Additional References
November 2005, The Elliott Wave Theorist
Nixon/Bush
Analysts should not take the idea of parallel social periods lightly. The August and November 2004 issues of The Elliott Wave Theorist made a case that Bush’s terms were mimicking the “late Johnson-early Nixon period.” Although Bush had long been riding at a comfortable level in the popularity polls, EWT predicted that his presidency would resemble Nxon’s in terms of the popularity polls. Nixon won a second term in a landslide and then collapsed in the polls less than two years later as the social mood turned negative. Specifically, EWT said, “Bush will probably experience something very like Nxon’s second term but worse…a drop to lower levels of popularity.” A year after our prediction, the outlook has nearly come to pass. A November 4 headline reads, “Bush’s Popularity Free-Falls to Levels Not Seen since Nxon.” A presidential scholar at the Brookings Institution commented, “No president in modern times has suffered this kind of political decline so quickly after re-election.”
According to the November 7, 2005 issue of U.S. News, “Today, astonishingly, it [his first term] all looks like a false prelude to a calamitous second act that virtually no one could have predicted.” If our approach allowed us to be one of the very few who made just such a prediction (we were similarly successful with Reagan, Bush Sr. and Clinton), one might suspect that we are onto something. Three full years remain in Bush’s second term, and a lot of downside potential remains in the stock market; it’s a combination favorable to our forecast.
October 2005, EWFF
The Elliott Wave Financial Forecast opened the year with the following comment on George Bush’s political prospects:
“The market falls in a genuine renewal of the bear market, Bush’s fortunes will fall with it. The impetus will be the same force that finally pushed Nixon out: a large-degree bear market in social mood. “
For periods of time, presidential popularity can stray from the stock averages, but the fate of the nation’s chief executive always ultimately rests on the long-term trend in social mood. As EWFF explained in January, the direction of George Bush’s presidency has been locked in with the direction of the Dow Industrials since at least the early part of 2004 when both turned lower simultaneously. At this point, Bush appears to be leading the way as his approval rating peaked in February ahead of the Dow and carried to a new low this month. The chart shows how the Dow has managed to resist the trend and push slightly higher from April to August, but these trends rarely diverge for long.
The larger the downtrend, the larger the political upheaval. This one is so big that political turmoil is actually getting out in front of the breakdown. According to pollsters at Zogby International, Bush’s approval rating is so low that he “Would Lose to Every Modern President.” The social scene is setting up as it did at the peak in 1968, when Lyndon Johnson’s popularity plunged so dramatically that he declined to run. Then as now, the Dow was within striking distance of a Cycle degree peak and the Value Line Geometric Average was actually at a new all-time high, one that would remain in place for the next 15 years. As then, emerging political unrest is spreading fast. Congress’ political standing is also at its lowest level since 1997. “Dark and ominous clouds are gathering over the Republican Party,” says a September 26 issue of the Washington Post. That was before Wednesday’s indictment of House Majority Leader Tom DeLay. “This is not what the Republicans envisioned 11 months ago, when they were returned to office as a powerful one-party government,” says today’s NY Times of the Republicans’ “Sea of Trouble.”
Conquer the Crash
Preparing for a Change in Politics
The Elected Leader’s Fortunes
U.S. electoral history [shows] that when the stock market is rising, reflecting a positive social-mood trend, voters tend to maintain the incumbent leader. When stocks collapse, the leader is thrown out in a landslide or by other means; though the instances are rare, there are no exceptions to this rule. Voters do not appear to care which party is in power at such times; they just throw whomever they perceive to be in charge, and his party, out of power.
National leaders always make things worse for themselves by (1) claiming credit when the economy does well, thereby implying that it’s their fault when it doesn’t, and (2) vowing to enact economy-boosting measures when the economy weakens, thereby supporting the fiction that they can control it, which puts their opponents in a position to claim that those policies failed.
A leader doesn’t control his country’s economy, but the economy mightily controls his image. When the economy contracts, that image suffers, and the voters throw him out. This is true of elected rulers all over the earth. For an instructive case in point, study the fortunes of U.S. president Richard Nixon, who won a second term in a landslide in late 1972 at a major top and was hounded from office less than two years later as the Dow suffered its largest decline since 1937-1938.
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