side express negative social mood.
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Positive mood – Negative mood
adventurousness – protectionism
alignment – opposition
benevolence – malevolence
clarity – fuzziness
concord – discord
confidence – fear
constructiveness – destructiveness
convergence – polarization
daring – defensiveness
desiring power over nature – over people
ebullience – depression
embrace of effort – avoidance of effort
forbearance – anger
friskiness – somberness
happiness – unhappiness
homogeneity – heterogeneity
inclusion – exclusion
interest in love – interest in sex
liberality – restriction
optimism – pessimism
practical thinking – magical thinking
search for joy – search for pleasure
self providence – self deprivation
sharpness of focus – dullness of focus
supportiveness – opposition
tendency to praise – tendency to criticize
togetherness – separatism
Forecasts for the Bear Market
As Bob Prechter wrote in October 2003 in his Elliott Wave Theorist, "The simplest forecast to make is that social mood and its expressions will escalate substantially toward the right-hand descriptions in the above list. We can also attempt some specific forecasts. Those below are presented in no particular order beyond their general categories. They are based upon the conjecture that social mood is about to accelerate toward the negative within a Grand Supercycle degree decline. All of these forecasts should be fulfilled probably within a dozen years."
This list is a long one with about 100 forecasts in the categories of Finance, the Economy, Politics, and Other Social Trends. In the interest of keeping this article relatively short, I will list one-third of the items from each category this week and follow up with two more articles
(Update: Part II and Part III are now online) to complete the list. Although some of these forecasts did not work out as Bob said (and I have marked them), the majority are right on the mark. See for yourself. And, remember, he made these forecasts five years ago.
Finance
- Stock markets around the world will continue to fall. Ultimately, the averages will drop more than 90 percent.
- Real estate values will fall more than they did in the 1930s and 1940s.
- Rating services will resume the trend of downgrading bond quality. Eventually, states, counties, cities, corporations and even nations will default on bonds in record amounts.
- Debt packages made of mortgage-backed bonds, auto loans and credit card debt will become viewed as unworthy investments.
- Many, if not most, pension plans will fall in value and be unable to provide the promised benefits. Anger over this development will result in demonstrations, violence and tardy and ineffective political reform.
- Prices for collectibles will continue to fall. Many will become little more than curios.
- More banks will fail than failed in the 1930s.
- The total amount of credit outstanding worldwide will decline substantially.
- The Federal Reserve chairman will be labeled a fool who is greatly responsible for the collapse.
The Economy
- The trend toward economic contraction that began in 2001 will continue to develop into a depression.
- The unemployment rate in the U.S. and in most countries around the world will rise and eventually exceed 25 percent.
- A record number of manufacturing companies in the U.S. will fail.
Politics
- George W. Bush, as we have said since his election and through his highest popularity ratings, will lose the 2004 election, probably in a landslide. [This did not happen, but he did suffer record unpopularity.]
- A Democrat will be the next president. (I think it will be Hillary Clinton, currently not a candidate.)
- Many of the entities that were privatized or “de-regulated” during the bull market will be re-nationalized and re-regulated. (A less-likely but possible alternative is that many regulatory agencies will be abolished.)
- Wave (a) of the bear market in social mood will bedevil more than one president.
- The occupation of Iraq by the U.S. will progress from a quagmire to a financial, political and public relations disaster.
- Terrorists will attack the U.S. again, more severely than on 9/11/01, probably within the next 18 months. [This did not happen.]
- Separatist movements will gain momentum. Many will successfully establish new geopolitical entities.
- Fears about technology will lead to restrictions on its development.
- Politics will become far more polarized, splintered and radical.
Other Social Trends
- Social groups, including economic, political, religious, genders and classes, will polarize and splinter further. That is, they will polarize both internally and with respect to opposing groups.
- The birth rate will continue to fall in the U.S. and Europe until the bear market in social mood (as indicated by the downtrend in stock prices) ends.
- Religion will become increasingly popular. Its advocates will become increasingly passionate. Religious intolerance will increase.
- Belief in magic will increase.
- Science will be turned to manipulative or malevolent purposes.
- Epidemics will increase in number and severity. Malaria will return to the U.S. Eventually, DDT will be re-legalized.
- Films will break new ground in horror, probably with themes that include suicide and torture.
- Environmentalists will become militant and intentionally destructive.
- Disney’s family-fare feature cartoons will fall in popularity, and the studio will stop making them.
- Professional baseball and basketball will suffer difficulties. New record performances by individuals will become rare. No team will have a “dynasty” during the bear market. Leagues will restructure. Attendance and viewership will fall. Salaries will decrease.
- New brutal sports will be introduced and gain popularity.
- Physical fitness (“working out”) will go out of style. [Update: Bally's Total Fitness files for bankruptcy, December 2008]
Want to be ahead of the crowd in understanding the markets? Then you've come to the financial forecasting company that has helped tens of thousands of subscribers stay ahead of both the crowds and the markets. You can, too, by subscribing to The Elliott Wave Financial Forecast, which includes a monthly mailing of Bob Prechter's Elliott Wave Theorist.
Get more information here.