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The second to last paragraph is what caught my eye. It says "Frankly, the whole era reeks, and it has for some time now." I wrote you about a month ago about how the host and callers of a local sports show where fed up with baseball. Here is the continuation of those feelings.
-Ryan Gordon

Barry Bonds does steroids? Yes, it’s an old story. One that Major League Baseball wishes would go away, but it keeps coming back. If Bonds goes ahead and plays in 2006, it promises to become a monster media circus. Tuesday’s “bombshell” has tabloids drooling over the prospect of a revelation a day “chase” for the home run record. With 708 homers, Bonds trails Babe Ruth by 6 and Hank Aaron by 47. The story has all the elements of scintillating public scandal that drags on through the course of the season. There’s the motive, an “insane jealousy” of slugger Mark McGwire; the jilted lover, Bond’s ex-mistress who’s dishing much of the dirt Bonds way; and the judgment, a lengthening string of Grand Jury sessions, indictments, convictions and who knows what once the trend makes an unambiguous turn down.

As Mr. Gordon indicates, the socionomic significance is in the timing of the whole story, which began as the greatest season-long display of home run hitting in history in 1998, when stocks put in a peak that stands as the front edge of the Grand Supercycle peaking process and the battle to surpass Roger Maris’s 1962 record for homers in season took place between Mark McGwire and Sammy Sosa. Both were disgraced this time last year when they testified before the U.S. Congress and the Dow Jones Industrial Average was making another important high. It didn’t turn out to be the ultimate peak of the bear market countertrend, but as we have explained in several entries over the last four years (see additional references below), the story is tracking the stock averages almost step for step. “The whole era reeks” because the social mood is changing from conciliatory in the extreme to confrontational. As we noted the willingness to pump up baseball players and their performance is no different from relaxed accounting standards and enforcement that allowed major corporations to continually increase profits at the end of the bull market. So, it is no coincidence that on the same day Sports Illustrated came out with ‘The Truth” about Bonds, Enron’s Kenneth Fastow was in court testifying that he was told to “juice the earnings.”

Here’s one more critically important parallel. The article is Sports Illustrated’s biggest exposé about drug use in sports since its first ever in June 1969. As we noted on Monday, with respect to the Oscar winners in 1968 and 1969 and many other cultural trends over the last two years, the steroids controversy is a throwback to the mixed social environment that reigned through that era’s big trend change from up to down. At such moments, something snaps and a collective willingness to look the other way in the interest of extreme performances comes to an end. Suddenly, society feels a need to confront itself. The emerging strength of the bear market is signaled by the initial decision to ban steroids for the first time in 2002, which came as the first leg of the bear market was reaching its lows. The first wave of controversy hit in 2002 when Ken Caminiti, a former MVP, admitted to steroid use. As the market was reaching its bottoming process in October, Bonds and New York Yankee slugger Jason Giambi were drawn into the scandal as they were called to testify before a grand jury in San Francisco. Despite testimony in which they admitted to taking steroids, both returned to the field and played in 2002-2005 as the Dow rebounded. But the gathering influence of the bear market is evidenced by baseball’s 2005 decision to implement testing, more rigorous penalties for steroid use and ban more drugs like amphetamines.  The fact that no similar actions took place in the bear market of the 1970s probably attests to the larger size of the unfolding bear market. 

EWFF, October 2005
Listen closely and you can almost hear the hot air of the bull market hissing away across the breadth of society. In the boardroom, schools and the profession of baseball, where steroids and other performance-enhancing substances pumped up the game, a face-the-music mindset is grabbing hold. “Reality Can’t Be Altered Or Ignored,” says a headline from the political front.

EWFF, July 2005
Back in November 2003, EWFF fully discussed parallels to a similar cultural transition in 1968/1969. One trend in the fall of 2003 that EWFF traced “straight back to the vibrant pop scene of 1969” was a fashion preference for bright colors. That trend is now giving way…  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.”

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, May 2004
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.

EWFF, November 2003
Like 1969, 2003 was a year in which baseball rebounded from two straight down years (in attendance). But the rally is not likely to be sustained. To generate excitement, baseball had to overthrow its own order. Ratings show that fans were more interested in the lovable losers than the Yankees, a team that dominated through the course of the mania as well as the last century of rising stock prices. Sustaining a dynasty in a bear market is much more difficult because unstable social forces make it almost impossible to maintain a winning balance. As the Series played out, a new item was added to baseball’s burgeoning list of troubles. 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 who actually ended one of its premier events, the all-star game, in a tie because he didn’t want the players to get hurt. Teams in Montreal, Tampa Bay and Minneapolis probably have negative values. Due to bull market partnerships with state and local governments and baseball’s recent labor agreement, however, the league cannot shut the teams down. Another interesting aspect of this month’s settlement 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.”