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Back in September 2002 when polyester enjoyed a sudden hip phase, the Cultural Trends section of The Elliott Wave Financial Forecast explained that the trend fits perfectly with the emerging bear market in social (see the additional references section below). The basic point is that bear markets take social interaction back back to the practices, trends and icons that were abandoned at the end of preceding bear markets. Thus the 2002 time-machine in which fashion, music and assorted anti-heroes of the 1970s were dredged up and rallied around as the first leg of the bear market approached its conclusion.

That was the “initial effect of the rush back” to the 1970s; now a more powerful burst may be starting. In addition to an unmistakable return to the hostile U.S.-Iran relations of the late 1970s (which contasts starkly with the cordiality EWT described in 1998),  the onset of ‘70s fever includes: a Super Bowl victory for the Pittsburgh Steelers, the same team that last won in 1980 (as well as 1975, 1976 and 1978); the return of the Pink Panther to movie theaters (a “three-movie stretch in the 1970s signified the high point for the series” with The Return of the Pink Panther, 1975, The Pink Panther Strikes Again, 1976 and Revenge of the Pink Panther 1978); and the re-union of Sly and the Family Stone, one of the most influential musical acts of the decade. The original members gave their first performance since 1971 at last nights Grammy Awards. Another throwback to the 1970s is the return of horror movies that are actually scary. Our January 9 entry and this headline from a recent issue of the Cleveland Plain Dealer attest to this development and the its relevance: “Horror Films Are Back, Scarier Than Their 1970s Prime.” Then there’s the “stuck in the 1970s” political likeness discussed in the article above and Monday's entry about the Nixonization of the Bush White House.

These are all strong whiffs of the 1970s but the most powerful blast from the last big bear market may be Barry Manilow’s stupendous debut at the top of the album charts. In inflation-adjusted terms, the deepest part of the Cycle degree bear market was from 1974 to 1982.



As the chart illustrates, Manilow had a slew of hits during this period including 16 top 20 singles and a No.1 album in July 1977. Even in his prime, however, a Manilow album never debuted at No. 1, suggesting that Manilow’s “magic” may be bigger than ever. What is it about Barry Manilow? The “campy” quality noted in the Daily News story is probably the key to it.  The first line in Manilow’s bio reveals that while he was “often maligned by critics" Manilow "was one of the best-selling balladeers of the 1970s.”

In bear markets, talent is not necessarily the key to success. In some cases, a lack of talent is what audiences respond to. We saw this back in the 1970s with the Gong Show, a TV "talent" contest that highlighted truly awful and off-the-wall performances. We see it now in American Idol, which is attracting “record audiences” and beat out the Grammy Awards last night by highlighting “bad singers.” In bull markets, society is more harmonious; so critical praise and popularity tend to go hand in hand.  Disparities between technical expertise and popularity are common in bear markets. For some reason, as the trend moves lower, audiences respond to acts that are odd, off-beat, sexually confused or even just plain bad. In the early 1970s, Manilow honed his skills accompanying Bette Midler in the gay bathhouses of New York. His "crooning" style is decidedly against type. He’s not handsome, his voice cracks at critical points and he lacks the masculinity of a Dean Martin, Frank Sinatra or Tom Jones. One blogger describes his break-through hit of 1974 this way: “The sexual ambiguity of Mandy qualifies it as the type specimen of metrosexual music.” On his new No.1 album, he refashions a host of crooner classics from the 1950s. We’ve yet to hear them, but our guess is that they won’t be a big hit with the critics. As the Independent (of London) says, “Watch out, it's the 1970s all over again.”

September 2002, EWFF
Back in January 1998, as the Dow moved up through the 8000 level for the first time, The Elliott Wave Theorist observed a flurry of cultural flashbacks to the 1970s and cited a critical difference between the 1990s and the 1970s. EWT observed that one big contributor to the triumphant psychology of the late 1990s was the vanquishing of the demons that had haunted the U.S. in the preceding bear market:
“At the top of each fifth wave, social mood conquers the fears that existed in the preceding fourth wave. The greatest fears of the last bear market, of a stagnant economy, inflation and now Iranian terrorists, have all been vanquished. It may be that our recurrent cultural harking back to the 1970s is a way of facing the old monster so as to write him off as less of a threat than we had remembered.”

On the way back down through 8000, the cultural echoes of the social scene are suddenly even more laden with 1970s accents. A bevy of 1970s styles like peasant blouses, rising heel heights and long denim skirts have returned to popularity. “Girls will be wearing the same things their mothers probably wore in the 1970s.” “The Afro, in all its curly, wild, 1970s bigness, is the hottest thing in hair.” Even polyester is back. The Associated Press says the “experts believe supplies of polyester could dry up altogether by 2008.” Apparently, the trend is so strong analysts expect it to last as long as the 1970s themselves. To deal with the worst decline in music sales since the 1970s, the music industry is pushing bands that sound “a lot like they’ve come from the ‘70s. On the airwaves now: a half-dozen Stones sound-alikes and a ringer for Neil Young. Rock sales are up 4% to 6%, the first significant upswing in almost a decade.”

Here’s one more flashback: At DC Comics, MAD magazine is drawing more interest than superheroes. Alfred E. Neuman, the gap-toothed moron from MAD magazine, is enjoying a renaissance. “Neuman’s “What Me Worry?” credo may be filling a void at a time when there’s plenty to worry about.” The Neuman persona seems to play on and deflect the biggest collective case of the jitters since the 1970s. The fear that was missing on the Dow’s ascent is very much in vogue now. As the Dow makes its way back toward 8000, major articles have chronicled a rise in anxiety due to dirty bombs, fast food, airplane travel, the U.S. mail and diseases ranging from the West Nile virus to “chronic wasting disease.” Fears over the latter illness led to the slaughter of 25,000 deer in Wisconsin. An August 8 USA Today article notes that the “Fear Industry Booms as Uneasy Citizens Seek Safety.” Another article reports that the latex glove industry has become a $3 billion industry thanks to fears about terrorism, anthrax, AIDS, E. coli and sanitation.

But instead of bemoaning the return to the “decade of decadence” as some commentators did in 1998, many are finding comfort in it. With the S&P registering a decline that was about equal to that of 1973-1974, financial writers pointed out that the last major downturn was really a lot worse. “For those with long memories and graying temples, the latest 31 months of bear market contraction scarcely warrant a damp brow,” writes one columnist. “But 1974 now that was a bear market. Stocks slumped, companies faced collapse and the very fabric of society came under threat.” Others admitted that conditions are looking more like the 1970s, but they say that the 1970s were not that bad. After listing the parallels and saying that it means that the bear market could drag on, one said, “None of this means that investors should abandon stocks.”

Since everyone who remembers the 1970s survived them, and the most recent memories are of the ultimate triumph in the late 1990s, the initial effect of the rush back is more of a homecoming than a bear market. Many people have reflexively adopted the tactics that worked well the last time around. A USA Today article about the “red-hot market for American muscle cars from the 1960s and 1970s” reveals how the stuff of the last bear market, like a 1967 Corvette and a 1969 Camaro, have literally become a financial and spiritual refuge from the “whims of Wall Street.” But this time, the demons are of far greater strength.