Pete Kendall's Socio Times: A Socionomic Commentary

June 20, 2006
Phil Mickelson admitted last week to spending three days in bed after previous disappointments in major championships.

If that's the case, it could be weeks before anyone lays eyes on Mickelson again following the bizarre events on the final day of the US Open at Winged Foot. The comedy of errors on the 18th hole were enough to send committed tee-totallers reaching for a stiff drink, and have started drawing comparisons with the Open at Carnoustie in 1999.

On that occasion Jean van de Velde stood on the 18th tee needing only a double-bogey six to win, but contrived to take seven.

April 2007
1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
29 30          

« Previous | Main Page | Next »

Is a Bear Market Breeze Blowing Golfers Off Course?
Category: SPORTS
By: Pete Kendall, June 21, 2006
Golf heroes are a feature of bull markets. On the pro tour, Tiger Woods has established himself as the sport’s dominant player, just as Jack Nicklaus did the mid-1960s and Bobby Jones in the late 1920s. “Tigermania” has coincided with an unprecedented middle-class enthusiasm for the game.
The Elliott Wave Theorist, October 1997

Any socionomic significance to major sports (golf) stars choking while at the peak of their career?
--Eugene J. Fina

The smaller the social unit, the harder it is likely to be to study the effects of social mood. You can’t get any smaller than the individual, so there is a danger of getting too microscopic in studying the output of single athletes. However, it is our contention that the trend in social mood ultimately effects performance. Pages 86 to 141 of Pioneering Studies in Socionomics offers our Elliott Wave analysis of a wide variety of sports including discussions about how the achievements of varoius athletes follow the dictates of social mood. In the case of the sloppy finish at this past weekend's U.S. Open, it certainly seems possibly that this is a coincident reflection of a major reversal. Interestingly, the comparison to 1999 reveals a precedent in that year’s “comedy of errors.” In the earlier case, the bad play actually preceded the all-time highs in all the major averages by several months.

A recent study of  “Sports Sentiment and Stock Returns” by Edmans, Garcia and Norli  (soon to be published in the Journal of Finance) shows a clear link between mood and athletic performance. The authors studied the stock market returns in the wake of international soccer, rugby, basketball and cricket games and found that market declines tend to follow losses. In the bull market game of soccer, the decline seems to be especially significant. Of course, from a socionomic perspective, the investigation is flawed because it assumes that game caused a bad mood which caused stocks to go down. The authors do not seem to have considered the possibility that a pre-existing mood could have caused both the decline in the market and the loss on the field. But at least, it’s a step in the right direction. It’s only a baby step but it's big because it recognizes the importance of mood in investment decision making. Academia is starting to realize what’s really in the driver’s seat.

To date, only socionomics recognizes the paramount importance of human psychology, which is the domain of the Wave Principle. R.N. Elliott’s discovery is a road map of the collective emotions that drive everything humans produce. People always ultimately live up to expectations. Or in the case of pro golfers at the current juncture, they appear to be playing down to a deflating social mood. When the quote at the top of this entry appeared in EWT, the stock market was in the midst of a mania. Tiger Woods was so hot that some commentators actually asserted that he could win his next 30 tournaments. If events drove emotions, he might have. Every win would drive him to ever higher emotional state that would allow him to stay head and shoulders above the competition. This is why extrapolation always ultimately fails as a forecasting tool (for a full discussion see the excerpt from Pioneering Studies in Socionomics in Additional References).

As it happens, the other big story at this year’s Open was the absence of Tiger Woods in the final round. Due to poor play, Woods was eliminated after the second round. From 1997 to 2005, Woods set a record by playing the final two rounds in 142 straight tournaments. In a reversal of form, he’s missed three cuts in the last year. If he’s like Jack Nicklaus, the bear market won’t hold him down for good. He’ll win again, but the public’s enthusiasm for the game should wane.

Additional References

Pioneering Studies in Socionomics
Linear Extrapolation: “Predicting” the Present
Trend extrapolation is the crudest form of technical analysis, and it is employed by nearly all conventional analysts, though they rarely realize it. Mainstream social and economic forecasting has forever been a practice of extrapolating present and recent conditions and trends into the future. More specifically, apparent predictions are simply (1) descriptions of present conditions (2) multiplied by an unconsciously calculated summation of multiple forward-weighted moving averages of the trends of those conditions. Obviously, in a changing world, this approach is doomed to fail. Because of this practice, both economists and futurists in general have always been notoriously optimistic at tops and pessimistic at bottoms, producing highly inaccurate forecasts of coming events. Now we know why. Because the forecasters have no reliable basis upon which actually to attempt a forecast, the prevailing social mood has full rein to affect the tone of their conclusions. The stronger the mood, the stronger their conviction, the more inventive their rationalizations, and the more extreme and confident their extrapolation. This means that the closer the social mood gets to the point of change, the greater will be conventional forecasters’ conviction that it will not change, and the further into the future will be their extrapolation. (See the classic example from July 1984 in the bond market section of Chapter 6.)

This convention is demonstrated almost daily in the financial press. A new 1998 book that is “must” reading for stock market watchers contains the statement, “I predict that we are soon going to see the greatest economic boom in our history.”41 This would have been a useful forecast, in fact it would have been an actual forecast whether it had turned out right or not, back in 1982. Today, it is simply a description of what has happened in the past sixteen years, multiplied and extrapolated into the pervasive social dream of the moment. A recent favorite headline of mine, from The Wall Street Journal, is “Economists Forecast Mild Inflation of 2.5% Yearly Through 2008.”42 Is there any basis whatsoever for this decade-long year-by-year forecast? Obviously not. Like all such “forecasts,” it is simply a statement of present conditions tempered by recent trends. It is a “prediction” of the present.

This wholly psychological phenomenon applies to virtually all people in all social fields. For instance, after Tiger Woods won the 1997 Masters tournament, a sports reporter explained how prior to the event he had been skeptical of Jack Nicklaus’s opinion of Tiger Woods’ abilities, but now he was declaring Nicklaus’s opinion “an understatement,” as there was no one to beat Woods over the next 30 tournaments. Countless sports writers echoed this sentiment. To date, Woods has yet to win another tournament. The point is not that the forecasters were wrong twice. The point is that at neither time did they make a forecast, at least not with any tools that allow one to do so. They were simply describing the latest achievements of the man. Their claim that they were forecasting does not change that fact. Nor does the same claim do so for economists.

The natural, unconscious way of anticipating reality is to observe it over time and assume that trends will continue in the same way as they have in the past. While this approach is applicable to physics, it is improper to apply it to social trends. By succumbing to the natural tendency to extrapolate, forecasters become part of each wave rather than rise above it.

There is a greater irony. The very fact that people extrapolate trends in this manner, particularly when their fellow men support them by agreeing, is what creates extremes in social sentiment. Thus, the phenomenon that produces the turning points in social behavior is precisely the one that masks them.

Post a comment

(you may use HTML tags for style)

April 16, 2007
Does Imus Cancellation Radio a Bear Market Signal?
read more
April 12, 2007
One Small Coffee Shop Uprising for Starbucks, a Grande Leap for Labor
read more
April 11, 2007
Dazzling Finish: Cars Bring Once-Boring Shades To Life
read more
April 10, 2007
T in T-Line Stands for Top
read more
April 5, 2007
The Fight for a Free Vermont? Must be a Big, Big Turn
read more


HOME | WHAT IS SOCIO TIMES? | CONTRIBUTE | SEARCH    Copyright © 2024 | Privacy Policy | Report Site Issues