Additional References
EWFF, July 2005
In baseball, the steroids controversy finally moved to page 1 with the March peak in the major averages. As it has, the game’s greatest player, Barry Bonds, has gone to the bench, his assault on the all-time home run record sidetracked by injury and steroid allegations.
EWFF, April 2005
In an apparent confirmation of EWFF’s thesis that there is no difference between the scandals surrounding bull market accounting practices and the baseball steroids controversy (see January Cultural Trends section), one columnist offered the following advice: “Here’s a tip from Mark McGwire, Oracle. Don’t begin by saying you’re not there to talk about the past. And don’t rant and rave to the cameras outside like Barry Bonds that you’re tired and you may never return.” The net for trapping bull market heroes of all types is clearly widening fast.
EWFF, January 2005
Squeezing the Juice Out of the Long Ball
What’s the difference between the steroids’ controversy in baseball and the accounting crisis at Fannie Mae? From a socionomics perspective, there is none. The slackening of accounting rules that allowed corporations to pump up their financial statements and the use of performance-enhancing substances by professional baseball players are just separate mediums through which the peak mood of the 1990s and early 2000s “juiced up” the social environment to reflect the end of a 200-year bull market. One key attribute of a fifth wave is that it lacks the underlying strength of the preceding third wave. But what fifth waves fail to produce in substance they make up for in an abundant optimism. Apparently, when it is a fifth wave of Supercycle degree, the positive outlook is so rigorously imposed on society that long-established social institutions such as professional baseball or industries such as the mortgage field stretch conventional standards to allow the achievement of record-high results, or at least the impression of them. As The Elliott Wave Theorist explained with regard to the financial fundamentals in September 1998, one key attribute of the last leg of the great bull market was its ability to get novice, as well as professional observers, to explain away, ignore and deny a long list of financial measures that were clearly weakening in the bull market’s waning days (see Chapter 1 of Conquer the Crash).
A bear market is the path through which historical standards and values are re-established. The first phase of this movement focused on Enron, and the front edge of the next wave is being signaled by a series of events that Bloomberg magazine is calling “Fannie Mae’s Fall From Grace.” Back in 2001, when Fannie Mae was still just below its all-time high, Money magazine tabbed Fannie CEO Franklin Raines “the most confident CEO in America.” Conquer the Crash responded, “His stockholders, clients and mortgage-package investors had better share the feeling, because confidence is the only thing holding up this giant house of cards.” With the Dow Industrials still above 10,000, confidence remains historically high. However, regulators showed that it is clearly teetering when on December 22, they managed to remove Raines from the chairmanship of Fannie Mae.
It is no coincidence that the steroids scandal in baseball also rose to the fore in December. Like many of Fannie Mae’s accounting tricks, widespread steroid use by major league players has been an “open secret” for some time. It is generally thought to date back to the front-end of the bubble era. Observers say they first noticed a suspicious bulge in homers and player physiques in 1995, the year the first bubble stocks appeared and the most manic phase of the long bull market began. In 1998, when the left shoulder of the great peak was formed by a preliminary high for most of the major averages, the Chicago Cubs Sammy Sosa and St. Louis Cardinals Mark McGwire both surpassed Roger Maris’ single-season home run record in an epic bid for that season’s home run crown. McGwire won with 70. In 2000, Major League Baseball set the all-time record for total home runs with 5,693, which marked an incredible 71% increase from 1990. In 2001, Barry Bonds broke McGwire’s single-season record with 73 homers. In 2004, he crossed the 700 mark for his career and moved within striking distance of the most venerated record in sports, Hank Aaron’s all-time home run record of 755. But his accomplishments, as well as the integrity of the game, were called into question earlier this month when it was revealed that Bonds had admitted to using steroids (“unknowingly”), during the 2002 season. The admission was a “scales falling from the eyes” moment for the game. Suddenly, the media had to face the fact that Major League Baseball looked the other way as Bonds and a host of other bulked-up stars effectively neutered the game’s cherished record book. “Baseball’s numbers are sacred. So now, if you can’t believe the numbers, what’s left to believe in?” asks one scribe.
