Pete Kendall's Socio Times: A Socionomic Commentary

The food served in California schools will be healthier starting next fall under legislation signed Thursday by Gov. Arnold Schwarzenegger. The new laws impose a campus ban on the sale of sodas, set a new nutritional standard for vending-machine snacks, and require more fruits and vegetables in meal planning. Beginning next July, students will be allowed to buy only water, milk, and some fruit and sport drinks that have limited sweeteners.
Associated Press, September 15, 2005

Blair Defends Terror Crackdown
Prime Minister Tony Blair has defended his Government's moves to toughen up Britain's anti-terrorism regime. Mr Blair has acknowledged that the law may need to be changed to achieve the Government's aim. Prime Minister rejected the criticisms of the Government's stance. He said: "Virtually every country in Europe has been toughening up their legislation.
The Scotsman, September 16, 2005

Carpool Lane Crackdown Starts
San Diego Union Tribune, September 13, 2005

Gang Members Arrested in Major Crackdown
WASHINGTON -- More than 650 suspected members of MS-13 and other gangs were arrested in the United States, Mexico, El Salvador, Guatemala and Honduras in a coordinated crackdown on violent Hispanic gangs, officials said Thursday.
The Associated Press, September 8, 2005


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Calif. Gov. Signs Ban on School Junk Food
By: Pete Kendall, September 16, 2005
A long-lasting downtrend implies a more negative social mood, which has results in terms authoritarian values.
The Elliott Wave Theorist, January 2005
In addition to these articles, a raft of recent news articles reveal major legislative, enforcement or military efforts by municipalities, states and countries to reduce everything from the size of the insurgency in Iraq to drunk driving, speeding, panhandling and poison ivy (in Raliegh, N.C. based on a 50-year-old law that was not enforced until late last year). Just within the last few days in England alone, authorities have promised to crackdwon on graffiti, hate preachers, crime, litterbugs and terrorists. In California, the Govinator better be careful. As EWFF noted our April 2004 write-up on the rise of controls (see Additional References below), bear market restrictions often backfire because they tend to create "a response by an adversary in the same negative mental state."  
Additional References

EWFF, April 2004
Springtime for Ursa
One of the great things about the Wave Principle is its tremendous scope. Users can take the stock market count and, by examining changes in the culture through similar wave positions in the past, do quite well at forecasting the social future. Readers certainly seem to appreciate this value. It can work the other way, too. There are times when broad changes in the social realm can be used to confirm the wave count. This appears to be one of those moments. There is no mistaking the footprints of a big bear market in the changing social landscape. One of the most prominent changes is the shift away from the permissiveness and feelings of alignment with others to a sudden public fetish for restriction and control. Here’s how The Wave Principle of Human Social Behavior described some of the key traits that create this reactive, bear market craving for regulation and revenge: “A waxing negative social mood appears to correlate with a collective increase in discord, exclusion, unhappiness, anger, opposition, depression, destructiveness and a desire for power over others.” Since the NASDAQ 100’s peak in January, the papers have been filling up with headlines that describe the major and minor effects of this mass emotional downswing. Suddenly, in totally unconnected sectors of the planet, the perception is that tolerance, efforts to “keep up with the Joneses” and openness have all gone too far and “something needs to be done.” The following news diary shows how fast and deep the latest trend change is:

January 13 “Feds Crack Down On ‘Raves’: Prosecutor Pursues Organizers of Parties.” In the late 1990s, raves were a night-life staple. Now they are “widely considered notorious havens for illegal drugs like ecstasy.” Ecstasy is to Cycle V as LSD was to Cycle III in the 1960s. Like LSD, it is a psychedelic that was actually legal at the start of its bull market. “Users report feeling blissed out, energetic and emotionally open and loving.” Ecstasy, which is known as an “empathogen” because of its ability to facilitate empathy, fit perfectly with the bull, but society sees it as downright irritating now.

February 12 “Bush to Crack Down on Nuclear Black Market.” Remember back in 2000 when the world was considered so open and safe that nuclear secrets were turning up behind copy machines at U.S. weapons labs? That view has changed. The U.S. Energy Department has also announced “major steps to improve security including the removal of plutonium and highly enriched uranium from Lawrence Livermore National Laboratory and other weapons sites.”

