Friday, August 31, 2012

The Rise of Paul Ryan

This is an update to an earlier post, "Update on the Road to Plutocracy", in which the forecast for a full blown plutocracy in the United States is slowly being fulfilled as the stage continues to be set behind the scenes. In August 11, 2012, Mitt Romney selected Paul Ryan as his running mate. The significance of the event, as with so many cases, is not fully recognized by most people. The key to the larger picture is that Paul Ryan is a member of the American Legislative Exchange Council (ALEC) and is closely connected with the Koch Brothers (and Koch Industries).

Paul Ryan's connection with Koch Industries and ALEC is very significant, as the Koch-ALEC cabal is identified as the engine that will drive the future plutocracy in the United States starting in 2042. This also does not conflict with the idea of a Bachmann Administration Period, which is forecast to span from 2017 to 2024. While Michele Bachmann has not been confirmed to be a member of ALEC, her platform is virtually identical to Paul Ryan's as far as economic policy is concerned. This brings about the possibility of Ryan / Bachmann or Bachmann / Ryan for the 2016 presidential election in which bearish social mood is guaranteed to result in the Democratic Party taking massive losses during the 2016 elections to a comparable (if not even larger) degree to the losses that the GOP sustained in the 2008 election and either Michele Bachmann or Paul Ryan as the next president of the United States.

The forecast for a plutocracy is based on the characteristic of a B wave within a larger bear market of Supercycle degree and above, in which B waves are technically weak with weak fundamentals. Just as fifth waves are weaker than third waves by every measure, B waves are weaker than fifth waves by every measure. A full blown plutocracy is consistent with the expected character of Supercycle wave (b) up (2042 - 2076) of Grand Supercycle wave [IV] (2000 - 2118), including the fact that only a small cross section of the populace will take part in the return to prosperity in the United States after "The Great Deflation" ends in 2042.

We continue to see evidence of a coming plutocracy in the United States, as new developments illustrate:

1 -- The middle class continues to decline with most people in that group substantially worse off than they were a decade ago.

2 -  The destruction of living wage jobs and family wage jobs continues unabated, with the last of the family wage jobs projected to be gone by 2015 and the last of the living wage jobs projected to be gone by 2020.

3 -- In spite of the phony "recovery" in the job market, corporations and businesses are not really putting in much effort in hiring more workers. This is consistent with the expectation of increasing conservatism due to a bearish social mood that is unfolding.

4 -- Poverty continues to proliferate, with the official poverty rate reaching the highest point since the 1960s. The actual poverty rate in the United States is likely around 35% to 40%. Expect the poverty rate to reach much higher levels by the time the plutocracy arrives in 2042.

5 -- As of 2011, 40% of households in the United States were living paycheck to paycheck. At the start of the Grand Supercycle degree bear market, the figure was 31%. There is no doubt that the bear market continues to have an effect on the economy, akin to a house that is prettied up with new paint on the outside even as the foundation of the house continues to rot.

The rise of Paul Ryan in the political arena is another indication of the coming plutocracy, In 2016, bearish social mood associated with Primary wave [X] down 2011/2012 - 2016) within Cycle wave x up (2009 - 2021) will make conditions ripe for Paul Ryan to ascend to the White House in 2017 either as VP or President.

Wednesday, August 22, 2012

Inclusionism Breaks New Ground

As a testimony of social mood remaining at historically bullish levels in spite of 12 years of bear market (so far), we witnessed inclusionism (characteristic of bullish social mood) break new ground with Russia joining the World Trade Organization (WTO) after 18 years of negotiations.  The significance of the event won't be recognized by most people, but it is a very significant event from a socionomic perspective. This type of event, along with Mitt Romney calling for more bull market in the economy and job market (see this post), could easily be a peaking signal with a large degree reversal just around the corner.

When inclusionism breaks ground in previously unreachable areas, it is a very strong peaking signal. The last event of this type was Bulgaria and Romania joining the European Union in 2007 just before Primary wave [B] of Cycle wave w down (2000 - 2009) ended in October 2007. It is also notable that there was a frenzied eastward expansion of the European Union from 2004 to 2007 with 10 nations added to the union during the period.