In the same vein as stock “bears” who nevertheless call for a continued market rise in 2005 and those recognizing real estate as a bubble yet call for real estate to remain buoyant, many sports columnists are incensed by the steroid revelations, but say there will be little or no effect on the game in 2005. They continue to track a high level of indifference on the part of fans. At this year’s winter meetings, player salaries again notched higher, and teams report no discernible effect on season ticket sales. “Fans Don’t Care About steroids,” says one headline. What these writers do not understand is that the overriding force behind baseball’s popularity was the long bull market, and the current indifference is the result of a countertrend rally that is ending. As its influence fades and the bear market returns, the baseball crowds will thin out and the disgust will come pouring out. The effects of a deepening negative social mood will undoubtedly extend onto the field since most players took steroids for the same reasons investors bought stocks: to make money, to mimic one another and, as author Carl Elliott explains, to avoid “the risk of being left behind.” “This may be less about the desire to succeed than the desire to avoid shame and humiliation,” says Elliott. The fear of shame and humiliation is a powerful motivator. But it totally re-orients itself in a bear market. As steroids and other performance-enhancing drugs themselves become a source of shame, not to mention severe punishment, their use will wane. This will probably reduce the size of the players (as forecast in the April 2001 issue of EWT) and home run counts, but it will get the game more in line with its roots, which is what bear markets are all about.
EWFF, August 2004
The bear market is evident in the steroids controversy. It turns out that the sciences of blood doping, steroid production and beating drug tests is far more developed than anyone suspected. As noted above, third waves are sometimes referred to as the “point of recognition,” and what people are recognizing in this one is that the games of at least the last 12 years were more of a pharmaceutical achievement than a tribute to athletic competition:
"Since the U.S. Anti-Doping Agency was created after the 2000 Sydney Olympics, 85 athletes were nabbed with a witches’ brew of chemicals. To keep illegal doping under control, USADA sends out a battalion of 100 officers to training facilities, events and athletes’ homes to test for drugs. But some drugs in use today were synthesized specifically to be undetected, and this is what worries officials the most. 'There have been rumors that there might be designer steroids for several years, and no one knew,' said a medical technology specialist for the USADA."
Now that the mentally blinding optimism of a Grand Supercycle climax is fading, integrity can make a comeback. But the re-leveling of the playing fields will have many negative side effects, such as the tarnishing of the past and present accomplishments of Olympic stars. Interest in the Olympics remains high because the Dow is still above 10,000. As the Dow heads lower, the cloud of uncertainty regarding steroids will grow larger, and the movement to reduce the size of the Olympics will be transformed into a drive to return the games to an amateur-only competition or to end them altogether. How the trend ends is anyone’s guess, but we know its direction and degree. Until further notice, so do you.
EWFF, November 2003
Several of the game’s biggest stars have been called to testify in a “designer steroid” case that will tarnish the image of several major sports. The list of witnesses includes Barry Bonds, who smashed the single season home run record with 73 home runs two years ago. The steroids were not discernible by testing until recently, so just as financial performance has been called into question by slack accounting standards, the home run record has been tainted. With the market near new highs, the story’s been stuck on page 3. Look for it to rise toward the front page as the downtrend intensifies. The precise findings of the investigation matter little. Once the bear market resumes, baseball will be tried and convicted in the court of public opinion.
EWFF, September, 2002
Baseball’s fortunes foreshadowed the overall peak and now appear to be closely shadowing the market’s descent. Disgruntled fans say the games are too long, the players are pampered, and the sport is being steered by a wishy-washy commissioner. Due to bull market partnerships with state and local governments and baseball’s recent, however, the league cannot shut the teams down. An interesting aspect of this months [labor agreement with players] is that players will be tested for steroids for the first time next year. Steroids have reputedly produced bigger, stronger athletes, so this policy may well fulfill one of EWFF’s more unusual forecasts from April 2001: “The physical attributes of players should shrink.”
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