March 8 “Crackdown on Cursing Starts.” A year ago, the FCC enforcement bureau ruled that use of the f-word at last year’s Golden Globe awards was not indecent because it was unrelated to a sexual act. But now it says that pop star Bono did, in fact, violate Federal regulations when he accepted his award.

March 10 “Senators Tell Baseball To Crack Down on Steroid Use.” Last October, when the “designer steroid” case hit the papers, EWFF explained that it was “stuck on page 3” because the market was still trending higher. We said, “Look for it to rise toward the front page as the downtrend intensifies.” Following the reversals from early 2004 highs in all three averages, baseball’s steroids problem did, in fact, make it to the front page. Notice, however, that crowds are still making their way out to the ballparks. That’s because stocks are still near their highs. When stocks collapse, the fans will file out and steroids will be cited as a major reason. But the real reason is the anger of fans, which is mostly still to come.

March 23 “Revenge Vowed Over Israeli Attack on Founder of Hamas.” The “unprecedented escalation” of the conflict in the Mideast is perfectly consistent with the long track record of Mideast turmoil, which suffered similar escalations near the downturns of 1929, 1966 and 1973. In the 1990s, it disappeared only to make a dramatic reappearance with the Palestinian riots, which hit in October 2000, right after the start of wave (3) of 1.

April 6 “Barcelona Bans Bullfighting.”

April 8 “FCC Fines Clear Channel $495,000 for Making  ‘Alleged Indecent Content.’” What was standard fare for “shock jock” Howard Stern during the bull market has now cost radio stations $500,000 in fines.
“Princeton Plan Seeks To Ease Grade Inflation.” Near the lows of the 1970s, Princeton handed out A’s to about 30% of students. Between 1997 and 2002, the percentage jumped to 45%, and grades below B became relatively rare. As the bear market continues, grade point averages will fall with stocks.

April 9 “Feds Crack Down On Tax Shelters.” Back in 1999, when the Dow’s peak was just months away, The Elliott Wave Financial Forecast noted that property seizures were down 98%, and “IRS agents are turning nice.” This was probably one of the clearest signs that the approaching peak in social mood was likely to stand for years to come. Now, the era of the nice-guy IRS agent is ending. The IRS is beefing up “enforcement” and training its sights on “high-income taxpayers.”

April 11 “Dutch Cannabis Crackdown.” “In an increasingly conservative Netherlands,” drug laws are being drafted that “may bring an end to Amsterdam’s anything-goes reputation.” The Dutch government will propose a ban on the sale of the country’s strong home-grown cannabis. Police have already shut down many of the city’s famous hash bars. “The crackdown has reduced the number of cannabis coffee shops from 2,000 a few years ago to about 700 today.”
“War’s Full Fury Is Suddenly Everywhere.” Several reporters concurred with this assessment from The New York Times: “The atmosphere in Iraq has completely changed. In just a week, a fading guerilla war has exploded into a popular uprising.” The reporter says, “I was left with the question: why now?” A Mideast historian offered a explanation that edged closer to socionomics: “The killing of four American contract workers in Fallujah on March 31 and macabre celebration afterward made extreme violence possible and even invigorating. These examples whip up emotions. Pack mentality can overcome reason and propriety.” The error in this analysis is that it attributes the emotion to the action, when it is the other way around. The killings and the escalating conflict that followed were an expression of a crashing social mood.

April 23 “Louisiana May Ban Low-Slung Pants.” A Louisiana representative who is “tired of catching glimpses of boxer shorts and G-strings over the lowered belt lines of young adults,” has submitted a bill that will punish anyone caught wearing low-riding pants with a fine of as much as $500 or as many as six months in jail, or both. It probably won’t pass (not yet, at least), but the bill clearly expresses a shift away from the permissiveness that reined through the end of the great bull market. “I’m sick of seeing it,” said the bills sponsor. “The community’s outraged.” (As the Dow chuggs lower, we may find out where the term “blue laws” come from.)

April 26 “Patriot Act Popular, Giving Bush an Edge.” This is probably one of the most profound evidences of the potency of the new trend. Just weeks ago, the Kerry campaign was planning to use the acts intrusion on civil rights as a campaign issue: “But instead of the ideal issue to use against President Bush,” the Democrats have discovered that the public is squarely behind the measure. “In a turnabout, the act suddenly has emerged as a cornerstone of Bush’s re-election campaign.”
“Vengeance is Mined It’s payback time. That’s been the mantra for a variety of movie characters determined to bring justice to an unjust world.” Four vendetta movies, The Punisher, Walking Tall (a remake of the original Buford Pusser revenge flick that came out in February 1973, one month after at the start of the bear market of 1973-1974), Kill Bill Vol. 2 and Man on Fire have come out in just the last four weeks. All four hit it big at the box office, with debuts at No.1 or No. 2.