Even though there has been a lot of speculation amongst the (euro) bears that the European Union will break up in the future, there is a strong case to be made that the expansion of the EU could continue all the way into 2021, the peak of Cycle wave x (2009 - 2021) up, with the break up (due to nations leaving the EU) to take place during Cycle wave y (2021 - 2042) of Supercycle wave (a) (2000 - 2042) down. The last part of Cycle wave x up (likely to be Primary wave [Y] up (2016 - 2021)) could feature a last frenzied expansion of the European Union before "The Great Deflation" unfolds in full force in 2021. Indeed, the stage is already being set for a last period of frenzied expansion starting with Croatia set to join the European Union in July 2013 and several other nations recognized as potential candidates to join the EU in the future.

The addition of Russia into the WTO is occurring as Primary wave [W] up is nearing a peak (current wave count was invalidated in the S&P 500, but still valid for the DJIA and Wilshire 5000. New charts coming in the very near future), with Primary wave [X] down to shortly follow the peak.

The European Union is expected to come under a lot of stress during Primary wave [X] (~2012 to 2016) down of Cycle wave x (2009 - 2021) up with perhaps a lot of speculation that Greece, Spain, Italy, or Portugal leaving the European Union during that time. When Primary wave [Y] (2016 - 2021) up of Cycle wave x (2009 - 2021) up starts, the European Union is expected to go on a frenzied expansion with inclusionism reaching levels regarded as unreachable today. There are five nations that are even now recognized as candidates for inclusion into the European Union -- Iceland, Macedonia, Montenegro, Serbia, and Turkey. In addition, Albania is in the process of applying for membership into the EU. From the socionomic perspecive, the most likely scenario is for Iceland, Macedonia, Montenegro, Serbia, Turkey, and Albania to gain membership in the European Union during the 2019 - 2021 time frame as the last part of the Cycle degree advance in social mood unfolds.

The Euro, the currency of the European Union, is expected to be a fully functioning currency during the rest of the "extend and pretend" phase (the second phase of "The Great Deflation"), with the fate of the currency expected to face very tough challenges during the third phase of "The Great Deflation" during the 2021 - 2042 time frame.

Tuesday, August 14, 2012

Update on the Apple Bubble

This is an update on the February 2012 blog entry on the Apple bubble, in which a case was made for Apple being a parallel of the South Sea Company. The Apple bubble is still in progress in spite of a decline that unfolded earlier this year. Investors are still very bullish on Apple as illustrated by a number of articles such as this one that is calling for more upside in Apple's stock price.

There was a very strong reason to not call a long term top on Apple even though the rally appeared to have played out. Here is an intermediate term chart of Apple to illustrate the point:

Apple's high for the year occurred in April 2012 before the decline started to unfold. The decline, now identified as Minute wave [iv], unfolded as a zigzag and reaching its low point in late May 2012 before resuming higher. There is already some recognition that Apple is a bubble, yet many people have attempted to call a long term top in Apple's stock, saying that the bubble has popped (the top calling has been unfolding since 2008!):

1 -- Yahoo news -- Apple bubble already starting to burst (August 18, 2008).

2 -- Seeking Alpha -- The Apple Bubble is ready to burst  (November 29, 2011).

3 -- Forbes -- Five signs that Apple is a bubble (April 23, 2012).

Bubbles always end in a bust, but they also seem to last longer than many people think possible. After the decline earlier this year, the stock is on the rise again. However, it is quite obvious that the rally lacks the impulsiveness of earlier rallies that propelled the company's stock to $600 a share earlier this year. The rally from the late May 2012 low appears to be unfolding as an expanding ending diagonal with the last part of the rally in progress. The target for the rally is $664 a share to be hit within the next few weeks before a sharp sell-off commences with the advent of Intermediate wave (4) down.

