Additional References
January 2006, The Elliott Wave Theorist
You Read It Here First, Over Two Years Ago
“In every field, women gain dominance in bear market periods.” –Prechter’s Pespective, 1996
“A Democrat will be the next president. (I think it will be hillary clinton, currently not a candidate.)”
— EWT, October 2003
“The downhill course of this presidency will pave the way for the Democratic candidate (probably Hillary Clinton) to become president in 2008.” —EWT, November 2004
“The extension [of women’s emerging dominance] to the highest levels of society is evident in a full-color picture of Hillary Clinton in a recent issue of USA Today. She’s standing confidently in front of two GIs in a pose that all but declares the former first lady fit for the role of commander in chief. As ‘the first female presidential frontrunner in history,’ she’s already the most accomplished female candidate for the presidency in history. Clinton’s ability to secure the 2008 Democratic nomination remains an open question, but with ‘tough talk on defense’ and an array of ‘pro-military’ stances, Clinton has solidified her prospects. If the Republicans are smart they’ll push their own iron lady, Condoleezza Rice, to the front of the pack.” —EWFF, September 2005
Before Hillary was even a prospect for candidacy, and before politicians even took seriously the idea of a female president, EWT picked her to follow George Bush in the White House. This forecast was particularly bold given that no woman has ever been on top of the ticket in a presidential election. But the predictive value of socionomics is powerful and lends itself to expectations that are dramatically different from those of the crowd. I originally thought that the bear market would push Bush out and Hillary into office after just a single term, but the stock-market recovery of 2003-4 brought prices to a slight net gain for Bush’s first term, and he was re-elected. His experience since then has been less than happy. As stocks registered just an intermediate-term low last fall in the middle of a larger rally, Bush recorded the lowest popularity ratings of his presidency. The rebound in social mood since then has produced another stock rally and an uptick in his ratings. But wave patterns and sentiment indicators argue that this uptick is temporary.
Hillary is the strongest woman in U.S. politics, and she is the only one known only by one name, like Elvis, Marilyn and Cher. This week I saw my first “Hillary” bumper sticker. Hillary’s profile should rise dramatically over coming months, and if the stock market does anything remotely as we expect between now and the election in 2008, she will be the next president.
October 2005, EWFF
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.”
At the state and local level, populist fervor is rising. In Pennsylvania, after the state legislature voted itself a “middle of the night pay raise” in July, a wave of outrage hit the newspapers and airwaves. Since a similar whiff of fury failed to amount to anything in 1995, few Pennsylvanians “predicted the level of hostility or how long it could simmer.” “The political establishment in Harrisburg underestimated the unifying power of outrage,” said the coordinator of a September 28 protest rally. In California, politicians are scratching their heads over the emergence of “grumpy voters. As they look around them and toward the future, residents of the Golden State are turning gloomy. By a 2-to-1 margin, registered voters in California say the state’s economy is now in ‘bad times’ rather than good.” In a “stunning drop,” the approval rating of action hero turned California Governor Arnold Schwarzenegger is down to 31%. “The word I hear most from business people is ‘surprise’ that he has squandered so much of his political capital and their money,” said a Republican political consultant. This is nothing. Probably by the Congressional election in 2006 and certainly by the Presidential election in 2008, the electorate’s seething desire to “throw the bums out” will completely reshape the political landscape.
November 2004, EWFF
As Gretchen Morgensen notes in The New York Times, the scope of the shenanigans is growing larger every day: “Like the universe itself, corporate chicanery just seems to keep on expanding. Unlike earlier versions, however, the latest scandals tend to implicate not just individual companies but entire industries.”
New York Attorney General Eliot Spitzer’s move against the insurance industry is rapidly evolving into the biggest antitrust case since a U.S. District Court ordered Microsoft broken up in June 2000. The Justice Department settled its differences with Microsoft near the October 2002 market bottom. This pattern of attacks at highs and conciliation at lows is consistent with the socionomic dynamic The Elliott Wave Theorist uncovered in May 2000. After showing that market peaks had accompanied every major antitrust initiative of the last 120 years, EWT’s “Socionomic Perspective on the Microsoft Case” offered the following explanation and forecast:
When the bull market reaches exhaustion, the old supportive mood begins to crumble, and the new punitive mood bursts forth. One result of this metamorphosis in social character is governmental attacks against highly successful enterprises. The exhaustion of an extremely positive social mood trend, as reflected by stock market statistics, affected the Justice Department’s emotional mindset and caused it to capitulate to a desire to attack the most successful corporation it could identify, which was Microsoft. Now that we know the implication of major antitrust actions for the position of social mood trend, we can anticipate that two to five years from now, the stock market is likely to be much lower than it is today.
This forecast was dead-on at the two years point, as the S&P declined 50% through October 2002. On a five-year basis, it is looking pretty good, too. Spitzer’s charges of “improper transactions in virtually all lines of coverage and all sizes of clients” likely marks the re-emergence of a new cycle of antitrust attacks and, thus, a renewed downtrend. Right now, the investigation focuses on three of the insurance industry’s most powerful companies: AIG, Marsh & McLennan and Ace, but it is likely to spread rapidly. According to Spitzer, the insurance firms have been using sales force incentive fees, known within the industry as marketing service agreements or placement service agreements, to collude in setting industry prices for most major lines of insurance. Spitzer says the techniques constitute a “widespread bid-rigging scheme.” But insurance industry executives say they’re just doing what everybody else does. If they are guilty of collusive price behavior, “every industry in the country” that has sales force incentive fees is, too. In a bull market, this defense would stop the inquest in its tracks. In a bear market, it just gets prosecutors more excited. Think of the headlines! Socionomics explains what’s going on: In a bear market, the public wants blood, and intelligent, hard-working, ambitious people like Spitzer will find a way to give it to them.
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Like the stock averages themselves, Congress appears to be leaning toward a big turn as the fall election season approaches. Many key political figures, like the U.S. president, are down in the polls, and vulnerable to a sea change in the public’s political sentiments. Most pundits feel the Democrats have a decent chance of gaining a majority in the U.S. House of Representatives and possibly even the U.S. Senate. This fits with the rising “throw the bums out mentality” discussed in the October 2005 issue of The Elliott Wave Financial Forecast (see Additional References below for the full entry). As the lead government attack dog against corporations and Wall Street, Eliot Spitzer’s political star is an ideal indicator of power that underlies this potential shift. With the Dow Jones Industrial Average close to its May high, the political establishment is still very much in place, but Spitzer’s landslide victory in yesterday’s primary for governor of New York indicates that the bear market undertoe is extremely strong. The challenger, Tom Suozzi a rising Democratic star who was dubbed the “perfect candidate for governor ... in any other year’ never got closer than 60 percentage points. Various issues of EWFF have demonstrated Spitzer’s knack for capitalizing on the bear market mood. 