April 29 “China Orders Banks To Suspend Making Commercial Loans.”
“First Criminal Charges Brought Under New U.S. Anti-Spam Law.” Nobody likes spam, but during the bull market everybody put up with it. Saying it’s “gone too far,” U.S. prosecutors have launched the first volley in what promises to be an ongoing attack on many bull market business tactics.

Bear markets are necessary because they correct the excesses of the preceding rise. At big turns, like the one that began in 2000, they bring a wave of reality that breaks down many of the illusions of the bull market years. By the end of the current bear market, baseball will be back on a level playing field, third graders who can’t read won’t be advanced to the fourth, and the airwaves will be safe for the ears of children. But the sobering process is never smooth because virtually every restriction or call for retribution listed above creates a response by an adversary in the same negative mental state. After Israel assassinated Hamas leader, Sheik Ahmed Yassin, a Hamas official responded, “Words cannot describe the emotion of anger and hate inside our hearts.” When Yassin’s successor was also assassinated on April 18, the headline said, “Hamas Vows ‘Volcano of Revenge.’” The more progress the U.S. forces make in Iraq, the more non-aligned parties join the fight and the more terrorists it creates. Another problem is overzealous implementation: The FCC’s new rulings caused radio stations to pull songs like Lou Reed’s Walk on the Wild Side, which has aired for years without complaint. In this way, even wise and well-conceived bear market reforms and dictates tend to have unintended negative consequences.

The Elliott Wave Theorist, March 2003
The question is not merely an academic exercise but has profound implications not just for your finances but for the social future as well, because the social psychology behind the stock market’s trends has other consequences. A long-lasting uptrend is driven by a more positive social mood, which has other results, including classical liberal political trends. A long-lasting downtrend is driven by a more negative social mood, which has other results in terms of social conflict and authoritarian political trends. In the 1980s and 1990s, we enjoyed one environment. Since then, we have been descending into its opposite.

The Elliott Wave Theorist,  August 2001
[Robert Prechter:] The dangerous authoritarian acts have always come in bear markets.

Q: For instance, the New Deal in the Great Depression?
A: That’s a classic example, but there are even more dramatic ones. The Russian Revolution took place in a bear market in October 1917. Authoritarianism accelerated in the 1930s’ bear market under Stalin, who murdered tens of millions of people. In China, communists took over in 1949, which was the very end of the world-wide bear market pattern in inflation-adjusted terms. The worst abuses there occurred in the bear market of the 1970s with the so-called Cultural Revolution, when the government stampeded city dwellers into the country to starve. Cambodia’s slaughter also took place in the ’70s. Then as we entered a bull market in the 1980s and 1990s, China softened up a little bit. The same increase in positive mood holding sway in the 1980s-1990s bull market brought Russia to a point where finally the logjam broke and even the Communist Party fell. So politics tend to wax and wane along with the wave pattern.

Q: So the greatest centralizations are installed in the depths of the bear market?
A: Yes. As the bear market progresses, people search for leaders to take them out of their misery. They tend to conclude that force is the answer. Ironically, it brings much more misery to bear.

Q: How should we understand the success of secession movements around the world today?
A: That’s a bear market phenomenon, too. I’ve been saying for a long time that as soon as the tide turns, you’ll see states wanting to secede, and countries breaking up. I wouldn’t be surprised to see California subdivide. Canada should end up as two, possibly three countries. The Soviet Union’s dissolution came from a different direction. That wasn’t states seceding but authoritarianism collapsing because of the bull market. You have to distinguish between the two.

The Elliott Wave Theorist, February 1989
In a formalization of the negative mood within a bear market, one or more of the new parties is likely to represent ideals inimical to individual liberty (such as socialist, racist, fascist or fundamentalist). In some cases, such as in Russia in the teens, Germany in the 30s, China in the late 40s, Cambodia in the 70s, and Iran in the late 70s, such parties have achieved power.   


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