Here is a longer term chart of Apple, showing how the rest of the Apple bubble may play out:

The blue box shown on the chart is the price territory of the fourth wave of one lesser degree, which would be around $300 to $375 a share. This follows a guideline that fourth waves go into the price territory of the fourth wave of one lesser degree. A sideways pattern for the coming Intermediate wave (4) down is in the forecast, most likely a flat, which should take around a year to play out.

As Intermediate wave (4) down climaxes in around June 2013, Apple could either come out with (or announce the unveiling of) an entirely new innovative product or make a move to acquire a large social media company. Either one could be seen as a massive game changer and give investors a reason to go on a bullish frenzy with the mainstream media along for the final ride up. The final stage of the Apple bubble will unfold during Intermediate wave (5) up, unfolding as an epic blow-off top that takes the company's stock as high as $875 to $1000 a share by June 2014. As a precursor to the coming blow-off top, there are already at least 216 hedge funds that have Apple in their portfolios, which is indicating a very high level of bullishness on Apple stock.

This chart shows the final Primary degree advance in Apple stock:

The final Primary degree advance will have lasted 5 years, from 2009 to 2014. Notice that Intermediate wave (2) down in April 2010 was very brief and very sharp, while Intermediate wave (4) down, as a guideline of alternation, is likely to have a much longer duration and unfold as a flat (a sideways pattern).

The bursting of the Apple bubble will have widespread implications as the stock is a component of both the S&P 500 and the Nasdaq. The aftermath of the bursting of the Apple bubble is expected to result in a massive decline in the stock market in general from 2014 to 2016 with the longer term aftermath persisting for years if not decades. The effects of the Apple bubble bursting will first be felt in the technological sector with many tech jobs being purged off the map in the 2014 - 2016 time frame, which will then have a ripple effect on other areas of the economy and job market.

Monday, August 6, 2012

Trend Extrapolation in Politics

On Saturday, August 4, 2012, an event that is considered very significant from a socionomic perspective has taken place. Most people will not recognize the significance of the event as it will be seen as just one more day of speeches by politicians made in an effort to influence the November 2012 election.

One day after the jobs report was released for July 2012, Mitt Romney made a bullish comment on the job market, saying that "America is poised to take off economically". This event is in the same league as the Federal Reserve Chairman saying that "rates will remain low until 2014.". What we saw is politicians extrapolating a trend that has been unfolding for over 2 years. Politicians are always the last people to act on a trend, and for that matter, the last people to extrapolate a trend. When a trend becomes so obvious that it becomes intuitive even for politicians to extrapolate the trend, the trend has run its course -- in other words, it is a peaking signal at tops.

Here is a long term chart of the S&P 500, with the event labelled on the chart:

Notice when Mitt Romney made the statement about "America being poised to take off economically" -- it is very significant that the statement was made just as Minute wave [ii] up is about to wrap up to a close within the next few trading days, with Minute wave [iii] down of Minor wave C down (April / May 2012 - June 2013) to follow shortly afterwards. The event will indeed turn out to be a significant peaking signal from a socionomic perspective.

The rally also appears to be corrective with a lot of overlapping waves and appears to be forming a bear flag.

Here is a close up of Minute wave [ii] of Minor wave C down in the DJIA:

The chart illustrates how close we are to the end of the rally that started in June 4, 2012. The structure, of course, is a complex (zigzag - double zigzag - flat) structure. The last part of the structure is just about completed with a few more small sub-waves yet to unfold. The waterfall decline to follow should start some time this week.

There is much to be said about Mitt Romney extrapolating a trend that has been in play for over 2 years -- namely extrapolating the trend in the job market. There is a very strong tendency for people to "predict the present" and extrapolate the present into the future when the trend has played out for a sufficiently long time. This event is a peaking signal for the job creation trend as well, with the larger trend of job destruction soon to regain dominance in the job market within the next few months (definitely by the end of the year). With US ISM Manufacturing (officially) in decline for the second month in a row, and US Factory orders and car sales unexpectedly declining last month, there is strong evidence that the declining portion of the business cycle is starting to have an effect on the economy, bringing about the next leg down in "The Great Deflation".