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The plunge in Bally Total Fitness is a good example of what can happen after a stock sells off 90%. It can lose another 90+%. Back in 2004, Bally was rallying off its March 2003 the there were many optimistic admirers of the stock. One frequently cited bullish note, for instance, was that its real estate alone was worth more than its current market capitalization. Here’s how The Elliott Wave Financial Forecast assessed its prospects:
No Gain, Lots of Pain
Back in the 1980s, one of the very first cultural trends The Elliott Wave Theorist identified as a by-product of the bull market was the move toward physical fitness: “There was a new energy building in the early 1980s, and humans had to express it by running, lifting and jumping up and down.” In the late 1990s, the corresponding forecast was for more sedentary lifestyles to grab hold. The dynamics behind the transformation are described in The Wave Principle of Human Social Behavior (1999). Ample evidence of its arrival is captured in the chart of the premier fitness stock, bally total Fitness, which fell almost 90% to a low of $4.36 in March 2003 (see chart p.9). Since then, it has rebounded somewhat, but the rally in fitness has been accompanied by all kinds of evidence of a falling rather than a rising underlying trend. Instead of a grassroots jogging or aerobics craze, for instance, the hot new thing in exercise has been toward regimens with bearish overtones such as kick boxing and military style workouts. According to a recent issue of the Wall Street Journal roughly 700 gyms now offer boot-camps:
‘Drop, You Maggot,
and Give Me Twenty’
Gyms Push Extreme Workouts
To Counter Exercise Ennui
Sounds like a good reason not to exercise: Getting up before dawn and crawling around on your belly in Central Park, while getting hollered at by an ex-Navy Seal.
It turns out that a growing number of people are willing to pay good money for workouts like that. In the latest response to the health-club industry’s perpetual dilemma how to keep workout-averse patrons working out gyms and personal trainers are pushing an array of aggressive fitness plans based on everything from U.S. military boot camps, to Soviet-style weightlifting regimens.

In an alternative bear-market survival technique, fitness clubs have embraced the racy sexual mores of the bear market (see August issue), making striptease workouts the new thing. Strip Workouts for Every Woman is a strong seller on Amazon.com. In another effort to literally broaden their appeal, Bally’s has started to highlight “full bodied fashion models” in its ads. “Americans are gaining weight, and health clubs don’t want to be left out.” Many fitness clubs have also added cooking classes to their offerings. In other words, the meager, one-year uptick has more to do with self-indulgence, self-defense and punishment, than self-improvement. The genuine article, a fresh grassroots passion for getting fit, will come again, but not for years and not until people swear off finance as the best road to self-improvement.

Most people will assume that Bally’s problems are due to mismanagement or some other aspect of its own individual circumstances, but the basis for EWFF’s forecast was an anticipation of structural weakness in the fitness industry as a whole. As the article at left and the charts below indicate, this vulnerability is starting to show.



The divergence between the rising number of clubs and a one year decline in the number of members (as of 2005) is exactly what we would expect to see at the end of a long fitness boom. More important is the larger implication which is offered in the quote from HSB at the top of this entry. As the treadmills and weight machines fall silent, the stock market should experience a steady slide. In a bear market, laying around becomes and art form and people who spend time at the gym are squares.